🤧 Another Day, Another Interest Hike

^{“An investment in knowledge pays the best interest."}

— Benjamin Franklin

👋 Friends, Rallie here. The newsletter sharing everything we know when it comes to crypto, finance, and tech.

On the menu:

• 🤧 Another Day, Another Interest Hike

• 🗞️ Headlines That Hit

• 📈 Refresh: Behavioural Economics

• ✌️ Trivia Thursday

• 💯 Top Tweets

The Rallie Recap

📈 This week, the Bank of Canada (BoC) hiked interest rates again, and Canadians aren’t happy. Here’s the rundown:

• Let’s rewind, what is going on? ⏮ The Bank of Canada raised its interest rate to 5%, the highest it’s been since 2001. ❌ Despite the current decline in inflation (3.4%), Canada has not reached the central bank’s goal of 2%.

• 🇺🇸 Our neighbours tell a somewhat different story... over in the U.S., inflation has sharply decreased (3%) and its rise is at its slowest pace in two years. 

• 🧐 So, why the difference? Rising interest rates is supposed to battle inflation and slow growth for an ‘engineered recession.’ However, Canadian’s excess domestic demand and tight labour market is a bigger problem than the bank expected. 📈 And Inflation is not cooling fast enough.

• The U.S. also has similar concerns and methods as Canada to battle inflation, but their predictions were more spot-on and their focus on core prices excluding food and energy costs is seen as a key player in their success. 🇺🇸 Additionally, differing economic cycles, domestic financial events, and government vs bank intervention play a critical role in Canada’s differences from the U.S.

• With another interest hike is predicted in July, their accomplishment seen as a temporary win for the U.S. by some. ⏳

• 🌡️ But let’s focus on the Canadian public - what are we hearing?

• What’s the fixation on 2%? 👀 BoC claims that this annual inflation rate typically is “when the economy is running near its capacity — when demand for goods and services is roughly equal to what the economy supplies.” ⚖️

• Bank of Canada’s governor defends the organization’s actions, ”If we don’t do enough now, we’ll likely have to do even more.”

• 🍁 However, inflation is not predicted to return to 2% until the middle of 2025, and while that happens, Canadians are expected to deal with rising interest rates with no promises of a cap. 💸

• Some experts say the 2% mark is not worth the economic impacts it has on its citizens. Will Canada even stay at that position when it reaches it?

• 📚 In tough times, it is best to arm yourself with what cannot be taken away…your knowledge! So stay up to date with the Weekly Rallie!

Headlines That Hit

• 🫴 Pay up! ~400K patents, controlled and pending, by Craig Wright could force computer programmers across the world to stop using open-source software.

• 🤖 Musk’s fight. While Twitter battles Threads, Elon launches AI firm, xAI, to compete with OpenAI.

• 🌊 Strike concluded! After 13 days, a deal between the dock workers and the BC Maritime Employers Association has been reached. 

• ₿ U.S government’s Bitcoin transactions. The United States Department of Justice (DOJ) moved Bitcoin worth ~$299M in a series of transactions after the Silk Road Seizure.

Rallie Refresh: Behavioural Economics

🕵🏼‍♂️ Ever wonder why people and organizations don’t learn from history and continue to repeat the same irrational economic choices? ☕ It’s due to a little something called behavioural economics. Let’s dive in.

 🏦 What is behavioural economics?

• Behavioural economics is a branch of psychology that analyzes the financial choices people make and how illogical actions from some individuals and (by extension) organizations happen. 🤨

• 🏷️ Companies use this field everyday, from Amazon’s Prime Day pricing to commercials and packaging. 🛒

• Many assume that rationality is the guiding principle for decisions regarding money and what their investments give to them, however, behavioural economics argues humans are not rational and often make decisions that are not in their self-interest.

😵 Hear us out! There are five factors when analyzing an individual’s financial behaviour for this theory:

1. Bounded rationality: when people make decisions based on typically limited public information. 😳

2. Choice architecture: the concept argues that manipulation is easy with its designs rooted in directing consumers into decision-making based on a “choreographed demonstration often between complementary goods.” 🔗‍💥

3. Cognitive bias: 🌟 behavioural economics claims elements like logos to the name of the CEO can evoke an unknown bias in a person to favour one company over the other.

4. Discrimination: people’s perception of the world and their experiences can lead to discrimination towards a person, group, etc. because of their favouritism towards different alternatives.

5. Herd mentality: the belief that the sway of a group over one’s choices can cause an individual to follow what other people do instead of rationality. 🔥 Is your favourite team or brand really the best out there or are you getting wrapped up in the excitement?

🤓 These factors are powerful influences in everyone’s daily life, but we haven’t even touched the principles of the theory. If you want to learn more about behavioural economists, let us know!

✌️Trivia Thursday✌️

💰 The answer for Tuesday’s newsletter (what was the total amount of foreign direct investment (FDI) in Canada at the end of 2022?) is $1,263.9B! Tune in next time for today’s fun fact answer.

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That's all for today. Stay hungry & we'll catch you next time. ✌️

DISCLAIMER: This is not financial or legal advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.