#213 - Russell Napier - "They Are Stealth-Stealing Your Monday”: Financial Repression is Here

The regulator told the pension funds and the life funds you need to match your assets and your liabilities and they bought it and the guys don't even know they've lost the money. So they've regulated them to buy the bonds because the government needed the money. When I talk about financial repression it is kind of esoteric so I had to think up a better phrase for it so I call it stealing money from old people. You denude property of its ability to protect you from inflation ultimately it was about making one asset class less attractive so you would buy more government bonds. If you bought a French government bond the 50-year bond with a half percent coupon. As of yesterday you lost 78% of the capital value of buying the risk-free asset from the French government. So you've effectively had your capital wiped out buying the risk-free asset. It could be quite scary for people listening to this you think I look I've worked my whole life I'm looking at my retirement I've saved I plan for it and because our governments have run up such high debts and they can't afford to pay their bills they're going to come after what I've worked hard for. This show is brought to you by my lead sponsor iron the AI cloud for the next big thing. Iron builds and operates next generation data centers and delivers cutting edge GPU infrastructure all powered by renewable energy. Now if you need access to scalable GPU clusters or are simply curious about who is powering the future of AI check out iron.com to learn more which is iren.com right Russell uh sometimes I need notes today's one of those days I just don't need any notes I'm trying to understand what is a bigger problem is it is that there's part of the vote in public that would rather vote themselves poor than have a party from the country that they are ideologically against or is it that most people just don't understand enough about basic economics. So we're going to be been by disagreeing I mean there are polls off the voters of the United Kingdom I think we're we're starting with this country the United Kingdom where we're setting today and one of the questions is do you prefer higher more tax or spend our cutting taxes and lower spending and there's not a significant majority in former of the latter amongst the population of the United Kingdom now that may not show up at the polling booth and there's lots of reasons for that because people usually vote against something rather than force something but for the first time in a really long time most people in this country would now prefer lower taxes and less spending is that because we've hit the middle class so hard. I so I think this is not the way beyond my pay grade here we're getting into sociology away away from financial literacy but I've got a very simple reason for that the so-called working class who when I was a boy worked in factories for a big company for a boss don't they are what I think pejoratively is called white van man and they take the risk in society they are take there the risk tickers in society the middle class are not necessarily the risk tickers a I might change that but if you're a risk ticker if you're a guy who's a plumber or a or a joiner and go out every day you're the guys paying the taxes you're the guys paying for everything else and fundamentally we'll just call them blue collar I don't you know I don't really care what term we have though it's those people who actually are voting for who are sorry not voting for but not expressing an opinion that they want the word tax is less regulation so we've got this vault fast then you have the public sector workers who are in favor of more taxation and more spending some price and price so I think the traditional narrative here is that it's the less well often society who vote for more stuff is not really that true of course we can't call plumbers less well often society anymore coming because they're doing very well for themselves so there's there's a there's a bigger shift underway here that we're not really focused on okay so how bad would you say the financial situation is of the country of the United Kingdom not that bad so I'm a completely non consensus on this so of our public sector very bad you know extremely bad of our private sector extremely good and that's the bit that we don't talk about you know I wrote a book on looking at the four great bottoms for the American stock market I read all the Wall Street journals at the bottom of bear markets and of course all the bad news is on the front of the paper and there is good news but it's in the middle of the paper and where we are in the UK today is all the bad news is on the front of the newspaper but our banking system is rock solid and these could be famous last words of course okay is rock solid our household sector is is is completely de geared since 2007 and our corporate sector is completely de geared from 2007 so when we look at the macro data our balance sheet is really quite similar to Germany now on the private sector so for all the bad news you read on the government which I can completely concur with we have this coiled spring in the form of a private sector that should the government decide to get out of the way I'm sure we're going to discuss that is really going to go through a profound large scale investment boom and let me say that that is not a UK phenomenon that's a global phenomenon every developed world country has a program now for massive investment and I'm on the count it says it will get done how it gets done and whether it produces any profits is a different question but it will produce jobs and I think in a world like this you know debtors get relief so I am much more optimistic there are lots of countries that do not have a fast fastly under geared private sector who are in deep deep trouble and I put France right at the top of the list so yeah so I've learned from history that you've got to look deeper into the newspaper so we had some pretty good growth numbers out today Gordon Bryan not everybody will trust what Gordon Bryan writes pretty right wrote a nice little letter in the FT recently a couple days ago pointing out that I think is Will Verhampton is one of the fastest growing regions of the United Kingdom so it's happening but as a financial historian I can tell you that nobody will recognize it until it comes and then we can talk about the catastrophe that there's a British government phone answers well let's talk about that because certainly when I talk to people people don't feel richer people feel poor people have a less holidays people are behind this people are worried about their mortgages and you know part of this might be that we get a lot of our news from online and the online algorithms like we've learned this with the podcast bad news sells better than good news but even with that people are feeling poorer sure so the government has to do something about it there was a brief period I'm going to say it was two and a half years were were wages real wages went up now it stopped again but there was a brief climber there were real wages went up so I think we're going to talk about financial repression and it's worth remembering that in the system it's all about getting nominal growing faster than dead so nominal has to be nominal household cash flow and nominal corporate profits nominal so everybody's listening to this knows a difference between nominal and real not everybody not everybody so nominal is if you got a 10% pay rise that's 10% nominal pay rise but if inflation's 10% you've got a zero real pay rise so we're definitely going to get higher nominal I think we for for many people and so they don't feel that as you just pointed out nobody feels you get paid 10% more inflation's 10% you really don't feel it and if you're not particularly wealthy you see worse because if all of inflation's in food and energy it's worse because inflation's not 10% significantly higher than that so we have an engineer a system where real wages are growing we have done that historically we can do it again it is very bad news for savers but it is not necessarily bad news for the people in receipt of the higher nominal income so let's take a little microcosm we're sitting in London the real value of property in London in some bits of it is collapsed no I don't think you and I are going to be buying instant gyms but anyway you know if you are one of those people you've just got considerably better off your salary is going much much further than it ever did so that's just a little microcosm of high in this world actually people can get better off in real terms not just normal terms but in real terms but to be clear we haven't done that yeah I mean that hasn't been achieved yet that's not where the country currently is but a grand investment boom can't take the country and the people who get paid less can't take them into into that world every person I've said opposite me who is an economist a professor somebody understands how the system works I mentioned you had Richard Werner here the other day said it is really easy for the government to deliver high growth I think so I think it's never been easier for a cup because we've got a private sector balance sheet coiled like a spring we have massive investment we need to do because we are distrustful of China and it's worth just pausing on that a little bit because that is where this investment comes from let me tell you the things that we're not currently not doing with China the national health is about two months ago national health service will not buy fridges from China anymore they don't trust them the government just banned the Chinese from building wind turbines in this country because they don't trust them I think it's public knowledge rather to the public knowledge that members of the armed forces in this country are not allowed to drive Chinese cars because the government doesn't trust them the Danes council the huge order for Chinese buses because they don't trust them you remember the internet of the things remember that what we got it what is the most important attribute of the internet of the things it's trust because you can turn anything off at any time we don't trust the Chinese now that might change but we don't trust the Chinese so we've got to build this stuff now I'm not suggesting that we're going to build all of that stuff in the United Kingdom we the developed world are going to build all of that stuff we know I have to replicate most of the productive capacity of China if we don't