1 00:00:05,920 --> 00:00:08,200 Speaker 1: Welcome to Ask Fear and Greed, where we take your 2 00:00:08,280 --> 00:00:10,799 Speaker 1: questions and do our very best to answer them. I'm 3 00:00:10,800 --> 00:00:14,720 Speaker 1: Michael Thompson, and hello Sean Ale. Michael got a good 4 00:00:14,760 --> 00:00:16,600 Speaker 1: question for you today. Every question is a good one. 5 00:00:16,600 --> 00:00:17,560 Speaker 2: Every question is a good one. 6 00:00:17,680 --> 00:00:21,480 Speaker 1: I love ones though that there's a potential stumping afoot 7 00:00:21,920 --> 00:00:24,520 Speaker 1: would like to stump you. Don't think we'll do it 8 00:00:24,520 --> 00:00:28,000 Speaker 1: today because this is on economics, right, Okay, you're comfortable. 9 00:00:28,280 --> 00:00:31,080 Speaker 1: It's come from Sam on Facebook. If you can go 10 00:00:31,120 --> 00:00:33,320 Speaker 1: to the website Fear and Greed dot com, dot au 11 00:00:33,440 --> 00:00:36,280 Speaker 1: or anywhere really LinkedIn Instagram. But Sam's gone to Facebook 12 00:00:36,640 --> 00:00:40,040 Speaker 1: and says, hi, guys, I heard you talking about the 13 00:00:40,159 --> 00:00:44,320 Speaker 1: RBA's warning on inflation being too low if they didn't 14 00:00:44,360 --> 00:00:47,199 Speaker 1: cut rates. That was last week. We're talking about that. 15 00:00:48,159 --> 00:00:51,400 Speaker 1: I get the impact of high inflation, but what's the 16 00:00:51,600 --> 00:00:54,160 Speaker 1: risk from inflation being too low? 17 00:00:55,160 --> 00:00:58,920 Speaker 2: Ah? That is an interesting question, say Michael. If I 18 00:00:58,960 --> 00:00:59,680 Speaker 2: said to you. 19 00:00:59,680 --> 00:01:04,120 Speaker 1: No, no, no, no no, don't ask me questions. You put 20 00:01:04,160 --> 00:01:05,959 Speaker 1: me on the spot. I'm not good under pressure. 21 00:01:06,319 --> 00:01:09,199 Speaker 2: So we're sort of talking deflation. If I said to you, okay, 22 00:01:09,240 --> 00:01:12,039 Speaker 2: you've got to buy a new car, Okay, good right, 23 00:01:12,360 --> 00:01:14,440 Speaker 2: and it's going to cost you fifty thousand dollars a day. 24 00:01:15,240 --> 00:01:18,240 Speaker 2: But we know prices are falling, so you can put 25 00:01:18,280 --> 00:01:20,800 Speaker 2: it off for six months and you can buy it 26 00:01:20,800 --> 00:01:24,480 Speaker 2: for forty nine thousand in six months time. Okay, what 27 00:01:24,520 --> 00:01:25,039 Speaker 2: are you going to do? 28 00:01:25,120 --> 00:01:27,560 Speaker 1: I'm probably going to delay by purchasing. 29 00:01:27,720 --> 00:01:32,560 Speaker 2: So if you delay your purchasing, that sloans economic growth 30 00:01:32,560 --> 00:01:34,440 Speaker 2: because you don't know you wait, and then in six 31 00:01:34,440 --> 00:01:36,240 Speaker 2: months time you think, oh, it's going to be forty 32 00:01:36,240 --> 00:01:39,160 Speaker 2: eight thousand and another six months. Maybetter just wait for that, Okay. 33 00:01:39,520 --> 00:01:42,000 Speaker 2: So it's actually it's a really simple answer to this. 34 00:01:42,160 --> 00:01:45,480 Speaker 2: The problem with falling prices is that it stops people 35 00:01:45,480 --> 00:01:47,760 Speaker 2: from doing stuff because they always think they're going to 36 00:01:47,800 --> 00:01:50,880 Speaker 2: get it cheaper in the longer run. And what you 37 00:01:50,920 --> 00:01:54,280 Speaker 2: want in an economy is people spending and churning over 38 00:01:54,360 --> 00:01:56,000 Speaker 2: money and economic growth happening. 