We've hit the ICEBERG, but everyone is still listening to the band playing

The full artcile at... Mogambo... I love the way he explains it
http://www.321gold.com/editorials/daughty/daughty092706.html
Some good insight can be found at,
http://www.321gold.com/

-- Paying a dollar for a single McDonald's hamburger seems like a lot to me, since I can remember when you could get a McDonald's hamburger for 15 cents in 1966.

So, class, put down your books and take out a clean sheet of paper for today's Mogambo Pop Quiz (MPQ). The question is, "If in 1966 I had started to save for my retirement, how much money would I need to save, per day, to buy one hamburger, per day, in the future, knowing that the hamburger is currently selling for 15 cents, but would cost a dollar in 40 years?"

Since everyone in the class is moaning and whining and scratching their heads, I kindly provide the hint "Firstly we note that inflation in the price of the burger has been 670% over 40 years. That's comes out to 4.9% inflation, per year, compounded."

Uncharacteristically forsaking my usual unhelpful, vengeful and insulting pedantry, I announce that I will magnanimously "Assume that inflation and expenses equals net capital gains."

I foolishly thought that would be enough to enable them to solve the problem, but with my Mogambo Super Hearing (MSH) I can hear them whispering into their little cell-phones to each other "What in the hell is this Mogambo idiot talking about?"

I make a mental note that since the government is tapping all of our phones now, I can simply have FBI give me a list of exactly who was talking to who in my class, and maybe get a transcript of their little conversations, so that I can take my calculated revenge with their final grades.

Having done that, I put a big, false smile on my face so that they would not suspect anything, and I go on to helpfully hint, "If you had saved up your retirement in cash, you actually lost 'money', as your money lost its buying power at the rate of 4.9% per year." Again I paused, expecting to see their young, fresh little faces light up at the sudden comprehension. But nothing! If anything, their faces were even MORE blank, and they were even MORE stupid than they were a minute ago. And then they wonder why I hate them so much!

Abruptly losing my patience, I leap atop a desk and scream out "If you had invested the money into assets on a buy-and-hold basis, year after year, it looks like you made money, doesn't it?" Frightened, they all nervously nod their heads up and down. Enraged, I go on, shouting, "But after you pay capital gains taxes, income taxes, miscellaneous other taxes, fees, expenses and commissions, and maybe some state income taxes, and after all THAT you then deduct from that pitifully diminished 'gain' the vast diminution of your wealth caused by persistent, grinding inflation, you ain't really earned squat! Hahaha! Squat! In fact, you lost wealth, you little twits! Hahaha! You are worse off than when you started! Welcome to ugly economic reality, you stupid, halfwitted morons!"

Still they sat there, perplexed and apparently paralyzed with fear for some reason. Tiring of this game, I give them the answer, "Mathematically, with real (inflation-adjusted) net gains of zero, to get a hamburger in the future, you have to save a hamburger today."

A murmur runs through the class! I have finally connected with these little boneheads! Excitedly, I quickly go on to say "Extrapolating, if you want to have a retirement lasting 20 years, after working for 40 years, and to do so with a retirement income equal to the buying power of 100% of your current income, then, adjusting for inflation and taxes, you have to save 50% of your income per year, every year that you work, for the whole 40 years! Hahahaha! Fifty percent!"

At that, they all jumped up, screaming, and ran from the class in horror, so I never got the chance to tell them that it gets worse if you are only 20 years away from retirement, because then you have to save (hahaha!) 100% of your income today!