Don't Take Financial Advice From Michael Fassbender

Moneybox
A blog about business and economics.
Oct. 16 2013 11:52 AM

Don't Take Financial Advice From Michael Fassbender

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Fassbender's just in it for the gold.

Photo by Frederic J. Brown/AFP/Getty Images

Michael Fassbender has a number of good qualities, but a recent GQ interview reveals a weak grasp of monetary economics and some badly unsound financial advice. It starts out with the revelation that Fassbender has been saving a lot of money during the past few years and, for example, "still lives in the same East London bachelor apartment he's had since his twenties" rather than upgrading now that he's a movie star.

What to do with that money he's saved?

"It's probably not good in the bank," he muses, as though this is the first time this notion has occurred to him. "You need to get it out of the bank."
Out of the bank?
"You hear, 'Oh, we're in this much debt.' It's like, where is that money?! All these numbers: Where do they come from? One hundred billion whatever, these numbers. I'd like to see a room with that amount of money. There is no room that could take that amount of money. That money doesn't exist."
But you're in the same spot, right? I don't know what you get for X-Men, but you've never seen $7 million in a room, either.
"No, but what I'm saying is like, countries going, 'We're in this much debt, and we've got to get it together to pay off this debt.' It's like, 'You're never going to pay that debt off. It's impossible.' I worry about currency and money. Inflation, bang, and next thing, a million's not worth anything. Like in Germany before and after the war, when it really crashed. It was like 2,000 marks for a loaf of bread or something, you know what I mean? That's why you've got to get it in bricks and mortar."
Perhaps it's time to upgrade to a new apartment.
"Or some gold."
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Several points here. For starters, if you want to hedge against inflation, don't buy gold. Buy inflation-indexed bonds. You can get inflation-indexed Treasury bonds, inflation-indexed U.K. gilts, whatever you like. Normal bonds pay an interest rate. Inflation-indexed bonds pay a (lower) interest rate plus whatever the inflation rate turns out to be. By calculating the difference between the rates, you can get a market test of inflation expectations. Right now financial markets expect long-term inflation to be quite low. Consequently, if you think you are smarter than the market and in fact inflation will be high, then you can make a lot of money by buying inflation-indexed bonds.

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In terms of rooms full of money, $7 million would fit into less than 4 cubic feet if you used $100 bills. Billions, obviously, would be a different issue. If you ever go to a Federal Reserve Bank for a tour, they can show you a cash room that is very genuinely full of unimaginably large sums of money. But obviously these days people don't use cash for large-scale transactions—it's all electronic—so this volume-of-money problem is basically irrelevant. In part for this reason, though, we used to have larger denominations of currency, including bills worth as much as $10,000 (Salmon Chase was on it) for general circulation. There was even a special $100,000 bill for use in internal government transactions. With $100,000 bills you could fill a room with billions quite easily.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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