Mailbag: incl. Is there an opportunity with Chemist Warehouse? January 5, 2025

24:41I love that analogy, mate. You've never said it so clearly. I love that. That's great. But right? Yeah, but it's volatile and it's small and it's risky. It's like, no, no, no, no. No, the volatility is a manifestation of all of that kind of stuff. That's what I want. It's not a bad thing. It's a good thing. You can say that again and again and again and people will nod and then they'll go and buy it and it'll drop 20%. I'm like, oh, it's not for me. Not for me. I'm going to go buy AGL. That's a much better bet. I'll go buy some AMP because that's blue chip. I was like, good luck. Yes. We didn't rant about AGL, by the way, earlier in the week, but there was some interesting report.

25:18This is a massive tangent. in a massive size. Were they charging dead people? No, this is the reverse. This is allegations of profiteering by the energy companies. Get out. Well, no, here's the thing. Based on a single year's earnings, which actually weren't true over the long term. Oh, okay. That's one of those, you know, Woolies and Coles price gouging things where you kind of go, Oh, I see, I see. No, that doesn't show that. It was a report released by an entity, I won't name, who basically said, look at last year's profits. These guys made a lot of money. Therefore, they're ripping you off.

25:47It's like, when did you start it? Very different story I won't go into. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

26:01Now, this one's a little bit inside baseball, but Adam asked, so I am going to answer it. He said, I have a question about the Motley Fool articles on DroneShield, as there seems to have been heaps showing up on our Google feed recently about the company. I'm wondering, are there more articles show up in our feed because we keep reading them? Or have there been a particularly large number of Motley Fool articles written about DroneShield recently? And who are the people writing the articles? Are they all Fool staff or are there freelance finance journos providing content? I'm asking the question for no reason other than curiosity.

26:34I don't want to make it about us, right? Because it's kind of a bit boring for everybody else. But given Adam asked, I figured other people might want to know. So I can't speak to the Google feed, Adam, but I suspect if my experience is anything like anybody else's, Google will serve you up exactly what you read. And so sometimes that availability bias means you do just see a lot of things that you already look at. I'm getting sort of a lot of cricket content at the moment on my Google news feed. Why? Partly because it's a cricket season, mostly because I'm clicking on it and I'm reading it. Andrew, I love this.

27:06I happened to jump on domain recently, Now I'm getting served a million property ads. So, yeah, I don't know why you're being fed the number or why you're noticing a difference in the feed. It might also be because you're paying attention. You're kind of noticing it more too. We write articles about things that people care about. So if there's a lot of search volume for a company, we'll generally write a lot about it because people are interested in it. That's kind of the business model. It's no surprise. I'm not giving away anything inside baseball here. If no one wants to read about, you know, Scott and Ram's rant emporium, then we probably don't write any articles about it.

27:40If everyone's writing about drone shield or Bitcoin or lithium or something, then there's probably a lot more about them. It's just a response to readership numbers, frankly. Who writes them? Combination. We have full-time staff, permanent staff. We also have permanent contractors in the phrase. We have regular contractors who write for us. They are, I said, some are full permanent employees. Others are freelance or contract writers. And yeah, we try and keep writers for the long term if they're happy to stay with us. So we kind of consider a part of the team and part of the family, but then a lot of them or some of them are not full-time employed, permanent, not only full staff.

28:22So there you go. Adam has another question, mate. I am pretty much the same age as you, Jancey says. And over the last few years, I've placed a greater focus on my finances as retirement draws ever nearer. That's you and everyone else, mate. The Fool podcast have both educated me, thank you, but also reduced my concern about my financial future with basic solid advice, and he strikes through advice and says reasoning, around how to approach things. This has also spurred a conversation with my kids. Now, that is probably the best compliment you can give us. One thing I've mentioned to them, but said I would put to you, oh, no pressure, is the following.

28:58I have wondered about allocating all things within one super fund to international pursuits and all personal investing outside of super to Australian investments. My thinking around this is that by having all international pursuits inside super, it simply reduces your workload as the super fund takes care of tracking all parcels bought and sold, taxes, dividends, exchange rates, et cetera. This leaves the individual to look at opportunities closer to home where they might have some advantage and where tax implications, dividends, et cetera, are known and exchange rates are not an issue. Just wondering what your general thoughts were on that strategy.

29:33Obviously, Adam knows we can't give advice, Ram, but what do you reckon, mate? Keep it simple inside your personal account and use the super fund to invest overseas or something different? I've got to think about that one. I mean, the simplicity as framed derives from the structures you've chosen, so ETFs or whether it's just a more vanilla super fund. But you can do that inside or outside of super, right? You can achieve that. If that's your concern and it's a legitimate one, if it is, you can do that just with a normal fund that's not a superannuation fund. So I don't see the point. I'm struggling here because maybe I'm missing something really, really, really obvious.

