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The Coffee Crisis of 2022?

HOSTS Adam & Thomas|17 November, 2021

Why are coffee prices sky-rocketing and why is Thomas paying $5 bucks for a latte? What do the boys make of Rivian – the biggest IPO since Facebook, why did CBA upgrade their forecasts, and why is 4/5ths of cash “missing in action”? All this and more on this week’s Comedian v Economist.

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Adam: [00:00:26] Hello and welcome to Comedian versus Economist. We demystify the world of money and help you get a handle on the bigger picture. My name's Adam, and we're joined, as always, by my little older brother and real life economist Thomas Hart of us. 

Thomas: [00:00:39] Yeah, Good, Adam, how I am pretty good. 

Adam: [00:00:41] Thank you. Hey, big show coming up. Thanks to everyone out there for joining us once again or welcome if you're tuning in for the first time. Got some nice reviews coming in, which we love. A review all the way from the US Navy this week. Thomas Struggle Cheek said Love the podcast, which is great given how much smack Thomas talks about America. It's not like it's every day. So we do like it if you if you leave us a review. But even more than that, though, if you could just recommend us to someone, that would be amazing. Next time someone asks you for a podcast recommendation, just give out TV a shout out. That'd be much appreciated. More listeners just means a few more resources we can put into bringing you a great show each way. In fact, I'd love to hear the most creative way that you've recommended our show to someone you know, like you could maybe pay a skywriter or get a chant going at the cricket. Or maybe, maybe you could just sit down with your long term partner. Put on some slow music, a lot of few candles and say, Baby, you and I have been together a long time now. I think it's time we take the next step. I want to spend the rest of my life with you. Listening to comedian versus economist. Baby, will you be with me? And can you pass that taco sauce? Something like that, something simple, 

Adam: [00:02:05] easy is 

Adam: [00:02:06] that. Otherwise, maybe just to say yes, I do have some vodka recommendations. Anyway, massive show. Let's leave that silliness there. And hey, I have a birthday next week, Thomas, and we're having a birthday. We turn one as a podcast, which is exciting, so I'm taking the week off. You do what you want. Well, does it pass? I'm not sure what's happening next week. I think you're catching up with an economist friend of yours, Thomas, a special guest on the show in my absence. Is that right? Yeah. 

Thomas: [00:02:36] Yeah, that's that's right. That's right. I think we're going to talk energy markets, which is probably a good one for you to duck out of, 

Adam: [00:02:40] actually, and I'm going to miss that. All right. Well, for now, big show coming up, as I say, so let's get started. And this week on the show, CBA have updated some of their forecasts now, saying there is a fair chance of rain on Thursday. Amongst other things, coffee prices have perked up a bit. No, seriously. What the hell, man? I got my coffee. Cash is king. The king is dead long live the king in a world of PayWave, Afterpay and bitcoin. Why is there more cash around than ever? But first, Thomas riddle me this. I started a car company in 2009 to date to date. I've delivered 150 cars, which wouldn't even fill the car park at the local RGA, and last year the company lost $1 billion. How on earth could I IPO this week and now be valued at $113 million? 

Thomas: [00:03:42] Oh yes. Big, big questions are the big questions. Is that? Yeah. So we're talking about Rivian here. So Rivian IPO on the Nasdaq last week. Biggest IPO since Facebook, I've been told definitely the hottest in the market is that shares popped 66 percent in two days, which is a huge, yeah, massive 66 foot. 

Adam: [00:04:05] That's huge. 

Thomas: [00:04:06] Yeah, yeah, it's massive. Yeah. To top the market cap now of 113 billion US dollars, that's more than the US giants of General Motors and Ford. On the back of one hundred and fifty three pickup trucks that they've delivered 

Adam: [00:04:24] this, this story makes very little sense to me. I mean, so we got this company, Rivian, which I don't know if you're aware they actually changed their name from Rivian. They used to be called mainstream motors. Uh huh. Uh huh. Yeah. But decided it was to 

Thomas: [00:04:40] mercury or mainstream. 