39 00:01:56,200 --> 00:01:58,480 Speaker 1: So I imagining that would kind of hit you non 40 00:01:58,560 --> 00:02:01,960 Speaker 1: essential spending, your discretionary stuff more than your essential Like 41 00:02:02,200 --> 00:02:04,280 Speaker 1: people aren't going to delay kind of spending that on 42 00:02:04,720 --> 00:02:07,240 Speaker 1: the groceries or the electricity bill or anything like that. 43 00:02:07,360 --> 00:02:10,079 Speaker 1: But the things like a car or a holiday or something, 44 00:02:10,080 --> 00:02:10,960 Speaker 1: they will delay. 45 00:02:10,760 --> 00:02:12,480 Speaker 2: So often when we talk about this stuff, we talk 46 00:02:12,520 --> 00:02:18,000 Speaker 2: about consumer discretionary and consumer staples. Yep, consumer stables, woollies 47 00:02:18,040 --> 00:02:20,040 Speaker 2: and coals. You're going to do your groceries no matter 48 00:02:20,080 --> 00:02:23,680 Speaker 2: what consumer discretionary. They're any interest rate sensitive. So if 49 00:02:23,760 --> 00:02:26,640 Speaker 2: interest rate's coming down, people buying more stuff. So that's 50 00:02:26,720 --> 00:02:30,239 Speaker 2: exactly right, But it goes beyond you and I buying 51 00:02:30,280 --> 00:02:34,160 Speaker 2: a car. So if you think about a business and 52 00:02:34,600 --> 00:02:37,680 Speaker 2: they're expecting a certain amount of income but then prices 53 00:02:37,720 --> 00:02:40,200 Speaker 2: are falling, they're still got to pay their wages bill, 54 00:02:41,160 --> 00:02:44,079 Speaker 2: So do they have enough money to pay the wages. 55 00:02:44,440 --> 00:02:46,519 Speaker 2: It's really hard to go to a workforce and say 56 00:02:46,520 --> 00:02:49,760 Speaker 2: we're cutting your wages because people leave. So what they 57 00:02:49,840 --> 00:02:52,280 Speaker 2: end up doing is actually, if you've got one hundred people, 58 00:02:52,600 --> 00:02:54,640 Speaker 2: they'll sack two people, so they're only paying for ninety 59 00:02:54,680 --> 00:02:57,560 Speaker 2: eight because they're getting less money in the future. So 60 00:02:57,800 --> 00:03:01,160 Speaker 2: deflation is a disaster in some ways. It's worse than 61 00:03:01,280 --> 00:03:05,840 Speaker 2: inflation because inflation you can do stuff. I mean hyperinflation 62 00:03:06,200 --> 00:03:09,799 Speaker 2: as in happened in you know, Argentina not that long ago. 63 00:03:09,840 --> 00:03:13,480 Speaker 2: Some of South American countries, that's disaster because the devalues everything. 64 00:03:13,919 --> 00:03:19,520 Speaker 2: But like seven percent inflation is not as bad as deflation, 65 00:03:20,120 --> 00:03:25,400 Speaker 2: because deflation totally undermines the economy. Even if you have 66 00:03:25,520 --> 00:03:28,960 Speaker 2: one percent inflation, you're still getting a sense of that. 67 00:03:30,200 --> 00:03:32,560 Speaker 2: So that's why deflation is so bad. 68 00:03:34,200 --> 00:03:36,240 Speaker 1: Have we just answered a question in record time? 69 00:03:38,160 --> 00:03:38,600 Speaker 2: Well? 70 00:03:39,840 --> 00:03:41,800 Speaker 1: I think we actually have. I mean, we're still I've 71 00:03:41,840 --> 00:03:44,000 Speaker 1: got