30:21What do you think? I don't think so. And some of this question, a great question by the way, Adam, but we're kind of left to interpret a little bit. I'm wondering whether Adam's actually thinking about he's got an industry super fund or a retail super fund where he kind of says, allocate this to overseas, then they do all the rest of the stuff. Whereas, you know, doing your own name, you keep your own records. And maybe he's kind of outsourcing the record keeping to the super fund, not an SMSF, but, you know, a large APRA regulated industry fund or retail fund. One that spends$400 ,000 on a birthday party?

30:50That's the one apparently, yes. So I suspect that's what he's doing. I'll let that one slide. We'll come back to that another time. God, I hate our industry. I hate it with a passion. So many snouts in the trough. Anyway. The good thing is, man, our listeners would never know, so that's also important. Well, that's why they do it, right? No, I mean that you hate them. Oh, that I hate them, right. But yes, that is why they do it because they get away with it. Big numbers, right? It's like fees in general. That's only a small portion of the total. Yeah, but it's a bloody large amount of money. Anyway.

31:23So, yeah. So I suspect that might be what I was thinking. is like let the complex stuff just let you do it under the structure of the super fund so they can kind of take care of the record and don't have to worry about it. I hear that, but like here's the thing though, right? It's not – people in our industry love to let you believe that. It is way too complicated for your pretty little head. It is very hard. Let us do it. Like it is a nuisance, right? But it's not that hard. If you can use it – open up a Google Sheet and just create an entry when you do it. It's all there. And if you really hate it, as I do, you know, get an accountant.

32:01That's what they're paid for, right? You can pay them a bit of money and they'll – all they need is reasonable records. And all you need to do for reasonable records is just write something down when you do it, you know? And it's more a question of process than anything else. So it's not – To super anyway, though. There is some benefit of saying, I've got a super fund anyway. I might as well let them deal with the paperwork rather than pay an accountant to do it. I can kind of see where it comes from a little bit. Yeah. Yeah, true. Yeah, I get that. But then are you getting that benefit? And the downside is that they're going to put you in a whole bunch of useless rubbish.

32:35Yeah, that's right. Rubbish. Yes. Which they are. I shouldn't make a blanket statement, but I'm going to make a blanket statement. They almost certainly will because, I mean, again, don't take my word for it. Just go look at how many have outperformed the market over any reasonable length of time and you'll find precisely zero or maybe three out of the 4 ,000 that offer it. So, you know, there's a reason for the cynicism here. Yeah, that's true. Yeah, yeah. So I would honestly say, depending on how much, if you are of a certain vintage and there is a certain amount that is in there, and I was late to this party, but set up a self-managed super fund.

33:09It's a bit of a, talk about record keeping. It's a bit more of a hassle on their art costs. But you can, you have far more control over it. Even if your goal is, I'm just going to set up an SMSF and buy two ETFs. Yeah. NASDAQ and ETF and an Aussie ETF, and that's it. That's all I'm going to do. I can't say the word guarantee. Whatever word is as close to guarantee as is possible legally, I will say that word in relation that you will outperform on a net of fee basis any of these quote-unquote professionally managed super funds. Got to ask you, though. If you had – so I have – we've put our – out of fault – out of fault funding for the Motley Fool for our employees if they choose otherwise Australian super.

33:51If I could go to Australian Super and put half my Australian Super industry fund in an ASX ETF and half in a NASDAQ or a US ETF or a global or something and save myself the hassle and paperwork of a self-managed super fund, I think I'd do that. Yeah, but Australian Super has - Whichever fund you choose. Yeah. Well, they usually have rules around it. So they'll let you do that for a portion of it, but not all of it. There's too many fees. I'm not going to let you do all of that. I mean, I need something good that's going to help me sell this thing. but we've got to keep a little bit for ourselves.

34:21So you're right. You're right. And it's a question. Look, if you've got, I don't know,$10 million, this is a no-brainer. Like the administrative costs of setting up and maintaining a super is a rounding error, right? Yeah. If you've got$100 ,000, it's not worth it. It's not large enough, yeah. You know, people will have different views as to where the right line is. But once it gets a certain threshold, I think it becomes a no-brainer. Even if it's like, well, but I don't want to do anything advanced. I just want to buy a couple of ETFs. I still think do it. I still think do it because, you know, just because of the default options, most of these funds are going to put you into are going to be really bad.