Adam: [00:04:45] So they've got so they've debuted. They are now worth $113, and they lost a billion dollars last year. Mm hmm. Oh, please, I can't at Woolworth's didn't Woolworths post like a massive profit and their share price tanked? Yeah, these guys have busted out of the gates with, yep, now at one billion loss, which is up from the previous year, by the way, they're not even tracking the right way. They lost many millions. Four hundred and twenty six million in 2019. So 2019 they lose 400 million. Everyone's like, we are in good shape for the IPO next year. I'm feeling good about this. 

Thomas: [00:05:22] Actually, it's worth it for four. Twenty six million in 2019, one billion in 2020 and in the first nine months of this year, it's another billion. 

Adam: [00:05:30] Right? 

Thomas: [00:05:31] Killing it, actually going the wrong way? Yeah. 

Adam: [00:05:33] But it's okay because we made how many cars? 253 delivered mostly so to the to the to their employees. Imagine that when negotiating the package. So what I get super is give you a bit of super go get a company guy here. What about really? 

Adam: [00:05:57] I'd rather not. 

Adam: [00:05:59] Right. So so these guys are they're an electric car company. They're obviously it's own now. Electric cars, 

Thomas: [00:06:06] not electric cars, electric adventure vehicles. That's what they're calling it. So the pickup trucks and SUVs, utes, utes and SUVs, if that's that's the segment that they've gone after. 

Adam: [00:06:17] Hang on this. Their main competitors, Tesla well-documented test success story, in a sense. 

Thomas: [00:06:23] Yeah, I mean, but Tesla Tesla's passenger cars at Tesla correct the passenger car market and 

Adam: [00:06:28] Tomado Thomas Taco tomorrow. 

Adam: [00:06:34] Well, no, I 

Thomas: [00:06:34] think I think you need more grunt. I think, I think speeds one thing, but grunt another thing. 

Adam: [00:06:39] It's not a stretch. If if you've got all the bits together, you've got all the bits together to build a car. You're not far away from building and you just chop chop the back window out and slash the roof in half and you got to use it.

Thomas: [00:06:55] I mean, if you push mechanics, I don't know if the EV market is a

Adam: [00:06:58] bit more 

Thomas: [00:06:59] complex than that. I think we're out of our depth here talking about how to get

Adam: [00:07:03] out of the ordinary. 

Thomas: [00:07:05] Yeah, yeah. So but that's that's the segment they're going after. And so they yeah, people appear like some some people talking up saying they did get their first mover advantage in that market is a big market. Like you look at Australian car sales like SUVs, like it's a thing like passenger cars on the way out, SUVs are on the way up. So if that's that's going to continue, then there's there's much more demand for passenger SUVs in their offer. Luxury EVs? 

Adam: [00:07:32] Yeah, but but that's what I'm saying. It's still a passenger vehicle. You don't need the you don't need more grunt than you'd get in a Tesla. I don't know what have they got the Model three or five or whatever it is, you don't need a lot more grunt. Like I've got a I've got an SUV, right? But it's not going off right. If I took that thing off road, like, I would need the bush mechanic because that's I sometimes get nervous going over speed bumps like its two wheel drive. It's it's got like a four cylinder engine. It's it's a nothing car. It's all about it. So yeah, it's pathetic. It's totally just like a like a soccer mom car ride. Yeah, right, right? So, yeah, go to yeah. So if they're if they like adventure vehicles, maybe that's a different that's a different model. 

Thomas: [00:08:18] Maybe, maybe. I think that the big thing that Rivian's got going for is that it's backed by Amazon. So Amazon owns 20 per cent of the company. And there's a contract. They have a contract with Amazon to build 100000 electric delivery vans. And I think that's what people are. That's what people are seeing here. Like you've got you've got Amazon backing you. So Amazon has deep, deep pockets and Amazon has runs on the board, just monstering every industry that they get into, whether it's Whole Foods or delivery or web services like wherever Amazon goes, they just like destroy whatever industry they move into. 

