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[00:00:56] Well, remember him? That was the former UK Prime Minister, Rissy Sunak,
[00:00:59] when asked about his commitment to keep funding state pensions in line with the cost of living.
[00:01:04] But he was right to be cagey because for any government that feels the need to balance the budget,
[00:01:09] the aging population just doesn't stack up.
[00:01:11] With more and more old people are really only free choices.
[00:01:14] You either flood the country with younger migrants to pay more tax,
[00:01:17] you pay less to old people and create a cohort of the elderly poor,
[00:01:22] or you rethink the idea that budgets have to balance.
[00:01:25] Now there's a change of government and it seems they are equally as unlikely to choose the third option.
[00:01:31] But maybe that's the right one. Look at that this week on the Deep Banking Economics podcast.
[00:01:42] Well, some call it the silver tsunami, and why not?
[00:01:45] Because perhaps the rising tide of old people is akin to a natural disaster.
[00:01:49] And is it one that countries are ready for?
[00:01:52] Unlike a tsunami, could it leave people homeless and defenceless in its wake?
[00:01:56] Well Steve, this story is very close to me in that I've got a close relative,
[00:02:02] a pensioner in Australia who's been forced out of her rented house
[00:02:05] where rents have skyrocketed since the pandemic.
[00:02:08] There were bad before, but now the average rent for a one bedroom flat in Sydney
[00:02:11] is $950 per week. That is twice the pension.
[00:02:15] Now you can get a bit of rent assistance,
[00:02:18] but I think that maxes out in $90 per week.
[00:02:21] So even if you don't eat or pay bills,
[00:02:22] you'd still be short by about $400 on just paying your rent.
[00:02:25] Which means you have to move into social housing.
[00:02:28] But there are 446,000 social houses in the entire country.
[00:02:32] Over 4 million people aged over 65.
[00:02:35] And of course, social housing isn't just for old people.
[00:02:39] So there's a real demand and a real shortfall.
[00:02:42] So it feels like that tsunami has already swept by
[00:02:46] and there's a few even bigger ones waiting to hit the shore
[00:02:49] and we're not doing anything about it.
[00:02:51] Yeah, I mean, it's horrible.
[00:02:53] I mean, you mentioned the cost of housing there,
[00:02:55] which is a huge factor because by having turned the housing into an asset class,
[00:03:00] unless you're a member of the house outright,
[00:03:03] then you are excluded.
[00:03:04] And as you get older, you get to the point you're just saying with your relative
[00:03:07] where you've got to think we've physically enforced homelessness.
[00:03:11] And that is, I mean, it's appalling enough when you see young girl people
[00:03:15] like in the 30s and 40s and maybe 50s who are homeless.
[00:03:18] But I'm starting to see the same on the streets of London too.
[00:03:21] People who are my age or older, who are homeless.
[00:03:24] And you think what has gone wrong with our society that we let this happen?
[00:03:28] And the Australian co-share mentioned,
[00:03:30] I made the mistake of running for politics there.
[00:03:32] Absolutely unsuccessfully a few years ago.
[00:03:35] And part of it, we did a piece on the Australian housing policy
[00:03:39] and what that's been doing.
[00:03:40] Of course, the objective of housing policy
[00:03:42] has been to increase the number of people who own homes,
[00:03:45] increase home ownership.
[00:03:46] And it's been wildly successful.
[00:03:48] The percentage of people who own homes has fallen from 43% to 30,
[00:03:53] under 30%, that's at home, the homes outright.
[00:03:56] The proportion of who own their homes with the mortgage has risen
[00:04:00] from 30% to 38%.
[00:04:02] And the proportion of private tenants has been driven up
[00:04:05] from 18% to 28%.
[00:04:07] So it's the exact opposite.
[00:04:09] And you've got to be, you know, hats off on three potential grounds,
[00:04:14] completely the opposite of what the policy is supposed to achieve.
[00:04:17] So housing is part of it, isn't it?
[00:04:19] And I mentioned that just to show how pensioners are struggling now
[00:04:23] and housing is certainly making it worse.
[00:04:25] But obviously just the general standard of living
[00:04:29] that pensioners will feel
[00:04:31] and how much worse it's going to get
[00:04:33] with the government having to bail out more people
[00:04:35] because most people do not have enough money
[00:04:38] sitting in private pensions to see them through their later life.
[00:04:42] And of course we're all living longer
[00:04:43] but we're also not necessarily living healthier.
[00:04:46] So medical bills increase as well.
[00:04:48] So the government has to bail out more and more money.
[00:04:50] Now if you create money to pay for the standard of living
[00:04:53] that's required, I mean we would be talking about massive amounts
[00:04:57] and you can argue about modern monetary theory
[00:05:00] and you have to really because that's the only way out, isn't it?
[00:05:02] But it's, but it is massive amounts.
[00:05:04] So if you imagine a third of the population is receiving a state pension,
[00:05:07] a third are at school or college or, you know, just too young
[00:05:10] and a third of the population are producing the economic output
[00:05:14] that is going to feed the consumption of 100% of the population.
[00:05:18] So in effect everyone who's working has to produce, you know,
[00:05:21] enough for two other people.
[00:05:23] Is that sustainable?
[00:05:25] Well it should have been because this is one of the, you know,
[00:05:30] side of it.
[00:05:31] We've had an increasing age profile as part of the effect
[00:05:36] of a successful economy.
[00:05:38] When you're, if you go back to the 1900s or the 1800s
[00:05:42] people didn't live, you know, past 60 years of age.
[00:05:45] So what took of the old people was they died.
[00:05:48] But now because we've improved health and we've improved
[00:05:52] nutrition and sanitation and so on, people live like younger,
[00:05:58] and it's hardly a surprise that that was going to happen.
[00:06:00] But if you look at the basic phenomenon under capitalism
[00:06:04] there's been an increase in the productivity per worker
[00:06:09] over 250 years ever since the Industrial Revolution.
[00:06:13] And it's not really per worker, it's per machine
[00:06:15] because what's given us that extra productivity
[00:06:17] is the increasing capacity of machines to convert energy
[00:06:20] into useful work.