34:58Yeah, I will just gently disagree. If I was going to SDTF, I'd do it through. Yeah, the option is Vanguard Super, actually. Oh, yeah. We have no affiliation with them. They're a not-for-profit. You can go through Vanguard Super. It's kind of a hybrid between an SMSF and one of the big industry regulated funds because they don't have those rules. It's kind of a brokerage platform and superannuation administration platform wrapped into one. My fees are a little bit high. I would suspect unless they decide to cancel the whole project, which is possible. Fees will come down meaningfully over time.

35:31And so if you're in there for 10, 20, 30 years, you say you're our age, hopefully you're in that fund for 40 years, that might be an option for you too. But yeah, or an SMSF. In terms of international versus local, though, Adam, to your question, I kind of go half back to Ram's question if you're worried about the workload buy an ASX listed ETF that covers those markets and be done with it if you want to buy individual shares in the US then absolutely think about it and if it works if you're buying individual shares you're probably not doing it through a super because you're probably using some of the sort of premixed funds anyway so honestly I if you're not going to buy individual shares in the US and you're going to buy a market or an index or a premixed option or something Just an ASX-listed US ETF.

36:16Vanguard is a VTS, which is a total US market. I think it's iShares. That's the one's IVV is the code. That's the S &P 500. I think I own both of those either directly or from my young bloke. So, yeah, they're perfectly good options, and you can do those inside or outside Supra. I wouldn't do either necessarily. Yeah, no, I don't think I would – I don't think I would – I wouldn't discourage you. If you're comfortable with doing it that way, go for it. But I don't think you need to separate it out that way. But if it makes it easier for you, then knock yourself out. Yeah.

36:51That's great questions, Adam. Thank you for asking those ones, mate. Very much appreciate it. Can I share with our listeners and with you, Ram? I know I've shared a bit of this for you before because it came through and I did kind of say, hey, have a look at this. We had an email. This is a comment, not a question. But it's kind of, you know, New Year and post-Christmas and all that kind of stuff. and if we're kind of trying to start off on the right note. This is a message we got from Rob. Now, Rob sent us a message a while ago, basically saying, hey, I've got a military payout, those who might remember.

37:24It was a, I think it might've been PTSD or a war injury. I can't quite remember. And Rob, my apologies, I'll be able to remember the specifics, but basically, look, I've got to lump some here. I've got to pay out. What should I do with it? And we, again, didn't tell Rob what he could or should do. We just kind of said, look, here's some options for you. Rob is a very, very good bloke, Graham. I'm going to just read this out. He says, hi, Scott and Ram. I want to thank you for taking the time to respond to my question back on the 27th of October. You gave me a lot to think about. And after much deliberation, I wanted to share what we decided to do with the lump sum.

37:54With the funds, we aimed to strike a balance between helping those close to us, securing our own future and creating opportunities to pay it forward. Here's how we allocated it. One, we helped a single mother friend by buying her a car so her three teenage children could learn to drive and gain independence. Two, we provide a small financial boost to a friend down on his luck, who no one else seemed to hear. That assistance got him through to the new year, and I'm proud to say he's already started repaying the amount now that he's secured a job. Three, we prepaid my mother's rent in her retirement village for the next 15 years.

38:30Purchasing in the complex wasn't a financial path we wanted to go down, so this was the best way to give her peace of mind. We also got her a new car to help her move comfortably through the next phase of her life. Four, we paid off our mortgage in full, which has been an immense relief and freed up passive income that we've directed towards home improvements, savings, investments, and even helping others. Five, we've started regular investments into well-researched ETFs, ensuring a strong foundation for our future. And six, the remainder sits in a high interest term deposit, with the annual interest covering our kids' education fees.

39:03We also set aside a lump sum as an emergency fund. This process has been incredibly rewarding, says Rob. The ability to help others while securing our family's future has brought us so much peace and joy. I was especially humbled by your story about your dad being a Vietnam veteran, Scott, and his views on commemoration and life. He obviously raised a great bloke in you, mate, and it's clear his values live on in how you approach things. Thanks again for taking the time to answer my question. I really appreciate it and wanted to let you know how much of a positive impact your podcast has had. All the best, Rob.

39:39Pretty cool. Isn't that cool? Yeah. I'll take that. Like, seriously. For all the suggestions we made, Rob, I'm going to say you've topped, certainly mine, I'd rank and make his own decision, mate, but you've, I mean, good on you, mate, you've got a massive lump sum. You could have kept it for yourself. You've helped your mum. You've helped a friend. You've helped a couple of friends. Mate, really, just bloody impressive. So, mate, don't give me any credit. You've done a great job yourself, and your wife and your family have done a wonderful, wonderful thing, I think, made across a whole lot of different people.

