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[00:00:02] [SPEAKER_00]: It is no secret that the most important and perfect health in the world.
[00:00:07] [SPEAKER_00]: We all strive to have a good work life balance, and the future to the best fitness and wellness
[00:00:12] [SPEAKER_00]: and sports and career is the ultimate motivation.
[00:00:16] [SPEAKER_00]: As a challenge for a goal of 5,000 people in Germany,
[00:00:20] [SPEAKER_00]: for the advantage of the goal and the work name.
[00:00:22] [SPEAKER_00]: With over 8,500 people, the over 50 different sports athletes,
[00:00:26] [SPEAKER_00]: for fitness and yoga studios, Schwimmbar and Bölderheim
[00:00:30] [SPEAKER_00]: are a bit so well-nest temple
[00:00:31] [SPEAKER_00]: to be the Tanzafet every night.
[00:00:33] [SPEAKER_00]: For more information,
[00:00:35] [SPEAKER_00]: visit Tanzafet.eu and fill in with the things
[00:00:37] [SPEAKER_00]: that are going on.
[00:00:42] [SPEAKER_01]: My home by G. Stobelathet's economy ultimately
[00:00:44] [SPEAKER_01]: remains just that healthy.
[00:00:47] [SPEAKER_01]: Well, John, that certainly are baseline view.
[00:00:50] [SPEAKER_01]: And I would just say, you know,
[00:00:51] [SPEAKER_01]: I'm not sure that this was a front-loading of rad cuts.
[00:00:55] [SPEAKER_01]: I think that the way that Jair Powell had to sell this
[00:00:59] [SPEAKER_01]: to the committee is that they really should have cut rates in July
[00:01:03] [SPEAKER_01]: by 25 basis points.
[00:01:05] [SPEAKER_01]: They opted not to do that.
[00:01:07] [SPEAKER_01]: And so this was really a catch-up cut.
[00:01:10] [SPEAKER_01]: And that's what you see, I think, reflected
[00:01:12] [SPEAKER_01]: in the dot plot as well.
[00:01:14] [SPEAKER_02]: This is the deep-unking economics podcast
[00:01:17] [SPEAKER_02]: with Steve Keam and Phil Dobby.
[00:01:21] [SPEAKER_03]: Well, let's Morgan Stanley's Matthew Hornback
[00:01:23] [SPEAKER_03]: took Yon Blumberg last week about the Fed cut
[00:01:26] [SPEAKER_03]: when it cut interest rates by half a percent.
[00:01:28] [SPEAKER_03]: The reason, well, because inflation is coming down
[00:01:31] [SPEAKER_03]: and the US economy is doing well.
[00:01:34] [SPEAKER_03]: So a sharp contrast to Europe in particular, Germany,
[00:01:37] [SPEAKER_03]: which is in recession with no great hope
[00:01:39] [SPEAKER_03]: that it's going to recover any time soon.
[00:01:41] [SPEAKER_03]: So why the big difference between the US and Europe?
[00:01:44] [SPEAKER_03]: Well, the answer is quite simple.
[00:01:46] [SPEAKER_03]: We'll look at that today on the deep-unking economics podcast.
[00:01:55] [SPEAKER_03]: So how have two of the world's major economies
[00:01:58] [SPEAKER_03]: that's fed this side of the pandemic?
[00:02:01] [SPEAKER_03]: Well, Steve, if we just look at GDP,
[00:02:03] [SPEAKER_03]: the US has grown from being a 21.7 trillion economy
[00:02:07] [SPEAKER_03]: just before the pandemic to being a 23.4 trillion dollar economy.
[00:02:12] [SPEAKER_03]: So that is seven and a half percent growth
[00:02:13] [SPEAKER_03]: we have a bit of inflation, of course.
[00:02:15] [SPEAKER_03]: In the meantime, so it's not quite as impressive as that.
[00:02:18] [SPEAKER_03]: The European Union though has gone from 14 and a half trillion
[00:02:21] [SPEAKER_03]: euros to just 15.1 trillion.
[00:02:23] [SPEAKER_03]: That's a growth of just 4.1%.
[00:02:26] [SPEAKER_03]: You can completely eradicate that.
[00:02:28] [SPEAKER_03]: That's a very profound inflation.
[00:02:29] [SPEAKER_03]: So why do you think, I mean, none of them are good figures.
[00:02:32] [SPEAKER_03]: Why do you think America is doing
[00:02:35] [SPEAKER_03]: so much better than the EU?
[00:02:37] [SPEAKER_04]: It's fundamentally because they've started to escape
[00:02:39] [SPEAKER_04]: from the near-classical curlade of believing
[00:02:41] [SPEAKER_04]: the government should run a balanced budget
[00:02:44] [SPEAKER_04]: and they have maintained their deficit for longer
[00:02:47] [SPEAKER_04]: than the Europeans have done.
[00:02:48] [SPEAKER_04]: Having obsessed about cutting it.
[00:02:50] [SPEAKER_04]: And it's not spoken that you don't get aggressive statements
[00:02:53] [SPEAKER_04]: about it.
[00:02:53] [SPEAKER_04]: Like you don't get the Joe Biden or Camala Harris
[00:02:57] [SPEAKER_04]: so channeling in M.T.
[00:02:59] [SPEAKER_04]: and saying that those sorts of statements,
[00:03:01] [SPEAKER_04]: but you do get them basically
[00:03:02] [SPEAKER_04]: fapping off any attacks from the media
[00:03:04] [SPEAKER_04]: about how bad is the government debt level
[00:03:07] [SPEAKER_04]: and how they have, how are you going to fill
[00:03:08] [SPEAKER_04]: the black hole and lots sort of nonsense
[00:03:10] [SPEAKER_04]: you get out of the British in particular?
[00:03:14] [SPEAKER_04]: So what you've had is a continuing level
[00:03:16] [SPEAKER_04]: of government spending into the economy.
[00:03:18] [SPEAKER_04]: And it's also just some extent,
[00:03:19] [SPEAKER_04]: this is an argument that we're on those
[00:03:21] [SPEAKER_04]: that makes rather well.
[00:03:24] [SPEAKER_04]: Boosted flows to people who have government bonds
[00:03:28] [SPEAKER_04]: because when you're paying five percent interest
[00:03:30] [SPEAKER_04]: on those bonds, admittedly that this is affected
[00:03:33] [SPEAKER_04]: by the maturity terms of the bonds
[00:03:35] [SPEAKER_04]: it's only specifically for the latest bonds
[00:03:38] [SPEAKER_04]: that have been issued at that rate.
[00:03:39] [SPEAKER_04]: Did you get the five percent
[00:03:41] [SPEAKER_04]: because a higher rate,
[00:03:44] [SPEAKER_04]: when you buy bonds, you get the face value,
[00:03:45] [SPEAKER_04]: whatever that's for the coup on says you're going to get
[00:03:47] [SPEAKER_04]: you get that coup on value.
[00:03:49] [SPEAKER_04]: So it doesn't change those,
[00:03:50] [SPEAKER_04]: but it does change the new ones.
[00:03:52] [SPEAKER_04]: And that because a large number of people,
[00:03:54] [SPEAKER_04]: not just the banks, of course,
[00:03:56] [SPEAKER_04]: sell many of the bonds to the non-financial
[00:03:58] [SPEAKER_04]: in the sector, the golden sector of the world.
[00:04:01] [SPEAKER_04]: But they on sale them quite a few of them
[00:04:03] [SPEAKER_04]: again to the wealthy members of the American public.
[00:04:07] [SPEAKER_04]: And consequently it's been an income boost
[00:04:10] [SPEAKER_04]: from interest payments on government debt
[00:04:12] [SPEAKER_04]: as well as government of the deficit itself.
[00:04:15] [SPEAKER_04]: So that's, but basically both those issues create money.
