The Markets IQ

There’s a saucy snippet of news doing the rounds that might have ambushed you at the water cooler at work, during a swanky cocktail party, or in one of those internet forum cesspits.

Apparently, the Federal Reserve is a shadowy, privately owned cabal, run by bankers, profiting off your ignorance, manipulating the economy from behind the curtain.

Cue the sinister music.

That’s right. While they aren’t running monetary policy, the reserve bankers are building and tearing down nations, plundering your bank account and teaching your cat bad manners.

Somehow, this has supposedly been going on right under our noses. Just a big, open secret, for anyone to examine.

Just like the lizard people, right?

Oh, did I mention it involves the Jews?

That’s right, those pesky Rothschilds are at it again!

There’s only one minor problem? And I must stress it is a very minor issue, hardly worth raising. But we’re trying to be comprehensive, so here it is.

It’s utter garbage.

Just like (spoiler alert) the lizard people conspiracy theory, this one about The Fed being a privately owned, zionist plot to overthrow your personal finances is completely removed from reality.

What Is Operating Leverage?

Operating leverage sounds like complicated finance jargon, but it's a simple concept beneath all the noise. It’s all about how a company’s cost structure affects profit growth.

It can be used to understand how a change in revenue translates into operating income in percentage terms. In simple terms, operating leverage explains how small changes in revenue can lead to big swings in earnings.

The whole thing comes down to the cost base. In particular, it boils down to fixed costs vs. variable costs.

How Operating Leverage Works (Fixed vs. Variable Costs)

Every business deals with two types of costs. Fixed and variable.

Fixed costs don’t care whether you sell one unit or a million. They’re stubborn. Things like rent, equipment leases, and salaried employees. They’re on the books whether your revenue is booming or flatlining.

That bakery on the corner pays the same to lease its oven and storefront whether it pumps out 10 loaves or 100. This creates a break-even point. Sales need to hit a certain level before the business turns a profit.

Variable costs, on the other hand, scale with production. More units sold means more costs. Ingredients, packaging, shipping, and hourly wages.

Inflation.

It’s a simple enough concept. Prices go up. Money buys less. But beneath that seemingly straightforward reality lies a force powerful enough to sink currencies, destroy savings, shape elections, and punch a hole through your weekly grocery budget. It’s not just an economic stat. It’s the oxygen level of the economy — too little and growth suffocates, too much and everything catches fire.

This guide cuts through the noise. We’ll break down what inflation is, what causes it, how it's measured (and why those measurements often miss the mark), what it means for your wallet, and how you can beat it in 2025 and beyond.

What is Inflation? Understanding the Basics

At its core, inflation is the rate at which prices rise — or more precisely, the rate at which your money loses value.

Your favourite flat white costs $5 today. Same beans. Same barista. Same Melbourne alleyway. But next year? $5.25. Harmless? Multiply that by every item in your life — fuel, groceries, rent, electricity, streaming subscriptions — and your $200 weekly shop starts looking more like $240.

This is inflation: slow, quiet erosion. And it compounds.