Latest / Money Grows on Trees / #246 - Why Is The Australian Dollar Collapsing?!

Transcript

#246 - Why Is The Australian Dollar Collapsing?! · Money Grows on Trees

0:00
Investors don't see Australia as a great place to invest because we're
0:03
running it poorly and because of that, the value of our dollar has
0:06
fallen drastically. If Apple spent no money on research and development, what
0:10
do you think would happen to the iPhone? Imagine what happened if the iPhone 3 didn't
0:13
innovate. You'd have got rid of the flipping thing. Well, that's what's happening to Australia. We're
0:17
not innovating. We're literally anti-innovating. The
0:20
cost of goods up, the cost of fuel up, housing up,
0:24
all these are like human needs up, up, up, up, up, up. Check this
0:28
out, $577 billion pumped into the economy, which
0:31
is 30% of the gross domestic product of the country in
0:35
that timeframe of COVID. I'm Lloyd James Ross, seven figure
0:38
investor and entrepreneur, and I've helped thousands of business owners and
0:42
professionals turn financial stress into success. If
0:45
you're stuck in old money habits, overwhelmed by investing or unsure where
0:48
to start, This is for you. I'll give you the mindset and
0:52
strategies to take control, grow your wealth, and achieve financial
0:55
freedom. It's time to make your money work for you. Ever
0:59
wonder why the Aussie dollar feels like it's worth less every time you
1:02
travel, shop, or fill up the tank at the gas station? You're
1:05
not imagining it. The Australian dollar is collapsing, and
1:08
it's not just bad luck or global chaos. There are real reasons behind
1:12
why it's happening. And today, I'm going to break them all down for you. In
1:15
this video, we're going to dive deep into why the Australian dollar is
1:19
losing value, what a fiat currency really is, the insane
1:22
money printing that happened during COVID, and how it all ties into
1:26
inflation, debt, and trust. And we'll look at the day
1:29
the Aussie dollar was floated. how inflation is baked into the system, and
1:33
why some are calling it the Australian peso in
1:36
jest. So if you care about your money, your future, or how to protect your
1:40
purchasing power, then this episode you do not want to
1:43
miss, all right? But before you watch this, go back and watch the
1:46
episode Why is the Australian property market collapsing? It's
1:50
our previous episode on YouTube. And there's a lot of incredibly
1:54
fun, entertaining comments in the comments there. So go check it out and find
1:57
out why it is collapsing. But we're going to find out why the currency is collapsing in
2:00
this episode. So before we jump into this completely, I
2:05
share some real data with you as to why this is happening in real time. I
2:09
want to talk to you about fiat currency. Currency is
2:12
just the exchange of value that we do in the world instead of barter.
2:16
People often talk about, oh, what happens if the world ends? I'm like, well, we
2:19
had a bit of a glimpse of that during COVID and guess what the currency of the
2:22
day was back then? It wasn't gold. It wasn't crypto. It
2:26
was toilet paper. Bartering,
2:30
trading goods and services with each other is actually the
2:34
original form of economics. Fiat
2:37
currency replaced bartering because it was just simpler
2:41
and easier. It's so much easier and frictionless to actually just use
2:44
paper asset, paper money to transact rather than say, hey, I'll
2:48
give you my iPhone if you give me that tire of your car, whatever it
2:51
might be. It just makes trading
2:55
goods easy and simple. A currency is
2:58
a store of value, it facilitates exchange of value, and
3:02
it's a measure or unit of currency. It does all these things.