[00:06:22] So we didn't start seeing this problem
[00:06:26] and we decided to live it all on what we called
[00:06:28] the private sector which really was what happened
[00:06:31] back with Maggie Thatcher and Reagan in the UK and America
[00:06:36] and the Australian equivalents of course
[00:06:39] to say let the market decide.
[00:06:42] But what we actually set off was a set of speculative bubbles
[00:06:44] that if you're one of the people who are lucky to ride
[00:06:47] the bubble you were fine, but if you did went on the bubble
[00:06:49] you're on your own and that's now leaving a large proportion
[00:06:52] of the population in destitution.
[00:06:54] And also when you take a look at the rate of economic growth
[00:06:57] or the reason that this Maggie Thatcher,
[00:06:59] Ronald Reagan, let the market rip argument was pushed
[00:07:02] was that look, we're all held back by the government.
[00:07:05] If we get the government, I've got to pronounce it right,
[00:07:09] government, I think so.
[00:07:11] Which country are you talking about here?
[00:07:13] The government.
[00:07:14] You see the way people abuse it in Twitter and stuff like that.
[00:07:18] Getting it out of the way is going to be such an increase
[00:07:20] in the rate of economic growth that you won't need
[00:07:24] social security and that's been also a rage of success.
[00:07:28] The average rate of growth under the period when
[00:07:30] the government got on the way back in the 50s and 60s
[00:07:33] and early 70s was about 4% per annum
[00:07:36] and the rate since the market rip has been 2%.
[00:07:38] So what you're saying is, I think if I'm reading between the lines
[00:07:41] or just trying to interpret it for everybody else.
[00:07:44] So this idea that one third of the population
[00:07:47] can create enough for everybody would be fine
[00:07:50] if we saw productivity increasing
[00:07:52] and that should be eminently achievable with
[00:07:55] modern machinery, modern technology.
[00:07:58] But you say now it's not happening because
[00:07:59] it's all been left to the private sector
[00:08:01] and the private sector's focus has been more on
[00:08:04] making money from investment in assets rather than
[00:08:08] which are not necessarily productive assets
[00:08:10] rather than focusing on productive capability.
[00:08:12] What the so-called Reagan and Thatcher reforms did
[00:08:16] I prefer to call them de-forms.
[00:08:18] It wasn't that it liberated the productive side of the economy
[00:08:21] it liberated the speculative side of the economy.
[00:08:24] When we talked about deregulation,
[00:08:25] we really meant deregulation in the financial sector.
[00:08:28] The regulations of the industrial sector were comparatively minor
[00:08:33] and mainly there to make sure we don't produce
[00:08:35] lead pipes and things of that nature.
[00:08:38] So those regulations weren't necessarily concerning
[00:08:41] the industrial side of the economy.
[00:08:44] The deregulation really the financial sector ripped
[00:08:46] and what we've had is a financialization of the system
[00:08:49] so far more of private money has gone into speculation
[00:08:52] and gambling on asset prices than used to happen
[00:08:55] in the 50s and 60s and it's been an abject failure
[00:08:59] in terms of its impact upon the overall economy
[00:09:01] rather than increasing the weight of growth
[00:09:04] from an average of about 4% per annum
[00:09:06] in the 50s and 60s and early 70s, it's halved it
[00:09:09] and then the outcome of that is we have pensioners
[00:09:11] like your relative not being able to afford housing
[00:09:15] and the incomes not being of the remaining one third
[00:09:18] which was supposed to be using much more productive machinery
[00:09:22] hasn't risen because we've actually
[00:09:24] rather than taking the government out of the way
[00:09:26] of the industrial sector we've shoved the financial sector
[00:09:29] in the way of the industrial sector
[00:09:31] and it's been twice as effective
[00:09:32] in slowing down the industrial sector
[00:09:34] as the allegedly defective government was at the same time.
[00:09:38] So doesn't that then mean inflation
[00:09:40] in that you got a whole load of people with demanding goods
[00:09:44] the demand for consumption is there
[00:09:47] well obviously that gets whittled away
[00:09:49] because they don't have enough money of course
[00:09:51] as they get older but I mean if they did have enough money
[00:09:55] you'd have the consumption there
[00:09:56] but you wouldn't have the delivery of goods
[00:09:58] so there would be an inflationary impact
[00:10:02] Well there's not going to be
[00:10:03] because you said they haven't got the money to buy in the first place
[00:10:05] so the demand just falls
[00:10:09] you get a stagnation
[00:10:11] and this is I've always got to mention
[00:10:14] that our main issue was to reduce
[00:10:18] economic impact upon the planet
[00:10:20] but what we've done is we've put ourselves into a complete corner
[00:10:23] because the mythical increase in productivity
[00:10:25] and economic growth has supposed to occur
[00:10:28] when we let the market rip
[00:10:29] we actually let the finance sector rip up the market
[00:10:31] and that's been the real damage
[00:10:33] and so after 40 or 50 years of that
[00:10:35] and that's how long it's been now
[00:10:37] you go back to the 1970s
[00:10:39] when Milton Friedman types took over economics
[00:10:42] and ever since that period
[00:10:44] the slowdown rate of growth has been so extreme
[00:10:47] the drop in the level of industrial development
[00:10:50] has been so extreme
[00:10:51] that the one third of the population
[00:10:54] which could have supported everybody now
[00:10:56] doesn't have the productive facilities to enable that to happen
[00:10:59] finance has made that assets unreachable
[00:11:02] for those who don't have money
[00:11:04] massive financial reserves in the first place
[00:11:06] so it's been a total catastrophe
[00:11:08] and now we've got to dig our way out of it
[00:11:10] and that really means stopping letting finance
[00:11:13] dominate capitalism
[00:11:14] and is the answer really
[00:11:16] modern monetary theorists block areas at this point
[00:11:19] but isn't the idea that
[00:11:21] if we get more people of working age producing more
[00:11:24] so if we get that productivity up
[00:11:26] so the investment is in productive capacity
[00:11:29] that we actually create a surplus
[00:11:31] not only is that one third feeding to the other two thirds
[00:11:34] it's actually doing more than that
[00:11:35] so that we can export more
[00:11:37] and then you expand your money supply
[00:11:39] and therefore you've got more money
