It’s No Big Deal, Let’s Play Truco — Inflation is No Big Deal

Have you ever played truco?

Truco — or what translates into English as ‘trick’ — is a really popular card game in Argentina. It’s somewhat similar to Poker in the sense that, as the name explains, the goal is to ‘trick’ your opponents.

It’s easy to play.

Each player gets three cards, one to play in each of the three rounds. The player that drops down the highest-ranking card (according to truco’s ranking) wins the round. You need to win at least two rounds to win the game.

But you can also collect extra points throughout the game if you have two or three cards of the same suit…or you can always try to trick your opponents into thinking you do when you don’t.

It’s usually played with four or six people divided into two teams. The more people, the more fun it is.

You see, you need to let your team members know which cards you have so that you can play the best hands together. The way you do this is through signals when your opponents aren’t looking. But you can always mislead your opponents by letting them see the wrong signals…

In short, truco is all about tricking your opponents into thinking you have great cards when you don’t. If you’re lucky, they won’t call your bluff and fold.

But it’s also about playing your game down when you have good cards so that they raise the stakes.

Until you see all the cards on the table, you don’t truly know what’s going on.

Inflation is No Big Deal.

Anyway, I read something this week that made me think of truco…the Fed saying inflation is no big deal.

From the Australian Financial Review:

US inflation is unlikely to get out of control despite the unprecedented government spending that’s been authorised in response to the coronavirus pandemic, Federal Reserve officials said.

“Our baseline view is that inflation is going to be close to our long-run objective of 2 per cent, but we will be vigilant,” Fed vice chairman Richard Clarida told CNBC in a television interview on Wednesday.

There are definitely signs of inflation out there.

Lumber is up close to 400% in the last year, corn prices are up 141% in the last 12 months, copper is up 92% and cotton is up 56% in the same time frame.

The Fed saying inflation is no big deal comes after US Treasury Secretary Janet Yellen spooked the markets earlier this week by saying:

It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat, even though the additional spending is relatively small relative to the size of the economy.

She then downplayed the comments saying she doesn’t see an inflation problem in the US and that any inflation would be short-lived because of supply chain shortages and recovering oil prices.

That’s the real question though, are these price increases we’re seeing temporary or not?

Central Banks Pumped A Lot of Money to Fight Off the Pandemic.

They did something similar in 2008 after cheap, credit-distorted prices. But asset prices collapsing exposed the game, and all the ‘prosperity’ we had seen in previous years had been a mirage.

Unconventional monetary policies like quantitative easing and negative interest rates trick you into thinking things are better than what they really are.

On that note, check out Ryan Dinse and Greg Canavan’s latest chat. We’ve been playing a game that’s been controlled by central powers, but the game is changing.

We didn’t see inflation in 2008. Instead, we went from easy credit to cutting credit and austerity. In my head that’s one of the differences this time, that some of that money is flowing into people’s pockets.

So far, people have been in lockdown unable to really spend except for things like renovations, new homes and food.

Money velocity, the rate at which money exchanges hands, has stayed down. But as we well learned in Argentina, thinking you can control inflation is a losing game.

Much like a game of truco, we can’t control what cards we’re dealt in real life.

We can’t control what central banks do or stop doing, we can’t really control a pandemic hitting the world, or how geopolitical tensions play out.

But what we can control is how we play our cards by taking control of our finances. By reading and researching as much as we can. By listening to as many different opinions to form our own.

So we can play our cards the best way possible.


Selva Freigedo Signature

Selva Freigedo,
For The Rum Rebellion

PS: In a brand new report, market expert Vern Gowdie warns of the dangers waiting in a post-COVID-19 world. Plus, he outlines the steps you should take now to protect your wealth. Learn more.

Selva Freigedo is a research analyst for The Rum Rebellion.

Born in Argentina, her passion for economic analysis started at a young age. Her father was an economist for the Argentinean governments and the family used to discuss politics and economics at the dinner table.

Argentina is a country with an unusual economic history. Growing up there gave Selva first-hand experience on different economic phenomena such as hyperinflation, devaluation and debt default.

Selva has also lived in Brazil, Spain and the USA.

Back in 2000 she was living in the US as the dot com bubble popped…
And in 2008 she was in Spain as the property market exploded and then collapsed…

She has seen first-hand what happens when bubbles burst.

Selva joined Fat Tail Investment Research’s team in 2016, as an analyst. She now writes from her vantage point in Australia, where she settled in 2015.

The Rum Rebellion