trust China and that is one of the biggest bums in history so I agree with Richard you have a balance sheet private sector balance sheet capable of funding it we have a strategic need to build it and it's not just that we've got the let's call that friend shoring so nice little phrase that Janet Yellen used for it we need to we do need to green the economy people will disagree on that but we need to do that we need money for defense so the answer to all of the problems that you and I are probably just about discuss all come down to one word investment and we've got a balance sheet that can do it so let's go on with it but what what what's getting in the way of it then why is it not happening if it because I you know you look at you look at this labor government you think Andy Burnham he's coming in I assume most people to come to power they they want to be remembered as a great leader as being successful as doing good things for the country if every economist that I meet and I and I know there are different economists, we've got different artists. ideas, but if everyone says it's easy, why will they not unleash the power of the private sector? There is an ideology lingering in the party. I mean, the Labour Party is not one party. Now, there is the Conservative Party. There are bits within it. And this Prime Minister has said he loves the 1970s. I mean, 1976, not far from here, Browns will tell the delegation from the IMF right because the country was bankrupt. Two former leaders of the Labour Party will one leader in the Chancellor, Carl Hahn and Healy, and Daniel Carp and Hahn to the IMF and then have a dramatic return. I mean, it's kind of nuts to harkum. The only way you can have a liking for the 70s is if you were only a child in the 70s. If you're bouncing up and down on the space hopper, driving your chopper on the circles, it was wonderful. Is this because ideologically they cannot admit that that should turn the country around? Well, I think ideologically they can't. There's a short-tune section of the party. I'm not saying he's actually one of them. I don't think he necessarily is one of them that has to be pounded to. That is the enemy. That's how you get that part of the party on board. You have to say that's the enemy. Now, saying it's the enemy, but actually, you know, the PR, I'm not even, is he worked with the private secretary of Manchester? I don't know. I have no idea what he did or not. But you have to pounder to that part of the party. Remember, this is the Greens taking all of the votes from the ideal, from the ideological bit of the party, that these are the bad guys. Most people listening to this will not have heard the debate prior to the Scottish elections. There's a reform candidate there. He's a very wealthy man called Malcolm offered. He was here. Right off with the green guy. Do you want more people like me? That's exactly right. He was here straight off today. That's what I was going to say. He asked the green party. You want more people than they said less. Now, who do the green party think it's got to pay for everything? So I, okay, I'll declare my ideological bias here. I think the people have written their ultimately pragmatists. And they vote ultimately. Sometimes it takes a while for a pragmatist. It delivers pragmatic outcomes. And I think we're not as prone to ideology, as I mean, you can see the bias in her and at all of this, because I am British. But I think ultimately we vote for pragmatists, not ideologues. And we'll get there in the end. And it could be Andy Birdham. And if he is disciplined by the bond market, big F, big question this week. If he's disciplined by the bond market, we'll get there quicker. So we're less prone to ideology. I can see how you're going to get lots of unawaited emails about all of this. Well, it depends. Look, you know, one of the things I've always said to people is like, I actually, I'm not, I haven't voted in last three elections, because there's no one to vote for. But I don't care. If the green party came out, which they would never do, said we want to have a productive economy, we want to unleash the private sector. We want to get kids to work. You know, we want to dereg it. I've been voted, I don't vote for anyone. I think the most important thing to fix in this country is the economic situation. Even the people who are, you know, very upset about the immigration situation in the country, I'll always say, look, you can have zero immigration. If you do not fix the economy, you're going to get materially poorer and your liver standards are going to drop. The most important thing is to fix the economy. I just cannot see. And I haven't seen in government, for a while, anyone who seems to be able to get control of power, who seems to be able to do this, at Liz Truss, made an attempt on her nose. She made some mistakes, but she seemed to upset Bank of England. Sure. Yeah. Well, we're getting into, I mean, you know, I'm a financial historian. We're not talking about the blob somewhere away from my, well, we didn't have to buy expertise, but the, this is, this is the fundamental volitionists that have ultimately the people prevail. Yes. And the people don't want the green party. They don't want neo-communists everywhere. There's not what they're voting for. Now, obviously North London is very different. You know, the, the communists, sorry, the green party. I think it's fair to call the communists. They're supported by the middle class. They're supported because they want to shore up the status quo, effectively. I mean, they might say, we're radical. We're going to change everything. You don't find many blue-collar people voting for that. What they want is more jobs and more money. They don't, I can't afford ideologies. Now, I know that running a business means you're always reachable until you're not. And the second you miss that call, that text, that follow-up, someone else picks it up. That's the bit people don't think about. You don't just lose that customer because you were worse than the other guy. You lost them because you didn't answer. That's why today's episode is brought to you by Quo, spelled Q-U-O. The business phone system built so you never miss a call. Everything lives in one place. Calls, text, voicemails, and your whole team can see it. So anyone can pick up a conversation, see the full history and reply properly. Instead of just that, sorry, what am I speaking to? It sets up in minutes on any device. You keep your existing number and you can add people as you grow. There's no IT and no hassle. And there's a built-in AI agent that takes the after-hours calls. It answers questions, books, appointments, so the phone's still working when your team's gone home. Money is on the line here, but you can always say hello with Quo. You can try Quo for free plus get 20% off your first six months when you go to Quo.com/peat. That's QuoQ-O.com/peat-te. So is the thing really getting in our way? The wings of the parties where they haven't a panda for certain ideological bends that stop some actually just going out and doing what is right. Does Andy Burnham really, we should be talking about economics, but does it seem to you like he knows what needs to be done? Yes, he has the panda that passes apart. I think that's, I think that is where he was. If you think back to the Liberal Party of the 1970s, that's exactly where it was. He had his ideological firebrands, let's call them the Benites, and they had its pragmatists. And what forced the pragmatists to win was the bond market. We couldn't borrow any more money. There's a famous speech by Callahan on I have to tell you conference that this is no longer an option. So is the bond market going to force Burnham to do something like that and panda to that other part of the party, but actually get on with going to the economy? So my answer would probably be yes, but of course I don't know, I'm so focused. It's a shame though, because it seems to me, therefore, there are a very low number of people, we're probably talking tens, maybe a hundred or so people who are ideologically holding the country back. I do think that it's not the people holding the company within the government. So I keep using the word ideology because I'm a pragmatist, and I think there are ideologues that are holding the country back, but I mean, but it's ideology. I think they probably do themselves. It doesn't work, but they don't want to go to a dinner party in North London and admit that. You know, if you're going to, I don't go to dinner parties in North London as you probably guessed, but these are the things you have to say there. This is where your whole self-esteem is based upon the fact that you say those things. And I'll blame the whole problems of the country on the North London Labour Party, which is not the whole Labour Party, which is why when Burnham comes from the North, one hopes that he doesn't start having dinner in North London. Stay away from Islington, please Andy. Okay, so you talk a little about financial repression. Even if we unleash the private sector, is financial repression coming for? Very probably. So let's begin with why I'm making the forecast with probably a high degree of certainty. I don't always make forecasts with a high degree of certainty, by the way. So it's because of the death to GDP in aggregate. So I've told you why the private school in public is bad, but in aggregate is bad. In aggregate, that's a bad number. Where are we? So the United Kingdom's total debt to GDP is about 234%, so public plus household plus corporations. Like 234% if I could draw a little graph would be not quite where we were at the end of World War Two, but pretty close, so pretty horrific. So it's not a good number. Unpayable. Unpayable in hard money. Maybe we'll come back to that. Payable in inflation. Yeah, absolutely. That's where we're going to next. But I just want to point out that 234% of GDP, although it's really bad, is actually very good. Relative to everybody else, not everybody else. Let's pick some numbers. So America is now a 254% of GDP. China is 300% of GDP. France is 324% of GDP. Japan is 350% of GDP. No, let's talk about the good ones. Well, the Germans are 200, but we're 234, not too bad. India is about 190% of GDP. So you've got a really big, big, big range here. But fundamentally, any number way up into the 200s and we are at 234, ultimately, you've got to do something about it. We have to do something. So here are the five things. And this is where we come to paying back in real money. So the number one, the beautiful way of doing this is really high real