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[00:00:34] [SPEAKER_03]: Our monetary policy actions are guided by our dual mandate to promote maximum employment
[00:00:39] [SPEAKER_03]: and stable prices for the American people. In support of these goals, the committee decided at today's
[00:00:45] [SPEAKER_03]: meeting to maintain the target range for the federal funds rate at 5.25% to 5.5%.
[00:00:51] [SPEAKER_01]: This is the Debunking Economics Podcast with Steve Keen and Phil Dobbie.
[00:00:59] [SPEAKER_02]: Interest rates. That's the Chair of the Federal Reserve, Jerome Powell,
[00:01:03] [SPEAKER_02]: telling people that interest rates are not coming down just yet in the United States.
[00:01:07] [SPEAKER_02]: Yet a week ago, markets were running scared that the US might be heading to a recession.
[00:01:11] [SPEAKER_02]: That is the power of central banks. If they want to, they can run the economy into the ground,
[00:01:16] [SPEAKER_02]: all in the name of fighting inflation. But are they fighting inflation?
[00:01:20] [SPEAKER_02]: And why do they think interest rates will always be higher now and from now onwards than they were
[00:01:25] [SPEAKER_02]: before the pandemic? What's changed between then and now? And what if they're wrong?
[00:01:31] [SPEAKER_02]: That's this week on the Debunking Economics Podcast. I'm Phil Dobbie. Steve Keen joining me as well. Welcome along.
[00:01:44] [SPEAKER_02]: All right. Well, interest rates are starting to come down as inflation supposedly eases off. The
[00:01:50] [SPEAKER_02]: Federal Reserve in the United States, their central bank, says they're now focused on jobs because if
[00:01:55] [SPEAKER_02]: they keep rates high for too long, there is the fear that more people will lose their jobs. And the fear is
[00:01:59] [SPEAKER_02]: that as in the past, once jobs start to disappear, there's a downward spiral that you can't get out
[00:02:04] [SPEAKER_02]: of because you end up with fewer people working, therefore they've got less money to spend. So that
[00:02:09] [SPEAKER_02]: causes a weakness in the economy and you end up with a recession. So they're a little bit worried
[00:02:13] [SPEAKER_02]: about that. So the Fed is expected to cut interest rates in the US several times this year. The RBNZ
[00:02:20] [SPEAKER_02]: cut rates this week. The Bank of England has cut once. They're expected to do it again,
[00:02:24] [SPEAKER_02]: even though inflation in the UK has just risen a little with numbers out for July.
[00:02:28] [SPEAKER_02]: So are they doing the right thing? And what will they cut rates down to? How low will they go? Well,
[00:02:33] [SPEAKER_02]: Steve, first off, I know you're not convinced that monetary policy actually works. So in saying that,
[00:02:38] [SPEAKER_02]: do you think we'd be in the same place we are now or maybe a better place
[00:02:43] [SPEAKER_02]: if we hadn't lifted interest rates in the first place?
[00:02:45] [SPEAKER_04]: Yeah, I do. I do. There's nothing, the interest rate did nothing to reduce the rate of inflation
[00:02:51] [SPEAKER_04]: because they weren't even addressing the cause of inflation. When you look at it,
[00:02:55] [SPEAKER_04]: the cause of inflation was increasing markups. And that was partially made possible by the
[00:03:01] [SPEAKER_04]: high level of government spending during the pandemic, necessary spending. Otherwise,
[00:03:07] [SPEAKER_04]: we'd be talking about a financial crisis now after what that would have done to people's
[00:03:11] [SPEAKER_04]: capacities to service their debts. But that gave room for markups to be increased. And they're
[00:03:17] [SPEAKER_04]: putting up rates now and the belief that it was caused by wage rises. And it wasn't. The two
[00:03:22] [SPEAKER_04]: major factors were increases in markups. And then also supply chain disruptions caused by COVID.
[00:03:32] [SPEAKER_02]: Yeah. So they're not saying it's purely wages, are they? In fact, I think that they'd argue probably
[00:03:39] [SPEAKER_02]: that that wage impact has been quite minimal lately. And you're saying it never was the case. It was
[00:03:47] [SPEAKER_02]: markups by and large. But those markups are happening for a reason, weren't they? And that was because
[00:03:51] [SPEAKER_02]: there was a great deal of demand for something that there wasn't a great deal of supply force.
[00:03:55] [SPEAKER_02]: I mean, you can't totally avoid the supply and demand side of this, can you? You can't, but it's not supply
[00:04:01] [SPEAKER_04]: and demand. Throw that theory out the window. It comes down to, as I did one of my little lines, I'm now
[00:04:07] [SPEAKER_04]: using them. You know, the old NRA line about guns don't kill people, people call people. Money growth doesn't
[00:04:13] [SPEAKER_04]: cause inflation, people cause inflation. And money growth can liberate one part of the two or three of
[00:04:21] [SPEAKER_04]: the causal factors in inflation. Markups, money wage rises and changes in productivity. It can affect the
[00:04:27] [SPEAKER_04]: first two. But when you take a look at it, the impact was almost for a couple of quarters out of
[00:04:36] [SPEAKER_04]: about 30 or 40, wages grew faster than the rate of inflation. But most of them, it was lower. And
[00:04:43] [SPEAKER_04]: they have a theory that they call their theory, the theory of inflationary expectations. And they
[00:04:49] [SPEAKER_04]: believe inflation occurs because people expect inflation to occur. They have a nice piece of
[00:04:53] [SPEAKER_04]: circular argument. But they say what they want to do, they believe by putting up rates, they reduce
[00:04:59] [SPEAKER_04]: people's expectations of future inflation. And therefore, people will increase their prices less
[00:05:03] [SPEAKER_04]: rapidly and you won't have the inflation. That's the sort of logic they go through.
[00:05:08] [SPEAKER_04]: But in fact, the effects are completely perverse compared to their theories anyway.
[00:05:12] [SPEAKER_02]: Well, what I love as well is the fact that now they're saying, well,
[00:05:15] [SPEAKER_02]: the one thing that's slow to come down is the cost of shelter in this was, I think,
[00:05:20] [SPEAKER_02]: in the UK statistics. So maybe it was the US. Cost of shelter, therefore, you know,
[00:05:24] [SPEAKER_02]: because in other words, the cost of keeping your house, of course, the biggest contribution to
[00:05:28] [SPEAKER_02]: that cost is the cost of your mortgage. So of course, it's not going to come down so long as
[00:05:32] [SPEAKER_02]: interest rates are high. Bring your interest rate down and miraculously, the cost of shelter
[00:05:37] [SPEAKER_02]: will come down. Therefore, inflation comes down. So I mean, there's lots of,
[00:05:40] [SPEAKER_02]: there are circular arguments all over the place on this, aren't there?