3:05
If it doesn't do those things, it's not really a currency. It's more of an asset or something
3:09
else completely. What is fiat currency specifically? It's
3:14
a currency that has value because the government says it does. So
3:18
it's by decree. It's not backed by any hard assets. So it's
3:21
not backed by gold. It's not backed by silver. It's not backed
3:24
by any hard physical assets, all right? And
3:28
some examples of a fiat currency are, of course, the Australian dollar,
3:32
the US dollar called the greenback, the euro, the yen,
3:36
the British pound. These are all fiat currencies,
3:39
okay? And of course, it's how we're transacting now. And
3:43
incidentally, the US currency still stands as the strongest currency in
3:46
the world. And it accounts for about 50% to 60% of
3:50
global trade. So very difficult to knock that off its
3:53
perch. I can't see that losing its reserve currency
3:57
in the world at the moment, although the RMB in China
4:00
The digital renminbi probably has the chance next to
4:04
becoming the global world reserve currency if the USD falls
4:07
off its perch. But I can't see that happening in our lifetime. But let's talk about
4:11
why the Australian dollar is collapsing. So the Australian dollar became
4:15
a global floated currency. fiat
4:19
currency in the early 1980s. Before then, it was actually linked
4:23
to the US dollar. So, the day it was floated
4:27
was back in the 12th of December, I think
4:30
it was 12th, yeah, 1983. The same year I was born, a great
4:33
year. So at the time, the treasurer Paul Keating, who became the Australian
4:37
Prime Minister, under the Hawke government, on the 12th of December 1983, they
4:41
floated the currency. So before then, it was
4:45
pegged to a basket of other currencies. And normally, currencies
4:49
are pegged to the USD. But
4:52
eventually they thought we need to float this, okay? And floating
4:56
means it's now, it's got its own value and the
4:59
value of it is assessed against other currencies, all right? So the
5:03
RBA or the Reserve Bank stopped sending the price back then, but it still controls the
5:08
supply of the fiat currency to the market through interest rates, okay? Why
5:12
did they float it? Five reasons. One, they wanted to modernize
5:15
the financial world of Australia because if
5:19
you have your own currency, it's almost like a maturity in your
5:23
economics situation in your country. They wanted to grow and
5:26
mature into a country that has its own currency. They wanted to modernize the
5:30
economics of the country. The other thing they wanted to do, number two, is they wanted to remove inefficiencies. They
5:34
wanted to They wanted to end the need to interfere
5:38
with the currency market locally. All right. And number
5:41
three, they want to encourage foreign investment. So they want to open up capital flow
5:45
into the country. And so this increases the investment, the
5:48
trust that investors have when they're bringing money into your currency, if you have your
5:52
own local currency, they wanted to handle trade
5:55
deficits better. So this allowed the currency to self adjust. to
6:00
better handle trade deficit. It's like automatically rebalancing
6:04
trade. So they want to do that. And the fifth one is they wanted to stop speculation and
6:10
around what happens, the speculation pressure
6:15
by removing the artificial pressure from defending the pegs that it was against. So
6:18
they had all these reasons to do it. And so they
6:22
thought, you know, we need to do this. We want to mature as a country. We have to have
6:25
our own currency, right? So that's why they floated it
6:28
back in the 80s. Now, what's interesting about that is that it's
6:32
not been backed by anything. And so the US dollar used
6:35
to be backed by gold. And then they removed this under the Nixon presidency. They
6:39
removed this from the gold standard, which means that you could just print it infinitely.
6:43
And the problem with that is you can do the same thing with the Australian dollar. So over
6:47
time, it's in the nature of fiat currencies to actually fall.
6:51
And the nature of them to fall is caused by two reasons. One is price
6:54
inflation. So this is where the cost of goods and services actually goes up. And
6:58
also the supply of the money to the marketplace. So both those
7:01
things acting at the same time will create some sort of inflationary pressure,
7:05
which means your money is worth less year by year by year by the exact amount
7:09
of or roughly the amount of inflation. Inflation
7:13
is really important to understand. So part of this episode
7:17
is to explain to you why or importantly
7:21
how the Australian dollar is falling
7:24
in value fairly quickly. All right, so the
7:28
very first reason why
7:32
fiat currencies fall is because I said, as I said before, there's excessive
7:36
printing. So they can supply the marketplace with more
7:39
money. And of course, if you supply with more money, there's more of it around, it
7:43
causes inflation because people have more money to actually spend. So it bids up the price
7:47
of goods and services. So an example would be, I mean, COVID, it
7:50
was just brutal stimulus, like it was what's called
7:53
stimulus led inflation. So obviously
7:57
there was fear that by shutting the country down,
8:01
the world down, that there would be a credit squeeze, meaning
8:04
there would be an unavailability of credit to continue with business
8:08
in the economy. And if you have a credit freeze, you can have some
8:11
serious things happen in your country like a run on banks. You don't want
8:15
credit to be frozen. So to prevent that, they
8:18
opened up the floodgates. They opened up the supply of money to prevent a
8:21
credit squeeze. And of course, there wasn't really a credit squeeze. All
8:25
that happened was they just flooded the country with money.