growth. Do I think we can elevate real growth to that level? Probably not. What kind of grow are we talking 10% growth? No, no, real growth per annum. I think four would do it. But four is very high. We, you know, I'm looking back into the 19th century now to see if we get numbers like that in huge investment. But so obviously, the great wide hope is AI that that can elevate the growth rate. I know we can talk about that as a separate issue. So there are five ways to do this. Really high real growth of steriting. Well, there is absolutely no political mandate for steriting at the minute anyway to fault. Well, Lehman Brothers to fault and it didn't really take us to a land flowing with milk and honey. The government agrees to fault it. It's taken at least 10 years for the nation to recover from that. And then there's finally financial repression. So I picked financial repression because it is the least, if you're a politician and you're choosing, it's the least bad option unless we get some sort of miraculous real GDP growth. But clearly, you have to try for the higher real GDP growth. You often do everything you can to achieve it. But I think it's going to be a challenge to get it to the right level. If like Britain, you start with a more moderate debt to GDP ratio, then maybe you need to do a little bit less financial repression. But four percent is that achievable with the right leadership and the right will support the public. Probably not. I mean, that's probably too high. I mean, you have to put that in their historical context. We just very, very rarely ever got to that level. That's a very, very high number. - Can you work towards it here and here? - Yeah, look, I'm saying we can get much, much higher than we are today. So if we were to get elevated real GDP growth, like two and a half isn't that long ago, where we could achieve stuff like that, helps a lot and reduces the nature, the level of repression that you might need. - But when they get to an opposite growth, do they spend more? - Yeah, spend more. - Yeah, spend more. - Well, there will be more spending on defense for sure. That's just inevitable given what's happening in China, not Russia. So yeah, there is a temptation that they spend more. So financial repression is the easiest one to slip into the public. - It is because you're attacking only one section of society, at least for the first decade. And that is saver. And you can see the rhetoric on that changing. So if I want to attack you, I have to give you a bad nasty name. So I'll call you a rontier. For those listening who don't know what a rontier is, you can Google it. But it's basically somebody lives their life on unearned income. And what could be more horrible on somebody learning their life on unearned income? So we have to demonize you as one of these people who lives on unearned income. Everybody else is like tolling hard, but you're 65 and living off your pension. That's unearned income. And we say that this is a legitimate person who has to lose. There's a grand reordering and has to come. The country's a mess. Who do we think has to pay for that? Well, to saver, because they've never had it so good. So that's how you do it. But it is worth pointing out in that environment that debtors do well. And young people probably do well in a great investment. So this is where we were after World War II. So I'm not making this up. We've done it all before. This is a redistribution of income. Correct. Financial repression is that. It's not necessarily done for that reason, but it is done to reduce debt to GDP ratios, but it has that effect. There will be a lot of people listening to this who've read, who've sort of bought a copy of Piccaday. Thomas Piccaday capital, the great Marxist economist. An oxymoron, if there ever was one. Not many people will meet at past page 20. But anyway, I think in the first 20 pages, you see a chart of wealth distribution. And you see, despite what Piccaday says, what you see is effectively the main reversion of wealth distribution. But if you look at the period after World War II, which is the period we're talking about here, financial repression, you get a collapse in financial inequality. But that's not because necessarily working people are doing better, although they are, it's known as the trance glories and France, the 30 glories years. But the savours are doing so incredibly badly. So when I was a boy in the '70s, the worst section of society that was really on its knees with the pensioners, well, that's not where we are today, is it? No. So we just got to go through reversing that. And my, I've spoken to pensioners about this, and when I talk about financial repression, it is kind of esoteric. So I had to think up a better phrase for it. So I call it stealing money from old people slowly. And the slowly bit's important, 'cause you mustn't frighten the horses. You know, they mustn't stampede for the exits. So that is a world where the politicians were saying, you know what, somebody has to pay for it. Why not those guys? Now, the triple lock, obviously, is evidence that they haven't got there yet. But the triple lock will have to go as well. So that's the word we want to go for the triple lock, baby. Yeah, it's incredible. I mean, all those, the problem with all those old people, and I'm obviously not one of them, is they all vote. So if young people really want to change things, they've got to get out and vote. So we haven't been really that precise about what financial repression is, isn't it? So to the extent that UNI's savers are within regulated financial entities, we force those entities to own government bonds. It yields that do not compensate us for inflation. Now, there's a hundred other things to it, but at the core of it, that is what a financial repression is. So bond yields are held below the rate of inflation by forcing us to buy them. I don't want to buy bonds. No, I don't want to buy them either. I mean, I wrote a huge piece from my clients. They said don't buy bonds. Yeah, 2021, I said, look, it was called the tree into the Finland station. And Lenin arrives on a tree into the Finland station and I said, look, this is a regime change. What's happening here in 2021? Which was the bankers, commercial bankers, expanding their balance sheets into a recession with government guarantees to create masses of money, is A, I'm going to create lots of inflation, tech, but B, it's a sign of a regime change that the government has realized how to make money. And you don't want to be anywhere near a government bond. Obviously, it's been right, but I want to show you how right it's been if you bought a French government bond issued in the first quarter of 2021. So that was a 50 year bond with a half percent coupon. As of yesterday, you lost 78% of the capital value of buying the risk-free asset from the French government. So that's a nominal number. French CPI, basket, not annual, but since then, is up 18%. So you've effectively had your capital wiped out buying the risk-free asset from the fourth biggest issue we're in the world. - Risk-free. - Risk-free. So I see if I can get this right in a way that George Bush didn't. Fill me once, shame on me. Fill me twice, shame on you. Now, our investor's going to be filled on second time on owning the risk-free asset. Given, that's an extreme example. A 50 year piece of debt's an extreme example. But no one knows they've lost us money. This is what I mean about stealing money from all people slowly. They don't know who owned that. I tell you who owned it. - Pension funds. - Yeah. The regulator told the pension funds and the life funds. You need to match your assets and your liabilities. You need to buy every piece of long-term paper that there is to match those two things up. And they bought it, and the guys don't even know they've lost the money. And they lost. That's the trend. That is the subtle trend. No one's ever explained it to me. Well, that's not the rationale there. And the rationale then was, if you have long-term liabilities, you need long-term assets. But you can easily just change that too. We need the money, and here's, and then give it another name. Stealing money from all people slowly. It's not declaring the government needs the money. You're going to lend it to it. So it's finding reasons of safety and security and prudence as to why you need to buy government bonds. In a risky, dangerous world, of course, you need more government bonds. So it's not dressed up in the language of, we need the money governor. It's not a revolver in the back in a dark alley in Suho. It's for your own good and safety. You need to have more government debt. So is the triple lock really a subtle way of hiding this? The belief you're outperforming? Yeah, well, that's the public sector, isn't it? So the public sector pension is what it is. It's the private sector pension. So it depends on where you as a pensioner set. If you have a private sector pension-- I'm more likely of my family's more likely of private sector. Yeah, so that's where you're going to lose it. I mean, fortunately, maybe not losing it as much as people think of the minute, because for all that you've lost on that asset, equities have done pretty well. So it's pretty well hidden down in the weeds at the minute. But that's my point. We're getting to the stage where you can't really hide it anymore. We filled the people once. Difficult to do it again. It might have to be more overt the second time. So the public sector pension, triple lock, will have to go eventually. But the attack is on the private sector. Now, to be clear, it's not just private sector pension funds, because you've got the sort of life insurance as well. But all sorts of pots of capital savings institutions in a society, and all of them can be put in there. So if we go back not that long ago, what are the legacies of the last financial repression? Is that at the age of 75, your pension on how to go into an annuity? And guess what the assets of an annuity are, government bonds. That's the legacy of the old, so we can bring that back. So many ways of doing this. We had, at one stage, I think the peak rate of transaction tax on equities in this country was 4%. There was never a transaction tax on government bonds to make government bonds more attractive. If you put on rent controls, then you denude property of its ability to protect you from inflation via higher rent, making government bonds more attractive. You give me any sort of piece of legislation we ran from 39 to 79. I'll show you how you ultimately was about making one asset class less attractive. So