[00:05:43] [SPEAKER_04]: Well, I mean, yeah. I mean, just to give you the numbers there, the inflation rate in 2000,
[00:05:47] [SPEAKER_04]: halfway through 2019, the mortgage rate in America, 3.73%. It peaked at 7.79. And it's currently,
[00:05:56] [SPEAKER_02]: what do we got about, about 6.9. The idea though, that, you know, you've got,
[00:06:01] [SPEAKER_02]: I mean, we had a lot of disruption to supply. And, but we had a lot of people with money in the banks,
[00:06:08] [SPEAKER_02]: because as we said, you know, the government gave a lot of money to people. So they had more
[00:06:11] [SPEAKER_02]: money to go and spend. And that mismatch had to be addressed though. And how do you do that if you
[00:06:17] [SPEAKER_02]: don't say, well, okay, we need to make it harder for you to have the money to spend. We need to do
[00:06:22] [SPEAKER_02]: something to inhibit your spending power. And that's what central banks are trying to do.
[00:06:26] [SPEAKER_04]: Well, a large part of it comes down to what Isabella Weber argues in favor of,
[00:06:29] [SPEAKER_04]: and that's price controls. Because the source of increased prices over the last 50 years has been
[00:06:38] [SPEAKER_04]: an incredible increase in the markup that corporations put on their base wage costs.
[00:06:43] [SPEAKER_04]: And those markups have gone, this is even using neoclassical empirical research, which,
[00:06:48] [SPEAKER_04]: you know, I expect to be wrong in the wrong direction. But the neoclassical work
[00:06:56] [SPEAKER_04]: postulated the markups used to be 20%, now they're 63%. What you've had out of it is a huge shift in
[00:07:02] [SPEAKER_04]: power away from workers towards corporations. And that's turning up in higher prices, which are then
[00:07:09] [SPEAKER_04]: undermining the power of the workers to bargain for wage rises. And anybody says, let's market
[00:07:16] [SPEAKER_04]: interference if we go there and try to boost wages. We've already done the market interference by
[00:07:20] [SPEAKER_04]: destroying the trade union movement, which economists were utterly complicit in over the
[00:07:25] [SPEAKER_04]: last 40 or 50 years. So, you know, they're using the wrong tools with the wrong theories and
[00:07:31] [SPEAKER_04]: getting the wrong outcomes. Right.
[00:07:32] [SPEAKER_04]: But I'm sick of it.
[00:07:33] [SPEAKER_02]: But if they hadn't done anything at all, though, and so they kept interest rates where they were...
[00:07:38] [SPEAKER_02]: Inflation would have come down.
[00:07:39] [SPEAKER_02]: Well, okay, well, let's talk through that. Because I mean, I think more people actually had
[00:07:43] [SPEAKER_02]: more money to spend because they've got the money that they've, you know, been given by the
[00:07:46] [SPEAKER_02]: government, money that, you know, has been shown as being increases in savings. They've got more
[00:07:52] [SPEAKER_02]: money sitting in their bank accounts anyway, which they can spend. But that's more of it.
[00:07:56] [SPEAKER_02]: But there's still that inhibited supply due to supply chain disruption. More of an opportunity
[00:08:01] [SPEAKER_02]: for those companies to say, well, we can actually increase our prices even more than we were going to.
[00:08:08] [SPEAKER_04]: I think a lot of that, like the huge boost in demand we had under COVID, a lot of American
[00:08:15] [SPEAKER_04]: workers got more in compensation for not being able to work through COVID than they get from
[00:08:19] [SPEAKER_04]: their bloody wages. That's how bad the wages have got to be in America in particular.
[00:08:23] [SPEAKER_04]: Yeah.
[00:08:23] [SPEAKER_04]: But that money, you know, it might still be in bank accounts, but I doubt that it's in
[00:08:29] [SPEAKER_04]: workers' bank accounts.
[00:08:30] [SPEAKER_02]: Yeah, well, in fact, the statistics show it's more or less depleted now anyway. All that savings is gone.
[00:08:35] [SPEAKER_04]: It's gone. So, you know, it was a pulse caused by both the high boost to government money
[00:08:41] [SPEAKER_04]: creation during COVID and then supply chain disruptions. And it's basically out of the way.
[00:08:47] [SPEAKER_04]: So this is a bunch of economists playing with models that are mathematically invalid
[00:08:53] [SPEAKER_04]: to control the models, but they might control the model, but they don't control the real world.
[00:08:58] [SPEAKER_02]: So how would you manage then if there's excess demand for something for which there's very little
[00:09:02] [SPEAKER_02]: supply? What would you do?
[00:09:04] [SPEAKER_04]: Well, fundamentally, that often causes prices to fall. And this is another of the paradoxes. And
[00:09:09] [SPEAKER_04]: I can actually quote some outrageously standard neoclassicals, Kittlin and Prescott, who were two
[00:09:16] [SPEAKER_04]: of the guys who got the Nobel Prize of giving us the rational expectations approach to a macroeconomic
[00:09:21] [SPEAKER_04]: theory. And they did a very good empirical study in the late 90s. I think I've forgotten the actual
[00:09:26] [SPEAKER_04]: date right now. And it's something I was, it was a business cycles, real data and a monetary myth.
[00:09:33] [SPEAKER_04]: That's like, that was the title of the paper. And what they found was that their theory told
[00:09:38] [SPEAKER_04]: them that prices would rise during a boom. And they actually found that prices fall during a boom.
[00:09:43] [SPEAKER_04]: And the real reason for that is that most corporations have, as in 95 to 99% of companies,
[00:09:50] [SPEAKER_04]: have diminishing cost of production as volume increases. They have fixed costs per unit, which
[00:09:55] [SPEAKER_04]: obviously falls as you increase output, but their variable costs also tend to be constant or even
[00:10:00] [SPEAKER_04]: falling. And therefore, if you increase the volume of sales, the price, the price,
[00:10:06] [SPEAKER_04]: the cost of production falls, which means it's feasible for the firms, if they kept their markups
[00:10:12] [SPEAKER_04]: constant, there would therefore be a fall in price coming out of that increase in demand.
[00:10:16] [SPEAKER_02]: Because of economies of scale, that's what you're talking about. But that was,
[00:10:19] [SPEAKER_02]: that wasn't the situation though here, was it? Because the, because there wasn't that opportunity
[00:10:23] [SPEAKER_02]: to increase production because there was a restriction on the, on the supply of services during COVID.