8:29
They were paying people 750 bucks a week or whatever it was to
8:32
just function without a job. And of course, it went to so many
8:35
people. They took the money. They didn't save it. They obviously went and spent it on
8:39
shoes, clothes, blah, blah, blah, blah. and they just spent it, which is
8:42
great for the economy, but it pumped the price of goods and
8:45
services way up for a couple of years. And we've basically seen,
8:49
just from that one thing they did during COVID with supply of
8:53
money, we've seen the, I feel, the Australian dollar lose half
8:56
its value, I think, in the last five years. It's been absolutely insane. Before
9:01
COVID, 100 grand was 100 grand. But after COVID, I really
9:04
genuinely feel like, and you probably do too, it's more like 50 grand. Because
9:08
if you think of inflation at, say, 10% to 12%, the rule of
9:11
72 suggests that in the seven-year period, it loses half its value. So
9:15
it's not been quite seven years, but let's say five years, and the currency's
9:19
lost, I would say, half its value. So if it
9:22
feels like you're poor, it's because you actually are from what's called inflation-led,
9:27
sorry, money printing or excessive money printing-led inflation.
9:32
Okay, the other reason why it happens to is that there's, there's
9:36
a sell off in the currency. So if you have If
9:40
the reserve bank of any country drops interest rates, there's
9:44
less likelihood that people will want to buy bonds in the country. So
9:48
if there's less enticement of investment dollars into the country, then
9:52
you will find that the currency itself loses value. So here's what happens economically.
9:57
When you reduce interest rates to stoke the
10:01
economy, you actually reduce the
10:04
returns that people get when they send money into your country to invest. So
10:08
as rates fall, the value of the currency falls too.
10:11
But as rates increase, the value of that local currency also increases. So
10:15
if you think about it... Before coven as covert hit
10:19
they were drastically reducing interest rates down to 1% so that massive
10:23
fall interest rates meant it sent the currency just
10:26
falling in value as a massive sell-off in the currency because People
10:30
didn't want to bring money into Australia then to invest because it was very low yields very
10:33
low bond yields here And so it made no sense to
10:37
put money in here. So a lot of that Caused you
10:40
know a sell-off in the currency. So interest rates do have a big impact And
10:44
then the other reason to why why inflation happens or why currencies
10:48
fall over time is There's actually a loss of confidence and trust a
10:52
lot of fiat currency is based around trust And
10:55
so if you start to lose trust in the in the in the currency, you
10:59
can have a collapse in the real value of it So some really serious examples
11:02
of this happening. You may have heard of these happening, but eventually what
11:05
happened in Zimbabwe is is they printed so much
11:09
money that it lost complete trust with the local people
11:13
that live there. And they absolutely exploded the
11:18
inflation there, which I'll come to in a second. And the same thing happened in
11:21
Venezuela, Argentina, The same thing happened in
11:25
Germany in the 30s. We've seen in the past multiple examples
11:29
of what's called hyperinflation from an absolute loss
11:32
of trust in local currency. So I'll come back to the data in a second on that.
11:36
The other reasons why currencies lose value over time is
11:39
because there's no hard backing. There's not backed by gold or any hard assets. And
11:43
it's just easy to print. So they can abuse that ability to print the fiat
11:47
currency. So there you go. When
11:51
you do it too much, so let's say for example, your interest rates are super low,
11:55
but you also print way too much money, you can get huge
11:59
imbalances that happen or you can get huge oversupply of a
12:02
currency in a place and the currency can effectively become
12:05
worthless. And so if I look at the examples of when this happened,
12:10
When when the currencies actually became worthless, right just possibility
12:14
in why me in Germany, which is pretty precedes World War two
12:18
This is kind of what they reckon cause the rise of Hitler is that in
12:22
why me in Germany? They needed a in 1923 they inflated
12:25
the currency so much you needed a wheelbarrow to buy a loaf of bread a
12:29
wheelbarrow of it was the marks at the time to buy a Bread,
12:33
which is crazy. Zimbabwe was 2008. It had
12:37
89.76 trillion percent inflation. The
12:42
inflation rate was just out
12:46
of control. They set the currency on fire. In
12:49
Venezuela in 2016, 2021, it became worthless.
