LDS Inc. - part 3

(by Dan Peterson sic et non blog)

When we last left off, in “LDS Inc. (Part Two),” we had established that spending money on such things as daily excursions to Starbucks or the latest electronic gadgets is very different than spending money on investments.

In a very real sense, though, to spend money on investments isn’t really to spend money at all.  It’s simply to find a means of storing, for future use, the value represented by that money.

If you were given $5oo dollars by your dotty aunt and immediately took it (and your vintage Yugo and your boyfriend) and headed off to Jean-Georges for some table-side French cuisine with fine imported wine, there would be no question that you had spent it.  What, though, if you stuffed it in your mattress for safe-keeping?  Would that be to spend it?  No reasonable person would say Yes.  But hiding $500 in your mattress would be rather stupid, wouldn’t it?  So, instead, you deposit it in your checking account.

Is that “spending” it?  Not really.   Not yet.

You can get a slightly higher rate of interest, though, if you buy a $500 certificate of deposit.  Is that “spending” it?  In a sense, obviously yes.  In another significant sense, though, not at all.  It’s just yet another way of storing the $500 — a rather wiser way than hiding it in your dirty mattress.


How, though, do banks generate the interest that they pay you?  Do they do it out of the generosity of their hearts?  Is it a gift, paid for by some mysterious stranger for his own eccentric and inscrutable reasons?  Not at all.  The bank is lending or investing the money that it takes in from the people saving with it, and is sharing its profits with them in the form of interest.

So let us suppose that, instead of buying a certificate of deposit, you purchase ten fifty-dollar shares of the Main Street Widget Company.  Does this mean that you’ve “spent” your five hundred dollar windfall?  In a sense you have.  But in a really important sense, you haven’t spent it at all.  This is really just another way of storing the money that Aunt Cormorant gave you, not fundamentally different from putting it in a bank account but much more savvy than hiding it in your mattress.

When the Church of Jesus Christ of Latter-day Saints invests money that has come into its possession, it isn’t really spending it.  It’s storing those funds for future use.

https://www.patheos.com/blogs/danpeterson/2019/12/lds-inc-part-three.html