[00:10:29] [SPEAKER_04]: And, and services, yeah, but it'd be broken different areas. So you, you know,
[00:10:32] [SPEAKER_02]: Well, goods and, I mean, goods actually more than services, but services were inhibited by the
[00:10:36] [SPEAKER_02]: fact that there were fewer people working as well, of course. So we had the great resignation.
[00:10:40] [SPEAKER_02]: And so, you know, so the cost of providing services because the cost of labor, because
[00:10:44] [SPEAKER_02]: there were fewer people around to work, and it was also part of the problem. So, I mean,
[00:10:48] [SPEAKER_02]: does that, that idea of a boom might be right, but this wasn't a boom, was it? This is a bit unusual.
[00:10:53] [SPEAKER_04]: Well, it was a boom during COVID. I mean, the initial bust and then boom. I mean,
[00:10:57] [SPEAKER_04]: the turnaround in unemployment was absolutely crazy. I'll see if I can actually spot that data.
[00:11:02] [SPEAKER_04]: I haven't got it on my machine right now in front of me anyway. But there was a huge increase in
[00:11:07] [SPEAKER_04]: unemployment and then bang, a dramatic fall when all the monetary change came through.
[00:11:13] [SPEAKER_04]: But the capacity of workers to bargain for wage rises in excess of CPI just wasn't there. So I think
[00:11:20] [SPEAKER_04]: they should basically keep the, and this comes back to my arguments about monetary theory
[00:11:24] [SPEAKER_04]: normally being ineffective unless you cause a crisis by it, which you can do by putting up interest
[00:11:31] [SPEAKER_04]: rates too high. Normally, it's ineffective. The stuff that has impact is fiscal policy.
[00:11:36] [SPEAKER_04]: Yeah. And also we should have, you know, the idea of the argument during the Second World War,
[00:11:40] [SPEAKER_04]: which, you know, John Kenneth Galbraith played a major role there. Agreements with
[00:11:47] [SPEAKER_04]: manufacturers not to take advantage of increases in demand to put up markups. Be satisfied with
[00:11:51] [SPEAKER_04]: the fortune you're making right now. Don't try to get a bigger fortune still by putting up your markups.
[00:11:56] [SPEAKER_02]: Yeah. So, yeah, that thing about it. So do you think it is, it's all wages? That's all they've
[00:12:00] [SPEAKER_02]: been concerned about? So, you know, that they see this, they have this fear that if people push for
[00:12:06] [SPEAKER_02]: higher wages in response to higher inflation, then that's going to mean that we get this nasty
[00:12:11] [SPEAKER_02]: spiral, upward spiral in wages because obviously people want to keep pace with the rising prices,
[00:12:16] [SPEAKER_02]: so they ask for more and so it goes on. But as you're saying, that's not happening. So they're
[00:12:22] [SPEAKER_04]: wrong to think that, aren't they? It's more that they believe that the real problem in their
[00:12:27] [SPEAKER_04]: thinking is that they believe that inflation is caused by people having expectations of inflation,
[00:12:32] [SPEAKER_04]: and therefore they think if they can get rid of the inflationary expectations, they'll get rid of the
[00:12:38] [SPEAKER_04]: price rises as well. And it's all driven on this vision that people have got what they call
[00:12:43] [SPEAKER_04]: forward-looking expectations, and we know what's going to happen. We're all able to predict the
[00:12:47] [SPEAKER_04]: future. You and I, your second name is Nostradamus, isn't it? Mine's Jesus. Good to meet you.
[00:12:53] [SPEAKER_02]: Well, we know. We all know you think that.
[00:12:56] [SPEAKER_04]: I think I'm God. You're okay. Fair enough. Okay. You're going to pay for that one.
[00:13:02] [SPEAKER_04]: But it's a completely false model. And what they do when they normally push it up,
[00:13:09] [SPEAKER_04]: they don't get anywhere in terms of real impact until such time as the private sector puts up its
[00:13:14] [SPEAKER_04]: interest rates and ends up getting to the point where people are no longer willing to take on
[00:13:18] [SPEAKER_04]: further debt. You get a drop in credit, and then you have a collapse in the economy.
[00:13:23] [SPEAKER_04]: So the real way the mechanism works is very, very different. In fact, the way that it real
[00:13:28] [SPEAKER_04]: way works is not even part of their models. And this is why I'm so critical of them.
[00:13:33] [SPEAKER_02]: But isn't it also part of it is that if you've got debt and they push up interest rates, you're
[00:13:38] [SPEAKER_02]: going to pay off your loans more slowly. So debt is higher than it would be with low interest rates.
[00:13:46] [SPEAKER_02]: And the central bank would say, well, that's good, because if people are having to service
[00:13:50] [SPEAKER_02]: more debt because they've got more of it, that means they've got less money to spend on other things.
[00:13:55] [SPEAKER_02]: So that's the job that we're trying to do. And when things get better, we'll drop those interest
[00:13:59] [SPEAKER_02]: rates. People will spend less money servicing their debt. Therefore, they'll be able to spend more
[00:14:03] [SPEAKER_02]: in the economy. So the economy will pick up. I mean, that's part of how monetary policy is supposed
[00:14:07] [SPEAKER_02]: to work, isn't it?
[00:14:08] [SPEAKER_02]: You're not playing for a market.
[00:14:11] [SPEAKER_02]: I'm the next governor of the Bank of England, didn't you?
[00:14:13] [SPEAKER_04]: No, because you don't understand anything like that.
[00:14:15] [SPEAKER_04]: Yeah.
[00:14:16] [SPEAKER_04]: But that is the thinking.
[00:14:19] [SPEAKER_04]: That is the thinking. Well, that's the ex post justification, whatever happens and whatever
[00:14:23] [SPEAKER_04]: goes wrong. But the fundamental thing is something is going wrong and they just kept their noses out
[00:14:29] [SPEAKER_04]: of it. You wouldn't have had much of a difference in the rate of increase and the rate of falling
[00:14:33] [SPEAKER_04]: of inflation. It was independent of their actions. And now we're now I've got, of course, we've got
[00:14:38] [SPEAKER_04]: extremely high real interest rates, which we haven't had for a hell of a long time. So for quite some
[00:14:43] [SPEAKER_04]: time, interest rates have been in like an after inflation terms below one or two percent of
[00:14:48] [SPEAKER_04]: some for quite frequently negative. Now, the real rate of inflation, given that we've got
[00:14:53] [SPEAKER_04]: the rate of inflation of about two and a half, three percent and reserve rates of
[00:15:01] [SPEAKER_04]: close to six and market rates of close to nine, we've got about a six percent real interest rate.