you would buy more government bonds and that British investors from 45 to 79 in real terms lost nearly 90% of all their money in British government debt. - So really, are you saying these people aren't ideas? They know exactly, but. - No, no, I'm not yet, but I'm not yet. I think, so I've been writing about financial repression for a long time. And the question always was, is there an evil hand behind the scenes moving the chess pieces? And I think the answer was, no, I paused there because there was a man who was in high policy circles in this country who did write a book about it and did suggest it and his name was Lord Turner. He published that about 2012, 13. So there was a blueprint there. But no, I think the government as governments do are reactive and so far have stumbled into all of this. It's been accidental, but I think in the last year and a half there is evidence that someone is working at eye. So if the United Kingdom was the best example, I can give you as the part of Mandation. So the British government, last one, conservatives, this one have a thing called the Manchin House Accord, where they're trying to steer the capital of the pensions industry into the certain assets that they think they should invest in in this country. So we'll just leave that there. But there was a problem with that. A lot of the guys who ran that money said, I'm a fiduciary, I have a legal obligation to my people and if you make me do that, they'll sue me. So last October, it's nearly a year ago, the British government passed a piece of legislation called Mandation, which sits up there now and says, "A government minister can force a pension fund to buy whatever they wanted to buy." Because that gave you a legal backstop, so if you get sued by your client, you say, "Wait a minute, wait, we haven't done it, "that it forced us to do it." So the moving to that piece of legislation tells me that there's somebody, and this came after though there's trust budget, where we had a spike in bond. So remember anyone talking about this? This sounds like one of these things that just goes under the call. Yeah, I would say. wasn't a high profile, but it wasn't done in secret either. I mean, there are a lot of hate on the pensions industry, obviously, we're not happy about it. So there's not a backstop. Now, is a backstop random? No, I think the backstop deliberately is trust thing helps that. So I think in the last 18 months, there's a little bit of sign of the moving hand. I mean, if Madame Smith believes in the invisible hand, this is the clunking fist. So the clunking fist is becoming more visible than it, you know, there is more order in this than there used to be. Right. So can you explain to me? Because look, I'm just a guy who goes to work who tries to save some money and help my kids and have a holiday each year. And I think a lot of people are probably in a similar position to me. I watch what happened with this dress. I quite like this. I believe she wanted the country to go. I believe she wanted unleashed the private sector. Unfortunately, she didn't last too long. I would like to see her as a prime minister of a longer. And I've read all the arguments either side, but I've got a feeling you fully understand exactly what happened there with every player. Can you explain to me how you saw it? Well, I think the problem with the plan is that it initially would have entailed a much bigger fiscal deficit. If there'd been something to perhaps contain the size of the fiscal deficit while this was going on, I don't think the bond market would have reacted as badly. There are, and there were then, backstops on the bond market that were not deployed. I do not have an opinion on whether that was a political choice by the institutions that can deploy the backstop or not. She obviously has an opinion on that. And she's very vociferous about it that the Bank of England could have deployed the backstop. And things would have been okay. I'm not taking an opinion on that. The point does mean I have a backstop. And it's not with the Bank of England. It's with the British government minister. That's the change. That's what's brought it. That's what tells you the clunking fist is moving. It's realizing we can't be dependent upon a decision of the Bank of England anymore. We need executive power to force people to buy these bonds. Had list, trust being in part, a time when the foundation was already in place, she would have been able to say you need to buy these bonds. She would have argued there's a temporary extension in the fiscal deficit coming until we get the elevator growth. And in that hiatus, you're going to own more government bonds. So the world, this world changed. Now I'm not sure to what extent other parts of the world changed the the mandate of the clunking fist, but it's been changed. So that tells you that somebody somewhere is working this out. I don't know. I don't know where Lord Turner is these days. I don't know if he's a consultant to the government or not, but he understood it and rooted all up. And there are people like him, and they'll just have mothers who say the post-World War II period was the golden area for Britain. Now in many ways it was if you're the average Joe. It just wasn't a viewer, a saver. And they think we can replicate this. And on the whole, I'm saying, yeah, we probably can replicate this, but the saver pays the price. And then who sacrifices the saver? Well, I think, so we had a little discussion before we began recording. And I don't think it matters whether they're left or right way. They all sacrifice to saver. Because what else are you going to do? So what should a saver do in this time? Start spending. Well, so yeah, so that is one thing you can do. Absolutely. But so the good thing is we have a history of this. Well, we know what worked the last time, which even as a financial historian, I'm going to tell you, it's not a foolproof guide to what happens the next time. But here are the things that would do well in a financial repression, almost you don't want own bonds. If I tell you we're going to inflate away our debts, why would you want to land anybody any money? But there are equities that do benefit from all of this. We've talked about what I think, which may or may not be true, this great capital expenditure boom that's coming across the developed world, while our equities that are well plugged into that. I believe we're suspending or we'll suspend very aggressively trade with China. Because we simply can't live with China. That is that competitive for whatever reason. It doesn't really matter. People argue why it's competitive. It's kind of irrelevant. Social politically, we can't cope with it. And therefore we won't. So there are lots of companies that make a huge amount of money because they're not subject to Chinese competition anymore. Gold is actually a good investment in a financial repression. And there are surprisingly, maybe we'll do a little more detail later. Banks are a good investment in this. So the problem here is as follows. When you reach a great big structural change in the world, the professionals and the amateurs are all looking back to guide their asset allocation. And doing that, they're on 60/40. 60/40 has been a nightmare, which is 60% equities, 40% bonds. And they still haven't really changed. And what you need to do at a time of great structural change is have a radically different portfolio. And that is a radically different portfolio. The stocks I've mentioned are usually classified as value stocks. Not very good definition of them. Value stocks, gold, banks, and invest in countries that aren't going to run a financial repression. And actually most of the emerging markets who've got very low data GDP ratios, ex-China, don't have to do it. Now the problem with that is it's an incredibly idiosyncratic portfolio. And everybody will tell you it's incredibly risky. Why is it incredibly risky? Because it doesn't look like anybody else's portfolio. But sometimes that's a good thing. Absolutely, that's my point. I mean, in a business cycle, when you're playing business cycles, then maybe being like everybody else is kind of useful. But when you come to a great structural change, you need to be radically different. The professional community can't be radically different. They have internal risk control officers. You'll tell them that this is far too risky. You as an individual can do that. And then you have to live with the volatility. So that's the problem we have. We've built an industry that is benchmarking, benchmark hugging. And it is not capable of making a grand leap. Why would you as a professional? You get it wrong, you lose your job. You get it wrong in the herd. Maybe you keep your job. So in my world, we mentioned it before we started recording. You mentioned gold. I didn't think on it. I don't always bring it up for the sake of it because the show used to be about Bitcoin, but a lot of my friends and people I know are investing in Bitcoin for the same reason that people are investing in gold. But you are some believer? No, I'm not. So a little bit of obviously three different types of crypto. We're just going to talk about Bitcoin. That's the only one I care. Yeah, because I think stablecoin will be very successful. I think the central bank digital currency will be very limited. It's too dangerous. I don't think they'll go there. So just to be clear, I'm not negative on all crypto. I'm not picking on Bitcoin either. I'm just picking on private sector crypto. Yeah, private sector crypto, whether it's called Biden or whether it's called Trump or whether it's called Bitcoin. So a currency as it used to be. So it doesn't have any of the, it used to be five, six years ago. It's got to be a coin. It's got to be a currency, but it's not a store of value. It's creditable. That's just, it says very volatile to be classified as a store of value. I'm used for the volatility. It's not a means of transaction yet. Those stablecoin, I think, really could be a means of transaction. It's not a method of account. So it doesn't have any of the functions of a currency. Sorry, it doesn't have all three functions. And it's clinging on to the store of value one, but it's exceptionally volatile. So when I speak to, I don't speak to a lot of Bitcoin people, but they do. And they say to me, well, what it is now is a way to avoid the government. That's what it is. It's not really a coin. It doesn't have those three values, but it's a way of avoiding the government. That's really why Bitcoin is going to do very well. You want to avoid a financial repression. You