[00:04:19] [SPEAKER_04]: I mean when you measure the amount of JDP
[00:04:21] [SPEAKER_04]: as you might have done money spent per year,
[00:04:24] [SPEAKER_04]: that also is also risen.
[00:04:26] [SPEAKER_04]: So you get better performance out of the American economy
[00:04:28] [SPEAKER_04]: than you're going out of the European
[00:04:30] [SPEAKER_04]: or the border boss,
[00:04:32] [SPEAKER_04]: both the country, especially can call the British European,
[00:04:34] [SPEAKER_04]: but the European Union economies are already okay.
[00:04:38] [SPEAKER_03]: So in both of those examples,
[00:04:40] [SPEAKER_03]: you gave it's expanding the money supply.
[00:04:42] [SPEAKER_03]: Isn't it really?
[00:04:42] [SPEAKER_03]: So the government is spending more money.
[00:04:44] [SPEAKER_03]: That's what they're doing.
[00:04:45] [SPEAKER_03]: Yeah. And the same with the bonds.
[00:04:47] [SPEAKER_03]: Yeah.
[00:04:47] [SPEAKER_03]: And by the way, on the bond on the bond issue,
[00:04:48] [SPEAKER_03]: and so I think the, you say it's wealthy Americans.
[00:04:52] [SPEAKER_03]: I think the base of that is broadening
[00:04:53] [SPEAKER_03]: because this big rise in ETFs
[00:04:57] [SPEAKER_03]: so people are buying up sort of like packets.
[00:04:59] [SPEAKER_03]: It becomes easier to buy this.
[00:05:01] [SPEAKER_03]: Yeah.
[00:05:01] [SPEAKER_04]: But the amount of your magic and buy
[00:05:03] [SPEAKER_04]: depends on how wealthy you are.
[00:05:05] [SPEAKER_04]: I'm sorry even those some poor people get ETFs
[00:05:08] [SPEAKER_04]: and they're probably going to have
[00:05:09] [SPEAKER_04]: they're buying a buy a damn suck
[00:05:11] [SPEAKER_04]: listening to the upper trust.
[00:05:12] [SPEAKER_03]: Yeah, exactly.
[00:05:14] [SPEAKER_03]: Okay, so it's more money.
[00:05:15] [SPEAKER_03]: So if you look at national debt in the US, for example,
[00:05:18] [SPEAKER_03]: I wrote in 22.7 trillion to 34 trillion.
[00:05:21] [SPEAKER_03]: So that's almost a 50% increase
[00:05:24] [SPEAKER_03]: whereas the EU increase over the same time.
[00:05:26] [SPEAKER_03]: This is again, looking from just before the pandemic
[00:05:30] [SPEAKER_03]: to second quarter of this year.
[00:05:32] [SPEAKER_03]: So 50% increase in the national debt.
[00:05:34] [SPEAKER_03]: The EU's national debt increased by 13, 13 versus 50.
[00:05:40] [SPEAKER_03]: So you know, the numbers are very clear aren't they?
[00:05:42] [SPEAKER_04]: Yeah, and this is the thing.
[00:05:43] [SPEAKER_04]: I mean, this is just,
[00:05:44] [SPEAKER_04]: and it is so frustrating
[00:05:46] [SPEAKER_04]: to watch this garbage being pumped out
[00:05:48] [SPEAKER_04]: by politicians and journalists around the world.
[00:05:51] [SPEAKER_04]: Because when you do the accounting
[00:05:53] [SPEAKER_04]: and that's one of the beauties of my revels
[00:05:54] [SPEAKER_04]: software that let you do the accounting
[00:05:56] [SPEAKER_04]: and see what actually is involved in
[00:05:58] [SPEAKER_04]: what we call government debt.
[00:06:00] [SPEAKER_04]: And this is a boy which Stephanie Kelton
[00:06:02] [SPEAKER_04]: and the modern monetary theory crowd
[00:06:03] [SPEAKER_04]: will be making incestantly.
[00:06:05] [SPEAKER_04]: Government debt is not what we think of as debt.
[00:06:09] [SPEAKER_04]: When you and I have debt,
[00:06:10] [SPEAKER_04]: we go to a bank.
[00:06:12] [SPEAKER_04]: We used to get down on their hands and knees.
[00:06:14] [SPEAKER_04]: Now it seems to be the bank
[00:06:15] [SPEAKER_04]: as they're doing that, but I won't go there.
[00:06:18] [SPEAKER_04]: But they want to, you basically, you're more gushing your assets.
[00:06:22] [SPEAKER_04]: They're people should remember,
[00:06:25] [SPEAKER_04]: or should be reminded of the actual meaning of mortgage
[00:06:28] [SPEAKER_04]: just Latin for death contracts.
[00:06:30] [SPEAKER_04]: So you know, you're giving away your assets.
[00:06:32] [SPEAKER_04]: So if you die, the assets go to the bank
[00:06:34] [SPEAKER_04]: that's sort of thing.
[00:06:36] [SPEAKER_04]: And if you can't get the income in them,
[00:06:38] [SPEAKER_04]: bang you fold and that's the nature of debt
[00:06:41] [SPEAKER_04]: that we all have as private debt
[00:06:44] [SPEAKER_04]: and not government debt.
[00:06:45] [SPEAKER_04]: Now you look at what happens with government debt.
[00:06:47] [SPEAKER_04]: And this is why it's important to the double entry book
[00:06:49] [SPEAKER_04]: keeping which the godly tables
[00:06:51] [SPEAKER_04]: and rebel make it incredibly easy to do.
[00:06:53] [SPEAKER_04]: When the government spends,
[00:06:55] [SPEAKER_04]: it puts money to people's deposit accounts
[00:06:57] [SPEAKER_04]: and simultaneously the balance of double entry book
[00:07:00] [SPEAKER_04]: keeping and this is actually part of the mechanics as well.
[00:07:03] [SPEAKER_04]: The amount of money in the reserve accounts
[00:07:05] [SPEAKER_04]: of private banks go up.
[00:07:07] [SPEAKER_04]: But that's what actually means they will then make the transfer
[00:07:10] [SPEAKER_04]: to your personal deposit account at private bank.
[00:07:13] [SPEAKER_04]: And so there is as well as creating money,
[00:07:17] [SPEAKER_04]: the deficit, the government spending
[00:07:18] [SPEAKER_04]: and excessive taxation creates reserves.
[00:07:21] [SPEAKER_04]: Now reserves used to be non-incomboning assets,
[00:07:25] [SPEAKER_04]: which is the last thing you want.
[00:07:28] [SPEAKER_04]: So the practice has been up until a global financial crisis.
[00:07:32] [SPEAKER_04]: You, the deficit creates reserves, reserves are an asset
[00:07:35] [SPEAKER_04]: but they're a barren asset.
[00:07:37] [SPEAKER_04]: The government then sells bonds
[00:07:39] [SPEAKER_04]: and the bonds offer a interest rate return.
[00:07:42] [SPEAKER_04]: So you have the banks and primary dealers
[00:07:46] [SPEAKER_04]: which have accumulated reserves courtesy of the deficit
[00:07:50] [SPEAKER_04]: being run.
[00:07:51] [SPEAKER_04]: They are offered a deal of converting these into bonds
[00:07:55] [SPEAKER_04]: which earn interest and which can also be traded.
[00:07:58] [SPEAKER_04]: They line up for it.
[00:07:59] [SPEAKER_04]: Okay? That's well, they want that.
[00:08:01] [SPEAKER_04]: That is then.
[00:08:03] [SPEAKER_04]: And how does the government pay for it?
[00:08:05] [SPEAKER_04]: It issues more bonds.
[00:08:06] [SPEAKER_04]: It's partly circular but the central bank
[00:08:09] [SPEAKER_04]: and then buy the bonds that are issued
[00:08:10] [SPEAKER_04]: to cover the interest rate.
