BTC in the PP

[Jack Jones]

Trying to tell people that they can run away with their wealth and start over or can be wealthy in some post-apocalyptic scenario is much harder to do when you're asking them to say "I have a very big number in my possession" as opposed to "I have a lot of gold in my possession". They're just not the same thing at all.

We don't have to invoke post-apocalyptic scenarios. Gold or Bitcoin would have preserved my family's wealth when the soviets invaded Latvia. There are scenarios where I'd rather have gold, and there are scenarios where I'd rather have Bitcoin. It's hard to move a lot of gold around.

I agree with you in that I have more confidence in sending a gold coin into the future than I do a Bitcoin. However, my confidence is changing over time. The longer the Bitcoin experiment remains a success, the more confident I am that it will supplant gold's monetary use.

[glennds]

My investments in crypto have been based greater fool speculation. Basically as I see more and more mainstream interest and enthusiasm for crypto the more confident I am that there will be a growing market. As long as the market of buyers is growing, the price should go up regardless of why they're buying or if they're wrong. Add the incremental institutional investors joining in. That's my thesis anyway, and I'm not risking any more than I can afford to lose.

But the regulatory risks are significant and I remind myself that the slightest whiff of inhospitable policy from Washington or the EU could send the crypto markets diving.

I appreciate your perspective of crypto as a speculation.

As a counterpoint, my investment in Bitcoin is like my gold purchases. I buy anonymously. I don't plan on selling. This is off-the-books wealth, to be tapped as a last resort, or otherwise handed down to my kids.

Is there any number at which you would sell your Bitcoin?

What if there was a scenario where your Bitcoin had escalated in value (expressed in USD). A lot. And let's say there were storm clouds on the horizon in the form of potential regulatory change that could adversely affect the market. Would you sell then?
Or would you take your chances and ride it down if it went that way?

[Jack Jones]

Is there any number at which you would sell your Bitcoin?

What if there was a scenario where your Bitcoin had escalated in value (expressed in USD). A lot. And let's say there were storm clouds on the horizon in the form of potential regulatory change that could adversely affect the market. Would you sell then?
Or would you take your chances and ride it down if it went that way?

I'm not thinking of it in that way. I don't look at the gold price and consider selling my gold coins. I'll consider rebalancing when the time comes, but I also might just let the allocation increase as it takes up a larger and larger share of my portfolio.

I'll also add that there are a lot of us out there with this mindset. For the price to remain where it is, we're buying and hoarding $36 million in BTC every day since ~900 new coins are being mined each day.

[Jack Jones]

Jack, what do you think bitcoin’s total addressable market is and where do you think adoption is right now and during the next bear market?

I think there's a chance that it eats up gold's market cap because it is more rare and easier to store/transport. And a lesser but non-zero chance that it becomes the world's reserve currency.

Seems like adoption is at the financialization stage. Also we have small countries and corporations holding it in their treasuries. I think things could move suddenly though if more large players move in.

[glennds]

Is it really a valid comparison when people compare gold and BTC quite as laterally as they do?
When I imagine a venn diagram, I can surely see some overlap between gold and BTC but only some.

For example, are we to assume that BTC buyers would have otherwise bought gold were it not for the opportunity to buy BTC? I don't think so.

Conversely, is it a good assumption to think that historical gold buyers have now turned away from gold in lieu of BTC?
Maybe some, but from what I can tell, gold bugs continue to be gold bugs for the most part, and BTC believers are attracted to crypto for features and expectations that never would have led them to gold as an alternative.

Again, I can accept a slice of overlap, but that's about it. For the most part BTC and crypto in general is a whole new and novel asset class that attracts its investors for reasons mostly unique to crypto. This is why I have trouble forecasting the value of BTC based on the gold market cap.

This is also why I have trouble considering BTC as a complete substitute for gold in a PP. But I have no difficulty seeing it as a speculative asset investment or store of value on its own merits, potentially a very good one over time.

[glennds]

It's all about trends and market share/fair valuation, no one is saying that these things happen over night and there is always going to be speculation along price discovery. We're having this discussion now, among investors who aren't "gold bugs" necessarily but who believe gold is a store of value. It's safe to say that at least some of us understand the need to diversify gold holdings into BTC proportionate to it's market share while it is not overvalued. The trick is to determine this for yourself and have a strategy for making that transition.