40:09And it's a pretty good example to follow, I reckon, Ram. Yeah, look, everything that we sort of talk about is ostensibly it's about making money, which kind of makes it sound pretty, you know. There are bigger things in life, but I just like Rob sort of said there, you know, brought us a lot of peace and joy. I think that's really the end goal for me. like money is a tool and I want something that that's got to be the end goal of it not you know it's got to have a purpose and what purpose is money if it can't bring you peace and joy in life so you've won you've won it life I would say you know someone else would have said I'm there's a part of me there's my inner finance bro that's going well you know the term deposit you could have maximized you know maybe if you'd split it more this way and you do like it's just a stupid answer.

41:02It is mission successful. You're a lot less stressed. You've done some good in the world. You've got a smile on your face. I have no notes. I have no notes. Well done. Pretty cool. So Rob, thank you, mate, for sharing that. Thanks for doing the right thing by a lot of people, mate. Good on you. That's awesome. And hopefully some of our listeners will be inspired by that. And thanks for letting us know. Really cool to kind of know we've helped some people out. Mate, I got a question from Michael, and I don't know the answer to this one. And you spend a bit more time thinking about currencies and inflations and money and stuff like that.

41:37So Michael poses a question, and I don't instinctively know the difference. So he says, Hi, gents. Thanks for all your wisdom. My wife and I love listening to you talk all things money. You either give us something to think about or reinforce our thinking. I'm also on my Bitcoin journey. Thanks to you, Mr. Page, says Michael, but need more help to convince my wife. Feel free to give me more ammunition, he says. Michael, you know better than that. Your wife is right. Until she changes her mind, you're wrong. My question is, he says, I heard a discussion about currency debasement and how it's different to inflation.

42:14I couldn't wrap my pea-sized brain around their explanation. So could you please explain if there is a difference in simple terms. Part of the reason we all invest is to stay ahead of inflation, but is debasement something else we need to be aware of? Thanks, Michael. I would have also categorized them the same way. I suspect they're two sides of the same coin. I reckon he's probably, I would suspect there is, I mean, turtle all the way down, right? We might have at the same place. I suspect the the person he was listening to might have been talking about inflation that occurs quasi-naturally as an outcome or an output versus debasement, which is a literal just money printing.

42:58Now, money printing leads to inflation. Inflation maybe is only a monetary phenomenon, if you believe some people. So, it might be two sides of the same coin. But I suspect he's talking, I'm making it up, Michael, if I'm misunderstanding you or misquoting you or misattributing your thoughts, I suspect they're just kind of talking about the outcomes of inflation of things are up 2%, therefore that's bad, versus what you said before a lot, which is measuring money supply and looking at that. I would assume it's just different sides of the same coin. Yeah. I mean, it's such a – trust me, it's such a deep habit hole.

43:34I'm very much a Milton Friedman acolyte when it comes to inflation. It is always and everywhere a monetary phenomenon. um prices will change and prices will go up not because of any change to the money supply but because of changes to either supply and demand which again and that's what i think is yeah you've got you've got to stop thinking that's a bad thing it's a it's a natural i won't say i wouldn't i wouldn't put a value judgment on it it's it's a description it's a description of what should happen what you would want to happen the classic example being on a rainy day umbrellas are more expensive ice creams are really cheap on a hot day it's the opposite yeah why more people want it and then it's that it's that signal that encourages others to go oh maybe i should bring some more my umbrella stock to market because there's a really good price and that it fixes itself that's the mechanism so that kind of inflation if you want to call it that is is great is brilliant shipping shipping containers got very expensive for a while there in covid Wheat got a bit expensive there for a while with what was happening in Ukraine and prices went up.

44:43And a lot of people who should have known a lot better started calling that inflation. And it kind of was inflation, but not really. That's the inflation that kind of fixes itself. Monetary inflation is a different story. So when people talk about debasement of the currency, they're usually talking about it's usually done in the context of we just printed a lot of extra money. The other expression you hear is we monetize the debt, which is just basically saying, because it's interesting, isn't it? It's really weird, right? What's so hard about it is because you really do have to question, what do you mean by money?

45:23Even the boffins will go, well, there's M0 and then there's M1 money and then there's M2 money and all that stuff. This is another type of money. And you know what? Different monies have different types of moneyness. and in a way a house is kind of a form of money we use houses as money as well and we actually use the very debt that we use to back the money as money because i can actually hold these u.s treasuries and that's i can actually make payment in that kind so that's kind of a money as well and it's like it's it's a real the rest of our listeners you know it's it's really it's really really interesting and and so so my point is is when you hear about currency debasement and debt monetization and these kinds of terms.