[00:11:41] you can pay more to pensioners for example
[00:11:44] because you have more money available
[00:11:46] it's not really the exports
[00:11:48] what it is is
[00:11:50] we should have been rather than
[00:11:52] letting the finance sector explode
[00:11:55] we should have blown it up relatively speaking
[00:11:58] and we should have been putting all the emphasis
[00:12:01] should always be on the industrial sector
[00:12:03] that's what enables the improved industrial technology
[00:12:07] that is what enables
[00:12:08] it's not people working harder and smarter
[00:12:10] it's making machines that enable us to process energy
[00:12:14] more effectively
[00:12:14] and doing smarter things which are designed
[00:12:17] not the workers managing the tools
[00:12:19] the tools themselves that matter
[00:12:22] I'm curious as to why that's not happening
[00:12:24] because it seems like there will be an obvious business case
[00:12:25] given that you've got that domestic demand
[00:12:27] and it's only going to get greater
[00:12:28] so let me give you some numbers
[00:12:29] in the UK the number of people aged 65 and over
[00:12:32] has increased from 9.2 million in 2011
[00:12:34] to over 11 million in 2021
[00:12:37] and the proportion of people aged 65 and over
[00:12:39] has risen from 16.4% to 18.6%
[00:12:42] and of course those people are only going to get older
[00:12:44] in fact the size of the UK population aged over 85
[00:12:47] and over could grow in the next 15 years
[00:12:51] from 1.6 million which is 2.5% of the population
[00:12:53] to 2.6 million which is 3.5% of the population
[00:12:57] so you would have thought
[00:12:58] if you want to invest some money
[00:12:59] you'd be saying well okay
[00:12:59] what can I do to produce stuff
[00:13:01] that will be consumed by those people
[00:13:04] and if I did that
[00:13:05] that would create jobs
[00:13:07] and that would create productive capacity
[00:13:09] but this comes back to the modern monetary theory point again
[00:13:12] and this is basically
[00:13:13] you come to subution as well
[00:13:15] if we had a decent pension scheme
[00:13:18] state-driven pension scheme
[00:13:19] funded by the state creating money
[00:13:21] which is the way the pensions were paid for
[00:13:23] they weren't paid for a taxation
[00:13:25] then these people would have money
[00:13:27] that they could actually spend buying goods and services
[00:13:29] and there would be more demand for industrial output
[00:13:31] so it is just showing
[00:13:33] this is just showing the long-term consequences
[00:13:36] of falling for naive ideas about economics
[00:13:38] which is otherwise known as neoclassical economic theory
[00:13:41] and then it's
[00:13:44] we're seeing social consequences coming out of it
[00:13:47] because if we expect that
[00:13:48] that aging population
[00:13:51] to pay for themselves
[00:13:53] well they pay for themselves one of two ways either
[00:13:56] they save money
[00:13:58] for their retirement
[00:13:59] as they go through their life
[00:14:01] which is in effect
[00:14:02] sucking money out of the economy
[00:14:04] or putting it into the finance sector
[00:14:06] during their earlier years
[00:14:09] so the finance sector grows as a result of that
[00:14:12] or they don't do that
[00:14:13] because they haven't got the money to do that
[00:14:14] and they are basically gestitute and homeless
[00:14:18] we're going to reach that head
[00:14:20] we're already reaching it
[00:14:21] yeah we're reaching it
[00:14:22] like if it's hitting your family
[00:14:25] you know you realize just how far this has descended
[00:14:29] it is a travesty
[00:14:30] the idea that you should save for your old age
[00:14:34] is great if you're wealthy
[00:14:35] again this is an income distribution effect
[00:14:37] the wealthy have no problem doing that
[00:14:39] the people who don't own
[00:14:41] aren't capitalists
[00:14:42] workers basically
[00:14:43] unless you're a high paid worker
[00:14:45] you can't save enough
[00:14:46] the whole superannuation scheme in Australia
[00:14:48] you know is skewed towards high income earners
[00:14:51] so everything we've done is say
[00:14:52] take care of yourself
[00:14:53] and by the way make sure you're not making enough money to do that
[00:14:56] when we've actually reduced the income share
[00:14:58] going to the bottom 60-70% of the population
[00:15:02] substantially
[00:15:03] and now rather than being a handful of people
[00:15:05] are finding that situation
[00:15:06] it's a substantial proportion of the population
[00:15:09] so have you done any modelling
[00:15:11] or has anyone done any modelling
[00:15:13] where we say well okay
[00:15:14] let's pay everyone more for their pension
[00:15:17] let's make sure everyone is well covered
[00:15:20] let's try and find a way that we make
[00:15:22] we make sure the house prices don't shoot up
[00:15:24] because you make money available
[00:15:26] then obviously it goes straight into housing assets
[00:15:28] so let's try and find a way of controlling that
[00:15:29] so the business case then stacks up
[00:15:32] for more home production
[00:15:33] so you get more productive capacity
[00:15:35] more investment in productive capacity
[00:15:37] and that grows the country's GDP
[00:15:39] has anyone done any modelling to see
[00:15:41] to what extent
[00:15:42] so in other words you may find
[00:15:44] that you spend a lot more
[00:15:45] paying money to pensioners
[00:15:47] but actually the economic benefits are so great
[00:15:51] I'm not going to go down the whole Laffer curve road
[00:15:54] but the economic benefits are so great
[00:15:56] that you're actually getting
[00:15:57] you're clawing some of it back at least
[00:15:58] in terms of taxation
[00:15:59] because you've got so much more growth in the economy
[00:16:02] well what this is the problem with the way
[00:16:04] that the conventional thinkers
[00:16:06] think about the government
[00:16:07] as they're seeing the government taxes
[00:16:08] and takes money away from me
[00:16:10] they're not seeing the government spending
[00:16:11] at the same time
[00:16:12] and normally government spending
[00:16:14] will exceed taxation anyway
[00:16:15] even the government's trying to reduce it
[00:16:17] but the result is there's more free cash floating
[00:16:19] around which people then use to buy goods
[00:16:21] off the industrial sector
[00:16:22] and in effect the government running a surplus
[00:16:25] which creates fiat money
[00:16:27] but government running a deficit
[00:16:28] which creates fiat money
[00:16:29] is what enables there to be enough money
[00:16:31] turning over that gives capitalists the money
[00:16:33] first of all for sales
[00:16:35] and then it encourages investment and so on