I won't argue that. I'm just saying it has been helpful to me personally to decouple my analysis of BTC from gold. It so happens I hold investment in each, one in the PP and BTC independently in what we might call the Variable Portfolio.

For a while I thought of BTC and gold as an either/or proposition. As in invest in one in lieu of the other. I think when I heard people say BTC is "better than gold" or that it out-golds gold, it created an association in my mind that I now question for the reasons above.

I just don't think BTC out-gold's gold any more than an apple out-oranges an orange even though they're both fruit. But if an investor decides for their own reasons to shift from apples to oranges staying within the fruit family, it's not for me to say they're wrong.

[glennds]

I just don't think BTC out-gold's gold any more than an apple out-oranges an orange even though they're both fruit. But if an investor decides for their own reasons to shift from apples to oranges staying within the fruit family, it's not for me to say they're wrong.

You mentioned overlap right?

So let's say out of 10 trillion dollars there is 5 trillion of overlap, and out of that overlap BTC will trend toward taking away 50% of that value. BTC will also gain market share from other assets that we will ignore for now.

Something like this still leaves BTC with 2.5 trillion market cap eventually. I think the problem people have is that while BTC may only be worth 100 billion right now they are assigning it a value of 500 billion to 1 trillion and it's just speculative in that sense. Does it make any sense to assign a multiple to BTC? Multiple of what if not earnings, perhaps future gain in market share?

This is total unscientific, back of the napkin analysis. But in my mind, maybe the overlap would be about 1/3. This would be a dollar value of about $3.5 trillion. So let's say BTC is half of that. Then we're talking $1.75 trillion. But like I said, the portion of the gold overlap is only part of BTC's market, there is a portion that is disconnected from gold entirely and represents the market coming from the entire universe of other asset classes. To capture that component maybe we double the $1.75 trillion to $3.5 trillion. That number is about 5x where BTC's market cap is today. This would be about 1/3 of the overall gold market today.
Barring a regulatory bullet or shock of some kind, I could see something like that happening. The big question is over what term? Maybe 3-5 years?
Again, just unsophisticated fooling around here. But I could see something like that happening.

And what's the downside in the other direction? Well if a regulatory threat comes to be from the US government or a coalition of governments, or oppressive tax policy, then I think the downside could be pretty bad. Maybe not zero, but perhaps lower than where BTC is today.

A simplistic thesis. You mentioned on-chain analysis which gets quite complex IMO. And there are other tools like the SFM model. The range of predictive outcomes from these various sources is staggering so no matter how sophisticated, some of them must be wrong.
But it's interesting to speculate about it and thank you for making me think about it a little more.

[Kbg]

Is it really a valid comparison when people compare gold and BTC quite as laterally as they do?
When I imagine a venn diagram, I can surely see some overlap between gold and BTC but only some.

For example, are we to assume that BTC buyers would have otherwise bought gold were it not for the opportunity to buy BTC? I don't think so.

Conversely, is it a good assumption to think that historical gold buyers have now turned away from gold in lieu of BTC?
Maybe some, but from what I can tell, gold bugs continue to be gold bugs for the most part, and BTC believers are attracted to crypto for features and expectations that never would have led them to gold as an alternative.

Again, I can accept a slice of overlap, but that's about it. For the most part BTC and crypto in general is a whole new and novel asset class that attracts its investors for reasons mostly unique to crypto. This is why I have trouble forecasting the value of BTC based on the gold market cap.

This is also why I have trouble considering BTC as a complete substitute for gold in a PP. But I have no difficulty seeing it as a speculative asset investment or store of value on its own merits, potentially a very good one over time.

Good thoughts, concur. My take is there multiple different types of folks interested in BTC or other cryptos in no particular order

Crooks via using it to skirt money trafficking laws or as a scam (e.g. create a "new" cryptocurrency and pawn it off on the gullible)

Techies

Pure speculators

Stick it to the government folks mentioned in my post on the other thread

True believers for whatever reasons (tech or otherwise)

I don't get why a gold bug would move to this stuff...a lot of the properties are like a 180 from each other.

[glennds]

I don't get why a gold bug would move to this stuff...a lot of the properties are like a 180 from each other.