buy Bitcoin. Well, let's go to China. You haven't got a jail for buying Bitcoin in China. So, you know, if it's really going to be this gaping hole to escape a financial repression, they're going to be after it. So that's why, you might say the same for gold, but it's actually much easier to to, to hide and maybe not move gold. Well, actually even moving gold fits in the glove compartment. It's very easy to hide and move Bitcoin. And, you know, we know in the US, they came off to the gold. But in China, they put people in jail for doing that. Yeah, that's China. The rest of the world. They don't put in jail for it. Not yet. I mean, I mean, we used to have capital controls. We had them. And people did good at jail. There's a famous corporation back in the 60s, early 70s called Bernie Cornfield International Receive Investors. And it looked like a mutual fund company, but it was an illegal capital flow company. And lots of them went to jail. And I mean, there was point having capital controls or exchange controls is you go to, you break them, you go to jail, but they could do that for gold as much as they could do for that one. They, they, they absolutely could if you're going to move across border. Yeah. So that, but that's the same risk on, on both sides. No, it's, it's not. I think it's much less on gold because gold is so much easier to have somewhere. And it's not a big asset class. It's getting bigger by the day, but it's not a big asset class. Gold is not a, I mean, the way I look at the financial repression, if you're a government, what you do is you look at a tree full of fruit and the fruit of savings. And you start with a low hanging fruit. Of course, you do pension funds, life funds, you regulate them anyway. You bring in the mansion house of corn, you bring in the foundation, easy, easy picking. But as it goes further, you've got to go higher up the tree. So the first thing I'd say is clearly Bitcoin is higher up the tree. It's going to be much more difficult to get your hands on. And then you work your way up. I put gold, maybe at the top of the tree, is that because the government has a gold themselves and they like it? No, no, it's not that. It's just, it's just not a big asset class. It's just not worth getting to when there's stuff further down the tree. I mean, just, I mean, obviously everybody talks about Roosevelt 33 and his, his hand in all your gold. But I know his debt's gold was quite a big chunk of a personal portfolio. Gold was money and money was gold in a gold standard. And now it's just a tiny bit. Now, if we're here in 10 years, maybe it'll be a big bit and the governments will come after it. But at the minute, if you and I were going to run a financial repression, we couldn't curl less about the holdings of gold because they're so small. I saw recently Christian, Christian the guards, Christian the guard talking about savings, the parasavings, there's a trillion euros or whatever knocked up in savings. I think it was Urshul of Wonderland. It's already Urshul of Wonderland. It's just not a big speech about all of the savings lying around Europe. And the same speech to Macron does, which is, [BLANK_AUDIO] I know the number is still right, but roughly 300 billion a year of European savings goes to Fund America, free choice, free choice by the people, by the savers, that's what they choose to do. I don't know what surprised you to know that the urge to fund a lion and Macron are not very keen on that idea, so they would like more control over those savings so they can be invested. Would they want them to be invested? That's financial repression. So in the context of Vondalein, Lagarde, Macron, they all want control over people's savings, so it is buying their bonds, one to one need. Need? They need it. But it's also a secondary point, which is the drugie plan. So drugie has a plan for massive investment across Europe to save it, and so they want it for that as well. But they're no different from the government of Britain, from the government of Canada. I mean, it's possible that the biggest investment of it in the world is not in Canada, because if Canada's really going to ostracize itself from America, given how you intertwine those two are, that might be where the biggest investment bonus to be, to finance that Canada will be bringing tens, if not hundreds of billions of dollars of capital back from America every year to fund it. That's the word we're looking at. As we said here today, bond markets are breaking. There are many reasons for that. We can talk about all of them. But the one that the press doesn't talk about is repatriation of capital. Everybody needs their savings home, and where are their savings? They're in America. 70% of the world's stock market, the land of the free American exceptionalism, that's where the savings have been going. And if Von the lion wants them back, the British government wants them back, Mark Carney wants them back. And financial repression is forcing them back. And at first instance, if you want to bring liquid capital back, the first thing you sell is your most liquid asset, which is government bonds. Which we've been seeing a lot of you selling the US bonds. Yep. But not just US. You know. Not anyone's, but France is the worst, much worse than the US. That's the word that we're living in. And that speech by Von the lion could have been really made by Andy Burnham. The thing is, Andy Burnham doesn't need to make that speech, because he already controls the savings of the British people through the powers of regulation. Von the lion needs to make that speech, because she has no control over the savings of Europe. I mean, the chancellor of Germany controls German savings. The president of France controls French savings, her desperate gambit is for the European Commission to get control of these savings, so that she has a role to play in the future and she'll feel. She'll absolutely feel. But that's why she's getting so vociferous about this, because she knows that if the Germans run financial repression independently, and the French run independently, let me nothing for her to do all day, and there's nothing a politician likes less than realizing that she's completely part of. So hence the great big public announcement that we absolutely need to have this capital union, because I need to control the allocation of savings. So I think the allocation of savings will be done in Europe, but it'll be done by the member states individually and not by the commission and Von the lion. So in my world, Bitcoin and gold has been quite the debate over the last few years. But why not both? Well, our boys over at Leiden have now got them side by side on just one platform, because they now support to the gold alongside their expanded support for USDT and USAT. So you can now trade across 10 integrated pairs with transparent 0.5% spreads. You can also now borrow and repay in the stablecoin that works for you. Now every asset is protected by the same custody discipline that has safeguarded over $11 billion in client value since 2018. Your transaction account and loan collateral assets are never lent out for interest, never used to generate yield and never put at risk to fund the business. That's the world's hardest assets with the flexibility to move between them. So you can explore this and what else is new at Leiden.io. That's Leiden.io, which is LEDN.io. Just know that availability does depend on your jurisdiction. It can be quite scary for people listening to this, you think, look, I've worked my whole life, I'm looking at my retirement, I've saved, I plan for it, and because our governments have run up such high debts and they can't afford to pay their bills, they're going to come after what I've worked hard for. What's my retirement going to be like? That's just where we are. You're not part of the enemy. You've got the money. You know, I know the speeches are always against the billionaires. Billionaires have got the money. Let's get the money from the billionaires. Well that proves to be quite tricky. And guess what? The billionaires don't have life funds and pension funds. So in terms of this tree of taking money away from people, the easy thing is just a regulated savings industry. It's quite difficult to go after the guys at the top. I mean, eventually probably make an effort, but we are already making the effort. Well, it's kind of California, aren't we? Yeah. Yeah, it doesn't. You know, we can, as we said here today, there's lots of stories about Greece and what Greece is doing to lure people away, but this is a problem for the European Union. Greece is hitting the headlines, but actually Milan's much bigger threat to Europe than many, many very wealthy French people are moving to Milan. There's a flat tax rate on your overseas, sorry, no Italian income. I've distracted a lot of people. Why is this a problem for Europe? To make a single currency work, you need to move towards a single fiscal system. And this competition for tax, and of course, the Irish have been doing it for a generation very successfully, well done them, but the Irish have been doing it for a generation. The Greeks are in the business. The Italians, I mean, who are they taking all this tax money from, France and Germany? And there are public finances, particularly the French are ready in a mess. So in terms of attacking the wealthy people, to the extent that they go to Greece, you've got a problem. So maybe you should stop that. So you just go back to your pension and life funds, you know, most people don't even know what's happening. How many people who have a French pension know they've lost 76% of their money landing into the French government? None of them. They'll protest when they realize. Yeah. Well, they'll protest. They protest every Sunday, anyway, just a new reason for a good protest on Sunday now. Is it Saturday? Well, Sunday's, I remember being part of Sunday, you can dip into three or four different demonstrations, depending on one's political opinions. I just, it is really sad. And maybe I just romanticize too much, but I just wish, I just wish we would have some political will to do this in a more honest way. Look, I am 10 maybe years away from retirement. I'd like mid to late 50s to be able to retire. And you know what, Russell, I don't mind taking a small haircut for the future, for the kids. Like I feel like in some ways it's kind of like a war footing, you know, both world war. Got a real rebuild this country. I want my kids to be able to have kids and buy a home. And in doing that, I want their peers to be able to have the same