12:53
It was just like paper. You can see it can
12:57
absolutely lose value in a period of months. It can just
13:00
dissipate. The value can dissipate. It's
13:03
designed to erode your money. So usually inflation
13:08
erodes your money by about 2-3% a year and it's a
13:11
quiet tax on your money. We really shouldn't be living in
13:15
a world where inflation exists. In fact, we should have deflation. I
13:18
would prefer deflation to inflation but somehow the
13:22
government has conned us all into thinking
13:25
wrongly that 2-3% inflation is what
13:29
we really want. I don't know how they've conned us into that, but deflation
13:32
is what we want. We want to actually have more wages increase and the value of things
13:36
like homes fall in value. Why do we want
13:39
prices of goods to go up? Come on, why do we want our
13:42
Big Mac to go up in price? We want it to come down in
13:46
price and we want our wages to go up. We want to get wealthy, not poorer, but
13:49
what has happened is that the fiat currency controlled by
13:53
governments, when it's not backed by hard assets has given them the
13:56
ability to print and the ability to keep inflation at
14:00
3% a year. Now, I think it's more than that. But what that's done is it's created a
14:03
quiet tax on the people and it's made everyone a lot poorer. And I
14:06
think it's just, we just don't want that. But I mean, they've conned us into thinking that's
14:10
normal. So, okay, back to a 2%, 3% a year. Don't
14:13
worry, I'll come to, in the next episode, I'll talk about how to overcome this stuff. So
14:18
it's designed to erode your money. What's inflation like in Australia? So these are
14:21
the stats from Australia. Currently, CPI stands for Consumer
14:25
Price Index. And it's where a basket of goods from groceries to
14:28
rent and fuel and so forth is put into a basket of average good prices. And
14:32
over the course of a year, CPI, Consumer Price Index, assesses
14:37
the increase in price from the basket of
14:40
goods in one year to the next year. So if CPI is 3.6%, right, then
14:45
that means the basket of goods for the next year has gone up by
14:49
3.6%. So the current inflation in Australia, they say, is
14:53
3.6%. However, it was up to 8% because of
14:56
COVID, because of all the massive money supply they put into the economy for
15:00
particularly no reason. They should have not done what they did, but it is done
15:03
now. So it's come down, right? But
15:07
that's the current inflation rate. The Reserve Bank of Australia targets
15:10
about 2% to 3%. But again, that's a quiet tax on people. And
15:14
of course, they're anticipating if oil
15:17
goes up, if there's more war, If
15:21
there's more inflation that's caused by that, then they may increase
15:24
rates and that can have a huge effect on the economy. But
15:28
for now, it seems like inflation is under control, but I don't believe
15:31
it. Again, in the episode I did on why the Australian
15:34
property market is collapsing, I talk about this thing called the the
15:38
Maxibon index that's a real personal life
15:41
experience. And I bought one the other day too, six bucks. And by
15:45
all accounts, the inflation rate is not 3%. And you probably agree with
15:48
me. And if you don't agree with me, put it in the comments below. If you agree with me, pop in the comments below.
15:52
I'd love to see what you think about that. What's driving
15:55
the, so here we go. What's driving inflation in Australia right now? There's probably five
15:59
core things driving inflation. One, COVID
16:03
shortages, so there's higher price on goods. So there was actually, we couldn't import
16:07
as many goods as what we used to. So like, remember when like boats were going up in value and
16:11
cars were going up in value? It's like, well, it's complete opposite to what you realize. So
16:15
there was higher price on goods that caused inflation. Rising energy and
16:18
fuel costs, that's still causing inflation. It's crazy to think how
16:21
much. fuel costs for us now in diesel, it kind of doubled. I
16:25
remember I used to be able to fill my car up for like a hundred bucks. Now it's like 160. So
16:29
I'd say there's 60% inflation on fuel, which is gnarly in five years.
16:33
So that's over 10% a year. We've got number three, wage
16:36
pressures. So We do have a, because of the aging
16:39
boomer population, we have a shortage in certain labor
16:43
markets in Australia, and that caused wage inflation. So you look at all
16:46
these inflationary pressures happening at the same time, housing and rental costs, because we
16:50
like to keep interest rates ridiculously low for too long because we're idiots. We
16:54
had... housing and rental costs go massively up.
16:58
So we had rental inflation and price of
17:02
housing inflation. So these are all important things. You're going to look at it. This
17:05
is like the cost of goods up, the cost of
17:09
fuel up, the cost of wages up, the cost of
17:12
like that's for businesses, hiring staff, going to pay more, housing up.
17:16
All these are like human needs up, up, up, up, up, up. And
17:19
of course, you add in the government stimulus that I spoke about, they pumped
17:23
in, check this out, $577 billion pumped
17:26
into the economy, which is 30% of the gross domestic product
17:30
of the country in that timeframe of COVID. They
17:34
just chucked the Australian dollar on the fire and shred it, just burnt it.
