What is the aim of the Federal Reserve?
'The Federal Reserve's Dual Mandate. The monetary policy goals of the Federal Reserve are to foster economic conditions that achieve both stable prices and maximum sustainable employment.'
Stable Prices/InflationInflation is the increase in the prices of goods and services over time.
'Federal Reserve policymakers evaluate changes in inflation by monitoring several different price indexes. A price index measures changes in the price of a group of goods and services. The Fed considers several price indexes because different indexes track different products and services, and because indexes are calculated differently. Therefore, various indexes can send diverse signals about inflation.'
So essentially the fed monitors average long run inflation, digging into sub categories to identify temporary unique data points and marries these with ‘core inflation’ (food/energy) data to assess inflation trends.
The Ethos/Mandate of a Technology CompanyOne can postulate that either through unintended consequences or innately by their very construction as follows:
Global Technology Dual Mandate. The expansionary goals are to disrupt, delineate and challenge existing models of business in a manner that increases efficiency, lowers cost whilst utilising less resource.Essentially a game of optimisation.
It follows that the intrinsic focus of global technology proliferation is potentially wholly antithetical to the aims and ambitions of central banks. The irrevocable change that has been experienced in all sectors and value chains within the world economy due to tech has allowed companies hitherto unknown access to many markets - leading to consequently a more streamlined global landscape for goods and services. This is a deflationary effect as consumers gorge on free delivery of goods (Amazon) and free provision of services (media/Netflix et al).
Issues and RamificationsThe Fed is the de facto central bank of the world. As such its monetary policy effects are global; the diminishing impact being achieved via its actions are very likely to seriously damage its credit standing as a nation and have wide ranging implications not least on the dollar and its reserve status.
Near zero interest rate policy naturally forces yield seeking investors into risk assets; public and private. Tech being the clear over-arching thematic trend in the paradigm shift towards borderless commerce.
Technological advancement and its occupation at almost supranational status is a powerful deflationary force resulting in the loss of many traditional jobs. A structural change in monetary policy framework is required; one that is not reliant on inflation targets to manage debt loads. Until then one can make the case that current monetary policy is diametrically at odds with the forces of innovation. Startups and established business alike are rampantly seizing every increasing opportunity to change the way we live; no facet left untouched.
Who will abandon their mandate first? Place your bets...
About Fuel Ventures:
- Fuel Ventures is a leading early-stage technology investor, investing in fast-growth UK and European businesses that have the potential to return between 10x and 100x.
- Entrepreneurial driven fund led by multi-exit entrepreneurs with £200m+ in exits.
- An advisory committee with over 50+ years’ experience, and exits totalling £2b+
- We now have 35 portfolio companies and after only 4 years our first fund has a 7.4X valuation uplift, validated by third-party follow-on investors.
- We screen 3500+ companies a year using our thorough due diligence processes internally, cherry picking the best 10 companies that have the potential to achieve 100x returns
- We put a director on the Board of every company we invest in and take an active and hands-on role in the management and development of each company, plus bring added extra value through our network of sector experts.
- We invest in commercially scalable technology companies, with operating gross margins between 30% - 90%
- Targeting a minimum of 10x return on investments over a 5-7 year horizon.
- Generous HMRC EIS tax benefits including 30% income tax relief, 0% capital gains tax on exit, loss relief, and inheritance tax relief for UK taxpayers.
- We invest in every fund ourselves, with a large 10% personal investment alongside our investors, this is £2,000,000 - £3,000,000 into every fund!