[00:08:11] [SPEAKER_04]: There's no exponential explosion and debt
[00:08:14] [SPEAKER_04]: that comes out of that.
[00:08:15] [SPEAKER_04]: The mechanics are straightforward
[00:08:17] [SPEAKER_04]: and people who worry about it,
[00:08:20] [SPEAKER_04]: a like people who worry that petrol tank
[00:08:22] [SPEAKER_04]: is going to run up.
[00:08:24] [SPEAKER_04]: They worry that they're worried about the petrol tank
[00:08:27] [SPEAKER_04]: when they're actually looking at the lubrication
[00:08:29] [SPEAKER_04]: of the engine.
[00:08:31] [SPEAKER_04]: It's getting two separate mechanisms confused.
[00:08:34] [SPEAKER_04]: So the, but the argument,
[00:08:35] [SPEAKER_03]: but the argument they do,
[00:08:36] [SPEAKER_03]: they do give though,
[00:08:38] [SPEAKER_03]: is that we'll say there's an interest rate
[00:08:41] [SPEAKER_03]: that's payable on those bonds of 5%.
[00:08:43] [SPEAKER_03]: That's 5% of the value of those bonds.
[00:08:45] [SPEAKER_03]: The government has got to stomp up
[00:08:46] [SPEAKER_03]: and pay for every year
[00:08:47] [SPEAKER_03]: and then that's where you get the argument.
[00:08:50] [SPEAKER_03]: Well, this is debt which is going to be paid
[00:08:52] [SPEAKER_03]: for in future generations.
[00:08:53] [SPEAKER_03]: And that's wrong.
[00:08:54] [SPEAKER_03]: That's wrong again.
[00:08:56] [SPEAKER_03]: We can well the many of them
[00:08:57] [SPEAKER_03]: he has created.
[00:08:58] [SPEAKER_03]: The money is created.
[00:08:59] [SPEAKER_04]: They're not borrowing it.
[00:09:00] [SPEAKER_04]: They create the money,
[00:09:01] [SPEAKER_04]: both of the deficit itself and for the payments
[00:09:04] [SPEAKER_04]: of interest on bonds,
[00:09:05] [SPEAKER_04]: they're creating the money,
[00:09:06] [SPEAKER_04]: they're not borrowing it.
[00:09:07] [SPEAKER_04]: And you might have arguments
[00:09:08] [SPEAKER_04]: about whether they're creating too much money
[00:09:09] [SPEAKER_04]: or too little.
[00:09:10] [SPEAKER_03]: And that's obviously the European.
[00:09:12] [SPEAKER_03]: Well, that would be said,
[00:09:13] [SPEAKER_03]: that's the, so it almost adds to the same thing.
[00:09:15] [SPEAKER_03]: So the government creates that money
[00:09:16] [SPEAKER_03]: and then they go, okay, well,
[00:09:18] [SPEAKER_03]: that money has been created
[00:09:19] [SPEAKER_03]: to pay for those bonds,
[00:09:20] [SPEAKER_03]: which means that money could have been used
[00:09:22] [SPEAKER_03]: instead to pay for hospitals, for example.
[00:09:26] [SPEAKER_03]: But in either case,
[00:09:27] [SPEAKER_03]: it's a problem.
[00:09:28] [SPEAKER_03]: It's a problem.
[00:09:30] [SPEAKER_03]: Yeah, the money is going into the economy
[00:09:31] [SPEAKER_03]: in both cases isn't it really?
[00:09:33] [SPEAKER_03]: Yeah.
[00:09:35] [SPEAKER_03]: So the net effect.
[00:09:35] [SPEAKER_03]: I mean, okay.
[00:09:36] [SPEAKER_04]: It's the interest rate they're paying,
[00:09:38] [SPEAKER_04]: which is the problem,
[00:09:39] [SPEAKER_04]: which is said by the central bank
[00:09:40] [SPEAKER_04]: and the central banks of,
[00:09:42] [SPEAKER_04]: they're run by near classical economists.
[00:09:44] [SPEAKER_04]: They've done a standard economy,
[00:09:45] [SPEAKER_04]: they understand a false model of the economy.
[00:09:48] [SPEAKER_04]: And that's why they think
[00:09:48] [SPEAKER_04]: putting interest rates up will control the economy.
[00:09:51] [SPEAKER_04]: But in fact, the cost of government borrowing
[00:09:53] [SPEAKER_04]: is said by the government's own decision making,
[00:09:56] [SPEAKER_04]: which is though unfortunately,
[00:09:57] [SPEAKER_04]: it's also a bunch of learn-effects.
[00:09:59] [SPEAKER_03]: Right, but it does relate to,
[00:10:01] [SPEAKER_03]: you know, they don't issue bonds
[00:10:02] [SPEAKER_03]: which are out of kilter and pay interest rates,
[00:10:05] [SPEAKER_03]: which are out of kilter with the interest rate
[00:10:07] [SPEAKER_03]: that's said by the central bank, though.
[00:10:08] [SPEAKER_04]: They've got, they've got, they've got it.
[00:10:10] [SPEAKER_04]: And they've got to say the rate that goes on the treasury
[00:10:12] [SPEAKER_04]: bond has to be the one to clear
[00:10:13] [SPEAKER_03]: by the central bank because they are bid for.
[00:10:18] [SPEAKER_03]: And so the markets make sure that they are same.
[00:10:21] [SPEAKER_03]: So, okay, so tell me this then.
[00:10:23] [SPEAKER_03]: So, I mean, that all makes sense.
[00:10:25] [SPEAKER_03]: I mean, and widely accepted, I think,
[00:10:27] [SPEAKER_03]: you know, in economic circles that the,
[00:10:29] [SPEAKER_04]: I'm not sure what I'm trying.
[00:10:30] [SPEAKER_04]: That's the trouble.
[00:10:31] [SPEAKER_03]: I came a lot up, but you know, I talked to a lot of bankers.
[00:10:33] [SPEAKER_03]: And the analyst I'm talking to,
[00:10:35] [SPEAKER_03]: you say, exactly, actually, you're being interested.
[00:10:38] [SPEAKER_03]: Exactly the same thing that's now opened with you.
[00:10:40] [SPEAKER_03]: Why is the US doing so well compared to the rest of the world?
[00:10:47] [SPEAKER_03]: And, you know, everyone goes well,
[00:10:48] [SPEAKER_03]: it's the inflation reduction act.
[00:10:51] [SPEAKER_03]: So all that extra government spending.
[00:10:52] [SPEAKER_04]: So I think there's...
[00:10:54] [SPEAKER_04]: It's a journalistic circles and what you'll see in the front page
[00:10:57] [SPEAKER_04]: in the New York Times and the front page of the Guardian
[00:10:59] [SPEAKER_04]: and so on.
[00:11:00] [SPEAKER_04]: It's all as black hole garbage.
[00:11:02] [SPEAKER_04]: And that's simplistic and the political circles as well.
[00:11:07] [SPEAKER_04]: And this garbage is what leads to the parallel paralysis
[00:11:11] [SPEAKER_04]: of the European Union,
[00:11:12] [SPEAKER_04]: because they've enacted that in the mastery treaty.
[00:11:14] [SPEAKER_04]: The stupidity of the current labor government
[00:11:16] [SPEAKER_04]: in the UK, you know, deciding to go to freeze,
[00:11:19] [SPEAKER_04]: pensioners to balance the budget absolutely insane decisions.
[00:11:23] [SPEAKER_04]: But in America, this thing to again.
[00:11:25] [SPEAKER_04]: You know, you know, you were at about level of the government
[00:11:27] [SPEAKER_04]: did so.
[00:11:28] [SPEAKER_04]: Yeah.
[00:11:28] [SPEAKER_04]: Next question.
[00:11:29] [SPEAKER_04]: Okay.
