C Thomas Printer and Austerity Jones talking about how relative money and wealth, and even inflation is.
Good morning I’m Austerity Jones and I am here with C Thomas Printer. Welcome back to your regularly scheduled programming. Good morning C Thomas.
C Thomas: Good morning Austerity. I am opening the episode with a movie quote. The name of the movie is Cast a Giant Shadow and it was filmed in 1966 starring Kirk Douglas and John Wayne. Kirk Douglas’ love interest Magda Simon remarks “You Americans, how can you understand horror? To you, horror is having a bathroom outside the house. You’re from a country so rich. Even your wars are rich wars, big guns, big airplanes.” I have often thought about this line, and how Americans are viewed differently from outside our country. It is a matter of perspective I suppose. In this movie, it recounts how America was the first nation to recognize Israel as a country, largely because it was the right thing to do. We fought World War II a) because Japan bombed Pearl Harbor and b) because fighting against the Germans and Japanese was the right thing to do. But that is from our perspective.
One of the best ways to evaluate a decision is looking at it from the viewpoint of another. It is a skill that many poker players use to try and deduce what cards their opponents are holding. Would someone play a strong hand this way, would they bluff here etc? A good poker player always seems to know what their opponent is holding, because they have recognized the patterns of betting and behavior and put themselves in the other person’s shoes and said is this how I would play this hand knowing what I know about this person? It’s a game of perspective. Which brings us to the word of the week perspective.
Perspective- a way of regarding situations or topics, or a point of view.
We can use that same concept when we discuss finance, or geopolitics, or macroeconomics. For example, we see inflation being a problem in the US with inflation over 7%, but how can we know horror? The inflation rate in Italy is 11.8%, in Turkey it is 84%, and in Argentina it is 92% (We have looked at Argentina’s history of inflation in our 4 episodes mini series, please see the link to the first episode of the series below).
When we think we have problems it is instructive to see how someone else is viewing our problem. The Federal Reserve has stated that they are going to defeat inflation by raising interest rates until the job is finished, but what effect does that have on the rest of the world? How does this policy look from their perspective? Now, most of the world is having higher inflation than we here in the US. Remember, we have the world’s reserve currency and the actions here at home affect the rest of the world. We must realize that the stronger dollar is really hurting other countries’ currencies. In the words of John Connally in 1971, “Our dollar is our currency, but it is your problem.” How? Let me explain: the international lending market is usually conducted in dollars, so when a country has to pay back a loan and their currency has weakened against the dollar, it takes more dollars to pay back that loan. That obviously hurts their margins, but we don’t even think of that here because we are like Magda says, from a country so big and rich.
There was an old saying that there are three things you never talk about in polite company: money, religion, and politics. It is considered rude, but it is also instructive because each topic is so divisive that it will often end in a fight. Well we have no such matters and you can pick that fight at any time by just reading Twitter. However, politics can often be broken down into blue versus red, Democrat versus Republican, and liberal versus conservative while religion can be broken down into believer versus non-believer, Christian versus Muslim, or Protestant versus Catholic. But money? How is money polarizing?
Money itself isn’t polarizing, it’s the perspective of the people regarding money that is polarizing. There are lots of people that love to spend other people’s money and have never had to earn a dollar in their life and they treat money very cavalierly. Others have no money or don’t make very much money, therefore they value every dollar passionately because it has required so much effort to earn them. Maslow’s Hierarchy of Needs does a nice job describing the different levels of financial comfort in a pyramid form. From bottom to top it goes physiological (food and shelter etc) to safety (a job and personal security) to love and belonging (friendship and intimacy), to esteem (self and status) and self- actualization (you can be whatever you want to be). This is very instructive in America because what are we teaching our kids today? You can be whatever you want to be, you are so important and I respect your self esteem so much and everyone deserves love etc. Well, I have an inverse view of that as a matter of perspective. I agree with the pyramid, but I think that each level of the pyramid needs to be built in succession. You don’t put the roof on a house before you put in the foundation and the walls. American kids are often so rich that they are born with food and shelter and personal security in the form of clothes on their back and an allowance to buy things for entertainment before they have had to earn and respect the base of the pyramid. More importantly, they haven’t developed the perspective to understand and respect people that are in that lower pyramid level.
When you are driving a car you are looking through the front window and you have a rear view mirror to see what’s directly behind you and there are side mirrors to see what’s on either side of your car, but it isn’t a complete 360 view, there are blind spots, spots you can’t see and they require turning your head to see if anyone is there. People that have money often have blind spots, they lack perspective. What is nothing for them to spend especially if they didn’t earn it is often a huge allocation of someone else’s budget. When someone is on food stamps in America,no other government program, just the Snap program, they make 62% of what the average Tico makes in Costa Rica. The average annual income over there is just over $5k. Another example: If you are unemployed and make the US average of $320 a week, you then earn just over $16k annually. This is about one third higher than the annual median income in Spain which is a little under $12k. So it is the perspective that we need to understand before we open our mouths and discuss money. When rich people speak of money problems, they often have no idea of what real problems are because they are on completely different levels of the hierarchy. If you want to avoid appearing a jerk or worse, be hesitant in speaking about money, about your spending of money, and most importantly how others should spend their money.
This is tough to do on a program where we discuss finance, but this is where we use our knowledge of perspective to be thoughtful around the subject. We offer financial tips every week and one of these tips was to start saving for an emergency fund. This is a good thing to do for everyone, but if you are wealthy, you might find this a waste of time. But it’s estimated that 60% of Americans don’t have $500 set aside for an emergency. We want to lessen your blind spot. It is a lesson that those in government also should learn. When Congress spends a pork laden $1.7T on running the government and Joe Biden tells you that everyone should go buy a new EV (average US sticker price $66k), they have blind spots. They don’t understand how hard many people have to work for a dollar. Yet, most importantly, we live in a great big world so when Americans are complaining about how tough their lives are, I suggest looking around the world. We are so big and so rich that no one around the world wants to hear us complain about our problems either.
Sincerely Yours,
C Thomas Printer
This week’s financial tip
is to pay off your credit card debt from your Christmas spending. Yes, you get a couple week reprieve from adding to your emergency fund because numbers matter. If you don’t pay off your credit card in full every month you will get hit with a brutal double digit interest rate. Since our savings rate is less than that, we must choose wisely. If you have paid cash or debit and have not gone into credit card debt please continue putting money aside. We are coming to the end of the emergency savings portion of our financial tip program and we will move on with other ideas. Stay tuned if you want to stay on top of your personal finances.
On this date in history
21 years ago to be exact, the Euro was introduced as the currency of the Eurozone.
Also born on this date
The king of rock and roll- Elvis Presley.
+ We would be remiss if we did not mention a birthday from last week: 99 years and 1 week ago, vice chairman of Berkshire Hathaway, Charlie Munger was born.
Learn more about Argentina economy
10.31.22 Lessons from Argentina – Part I – C Thomas Printer Cooperative | Podcast on Spotify
October 31, 2022 | Lessons from Argentina – Part 1 – The C Thomas Printer Cooperative
To watch us
C Thomas Printer Cooperative – YouTube
Resources of the episode
Maslow’s Hierarchy of Needs Explained (thoughtco.com)