I am writing to you in response to your Podcast #276.
The first thing I want to say is—well done! You talked about economics and money for four hours and attracted over three million viewers. The monetary system faces grave problems and discussing them is important.
Purchasing Power and Yield Purchasing Power
Michael, you make a great point about the amount of capital needed to pay for retirement. You noted that at 5%, one needs $1 million worth of capital to generate $50,000 income. But when the interest rate drops to 0.5%, then the same bond that pays the same $50,000 a year rises to $10 million.
You are describing what I call Yield Purchasing Power. Most people think only of Purchasing Power as: how many years can you live by liquidating your capital? A million bucks lasts 20 years, at $50,000 a year. By contrast, Yield Purchasing Power asks how much capital is needed to earn $50,000. At 5% interest, $1 million in capital yields $50,000 a year forever. One should not consume capital, but invest it productively to earn a yield.
Bitcoin Has No Yield
Read it all HERE