[00:11:30] [SPEAKER_04]: And the American politicians,
[00:11:32] [SPEAKER_04]: least than the couple, the Democrats and Shards at the moment,
[00:11:37] [SPEAKER_04]: are giving us a sensible push-off to this particular idea
[00:11:41] [SPEAKER_04]: logical and accounting, these stupid arguments.
[00:11:44] [SPEAKER_03]: Except a cat and cat and cat and with a peer,
[00:11:46] [SPEAKER_03]: I'd agree of course they have that threat
[00:11:48] [SPEAKER_03]: to close down government, which we had again where,
[00:11:51] [SPEAKER_03]: you know, the debt to everyone votes on that.
[00:11:53] [SPEAKER_03]: The strength enough, there's a bit of, you know,
[00:11:55] [SPEAKER_03]: towing and throwing, you know, will it give it,
[00:11:57] [SPEAKER_03]: you know, will let it pass along as you do this
[00:11:59] [SPEAKER_03]: for my constituency or whatever.
[00:12:02] [SPEAKER_03]: You get a bit of RGB, you know, always gets past
[00:12:03] [SPEAKER_03]: of the debt ceiling, always goes up.
[00:12:05] [SPEAKER_03]: Well, at that stage again this month.
[00:12:07] [SPEAKER_03]: But he never does more training.
[00:12:08] [SPEAKER_03]: Pass, does it?
[00:12:09] [SPEAKER_03]: That's the thing in all they always just keep on pushing it
[00:12:12] [SPEAKER_03]: up and their economy keeps on growing.
[00:12:14] [SPEAKER_03]: But tell me this.
[00:12:15] [SPEAKER_03]: So if the national debt, as I said, is increased by 50%
[00:12:19] [SPEAKER_03]: pre and post pandemic in the US and only 13% in the EU.
[00:12:24] [SPEAKER_03]: In the UK, it's increased by 95%.
[00:12:28] [SPEAKER_03]: And yet we're not seeing that same, you know,
[00:12:31] [SPEAKER_03]: high degree of growth in the UK.
[00:12:33] [SPEAKER_03]: Whether UK is definitely doing better than the EU,
[00:12:35] [SPEAKER_03]: that's for sure, but not doing as well as America.
[00:12:37] [SPEAKER_03]: So it's got to be a question of how you spend the money as well.
[00:12:39] [SPEAKER_04]: It's also the structure of the economy.
[00:12:41] [SPEAKER_04]: I mean, the UK economy made the decision under
[00:12:44] [SPEAKER_04]: as a Maggie, that's 40 or 50 years ago
[00:12:46] [SPEAKER_04]: to go with services rather than the manufacturing.
[00:12:50] [SPEAKER_04]: I remember saying, young kid, I'm watching an English show
[00:12:52] [SPEAKER_04]: called The Plane Makers.
[00:12:54] [SPEAKER_04]: Can you imagine that?
[00:12:55] [SPEAKER_04]: An English show, TV show called The Plane Makers today?
[00:12:58] [SPEAKER_04]: Of course, the company that was the model was shut down.
[00:13:00] [SPEAKER_04]: The show doesn't exist anymore.
[00:13:03] [SPEAKER_04]: Exactly.
[00:13:03] [SPEAKER_03]: So don't do make planes in the UK.
[00:13:06] [SPEAKER_03]: But largely for bombing countries.
[00:13:07] [SPEAKER_04]: Well, that's important.
[00:13:09] [SPEAKER_04]: Yeah, yeah, yeah, yeah.
[00:13:10] [SPEAKER_04]: There's a growth industry for you, the war machine.
[00:13:12] [SPEAKER_04]: But yeah, that's the irony.
[00:13:15] [SPEAKER_04]: When without the manufacturing sector, you can't respond.
[00:13:18] [SPEAKER_04]: The inflation reduction act is just American,
[00:13:20] [SPEAKER_04]: you know, the financial people are happily
[00:13:25] [SPEAKER_04]: acknowledging that's what's the economy taking over.
[00:13:29] [SPEAKER_04]: That is specifically directed, improving,
[00:13:32] [SPEAKER_04]: are degraded, but still strongly
[00:13:35] [SPEAKER_04]: existent American manufacturing sector.
[00:13:38] [SPEAKER_04]: So it's rather hard to kick start the service sector
[00:13:40] [SPEAKER_04]: with more money because that normally means
[00:13:42] [SPEAKER_04]: you have more private debt and that's more
[00:13:45] [SPEAKER_04]: of a negative and an oppositive.
[00:13:46] [SPEAKER_03]: So inflation is coming down.
[00:13:49] [SPEAKER_03]: So that's another win for the United States.
[00:13:52] [SPEAKER_03]: So it's down to 2.9% for the United States.
[00:13:55] [SPEAKER_03]: But it's only 2.4% for the EU, 2.2% for the UK.
[00:13:59] [SPEAKER_03]: Australia's up at 3.5%, still 0.6% for China.
[00:14:03] [SPEAKER_03]: But if we look at the core rate, so you take out food
[00:14:04] [SPEAKER_03]: and energy, which is, I don't know whether it's ever a good idea
[00:14:08] [SPEAKER_03]: to say this act because this is actually what impacts people.
[00:14:10] [SPEAKER_04]: But you take out food, honestly, mode.
[00:14:13] [SPEAKER_04]: Who knows food?
[00:14:14] [SPEAKER_04]: You know what kind of a say, you know what?
[00:14:15] [SPEAKER_03]: What a real, incredibly interesting thing.
[00:14:17] [SPEAKER_03]: Because it kind of is say, let's just look at the core.
[00:14:19] [SPEAKER_03]: Let's take out food energy because they are volatile items
[00:14:22] [SPEAKER_03]: and you know these are volatile items.
[00:14:24] [SPEAKER_03]: These are the things they put, you know,
[00:14:26] [SPEAKER_03]: matter most of people.
[00:14:26] [SPEAKER_04]: Tell you what, tell you what, I'd be happy to take food
[00:14:29] [SPEAKER_04]: and energy out if economists apply to themselves as well.
[00:14:32] [SPEAKER_04]: That would be really a lot of fun to watch.
[00:14:33] [SPEAKER_03]: So I didn't have food or energy.
[00:14:35] [SPEAKER_04]: Yeah.
[00:14:35] [SPEAKER_04]: No food or energy for economists to define core inflation
[00:14:38] [SPEAKER_04]: as taking out food and energy.
[00:14:40] [SPEAKER_03]: Anyway, look, it's a steeper to eat system argument isn't it?
[00:14:42] [SPEAKER_03]: For saying, well, inflation is actually a little bit higher
[00:14:44] [SPEAKER_03]: than we, you know, than that core, that non-core rate.
[00:14:47] [SPEAKER_03]: It tells you, so 2.9% for the US becomes 3.2%.
[00:14:51] [SPEAKER_03]: 2.4% for the EU becomes 2.8%.
[00:14:56] [SPEAKER_03]: 2.2% for the UK actually becomes 3.6%.
[00:15:00] [SPEAKER_03]: And so the interesting thing is I think this is valid though
[00:15:04] [SPEAKER_03]: is looking at the services component.
[00:15:07] [SPEAKER_03]: Because that sort of like saying, well, okay,
[00:15:08] [SPEAKER_03]: here's particularly for economies like the UK
[00:15:10] [SPEAKER_03]: and only US really where the services sector is so dominant.
[00:15:16] [SPEAKER_03]: If you've got high levels of inflation there,
[00:15:18] [SPEAKER_03]: then that's, that is a concern if it's not coming down.
[00:15:21] [SPEAKER_03]: It's not coming down.
[00:15:22] [SPEAKER_03]: So they're all in the 4.5, 5.4.5.
[00:15:25] [SPEAKER_03]: It's almost everywhere you look apart from China, obviously.