17:40
That's just wild. They kept the JobKeeper on
17:44
for 3.8 million workers for way too long. I remember they were
17:47
paying everyone $750. I didn't get mine. Did you get your $750? I
17:51
never got $750. Where's my $750? Just
17:56
quickly, if you're ready to take control of your finances but feel stuck on
17:59
where to start, I have a solution. My book Money Buys Happiness
18:04
simplifies investing and wealth building with practical steps to help
18:07
you achieve financial peace. Get your copy via the
18:10
link in the show notes and let's get your money working for you. Now back
18:13
to the episode. A friend of mine, I had him on the show, Simon
18:17
Beard, he owned Culture Kings, founder
18:20
of Culture Kings. I've had him on the show. Go back and check out the episode of me interviewing
18:24
Simon. He said
18:27
he set up to sell his business before COVID, but it just
18:30
so happened that the government stimulated the economy with
18:34
COVID money. He said that really went straight into the hands of
18:37
his ideal customer, which is young kids, and they went and bought hats and shoes and stuff from Culture
18:40
Kings and he said his business has blitzed and he said he
18:44
exited perfectly and he sold for 600 million. So
18:47
that's an example of how sometimes this type of thing can also benefit business
18:51
owners. But he also said that it was just wildly well-timed and go
18:55
check out the episode too. But this is what happened during COVID. Why
18:58
is the Australian dollar falling? What's causing the collapse of the Australian dollar? I'm
19:02
going to give you 10 real core reasons. So get ready and buckle up
19:05
for this. The first reason is this, the Reserve Bank
19:08
of Australia versus the Federal Reserve of America. So right now,
19:12
the Reserve Bank of Australia has a cash rate at 4.1% and
19:16
the federal fund rate is higher than that. So the USD federal
19:20
fund rate is over 4.5% and they're increasing and they look like they're going
19:23
to hold rates where they are, but we just dropped rates. So the fact that
19:26
the Reserve Bank of Australia is dropping rates, is
19:30
causing our currency to fall in value, and the fact that the federal funds
19:33
rate in America is keeping them steady, or maybe even increasing them, it's
19:37
gonna create more demand for the US dollar. And because we
19:40
measure the value of our Australian dollar against the US dollar, we're seeing it
19:43
fall against the greenback, okay? So there is this battle against the
19:47
two reserve banks at the same time. We're reducing rates, creating Australian dollar
19:50
weakness, and they're keeping rates the same, or increasing them. It looks like they're
19:54
not increasing them yet, but they might, and it's creating Value in
19:57
the US dollar so you can see that's the first thing that's creating this weakness.
20:01
That's why when you go to America I've been to America. I'll be going to America for
20:04
the third time this year You feel like a poor person as soon as you walk
20:07
off the plane you get off the plane. You've lost half your purchasing power I
20:10
was at the airport and recently coming back from the States and we're in a long line and
20:14
we're coming through the gates to go through Immigration as American guy big
20:17
loud American guy from Hawaii was then he was you know, you could tell
20:21
he's from America and And I said, oh, I
20:24
said, how does it feel to be a millionaire? He's like, what are you talking about? I said, you just got the plan in
20:27
Australia. You got US dollars, you're a flipping overnight millionaire. So it's
20:30
a really challenging time to go to America right now because we have huge weakness of the
20:33
Australian dollar versus the USD, OK? The second reason why the Australian
20:37
dollar is collapsing is this. China's economic slowdown. Our
20:42
currency is very driven by resources
20:46
here. So like our currency is heavily dependent on the
20:49
price of iron ore, the price of coal, the price of all
20:53
the different metals that we send overseas. And so we're
20:56
very resource driven currency. And
21:00
so When China pumps and the economy is
21:03
killing it over there, and they're importing a ton of our resources, the
21:07
value of our dollar is a lot higher. So the fact that recently,
21:10
too, because of the tariff war that is happening with the US and China, massive
21:14
exports dropped out of China like 34% year on year. So it's
21:18
a huge shift in how much they're consuming there. And of course,
21:21
their property market completely collapsed. They were building
21:25
ghost cities, and those ghost cities actually turned
21:28
into just wasted steel and all this incredibly wasteful
21:33
resource. And we were pumping China with so much iron ore
21:36
to build all these buildings. And that's started to come off the ball now. A lot
21:40
of the property sectors come off and decreased. So
21:43
the fact that China's slowed down means there's less demand for
21:46
our commodities here, which means there's less demand for the
21:50
Australian dollar. Does that make sense? So that's the second reason. The third reason
21:53
why the Australian dollar is collapsing is because commodity
21:58
prices here are falling across the board. We've had a massive fall in lithium. We've
22:02
had falls in iron ore prices, spot iron ore prices falling. We've
22:06
had, thankfully, gold's increased in value, but we've
22:09
had a lot of Again, commodities in Australia fall away because
22:13
the demand for those commodities, not just in China, but other areas around
22:16
the world has actually slowed down because of a slowdown in
22:20
global economic growth. There's been very sluggish growth in the
22:23
world's economy, which means if Australia's got, in fact, Australia does
22:26
have the richest resources in the world. Recently, they just discovered like,
22:30
I think it was $6 trillion worth of iron
22:34
ore deposits here, some crazy number. I think it was 6 trillion. I mean, look
22:37
at how powerfully rich we are as a very rich resource nation.
