So here is something different, as Peachy posts go. Not just because it’s under a stupid MB-style click bait heading. But because it’s not really preaching or gloating, but rather some musing (perhaps, plodding, pleading?).
This is not something that I am pushing as the truth, but how things appear to me, from one perspective. Sometimes.
Going on this jotting journey partially because of friend Coming who, while riffing on stupid cryptards, has uncorked the question on hyper inflation. Partially because of friend BJW and his earlier “money and guns” post ( https://www.ezfka.com/2021/03/05/fiat-has-value-because-the-government-has-guns/ ). Partially because of other stuff, like reading various inflation vs deflation or “where’s the inflation?” rants over the years.
Anyway, here is the idea – the inflation (or hyperinflation) that people are looking out for is actually in the rear view mirror. It’s behind us.
If inflation is the loss of the purchasing power of currency and hyperinflation is the same, spurred by a loss of faith in currency, then are we not already largely there?
It feels like peoples attitude to money – in the form of AUD currency – has really changed. Money – in the form of currency – has become worth less. Tending to worthless. It feels like rather than accumulating AUD currency, people have really started to eschew it.
Some case study sketches on this theme.
1. Point one: The prices of everything (the value of nothing)
Not so long ago, prices mattered. People looked around for better prices on things and there was a class of things that people judged that they *could not afford*.
I look around and see a different set up. Prices don’t matter and there aren’t really things that people judge that they can not afford. Prices are just numbers, a detail to be disregarded.
As examples – a $500 pair of shoes used to be a special thing to have in your wardrobe. You’d agonise for months before making the purchase. You’d wear them out on special occasions. You’d discuss them with your girls. (Some people couldn’t afford $500 shoes.)
Now $500 is just how much you regularly pay for shoes. That’s just how much they cost. Sometimes you buy some cheapies for $200-$300.
Same thing with $200 blouses. Even bigger thing with dem iPhones. The very first iPhone (iPhone 4) was considered a VERY EXPENSIVE THING at about $900. Most people only lusted for one and didn’t buy one. Instead they went for Samsung or HTC lookalikes for $400 or so.
Now an iPhone is at least $1,500 and people just go and buy one. In fact they buy 3 (hubby needs one, as does junior in grade 6). That’s just how much things cost.
1.1 The prices of everything corollary
It looks like very significant inflation in the price of consumable goods is already behind us. We are living in it.
2. Point two: “The Corolla” and broader old banger situation
A biographical sketch, now.
When Peachy was a prim whipper-snapper, an old uncle who was an engineer tried to spark an interest in things manly and mechanical (“come on, it will be more fun than playing dress-ups and gossiping all day”).
One of the uncle’s ruses that Peachy *almost* fell for was a plan to buy an ancient Corolla to pretty up together – for Peachy to ultimately drive on those Peachy P-Plates (“good cars, those Corollas, keep going forever. Flush out the tank, rebuild the carby, maybe some new rings…”).
Alright, so what’s the point of point two? Two points:
Point one – The prices of the used Corollas were typically $600-$800 with something like 100,000km on the clock. $1,000 got you “a really good ‘un”.
Peachy tried pricing up a similar car now…
It’s 5 times more expensive, has more ks on the klock and it certainly isn’t gotten any younger.
Point two: Who these days would be caught dead being a p-plater in a car more than 5 years old? And not a euro? Let alone working on a car!
2.1 The Corolla corollary
It looks like very significant inflation in the price of consumer durable goods is already behind us. We are living in it.
3. Point three: “investments” – crypto currencies, shares, whatever
Anyone I talk to doesn’t keep anything but a token amount in cash/deposits. Everything is ploughed into consumption. Or into assets. Or into “assets”.
People will buy shares at record valuations. People will buy shares in companies that they don’t understand.
People will trade options and FX.
People will buy crypto currencies that they don’t understand…at record valuations.
3.1 The “investment” corollary
All of this “investment” behaviour is entirely consistent with the viscerally felt (but perhaps not consciously realised nor verbally acknowledged) experience of cash devaluation from christmases past and an expectation of cash devaluation in christmases yet to come. Getting out of dollars and getting into anything that is either not dollars or is undollars.
So what does “now” feel like?
Having cash in your bank account is complete poison now. If you have $30,000 just sitting there, you are embarrassed to tell your friends, because they will look at you like you have two heads.
The mood is different to, say, a decade ago.
What’s the point of having thirty thousand big ones just in cash? Anything you need to buy, you should buy now. Anything you might need in the future you can’t really “save” for because it will cost more later.
People will buy anything – without much regard to price – if it offers them some value now, some value on an ongoing basis, or some possibility of some kind of return in time. The last thing people want to have is I applied funds. This is considered to be a wasteful.On some days, this certainly feels like a loss of faith in the currency to me.