[00:15:28] [SPEAKER_03]: That service inflation is still very high
[00:15:30] [SPEAKER_03]: and that isn't coming down.
[00:15:32] [SPEAKER_03]: But you think that's going to need to do with interest rates?
[00:15:34] [SPEAKER_04]: Well, interest rates are irrelevant.
[00:15:36] [SPEAKER_04]: I mean, the only way interest rates
[00:15:40] [SPEAKER_04]: work to control the economy.
[00:15:41] [SPEAKER_04]: If you put them up so much
[00:15:43] [SPEAKER_04]: that the private sector matches those increases,
[00:15:46] [SPEAKER_04]: crushes the demand for credit
[00:15:48] [SPEAKER_04]: and potentially sends lots of people with a gusting dead bankrupt,
[00:15:51] [SPEAKER_04]: then you have a down turn and a slump.
[00:15:55] [SPEAKER_04]: That's the way interest rates are control mechanism.
[00:15:58] [SPEAKER_04]: They're a bit like it deciding to slow a car
[00:15:59] [SPEAKER_04]: drown by throwing a brick at the driver.
[00:16:01] [SPEAKER_04]: It tends to work but it also tends to crash the car.
[00:16:05] [SPEAKER_04]: So they're very, very blunt and un,
[00:16:08] [SPEAKER_04]: they cannot be used to fine-tune the way
[00:16:10] [SPEAKER_04]: that neocrystical economies believe they can.
[00:16:12] [SPEAKER_04]: And this is the trouble.
[00:16:14] [SPEAKER_04]: We're in a world which is run by a economist
[00:16:16] [SPEAKER_04]: who doesn't understand the world.
[00:16:17] [SPEAKER_03]: By the way, third brick at me
[00:16:18] [SPEAKER_03]: when I'm driving my car and it's not going to crash.
[00:16:21] [SPEAKER_03]: Particularly one on the motorway
[00:16:22] [SPEAKER_03]: because it will just slow down in line with the car
[00:16:24] [SPEAKER_03]: and fund of you and for taking my foot off the pedal
[00:16:26] [SPEAKER_03]: it'll stop anywhere.
[00:16:29] [SPEAKER_03]: So that NL is working anymore.
[00:16:31] [SPEAKER_03]: Steve, it's out of date because of modern technology.
[00:16:35] [SPEAKER_03]: But okay.
[00:16:36] [SPEAKER_04]: I'll throw it from behind as if I'm lucky.
[00:16:39] [SPEAKER_03]: So the fact that inflation is coming down
[00:16:41] [SPEAKER_03]: but services inflation is staying up.
[00:16:43] [SPEAKER_03]: So I'm curious about that one
[00:16:44] [SPEAKER_03]: because that is the same in the US and Europe.
[00:16:48] [SPEAKER_03]: So we can say, well, you know,
[00:16:50] [SPEAKER_03]: the US is doing well on growth
[00:16:52] [SPEAKER_03]: but still got this inflation rate
[00:16:55] [SPEAKER_03]: that's refusing to come down.
[00:16:57] [SPEAKER_03]: But that is just demand.
[00:16:59] [SPEAKER_03]: And then there is this service sector
[00:17:00] [SPEAKER_03]: because we are all going out to cafes
[00:17:02] [SPEAKER_03]: there's less people working.
[00:17:04] [SPEAKER_03]: It's an or you know or wanting health support
[00:17:07] [SPEAKER_03]: or whatever.
[00:17:07] [SPEAKER_03]: All of these human-based services
[00:17:12] [SPEAKER_03]: which there's just not enough people.
[00:17:14] [SPEAKER_03]: That's the issue isn't it?
[00:17:15] [SPEAKER_04]: Yeah, I mean it's also because inflation
[00:17:18] [SPEAKER_04]: is an income distribution phenomenon
[00:17:20] [SPEAKER_04]: and when you have the inflation rate of inflation
[00:17:22] [SPEAKER_04]: going up it often hits the commodities that people
[00:17:27] [SPEAKER_04]: pull people by and all than rich people
[00:17:28] [SPEAKER_04]: and the people on service industry don't have the bargaining power
[00:17:32] [SPEAKER_04]: of people in manufacturing often.
[00:17:35] [SPEAKER_04]: So what you'll have is a belated catch-up
[00:17:38] [SPEAKER_04]: as the cost people start putting up their rates
[00:17:42] [SPEAKER_04]: for manicures, etc. etc.
[00:17:43] [SPEAKER_04]: It turns up as a slow creep in the inflation rate.
[00:17:47] [SPEAKER_04]: I've got a feeling, I don't know,
[00:17:48] [SPEAKER_04]: but I've got a feeling it's more that effect
[00:17:49] [SPEAKER_04]: that's causing inflation and bullying
[00:17:51] [SPEAKER_04]: during the service sector.
[00:17:52] [SPEAKER_03]: Okay, well explore more of this when we come back.
[00:17:53] [SPEAKER_03]: One of the things I want to look at
[00:17:54] [SPEAKER_03]: as well as the impact of fur low
[00:17:57] [SPEAKER_03]: and whether the US on reflection
[00:17:59] [SPEAKER_03]: had a smarter way of dealing with all of this.
[00:18:00] [SPEAKER_03]: We'll look at that when we come back
[00:18:01] [SPEAKER_03]: on the deep banking economics podcast.
[00:18:03] [SPEAKER_03]: It's me and Steve back in a moment.
[00:18:06] [SPEAKER_02]: This is the deep banking economics podcast
[00:18:09] [SPEAKER_02]: with Steve Keen and Phil Dobby.
[00:18:20] [SPEAKER_03]: So we're looking at the differences between Europe
[00:18:22] [SPEAKER_03]: and the US and why the US seems to be coming out of the pandemic.
[00:18:26] [SPEAKER_03]: That much better than the EU,
[00:18:28] [SPEAKER_03]: in fact the EU seems to be really, really struggling
[00:18:30] [SPEAKER_03]: but to hear if you look at Germany now.
[00:18:32] [SPEAKER_03]: I mean we've given sort of an aggregate
[00:18:34] [SPEAKER_03]: great figure for the European Union.
[00:18:36] [SPEAKER_03]: I think Germany is 100 out of Germany
[00:18:38] [SPEAKER_03]: is basically flagging and stagnating
[00:18:41] [SPEAKER_03]: and doesn't seem to be getting any better.
[00:18:44] [SPEAKER_03]: But what about the way that we dealt with fur low?
[00:18:48] [SPEAKER_03]: So the approach within Europe and the UK
[00:18:51] [SPEAKER_03]: and Australia many places was to say,
[00:18:53] [SPEAKER_03]: well okay, we'll just pay people for their jobs.
[00:18:56] [SPEAKER_03]: We'll pay 80% of their salary
[00:18:58] [SPEAKER_03]: just to keep the economy afloat.
[00:19:01] [SPEAKER_03]: Whereas the US approach was more sort of well,
[00:19:05] [SPEAKER_03]: actually you need to go on an employment benefit
[00:19:06] [SPEAKER_03]: if your job can't survive.
[00:19:09] [SPEAKER_03]: We're not going to fur low you,
[00:19:10] [SPEAKER_03]: but we will give you welfare payments.
[00:19:13] [SPEAKER_03]: So the US unemployment rate during the pandemic
[00:19:16] [SPEAKER_03]: peaked at 14.8%.
[00:19:20] [SPEAKER_03]: Whereas the EU unemployment rate peaked at 8.6%
[00:19:24] [SPEAKER_03]: because of fur low.
[00:19:26] [SPEAKER_03]: There's argument out there that fur low actually
[00:19:28] [SPEAKER_03]: just delayed restructuring in the economy
[00:19:31] [SPEAKER_03]: and that restructuring has helped the US to bounce back.