to say though, the moment that you looked at 72 00:03:44,040 --> 00:03:47,200 Speaker 1: me and said, Michael, it took me straight back to 73 00:03:47,320 --> 00:03:50,360 Speaker 1: year nine and being kind of asked in class. Even 74 00:03:50,400 --> 00:03:53,040 Speaker 1: if I know the answer to a question, just instantly, 75 00:03:53,080 --> 00:03:55,600 Speaker 1: the palms start to sweat, the heart rate goes up, 76 00:03:55,920 --> 00:03:58,240 Speaker 1: and I'm just like, no, please ask someone else. And 77 00:03:58,240 --> 00:03:59,480 Speaker 1: the problem is when it's just the two of us 78 00:03:59,520 --> 00:04:02,280 Speaker 1: in the studio, there's no one else for you to ask, 79 00:04:02,400 --> 00:04:04,400 Speaker 1: no kind of under pressure. 80 00:04:04,440 --> 00:04:06,360 Speaker 2: That's a lie. We have a third person in this 81 00:04:06,400 --> 00:04:07,640 Speaker 2: studio we do today. 82 00:04:07,840 --> 00:04:11,320 Speaker 1: Yes, we are joined in the studio today by my 83 00:04:11,440 --> 00:04:14,000 Speaker 1: brother Andy, who is one of Beer and Greed's kind 84 00:04:14,000 --> 00:04:16,520 Speaker 1: of longtime listeners, who is actually doing the tactic that 85 00:04:16,560 --> 00:04:19,000 Speaker 1: I did in year nine. And then he avoids eye 86 00:04:19,000 --> 00:04:21,000 Speaker 1: contacts so that he doesn't have to say anything, which 87 00:04:21,040 --> 00:04:22,000 Speaker 1: is exactly what I did. 88 00:04:22,160 --> 00:04:25,320 Speaker 2: I mean, I do like Andy, except I'll put on 89 00:04:25,360 --> 00:04:29,040 Speaker 2: the weekend edition. Often when I'm right and you're wrong, 90 00:04:29,080 --> 00:04:29,800 Speaker 2: he sides with you. 91 00:04:30,520 --> 00:04:32,279 Speaker 1: Well he should, because I'm right. 92 00:04:33,240 --> 00:04:34,120 Speaker 2: Sibling stuff. 93 00:04:34,320 --> 00:04:36,159 Speaker 1: Yeah, no, it's fine. And he's also the one that 94 00:04:36,520 --> 00:04:42,599 Speaker 1: suggested that your reference recently to big Daddy should stick. Yeah, 95 00:04:42,680 --> 00:04:44,760 Speaker 1: and that you should now henceforth be known as Sean 96 00:04:44,760 --> 00:04:45,240 Speaker 1: big Daddy. 97 00:04:45,240 --> 00:04:47,480 Speaker 2: Alma, Well, I'm not the first Sean to be known 98 00:04:47,520 --> 00:04:51,120 Speaker 2: as big Daddy, So I'm back. In fact, Andy's back 99 00:04:51,120 --> 00:04:51,839 Speaker 2: in my good books. 100 00:04:51,839 --> 00:04:54,360 Speaker 1: Okay, he's back. All right. Well done Andy, and well 101 00:04:54,400 --> 00:04:56,960 Speaker 1: done Sean for answering the question in record time. Thank 102 00:04:57,000 --> 00:05:00,000 Speaker 1: you Michael, thank you Sam as well for asking it. 103 00:05:00,040 --> 00:05:02,080 Speaker 1: And if you've got your own question that you would 104 00:05:02,120 --> 00:05:04,039 Speaker 1: like to put to us and we can try and 105 00:05:04,040 --> 00:05:06,320 Speaker 1: beat our record, we could go for like ninety seconds flat. 106 00:05:06,480 --> 00:05:08,839 Speaker 1: Send it on through via LinkedIn or Facebook or Instagram 107 00:05:08,920 --> 00:05:11,800 Speaker 1: or Fearangreed dot com dot au and we shall pop 108 00:05:11,839 --> 00:05:13,839 Speaker 1: it on the list. I'm Michael Thompson and this is 109 00:05:13,880 --> 00:05:14,760 Speaker 1: ask Fear and Greed.