46:03What they're basically saying is that we don't have enough money, so we're going to give you an IOU. The market doesn't want to touch it, so I guess we'll buy it ourselves. But it's not us because it's an independent body that sits over there and they're different. They're totally different to us. But they're going to buy it. That's left hand. We're the right hand. We're the right hand. That's different altogether. And again, it sounds so crazy when you say it out loud, but they literally print it out. They don't even print it. They press a button. It's a keystroke. And the money exists. And it didn't exist before, you know.

46:36So you look at the – it's actually very handily. It's produced in all of the central bank annual reports. You go to the RBA website, look at it. They'll tell you exactly the amount of reserves that they have there and how they adjust that and how they change that and how they use that to purchase things through what they call open market operations. That sounds very sophisticated. What are you doing there? Oh, I'm just creating money out of thin air and buying stuff on the open market. Okay. Does that impact the – yeah, oh, yes. but only in the best way. Only in the best way does it impact things and there's never anything negative about it.

47:04And trust us, bro, we've got this sorted. So there's a whole bunch of sarcasm and derision. There's a lot of sarcasm. Luckily, this isn't a print podcast, mate. Otherwise, some of that might be useful. I'm pretty sure people have got the sarcasm. I think the thing is that if it's not shocking or egregious to you, it's just because you don't understand it. And I don't say that in a derogatory way because why would you – like the things that we sort of assume are true and we take for granted, we sort of assume them to be that way because anything else would be crazy. And then you go, no, no, no.

47:43Actually, that crazy thing that you think would be – like that's actually what happens. But it's too crazy to be real. Well, I would hope that that was true, but it's not, right? And it's sort of like, that's why it's such a fascinating thing to sort of pick into here. And I wish more people would do it of the Jonos. And, you know, when Michelle Bullock gets up there and I just ask some of these really dumb questions and get them to give you an answer. Because I guarantee you, the one in a blue moon time when it sort of does tend to happen, you get a very hand wavy. It's all cool. Don't worry.

48:16It'll be all right. Like, okay. So yeah, currency debasement is a bad thing. And the best way I've found to explain it, because people get it more easily this way, is with shares. You own shares in a company. The company goes and issues 30 % more shares that didn't exist before. You don't get any of them. They've issued them to someone else. Are you happy about that? Probably not, because you've been massively diluted. Right. You used to own 1 % of the company. Now you own 0.7 % of the company. Your proportion is reduced by that increase of someone else. You have had value stolen from you in a very literal sense.

48:57Very literal sense. Now, I forget. I haven't looked at it for a while. Stolen might be a little less literal, but I take you. No, it's stolen. If you don't think that's stolen, then I got to get you to buy some shares in my company. And then I'm going to issue myself a whole bunch. Let's see if you change your chain. the stolen stolen infersome illegality and some lack of participation in the process oh it's perfectly legal oh it's perfectly legal and shareholders could actually vote to not to stop the CEO doing it right so it's not I don't disagree with the dilution you know I'm a bit penitent with some words sometimes I think it's nothing untoward that's not legally enforceable and actually done regularly and with the shareholders full awareness and approval individually but some shareholders may disagree but So I might say I don't like it, but you say, well, hang on, I don't know if you said the company, I've decided I'm going to issue your shares.

49:51Okay, I guess that's what's going to happen. Well, so let's do it this way. Keep going. Don't quote me on the exact numbers, but it's very much in this ballpark. Something like 20 % of the Australian dollars that exist today, the vast, vast, vast, vast, vast majority of Australian dollars exists in bank databases, and there's a little bit of cash which is crazy to think about right there i don't even don't just not even back by goals ended back by the notes you can't literally add all the notes together and count them it doesn't happen isn't that weird i had a conversation the other day so i go oh dude is if we're gonna ever go to a digital currency i was like dude we have a digital currency today like we've had one for a long time right 100 anyway so that all the money that we have as as i have just defined there is now about 20 % more of it than there was pre-COVID.

50:44Yeah. Yeah. All right. So again, break out the Monopoly board. You've got a few, you've got something on Mayfair. I've got something on old Kent Road, whatever, whatever it kind of is. And then all of a sudden we just, we increase the number of, of money on the monologue that all the players have by 20%. Yeah. It goes to other people. It doesn't go to you. It goes to other people and nothing else changes. Correct. What do you think the natural consequence of that scenario is? I would say prices go up because everyone's got more. Now, the number of squares doesn't change. The number of hotels and houses hasn't changed.

51:21But the number of the abacus, this grand abacus that we use to keep track of everything else has changed massively. And so there's only one variable that can adjust, which is the price. It's the only thing that can adjust. And so it is why it is such a pernicious, egregious kind of thing. Now, before I get too far down my little rant hole here. Oh, dude, you can't see the surface from here. You already don't care. No, it's long gone. I know the pushback because I get the pushback all the time. People go, no, no, no, no, no. We really need to do that because it's emergencies. And it's like, okay, the trouble is there's always an emergency.

