A forum user: "Cash loses 7% a year in real terms"

A forum user argues that cash loses 7% real annually and that liquidity is no longer a safe haven

Anyone in cash waiting for a stock market drop like the one a participant estimates at 40% in 2007 is losing money while waiting. The calculation circulating among investors puts the real hit to cash at between 7% and 10% annually: inflation, taxes and no yield to offset it. The thesis is uncomfortable and goes against the instinct of anyone who has been through a crash: the move is not to maximize gains, but to avoid taking the -30% while others do. Some argue that the crisis many expect would look more like 2000 than 2007.

Why 2007 won't repeat: deflation then, inflation now

According to one user's summary of the debate, in 2007 the system entered deflation and idle money held up. Today the scenario would be the reverse: sustained inflation, debt paid by issuing and distributing it in installments among everyone, with CPI in the middle and a convenient scapegoat to blame. Under that framework, holding cash is, in his view, a slow way to become poorer.

What does repeat, according to this narrative, is the unequal distribution of opportunity. Those who had savings and financial literacy bought assets at bargain prices; those in the stock market saw a -40% hit to their wealth. Those who reacted in time cut exposure and improved their relative position without earning an extra euro.

Where to exit and where to enter: money markets, fixed income and the tax trick

Money market funds and high-yield accounts are mentioned in the debate as a place to park cash while waiting for deposit rates to start moving. And there is the detail that a user breaks down: rotating from international value to fixed income that matches inflation without going through Hacienda (Spain's tax agency), taking advantage of the tax deferral of funds. The 25% that is not given to the Agencia Tributaria is, in his opinion, free return.

For an inflationary shock with an energy epicenter, another participant points out that the bet is on value and commodities versus growth and technology. The relevant question, he adds, is not whether to exit, but where to exit from and where to enter.

The wage gap that fuels distrust

The numbers one forum user cites are telling: average salary of $40,000 in Spain, $35,000 excluding Madrid, compared to $75,000 in Germany or $100,000 in Switzerland. A liter of gasoline, $2.4 in Madrid and $1.2 in Connecticut.

With those differentials, some conclude that one must be invested. The problem remains the same: no one has said which month the market will fall, and getting out early costs as much as staying in.