Adam: [00:08:57] It's probably better than the the army of Ford Fiestas. I've got going around at the moment with the Amazon Flex system, we're not even allowed to own it, right? 

Thomas: [00:09:07] So I think I think this is what really, I think this is what the market's reacting to. This is my theory that what the market's reacting to is not that Rivian has iPod is that Amazon has announced that they're getting into EVs, right? And this and Rivian is the vehicle for it. And so people are going like, Okay, Amazon is getting into EVs. I'm going to back that just because Amazon such a monster. 

Adam: [00:09:27] I guess a safer play in my book. Wouldn't you just buy Amazon? 

Thomas: [00:09:31] Yeah, I guess you could. I guess you could be a drop in the bucket for Amazon to market cap, wouldn't it? Hmm. 

Adam: [00:09:37] Yeah, maybe. I don't know. You tell me. 

Thomas: [00:09:39] Like it's not even if really? Yeah, it is a it was a rhetorical question. You didn't ask the answer. No. But like if Rivian Kilda is not going to really move the dial on Amazon's profits much, I wouldn't have thought No. 

Adam: [00:09:53] Yeah, OK, fair enough. I know the other thing I was thinking about this is there's so we've got this new company and it's like, it's another one of these kind of start ups. In a sense, it hasn't been around very long. It's coming into a new and new technology or a new phase of a very old industry, right? Like, you know, motorcars been around for a long time. Where are the big giants of auto manufacturing? Surely they're like, you're taking on them as you know, more than you taking on Tesla and a lot of ways.

Thomas: [00:10:19] Yeah. Yeah, that's right. I mean, Ford owns 12 percent of Rivian, which is sort of interesting. So they're kind of they've got their finger in the pie as well. Like why Ford's not doing their own thing and then probably are doing their own thing, but maybe it's just specialised. I mean, yeah, it's interesting. Like also. Look, I don't think I think Rivian's planning to to buy this stuff of of offshore, whereas that compared to Tesla's one of the things that, like Musk prides himself on, is that he builds the machines that make the machines so he he invests in in the tech that actually builds the cars and is able to do it in America. And owning that tech gives it gives Tesla a big advantage as well, which I think that's one thing that separates it from Rivian. I mean, in terms of the Tesla's interesting comparison, because Tesla launched in 2010, but it didn't turn a profit until last year, its first profit was last year, so that's over a decade to to get in the money market. Elon Musk was on Twitter. He must have had his account reinstated since last week. He says, I hope they're able to achieve high production and break even cash flow. That is the true test, he tweeted. There have been hundreds of automotive start-ups, both electric, electric and combustion. But Tesla is the only American carmaker to reach high volume production and positive cash flow in the past 100 years. What do you reckon? 

Adam: [00:11:38] What? That doesn't stack 

Thomas: [00:11:39] up? Well, I think I think you're saying that Ford and General Motors are more than 100 years old, so this is the first new car American car company to actually make get positive cash flow. 

Adam: [00:11:49] Oh, right, okay. I thought he was just going back through the history of time and and talking about electric cars only. Because then you could just claim, like the last million years. All right, Thomas Commonwealth Bank have come out this week with some updated forecasts. What are we looking at? 

Thomas: [00:12:08] Yes, a good times ahead. Basically, some, yeah. Yeah. Now they're seeing the economy snapping back more quickly than they had anticipated. They had that a pretty quick return to trend, yet had this shape in the in the profile. So a big dip in the first COVID outbreak and then another dip with the lockdowns that we've just gone through and then coming back to trend. 

Adam: [00:12:29] So hang on, hang on, hang on. It's bouncing back quicker than expected after the last time where it bounced back quicker than expected. 

