Money Makes Money

I make assumptions. One of those assumptions is that money can make money. That hoarding is stupid. Buffers aren’t hoarding. A Buffer is some money, or energy, or (fill the gap with something that is essential) that is there in case of an emergency. The world is complicated, ambiguous, and random. Nothing happens in straight lines, so we need to hold something back. Emergencies lose their teeth when you plan for them. Beyond a Buffer, extra becomes wasteful. The magic trick of Capitalism is to keep the extra working. Instead of hoarding, money that does something useful gets paid. Capital can grow, or sustain. A Sustainable Drawdown Rate is the assumed amount of spending that the average 65-year-old can extract from Capital without the money running out. 3.5% is a reasonable SDR. The underlying assumption is that money can comfortably be paid $3.50 for each $100 that is put to work (rather than kept under the bed). On average, you can spend that $3.50, and still have what you had at the beginning of the year. Capital can be the breadwinner. Capital can work, so we can live.

Money can win bread