My theory -
Some subset portion of the gold investor base does so out of a deep mistrust of government and "paper money". They like gold because no single central authority is in charge of it. Some are even survivalist types. They're in your "stick it to the government" category.

At least on this one criteria, there is some similar attraction toward Bitcoin. The pandemic era of money creation has only strengthened the belief among these types that the US dollar is racing toward zero.
Like you say, there are other properties that are vastly different between the two, but if this one criteria was the important one to someone, there's your answer.

[I Shrugged]

I wouldn’t call it sticking it to the government. More like protection against government malfeasance regarding money.

[Kbg]

I don’t get the government malfeasance stuff. Inflation is not simply a function of money supply. It must be combined with actual goods scarcity to occur and I can’t think of any historical event where the scarcity had anything to do with the currency.

Everything for the past 13 years demonstrates that the Fed can turn the money spigot on at full blast and leave it there with zero inflationary effect…fast forward to right now why has inflation kicked in because there is scarcity due to a lot of broken supply chains and labor.

[Kbg]

If someone can think of a reason why gold will always have an edge over BTC I'd love to hear it.

Not sure it will be an edge, but I do think physicality makes gold fundamentally different. We like to talk about SHTF scenarios here from time to time…no electricity, you are screwed with BTC. Meanwhile, the gold bug can slip a couple of 1 oz coins in his/her pocket and go in search of something to buy with them.

[glennds]

We hold gold in the PP fundamentally because it is a long term store of value so if anyone wants to challenge why BTC cannot fulfill that role due to a difference between it and gold then let's talk about it.

The entire PP is a long term store of value in real terms. Gold's earns a place in it is because of the way it predictably responds to certain economic conditions, namely Inflation. If BTC can be relied upon to behave in a similar way, it could potentially replace gold (within a PP), but there simply hasn't been enough history to demonstrate that it would.
The crux of the PP is the interplay of the four asset buckets relative to four different economic conditions.

[I Shrugged]

I don’t get the government malfeasance stuff. Inflation is not simply a function of money supply. It must be combined with actual goods scarcity to occur and I can’t think of any historical event where the scarcity had anything to do with the currency.

Everything for the past 13 years demonstrates that the Fed can turn the money spigot on at full blast and leave it there with zero inflationary effect…fast forward to right now why has inflation kicked in because there is scarcity due to a lot of broken supply chains and labor.

I’m old enough to remember when McDonald’s advertised “change back from your dollar” when you bought a burger fries and drink. The government devalues your money, wages, and savings year after year. That’s malfeasance in my book. And that’s the case for gold.

[I Shrugged]

I was wrong. It was TWO burgers, fries and a drink.
If you have 30 seconds:

https://youtu.be/4oBpdBn5GZw

[Kbg]

I don’t get the government malfeasance stuff. Inflation is not simply a function of money supply. It must be combined with actual goods scarcity to occur and I can’t think of any historical event where the scarcity had anything to do with the currency.

Everything for the past 13 years demonstrates that the Fed can turn the money spigot on at full blast and leave it there with zero inflationary effect…fast forward to right now why has inflation kicked in because there is scarcity due to a lot of broken supply chains and labor.

I’m old enough to remember when McDonald’s advertised “change back from your dollar” when you bought a burger fries and drink. The government devalues your money, wages, and savings year after year. That’s malfeasance in my book. And that’s the case for gold.

Apparently you didn’t live through the Great Depression. You might have a different opinion.

For me, I prefer the larger drinks now. I do miss penny candy though. Spent many summers sitting on a curb eating 25-50 pieces of candy with my Schwinn Sting-Ray posse after a hard ride. 10 cent Pepsi in a bottle was pretty sweet as well.

[I Shrugged]

kbg, are you taking the position that the government hasn't devalued our money, or that they have but it's fine?

[Kbg]

kbg, are you taking the position that the government hasn't devalued our money, or that they have but it's fine?

Yes they have and it's ok but not great by any means.

I am taking the position that a hard fixed currency system is heinously bad during a severe recession or depression and far worse overall than "slow burn" inflation.

Extremely high inflation is almost as bad as fixed currency...so don't think I'm arguing to be like Argentina, Zimbabwe or Venezuela here.

There actually is a mama bear just right approach.

If any inflation insanely bothers you then stick to tangible assets at the expense of volatility. Free lunches are far and few between when it comes to economics and investing. There isn't one here. There are tradeoffs.