Thomas: [00:12:37] Yes. 

Adam: [00:12:37] Yes. Yeah, the last time being, like six four months ago. Yeah, yeah. Did we learn as economists tell us, we learnt nothing from the first bounce back? Yeah. 

Thomas: [00:12:48] Well, know there were a few unexpected developments 

Adam: [00:12:51] that directly were impossible to predict. Look, forecast things are right. Yeah, no. 

Thomas: [00:12:59] Apparently, yeah. Yeah. Then we had the economy snap back out of the first Covid downturn much. It was a snap back. It was as much quicker than people thought. And then we went into lockdown again, and we pretty much got back to trend. You look at GDP level of GDP, you pretty much go back to trend out after that first snap. Back then we we tanked again. We probably went about half lost about half as much as we did in the first downturn. And that's where we're at now. But yeah, so how quickly we come back is the question. And CBO had been saying, we're going to come back pretty quickly, but now it's actually going to be even quicker than we thought. They're updating the forecast and it's going to be quicker than we thought. And so by the second quarter of 2020 to first quarter of next year, we're back fully on trend. So almost like Covid had never happened. Wow. Yeah. So remember, you 

Adam: [00:13:47] could kind of never happen. Yeah, yeah. 

Thomas: [00:13:51] Yeah. In terms of the GDP, so yes, I think it's yeah, just got the two reasons that pointing to the first is that the vaccine rollout has gone much better than expected. So we had gone from being one of the worst performing countries in the developed world. 

Adam: [00:14:06] It's killers. It's all roses now. And then you get back in the media like literally two months ago, they were like, This is the worst rollout in the history of rollouts. No one's having it. We had a whole we had like millions of doses sitting on planes because we were like, I'm not having AstraZeneca. What are you crazy? That's for? That's for the poor people. And now here we are saying this is one of the most successful rollouts ever. 

Thomas: [00:14:32] Yeah. Well, yeah, we've gone from being one of the worst or one of the best, and it's all thanks to the New South Wales of Victoria. And really, it was just people motivated to avoid the impacts of the of the of Covid so that you see that in the States and New South Wales and Victoria, up above 90 per cent now of single dose above 16, whereas a Queensland, I think, are tracking around 80 percent cent. They might be a bit higher than that now. But yeah, so the fear does seem to be a big driver in getting those vaccines into arms. But yes, but that means that it's sort of that change. It changes the economic outlook and how smooth the economic reopening is going to be in CBA's eyes. And the other thing that they're pointing to is that the unemployment rate never lifted as much as they were expecting that you had this as support packages going to employers and just generally government money flowing into the system. And that kept people in jobs and the unemployment rates held low like it didn't didn't even really tick up some of this sort of sort of some shift in participation, but unemployment's been very low. So we now, you know. A full percentage point lower than where we were pre-COVID. 

Adam: [00:15:39] But is that because of border closures as well? Don't they play a big part in that so people couldn't come into the country, a lot of the foreign workers that we might have had? 

Thomas: [00:15:47] Yeah, yeah. Yeah, that's true. That's true. That's that's that's definitely part of it. Yeah. But there's a survey measure from the Melbourne Institute, the Westpac Consumer Confidence Survey, and there's a question like how do you feel about your job security? And that's a that's a bumper levels. So that's in line with the unemployment rate. So people are generally feeling pretty secure in their jobs and that that tends to translate into spending. So when people are feeling secure, they spend well. Mm-Hmm. And if you track the spending as well as the CBA, published this chart on the on the card spending. So what people are spending on CBA cards and that is New South Wales is really interesting. That's a New South Wales. As soon as it came out of lockdown, the card spending just snap right back to where to where the other states were Queensland and WA or sitting. Yeah. Well, so yeah. 

Adam: [00:16:34] So yeah, well, we talked last week about more people going out to eat, and some shopping supermarket chains were noticing a dip as people, you know, eat out more and did less grocery shopping and stuff like that. 

