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we live in a world where there's so many things happening and all these things have an influence on markets but the principal driver of say financial markets of stocks and bonds has been monetary policy in the western world and that has made any precise assessment of the strengths of an economy very difficult because let's assume you tell me mark how are you and how is your business i tell you everything is great but i don't tell you that everything is great because i just got a loan of say a hundred million dollars which i know i will never be able to pay back but i can spend it and so by spending it i live a very great life and maybe one day a bank will have to write it off or something like this but the money that i got free of charge from whatever the government or the state or the bank allows me to live way above my standard of living doesn't mean that it's sustainable that is the point and when you ask me about the global economy i think we are in a super real economy in the sense that the typical household according to statistics at 35 years of age is less wealthy than the parents were when they were 35 and they earned less in real terms inflation adjusted than they were 35.
number two point i'd like to make is we have today a rate of inflation and we have to define what this inflation is when stocks go up when properties go up is this inflation or is it bull mark there are many interpretations basically inflation is uh excessive printing of money an increase in the quantity of money so something will go up so it can be that say commodities go up and it can be that stocks go up it could be that bonds go up it could be that houses go up at cost of living and so forth and so let's say for most ordinary people inflation is an increase in the cost of living now the cost of living at the present time and you have a household and you have maybe children and i have also children but my daughter is already grown up so your rate of inflation is a different one than mine but say if i look at all the literature about inflation at the present time it has to be in the united states between seven and twelve percent per annum depending on the household and where you live and so forth but in some areas uh you know rents have gone up by 20 over the last 12 months and in our other areas less and then if you own a house maybe you don't feel it that much and so what so it's difficult to calculate but i think a fair assessment would be to say something between 7 and 12 now the last time inflation was this high was in the 70s but at that time the fed fund rate was around 8 and now we have central banks in europe they think inflation is transistory you know they don't need to do anything and in the u.s the big debate that is a big debate is whether to increase interest rates from zero to 0.25 or 0.50 you understand this is a so real world interest rates when the rate of inflation is this high should be say on the fed fund rate six to eight percent minimum but we are there not even but they haven't increased it yet and they're still buying assets you have to see this they're buying assets they're not they haven't stopped printing money not at all and so i don't know what the outcome will be but i i don't i can't imagine that it will be a favorable outcome in the long run and in the meantime i'd like to just say one thing to everyone you know when i grew up in the 60s and 50s my grandparents always said you know you have to save some money and you put in the bank and then you have some reserves today money in the bank and reserves is about the worst thing you can have because in a year's time through this inflation i explained it will be worth seven to eight percent maybe twelve percent less than it is today you
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