Maybe I can give a small example to help readers understand what I'm talking about. The board has had quite a few posts debating the merits of BTC as of late. And let's say in some fantastical world it becomes the only global currency and then a nuclear electromagnetic pulse hits the earth natural or man made...what would happen? Yep, this is an EXTREME scenario...but the point is the money disappears and the economic devastation is very severe...this actually happened during the Great Depression in the US and in other shapes and forms in other countries and is literally why there is not a single government on the entire planet that has a fixed asset monetary system anymore.

Does the Fed have too much power, probably if not certainly. Is money manipulated, yes. Even hard money has been manipulated (just add some lead to it, voila...debased). All these are valid points, but this doesn't equate to hard money being a good approach, as compared to others, for advanced economies. If this is a religious thing for you, you are entitled to those beliefs. For me, don't want no baby or papa bear. I want that just right.

I think we should just cut to the chase...many think that somehow fixed money takes power away from the government somehow. If someone thinks this they are seriously deluded and know very, very little about economic history. It's just not true. There hasn't been a monetary system ever that isn't manipulatable and hasn't been manipulated by those in power. If you really want to educate yourself on this, pick up some books on economic or commercial history running from the early 1400s to today. If you do, I promise you'll come back here (or think) oh, yeah...kbg was right on this one.

[I Shrugged]

kbg, are you taking the position that the government hasn't devalued our money, or that they have but it's fine?

Yes they have and it's ok but not great by any means.

I am taking the position that a hard fixed currency system is heinously bad during a severe recession or depression and far worse overall than "slow burn" inflation.

Extremely high inflation is almost as bad as fixed currency...so don't think I'm arguing to be like Argentina, Zimbabwe or Venezuela here.

There actually is a mama bear just right approach.

If any inflation insanely bothers you then stick to tangible assets at the expense of volatility. Free lunches are far and few between when it comes to economics and investing. There isn't one here. It's a tradeoff.

I’m not talking about gold replacing today’s money. I’m talking about why I own gold.

[D1984]

I don’t get the government malfeasance stuff. Inflation is not simply a function of money supply. It must be combined with actual goods scarcity to occur and I can’t think of any historical event where the scarcity had anything to do with the currency.

Everything for the past 13 years demonstrates that the Fed can turn the money spigot on at full blast and leave it there with zero inflationary effect…fast forward to right now why has inflation kicked in because there is scarcity due to a lot of broken supply chains and labor.

I’m old enough to remember when McDonald’s advertised “change back from your dollar” when you bought a burger fries and drink. The government devalues your money, wages, and savings year after year. That’s malfeasance in my book. And that’s the case for gold.

Wages over the long term typically at least keep up with inflation which they indeed mostly have; check out the AWI from Social Security or AHEPTI from the Federal Reserve Data (FRED) website and compare it to CPI. Ideally they would also keep up with economywide productivity growth above and beyond merely keeping up with inflation (that they haven't always done so in the last 40-50 years has to do a lot more with other economic factors than it does with inflation or "dollar devaluation" by the Fed).

What you said about money and savings is only true if you keep your savings as physical paper currency in a cookie jar, under the mattress, or buried in a coffee can in your backyard. If you had merely put it in T-Bills (i.e. in a T-Bill money market fund with a 0.04% expense ratio) starting in 1969 you'd have around $11.10 today (end of July 2021); if you'd done the same with a blend of 3 month and 6-month CDs you'd have approximately $12.94. That ad you linked to (the one on Youtube that said it was from 1969) showed what appeared to be two regular hamburgers (i.e. not Big Macs or Quarter Pounders) and what McDonald's would today call a small fry and a small drink. I'd bet that if I went to my local McD's tonight with either $11.10 or $12.94 I could buy those same items and get change back too.

And all the above is only considering what would've happened if you'd invested in the safest risk-free assets imaginable. You would be able to buy even more hamburgers/fries/sodas if you'd invested in stocks, bonds, real estate, or gold.

[Kbg]

kbg, are you taking the position that the government hasn't devalued our money, or that they have but it's fine?

Yes they have and it's ok but not great by any means.

I am taking the position that a hard fixed currency system is heinously bad during a severe recession or depression and far worse overall than "slow burn" inflation.