22:40
It's just that the growth in the world has meant that, hey, we don't
22:44
need as many resources from you, Australia. So of course, our currency falls. The
22:47
fourth reason why it's collapsing is this. There's sluggish wage
22:51
growth here in the country. In fact, we've been in a silent recession for the last
22:55
three years, I think. I mean, it's been like
22:59
a quiet recession, because a recession is when you've had two successive quarters
23:02
of negative GDP growth. But we've been so close to negative.
23:07
We've just been sitting, we're teetering on negative. We're like zero point something. It's
23:10
just been teetering on no growth. We've been in
23:13
a bit of stagflation where nothing's actually happening. So
23:17
we've had sluggish wage growth, we've had more consumer
23:20
spending, and we've really not had any productivity gains. And
23:24
so if you're not a productive country, why would your
23:27
currency be valuable? it wouldn't be, right?
23:30
So you're seeing this, you know, the fact that we've got pumping out
23:34
social security so much, we're pumping at NDIS, we're pumping
23:37
out We're providing poor
23:41
energy policy. All these things that I spoke about in the other video
23:45
on why the Australian property market's collapsing is the same reason
23:48
why a lot of our currency is collapsing at the same time, right? So there you
23:52
go. Cautious consumers means there's a weaker domestic economy. So
23:55
we're not spending on parts of the economy we need to spend on
23:58
for a productive outcome. pumping
24:02
up housing where we're really not spending when we need to spend. Number
24:06
five reason why the Australian dollar is collapsing, debt to
24:10
GDP. 111.5% in quarter three
24:13
of 2024. It's one of the highest globally. That
24:17
means that we've got the most debt to GDP. In
24:21
fact, we've got the highest household debt to
24:26
income or to GDP in the world. We do. We have the highest household
24:30
debt. I think it's something like 200%. It's a
24:33
whole 100% higher than other countries. It's like we're just soaking
24:38
in debt, which tells me a lot of the The
24:41
monetary supply that's coming to the economy is just pumped into land. It's
24:45
a weird thing. We have this saying in Australia, we dig holes and buy houses.
24:49
That's our whole economy. We dig holes, buy houses. Unfortunately,
24:53
the world doesn't want what we're digging out of the holes as much, so the currency is falling. Of
24:56
course, if we're pumping up property and increasing the inflation in that area, we're
24:59
also hurting the currency. Number
25:02
six reason why the Australian currency is collapsing is because we
25:06
also have an account deficit. We have a trade deficit. We're 14 points.
25:10
Check this out. 14.7 billion in
25:13
deficit Q1 2025, right? That's a
25:17
current account deficit. That's a trade deficit on the current account of 14 billion.
