A View From A Farr: Inflation keeps the Poor Poor and the Rich Rich by Ed Farr

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Inflation Keeps the Poor Poor and the Rich Rich. by Ed Farr

In the old days you could build wealth by stuffing coins under the floor.  The gold dollar that bought a goat on Tuesday could buy a cow later. Under capitalism, production gets better and cheaper.  The longer you hold your money, the better and cheaper products become. At least that is how it should be.  Inflation screws it all up. Inflation keeps the poor poor by making this kind of saving impossible.

If you want to save in an inflationary economy you dare not stash money away. Money loses value. You must invest or your dollars become pennies. Investing, though, is a business. You must constantly go over your accounts. Bonds and mutual funds carry risk. You are taxed on your gains.  You must learn about Roth IRA’s, simple IRA’s, collectables, annuities, cost basis, depreciation and Janet Yellen’s latest speech.

Investing is fun, unless you’re poor. If you are an over-worked widow, an ascetic intellectual or a starving artist you have other things to think about. Still, you must obey the iron law of inflation. Invest or end up with nothing.

The rich are good money managers by definition.  At the Wall Street casino they are the card counters. Instead of making stuff, rich investors put their energies into speculating on paper. And when they win who loses? The poor guy who doesn’t understand the game.  The rich guys buy when the poor sell out.  He sells when poor make bad buying decisions. The poor aren’t clever investors; they’re truckers or roofers or waitresses or yet-to-be-employed kids.

The rich are specialists.  They thrive while the poor dive.  Inflation clobbers the poor in two ways.  It raises prices while it makes saving nearly impossible.

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