Thomas: [00:16:46] So. Yeah, that's right. That's right. Yeah, I mean, there's a few interesting the other interesting like with this with the say. So part of the story through Cove is because people couldn't get out and spend, but incomes were held up by government support payments that you had this boom in savings. And we talked about this before. But those are probably some of their internal data. So they're looking at deposits and offset accounts of money held an offset that offset accounts, it's up about 20 25 per cent from where it was pre-COVID. So quite a big, big jump in. Yeah, cash in in deposit accounts and offset accounts. And then they also then they then break that down by a generation. So you can get the boomers, Gen X, Millennials, Gen Z, and it's pretty much in line with age. So the Boomers, their savings are about 20 percent cent right. Gen Z's up about 80 per cent. 

Adam: [00:17:38] Oh, I was going to say Gen Z wouldn't know what the hell an offset account was. 

Thomas: [00:17:41] Now they probably don't have an offset account, but they probably got cash. 

Adam: [00:17:45] Yeah, right. So they're up 80 percent. They're saving more than boomers 

Thomas: [00:17:49] were in percentage terms. So it's Gen Z's off a very low base compared to Boomers, right? But they also have a higher propensity to consume income because they don't have a lot of they don't tend to say young people typically don't tend to save so much. So you expect once that once they're locked down, they're going to see a big jump in their savings. Mm-Hmm. And that's sort of what you get. So yeah, so boomers up about 20 per cent, but Gen Z up 80 per cent in terms of their household deposits. 

Adam: [00:18:16] Yeah, well, ours is up. Ours is up this week until the end of this week when the new kitchen goes in. Yeah, the all offsets can take a fair whack. All right, let's take a break here. Thomas, you're going to share that chart to our socials, Instagram and Facebook US at CBC podcast. Coming up after the break, we're going to be talking about why the cost of coffee might go through the roof and why has all the cash in the economy come from? Be back with more comedian versus economist right after this. Welcome back here on comedian versus economist, of course, you can always send us an email. We love hearing from your CV at Equity Mates dot com or via the website Equity Mates dot com forward slash CV. But Thomas, for now we're talking coffee. We've got a climate disaster looming. We've had a global pandemic and now you're telling me that I'm on not be able to get a decent cup of coffee. What's going on? 

Thomas: [00:19:09] Yeah, yeah. No. I went to went to my coffee shop the other day and five bucks for a latte 

Adam: [00:19:17] was 

Adam: [00:19:18] thus for forms the basis of our research for the show. That's how I got to write 

Thomas: [00:19:23] that to the bank. Now there's a couple, there's a couple of things going on with that. So one is that coffee prices are spiking right now. So the food futures on Arabica coffee, they're up 63 percent so far on a note on their recent low. So, yeah, big big boom in coffee prices. 

Adam: [00:19:40] Fun fact. I heard that the I heard that the bean that they make instant coffee from is called the Robusta, just just in case instant coffee wasn't appealing, unappealing enough as it was. They've made it from a bean that sounds like it was great on a fence post. So just picture of like just starting the whole thing in a cheaper and well, then forty three. So Arabica 63 percent, up 63 percent. 

Thomas: [00:20:14] So that's a that's all on supply problems. So Brazil is the biggest producer in the world. The outlook for for 2022 23 is somewhere between 34 and 39 million bags of coffee, but the typical year for them is around 50 somewhere around that. So, yeah, quite quite a big hit to supply some of that's logistics. Well, the freight and shipping, that sort of story going on, there's a lot of weather events. So yeah, there's drought and drought and frosts in Brazil and then heavy rains that had drought and then frosts, and then they had heavy rains that triggered a fungus outbreak. 