52:01Okay, though. and the second part is yeah but it's it's not so much that you created new money it's what you do with the money it's like and that i very much agree with it's like aha now we're on the same page so if you want to create 20 you want to inflate the money supply by 20 and you're going to use that money to to invest in a whole bunch of productive capacity that means that we have more stuff so it normalizes so yes more money but we use that money to to make much more stuff a kind of very messy way of going about it because it kind of all nets sort of out in the end. But that's a valid point.

52:35You know, if you feel as though that there is a pressing need to do it and that you can be smart with it, then okay. But what Australia has done, and this is even before COVID, is that we have taken all of this newly created money and we put it into unproductive assets, namely residential property. And again, it's not a diss. Property is brilliant. Like there is nothing. As someone who sleeps under a roof, I am a big fan of property, right? You like the roof. I love the roof. I can look at the ditch across the road. I can sleep in that or I can sleep in my house. I'll take the house. Thank you very much, right?

53:15It's massive amounts of utility that's there. But when you get to a stage where what is it, like 40 % of housing investors are actually structuring these investments so they bleed cash on a cash flow basis. It's sort of like, and that is where we have allocated this newly created capital. So in other words, when I borrow money and I put it into an existing house, existing house being the key word there, I don't change any of the productive capacity of the economy, but that money exists. The bank snapped its fingers. It created some extra zeros in someone's bank account, the person that you bought the house of.

53:49And that person then went and participated in the economy doing whatever they do. We have these multiplier effects here. So it's a long run up and a long rant to kind of say is that when you debase, this is the debasement of the currency. This is what we are doing with all of this egregious money creation and misallocation of capital. And it explains so much of the ills of society and the problems that we deal with now. But instead, we shake our fist at the supermarkets and we get angry at some CEOs and, you know, we completely, everyone feels the problem. Everyone knows there's something wrong, but very few people can point to the core reason of it.

54:30And I would say, look, I might be wrong. I mean, maybe I'll change my mind on this, but like so far, I'm just more and more convinced that if there was one thing to point to, it's the money. The money being broken. Anyway. Well, I thought I'd say fix the world. Thank you, Ram. Fix the money, fix the world. Such a powerful idea. I've got much to disagree with Ram on. Inflation and currency debasement are kind of the same thing, or kind of joined at the hip. Debasement is one of, if not the cause of inflation. And I suspect what was being discussed was worry about the price of groceries going up 2 % or 3 % or 4%, and then relative to wages.

55:12It's kind of the output. but it's what's left over. I suspect the difference is what's actually, they're trying to point the finger at the debasement specifically as either A or the cause of that. And so why trying to deal with inflation about how do we bring the price of bread down per se, but how do we stop more currency being printed, which probably ends up with the same thing, which is bread going up too much. But again, that's my just straight out supposition. I would phrase it like this. I would say inflation is the symptom that you see and observe. Right, yeah, there you go. Debasement is the cause.

55:44Yes, yes. For my two cents, mate, I think on that one, I think there is a structural – I'm not going to, yes, but he may know more than me. I think in my head there is, you know, you build those stacked graphs and there is kind of, you know, when there's multiple components to something, you've got like the base level and there's a bit above, a bit above that, and you kind of say, okay, what's going on here? I suspect that – well, now they're talking about structural and cyclical. I suspect that all inflation over time is monetary. I think that's right. Yeah. In aggregate over long periods of time.

56:22You know what the funny thing is, is when you plot those two things together, they're almost on top of each other. Right, exactly. So it seems like a reasonable... But I do think in the short term, where we see these surges of inflation is not necessarily and needn't to be necessarily mathematically only monetary. And so I think that's where So if you kind of look at the two components, you know, why do things cost more than 50 years ago in nominal terms, you could probably, as you say, overlay the money supply, go, well, over that time it's happened. A lot more money. Now, that being said, governments could create inflation tomorrow by borrowing another trillion dollars and spending it tomorrow.

56:56And that would be borrowed money, not created money. No, no, no, no. And yes, it would have to be paid back at some point. That is created money. Okay, okay. Every time a loan is made, money is created. Let's say they didn't do it. That's what I'm saying, right? So the money being spent will create the inflation, irrespective of the source and irrespective of the eventual funding circumstance. Well, sorry, you have to be pedantic with this stuff. Yeah, please. If the money existed already, right, and you decided to put it over here instead of over, there is that opportunity cost kind of. But use it versus leaving it sitting is my point, right?

