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A Burger Explains Inflation

Everyone’s freaked out about inflation, but what is it exactly? (Asking for a friend)

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Tell your friend there’s no need for embarrassment. People stress about inflation, but ask them to explain how it actually works, and that gets a little hazy.

Okay, cool. The friend—c’est moi! What do I need to know?

In a nutshell 🌰 Inflation is the rate at which the costs of goods and services increase over time. It gets a bad rap, but a modest level of inflation (around 2%) is a good thing.

As the economy grows, businesses and consumers have more money to spend. That means higher demand, which leads to higher prices. Over time, wages should rise along with inflation (since the price of labour should increase with everything else).

Unfortunately, this recent inflationary spike — to almost 7% — has been too sudden for many salaries to keep pace. So, people are feeling it whenever and wherever they spend.

How do we fix it?

Governments can heat up or cool down the economy by raising or lowering interest rates, making money more or less expensive to borrow. There are other issues that impact inflation, too, such as global supply chain flows and geopolitics.

Zzzzzzz…..

Okay, okay… Do you like burgers?

Wait—what?—burgers!

Welcome back. The Big Mac Index was invented by The Economist as a more digestible way to explain the purchasing power of a dollar around the globe. In 1986, a McDonald’s signature sandwich cost $1.06. In 2022, you need $5.65 to buy the same burger. 

Whazzat?

Inflation makes your dollar lose value over time. As the price of ingredients, real estate, employee wages, and transportation go up, the power of your dollar goes down. It’s one reason people work to grow their money in the markets, instead of holding it all in a savings account. Because on its own, a dollar today’s worth a little less tomorrow.

Can I get a side of fries with that?

Whoa, Rockefeller! Potatoes average an inflation rate of 4.58% per year

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Inflation’s Hitting the Tooth Fairy

My six-year-old just mentioned that her friend got $20 from the Tooth Fairy. Is that the going rate?

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Twenty bucks is nearly four times the national average, which hit an all-time peak in Canada this year at $5.99. It’s possible the Tooth Fairy was feeling generous, but equally likely she forgot to make change before flying in. 

Given the predictability of this particular payday (20 teeth over about six years), tooth loss is a great opportunity to talk about, you know, fiscal responsibility. Sound about as fun as oral hygiene? Okay, we get you, but the tooth fairy really is a good way to table topics like saving and investing, even inflation (the rate of increase in prices over a given period of time). 

Let’s look at the numbers: 20 teeth x 5.99 = $119.80. Your child’s mouth is building an empire, so it’s as good a time as any to talk about what that money could do over time. 

Delta Dental is an American insurance company that has been tracking the tooth fairy’s financials since 2001. It turns out the amount kids find under their pillow is a good barometer for the overall economy. Your average baby molar fetched more in 2006 than it did in 2008 following the economic downturn. And the fact that rates are higher than ever this year is an encouraging sign of post-pandemic recovery. Another principle at play is what’s known as income elasticity of demand. This is the idea that when people (or fairies) have more money on hand, there are certain things they tend to splurge on disproportionately. Children are one of these items.

So while the TF’s feeling generous, take advantage of a happy time and a teachable moment—while it lasts. One columnist recently argued that given the terrible hours, unsafe working conditions, and non-existent travel budget, the Tooth Fairy may be ready to join The Great Resignation. Who could blame her? She’s an essential worker who doesn’t even get dental insurance.

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The Business of Memes

Fast reads on things kids care about, or cared about, or may care about again.

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  • Meme stocks as an asset class? Nice work, Reddit. 
  • “Meme fashion” label Pizzaslime makes fast fashion look slow. They’re doing brisk business selling wearable internet culture to Gen Z.
  • Want to create a meme for the ages? According to one prof, there’s a formula for that.  

Read on…

***

The craze around the trading of “meme stocks” GameStop and AMC Entertainment has largely fallen out of mainstream news, but Reddit’s still chasing the highs. And so, it was just a matter of time before MEME ETF hit the scene. MEME launched this December, thanks to Roundhill Investments, purveyors of specialty ETFs such as the Esports & Digital Entertainment ETF, NERD.

With subreddit WallStreetBets 10x-ing in 2021, social investing is here to stay, even if MEME’s performance is on the decline…for now. 

So, should you “buy the dip” on MEME? It’s very early. The fund rebalances bi-weekly, and focuses on stocks “that are both highly shorted and subject to increased retail sentiment”. In other words, if you love roller coasters, this could be a love match. No matter what, it’s bound to keep you calmer than trying to keep up with what’s trending on Reddit.

Nasdaq.com | Sept. 4, 2021

The two millennials behind “meme fashion” label Pizzaslime have made millions selling merch to people interested in wearing internet culture IRL, reports Insider. Their wares reference nerdy-cool things like Elon Musk tweets about meme stocks (“Gamestonk!!”) and that endlessly remixed photo of a mittened-out Bernie Sanders. Commenting on Pizzaslime’s runaway success with Gen Z, one fashion expert said “What matters to younger consumers is what captures their attention and has the ability to spread like wildfire across social networks — and this is exactly why meme fashion is so popular.” We’ve seen plenty of articles in recent years bemoaning how Gen Z has killed the fast fashion propagated by millennials. Perhaps the younger generation has just put a new spin on it — one somehow both faster and more enduring at once.

Insider | May 16, 2021

Speaking of enduring, what is it that gives some memes such incredible longevity, despite the “here today, gone tomorrow” reality of internet culture? Speaking to Forbes, Leilani Carver, a professor of strategic communications, says that since older memes are better known, more people “have the necessary subcultural knowledge to interpret/understand the code and ‘get’ the meme.” 

In the age of the Remix, everything old is new again. We’re into it.

Forbes | Aug. 30, 2021

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Mistakes were made

Anonymous Financial Confessionals. Your mistakes are safe with us.

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One of my best friends just turned 36.
She laments that she still has a mountain of student debt.
She wonders if she’ll ever be able to pay it off.

This same friend went to Hawaii and bought a $900 jacket last month.

Mistakes were made.