[00:16:37] so what we had back in the 70s
[00:16:39] was an argument that was naïve about
[00:16:40] the monetary system
[00:16:41] naïve about the role of the government
[00:16:43] in the economy
[00:16:44] and basically thought the private sector
[00:16:46] could create the money
[00:16:47] well it doesn't that's called forgery
[00:16:49] it's in the private banks do
[00:16:51] but they create it predominantly for asset speculation
[00:16:53] and we've had this dramatic increase
[00:16:55] in the size of the financial sector
[00:16:57] and what it's done has meant that industrial
[00:17:00] you can't get investment capital
[00:17:02] for love nor money from the financial sector
[00:17:04] most of the time these days
[00:17:06] it's much much harder to get the money
[00:17:08] that used to exist for companies like
[00:17:10] good companies like I think it was called Boeing
[00:17:13] it still exists
[00:17:14] when it was done there by engineers
[00:17:17] and it was all about let's improve the engineering
[00:17:20] then you got technological development
[00:17:23] which meant you got more productivity out of the machines
[00:17:26] and therefore we could have less people supporting
[00:17:28] less workers supporting more people
[00:17:30] we could have coped with this
[00:17:32] now we're paying effectively for 50 years
[00:17:34] of naïve but smug
[00:17:36] economists taking over the running of the economy
[00:17:40] and telling us that we should reduce the size
[00:17:42] of the government
[00:17:43] that's reduced the money supply
[00:17:44] that's reduced the cash without
[00:17:46] without debt attached to it that the private sector gets to spend
[00:17:49] and its impact has been just pretty much half the rate of economic growth
[00:17:52] and put us in the dilemma we are now
[00:17:54] when of course we want to reduce the rate of economic growth even more
[00:17:57] because of the impact we're having on the climate
[00:17:59] so it's we're not in a problem
[00:18:03] we're not in a difficult situation
[00:18:05] we're in a predicament
[00:18:06] right we keep on walking against the brick wall
[00:18:07] and then we're walking back again
[00:18:09] thinking when will this brick wall come down
[00:18:11] we're just banging up against it
[00:18:12] and it is only going to get worse of course
[00:18:15] because of this ageing population
[00:18:16] so so long as we keep on saying
[00:18:18] the government's got to spend less
[00:18:20] but there's more demand on the government
[00:18:21] because there's more demand on health services
[00:18:23] there's more demand on pensions
[00:18:26] we are just going to try and avoid paying that money
[00:18:29] then the whole situation is going to get worse
[00:18:31] the economy is just going to get slower
[00:18:32] until there's a realisation we'll know
[00:18:34] if you pay these people money
[00:18:35] then they are going to spend
[00:18:36] and that's going to help consumption
[00:18:38] that's going to help businesses grow
[00:18:40] but at what point do we reach that conclusion
[00:18:42] because we've not reached it so far
[00:18:43] and the situation is critical right now
[00:18:46] the latest you know the chancellor
[00:18:47] the UK Labour Party chancellor
[00:18:49] and you see all the
[00:18:50] who could just as easily be the chancellor
[00:18:52] for the Conservative Party
[00:18:53] all the guff coming out
[00:18:54] and the MPs in the Labour Party
[00:18:55] the black hole, the yada yada yada
[00:18:59] it is again this naivety
[00:19:01] about the government's role in creating the money
[00:19:03] that enables the capitalist system to function
[00:19:06] is completely shared by the Labour Party
[00:19:09] and that applies
[00:19:09] the one bright light is
[00:19:12] says the democrats and the states
[00:19:14] aren't quite as naive right now
[00:19:15] some of the stuff coming out of Kamala Harris
[00:19:18] appears whenever she's challenged
[00:19:19] and how can we defend it
[00:19:20] this is well you know we spend it
[00:19:22] and then we get productive feedback
[00:19:23] and we do better
[00:19:25] it's not quite the full awareness
[00:19:28] of modern monetary theory
[00:19:29] that the MMPs would like to have
[00:19:31] but it's dismissing the argument
[00:19:34] how are we going to pay for it
[00:19:35] and the whole of the situation
[00:19:36] and she's talking about price control
[00:19:37] she's a woman after your own heart there
[00:19:39] Steve King
[00:19:39] no there's some good signs there
[00:19:41] but she'll get lambasted of course in the debates
[00:19:43] we do know that
[00:19:44] I just done a podcast on that
[00:19:46] just this week and you know
[00:19:48] a lot of these policies
[00:19:49] even though they're right policies
[00:19:51] the media will crucify over them
[00:19:52] that's the problem
[00:19:53] so you say you can't win
[00:19:54] so look when we come back
[00:19:56] I mean because it is an interesting example isn't it
[00:19:58] I mean America
[00:19:59] all through the last term of office
[00:20:01] has been a high spending government
[00:20:04] and look the economy is doing better
[00:20:05] than just about anywhere
[00:20:06] and you'd have to say that is because
[00:20:08] they flooded more money into the economy
[00:20:09] which has helped their productive capacity
[00:20:11] and the middle of year
[00:20:12] so there's the casing point
[00:20:14] easier for them to do of course with the reserve currency
[00:20:16] that would be the counter argument
[00:20:18] from everybody else
[00:20:19] let's suspect
[00:20:20] look when we come back
[00:20:21] I want to see whether some countries are going to suffer more than others
[00:20:23] because what about countries
[00:20:24] which have got a young population for example
[00:20:25] does that give them a natural advantage
[00:20:28] we'll look at that when we come back
[00:20:29] on the Debunking Economics podcast
[00:20:30] we're talking old age
[00:20:32] it's me and Steve King
[00:20:32] how appropriate
[00:20:34] we'll back in just a second
[00:20:35] this is the Debunking Economics podcast
[00:20:38] with Steve King and Phil Dobby
[00:20:43] we are looking at old age
[00:20:44] on the Debunking Economics podcast
[00:20:46] and the inability for government
[00:20:48] supposedly to pay for old people
[00:20:51] and there are an increasing number of old people
[00:20:53] and they are slowing the economy
[00:20:55] but are they just slowing the economy
[00:20:57] because we're not paying them enough money
[00:20:58] we're not giving the support
[00:21:00] for their health services
[00:21:01] for their spending in the wider community
[00:21:04] and of course you know
[00:21:05] one of the things that comes out of all of this Steve