Extremely high inflation is almost as bad as fixed currency...so don't think I'm arguing to be like Argentina, Zimbabwe or Venezuela here.

There actually is a mama bear just right approach.

If any inflation insanely bothers you then stick to tangible assets at the expense of volatility. Free lunches are far and few between when it comes to economics and investing. There isn't one here. It's a tradeoff.

I’m not talking about gold replacing today’s money. I’m talking about why I own gold.

Own it. Its got an outstanding long-term history of maintaining purchasing power but it's really volatile as well. I'd never tell anyone who understands the tradeoff not to invest in gold. To be super clear...I am not a gold hater or even a mild disliker of it. I think it is a fabulous asset with some really good characteristics...just not a fan of it as the basis for a monetary/currency system. Because it is relatively fixed in quantity, which makes it good as a store of value, is the same thing that makes it bad as a currency basis.

[Kbg]

I don’t get the government malfeasance stuff. Inflation is not simply a function of money supply. It must be combined with actual goods scarcity to occur and I can’t think of any historical event where the scarcity had anything to do with the currency.

Everything for the past 13 years demonstrates that the Fed can turn the money spigot on at full blast and leave it there with zero inflationary effect…fast forward to right now why has inflation kicked in because there is scarcity due to a lot of broken supply chains and labor.

I’m old enough to remember when McDonald’s advertised “change back from your dollar” when you bought a burger fries and drink. The government devalues your money, wages, and savings year after year. That’s malfeasance in my book. And that’s the case for gold.

Wages over the long term typically at least keep up with inflation which they indeed mostly have; check out the AWI from Social Security or AHEPTI from the Federal Reserve Data (FRED) website and compare it to CPI. Ideally they would also keep up with economywide productivity growth above and beyond merely keeping up with inflation (that they haven't always done so in the last 40-50 years has to do a lot more with other economic factors than it does with inflation or "dollar devaluation" by the Fed).

What you said about money and savings is only true if you keep your savings as physical paper currency in a cookie jar, under the mattress, or buried in a coffee can in your backyard. If you had merely put it in T-Bills (i.e. in a T-Bill money market fund with a 0.04% expense ratio) starting in 1969 you'd have around $11.10 today (end of July 2021); if you'd done the same with a blend of 3 month and 6-month CDs you'd have approximately $12.94. That ad you linked to (the one on Youtube that said it was from 1969) showed what appeared to be two regular hamburgers (i.e. not Big Macs or Quarter Pounders) and what McDonald's would today call a small fry and a small drink. I'd bet that if I went to my local McD's tonight with either $11.10 or $12.94 I could buy those same items and get change back too.

And all the above is only considering what would've happened if you'd invested in the safest risk-free assets imaginable. You would be able to buy even more hamburgers/fries/sodas if you'd invested in stocks, bonds, real estate, or gold.

Thanks for this...the above is mama bear. If I can't get access to a gold coin to buy something at McDonalds, that's baby bear. If my pay check is a $100 and my meal is $1000 that's papa bear. (and this three bears thing is really stupid as an analogy :-))

Of note, for the far right anarchists on the board you should get down on your knees and pray mightily for extremely high inflation...it has a fairly decent correlation to past revolutions.

[Jack Jones]

Wages over the long term typically at least keep up with inflation which they indeed mostly have; check out the AWI from Social Security or AHEPTI from the Federal Reserve Data (FRED) website and compare it to CPI. Ideally they would also keep up with economywide productivity growth above and beyond merely keeping up with inflation (that they haven't always done so in the last 40-50 years has to do a lot more with other economic factors than it does with inflation or "dollar devaluation" by the Fed).

What you said about money and savings is only true if you keep your savings as physical paper currency in a cookie jar, under the mattress, or buried in a coffee can in your backyard. If you had merely put it in T-Bills (i.e. in a T-Bill money market fund with a 0.04% expense ratio) starting in 1969 you'd have around $11.10 today (end of July 2021); if you'd done the same with a blend of 3 month and 6-month CDs you'd have approximately $12.94. That ad you linked to (the one on Youtube that said it was from 1969) showed what appeared to be two regular hamburgers (i.e. not Big Macs or Quarter Pounders) and what McDonald's would today call a small fry and a small drink. I'd bet that if I went to my local McD's tonight with either $11.10 or $12.94 I could buy those same items and get change back too.