25:20
So we've got a net capital outflow from Australia. And the reason for that too
25:24
is because our interest rates are too low. So that
25:27
is burning not well for the value of the Australian dollar. Number
25:31
seven, the global risk off sentiment. So global risk off means
25:35
people are not open to investing in what's called risk assets. So things
25:39
like tech stocks and so forth that generally are high
25:42
growth, they call that risk on. And risk-off sentiment means
25:46
we're not prepared to swing at those risky assets. So what we want
25:49
to do is we want to go back into non-risk assets. So there's a
25:53
global shift in risk-off sentiment
25:57
versus risk-on, and the Australian dollar is a risk-on currency. And
26:01
so if there's no risk on, then the value of the Australian dollar is falling. And
26:05
so basically in uncertain times, so when there's risk off sentiment,
26:08
people run to the US dollar. They run
26:12
to the Japanese yen. They run to other currencies that are more strong than
26:15
ours. They run away from the Australian dollar. That's what happens. So
26:19
what we want is to have risk on. But that's not happening because there's wars. There's
26:24
fear of inflation. There's all these fears happening in the world right now. And
26:28
it's running people to the U.S. dollar. That's why the
26:31
U.S. dollar has gained so much strength and the Australian dollar has lost so
26:34
much value. Number 8 reason why the Australian dollar is falling in
26:38
value because the Forex market, so there was large traders holding about 8,500. net
26:42
long Australian dollar contracts in early 2000, earlier this
26:46
year. And so that shows you there's a lot of volatility risk. And so if there's a
26:49
lot of volatility risk in the currency, generally speaking, it's not well sought after,
26:53
it's too risky for people to hold, so they don't want to hold it. So the demand for Australian dollar falls,
26:56
okay? Number nine reason why the Australian
26:59
dollar is collapsing is geopolitical tensions, right? What's happening right
27:03
now is Iran and Israel are at
27:06
war, effectively overnight, we just announced they're at war. And so that's
27:09
huge, I would say, destabilization
27:13
of that region, not to mention the fact that Russia and Ukraine are
27:17
still at war. So we've got two wars happening. We've got uncertainty
27:21
in China in terms of the economy. We've got huge uncertainty and
27:24
civil unrest in the United States. There's a lot of protests happening around the ICE
27:28
removal of illegal immigrants there. So massive
27:32
uncertainty, particularly in the Asia-Pacific area where our currency lives.
27:36
And so there's a huge amount of investor caution. So they're not really wanting to put their hands on
27:39
the Australian dollar, like, nah, Take me to the USD, take me to gold, take
27:43
me to all these not, you know, risk-off type currencies and assets.
27:46
And so that's causing this fall in the value of the Australian dollar.
27:50
And finally, number 10, weak business investment. In
27:54
Australia, we don't have a lot of people wanting to invest in our country because we
27:57
don't invest well in new businesses. We don't invest well in innovation. I
28:01
saw this article pop up the other day. Annoyed me, it was like two days ago.
28:05
And Anthony Albanese, the prime minister, said that Australia is
28:08
a leading tech country. I just want to punch it.
28:11
What? What? What? Leading tech can't ... We
28:15
can't even get our NBN sorted. We're
28:18
terrible at adopting technology. We're slow. We're
28:23
way out of date already in AI. We're
28:26
not really ... We used to be tech innovators. Australia had
28:30
some cool inventions. We invented the torpedo. We invented the Victor lawnmower. We
28:34
went to the Hills Hoist, Clothesline, we're innovators. No, but we
28:38
used to be more of a manufacturing-related innovation economy, but we
28:41
have pretty well just destroyed all manufacturing in the country. We're
28:45
not tech innovators. We don't invest in businesses. In fact, our
28:48
banks do not lend well to businesses. They are more about
28:52
lending to property owners. What's happened is because we've just
28:56
become property sycophants, property like
29:01
addicts. All we've done is bid up our own land price with
29:04
our money. We're a bunch of idiots. What we need to be doing is spending money on
29:07
business innovation. We've been hit hard with
29:11
capital sliding into Australia for investment because we have soft growth. Of
29:14
course, if you have a country that has not innovated, imagine a
29:18
company For one second, just imagine there's a company, a
29:21
business, and it spends no money on R&D. So
29:25
no money on research and development. If Apple spent no money on
29:29
research and development, what do you think would happen to the iPhone? It
29:32
wouldn't have innovated since the iPhone 3. Imagine what happened if
29:35
the iPhone 3 didn't innovate. What would you have done? You'd have got
29:38
rid of the flipping thing. Well, that's what's happening to Australia. We're not
29:42
innovating. We're literally anti-innovating. All
29:46
we're doing is taking the money we got and chucking it to non-productive parts
29:49
of the country. Country
29:53
working, because we're not innovating. We're not spending any money on R&D. Zip.