Adam: [00:20:56] Now what 

Adam: [00:20:57] you know, you don't want that in your coffee 

Thomas: [00:20:59] now and then the the apparently pruning got out of hand that the growers prune their bushes too much, in some cases all the way down to the stump. And that's going to delay the recovery by one to 

Adam: [00:21:11] two years brought to you by manscaping. Right? That's going to delay recovery. Oh man. Yeah. What? Wasn't anyone watching them? We have people in charge of this sort of thing. Well, I think 

Thomas: [00:21:25] maybe there's a thing that was maybe related to the fungus. Mean, that was how they dealt with the fungus outbreak. I mean, 

Adam: [00:21:31] I don't want to I don't want to over. I'd be overdramatic about this. But can you imagine like we had lockdowns, you know, how much that hurt the economy? Can you imagine if the economy tries to function without coffee like it's going to be? You know, I mean, it'll obviously snap back quicker than expected, yada yada yada. But but this isn't the way we're heading into dark times. You take away people's coffee, you lock them up in their house for three months. That's one thing. You take away their coffee. You're going to have robots telling you right now. 

Thomas: [00:22:02] Yeah, well, it's going to it's going to get going to get expensive. I think I mean, we're talking about the future prices for 20 to 22 23. So it's kind of locked in. So we've got a bit of a shock ahead of us. 

Adam: [00:22:14] Right? 

Thomas: [00:22:15] Mhm. Yeah. So and it was already like I talked to my mate runs a cafe, but they're they're already seeing in the prices that they're paying. But the other thing going on for there's going on for coffee is that in our case, it's labour costs. So he's he's he's really struggled to find people to work in the cafe because we've had around Byron Bay and up here. We've had, you know, house prices are up by 30 percent. Rents of rents are up. I know my daughter and my guess would be like 30 or 40 percent, if not more. Yeah. So if you're, you know, someone working in a cafe, you're really struggling to meet rent, let alone buy. So that creates a shortage. And that's on top of the, you know, without the foreign workers who often often gravitate to hospitality jobs via the if I was running an article this week about dishwashers charging fifty dollars an hour to wash dishes 

Adam: [00:23:11] and those machines that just screws every chance they get. 

Adam: [00:23:18] I mean, 

Adam: [00:23:18] my my dishwasher doesn't do a very good job of 50 bucks an hour. So what? So what do we all do? I guess we just switch to what Red Bull and Mother Cafe in from there. It's actually when you said in the article about the about the coffee shortage, I thought I did a bit of research and I was curious to know how they made the caffeine in in Red Bull and mother to see if it was the same, if it was the same caffeine. And it turns out they don't. It's oh, it's like purely synthetic, says here. Ingredient such as taurine, caffeine and vitamins are synthetically produced to ensure consistent, high quality, which is kind of like it just makes Red Bull a bit of a contradiction in a can because it also says the water in Red Bull is alpine water of the highest quality, which comes from the Austrian and Swiss Alps. The sugar is produced from sugar beet ingredients such as Taurid, caffeine and vitamins, a synthetically produced to ensure consistent, high quality. It's from the Red Bull factsheet. Well, you know you'd have to mix in anything natural with this Swiss alpine water brought Thomas. Finally, it seems like we're seeing the end of cash all through society. And now you're saying that ATMs are being pulled out left, right and centre. What's going on? 

Thomas: [00:24:37] Yeah. So we've got some app or data for being the banking regulator, and I got some data from them last week saying that 447 branches so bank branches, or nine percent of the total branch network have closed in the past year. So, yeah, big big fall in number of branches around, but and ATMs disappearing at a quicker rate than that. So they lost 1864 ATMs, or 19 percent of the network ripped out in the past year in the past five years. There's been a 44 per cent fall from 13000 or down to 7000 odd and 803 or a third of the entire network in the last two years alone. So a rapid, rapid ripping out of ATMs 

Adam: [00:25:25] will get some cash out for indoor soccer tomorrow night before it's too late. 