[00:15:05] [SPEAKER_04]: And that's going to discourage a lot of borrowing by corporations in particular in the near future.
[00:15:12] [SPEAKER_04]: Right. Might keep house prices down, though.
[00:15:15] [SPEAKER_04]: No, no, no house prices. You can't do house prices for. What are you, a communist?
[00:15:20] [SPEAKER_02]: Well, slow the growth of it, maybe. So, so, so, okay. So where would we be now? Actually,
[00:15:26] [SPEAKER_02]: before we look at where we would be if we if they hadn't touched interest rates. Yeah.
[00:15:30] [SPEAKER_02]: The one thing that always gets me with these models, you know, I'm a big, big fan, big advocate
[00:15:35] [SPEAKER_02]: of segmentation just because, you know, that's what I did in my in my marketing days. So it always amazes
[00:15:40] [SPEAKER_02]: me that they, you know, central banks don't use this kind of modeling because I mean, even if we just
[00:15:45] [SPEAKER_02]: look to the bottom quintile with their income of just over 15,000 pounds a year and the top quintile
[00:15:50] [SPEAKER_02]: with an income of 138,000. And that's before you do, you know, spurious things with tax.
[00:15:55] [SPEAKER_02]: Then the the elasticity of demand for anything at all in that bottom quintile is going to be
[00:16:00] [SPEAKER_02]: way more than it is at the at the top quintile. So the ability to buy something, if you're not
[00:16:06] [SPEAKER_02]: going to have a great deal of money, if the price goes up, you're much less likely to buy it.
[00:16:10] [SPEAKER_02]: Whereas in the top quintile where they're spending like crazy, they are going to be less influenced
[00:16:16] [SPEAKER_02]: by changes in price. So if you were to do so just so higher interest rates not having a great deal of
[00:16:23] [SPEAKER_02]: impact on the top and they're the ones spending and therefore they're the ones pushing prices up,
[00:16:28] [SPEAKER_02]: having a great deal of influence on people at the lower level and who really can't react except
[00:16:34] [SPEAKER_02]: by not buying stuff. But by they're not buying stuff, they're not really changing prices very much
[00:16:39] [SPEAKER_02]: because they're not buying a great deal of it anyway. And that's a fundamental problem with it all, isn't it?
[00:16:43] [SPEAKER_04]: It is. It is. And this is the models that central bankers use, uh, fund fundamentally single agent
[00:16:51] [SPEAKER_04]: models that just have a, you know, they have a single thing called GDP, which is basically
[00:16:56] [SPEAKER_04]: mythical commodity that the nickname for which is widgets. So they have a model with the widgets per
[00:17:01] [SPEAKER_04]: year being produced. They have a single, single household, uh, which, which has a, a single capitalist
[00:17:07] [SPEAKER_04]: who also happens to be the single worker and on it goes. Um, so if you really wanted to have
[00:17:13] [SPEAKER_04]: more sophisticated models, you'd actually go back in time when they used to use what they call
[00:17:18] [SPEAKER_04]: computable general equilibrium models, uh, where they would break the economy down into sectors.
[00:17:22] [SPEAKER_04]: So you'd have like 80 sectors. Um, there'd be, well, not just widget, but you'd have effectively
[00:17:27] [SPEAKER_04]: have the steel market, the steel industry, the food industry, uh, et cetera, et cetera.
[00:17:32] [SPEAKER_04]: And that disaggregation gave you some capacity to do the segmentation you're talking about,
[00:17:38] [SPEAKER_04]: but because they made them equilibrium models, mathematically, they had to break down. And this
[00:17:42] [SPEAKER_04]: is the thing that most of them don't know, uh, that the, the, the, the, when you try to impose
[00:17:47] [SPEAKER_04]: equilibrium on a multi-commodity model of the economy, you fall for out of a mathematical
[00:17:52] [SPEAKER_04]: theorem known as a proof for it. Uh, was it Perron-Ferbenius theorem?
[00:17:57] [SPEAKER_04]: Oh, yes. Okay. You know that one well? I'm glad you, you got to learn that one in kindergarten.
[00:18:02] [SPEAKER_04]: I drank about it last night. Yeah.
[00:18:04] [SPEAKER_04]: I had a bad night's sleep. Yeah. Okay. Okay. It, it is one that says the, the, the,
[00:18:10] [SPEAKER_04]: what's called the, uh, I might use the technical term, but the, the equilibrium from multi,
[00:18:15] [SPEAKER_04]: a multi-commodity model of input and output production is unstable. Okay. You will not reach
[00:18:21] [SPEAKER_04]: the equilibrium. And yet, because they said that they're called computable general equilibrium models,
[00:18:25] [SPEAKER_04]: they weren't even aware of the problem or they tried to avoid it. And what would happen,
[00:18:29] [SPEAKER_04]: those models would break down mathematically and they'd give up and, and then to go. And so the,
[00:18:34] [SPEAKER_04]: the, the, the technical problem with that model, because they forced equilibrium on it is one of
[00:18:38] [SPEAKER_04]: the major reasons they moved to the modern ones, but they call dynamic stochastic general equilibrium
[00:18:42] [SPEAKER_04]: models. And that's the sort of stuff central banks use these days. And they aggregate the entire,
[00:18:46] [SPEAKER_04]: um, uh, population into one, one individual they call the representative agent. So, you know,
[00:18:52] [SPEAKER_04]: the, the, the, the, the old saying, you don't want, you'd never eat a sausage again,
[00:18:56] [SPEAKER_04]: if you saw how sausages were made. Yeah. Yeah. It's the same about the models
[00:19:00] [SPEAKER_02]: that central banks use. I guess. Absolutely. But I mean, but, um, uh, yeah. So what would happen
[00:19:06] [SPEAKER_02]: if we were, if they, uh, suddenly drop rates now then where, you know, if, if you were in charge,
[00:19:10] [SPEAKER_02]: all of a sudden you said, oh, sorry, we made a big mistake. First of all,
[00:19:13] [SPEAKER_02]: what would you take the interest rate down to? And what would be the impact? Well,
[00:19:15] [SPEAKER_04]: if you brought the interest rate, you know, and I'd drop it to maybe two,
[00:19:19] [SPEAKER_04]: the, the, the, the, uh, bond rate to about 3%. And I don't think it should move much from that
[00:19:23] [SPEAKER_04]: over time. I think 3% is a reasonable, uh, compensation for banks, for the, uh, for the
[00:19:28] [SPEAKER_04]: costs of running, running the payment system, which is what, the large way that I see a reason,
[00:19:33] [SPEAKER_04]: a reason to have a interest rate on bonds in the first place to underwrite the public service
[00:19:37] [SPEAKER_04]: that they, the banks do actually carry out whether they want to do it or not,
[00:19:42] [SPEAKER_04]: where they provide the payment service that enables a capitalist economy to function,
[00:19:46] [SPEAKER_04]: but drop it back to that level. What you would do,
[00:19:48] [SPEAKER_04]: there's a several potential impacts. One is that putting up interest rates as high as they are
[00:19:53] [SPEAKER_04]: right now is actually underwriting, undermining the stock market potentially, because you have
[00:19:59] [SPEAKER_04]: people who've got a choice now between putting their money in bonds or putting it in the stock
[00:20:02] [SPEAKER_04]: market. You put it in bonds in stock market right now, maybe the market will crash. You know,
[00:20:07] [SPEAKER_04]: you don't know. That's one of the worries we had just recently. You put it in bonds,
[00:20:10] [SPEAKER_04]: you get a guaranteed 6% rate of return. Why not put it in bonds? So if you then drop the interest rate-
[00:20:16] [SPEAKER_02]: Well, because I mean, the answer to that surely is, well, it depends how much you're spending for
[00:20:19] [SPEAKER_02]: that bond because that inverse relationship and how much you pay for them in the interest rate. So
[00:20:23] [SPEAKER_02]: you pay more for bonds now, you might find that the price you sell it for is less ultimately. So
[00:20:29] [SPEAKER_02]: bonds are very complicated, aren't they?
