Can you live on a fixed term?: the surprising response of a youtuber based on real interest and inflation data – ADNSUR

In one of the videos that he presents on Youtube ‘The Bag Man’There is an in-depth analysis of the evolution between interest rates and inflation, by proposing a comparison between what happened in the period 2018 and 2022. The result, as ADNSUR was able to evaluate, is more than surprising.

According to what the youtuber raised, a deposit of 1 million pesos in January 2018generated a total return, applying compound interest (that is, reinvesting principal and interest every 30 days), which in the first month of this year it became 5 million pesos.

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4 million profit? It seems a more than auspicious rate of return, in 4 years elapsed. However, we must take into account the Argentine ‘little problem’ called inflation, which although this year has been socialized to almost everyone, is a ranking in which we have won several World Cups since a long time.

When our youtuber friend updated the amount of the initial invested capital of 1 million pesos, when crossing it with the accumulated inflation in the 4 years (with a total of 366.8%), that amount of January 2018 was equivalent in January 2022 to 4.7 million pesos.

What does the above mean? That the net yield of the fixed term is only 300,000 pesos, since the rest is updated for inflation. In other words: of the 5 million at the end of the account, 4.7 would buy the same today as 1 million bought 4 years ago. And when that amount is distributed over 4 years and, in turn, over 12 months, the value is practically insignificant for daily subsistence.

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Until August 2022, the account would have been even more negative

If the calculation is updated until August 2022, the inflation calculator applied for the previous case determines that 1 million pesos of January 2018 is the equivalent today to something more than 6.8 million pesos.

To better understand the above calculation, you can think of the following example: a 0 km vehicle that in January 2018 cost 1 million pesos, today costsfor the same vehicle and model (beyond the technological adaptations or redesigns that are added each year), about 6.8 million pesos. Silver is much more, but the acquired good is the same.

Against this calculation, the fixed term started in January 2018 would have yielded clearly negative results, since even in the most optimistic projection, the interest rate is not enough to balance the capital updated by inflation.

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Let’s see: applying each of the rates that were rising month by month (assuming that the saver had renewed their fixed term monthly one day after the rise, which was on different dates and with little prior announcement), the calculation up to August yields a total yield of 6.3 million pesos. The saver should have waited until next September, renewing in August with a monthly 5.8%, to reach just 6.7 million pesos.

Said more clearly: whoever deposited 1 million pesos in January 2018 and renewed them monthly, capital and interest, today would have the equivalent of 900,000 pesos at that time.

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