Thomas: [00:25:29] Yeah, so there's a couple of things are partly it's demand driven, so saying the ATM. Australian Banking Association sort of saying that ATM withdrawals have fallen 20 per cent in the year to August 2021 and the 16 per cent the year before. So this big decline and we saw this with Covid said, like with a lot of everything went online or sort of, you know, everyone's playing by cards. A lot of lot of shops weren't even accepting cash. And so there's a big fall in the demand for cash. So 16 percent last year, 20 percent this year. So the pretty big declines. 

Adam: [00:26:01] I'm almost at a I'm almost at a point now where I don't need my wallet. I've got like my metro card for the train and that is literally the only thing I need one of them. 

Thomas: [00:26:13] Everything else is 

Adam: [00:26:13] on the phone like I have. No, I just don't carry cash and everything I can do on my phone. 

Thomas: [00:26:19] Yeah, drivers, a lot. And so so that [

Adam: [00:26:21] hey, it's so there. 

Thomas: [00:26:22] Yeah, yeah, no, that's right. Yeah, I see people advertising wallets online. I think that's a that's a dying industry. You heard it here first short. Will it tell 

Adam: [00:26:33] us? Sure. Yes. 

Thomas: [00:26:38] Yeah. It's said demand for ATM and cash is down generally. But the other thing is that once there's been a sort of industry wide shift towards fee free withdrawals, which turned ATMs into a profit centre into a cost centre. So the sort of no, you're right, no point in even having them anymore, they're just the cost. So the banks are kind of keen to get rid of 

Adam: [00:26:57] them, just servicing people for nothing. 

Thomas: [00:27:03] It's just offering convenience with no price attached to it.

Adam: [00:27:07] Yeah. 

Thomas: [00:27:07] I mean, we should 

Adam: [00:27:08] note that the 

Thomas: [00:27:09] data on cash withdrawals comes from the APA so they could be talking their book there, but justifying. But we do, and we do know like definitely in terms of the percentage of transactions cash is is has declined sharply since Covid started. I think we're down to like a fifth in less than a fifth in Australia now of all transactions happening with cash. But there's an interesting thing is that while demand for cash is tanking, there is huge amount of cash coming into the system. So I've got a chart here of share, which is from the RBA on their money AG. So during 2020, currency, the amount of Dollars and coins in the economy was growing at almost 20 per cent 

Adam: [00:27:54] what 

Thomas: [00:27:55] was booming and is now falling back to growth of five per cent, which is sort of in line with historical averages. But there was a huge boom in the amount of money, but not not not like digital money, like like the most. When we talk about quantitative easing and money printing, that's just like digital money, just pressing a button. This is actual hard currency, yet growing at 20 per cent. What is it going? Well, this apparently is a thing called the paradox of banknotes, 

Adam: [00:28:19] which is a I like it.

Thomas: [00:28:20] Yeah, it comes from the central banks, but we don't like it as much. But yeah, so the central banks talk about this paradox of bank banknotes is that while there's much less cash being used in transactions, demand for cash is booming. Yes. Then in Europe, the ECB released something saying that a fifth of banknotes in circulation were being used in recorded sales. So only that only a fifth, 

Adam: [00:28:44] only one fifth. 

Thomas: [00:28:45] Yeah. So four fifths, which is kind of like, we're not really sure where they are and what they're doing. 

Adam: [00:28:51] Isn't this the whole problem with cash? Isn't this why governments and everyone else are so supportive of kind of getting away from cash is because cash, the traceability element like cash cash isn't traceable. You know, even I think we talked to that last week about CBA offering bitcoin bitcoins traceable to a degree. If you know, like a wallet address, you can see money flowing around the system, whereas cash is sort of very untraceable. But you're saying it's the government that's making the cash. 