[00:21:07] is that we push back the pension age
[00:21:10] and then you know should old people work
[00:21:12] it becomes the question
[00:21:14] I mean it's just such a stupid question
[00:21:16] who would take them you know
[00:21:19] raising the pension age is hardly the answer
[00:21:23] all it does is it means you claim
[00:21:25] unemployment benefit rather than a pension
[00:21:27] because you get to say an agent
[00:21:28] who wants to employ a 75 year old for itself
[00:21:32] yeah and that's I mean
[00:21:32] the other is you're coming up
[00:21:33] and another I'm 71
[00:21:35] I'm certainly experiencing what old age does to you
[00:21:37] I mean one of them I can barely close
[00:21:39] one of my fists I've got arthritis
[00:21:41] but I'm not a manual worker
[00:21:43] I can get away with it
[00:21:44] but if you're a manual worker
[00:21:45] and you have arthritis
[00:21:47] and you're expected to continue working
[00:21:48] till you're 67 and then 70 and so on
[00:21:51] it's showing a fundamental failure
[00:21:53] in how we manage our economy
[00:21:55] and that you know
[00:21:58] it's taken 50 years to get to this point
[00:22:00] where we realize
[00:22:00] the neoliberal focus just is a failure
[00:22:05] it's a fallacy
[00:22:06] it was never right in the first place
[00:22:08] but it takes 50 years to get to the point
[00:22:10] where it's failure to achieve what it promised to do
[00:22:12] it's failure to double the rate of economic growth
[00:22:14] its success actually in halving
[00:22:16] the rate of economic growth fundamentally
[00:22:18] and the failure to build houses
[00:22:23] is a success in making houses more expensive
[00:22:25] all these things have meant
[00:22:27] that we've got a complete predicament
[00:22:29] because to get ourselves out of it now
[00:22:31] we have to start building the productive facilities
[00:22:33] that we've spent 50 years neglecting
[00:22:35] I've read a fair bit about
[00:22:37] how governments can cope with an aging population
[00:22:40] I must admit
[00:22:41] I'm not really reading too many places
[00:22:43] where the government should just pay more money
[00:22:45] to more old people
[00:22:46] so that they have the spending capacity
[00:22:48] to help the economy grow
[00:22:50] I've seen lots of sort of peripheral type policies
[00:22:53] like for example
[00:22:55] tax offsets for grandparents
[00:22:57] looking after grandchildren
[00:22:58] rather than grandparents doing it for free
[00:23:01] and that's not counted as GDP
[00:23:03] because no money is changing hands
[00:23:06] maybe they could charge the children
[00:23:07] who claim it as a tax deduction
[00:23:08] so in effect
[00:23:09] the state is paying the grandparents
[00:23:11] and we get GDP growth out of that
[00:23:13] but of course nothing is changing that situation
[00:23:14] whatsoever
[00:23:15] it's just really playing with numbers
[00:23:17] and there's lots of examples like that
[00:23:18] about people thinking
[00:23:20] this is going to solve the problem
[00:23:21] without I think recognizing
[00:23:23] just how enormous this boom is
[00:23:27] the baby boomers are retiring now
[00:23:30] or have retired
[00:23:32] and it's a...
[00:23:33] you can just watch that bulge
[00:23:36] going through the population
[00:23:38] just looking at those graphs
[00:23:41] and it's there now
[00:23:42] and it's real
[00:23:43] and what worked for the baby boomers
[00:23:45] when they were employed
[00:23:46] and then the wealthy ones of them as well
[00:23:48] once were employed in well-paying jobs
[00:23:50] and so on
[00:23:51] they did pretty well out of it
[00:23:52] and if they bought property
[00:23:54] and they wrote the speculative bubble
[00:23:55] that was generated by liberating finance
[00:23:57] back in the 70s
[00:23:59] then they're doing okay
[00:24:01] and they're wondering what the hell
[00:24:01] are the rest of you complaining about
[00:24:03] but the rest of you is going to be
[00:24:04] 40% of the population if not more
[00:24:06] and if you end up with 40%
[00:24:08] of the population on the street
[00:24:10] homeless
[00:24:10] they're going to be on the street
[00:24:12] doing other things as well
[00:24:13] so the level of political turmoil
[00:24:16] we're likely to see coming out of this
[00:24:18] is quite extreme
[00:24:18] France has seen that of course
[00:24:20] because at one stage
[00:24:21] to try to balance the budget
[00:24:22] same old nonsense
[00:24:23] that happened in France
[00:24:28] the impact was a complete riot
[00:24:30] the French are very good at rioting
[00:24:32] we should probably take some lessons from them
[00:24:34] and the proposal was shelved
[00:24:36] but all this stuff was coming out of the belief
[00:24:38] that the government should be saving money
[00:24:40] and what the government does when it saves money
[00:24:41] is destroy money in the private sector
[00:24:43] this is the accounting
[00:24:44] now you know I've got my problems with parts of MMT
[00:24:47] but the insight they had
[00:24:49] that the government spending
[00:24:51] actually creates net financial assets
[00:24:53] for the non-government sector
[00:24:55] and that precisely as much as the government gets
[00:24:57] negative equity
[00:24:58] the rest of the economy gets
[00:24:59] identical positive equity
[00:25:01] that is 100% correct in the accounting alone
[00:25:03] and if you try to go the other way
[00:25:05] you destroy the amount of money
[00:25:06] the private sector has to work with
[00:25:08] and you end up with a private sector
[00:25:09] that doesn't grow as it could
[00:25:13] as it should
[00:25:13] and we end up with poverty
[00:25:15] and then we're politically involved against it
[00:25:18] that idea of the sector or balance
[00:25:21] that's just not widely accepted
[00:25:22] amongst economists
[00:25:24] and yet it seems a bit obvious
[00:25:25] it's obvious
[00:25:26] and it does get out of money doesn't it
[00:25:28] I mean there's only so much money in circulation
[00:25:31] so for people to be better off
[00:25:33] either that you create more money
[00:25:35] or the money moves faster
[00:25:38] otherwise it's a set amount of money
[00:25:39] that's there
[00:25:40] and it's either in the public sector
[00:25:41] or the private sector
[00:25:43] I'll write a few posts
[00:25:44] which I've got to go back to writing up
[00:25:46] on my sub-second Patreon
[00:25:47] talking about the meme
[00:25:48] that is destroying western civilisation
[00:25:50] and that meme is supply and demand
[00:25:52] that mental framing that says everything about a demand curve
[00:25:54] and a supply curve
[00:25:55] and the point of intersection
[00:25:56] and that is applied to the monetary system as well