[00:19:34] [SPEAKER_03]: Is that a valid argument to think?
[00:19:36] [SPEAKER_04]: I'm not so fast.
[00:19:38] [SPEAKER_04]: If it's feasible, I mean, they're not much more interested
[00:19:41] [SPEAKER_04]: in Germany as the impact of energy process
[00:19:43] [SPEAKER_04]: and the unavailability of energy.
[00:19:45] [SPEAKER_04]: I mean this is the other issue which we just focus
[00:19:48] [SPEAKER_04]: on the pandemic, we ignore the energy issues as well.
[00:19:51] [SPEAKER_04]: And one of my favorite near-classical papers
[00:19:53] [SPEAKER_04]: is by a guy called Rudy Backman Hi, Rudy.
[00:19:56] [SPEAKER_04]: Where he points out that according to the near-classical growth theory,
[00:20:00] [SPEAKER_04]: a 10% fall in the availability of energy
[00:20:03] [SPEAKER_04]: should reduce germinate output by a
[00:20:05] [SPEAKER_04]: according to conventionally economic theory,
[00:20:08] [SPEAKER_04]: 0.4%.
[00:20:09] [SPEAKER_04]: Okay, so 10% fall in energy,
[00:20:12] [SPEAKER_04]: 0.4% fall in GDP
[00:20:14] [SPEAKER_04]: and the best ticket boosted to was a 1.5% fall in GDP.
[00:20:20] [SPEAKER_04]: Now instead we're seeing
[00:20:21] [SPEAKER_04]: you know, Germany's industry, as you say,
[00:20:24] [SPEAKER_04]: it's really, really lagging badly.
[00:20:27] [SPEAKER_04]: A lot of manufacturing is shutting down.
[00:20:28] [SPEAKER_04]: They can't afford the cost of energy they're now paying
[00:20:31] [SPEAKER_04]: and the unavailability of energy is a major issue
[00:20:34] [SPEAKER_04]: for the German economy, which of course
[00:20:36] [SPEAKER_04]: is not the situation if the United States.
[00:20:39] [SPEAKER_03]: Yeah, well German GDP growth rate currently is zero
[00:20:42] [SPEAKER_03]: or you know possibly in the negative but annualised zero at the moment.
[00:20:47] [SPEAKER_03]: So yeah, I mean there's real problems
[00:20:49] [SPEAKER_03]: and that's actually another problem for the
[00:20:51] [SPEAKER_03]: so you're not convinced on this idea that
[00:20:52] [SPEAKER_03]: well a bit of restructuring in the
[00:20:54] [SPEAKER_03]: because I mean with the fellowing, there's no doubt
[00:20:56] [SPEAKER_03]: is that so jobs were kept alive during furlough
[00:21:00] [SPEAKER_03]: the perhaps shouldn't have been.
[00:21:01] [SPEAKER_03]: Not just because of the pandemic but you know
[00:21:03] [SPEAKER_03]: if you take it that period of one or two years,
[00:21:07] [SPEAKER_03]: there would have been restructuring happening in companies
[00:21:08] [SPEAKER_03]: but companies are going to say well we're not
[00:21:10] [SPEAKER_03]: going to get rid of these people or restructure
[00:21:12] [SPEAKER_03]: because well the government's paying for it.
[00:21:16] [SPEAKER_03]: So yeah, so it's possibly going to lose here.
[00:21:19] [SPEAKER_04]: Yeah, it's possibly an issue but I'm not sure
[00:21:22] [SPEAKER_04]: if asked about it because of the main thing
[00:21:24] [SPEAKER_04]: which ever where you did it, you had no make sure people continue
[00:21:27] [SPEAKER_04]: receiving an income during the pandemic.
[00:21:29] [SPEAKER_04]: Otherwise the financial system would have collapsed
[00:21:33] [SPEAKER_04]: so you know I mean in some ways the British
[00:21:37] [SPEAKER_04]: and the European system has fasted because of the
[00:21:39] [SPEAKER_04]: okay we don't lose your job here as a pay check
[00:21:42] [SPEAKER_04]: covering it. The interesting thing for Americans
[00:21:44] [SPEAKER_04]: was that there were something very repayments as well of course
[00:21:47] [SPEAKER_04]: so that it wasn't just a case of saying no go on the doll
[00:21:50] [SPEAKER_04]: and the doll's going to remind it the current level
[00:21:52] [SPEAKER_04]: so you can have a substantial fall in your income.
[00:21:54] [SPEAKER_04]: They're worrying come support from the American government as well
[00:21:57] [SPEAKER_04]: and a lot of low income Americans off at least
[00:22:00] [SPEAKER_04]: of the order of like from what I understand about 20% of the population
[00:22:04] [SPEAKER_04]: or more ended up getting more income during COVID
[00:22:07] [SPEAKER_04]: than they got during a normal period.
[00:22:09] [SPEAKER_03]: Yeah, yeah they've got to check in the post.
[00:22:11] [SPEAKER_03]: There was yeah exactly. I know that because my wife got one
[00:22:15] [SPEAKER_03]: even though we live in the UK.
[00:22:18] [SPEAKER_04]: If I want to benefit from the Americans
[00:22:20] [SPEAKER_03]: choosing if attacks all over the bloody planet.
[00:22:23] [SPEAKER_03]: Exactly they occasionally they'll pay out
[00:22:24] [SPEAKER_03]: although I don't think we'll see those days again.
[00:22:27] [SPEAKER_03]: So the other problem for the EU of course which
[00:22:30] [SPEAKER_03]: America I mean America has states but the Europe has countries.
[00:22:35] [SPEAKER_04]: How do you say the UK states under the European Union?
[00:22:38] [SPEAKER_03]: Yeah but then they're not the same though are they because obviously
[00:22:41] [SPEAKER_03]: they're not anything but yeah and so you've got
[00:22:43] [SPEAKER_03]: you know this big problem that got the huge variations
[00:22:46] [SPEAKER_03]: so right now for example the unemployment rate in Spain
[00:22:49] [SPEAKER_03]: is 11.5% but Spain is growing really well it's got 2.9%
[00:22:55] [SPEAKER_03]: growth rate better than many other places and I think it's a lot of
[00:22:59] [SPEAKER_03]: that is because of tourism you know so they're getting
[00:23:01] [SPEAKER_03]: foreign money coming year that's helping the the economy to grow
[00:23:05] [SPEAKER_03]: because the Brits all of a sudden now you know engulfing the
[00:23:08] [SPEAKER_03]: country and the Germans engulfing the country again
[00:23:10] [SPEAKER_03]: but those people who are not working in that sector aren't doing very well
[00:23:13] [SPEAKER_03]: so you've got a very high unemployment rate.
[00:23:16] [SPEAKER_03]: Germany as a states got a very very low growth rate
[00:23:21] [SPEAKER_03]: and try to see whether unemployment rate that unemployment rate is not too bad
[00:23:24] [SPEAKER_03]: it's only 3% actually the lowest in the EU.
[00:23:28] [SPEAKER_03]: So they've got low growth but also very low unemployment
[00:23:31] [SPEAKER_03]: and then you've got places like Ireland which are now having to restructure
[00:23:33] [SPEAKER_03]: because the EU has suddenly been alerted to the fact that maybe the
[00:23:37] [SPEAKER_03]: tax laws are helping Ireland have changed of course
[00:23:39] [SPEAKER_03]: and they're married to charge wooden poor tax Dodgers would
[00:23:42] [SPEAKER_03]: thank well and then now they're paying for it now because they're going to grow
[00:23:44] [SPEAKER_03]: they've got a negative growth rate of about 4% I mean actually
[00:23:47] [SPEAKER_03]: that they're doing worse than they're just about anybody in the EU.