Thomas: [00:29:18] Yeah, but it's sort of going outside like so even like so wild demand for cash transactions is plummeting. Demand for actual cash is booming. So and the euro responded to this and printed 140 billion euro of extra cash, extra hard currency that's on top of the QE just to meet this demand. And they're thinking no one's really talking about it, but everyone seems to think it's just black market operations. Yeah. So the Britain's National Crime Agency did an analysis of how many banknotes were printed and how many were used in transactions to figure out the leakage. And they found out that so much money is leaving the country that the only feasible way it could be doing it is in massive trucks. It's just that much money leaving the country 

Adam: [00:30:09] that it can't be like, so it can't be like a little drug mule here and there. 

Thomas: [00:30:13] No, no. There's a story of a couple of weeks ago where this woman got picked up trying to fly to somewhere in Europe, out of out of the UK, and she got busted with like $3 million in just notes. And it's all late teens and 20s, like she had three suitcases that she was lugging around and was carrying a load of luggage. 

Adam: [00:30:34] She's like, I don't know if it's going to be cold or not. 

Adam: [00:30:38] Well, I read that you said apparently she had a she had it wrapped in coffee to try and like to smuggle like to, you know, throw off the sniffer dogs. But given the price of coffee now, I imagine it'll be the other way. So people be racking up a copy of banknotes as they tried smuggling of Arabica beans over the border. 

Thomas: [00:31:01] Yeah, so and so legal, obviously, to smuggle that much money out of it, but that the authorities were saying, like if they're willing to just let that much go in one hit and risk losing it, then there must be so much money flowing out of the system. And as the saying, it must be truckloads. 

Adam: [00:31:17] It can't all be that, can it? Is he saying we live in a society where four fifths of the cash in the economy is being managed by the mafia and ne'er do wells, 

Adam: [00:31:31] who was supposed to either a bit 

Thomas: [00:31:38] more organised and your mates then or with food? 

Adam: [00:31:44] Yeah, I think 

Thomas: [00:31:46] I think I think I think that's what we're saying. I think that's what we're saying. Yeah. And I think this. Hmm. Yeah. Yeah, it's yeah, it's it's massive and it's and it's probably just accelerating because people are turning away from cash in droves. And yeah, I think I think it's really interesting, like if people are worried about moving to a cashless society, you're going to quickly end up with a situation where 90 percent of cash is held by criminal elements. And the case to outlaw cash is going to become it just gets easier and easier to make as you go. 

Adam: [00:32:15] All right. Well, if anyone is out there holding suitcases full of cash, feel free to sling some through to your mates. Here at Kva, we could certainly do with a bit to keep bringing you some content that does this for this week. Don't forget to check out all the other great podcasts from Equity Mates Media Get Started Investing feed Equity Mates Investing Podcast. You're in Good Company took money to me and the brand new Crypto Curious Podcast. I listened the other day. It's fantastic. If you'd like a crypto, so lots to get your ideas around. Also big news. This week we're launching the Equity Mates Media Awards, which is a chance to give our community an opportunity to recognise some of the best products, platforms and voices in the Australian financial landscape. So this year there are five awards. We're seeking nominations for Investor of the Year. CEO business leader of the ETF of the Year platform of the year and Community Member of the year. So that could be you. So find the link in the show details in the show notes and make sure you get your nominations in. But that's it for us this week. We will talk to you again next week. Thanks as always, for tuning in. We will see you then.

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Meet your hosts

  • Adam

    Adam

    Adam is the funniest and most successful comedian in his family. He broke onto the comedy scene as a RAW comedy national finalist before selling out solo shows at two Adelaide Fringe festivals. He’s performed stand-up to crowds all over Australia as well as enjoying stints on radio with SAFM and most recently as a host of the Ice Bath on Triple M. Father of two and owner of pets, he may finally be an adult… almost.
  • Thomas

    Thomas

    Thomas, the economist, is the brains of the outfit. He studied economics and game-theory at the University of Queensland and cut his teeth as an economist at the Reserve Bank of Australia. He now runs his own economics consultancy, with a particular focus on the property market. He lives with his wife and two kids in the hills outside Byron Bay.

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