(Mike Maharrey, Money Metals News Service) Let’s imagine I save enough money to buy a car for my kid. However, he’s only 13, so he won’t be driving for a few years.
In a sane world, I could just stick the money under my mattress and buy a car in three years. But we don’t live in a sane world. We live in a world where the government relentlessly devalues your money. If I pull the cash out from under my mattress in 2029 or 2030, it almost certainly won’t be enough to buy a car at the inflated price.
Maybe I should take some of that money and make a bet on tonight’s Bucs-Jets preseason game. If I win, I can pad the savings and maybe afford that car.
Sounds crazy, right?
Maybe not.
Apparently, a lot of people have turned to sports betting as an investment strategy.
It’s Impossible to Save
Inflation is tough on ordinary working people. Eventually, wages catch up with price inflation. However, they always lag. That means workers are constantly engaged in an unwinnable game of “Chase the Inflation.”
It’s even tougher on people trying to save or living on a fixed income. Rising prices make them poorer and poorer every month.
This is the root of the affordability problem. It’s not that kids are buying too many $20 burritos. The problem is that a burrito shouldn’t cost 20 freakin’ dollars!
As with any economic dynamic, inflation creates incentives.
For savers, it drives them to seek bigger and bigger returns to keep up with the government’s monetary devaluation. At first, a simple savings account with a relatively low yield will do the trick. But as the dollar loses purchasing power, you need a better return to keep up. So, maybe you stick your money in a higher-interest-yielding CD.
Soon, that’s not even enough. Your interest rate is better, but the real interest rate when you factor in inflation is negative. You’re still losing purchasing power over time. You need better returns, so you start chasing gains on the stock market.
Now, that’s all well and good, but it introduces risk. A savings account or a CD is a relatively safe place to park money. But the stock market can get volatile. You might earn a bigger gain. On the other hand, you can quickly lose a lot of money.
Risk or no risk, you want to retire. You want to have enough money to do all the things you want to do, so you suck it up and chase the rainbow.
And pretty soon, you find yourself taking on even more risk to boost your returns. You start speculating on startups and junk stocks.
You can see how easily this scenario can play out.
I Bet I Can Save!
Well, now we’ve taken things a step further.
According to recent Bloomberg research, people are increasingly using sports betting as a “deliberate part of long-term financial strategy.”
Talk about taking on risk.
Around 12 percent of the people surveyed said that gambling was one of their investment tools.
Gen Z is driving this trend, with 26 percent saying sports betting is part of their investment strategy. Meanwhile, 52 percent of the Gen Z respondents admitted directing investment funds into sports betting over the last year.
In his 1964 book “What You Should Know About Inflation,” Henry Hazlitt saw this coming.
“Inflation … encourages and rewards speculation and gambling at the expense of thrift and work.”
It’s easy to point fingers and get all judgy about “young people these days” gambling. But what are they supposed to do? Their money is garbage, and they know it. When you create incentives, people will respond.
My friend Jp Cortez over at the Sound Money Defense League summed it up perfectly, observing that “Fed policy has destroyed money as a savings technology.”
“Inflation and the erosion of cash returns amplify the search for higher-risk ways to ‘get ahead.’ As [economists Ludwig von] Mises and [Murray] Rothbard warned for decades: the slide from sound money ends in gambling degeneracy.”
Fortunately, there is a way to preserve your wealth over time without hoping the Tampa Bay Buccaneers will cover the spread. You can save in real money — gold and silver.
Anyway, that’s my thought for today. Now, excuse me. I need to sell some stock and place a bet on that game tonight.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
