Here’s an idea for you.
The NAB has published house price data showing an annual increase of 21.6%. That’s 1.6% per month.
The average price of a residential property in New South Wales is now $1m (higher in Sydney).
Property prices are increasing at about $16,000 per month. The average salary in NSW is about $70,000, meaning you would take home about $4,700 per month. The monthly increase alone in asking price is 3.5x an average person’s take home pay. There is precisely zero chance of saving the required amount for a deposit against these metrics.
Most people are missing the point though. Arguably, house prices are barely moving at all. The amount of Australian Dollars in circulation doubles every six years. The full data set from the chart below is here.
The money chasing hard assets increases at about 11% per year in normal circumstances. Circumstances are not normal currently though; the rate of increase is above 20% per annum and has been for 18 months now. In quantum of money terms, house prices are hardly moving at all.
The truth is workers are getting materially poorer every day. The great fiat currency rip-off is playing out before your eyes. Nobody wants to see it though, and why would they given the depressing picture it presents?
The digital age is absolutely crushing the returns to labour. Real wages are being destroyed because so many businesses have discovered real economic saving through technology, they are unlikely to go back. How are people reacting? In the US and across the QE world, they are declining to work because it simply isn’t worth it. They are right.
As things stand you could work for a lifetime on the average salary and acquire absolutely nothing.
Watch the denominator. Simply divide what you are paid by the number of dollars in circulation. Watch the number fall steadily each year.
- Fees will fall on the network; overall users will view this as good and miners might view this as bad.
- The rate of growth of Ethereum will fall substantially with an inflation rate below 2% similar to bitcoin.
- The journey towards proof of stake will continue; London is one step on that journey and once complete Ethereum will cease to be a proof-of-work asset.
Some commentators believe the adjustment to the inflation rate will mean Ethereum could challenge Bitcoin as a store of value. I think that is unlikely, for several reasons. Firstly, the fact that Ethereum has changed its monetary policy at all is not a good thing, because it means it can be done. Not so Bitcoin, a network with a monetary policy that has never deviated since launch.
Secondly, the move to proof-of-stake will mean Ethereum no longer has a reference point in physical reality. Mining Bitcoin will continue to have a high and provable cost in terms of production. Ethereum production will simply rely on who controls most of the token itself.
The two largest digital assets in the world are embarking on very different roads this week.
The Roman Politician Tacitus wrote this 2000 years ago:
The man in the picture is delivering the US Senate its Infrastructure Bill. The draft bill is 2,702 pages and proposes $1.2 trillion in spending. By comparison the United States Constitution is only 52 pages long and the hugely controversial Affordable Care Act, 974 pages long.
The length of a bill simply indicates the number of people who have been bought off with pork barrel promises. Some of my favourites this time are:
- Sec. 11522: $250 million for the “Invasive Plant Elimination Program”
- Sec. 13001: $50 million for “Strategic Innovation for Revenue Collection” – some nice new taxes then
- Sec. 13008: $unspecified for “Wildlife-Vehicle Collision Research”
- Sec. 23007: $unspecified for “Promoting Women in the Trucking Workforce – only 6% of truck drivers are women
Another interesting inclusion was that three years from now, all new cars will be fitted with a breathalyser. Presumably the engine won’t start until you pass. Naturally, the bill includes a cryptocurrency tax grab too.
The biggest scandal of all is the $1 billion that has been allocated to the Appalachian Regional Commission. That Commission is run by the wife of Senator Joe Manchin, he has kindly pledged his support for the Bill.
Not much changes in politics.
This is the company that has the most money in the world, isn’t it? Borrowing money?
Not only are Apple borrowing money they don’t need, they borrowing for 40 years at a yield 0.92% above US Treasuries.
From Apple’s perspective perhaps the deal is a good one. They have realised that holding cash is destroying shareholder value because it effectively evaporates in their hands, so they have embarked on the largest share buyback program ever known. As a lender though, I would have a few questions.
Here are the largest companies in the world from 40 years ago (when Apple are due to pay up). Half of them do not exist and only Exxon Mobil is still in the top 50 (35th).
In 1985, IBM was the biggest company in the world, 2.5 times larger than the number two company. It had an insurmountable lead in tech. Then from 1995 to 2019, IBM spent $201 billion on stock buy backs. Today, the company is worth $125 billion having set fire to about 1.5x their own market cap.
Once a company runs out of things to do with its money other than consume itself, you might conclude the growth days are over. Apple will be a great company for a long time yet, but 40 years?
Here is the “at-a-glance” Euro area policy statement issued by the ECB this month. This is not the version issued for 12-year-olds, this was their real press release.
We have three boats of money printing pulling our vessel in an unknown direction.
A confused citizen wants lunch but sees that it is 2% o’clock.
This is the control room at Chernobyl.
Our needles are larger than a human.
Our house of cards floats on air.
Have a nice weekend.