[00:25:59] where it's wrong enough in the real world
[00:26:02] when you look at actual manufacturing
[00:26:03] it's just a complete myth
[00:26:04] even in that foundation
[00:26:05] but when you apply it to the monetary system
[00:26:07] it means that people think
[00:26:09] that the government spending more money
[00:26:10] takes money away from the private sector
[00:26:12] the accounting is 100% the opposite
[00:26:14] if the government spends more
[00:26:15] there's more money in people's accounts
[00:26:18] so what we're doing is actually
[00:26:19] effectively it's like saying
[00:26:21] according to this manual here
[00:26:22] the best way to get the boat to go faster
[00:26:24] is to dig a hole in the hull
[00:26:26] Right, okay
[00:26:27] I love your analogy sometimes
[00:26:28] sometimes they don't work
[00:26:29] sometimes they're good
[00:26:30] I'm not sure about that one
[00:26:31] but look the
[00:26:32] Oh you can have a water spout
[00:26:33] instead if you like
[00:26:34] and it's a good talk to you
[00:26:35] Look you know when we've got
[00:26:38] billionaires lost at sea
[00:26:39] maybe it's not the best topical analogy
[00:26:42] Look the curious story
[00:26:44] that one wasn't it
[00:26:44] there's something going on there
[00:26:46] but look the
[00:26:48] so the percentage in the year
[00:26:51] the UK who are over 65 is 18.6%
[00:26:55] in Japan it's 30%
[00:26:57] in Greece it's 23%
[00:26:59] so less than 20% we're doing well
[00:27:01] Australia is actually only on 16.5%
[00:27:03] so you know better than all of those
[00:27:05] but look at Japan
[00:27:06] 30% of its population is over 65
[00:27:08] and yet when I talk to people about Japan
[00:27:10] they do talk about how
[00:27:13] Japan's economy is burgeoning now
[00:27:16] because they've got
[00:27:18] inflation there's a reason for investment
[00:27:19] they don't seem too wide about the aging population
[00:27:22] because they're saying well companies can grow now
[00:27:24] because we've got a bit of inflation
[00:27:25] so companies are getting a bit of a return
[00:27:28] they can invest in the mechanization
[00:27:30] which is going to create the output
[00:27:31] the economy needs and creating that surplus
[00:27:34] because they obviously you know
[00:27:36] export more than they consume
[00:27:37] so they're less concerned
[00:27:38] because they've got that strong export focus
[00:27:40] they're less concerned about their aging population
[00:27:43] yeah interesting
[00:27:43] the other thing about Japan
[00:27:44] has been the case all the way through
[00:27:46] even though they stuffed up
[00:27:47] by letting the financial sector rip in the 1980s
[00:27:49] Japan's began problems began
[00:27:51] when they decided to deregulate finance
[00:27:53] and people might not remember this now
[00:27:55] it's so long ago but between 1980
[00:27:57] and 1990 the price of housing
[00:28:00] in Japan doubled or trebled
[00:28:02] the stock market blew up to a
[00:28:05] I think the Nikkei peaked at 39,960
[00:28:08] and it then got down to the lowest 7,000
[00:28:11] in the aftermath of the whole thing
[00:28:12] so what you had was letting the finance sector rip
[00:28:15] destroyed part of the fabric of Japanese society
[00:28:19] but the foundation is still being
[00:28:21] a highly industrialized and technological society
[00:28:24] that was still there
[00:28:25] and what's happened since is
[00:28:27] the government has continued to run deficits
[00:28:30] the central bank has bought the debt
[00:28:32] you've got this huge level of government debt
[00:28:34] which is actually a record of how much
[00:28:36] government money is being created for the economy
[00:28:38] and though it hasn't, they haven't managed
[00:28:40] to get their industrial sector out
[00:28:42] of the excessive debt they took on during
[00:28:44] the bubble economy
[00:28:44] therefore they're not investing at the rate
[00:28:46] they're used to
[00:28:47] they're still investing at a better rate
[00:28:49] and building factories
[00:28:52] and producing new technologies
[00:28:54] at a better rate than most of the western economies
[00:28:56] so despite the fact that they've got this
[00:28:58] extremely high ageing profile
[00:29:00] overall they're provided for their people
[00:29:02] in a way that the European countries
[00:29:04] and the Anglo-Saxons have not done
[00:29:06] because the government debt has helped
[00:29:08] and so there's less concern about the
[00:29:10] 18 population
[00:29:11] and yet what about the countries
[00:29:14] where there's not an 18 population
[00:29:15] based so the Middle Eastern North Africa
[00:29:16] for example most countries they're very young
[00:29:19] so Bahrain, Saudi Arabia, Libya, Egypt
[00:29:21] only about 4 or 5% of the population
[00:29:23] is over 65
[00:29:26] so doesn't that give them
[00:29:27] a natural advantage
[00:29:29] because they've got so much more productive
[00:29:31] capacity and doesn't that create
[00:29:33] a problem for those countries
[00:29:35] if they are telling themselves
[00:29:37] you know we don't want to get into debt
[00:29:39] we're just going to have to get by
[00:29:41] with only one third of the population working
[00:29:42] well the main thing is not the number of people
[00:29:45] you've got it's the number of machines
[00:29:46] your people are making
[00:29:47] I get very annoyed
[00:29:50] about the whole kind of labour productivity
[00:29:52] and when you look at neoclassical economics
[00:29:54] I've just read a particularly
[00:29:57] egregious example of neoclassical
[00:29:59] thinking in the last week
[00:30:00] a book called Growth of Reckoning
[00:30:03] by an economist from King's College
[00:30:06] the naivety that they have
[00:30:08] that it's people working harder
[00:30:09] and working better
[00:30:10] it's not people working harder or better
[00:30:12] it's people working with better technology
[00:30:14] better machines
[00:30:15] and it's the investment in the machinery
[00:30:17] that enables you to have that growth
[00:30:19] now if you look at those countries
[00:30:20] some of them have got enormous technology
[00:30:22] and certainly you see what's happening
[00:30:24] the Saudi Arabian out of
[00:30:26] what is it called the Abu Dhabi and so on
[00:30:29] the enormous
[00:30:31] focus upon using the fortune
[00:30:34] they're making out of their oil exports
[00:30:35] to industrialise their economies
[00:30:37] whether they'll pull it off in time
[00:30:38] another story
[00:30:39] but the extent to which they've put that money
[00:30:42] into building industrial
[00:30:46] capability is huge
[00:30:47] and if you don't have that money coming
[00:30:49] into the industrial capability