because I'm suggesting you can do that. I'm suggesting you can do that. Try not to have your money in regular financial institutions, number two, on-value stocks. But what do I mean by gold and you can profit from this? But that's for me personally, correct. But what I mean, I want it for their generation. Sure. And it appears to be that their generation will benefit from this financial repression. They will be the beneficiaries. But I don't think it's happening because the powers are be that control these want to control our money are thinking about the future, because they think about saving themselves. Well, there's two things they're thinking about. So one is, just what you said, and the second one is China. Yeah. And we must not underestimate what this country has to do now in a cold war, or France, or Germany, or Canada, or America. And that's where the job's come from. We have to build. We have to build. Like really, like never before this country lost a significant stock of its capital assets due to enemy bombing after World War II. We've lost even more due to the hyper competitiveness of China. And that all has to be rebuilt. I don't think all of it is rebuilt here, but some of it is rebuilt here. And that's what the politicians are thinking about. You know, this great thing. Are we really, really rebuilding the defenses of this nation, the defenses from Russia? No. No, it's not possible. Yeah. We can see where Russia is in Ukraine. We're building it for something bigger than that, and that's China, and nobody will talk about that. Nobody will say anything about it. But this is not about going to war. It's about about real lining the supply chains of the entire developed world to be less reliant on China, whether it's solar panels, automobiles, fridges, buses. The whole thing. Now, if trust is instantly regained on the Chinese leadership, or there's a new leader and we instantly regain trust, then I'll have to come back here and have a different opinion. So that's what they're trying to do, and that's what they'll create to jobs for your children and your grandchildren, and create for them a better future than it currently would appear to be. You probably don't need a university degree for quite a lot of that, by the way, soon. Well, it's a big conversation on a household at the moment, you know, with a 16-year-old, I mean, how do you even choose what to learn, because in five years' time, I think the world's going to look very-- I think they should learn from their father. I think they learn communication. I mean, this is one thing, I think, that will always be the ability to communicate, which is the ability to lead. Like maybe one day it's only AI, there's no human beings to lead, but the ability to communicate would appear to me, and this is an older generation, always say, would appear to be a dying art amongst the young generation. That is a problem. We're interested in being at this conversation yesterday, because my daughter is an artist, she loves art. But, you know, part of our A-level, she has to do other subjects. She took economics because, you know, she wanted to make her dad proud. I was going to say she wanted to make you happen. Yeah, but she's not enjoying it. She wants to be an artist, and we're interested in the conversation, and I said to her, yes, I said, I don't mind you being an artist, but I also want you to get a job, because the creativity is beautiful, but you've got to be able to learn to communicate with people, to be able to deal with people. So we've had that conversation, and it's a really funny time, because when my son went, it got to say we were selecting A-levels, this was what, I mean, he's 22 now, so you're talking six, seven years ago with things about it, there was no chat GPT we were talking about. We considered his career. With my daughter now, I've got no idea what the world would look like in five years. is the conversation now is pursue your curiosity. Pissue your curiosity. Just pursue that in five years' time. We'll figure out the world that is here. We'll figure out what's right for you and it's very different. - So I understand that completely, but there will be a lot of blue collar jobs. And in terms of daughter, I think if she in the way, along the way, learns to communicate with people, lead people. Personally, based on my own experience, I think a lot of that comes from the sports field. Team sports may not come from university at all, but I can't foresee a world where they are 10, 15, 20 years from now, where there isn't the role for somebody who can communicate and lead a team. - I completely agree. - Yeah. - And that's a skill set, which, you know, tons of people have it. They're gonna aim at a university. They're brilliant at it. - Just back to the point I was making previously, that look, again, I don't mind elements of financial repression where we're talking about rebuild energy, not saving the government. I think there's a distinct difference between rebuilding the country and saving the government. - They don't see the distinction. - They don't, but we do. And saving the government means saving phase, which means, yeah, sure enough power, which means, you know, all the things that come with that. And to me, the problem we have with that is, is like, even if we get to that high growth, they'll just spend more again, stupid shit that needs to maintain power. But if there was a genuine plan to rebuild the country, if somebody came out and said, okay, look, Pete, you're gonna have to pay a bit more tax. You're gonna have, you know, you're gonna have a lower pension, but we're doing this to rebuild the country for the children. Here's the plan. I think I can be on board. - Don't rule it out. That's all I would say. Don't rule it out. I know we're both skeptical about that. I think it is because there's this block in the Labour Party, which is ideological and probably doesn't represent the base of the party. The base of the party's working class. That's theoretically what Labour's about. But there is now, obviously, a large public sector middle class part of the Labour Party. So that battle has to go on. I mean, be slightly more optimistic than you, that one bit of that wins on the other, but that battle, as it has gone on throughout the history of the Labour Party, has to be won by somebody. The question is, I hope we don't have to win another four, five, six, seven, eight years before one of them wins it. - So in the '70s, they still have this middle class, like a wing. - Well, they did, but I mean, remember what happened. - I don't agree. - '78 I was born. - Who voted Margaret that during the party? The working class. - Yeah. - That's what happened. - My debt. - So they just stuck with that and said, these are the people we represent and the whole working class who was posted, not the whole one. The guys in Liverpool didn't. But a large percentage of them just said, "Well, what the hell, if you're not, "if you're not going to represent us, "then we're going to vote for somebody else." That is the fear he currently faces from reform. And he better do something about it. I mean, the reform party will not run through all the policies of the reform party. But one of the things is, we'll get the government off your back. I mean, that's it. And it's very popular with blue collar voters. If Andy Burnham can't see that, I know he sees it. And he'll have lots of advisors telling him it as well. Many has this other bit. The ideal ones who are saying, "Oh, that's not Liverpool really stands for." So if he doesn't do something, he loses the vote the way Callahan lost it to that term. - You are still very optimistic there. - I'm getting old now. I've lived in the country a long time. You know that great thing about that quote from Churchill about Americans. They always do the right thing after they've exhausted every other, I think the British people get to the right thing much more quickly than Americans do or other countries do. I think there's a pragmatism here that'll get us there. It could be in this government. That's probably where you would call me widely and july and stupidly optimistic. But I think we can get to the right answer quicker than other nations. But I don't know that if it's this year or next year or the year after. - Yeah, I mean, I look at this, only this week Donald Trump offering to pay $5,000 to every citizen if they win the midterms. I mean, it just seems so lunatic. - Well, I mean, I get it, but I know it's a lunatic. But there's a pervasive view in across the developed world by some people that most people in the country are stupid and fall for that stuff. And they're not, and they're not. - Well, I mean, you know, what's his name? 'Cause I've lost his name. The Labour guy a few years ago, want Jeremy Corbyn. - Corbyn, he pre-election, starting off from everything for free. Everything for him, and nobody bought it. - Yeah. - Nobody bought it. - Absolutely, and once upon a time, these people voted for Thatcher. That's a pragmatism. It's to say that inherent within the country, there is no ideology, there's just pragmatism. And we'll get there, but it's just taking a long time. - Okay, well, we should finish talking about AI, 'cause it's come up a few times. So you optimistic that AI can bring a productivity boom and therefore growth on how much you look at the other side of this where there may be a lot of jobs lost, and we have to consider that maybe this is a world that can't really support that much debt. - That's a brilliant question. I think a lot of people don't think about that second bit, and that's a bit we need to think about. We're a debt based world. - Yep, so let's talk about the upside first, and there's no doubt it will produce higher levels of productivity growth, which is not necessary to assume as high levels of real growth. We have to remember that because of the dislocative effects that you say. So there, no, a little bit on that. We have lots and lots of history of technology booms. And lots of parallels and analogues that we can look at. So what will they tell us about this? Well, they will tell us that at a certain point in time, financial capital will fall over itself to fund the technology, and then it will stop. And it will stop because it doesn't see the returns, and we may be not there yet. But, and then after a couple of years, it'll see the returns and it'll come back. In other words, any technology boom should be feast and famine, and we kind of saw this with a dot com bubble. So we're absolutely enthused. But in some stage, the people who provide the financial capital will