Good Money and Bad Money: the Rules have Changed

There is good money and bad money. If you took out a mortgage in order to buy a house or a long term loan in order to buy an assets between 1964 and 2008 in most developed or developing nations in the world you borrowed good money and repaid in bad money. If you saved money between the same periods in a deposit taking institution you parted with good money and in most cases got back bad money years later. In 2008 the rules changed although most ordinary people did not know it, because the rule change was not generally known. 

Inflation means you should borrow good money and repay bad money: deflation means you should lend bad money and get back good money.

The difficulty is that borrowing and saving over the long term involves for most ordinary people a desire to acquire or grow an asset, combined with an attempt to predict the future. The soothsaying element is of the same ilk as the kind of soothsaying that ordinary folk have to undertake when they elect their governments. Predicting the future is a pastime which has little chance of success but is essential, It is intelligent guesswork which requires information, and much information is hidden from the likes of us.

The deposit taking and lending institutions have much better information than ordinary people and do not share it fully; they only share the parts which they think will influence the decisions of ordinary people in ways that the deposit taking and lending institutions (that is to say the banks) think will ensure that ordinary people make decisions that will benefit the deposit taking and lending institutions, rather than the ordinary people.

The rules have changed and no one really knows what the rules are today. Timing, as always, is important, as one Julius found out when he told a soothsayer that the ides of March had come, and discovered later that they had not yet gone.

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