Welcome to all of the beautiful new good young moneyers who have joined us since last Thursday. We’re building a values movement, join us!
Hi 👋 hello. This week we’re paying $1.99 a litre for petrol and investigating the world of choose your own monetary policy. In some ways, this builds on last week’s: all possible views about the future of humanity are wild. Let’s goooooooooooo. 💫
If petrol station’s have ideal customers, I am a strong contender. My one downfall is that I don’t drive much (fill up every 6-8 weeks kind of vibe). Aside from that: when I buy fuel, my car is empty and I’m expected somewhere. I don’t have the time to drive somewhere else and save 20 cents a litre. Which means last week, I stumped up $1.99 per litre. That’s +50% on my yearly average.
Of course, lots of factors determine petrol prices, but one of them has been doing the rounds on the news. Inflation! It’s really high in the US. In Australia?
We’re actually on the low end of our 2-3% inflation target right now, according to our central bank’s November update:
“Inflation has picked up, but in underlying terms is still low, at 2.1 per cent. The headline CPI inflation rate is 3 percent and is being affected by higher petrol prices, higher prices for newly constructed homes and the disruptions in global supply chains.” — The RBA
This type of chronically slow inflation is the most politically palatable way for governments to promise us the future and fund it with debt. When prices rise slowly each year, in a hardly noticeable fashion, this is great for the government because the people don’t notice and therefore don’t get upset, and our debt becomes cheaper to repay. The people are economically fine too, as long as wages continue to increase annually. Even better if they own assets that benefit from inflation.
But these kinds of averages conceal. It’s not 2-3% inflation on everything, it’s 50% rises in fuel prices and 50% declines in the prices of TVs. It’s a split economy, or this famous graph from 2017:
It’s rising costs of living and falling prices of discretionary goods, and wages that aren’t rising fast enough. This hurts people with middle and lower incomes the most. While I have the privilege of being able to afford $1.99/L fuel, it still doesn’t feel very good. When the RBA talks about higher prices of newly constructed homes, these are the homes that are typically in growth corridors of cities where land is more affordable. The entry level homes. Being priced out of entry level homes doesn’t feel good. It’s political dynamite.
As we said, averages conceal. While the stock market recovery may have been swift, this remains a divided economy, a divided country:
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair.” — Charles Dickens
The obvious next question is, well, where to next? But while we could lay out the various scenarios, we’re not here to try to predict the future, but instead to try and understand the present. One interesting response is the vast swathes of people choosing to experiment with their own currencies and monetary policies. Whether by creating them or investing in them, interest in ‘token economics’ or ‘tokenomics’ is at all time highs.
Tokenomics are the set of rules which govern the launch and supply of a cryptocurrency. And right now, it’s a choose your own adventure kind of world, where the adventure is monetary policy. Some tokens are deflationary, some are hyper-inflationary. Some are decentralised, some centralised. Some have a fixed supply, some uncapped. Some are backed by assets, some by memes. This is experimentation in global currencies not seen since...the last currency collapse?
What a 💫time💫 to be alive.
As always, thank you for reading. I hope you found value here. If you did, why not share this article? We’re so so so close to hitting 100 subscribers and giving away a stack of the very best books when we do.
P.S. I would love to see the RBA take a leaf out of the FRED’s book and compare prices of prawns and tofuprawns in their December update:
Happy Thanksgiving to our American GYMs.