[00:20:31] [SPEAKER_02]: Extremely complicated. Yeah. They just shouldn't be there.
[00:20:35] [SPEAKER_02]: But a safer bet. You say long-term a safer bet than shares.
[00:20:38] [SPEAKER_04]: Well, yeah, we did the moment because if you buy bonds right now, the bonds have got a face
[00:20:42] [SPEAKER_04]: yield of 5.5%, which is pretty reliable. You buy it, you pay $1,000 to buy the bond. You're going to
[00:20:49] [SPEAKER_04]: get what, $55 a year coming out of that. It's a solid rate of return. It's higher than the rate of
[00:20:54] [SPEAKER_04]: inflation. You do it. And that gives you, you know, there's a lot of people I know who would
[00:20:59] [SPEAKER_04]: not normally buy bonds or bought bonds because they're wealthy and it gives them a guaranteed
[00:21:04] [SPEAKER_04]: return and they're happy with that rate of return. If you keep on going, those high rates,
[00:21:08] [SPEAKER_04]: you undermine the stock market. Drop it back down again, people are going to look to risky assets.
[00:21:13] [SPEAKER_04]: Maybe you might boost the stock market again. That's one of the perverse effects you could get
[00:21:16] [SPEAKER_04]: by dropping rates. You could drive the stock market up. Well, we'll look at what central banks
[00:21:21] [SPEAKER_02]: think they're heading to. We'll look at, you know, what is the R star? Where did that come from?
[00:21:26] [SPEAKER_02]: And what does it mean? And, you know, really, where are central banks heading to? We'll look at all
[00:21:32] [SPEAKER_02]: of that in a second. When we come back after the break, it's the Debunking Economics Podcast.
[00:21:36] [SPEAKER_02]: I'm Phil Dobby. He's Steve Keane. Back in a second.
[00:21:39] [SPEAKER_01]: This is the Debunking Economics Podcast with Steve Keane and Phil Dobby.
[00:21:48] [SPEAKER_02]: So, Steve, you were talking about the need to reach some sort of equilibrium. I love that term
[00:21:54] [SPEAKER_02]: equilibrium, actually, because bankers love it, economists love it. And the easiest argument
[00:22:00] [SPEAKER_02]: I always think against equilibrium is, can you actually point to a point in history anywhere
[00:22:04] [SPEAKER_02]: where we've been in equilibrium? Can you point to a stage where the economy, interest rates,
[00:22:10] [SPEAKER_02]: you know, everything settled down for a period of, you know, more than a week?
[00:22:16] [SPEAKER_02]: Where was that equilibrium and how do we get back there?
[00:22:18] [SPEAKER_04]: It never applies. And this is one of the crazy things about economic theory.
[00:22:21] [SPEAKER_04]: And it's one of those accidents of history, because if you look back and read the originals,
[00:22:26] [SPEAKER_04]: people like Jevons and Marshall, not as much Marshall, but certainly Jevons and Clark and a few others,
[00:22:34] [SPEAKER_04]: they say that the whole idea of an equilibrium is a fiction. They know that's not the way the world
[00:22:39] [SPEAKER_04]: actually operates. Jevons, I think, wrote at one stage that the permanent state of the system,
[00:22:45] [SPEAKER_04]: is change. And we're using equilibrium as a concept only because that way we can manage
[00:22:52] [SPEAKER_04]: through the modeling right now, because, you know, we're talking back in the 1870s,
[00:22:56] [SPEAKER_04]: we don't have the mathematics. Nobody's invented computers yet.
[00:23:00] [SPEAKER_04]: Those computers started to let them down by not inventing computers back in 1870.
[00:23:04] [SPEAKER_04]: But they knew it wasn't feasible. But then, because economists tried to do the modeling within this
[00:23:10] [SPEAKER_04]: framework for 30 or 40 or 50 years, they kept on having problems. They kept on falling over. It would
[00:23:15] [SPEAKER_04]: not work in equilibrium. And what they ended up doing was making equilibrium into like a belief system.
[00:23:21] [SPEAKER_04]: They imposed equilibrium on the system. And my favorite individual who did this was Irving Fisher.
[00:23:28] [SPEAKER_04]: Now, Fisher was late into the game. He did his PhD back in 1907. But he was the leading mathematical economist at the time.
[00:23:35] [SPEAKER_04]: And he's modeled the way called the theory of interest, had tried to extend the concept of equilibrium in a goods market to equilibrium in the money market.
[00:23:44] [SPEAKER_04]: And he realized, of course, when you borrow money, you don't you what you get, you get before you pay for it.
[00:23:50] [SPEAKER_04]: You got to pay, you know, you borrow the borrowed $100,000. You got to pay it back over time.
[00:23:55] [SPEAKER_04]: You pay the interest slowly. And he therefore said the only way can make this work is to assume
[00:24:00] [SPEAKER_04]: that markets are in equilibrium throughout time and that all debts are paid.
[00:24:04] [SPEAKER_04]: Along comes 1929, guess who managed not to pay his debts?