57:30So the act of spending that money in a short period of time can create that supply-demand imbalance that you kind of started by talking about. So if all of a sudden everybody wanted to – if I took – let's say I've got a backyard full of$100 notes that are in shoeboxes and there's a very big backyard. I took them all out today and I went and threw all that money into freighting as much stuff around the world as I could. I decided I would send empty containers backwards-forwards from here to Antarctica and half the world's supply of containers. The price of what was left would go up. Yeah. And so you would cause an inflationary spike.

58:07That's what I'm talking about, the cyclical versus the secular. So the structural increase is the money supply. But in the short to medium term, the use of the velocity of the money can change, and that can impact the inflation bursts. So I think there's kind of those two to go together. Now, over time, that washes out, right? Because someone spends it. You've made the point a lot of times. if I send half the world's containers to Antarctica, someone else says, I'm going to build some containers because I can afford to now because they cost$10 ,000 or higher. There's this irrational buyer out there in the market who's like, okay, I'm going to get on that.

58:40I shall unburden him. Right. And that's kind of why I mean about the structural versus the cyclical. And if you think about the spending that's been done relatively recently, yes, to your point, somebody's absolutely magicked into existence and that's the monetary bit. I guess I'm just making the point that you don't need that impact to have a cyclical or a short-term impact, just the variabilities, the vagaries of supply and demand, deliberately or otherwise, can have those impacts, and then eventually they sort themselves out. And that averages back to your point, which is it's monetary over a long enough period of time.

59:15Just in the short term, it can simply be a case of too many people buying too few goods. If the number of goods dropped tomorrow, the banana harvest, a great example, right? Banana harvest, literally gone. Gone. You go, okay, well, the price of bananas has got 15 bucks a bunch. It wasn't because someone printed banana dollars. It was just there was a shortage of bananas and the price went up. And again, I want that to happen. I mean, I don't want my bananas to be more expensive, but again, so I'm not hypothetical. There's been a massive tropical storm. All banana crops are gone. We've only got 5 % of the bananas that we used to have.

59:51And I, as a politician, want to make everyone happy. I'm going to go, well, you can't put the price up. Can't put the price up anymore. That's just what it is. Yeah. Now, anyone else who's looking at potentially correcting that supply imbalance, not because they're looking at some macro analysis, just like, I want to make a buck. That price signal is gone. So, it's like, oh, the powers that be have just mandated that I can only sell bananas for this price. I can't barely make them for this price, especially given that half of my trees are in ruin from this storm. I can't do it, so I won't do it.

1:00:25That's right. And like, well done, Mr. Politician. You've just made the problem 50 ,000 times worse. Whereas in a real world scenario or in a sane world scenario, you go, wow, the price of bananas has just gone up 10x. Let's scramble. Let's get some more bananas out there on the market. Supply side response, prices come back down. Everyone is happy. That's what money does. Money coordinates global economic activity and it does it brilliantly, right? And just let it do its thing. And if prices go up sometimes, good, good. It means that there's not enough supply and there's more demand and it will fix itself.

1:01:04But all I'm saying, just to bring you back to the high-cost, my argument is just that in the short term, those things happen aren't necessarily monetary. So I think we say inflation is always never monetary. I think that's only true of the long term. So we get the semantics, right? I think every economist in the world would disagree with you, but I take what you're saying. Well, what do you mean? No, that's the difference. Prices go up as inflation. That's how we measure it. No, there's prices going up. We define as – no, that's different. Do we call it deflation when – do we talk about deflation in the sense when prices go down?

1:01:40Prices are going down. They're responding. There's been a massive flooding of the market of beanie babies. They're everywhere now and they're really cheap. No one's talking about deflationary pressures. Price went down. It sounds like it's a semantic point, but it is a kind of semantic point. There is prices changing, as would happen in any free and open, well, healthy, robust functioning market. And there is a consistent, pervasive, steady, across-the-board rise in inflation over time. That's inflation. Of prices. That's inflation. Prices changing is good, is normal. is what you think. Yeah, but that's because you're using inflation as a pejorative.

1:02:22I actually don't think it is that other than either you or we've come to see it as that. Inflation is the increase in prices. That's literally – it's the change in price from year to year is either inflation or deflation. It's inflation because it tends to go up. I know. I think saying price goes up isn't inflation. It's like, well, that's all it can be. I take your broader point. Well, if you define it that way, then that's all it can be. But I'm trying to be more subtle in the definition of it. I'm trying to sort of say prices will change. Prices will change. They always have. They always will.