[00:23:51] [SPEAKER_03]: So you know navigating your way through when you've got
[00:23:54] [SPEAKER_03]: such a mix of economies is a is a hindrance to growth is not
[00:23:59] [SPEAKER_03]: and you know a big support of the EU but I do wonder whether actually
[00:24:02] [SPEAKER_04]: it does seem to grow. It does. I mean this is this we've had
[00:24:06] [SPEAKER_04]: there 40 years of the is it what 40 years or this is 25 years of the
[00:24:11] [SPEAKER_04]: 25 or 25 years of the euro and if the evidence isn't in already
[00:24:15] [SPEAKER_04]: the impact that's been negative on Italy in particular
[00:24:19] [SPEAKER_04]: it's been a negative it's a silly idea it should never have been
[00:24:23] [SPEAKER_04]: intimate then you're now saying they are being packed off
[00:24:25] [SPEAKER_04]: but so I'm going for a European Union just against the euro.
[00:24:28] [SPEAKER_03]: I was well-being and some of the regulations so the EU rules
[00:24:32] [SPEAKER_03]: which admitted immediately they did drop during the pandemic because they
[00:24:35] [SPEAKER_03]: had to but the idea that annual budget deficit shouldn't exceed 3%
[00:24:40] [SPEAKER_04]: that's crazy. The master actually. Yeah that's insanity.
[00:24:43] [SPEAKER_03]: But you know Germany's been very well behaved you know through all of this
[00:24:46] [SPEAKER_03]: so they they're deficit last year 2.5% of GDP so they didn't exceed
[00:24:51] [SPEAKER_04]: that 3% which is why they didn't grow. I mean this is the
[00:24:55] [SPEAKER_04]: thing if you say the government's not going to create money then the
[00:24:58] [SPEAKER_04]: economy's going to grow more slowly. Again this all is stuff
[00:25:02] [SPEAKER_04]: it is crazy how bad the economics discipline is looking in
[00:25:06] [SPEAKER_04]: you an evidence so they have all this econometric high
[00:25:10] [SPEAKER_04]: high-falutants statistical analysis they'll they'll torture the data until it
[00:25:13] [SPEAKER_04]: confesses but to actually look at the raw data and say what's going on here how
[00:25:17] [SPEAKER_04]: we could fed go say comparing the period of the so-called
[00:25:21] [SPEAKER_04]: canzing in period to the what's been near a classical and then
[00:25:24] [SPEAKER_04]: auto liberal under the under the euro compare it and you get well
[00:25:28] [SPEAKER_04]: sorry guys we said we do better than the canzing and we've done worse than
[00:25:32] [SPEAKER_04]: the canzing and maybe we should change the theory that never happens they continue
[00:25:35] [SPEAKER_03]: on the same bloody religious parts yeah and hence you know that
[00:25:39] [SPEAKER_03]: staying within the 3% of annual budget deficit to GDP
[00:25:45] [SPEAKER_03]: Germany 2.5% the UK well we didn't you know we don't have to because we're not
[00:25:50] [SPEAKER_03]: part of anymore we were 3.8% in the UK and the UK economy is doing better
[00:25:55] [SPEAKER_03]: than the European economy that's for sure as a whole but yeah just as well the United
[00:26:00] [SPEAKER_03]: States is not part of the EU because they're deficit was 6.3% of
[00:26:04] [SPEAKER_04]: that sensible yeah and yeah I mean there's the basic rule that I have for
[00:26:09] [SPEAKER_04]: what the deficit should be in the context of a growing economy which is the
[00:26:13] [SPEAKER_04]: whole you know again climate change but in the context of a growing
[00:26:17] [SPEAKER_04]: economy if your economy is growing it's 6% normal out of which is
[00:26:23] [SPEAKER_04]: the partially real partially inflation and you're right
[00:26:27] [SPEAKER_04]: turn over money is about two then you you're sorry if you
[00:26:32] [SPEAKER_04]: deficit needs to be related to the rate of growth of the economy the bigger
[00:26:36] [SPEAKER_04]: the rate of growth economy the bigger the deficit you need to finance it otherwise
[00:26:39] [SPEAKER_04]: people got a spend existing money more quickly which they do not do yeah
[00:26:44] [SPEAKER_04]: okay the the the historical standard for the rate of turnover money is about 1.8
[00:26:48] [SPEAKER_04]: this is before we got under the high private debt levels after the in the
[00:26:52] [SPEAKER_04]: 9 and 60s and 70s but that 1.8 rate of turnover tell sure that you know if you
[00:26:58] [SPEAKER_04]: need to relate the rate of growth of the economy and the rate of growth of
[00:27:02] [SPEAKER_04]: money and if you don't do it you're going to stuff up and even Milton
[00:27:04] [SPEAKER_04]: freedom to some extent you can get to to our arguing and that
[00:27:08] [SPEAKER_04]: that fashion you ought to control how often the color copters
[00:27:11] [SPEAKER_03]: flow over the mythical economy yeah because of our manning 60s and a year
[00:27:16] [SPEAKER_03]: and I want to spend more I've got around 80s thousand a year
[00:27:20] [SPEAKER_03]: and my company my company's got to be able to pay me 80s thousand a year which
[00:27:25] [SPEAKER_03]: means they've got to make more money which means you know if they're paying
[00:27:29] [SPEAKER_03]: more they're going to have more purchases coming from somewhere
[00:27:32] [SPEAKER_03]: so our workers all that extra money come from it's either got a
[00:27:35] [SPEAKER_03]: come from the government putting money into the economy or it's got to be
[00:27:38] [SPEAKER_03]: from that company short term borrowing and that they're going to get that
[00:27:42] [SPEAKER_03]: growth but they've got to when they when they pay back that borrowing
[00:27:45] [SPEAKER_03]: then you know they lose all of that so it's
[00:27:48] [SPEAKER_03]: standstories and ultimately that growth has got to come from the government
[00:27:51] [SPEAKER_04]: the government you've got to come from many creation and if you have a coming
[00:27:54] [SPEAKER_04]: from government creation it doesn't come with a negative for the
[00:27:58] [SPEAKER_04]: the recipients as it does for private private debt you get more money from
[00:28:02] [SPEAKER_04]: private banks but you've got to then you know you've got to service that debt
[00:28:06] [SPEAKER_04]: so there's a sensible role for third money in a fee a mixed
[00:28:09] [SPEAKER_04]: fee it credit economy and the inability to realize that
[00:28:14] [SPEAKER_04]: I think largely comes out of the equilibrium fetish of mainstream
[00:28:17] [SPEAKER_04]: economists because they talk about you know the rate of a change of
[00:28:20] [SPEAKER_04]: they don't they talk about growth but they never talk about rates of change in the
[00:28:25] [SPEAKER_04]: sense that their whole theory is about equilibrium and you know supply
[00:28:28] [SPEAKER_04]: equals demand and all the static thinking and when you take into account
[00:28:32] [SPEAKER_04]: that if we're a growing economy and you're growing money supply then you're
[00:28:35] [SPEAKER_04]: basic your money or MV equation the money money times velocity equals
[00:28:39] [SPEAKER_04]: prices times turnover is now money times velocity plus the change in the money
[00:28:43] [SPEAKER_04]: supply now if you don't have that change in the money supply component and
[00:28:47] [SPEAKER_04]: then you're you're distorting your analysis and that's the they
[00:28:51] [SPEAKER_04]: leave it out because they have no understanding if I'm
[00:28:53] [SPEAKER_04]: honest credit either by private banks or by the government
[00:28:56] [SPEAKER_04]: and therefore this lease of these ridiculous policies which end up
[00:28:59] [SPEAKER_04]: staffing what they're trying to achieve which is the economic growth
[00:29:03] [SPEAKER_03]: so wonder where that your favorite topic has prices how much how influential they've been
[00:29:08] [SPEAKER_03]: in them in the situations well so we know for example has prices going backwards
[00:29:13] [SPEAKER_03]: in China and so sort of like the negative wealth effect is being seen as one of