[00:24:08] [SPEAKER_04]: Irving Fisher.
[00:24:10] [SPEAKER_04]: Right.
[00:24:11] [SPEAKER_04]: So it's a part of me being a bit long-winded here.
[00:24:13] [SPEAKER_04]: No, but that's what made him change his thinking.
[00:24:15] [SPEAKER_04]: Made him change his thinking because he was bankrupted.
[00:24:18] [SPEAKER_04]: It wasn't for his sister. I do sister-in-law who's wealthy.
[00:24:22] [SPEAKER_04]: He would have been driven to the bankrupt. So she lended the money to stop him going bankrupt.
[00:24:27] [SPEAKER_04]: Columbia University gave him a house to live in.
[00:24:29] [SPEAKER_04]: So he wasn't homeless after he lost his house.
[00:24:32] [SPEAKER_04]: And in this sort of devastated state, just completely wiped out, he looked back and said,
[00:24:37] [SPEAKER_04]: what the hell did I get wrong? And he finally worked out it was believing in equilibrium.
[00:24:41] [SPEAKER_04]: And I'll just give a couple of quotes from a paper people can find on the web.
[00:24:44] [SPEAKER_04]: I highly recommend reading it. The debt deflation theory of Great Depressions.
[00:24:49] [SPEAKER_04]: And he starts off with a whole sort of, you know, I think it's 40, 49 points that he raises dot by dot.
[00:24:54] [SPEAKER_04]: He says, the economic system contains innumerable variables.
[00:24:58] [SPEAKER_04]: Changes in any or all of these vast array of variables may be due to many causes.
[00:25:02] [SPEAKER_04]: Only in imagination can all of these variables remain constant to be kept in equilibrium by the balanced forces of human desires as manifested through,
[00:25:10] [SPEAKER_04]: in air quotes, supply and demand.
[00:25:12] [SPEAKER_04]: And he then finally, this is quite a few times he says it.
[00:25:15] [SPEAKER_04]: Theoretically, there may be. In fact, at most times there must be over or under production, over or under consumption, over or under spending, over and under everything else.
[00:25:25] [SPEAKER_04]: It is as absurd to assume that for any long period of time, the variables in the economic organization or any part of them will stay put in perfect equilibrium as to assume that the Atlantic Ocean can never be without a wave.
[00:25:37] [SPEAKER_02]: Right. But I mean, the argument, the counter to that, which would come from, you know, a lot of economists is, well, we're not saying you're there, but you're sort of dancing around it.
[00:25:46] [SPEAKER_02]: You know, you may be in a state of flux, but you are in a state of flux dancing around a central point.
[00:25:53] [SPEAKER_02]: The flux capacitor.
[00:25:55] [SPEAKER_02]: Well, just a constant state of movement around a set point.
[00:25:58] [SPEAKER_02]: And so they'd say that, yeah, that's that set point is where is where, you know, we see as equilibrium.
[00:26:04] [SPEAKER_02]: You may never touch it, but you're always moving around it.
[00:26:06] [SPEAKER_02]: That would be their argument.
[00:26:07] [SPEAKER_02]: That'd be the argument, as usual, that technically mathematically wrong.
[00:26:10] [SPEAKER_04]: You can't model it that way.
[00:26:12] [SPEAKER_04]: I mean, if you do the complex system work that I do, the first major equation that system was done by Lorenz back in 1963, the model of the stylized model of the weather.
[00:26:23] [SPEAKER_04]: And it had three equilibria, all of which are unstable.
[00:26:26] [SPEAKER_04]: So if you try to predict the course of the system by saying, let's, you know, you're going to go forward on one of these three equilibria.
[00:26:32] [SPEAKER_04]: When you run the simulation, you never get there.
[00:26:35] [SPEAKER_04]: You get pushed away from it.
[00:26:36] [SPEAKER_04]: So they've got to break away from this belief that everything happens in equilibrium and think in terms of far from equilibrium.
[00:26:42] [SPEAKER_02]: So do you think part of the problem is that economists like to be seen as being scientists and scientists, you know, in lots of fields do have a few set numbers.
[00:26:51] [SPEAKER_02]: So there's a set speed of light, you know, there's gravity is set.
[00:26:56] [SPEAKER_02]: You know, all of the in science, we've got a lot of variables which are fixed.
[00:27:00] [SPEAKER_02]: And in economics, it seems there's none.
[00:27:02] [SPEAKER_02]: There's nothing that's fixed in the economics.
[00:27:05] [SPEAKER_02]: If economics is a science, there's nothing you can say that will always be the same.
[00:27:09] [SPEAKER_04]: Well, I mean, they were looking for universal constants and stuff like that.
[00:27:12] [SPEAKER_04]: They'd like to be able to make that happen.
[00:27:14] [SPEAKER_04]: And this is actually when you look at the way the theories were evolved.
[00:27:19] [SPEAKER_04]: There was a huge amount of physics envy in how they built the models to believe that they would find some, pardon me, fundamental forces.
[00:27:28] [SPEAKER_04]: But they don't exist in terms of, you know, given constants and things of that nature.
[00:27:33] [SPEAKER_04]: But it is a bit of a way.
[00:27:36] [SPEAKER_04]: We're paying for the follies of economics.
[00:27:39] [SPEAKER_02]: And that's what I find so frustrating.
[00:27:41] [SPEAKER_02]: Right. And now, of course, they are trying to get back as they start to drop interest rates.
[00:27:47] [SPEAKER_02]: They want to get to the neutral interest rate or the natural point, they reckon.
[00:27:52] [SPEAKER_02]: Where, you know, the idea of this is their policies are no longer restricted.
[00:27:56] [SPEAKER_02]: The R star, yeah.
[00:27:57] [SPEAKER_02]: The R star, yeah.
[00:27:59] [SPEAKER_02]: So I don't know where the R.
[00:28:00] [SPEAKER_02]: So R stands for the rate of interest, doesn't it, in a lot of modelling?
[00:28:03] [SPEAKER_02]: So I guess the star is to say, well, it's a constant.
[00:28:08] [SPEAKER_02]: But so, yeah.
[00:28:10] [SPEAKER_02]: But, I mean, no one seems to know what it is.
[00:28:12] [SPEAKER_02]: It's one of those.
[00:28:13] [SPEAKER_02]: Well, it's a constant.
[00:28:13] [SPEAKER_02]: We've just got to find out what it is.
[00:28:15] [SPEAKER_02]: So we've got a lot of central banks saying, well, we don't know where we're heading back to yet.