29:57
In fact, we're borderline going to lose our security agreements
30:01
to the United States, because we're run by a bunch of Muppets. Frankly,
30:06
and you don't really have to, it's gross incompetence is
30:09
what it is. We're so attached to doing
30:12
what's right with all these woke agendas that we cannot
30:17
even start to look at how our country's gonna live for the next 50 years. If
30:20
we don't innovate in Australia, we're not gonna have any capital
30:24
investment in Australia. I mean, if you think about it, if Australia was a
30:27
company in a business right now, truthfully, and you know that it's
30:30
not innovating, and all of its poorest non-productive
30:35
employees, imagine your business, you got all these employees, and all
30:38
they do is just move paper around all day, they don't actually do anything productive, and
30:41
a lot of them are sick and tired and fat and overweight, and you just give them all this money
30:45
out of the profits, and none of them are producing any sales for your business, what do you
30:48
think would happen to your business in the next 10 years? It'd be gone. It'll
30:52
be gone. What do you think is happening to Australia? If
30:56
we're not innovating and spending money on R&D, if we're not actually incentivizing
31:01
and paying our highest, most productive talent, if
31:05
we're actually incentivizing to actually do
31:08
less work, so we're actually putting too much into social security. If
31:12
we're not innovating our energy policy, and we're making it
31:15
even more difficult to actually pay for energy. In fact, if you look
31:18
at your energy bill of the last quarter, tell me, how is it
31:22
that a country with the most land has the greatest housing shortage
31:25
in the world? And you tell me how the country with the most resources and
31:29
energy and hydrocarbons in the world is having the
31:32
highest energy prices in the world. How? It's
31:36
because the business that we run here is being run by
31:40
an idiot. And it's good, Warren Buffett says,
31:43
invest in a business so good that even an idiot can run it because sooner
31:47
or later one will. So if you look at Australia as more
31:50
of a business, as an example, is that strong
31:54
in resources, wonderful. Light in population, wonderful.
31:58
We actually have almost no one lives here. Massive land mass, wonderful. You
32:01
would think based on that, we would be the richest country in the world.
32:05
And the value of our Australian dollar would be way above the
32:08
US dollar. But the truth of the matter is, because we're running it
32:11
poorly, investors don't see Australia as a great place to
32:15
invest. And because of that, the value of our dollar has
32:18
fallen drastically. And it's sitting around about 0.649 US
32:22
cents to the one Australian dollar. And the history of the
32:25
Australian dollar has been, on average, it'll sit at about $0.75. So we're oscillating
32:29
around this weaker Australian dollar. It's collapsing further and
32:32
further and further and further from inflation. then you can
32:35
possibly even keep up with and that's why it would feel like right now
32:39
despite wage increases, despite the fact that having
32:42
some successful years in your business or your job, And you're like, why
32:46
am I feeling poorer? And it's because of these things happening all at once that
32:49
are collapsing the Australian dollar. So they're the 10 reasons why
32:53
the Australian dollar is absolutely collapsing. They're
32:57
all very succinct. They're all happening at the same time. So yeah, a
33:00
couple of things happening. One, you're going to feel poorer because
33:04
you effectively are from inflation. And two, if you assess it
33:07
against other currencies, we're also falling. So we're falling in the the
33:14
foreign exchange rate of other currencies, and we're also falling from
33:17
the inflation rate of our own currency. So two things happening at once. So
33:21
it's not a great time to be investing overseas, that's for sure, for the Australian dollar.
33:25
But it can flip and it may flip, but what we do need is we need a complete flip of
33:29
the Australian economy with better leadership, but that's out of our control. So
33:33
what is in our control? What is in our control? How do you
33:36
protect yourself from the inflationary hit to
33:39
the Australian dollar? And how do you protect yourself against you losing
33:43
wealth over time if you're earning Australian dollars? All right. And that's a great question.
33:46
So it's not falling randomly. It's a result
33:50
of all these unchecked spending, rising debt situations and
33:53
a system designed to quietly erode your wealth, right? But what
33:58
you have to understand is it's happening. And you can implement steps
34:01
yourself to actually prevent it. Alright, so in the next
34:04
video, I'm going to break down exactly how
34:08
to protect your money during inflation, right
34:11
from smart investments and ideas that are simple, you can follow follow
34:15
model, and they're well documented and well known. And I'm
34:18
going to go through exactly what has happened to countries that have
34:21
gone through hyperinflation, what actually happened to them, and how hard assets
34:25
can prevent you losing wealth if that happens to the Australian dollar. Alright,
34:28
so if this video gave you value, hit the like button,
34:32
hit the subscribe button, share with someone who needs to hear it. And don't
34:35
miss the next episode because I dive deep into how to prevent your
34:39
money from eroding away in the next one. So go check it out. Knowledge
34:42
is power, but only if you use it. See you in the next episode. Thanks for
34:46
listening to Money Grows on Trees. If you enjoyed the episode, leave a five-star
34:49
review on Apple Podcasts and Spotify and subscribe to
34:53
us on YouTube so you never miss an episode. And if you're serious about building
34:56
wealth, make sure to check out the links in the show notes and follow me on
35:00
all social media platforms, at LloydJamesRoss for