Re: Reserve Studies
From: Brian Bartholomew (bbstat.ufl.edu)
Date: Sat, 5 Aug 2006 14:00:08 -0700 (PDT)
Do the reserve studies address the currency wearing out with age, too?
I'd love to know what forms existing cohos are holding their reserve
savings in, such as currency (whose?), stocks or bonds, so that in 20
years it will be worth enough to do what it's been saved to do.

Let me wildly claim the rate of monetary inflation is 4% a year.
This number is from the St. Louis federal reserve:

        http://research.stlouisfed.org/publications/usfd/page3.pdf

4 percent per year is 1.04^20 = 2.1911.  That means when you go to
replace your roof in 20 years, your saved money will buy
1/2.1911 = .4564 = 46% = only half the roof.

Rather than discuss what the future rate of inflation might be, which
is hard to predict, I would rather assume that monetary inflation will
exist at between 3% to 10% a year, and ask how to save a reserve fund
in that climate.
                                                        Brian

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