[00:30:50] it doesn't matter we've got lots of young people
[00:30:52] you've got to have the machinery for them to work on
[00:30:55] which they've got to be trained for
[00:30:57] obviously but the fundamental cause
[00:30:58] of productivity is not labour productivity
[00:31:01] it's capital productivity
[00:31:02] and we've ignored that by living
[00:31:04] in the mythical world of neoclassical economists
[00:31:06] dragging into the real world where it makes
[00:31:07] a total stuff up in the system
[00:31:09] so the short term solution in lots of places
[00:31:11] including the UK has been to say
[00:31:14] well okay we'll improve that productivity
[00:31:16] by getting more people from overseas
[00:31:18] we'll get younger migrants
[00:31:21] to offset that aging population
[00:31:23] which even if it did work
[00:31:25] obviously as a short term measure
[00:31:27] because those people
[00:31:28] guess what, even foreigners
[00:31:30] get old
[00:31:31] and
[00:31:33] you know so at some point
[00:31:34] they're just going to add to the bubble
[00:31:36] later down the track
[00:31:37] so even if it did work it's only going to be a short term fix
[00:31:40] yeah you've got to be
[00:31:41] we should have been
[00:31:44] as we've increased the productivity of the economy
[00:31:47] which has been through technological
[00:31:48] change embodied in the machinery
[00:31:52] which of course
[00:31:52] powered by fossil fuels which is the problem
[00:31:54] we should have been reversing direction 50 years ago
[00:31:56] on that front and again it's economists
[00:31:58] that got in the way of that reversal
[00:32:01] but oh that
[00:32:02] we've written you a direction
[00:32:03] but yeah we should easily be capable
[00:32:06] of supporting an aging population
[00:32:08] and of educating the youth well
[00:32:10] now we're doing neither
[00:32:11] and that is, we're seeing
[00:32:13] the consequences of this
[00:32:16] but the thing is once you've done that for 50 years
[00:32:18] where you're trying to drag yourself up
[00:32:21] from is a lot lower place than you would have been
[00:32:22] if you hadn't followed this nonsense idea
[00:32:24] of Dyson the first place
[00:32:26] so I wonder whether you know
[00:32:28] the concern we've got about the aging population
[00:32:30] actually is just the first stage
[00:32:31] of what would be a bigger concern
[00:32:33] because the next thing after you've got old
[00:32:35] so I'd tell you this Steve, you might not be aware of this yet
[00:32:38] but I think you've got a few years to go
[00:32:39] but the next stage is you die
[00:32:42] and you know
[00:32:43] and so this aging population will die
[00:32:46] and that will mean a reduced
[00:32:47] population ultimately so the fertility
[00:32:49] level in the UK now
[00:32:51] is below 1.5
[00:32:53] so for every two people we're producing
[00:32:55] just one and a half new people
[00:32:57] so
[00:32:59] not only is the population aging
[00:33:00] it's then going to shrink, in fact I think if you do the maths
[00:33:03] if you've got a birth rate of one and a half
[00:33:05] that means the population
[00:33:08] halves
[00:33:08] in about 60 years
[00:33:10] so that's what we are facing
[00:33:12] now of course that's in the west
[00:33:14] but you know if the rest of the world is going to go through that as well
[00:33:17] so we will reach, I mean it might take a bit of time
[00:33:19] but we're not going to reach a peak population
[00:33:21] then we're going to start to see a population decline
[00:33:23] but certainly in the west right now
[00:33:24] without migration we've got declining populations
[00:33:27] and yet we've got economies that are built
[00:33:29] on growth and productivity
[00:33:31] and
[00:33:33] how do you balance those two things?
[00:33:35] You don't, this is again what's
[00:33:37] it's not a problem, it's a predicament
[00:33:39] you're getting yourself out
[00:33:40] there's no pleasant way to get ourselves out of the situation we're in
[00:33:43] so we
[00:33:44] should be actually pleased that populations are falling
[00:33:47] because humans as a species
[00:33:48] put far too much pressure on the planet
[00:33:51] and that's what's the
[00:33:52] the large thing behind climate change
[00:33:54] and the damage was
[00:33:56] I do think that billionaire was lost to a water spout
[00:33:59] okay I'm not going to get hit by this
[00:34:00] CIA Jewish
[00:34:02] space laser or maybe an Arabic
[00:34:04] space later that took him out
[00:34:06] but we're going to see more
[00:34:08] and more of this stuff and
[00:34:10] this sort of catastrophe
[00:34:12] is a product of
[00:34:14] ignoring what actually gave us
[00:34:16] productivity capacity in the first place
[00:34:18] which is improving
[00:34:20] how much energy we use
[00:34:23] but also getting the energy from other sources
[00:34:25] rather than taking out a fossil fuels
[00:34:27] which is what's done the damage
[00:34:28] in terms of global warming
[00:34:30] so it is
[00:34:32] there's no easy way out of this
[00:34:34] and I certainly think
[00:34:36] we're going to see a peaking population
[00:34:39] and a falling population
[00:34:40] which will add to our
[00:34:42] dilemmas because we won't necessarily be losing the people that
[00:34:45] are unproductive
[00:34:47] well we don't of course
[00:34:48] we're going to fight against that falling population
[00:34:49] so that's why we take migrants on
[00:34:51] JD Vance who could be the vice president in America
[00:34:54] he was only touting it as an idea
[00:34:57] for discussion but
[00:34:58] he said about a week or so ago
[00:35:01] that he feels as though
[00:35:02] if you have more kids you should get more votes
[00:35:06] I think he actually
[00:35:07] went against the idea when
[00:35:08] one person, one and a half votes
[00:35:11] yeah I think he's so like
[00:35:12] if you've got two kids you maybe get
[00:35:14] half a vote for each of the kids
[00:35:15] so it would encourage people to have more kids
[00:35:18] because they'd get more votes
[00:35:20] I think he went off the idea when it was pointed out
[00:35:22] to him that actually the average family size
[00:35:24] for a democrat
[00:35:26] voter is greater
[00:35:29] so the republicans would never get it again
[00:35:31] under that
[00:35:32] but anyway it just shows how we're hell bent
[00:35:36] on maintaining
[00:35:36] the population because we see that's the only way
[00:35:39] that we can maintain
[00:35:40] our living standard and continue
[00:35:42] growth in the economy
[00:35:43] but can we, if we've got this aging population
[00:35:46] and then they start to die
[00:35:47] and so we've got a shrinking population
[00:35:49] can we maintain
[00:35:51] our standard of living
[00:35:53] through all of that?