reconsider the returns that the physical capital will get, and it'll stop for a bit. It doesn't change the long-term projection for AI. So the best example of an equity for that would be Amazon. Falls 90%. I remember. But how'd you bought it in 2000 and held it to 2026? You didn't care about the 90% decline, because you made so much money. The point is that for a while, we couldn't work out where the cash flows would align. Amazon was building lots of eyeballs, but would it get the cash flows? We didn't know. That's what'll happen. I think that'll happen with AI. It seems more clear where those cash flows will align, but it's not that clear. So in terms of AI, you can't say it's going to give you a permanent lift and productivity growth. It's likely to be up, it's likely to be down. But in aggregate over 10 years, it'll be a positive number. The bigger problem the one you've just mentioned is the reassignment of cash flow in a word of high debt. And there are three people we have to worry about. The household sector and the corporate sector and the government. Well, look, if you reassign cash flows of the household sector and the corporate sector, that is the government, because tax, that's us. So that's the challenge. And I think there are significant challenges in that. One of the reasons we might have to slow this down is if AI starts taking all the cash flow from heavily indebted companies, those companies default on banks, those banks from in trouble, et cetera, et cetera. So the problem with AI is we're looking at so many moving pieces here. So what is the net from all of that? I think the net from all of that is we do get higher real growth. Clearly, I think it's supplemented and actually bigger driver will be in, will be investment. But there has to be something to slow down this reallocation of cash flows. If it really accelerates the way it could accelerate, we're going to have a credit problem. One of the good news for the United Kingdom is we've got low debt to, low private sector debt GDP France has got high problem. So you can then sort of go around the countries and say, who's going to have the biggest problems from a reallocation of cash flows? And you don't, you know, UK is going to have a wrong, but you don't point to the United Kingdom as the biggest loser in their other places. I think people will say that's a very unclear answer because I try not to be the two handed economist on the one hand on the other hand. But it creates periods of great technological breakthrough. There are pluses under our minuses. Andrew Carnegie, but the way the famous steel man left Scotland as a young boy with his father. He left because his father was a weaver. And he was completely run at a time by a technological breakthrough when to America became possibly the richest man in the world if not one of the three richest men in the world. So the technological mess that comes along. Historically, it reassigned people all over the planet. It reassigned cash flow at white people. That's not the word we live in. That's not going to, it's not going to be hard to happen. It can't happen. The social political system can't handle the scale of technological revolution that AI brings. Most people will say, if they're Peter Thiel, a little bit of George and Tina says, coming anyway, I think you're a political economist, which I would style myself as because I'm certainly not an economist. You would say that just means the state has to manage this in some way to slow it, not stop it, but to slow it. And financial capital can slow it for two or three years by just pulling the plug and financing, but ultimately something bigger. We can't have another Andrew Carnegie. We can't have, well, Ireland for all the reasons to do with the potato lost a third of its population to America. Or America and Britain, we can't, that's not. We can't deal with the dislocation. That's necessary of a technological revolution as a scale, so we'll have to slow it down. So really, the primary difference with AI is the pace of change, we say some precedented. Yes, I think that's true. I mean, the real ways, or, I mean, I want to like as the Strathcona was the world's first refrigerated ship. I think it's 1870, leaves Argentina. And if you're in the beef cattle farming business in the United Kingdom, problem. But not when the Strathcona arrived. But you know, two years after that, three years after that, four years, it takes a while cumulative effect. I think the difference with this one is just how quickly it could happen if unregulated. And I think that is genuinely different from all the technology boomers we've had before. This one can happen much more quickly. But that's not the key question. The key question is, can society deal with it? And if it can't, what was it do about it? Well, we had an interesting conversation here the other day with the guys at CEO and the AI industry and he made me think about something with it. I didn't even thought about I use AI, I pay for my tokens, it's expensive, but you know, it's manageable. But I assumed the long-term business model of these frontier AI labs was people buying tokens and he said no, the future of these businesses is they've spent the last four years sucking up the entire history of human knowledge and including your podcast, including my podcast, yeah, it's out there. But although I feel this is a defendable job for now, but they've where the real power is is where they've got models ahead of us. They've got the, we're on GPT-6 now, Astra, they all have models far more advanced. They can just be able to build new businesses or they're going to be able to attack businesses that currently exist and they're going to create business models which aren't the tokens, which is, you know, I mean, we've seen these big breakthroughs in mathematics and physics and they'll probably be drug development. That's where they're going to make the real money and that could have the catastrophic effect for traditional businesses. That's right. So I mean, I just always come back to debt. So if it really signs cash flow, it gives you a debt crisis. Therefore, it'll have to be slowed down in some way. You mean by that is companies that currently have debt, who suddenly lose their cash flow, that's a problem. Is it a problem for the global credit system? Yeah. And we don't like problems for global credit systems as Lehman Brothers proved it. So that means a society has to slow things down. Can't tell you how they slow it down, but they have to slow it down. It's going to be a world world, man. Yeah, it certainly is. You think of real ways. That was a wild world, but, you know, transform the whole world, but not on it, not on this pace. This is only wild because of its speed, but in terms of the scale of transformation, you know, we have seen all this before, but never, never probably at this pace. We've had time to kind of absorb it. Yeah. You know, you're reading the novels of George Eliot, for instance, it's about the coming of the real way and the changing of rural Britain, but it takes place over 20 years, not two. Not two. Wow, Russell, a lot to think about. I really do appreciate you coming in and talking to me. Is there anything I didn't ask you, but you wish I had. Hmm. Let me think financial, what else do we need to know about financial repression? I think it's important that you try and so I won't set a presentation of financial repression with Theresa May. We were both on the same stage at the same time. There's a very long time ago, and I did my presentation on financial repression, and I concluded with just to be provocative, I said, so in conclusion, get your money out of the country. When I said it, that wasn't a bad idea. Anyway, the first question for the prime minister, the future prime minister was, what do you think of Mr. Nipier's presentation? And she said, or would you like to comment on Mr. She said no. So think when you're reading the newspapers every day, look at that little bit of news and say, is this building the wall? Is it the wall of finance? Is that another brick in the wall if we can quote from Pink Floyd? And try to see the world through the prison of financial repression, because something that looks completely an end in the regulatory world actually is important. So economists tend to see the word as monetary authority, which we know on the whole separate from the government, fiscal authority, and then they stop. The regulatory authority is what will determine the next 20 years. This is what determines the situation post World War II. So you'll be lots of people listening to don't agree with me, don't think there's financial repression. I would say whenever you're looking to use it through the prison of the regulatory state, because that is where it's coming from. And all of the noise and obviously monetary and fiscal are important, but that's where all the focus is. And you've got to start looking at where this regulatory state is beginning to say it, edge of the radar screen is beginning to move in and then think of what the consequences are for you and where you should allocate your money. And the number of ways to do it is put it in a country that isn't going to have financial repression. Hold on. So if you're looking through the regulatory prison, is it wider than just looking at regulation of the financial markets? When you see, for example, digital IDs, attacks on free speech, is that all part of the same thing? I'm not sure about free speech, but I think the ability to know where your welfare is. Anything that sort of is about where your wealth might be is to do with building a building block of financial repression. When Richard was here the other day, one of the things he talked about was if we want to unleash the private sector, if we want to have a growing, successful middle class, he says, we really needed decentralization of the banking sector because at the moment we are consolidating five large banks. He said, we need lots of regional banks lending. Absolutely brilliant comment. And you know someone who's doing something about that, Scott Bassant. Bassant is spending a lot of time with so America's blessed with a lot of regional banks. So tiny compared to the big guys, but it's been shrinking. It's been shrinking from a very high number, but they're still there. And I can point you to speeches by Bassant where he talks about the importance of these banks for getting money to small media enterprises and households. And geopolitically they're important for re-industrialization. Absolutely Britain needs that. And if they've got to find a way to