And all the above is only considering what would've happened if you'd invested in the safest risk-free assets imaginable. You would be able to buy even more hamburgers/fries/sodas if you'd invested in stocks, bonds, real estate, or gold.

This is a wealthy, educated perspective. Inflation hurts the poor more than the wealthy. A greater proportion of their wealth is in cash because, well, they don't have any money to invest.

My mother-in-law still gets paid the same $18/hr she did 10 years ago. I agree that over time, wages adjust w/ inflation, but I would guess that is largely driven by younger folks entering the workforce. Older people settle into their lives and watch the price of everything go up.

Regular people don't know what T-bills are. I recently talked to another relative who has always been relatively saavy w/ her finances (for an average person), but she was lamenting that she didn't know what to do w/ her money anymore. She couldn't find a bank that pays decent interest.

Also, how about the T-bills currently being issued? Can we say w/ a straight face that they will keep up with inflation?

[D1984]

Wages over the long term typically at least keep up with inflation which they indeed mostly have; check out the AWI from Social Security or AHEPTI from the Federal Reserve Data (FRED) website and compare it to CPI. Ideally they would also keep up with economywide productivity growth above and beyond merely keeping up with inflation (that they haven't always done so in the last 40-50 years has to do a lot more with other economic factors than it does with inflation or "dollar devaluation" by the Fed).

What you said about money and savings is only true if you keep your savings as physical paper currency in a cookie jar, under the mattress, or buried in a coffee can in your backyard. If you had merely put it in T-Bills (i.e. in a T-Bill money market fund with a 0.04% expense ratio) starting in 1969 you'd have around $11.10 today (end of July 2021); if you'd done the same with a blend of 3 month and 6-month CDs you'd have approximately $12.94. That ad you linked to (the one on Youtube that said it was from 1969) showed what appeared to be two regular hamburgers (i.e. not Big Macs or Quarter Pounders) and what McDonald's would today call a small fry and a small drink. I'd bet that if I went to my local McD's tonight with either $11.10 or $12.94 I could buy those same items and get change back too.

And all the above is only considering what would've happened if you'd invested in the safest risk-free assets imaginable. You would be able to buy even more hamburgers/fries/sodas if you'd invested in stocks, bonds, real estate, or gold.

This is a wealthy, educated perspective. Inflation hurts the poor more than the wealthy. A greater proportion of their wealth is in cash because, well, they don't have any money to invest.

My mother-in-law still gets paid the same $18/hr she did 10 years ago. I agree that over time, wages adjust w/ inflation, but I would guess that is largely driven by younger folks entering the workforce. Older people settle into their lives and watch the price of everything go up.

First of all, see: https://papers.ssrn.com/sol3/papers.cfm ... id=3571909

This study is titled: Inflation and the Income Share of the Rich: Evidence for 12 OECD Countries

The authors' conclusion: "This paper examines the distributional implications of inflation on top income shares in 12 advanced economies using data over the period 1920-2016. We use Local Projections to analyze how top income shares respond to an inflation shock, and panel regressions in which all variables are defined as five-year averages to examine the impact of inflation on the position of the top-one-percent in the long run. Our findings suggest that inflation reduces the share of national income held by the top one percent. Furthermore, we find that inflation shocks and long-run inflation have similar effects on top income shares."

Second, how much inflation hurts or helps you depends not so much on whether you are wealthy or middle class or poor but on whether you are more of a borrower or lender.

With that said, most of the debt in the US is owned (directly or indirectly) by the upper middle class, the wealthy, and the ultra wealthy (which makes logical sense given the income and wealth distribution of the US; most of any kind of financial asset will be owned by these groups). The deliberate holding of rates at around 2% during 1946-47 while inflation averaged around 10% in the US was a confiscation of bondholders' wealth in real terms. Same applied in the 1969-1981 inflation (albeit rates were allowed to rise during this time.....although this also hurt long-term and mid-term bondholders as well since rising rates mean falling bond prices).

A middle class person with a mortgage may very well be helped more by inflation than hurt by it (look at the 1970s.....even if one's wages didn't quite keep up with inflation, the nearly double-digit average inflation rate from 1973 to 1981 basically washed away in real terms much of the mortgage debt--taken on at lower fixed rates from the 1950s to the early 1970s--of homeowners).

