MONEY TIPS I WISH SOMEBODY TOLD ME EARLIER - Clueless Conversation #5

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[pantonfire]

I know how much Sapan earns. I am also his brother.

[aashiksikaria]

"This is far outside my understanding but feels so important."

- Audience in this whole series of podcast.

[NaveenKumar-cnpc]

Q. Why do comedians make more sense then anyone else..?
A: ... becoz they are honest.

[Uran.Khatola]

Tanmay is being a father to the bot army and giving financial education to them. Thanks Daddy!

[yuvrajwadhwani]

Finally, somewhere I can share my "gyaan." FYI, inflation occurs for one reason, and one reason only. It is **expansion of the money supply**. Rising prices are a symptom of inflation, not the cause. If your temperature rose, you don't have a fever. You have a fever, that is why your temperature rose. It is an important distinction to understand.


Inflation does not happen because the economy is growing; it does not happen because wealth is growing. If the economy grew and the money supply was constant, prices would fall. And that is normal. Rising prices are not normal, but we've been living with it for so long that it feels like it is.

How does the money supply expand? Government! Since money is debt-based (I know, what?), the govt can issue new money when needed. Whenever they issue new money, they steal a little purchasing power from all the existing currency, which debases the currency, and that is what causes inflation. Just think about it, if the govt is issuing a package of 20 lakh crore, where do you think the money will come from? The govt might have reserves, but a lot of it will come from inflation, which means the government will create new money out of thin air. I wish I could do that.

The US Dollar is the world's reserve currency, and not too long ago, it was pegged to gold. This arrangement was known as the **gold standard**. You could literally walk into a bank with USD and exchange it with gold, the amount of which was fixed. Yes, that time, the price of gold was fixed, and it didn't fluctuate like it does today. The gold standard ensured that the overall supply of USD was limited to the amount of gold that existed (or mined). Since all the world's currencies are pegged to the US dollar (even today), this kept every currency in check.

On 15th August 1971, President Nixon took the US off the gold standard (to fund a war, of all reasons), and thus begun the systematic destruction of the value of currencies around the world. Since the governments had gotten a free hand, they debased their currencies with no end in sight. The countries that over-did this experienced hyperinflation. A recent example would be Zimbabwe, but it has happened in many other countries. Fun fact, Zimbabwe had so much inflation that the prices doubled every 8 hours. In the end, they had to issue a 100 Trillion Dollar (Zimbabwe dollars). For perspective, the world GDP in 2017 was around 80 Trillion Dollars (USD). And that 100 Trillion Dollars still wouldn't buy a loaf of bread.

TL;DR: The government causes inflation. It is not necessary. It is not a result of a growing economy. It is actually quite the opposite. Thanks for listening to my TED talk.

PS: Governments are fully aware of the fact that they cause inflation. Don't believe me? Just look at the size of your coins. Coins have 2 values. Melt value and face value. Melt value is the value of the metal that was used to forge the coin. The face value is what it says the value is. If melt value > face value, then people could melt the coins and sell the metal at a profit (which is illegal). To stop this from happening, the melt value has to be kept < face value, always.

So if you notice a new coin which is thinner and lighter than the previous version (just look at Rs 5 and Rs 10 coins), you should know that the government is planning to introduce inflation in the economy.

If you want to learn more about inflation, Google "Mises Institute Inflation book". It is pretty insightful.

Me, out. Yes, I'm an economics geek.

[harshjha]

"This is so far outside my understanding but feels so important"
-Me in 10th standard choosing between Science, Commerce & Arts

[saransh.agarwal]

I personally don't talk about money with random people or even distant relatives or friends is because people take money as a very generalistic way of judging someone's worth in all aspects including how smart, hardworking, intellectual, skilful that person is. Which is not really fair. Because it depends on a lot of other factors such as demand of that particular skill, people not knowing how to negotiate, the place where you're located like even if i get a 30% hike on my salary it would be compromising on my lifestyle if I move from Bangalore to Mumbai. There are a lot of other factors too. I actually know good friends who are making lesser money than me but are equally if not more talented in their skillset. Money is just a very binary measure to judge someone (unless you're an IAS ).

[dt]

Tanmay's genuine concern for our youth should be appreciated.
I'll not be surprised seeing stand-up comedians entering politics in near future.

[sohaankp]

"just like money, relationships compound over time"

[nainikasharma]

The corporate part was so needed!!
Women actually dont talk about money at all.

[vinayvardhansingh]

Negotiation power of employees has been ruined due to corona.

[mansikhurana]

Fun fact: Today morning had a meeting with my manager regarding my expectations vs what i got in April 2020 as appraisal. A little background when i was fighting for the designation i have been handling the responsibility for and yet have not been reflected on papers, things got a little ugly. When i shared my concerns with my family, my father was like “you should never ask” “this is the era of snatchers and that is what you are doing right now” his words and attitude of-course effected me even though i know better than that at my age. Back to today’s convo with my manager i told him my reduced bracket of expectations. I was pissed at my self afterwards bcz i valued my self low. Thank you Tanmay this is very relatable, the advice that you give of talking to your friends, your peers about money is very important. The conversation about money is not suppose to be felt wrong or awkward but it is what our upbringing in a conservative middle class has tough us. Sorry for the long post 😝 Incident was of today, felt like sharing.

[atree]

Hey Tanmay you are not only good at making people laugh but also at making informative Nice podcast!!!

[geetikadua]

This ended too quickly.. I wanted to hear more money stories! I could listen to Tanmay talk all day honestly!!

[tusharpandey]

I'm 23 and I have zero Savings in my bank account and of course no stable job.
I just don't have guts to be independent Artists without being unsure about future...
I have ideas but I don't know how to implement it.

Yup I'm just a another broke with a architecture degree.

[sindhuvarathra]

To simply describe Tanmay I would say "Intellectually humorous"

[noelsry]

Gaurang should have a YouTube channel of his own explaining basics of finance and giving tip and tricks to people who are new in this area. I’d love to listen to him talk about it. If he already has a channel doing it, please share the link to it.

[siddhantshah]

As someone who has just started working, I really like listening to these podcasts. I made it an effort to make myself financially literate before uni ended, and start investing as soon as the salary starts. So now that I am earning, it is nice to see people my age have questions similar to the ones I had (or still have), and get advice on it which is applicable.

PS: Only one bad habit with money: sneakers (I am sure Tanmay will relate).

[surbhibagra]

That women story is so true.. yes we need to change and talk about appraisal when we are working the same as any other person.. let's stop being embarassed to ask for our own money

[udayrathod]

Its mother of irony that they made jokes on our economy without knowing what is inflation.