getting a big guy, it's very difficult to set up a bank. I've run a thing called the Library of Mistakes. And we on Monday night, this week, we had Alexander Hoor of C-Horan Company, the bank, which was founded by his family in 1672. And you won't find any bigger proponent for small banking than Alexander Hoor. That is obviously what we need. But the last bank, I still think the last bank data license in this country was hamdened bank of Edinburgh. And I mean, it was six, seven years it took them to get a license. Decentralization of the provision of finance by banks is really, really, really important. It is working. But is this controlled by the big banks? They don't want this. They're lobbyists that stop from this. Of course. I mean, we're on a different subject now, but the world to understand that I thought was impossible in the world that we live in is controlled by oligopolies. I mean, how can you have a global beer oligopoly? I want to thought that was impossible, but we actually have got a global beer oligopoly. We've got a beer oligopoly. There are like three big beer companies that control not all of the world's market, but a large chunk of the world's market. Make horrible beer. But still have this oligopoly. Well, the banks are oligopolies as well. So when we talk about the future, I think we, your questions to me and my answers, you sort of look at this future where there's more state involvement. But if Adam Smith was here, the weird Adam Smith, he was saying, he would say, "What we need is to break up these oligopolies." These oligopolies are not good, are not capitalist, not good for society. I made a break them up. And if we could get lots of small banks in this country, lending to people that they knew, then that would be a huge leap forward for the country. So maybe going forward, one of the other things that will happen is an attack on the oligopolies. I think what is really interesting is you don't have to be on the left. I went to an academic symposium recently, quite a lot of them are Marxists and say they're Marxists and they were talking about breaking up big companies. You don't have to be a Marxist or want to break up big companies. You could be Adam Smith and want to break up. You can be a libertarian. You should be talking to the libertarians. We couldn't talk to libertarians, we're Marxists. This is something that they have in common. So maybe we're getting to a world. And that's where I wanted this sort of to finish, actually. The Americans have a body for this, I think it's called the Federal Trade Commission, where they take actions to break up middle oligopolies and middle oligopolies. The president who took the most actions in history was a Republican, and his name was Eisenhower. And Eisenhower's final speech before leaving office was to warn us about the military industrial complex, which is the concentration of power via outside democracy. And this is a very opportune moment to discuss that. Because last week, the National Bureau of Economic Research released data that shows corporate profits as presented to GDP in the United States of America around all time high. Now, this used to be the most mean-reverting series in economic history, and it seems to have stopped mean-reverting. So I just want to finish on that, because it was signed like the tenor of our conversation, is all the evils of the world or the evils of the government. The oligopolies are a problem. They're a problem for society, they're a problem for liberty, they're a problem for the distribution of wealth, they're not a good thing. And of Adam Smith was here, he'd say all of that. So I'm not a Marxist. Well, so interestingly, a lot of the conversations we found on this podcast recently were people who sound like conspiracy theorists, but it seems to be getting their facts straight, is that, yes, look, I'm not a fan of the government. I think the government's mainly incompetent, but there is a layer now above the government, which really controls what's happening, which is the asset management, the money people, the people who move the money, they own large percentages of these companies. They want to have it in this way. And that, even Tramath, I don't know if you know Tramath, he's on the all-in podcast talked about, he said, this basically sounds conspiracy, so there's basically 150 people who control where the money goes in the world, where the vast sums of capital are, and they want the centralization. So we, library mistakes, we run lectures, and you'll find a lecture who go to our website, recording, I'll film a Scott Morton, who's a professor of economics at Yale, and she's written this up. And what she points out is that if you are a large wealth manager, I think we can mention one, because it's just a statement of fact, black rock, for instance. It's one we all go to. Okay. And it runs lots of insects funds as well. And there are three large beer companies in the world. They will own shares that all three of them. When they go to a meeting with those companies, do they suggest to them that they should compete more viciously? You know, this is a point she makes. It's a very obvious point. So the success of big asset gatherers, and particularly the success of index funds. Constance rates ownership, the male ion ownership with oligopoly, whereas if you and I own a small brewery, I do want a small brewery by the way, we want to beat the socks off the big brewers, we want to compete and we want to win. But if the index funds all hope to see him three brewers, they don't want him to compete. And this oligopolistic behavior comes in many different places, but you're right to point out that one of the places it comes from is the success of some particularly big asset gatherers, Vanguard, BlackRock, and State Street are the three index funds. And index funds are clearly a good thing for the consumer, but there's not so many things that can be good for the consumer, that can be bad for society. And I think that's where we are with these funds. Now, we're not anywhere near to breaking these things up, but the time will come when we'll have another Eisenhower who'll say, "Look, the par is not within the elected representatives of the people, and we need to get it back." Yeah, because there's alignment between the asset managers and the politicians, and whilst they're aligned, it's going to be very hard to break it up. Sure, so maybe we need a general to break it up. General Eisenhower. But he's not always the only one Teddy Roosevelt tried to do it. Woodrow Wilson tried to do it, even John F. Kennedy tried to break up the steel monopoly. Yeah, when Kennedy tried to break up the steel monopoly, the steel companies came in and sort of started beating him up. And I think you know who John Kennedy's father was Joseph P. Kennedy, great speculator first head of the SEC. And apparently as they were leaving the room, the Kennedy showed it after them. My father always told me that businessmen were sons of bitches. Thank you so much. Tell people about your newsletter. Well, my newsletter is mainly aimed at institutions, but there is no version which is aimed at high net worth individuals. So you have to take a little box to say that you fall into that box. It has a unique name. It's called the solid grind. So it's not difficult to find if you put my name on the solid grind. Given my accent, I should spell that, shouldn't like because I'm with people. The solid ground. Yeah, we'll put it in the show notes as well. Yeah, yeah, people got it. So it's, yeah, and then it's all pretty self-explanatory how it is and what it works. Now more importantly, tell me about your beer. So my beer, so I often get described as a Scottish economy. It's the only problem being I'm not Scottish and I'm not the colonist. But anyway, actually from Northern Ireland, some of my brewery, brewery like co-funds with others is in Northern Ireland. It's in Balahe. Balahe, yeah, that's right. Yeah, progress is at home. And that is, and if you think of Northern Ireland, there's a great big hole in the middle, which is called Lockdown, top left hand corner. And it's called Heaney Farmhouse Brewing. And it's an adventure with the nieces and family of Schumus Heaney and Schumus Heaney won the Nobel Prize for poetry. And this is the other side of the family is brother Schus side of the family. We build that on the family farm. And it's tough. You try competing with a global oligopoly. You know, it's tough. And it is beer, right? No whiskey? No, no, it's beer. How many beers do you make? Five standards and then the specials. So it's kind of I think what most micro breweries do. But it's a very, very tough market. I mean, we, look, there's, there's some really good beers in this country that you can buy in the supermarkets from like two-point-a-bottle. That's a, that's a pretty competitive price. I'll be going on the Pennines real yield trail. So now I believe that in badly, you can still buy a one-point pint. So, you know, this is a tough market. Hey, so if I, if I, because at some time, when I get, when I get a Donnie call, sometimes I fly the knock, but I don't like the drive. Sometimes I go to dairy, quite like the drive. Sometimes if I don't mind a long drive, I do go to Belfast because it's a lovely drive over to Donnie call. Does that mean I will go past the brewery? Yes. Is that the journey? Yeah, it is. You're going really very close to it. You've got a pub on that's there. There is a tasting room there. No, this is a fairly new thing. And of course, the pubs of Balaki will sell it. I'm Castle Dawson. And yeah, you'll be going right past it. I'll probably need a night. Just as you cross the river band. Just as you look to your left and you see the eel fishery to the left, you're within drinking range of the brewery. I'm not in, but then I won't be in driving range of anecdotes. I'll probably need to find a hotel for the night. You might have to just shut up and Balaki for the evening. You can go to the Shima's Hini Visitor Centre in Balaki. Have a couple of beers. Eat some fresh eel. I've never had a eel. No, I had it once. It sounds gross. It tells you everything you need to know. But yeah, so that's your option next time you're driving. I tell my dad, I tell my dad to meet me there and we'll do it. Listen brilliant. Thank you so much. I really appreciate this. You genuinely helped me understand some things. I didn't understand hopefully the listeners too. I hope at some point we would do again, though. Okay, we will see. We will have to see. Good luck Russell. Thank you very everything. Thank you to everyone for listening.