A lower-class person (say, a Gen Z'er just getting started in his career) who is up to his eyeballs in student loan debt, credit card debt, and an auto loan would probably welcome some inflation which would reduce the real value of his debts.

Less than 10% of the income of retirees comes from interest payments; see https://www.newyorker.com/magazine/2013 ... -up-savers; to quote: "even seniors, one of the groups most obviously hurt by low interest rates, get only ten per cent of their income from interest payments". The majority of cash income for seniors in the US comes from Social Security; Social Security income is inflation-indexed so it rises as inflation rises.

The largest asset most working class and middle class people own (albeit not one that can be directly capitalized since doing so would involve essentially selling oneself into slavery) is the value of their labor. To the extent that wages haven't always kept up with inflation (much less with productivity growth) from the early 1970s onward, that is more of the fault of policy choices we've made (bust unions, not raising the minimum wage, no limits on executive pay and/or the ratio of said pay to median worker pay, taxing capital income lower than wage income, offshoring, lowering corporate tax rates which in turn incentivizes companies to keep wages low since at lower tax rates they keep more of the gains of doing so, weakening or elimination of anti-trust regulation, allowing rentier parasitism like too much of the pharma industry or financial industry today engages in, having a mostly shareholder-friendly economic model vs one that takes all stakeholders into account, not having a UBI and universal healthcare which results in potential workers desperate to take any job and there's thus no pressure on employers to raise wages, etc) than of inflation per se. If we reversed these policy choices wages would no doubt at least keep pace with inflation (and indeed with real productivity growth as they did from the late 40s to the early 70s) and your mother in law would see some real inflation-beating wage gains.

[D1984]

Wages over the long term typically at least keep up with inflation which they indeed mostly have; check out the AWI from Social Security or AHEPTI from the Federal Reserve Data (FRED) website and compare it to CPI. Ideally they would also keep up with economywide productivity growth above and beyond merely keeping up with inflation (that they haven't always done so in the last 40-50 years has to do a lot more with other economic factors than it does with inflation or "dollar devaluation" by the Fed).

What you said about money and savings is only true if you keep your savings as physical paper currency in a cookie jar, under the mattress, or buried in a coffee can in your backyard. If you had merely put it in T-Bills (i.e. in a T-Bill money market fund with a 0.04% expense ratio) starting in 1969 you'd have around $11.10 today (end of July 2021); if you'd done the same with a blend of 3 month and 6-month CDs you'd have approximately $12.94. That ad you linked to (the one on Youtube that said it was from 1969) showed what appeared to be two regular hamburgers (i.e. not Big Macs or Quarter Pounders) and what McDonald's would today call a small fry and a small drink. I'd bet that if I went to my local McD's tonight with either $11.10 or $12.94 I could buy those same items and get change back too.

And all the above is only considering what would've happened if you'd invested in the safest risk-free assets imaginable. You would be able to buy even more hamburgers/fries/sodas if you'd invested in stocks, bonds, real estate, or gold.

Regular people don't know what T-bills are. I recently talked to another relative who has always been relatively savvy w/ her finances (for an average person), but she was lamenting that she didn't know what to do w/ her money anymore. She couldn't find a bank that pays decent interest.

Also, how about the T-bills currently being issued? Can we say w/ a straight face that they will keep up with inflation?

First of all, why is she--or anyone--entitled to a positive real rate of interest on their savings? If you are familiar with the IS-LM macroeconomic model you might consider that at times real rates may actually need to be negative in order for a given economy to have full or near full employment. Why should the economic interests of savers always take precedence over the economic interests of workers?

Second, I-Bonds. They pay 3.54% right now and will at least keep up with inflation....I would also add that some of the higher yielding reward checking accounts at banks pay between 2.5 and 3.3% at the moment.

Third, I personally wouldn't have a problem with the government or the Fed offering an account similar to a checking account that paid the greater of:

A. Inflation plus 0.01% (i.e. if inflation was 3.00% then the account would yield 3.01% )

B. An average of the 3-month CD rate and the T-Bill rate

C. 2.50% nominal

On a sum of, say, $65,000 or $70,000 max. This would allow small savers a guaranteed inflation-beating (or at least inflation-equaling) return while at the same time not unduly rewarding those with millions to invest with an interest rate higher than market rates.