1:02:50But if we're going to call every price increase inflation, we are conflating it with this other phenomenon that we've been talking about. So it's like, well, that's why people get confused, right? It's like, well, what do you mean by that? Well, I mean this by it. What do you mean by it? Wait a sec. We're all using the same word, but you mean that and I mean this. And so I'm just – you're right. You're right. That's how the word is used. But I would tease – I think it's a very, very unhelpful nomenclature that we have where I would sort of tease it apart and just sort of say, no, when you have excess money creation, that kind of price increase is different in character and nature than the price change that you would observe through interaction of supply.

1:03:33I agree what I'm saying, which is exactly what I was saying about the sickle versus the structure. I think we're on the same page. We are on the same page. Definitions are painful. I think concepts are more useful. And by the way, the other good thing about that idea of, hey, what does this word really mean? Not that you're right or I'm right. It's just that actually it makes us talk about that exact issue, which is, okay, well, we can both say it's inflation, but we think there's some subtleties here that are worth exploring. That's kind of the point as well. So when I think today, it's so the topic of the time.

1:04:03It's the cost of living crisis. You cannot turn on the news without hearing some story about that. All of the strikes that are happening, it's just cost of living, cost of living, cost of living. It's inflation, it's inflation, inflation. In that context, we're talking about a multi-year kind of trend where everything has gone up very, very, very significantly and to a much greater extent than the CPI, I would argue, reveals. That is something that is beyond supply-demand imbalances. That is well beyond supply-demand imbalances. And that's where the difference is important. That's the difference, right?

1:04:37And that's just to really hammer home the point, that is the thing that we need to be angry about because that is an own goal. We created that problem. We 100 % created that problem. And deliberately too. Deliberately. And after doing it for the hundredth time and after observing the implications of it, we still sit there and go, this is a good idea. That is the definition of insanity. And again, why is that though? Just to pull on that thread for a second. Why can anyone possibly reach that conclusion? Because when you do have excess money out there, it finds a home. Because people aren't dumb.

1:05:15People want to preserve their purchasing power. Of course they do. Where do you preserve your purchasing power? If there is a dearth of scarcity in the money, right, there will be a scarcity in the thing that the money buys. So I'm going to buy a bunch of houses. I'm going to buy a portfolio of stocks. I'm going to do that because you know what? Sold patents and shares are scarcer than the money. So, sold patent shares goes up. Houses are more scarce than the money. So, the house price goes up. So, the reason that half the population can go, no, this is a really good idea is because in their world, and they're right, in their context, through their own experiences, it's not really a problem.

1:05:59It's not really a problem because most of my money isn't in money as we would conceive it, like in the zeros and ones at the bank at all cash. Most of my money, and think about this yourself, anyone who's listening, when you think, if I was to say to you, what's your net worth? You don't just look at your bank balance. You look at your house. You look at your car. You look at all of these other kinds. There is a moneyness, I guess, to all of that kind of stuff. And do you see where I'm coming from? Yeah, totally. Absolutely. So to answer my own question, why is it after such obvious empirical evidence that this money creation stuff really isn't great on a net basis at large?

1:06:34Yeah, but it is actually. If you've got assets, it's actually pretty nice. It's actually really nice.

1:06:43And, yeah, and I think that's why it persists. It sounds cynical. It sounds jaded. It sounds conspiratorial. But it's just like, well, if you're going to print a bunch of money and it can avoid me suffering any short-term consequences and as an owner of assets, it's actually going to enrich me. It's fake growth. It's fake growth. But nominally my prices are going to go up and I'm going to feel pretty good. and it's going to offset any of these other inflationary impacts and non-discretionary things that I have to buy. Not a bad thing. And it just turns out that most people who make these big decisions tend to be pretty well off and tend to have a lot of assets.

1:07:18Tell me I'm wrong. You did ask, Michael. You did ask. Tell me I'm wrong. And on that confident ranty note, we will draw this particular podcast episode to a close. I'm assuming you'll come back on Friday. I have to assume this time because this has been pre-recorded. Will you turn back up in early January and just continue the conversation? If people are going to keep sending in really awesome questions, I love this stuff, then yeah. And also, I guess what would be really cool too is just like, I'm just law of large numbers. I'm sure there's plenty of people listening go, I thoroughly disagree.

1:07:54In fact, I've had some people write in, right? And like, you know, professors of economics and stuff like, brilliant. I think we probably both want it, right? Like give us a test. If we're missing – I want to include you in this insanity. If I am embarrassing myself, it's a very good chance. Please let me know. We'd like to know. Because I'm going hard on this stuff. And someone's got to like pull me out. If I'm screwing this up. And I say, no one's yet been able to do it. But that doesn't mean it can't be done. So just let me know is what I'm saying. There you go. Love it. All right. Let's wrap this one up.

1:08:31Mate, I will look forward to speaking to you on Friday. Until then, have a wonderful week and full on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services License 400691.