[00:28:19] [SPEAKER_02]: We're heading back to the neutral rate.
[00:28:21] [SPEAKER_02]: We'll sort of know when we get there.
[00:28:23] [SPEAKER_04]: Well, again, that is seeing the interest rate as a command variable for the system without including a level of private debt in the model.
[00:28:31] [SPEAKER_04]: And this is, you know, my many frustrations about the way they work.
[00:28:34] [SPEAKER_04]: They try to have a control system by leaving out the phenomenon on which that control system is imposed.
[00:28:42] [SPEAKER_04]: And, again, it's this whole idea that there's a mental system, that people have some rate of time discount that they think sets what the rate of interest should be.
[00:28:53] [SPEAKER_04]: So you try to get the R-star to equal people's rate of time discount in a real rather than a CPI inflating sense.
[00:29:01] [SPEAKER_04]: And that's where the R-star comes from.
[00:29:04] [SPEAKER_04]: But it's nonsense.
[00:29:05] [SPEAKER_04]: Again, it's a fantasy model.
[00:29:07] [SPEAKER_04]: We are letting a bunch of people who believe in fairies try to control the monetary system.
[00:29:12] [SPEAKER_02]: Well, what gets me is, I mean, all the talk seems to be, well, R-star, you know, might be about 3%, you know, which is actually the figure you mentioned in the first half about where you'd bring back bond yields to.
[00:29:24] [SPEAKER_02]: But the, you know, of course, you know, since 2009, the Bank of England, the interest rate has been below 1% for quite a bit of time, you know, for more than a decade.
[00:29:36] [SPEAKER_02]: So does that mean, you know, and we were stuck there.
[00:29:39] [SPEAKER_02]: So does that mean R-star is or was less than 1%?
[00:29:43] [SPEAKER_02]: Well, no, because we also had very slow growth, which would actually suggest that the interest rate was too high by their reckoning.
[00:29:50] [SPEAKER_02]: So, in fact, they dropped the interest rate to 0.5% in 2009 because some parts of the world it went into negative.
[00:29:56] [SPEAKER_02]: So how can you talk about which?
[00:29:58] [SPEAKER_02]: So to say that R-star is going to be 3% now when it was basically close to zero and all central bankers are saying we're never going to go back there.
[00:30:07] [SPEAKER_02]: I mean, David Bailey from the Bank of England earlier this month said we don't expect to go back to zero because zero was the product of huge global shocks.
[00:30:16] [SPEAKER_02]: So we're not going to have any more shocks.
[00:30:18] [SPEAKER_02]: And, you know, if COVID wasn't a shock, I don't know what isn't.
[00:30:23] [SPEAKER_02]: And, you know, those shocks apparently that he's talking about, they lasted for more than a decade because that's how long interest rates were that low.
[00:30:29] [SPEAKER_02]: So that sounds like a load of baloney.
[00:30:31] [SPEAKER_02]: So what's changed?
[00:30:32] [SPEAKER_02]: What's to stop us not finding ourselves going back to near zero interest rates?
[00:30:38] [SPEAKER_04]: Mike will be forced into that at some point because they're going to be – I mean, the thing I'm expecting is the climate catastrophe.
[00:30:43] [SPEAKER_04]: And, you know, and when that hits, bang, they're going to try to minimize the cost of finance or anybody who's got any debt whatsoever.
[00:30:52] [SPEAKER_04]: And they'll be forced to drop the rates again.
[00:30:53] [SPEAKER_04]: To get – to wipe off that debt, you mean?
[00:30:55] [SPEAKER_02]: Or to –
[00:30:56] [SPEAKER_02]: Yeah.
[00:30:58] [SPEAKER_02]: Because we need – okay, talk that through a little bit more because we need people to be able to spend more building resistance to climate change.
[00:31:06] [SPEAKER_04]: People are going to be going – I mean, if you have people who have borrowed money for agricultural inputs, for example, and then the crop gets completely wiped out, there's no way they can pay the debt back.
[00:31:17] [SPEAKER_04]: So we're going to have that on a grand scale across a whole range of industries.
[00:31:21] [SPEAKER_04]: The cost of insurance is going to wipe a lot of people out as well.
[00:31:24] [SPEAKER_04]: That's happening already in, you know, a nice climate-denying part of the world like Florida.
[00:31:28] [SPEAKER_04]: You can't get insurance anymore.
[00:31:30] [SPEAKER_04]: So all these things are going to be having a huge impact on people's capacity to service their debts.
[00:31:34] [SPEAKER_04]: And at this stage, the central banks will be forced back towards zero interest rates.
[00:31:38] [SPEAKER_04]: And they'll – you know, I don't want those guys in charge forever.
[00:31:41] [SPEAKER_04]: It's been bad enough dealing with them, you know, before the ecological system breaks down.
[00:31:48] [SPEAKER_04]: Bad enough for this moment.
[00:31:49] [SPEAKER_04]: Heaven help us if they're in charge when the ecology starts to fall apart.
[00:31:53] [SPEAKER_02]: Right.
[00:31:53] [SPEAKER_02]: And you talked about it before about, you know, well, some of this is, you know, it needs fiscal policy to deal with.
[00:31:58] [SPEAKER_02]: And, of course, can we avoid interest rates moving by just, you know, using fiscal policy more?
[00:32:05] [SPEAKER_02]: So when the economy tanks, do we just need more fiscal policy to – you know, could you keep that interest rate at – well, let's call it an equilibrium.
[00:32:16] [SPEAKER_02]: No, let's not call it an equilibrium.
[00:32:17] [SPEAKER_02]: But let's keep it at a fixed rate.
[00:32:19] [SPEAKER_02]: Let's call it a constant.
[00:32:19] [SPEAKER_02]: A constant rate.
[00:32:21] [SPEAKER_02]: And then do the rest with fiscal policy.
[00:32:24] [SPEAKER_02]: That would be –
[00:32:24] [SPEAKER_02]: Yeah, we could.
[00:32:25] [SPEAKER_02]: The issue is, of course, isn't it?
[00:32:26] [SPEAKER_02]: You know, the moment we see anything, any movement, any downturn in the economy, the government looks at the central bank.
[00:32:31] [SPEAKER_02]: The central bank looks at the government and says, well, okay, which one's going to do it this time?
[00:32:35] [SPEAKER_02]: You know, it's – and very often when they do have a go, they go at each other, you know, from opposite ends.
[00:32:41] [SPEAKER_02]: So they actually negate the work of the other one.
[00:32:43] [SPEAKER_04]: Yeah.
[00:32:44] [SPEAKER_04]: I mean, because, again, economists run both the Treasury and the central bank.
