David S
Junior Chimp
Posts: 5,250
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« on: March 12, 2006, 08:10:12 PM » |
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Inflation acts like a tax on savings and future earnings.
Government creates money it doesn't have and then spends it which causes inflation. The 100 bucks you have in the bank this year will purchase only 96 dollars worth of stuff next near so in effect you have been taxed out of 4% of your savings. You might invest in CDs which currently pay just a bit over 4% interest and are quite secure, but the interest will be taxed so you probably don't break even with inflation.
You can invest in stocks or commodities or real estate to get a higher return but the risk is higher too.
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