Why are central bank cash deposits a poor long-term asset to hold?
Replied byRay Dalio
Founder at Bridgewater Associates
Niche: Finance
Revenue: Not Publicly Disclosed/month
Location: Westport, Connecticut, United States
Started: 1975
Cash feels safe, but inflation eats away its purchasing power. Even if you earn interest, you must pay taxes on those nominal gains. Over a long period, cash deposits guarantee a negative real return after accounting for inflation and taxes.
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