Today I did a little research about savings in US. I am trying to figure out how I should distribute my tuition money for next year. I want to save $5,000 in a 100% safe place (because I need the money in June), and do some simple investment with the rest.
I looked at two of the safest investment: treasury bill and certificate of deposit.
Treasury bill is issued by the government to raise money from individuals. The interest rate can be as low as zero. Under the best circumstance, the interest rate is still below 0.5% annually. So it does not make sense for me to lend $5,000 to US government and get around $10 of interest after half a year (and think about all the troubles to register and bid and buy and sell!). Then I was thinking: does it make sense for Chinese government to lend trillions of dollar to the US government?
The bank deposit is equally depressing. The rate is no better than T-bills. And I don't even want to think about lending money to Bank of America, even though it is only $5,000.
Then I looked at the increase of CPI in US. The CPI indicates how expensive things are, or how much the cost of living has changed. The average increase of CPI in recent years range from 3%-4%, which is much higher than the interests from either Treasury bill or bank deposit. This means, if I don't make more than 4% profit with my money every year, I am actually losing money! This means that if I don't want to lose money, I have to invest my money into one of the many risky markets.
When you think about this, it is quite absurd. You have already worked hard enough to earn the money. Then you have to fight even harder to keep the money from being robbed by the system! If you don't move, you will just keep losing money at a 3% annual rate. After 20 years, you will lose half of the value of your savings. So no matter how tired you are, you have to get up and invest your money into the market. Once you do that, you find yourself in a even more dangerous situation. You can lose more money even faster! But you have no choice.
For me, I believe (or hope) that I am smart enough to make money from the market. But most people don't have the time and expertise to navigate through the dangerous market place. They have two choice: save the money and let it shrink, or invest the money and pray. Most people who invest the money into the market (and expecting a high return) will lose it.
So isn't there any way that people can just safely save their salary without being secretly and slowly robbed? Or this world is too dangerous a place for honest people? Maybe one day I can start something to fill the gap.