[00:35:55] Again if we'd been doing
[00:35:57] the industrial development that we
[00:35:59] were still moving in that direction
[00:36:01] back in the 1970s
[00:36:03] if we'd continued that focus rather than handing over
[00:36:05] to the finance sector the answer would be yes
[00:36:07] but we've lost 50 years of this
[00:36:09] and people don't realise
[00:36:10] how much a mistake compounds over time
[00:36:13] because if you end up like
[00:36:15] I'm not going to talk just in terms of growth
[00:36:17] but in terms of say technological
[00:36:19] improvement that enables you to use
[00:36:21] say less energy and produce the same
[00:36:22] amount of output, if you have that at the rate
[00:36:25] of 2% per annum
[00:36:27] and you then compound that mistake by
[00:36:29] 2% per annum you get this age
[00:36:31] where you're about half as all less productive
[00:36:33] I haven't actually done the numbers
[00:36:35] I need to get out of calculated to do it properly
[00:36:37] but you find
[00:36:38] you lose dramatically over time
[00:36:41] and that's what we've been doing
[00:36:43] so we've got ourselves
[00:36:45] whereby letting the finance sector rip
[00:36:47] the finance sector has ripped us off
[00:36:48] we haven't had the growth that would enable
[00:36:50] us to sustain higher populations
[00:36:53] we haven't had the improvements in technology
[00:36:54] that would enable a smaller workforce
[00:36:56] to support a larger number of people
[00:36:58] who are no longer producing
[00:37:00] output and so we're in a huge
[00:37:02] predicament and there is no easy way out
[00:37:05] so if
[00:37:07] we introduced a policy that said
[00:37:08] right well okay we are going to give you
[00:37:10] a good standard of living for every pensioner
[00:37:13] we're going to make sure you've got a house
[00:37:14] and a decent standard of living to whatever age
[00:37:16] you live to and it's all going to be
[00:37:18] paid for by the government
[00:37:20] there'll be very little reason for me
[00:37:22] to invest in our retirement fund
[00:37:25] early on in my life
[00:37:27] so I guess that's money that wouldn't
[00:37:28] go into the finance sector
[00:37:30] I'd spend it
[00:37:31] in the broader economy and the hope would be
[00:37:33] demand for industrial corporations
[00:37:36] that's right yeah
[00:37:36] and that would increase our output
[00:37:39] and our productivity as we try and service
[00:37:41] that there's still
[00:37:44] a same level of
[00:37:45] ultimate consumption though
[00:37:47] you can only consume so much each person
[00:37:49] can only consume so much so there would
[00:37:51] be areas that we just pay more for more stuff
[00:37:53] wouldn't there? Maybe that doesn't matter
[00:37:55] well it would be the same but to a direction
[00:37:57] that's the sliding door we didn't go through
[00:37:59] we took the wrong sliding door
[00:38:01] 50 years ago and there's no easy way
[00:38:03] back to where we would have been had we not made
[00:38:05] the mistake. People, the classic
[00:38:07] if you look at what people
[00:38:09] thought we'd be having in the
[00:38:10] in the 2020s
[00:38:13] when you look back in the 1970s
[00:38:14] you see the vision that people had
[00:38:16] of back to the future
[00:38:18] people on hoverboards everywhere
[00:38:21] and flying cars
[00:38:24] not that I want flying cars
[00:38:25] we now know the dangers of that
[00:38:27] level of transportation
[00:38:29] but the fundamental thing is we have
[00:38:31] spent 50 years following
[00:38:33] a financialization path rather than
[00:38:36] an industrialization path
[00:38:37] and hopefully that's why we're
[00:38:39] finding pensioners who are finding themselves
[00:38:41] homeless. Yeah thanks for
[00:38:43] bringing us back to where we started because
[00:38:45] that is going to happen to so many more people
[00:38:47] it is. This is why it's a
[00:38:49] you know a cliff edge that we are
[00:38:51] well we've already fallen off the cliff edge
[00:38:53] it's just two other cliff edges
[00:38:55] we've got to follow our way down next
[00:38:58] alright
[00:38:59] yeah uplifting is always
[00:39:02] Steve but the answer
[00:39:03] something's got to change. Dave and it won't
[00:39:06] until this is the other thing
[00:39:08] the capacity of the
[00:39:09] of the political
[00:39:11] structural
[00:39:13] political financial complex
[00:39:15] political financial complex to continue
[00:39:17] down the same wrong path as just breath taking
[00:39:19] Well yeah but you know maybe as more
[00:39:21] kids see that more of their parents are
[00:39:23] you know hitting a wall
[00:39:25] maybe they'll feel as though there's a need for political change
[00:39:28] so maybe that's what drives it always
[00:39:29] gonna give hope to the young population
[00:39:31] because they are you know
[00:39:33] actually let's be honest they're smarter than we
[00:39:35] were and you know so there is
[00:39:37] hope. Good to talk Steve catch you next time.
[00:39:40] Okay Matt bye. The debunking
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