[00:32:49] [SPEAKER_04]: So it's got the same – people who believe the same sorts of things in charge of what's done.
[00:32:54] [SPEAKER_04]: And they've all been taught, and over the last 40 years this has been quite a dominant theme in economic education, is that fiscal policy is ineffective.
[00:33:04] [SPEAKER_04]: This is – in fact, if you get Mancu's text, he has spent a huge amount of time devoting it to the idea put forward by a guy called Robert Barrow of ineffectiveness of taxation.
[00:33:14] [SPEAKER_04]: Because what people do is they know that if there's an increase in spending now, there must be an increase in taxation later.
[00:33:20] [SPEAKER_04]: So they put money aside so their kids and their grandkids and their grand, grand, grandkids can pay the taxes they expect to be levied upon them.
[00:33:27] [SPEAKER_04]: Total fantasy stuff.
[00:33:29] [SPEAKER_04]: But nonetheless, they swallow this garbage, and then they thought that the fiscal policy is ineffective where the monetary policy works.
[00:33:36] [SPEAKER_04]: It's the other way around.
[00:33:37] [SPEAKER_04]: Yeah.
[00:33:38] [SPEAKER_02]: So it's Keynes rather than Friedman, really, isn't it?
[00:33:41] [SPEAKER_02]: Absor-bloody-lutely.
[00:33:42] [SPEAKER_02]: Yeah, but they're more Friedman than Keynes.
[00:33:43] [SPEAKER_02]: Yeah, throw away those Keynes books.
[00:33:45] [SPEAKER_02]: It seems to be what they're saying.
[00:33:46] [SPEAKER_02]: So here's the final question.
[00:33:47] [SPEAKER_02]: You mentioned Irving Fisher before.
[00:33:49] [SPEAKER_02]: So the bigger question is, what happens if interest rates stay too high for too long, where they are now?
[00:33:55] [SPEAKER_02]: What if demand falls away faster?
[00:33:57] [SPEAKER_02]: I mean, the central banks, I know they are fearful that jobs will fall away very quickly and we could find ourselves in a recession.
[00:34:04] [SPEAKER_02]: What happens if that happens?
[00:34:06] [SPEAKER_02]: And it's quite severe.
[00:34:07] [SPEAKER_02]: So then we start to see prices fall, wages fall because there's less demand, there's rising unemployment.
[00:34:14] [SPEAKER_02]: But we all still have that debt.
[00:34:17] [SPEAKER_02]: We all still have to service our debt even though we have less money.
[00:34:21] [SPEAKER_02]: So that's, you know, so we're spending a higher proportion of what little money we do have paying the very high interest rates on our loans on our house.
[00:34:31] [SPEAKER_02]: That's the definition of debt deflation, isn't it?
[00:34:33] [SPEAKER_02]: I mean, could we end up there?
[00:34:34] [SPEAKER_04]: Yeah, we could.
[00:34:35] [SPEAKER_04]: And that's, again, because these guys don't know, they don't realise the importance of private debt.
[00:34:41] [SPEAKER_04]: They don't factor it into their models.
[00:34:43] [SPEAKER_04]: They're doing this damage without knowing what they're actually affecting.
[00:34:45] [SPEAKER_04]: They're obsessing over government debt.
[00:34:47] [SPEAKER_04]: Again, that's not the problem.
[00:34:48] [SPEAKER_04]: The problem is private debt.
[00:34:50] [SPEAKER_04]: So everything they do affects things they don't understand.
[00:34:52] [SPEAKER_04]: So what will they do, do you think?
[00:34:54] [SPEAKER_04]: Do you think they will?
[00:34:55] [SPEAKER_04]: They'll drop rates, but very slowly.
[00:34:56] [SPEAKER_02]: Well, yes, but when we've been in this position before, they've started to drop rates slowly.
[00:35:00] [SPEAKER_02]: Then all of a sudden they drop on like a brick.
[00:35:03] [SPEAKER_02]: So I wonder whether we're going to go through that this time.
[00:35:04] [SPEAKER_04]: That could be the case.
[00:35:05] [SPEAKER_04]: I mean, like, you know, the bank, we were both in Australia at the time of the global financial crisis.
[00:35:10] [SPEAKER_04]: And the RBA was putting up rates right through the beginning of the crisis because their model
[00:35:14] [SPEAKER_04]: saw them there's going to be inflation.
[00:35:16] [SPEAKER_04]: America was doing a similar sort of thing, not quite as stupidly, not quite as badly.
[00:35:20] [SPEAKER_04]: But yeah, they're putting up rates thinking they're controlling inflation.
[00:35:23] [SPEAKER_04]: And bang, where did the economy go?
[00:35:25] [SPEAKER_04]: Yeah.
[00:35:25] [SPEAKER_02]: And then they dropped them like a brick.
[00:35:27] [SPEAKER_04]: Yep.
[00:35:27] [SPEAKER_02]: Yep.
[00:35:28] [SPEAKER_02]: Yep.
[00:35:28] [SPEAKER_02]: So I wonder whether it's just taking a bit longer because, well, I mean, it's all supposedly,
[00:35:32] [SPEAKER_02]: you know, they're doing it all very delicately to try and get this, avoid this, you know,
[00:35:36] [SPEAKER_02]: a hard landing.
[00:35:37] [SPEAKER_02]: They're going for the soft landing, but maybe it's a hard landing is unavoidable.
[00:35:40] [SPEAKER_02]: It's going to be interesting to see what does happen.
[00:35:43] [SPEAKER_02]: But yeah, we shouldn't have bothered.
[00:35:45] [SPEAKER_02]: It seems to be the message.
[00:35:47] [SPEAKER_02]: And as soon as we get down to two or three percent, the better.
[00:35:50] [SPEAKER_02]: Good to talk, Steve.
[00:35:50] [SPEAKER_02]: We'll catch you again next week.
[00:35:51] [SPEAKER_02]: Thanks.
[00:35:51] [SPEAKER_02]: Bye.
[00:35:53] [SPEAKER_01]: The Debunking Economics Podcast.
[00:36:01] [SPEAKER_02]: If you've enjoyed listening to Debunking Economics, even if you haven't, you might also enjoy
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[00:36:07] [SPEAKER_02]: Each week, Roger Hearing and I talk to a guest about a topic that is very much in the news
[00:36:12] [SPEAKER_02]: that week.
[00:36:12] [SPEAKER_02]: It's lively.
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[00:36:15] [SPEAKER_02]: So search The Y Curve in your favourite podcast app or go to ycurve.com to listen.