Thread by @Crypto8Fi

Economics 101 for you, your family, aunts and uncles:

A thread explaining why we need to reconsider how we deal with our finances in the current circumstances.

A thread 🧵👇

Situation: You owe money to X individuals currently.

You need to pay this back.

It is set at a variable rate, which means it can change over time.

If this is you, then keep reading.

Some basic concepts to establish first.

Central banks of every nation set the base rate.

Commercial banks that me and you borrow from, set their interest rate from the "base" interest rate.

If the base rate rises, it is likely that the interest rate on your mortgage loan will also rise.

You have to pay more.

And your wages aren't increasing 5-7% a year are they?

5-7%? What do you mean?

That is the expected impact of inflation that has occurred over the last two years.

Figures have been appropriated from macroeconomists much smarter than me.

I enjoy talking about macro in the context of crypto

Anyways....

You are not going to turn around tomorrow and say to your employer:

"Pay me 5-7% more on the basis of inflation"

No, because you run the risk of losing your job to someone else who doesn't mind the pay cut.

Yes, inflation makes your annual wage pay cuts.

Anyways, maybe you don't believe me.

Then, just look at oil and gas prices.

Diesel. Petrol. Food. Goddam McDonald's as well.

If the 99p McFlurry gets more expensive before summer, we have to boycott em.

What are your main portions of spending?

The greatest bit of household expenditure is on mortgage repayments monthly.

If you don't have a mortgage. Good for you.

But this is addressed to my dear readers who are paying back hefty sums monthly.

It is more than likely that your government will change the base rates.

The FED for example, are most certainly planning on interest rate hikes given their hawkish stance.

Let's take a look at what Goldman Sachs forecast.

Chief Economist at Goldman Sachs forecasts a 0.5% increase in May and June.

Followed by 0.25% in the remaining four meetings in 2022.

Essentially, 3% increases over 18 months.

Let's look at this mathematically shall we?

You have a mortgage. Let's discount how much you have to pay back aggregately.

You have to make payments of $4500 monthly.

And then adjust that for your variable interest rate of 2.5%.

That's $112.5 currently.

How about 5.5% now?

That's now $247.5. More than double.

Something I am watching is the difference between the two-year Treasury note and that of a 10-year Treasury note.

It has been widening in recent weeks.

It is a #Wallstreet indicator a recession is inbound.

My crypto take would be something like this:

DeFi degens: Have a look at gold peg stables.

Focus on gold, bitcoin and time-tested alts for now.

Uncertainty has spread too far and wide.

I have written in depth into the case for these assets below:

medium.com/@crypto8fi/gol…

Some accounts to follow for well thought macroeconomic insights:

@RaoulGMI @MacroAlf @chigrl @biancoresearch
@JeffBooth @Kevin_Kelly_II @42macroDDale @Nouriel @mnicoletos @albertedwards99

There's many more. But here are some great ones.

A RT would mean a lot!

Anyways the moral of this story is fix your finances now.

Don't wait until legislation prevents you from changing your variable interest rate loan into a fixed one.

Taking pre-emptive action, will lead you to the biggest success financially.

For both you and your family.

Hope this was insightful, a retweet and like would mean a lot!

More #Macroeconomic insights coming your way, follow to keep up.

Here are some of my past threads:

https://twitter.com/Crypto8Fi/status/1507323532337770502?s=20&t=Cx2r93LIipSEhWarxfVKjw