[00:29:18] [SPEAKER_03]: the main reasons why people in China are just not spending anymore because they just
[00:29:21] [SPEAKER_03]: don't either they don't have the equity or even if they still have money
[00:29:24] [SPEAKER_03]: to spend they don't want to because they see that their wealth is diminishing
[00:29:27] [SPEAKER_03]: because their house is going down in value well it's the opposite the United States
[00:29:31] [SPEAKER_03]: so strangely the United States has prices have increased from again
[00:29:36] [SPEAKER_03]: looking at just before the pandemic so Q4 2019 to Q2 this year
[00:29:41] [SPEAKER_03]: has prices having increased by 70 percent what in the yep in the EU it's 25 percent
[00:29:50] [SPEAKER_03]: in the UK it's it's 25 percent 35 percent for a story
[00:29:54] [SPEAKER_03]: I've been ignoring a house prices obviously 70 percent of what you're
[00:29:57] [SPEAKER_03]: in period again actually so today say 7000 50 it's gone from in 2019
[00:30:00] [SPEAKER_03]: from about 265 thousand was the median house price up to 406 thousand so a little over 50
[00:30:07] [SPEAKER_04]: percent okay okay that's strawberry ridicular cia
[00:30:10] [SPEAKER_03]: house has got up so much in value you can release equity and spend it or you just
[00:30:14] [SPEAKER_03]: feel richer and you go out and spend so consumer can so
[00:30:18] [SPEAKER_03]: consumption goes up creating a house was in the ATM and you look at consumer spending
[00:30:23] [SPEAKER_03]: over that same period up 21 percent in the United States 15 percent for the EU
[00:30:28] [SPEAKER_03]: for Germany consumer spending over that period that five year periods actually fallen
[00:30:32] [SPEAKER_03]: 1.9 percent this is in absolute terms so factor in inflation
[00:30:37] [SPEAKER_03]: consumer spending is well done so no surprise the jem in economies didn't so badly
[00:30:41] [SPEAKER_04]: yeah yeah it was quite a bit of a bit of a strategy to go there recently and
[00:30:44] [SPEAKER_04]: just feel that the degraded state of it if you're a German infrastructure as well i'm going
[00:30:49] [SPEAKER_04]: for the joke they call on their portfolio yeah the one that's out like and take out
[00:30:57] [SPEAKER_04]: of this is that this is how the the country's gave us all the liberalism they've now
[00:31:02] [SPEAKER_04]: the combination of us at a mastery and attitude to economics with an obsession
[00:31:05] [SPEAKER_04]: about reducing government debt is Germany so this is basically come up and
[00:31:10] [SPEAKER_03]: for Germany though i feel sorry for the other Germans whereas you know supposedly
[00:31:14] [SPEAKER_03]: that bastion of capitalism the United States just seems a bit so solicitor
[00:31:19] [SPEAKER_04]: yeah i mean there's this thing that we lived in a mixed economy guys i mean again
[00:31:24] [SPEAKER_04]: with the pro-program if you want to symbolize a relationship between the two not a
[00:31:29] [SPEAKER_04]: paracivic and unfortunately you know i've got to agree with some of the
[00:31:34] [SPEAKER_04]: planes about excessive regulation on occasions in some areas
[00:31:40] [SPEAKER_04]: and slow preprocessing but a lot of that slow processing comes because you've
[00:31:45] [SPEAKER_04]: started the public sector and i'd like to notice the alarm muster is complaining about how
[00:31:49] [SPEAKER_04]: long it's taking to get approval to be able to get the changes for this the Starship
[00:31:54] [SPEAKER_04]: for a program if necessary got the budget had you know 50 years ago
[00:32:00] [SPEAKER_04]: the first of all it already have a very based on miles anyway but there'd be staff
[00:32:05] [SPEAKER_04]: to read into where they're documents and approve them so with you know you
[00:32:10] [SPEAKER_04]: use staff one half of the system it's not amazing the system is a whole fails to work well
[00:32:15] [SPEAKER_03]: there you haven't commented on the wealth effect do you think that might be part of it though
[00:32:18] [SPEAKER_04]: that it's hard potentially pipe is of the ocratic expression of the american's using the
[00:32:22] [SPEAKER_04]: houses as a tms yeah but that's that's storing our problem for future in terms of a credit
[00:32:27] [SPEAKER_03]: breakdown yeah exactly yeah rising private debt not a good thing all right so what about
[00:32:33] [SPEAKER_03]: productivity then so the u.s is they the u.s is starting to see that pick up there's the world
[00:32:38] [SPEAKER_03]: it seems like it's a bit of a disaster the u.s is picking up obviously because there's
[00:32:42] [SPEAKER_03]: the tech sector is based there and nowhere else seems to be able to match it and it's also
[00:32:46] [SPEAKER_04]: I mean the application of that does technology to new manufacturing process so you know
[00:32:52] [SPEAKER_04]: injury-dury printing which was taken a long time to come seriously a serious factor but it's
[00:32:59] [SPEAKER_04]: now a huge part of manufacturing in auto mobiles and obviously the space industry and that
[00:33:05] [SPEAKER_04]: of course there's no no question the america leaves the space industry that is done
[00:33:09] [SPEAKER_04]: with a whole range of companies not just not just space six so there's ways in which this
[00:33:15] [SPEAKER_04]: technology can be applied to produce better machines and that's what labor productivity actually
[00:33:19] [SPEAKER_04]: is working with better machines so that's again a manufacturing focus in america again because
[00:33:26] [SPEAKER_04]: the inflation reduction act was a you know a way of packaging up something which is really
[00:33:30] [SPEAKER_04]: an attempt to re revitalize american manufacturing first of all there is something to re
[00:33:35] [SPEAKER_04]: vitalize unlike in the UK or Australia even more so and and the technology there's an enormous
[00:33:43] [SPEAKER_04]: amount of technology which is now being applied to these areas so yes this the gains can be there
[00:33:49] [SPEAKER_04]: and america's going to see them we're certainly the UK will not most of Europe one day yeah
[00:33:53] [SPEAKER_03]: and the the inflation reduction act I mean it hasn't created more public sector workers I mean
[00:33:58] [SPEAKER_03]: it really is money that's gone into helping the private sector to develop if you look at
[00:34:02] [SPEAKER_03]: I mean the number of people employed in the public sector 16.4% in the EU 15% in the United States
[00:34:09] [SPEAKER_03]: is actually really not much different it hasn't really increased very much either since since before
[00:34:14] [SPEAKER_03]: the pandemic so it is putting you know it's not creating jobs for the public sector it's just
[00:34:18] [SPEAKER_03]: creating jobs generally unhelping growth in the private sector which is obviously you know no one
[00:34:24] [SPEAKER_04]: would argue that that's not what we want to see yeah and it's also a lot of this is leading to
[00:34:30] [SPEAKER_04]: technological progress and more investment in new engineering approaches applying new forms of science
[00:34:36] [SPEAKER_04]: to manufacturing and so on that's what we need that and if you stifle that which is what's
[00:34:43] [SPEAKER_04]: out of stifling government spending for a long long time government is often a provider of
[00:34:48] [SPEAKER_04]: some of the risk capital for the rest of those time these things are taken on see you got
[00:34:52] [SPEAKER_04]: Marianna mosa cuto's gagam about the entrepreneurial state I'd like to marry that which
[00:34:56] [SPEAKER_04]: bill James I can it's about doing capitalism in the innovation economy you to have successful
[00:35:02] [SPEAKER_04]: innovation you need people looking forward to lose money and the two trips they can do that
[00:35:06] [SPEAKER_04]: a highly wealthy individuals and the government which creates money so can afford to create some
[00:35:11] [SPEAKER_04]: of that in wasteful ways but that waste is often what leads to innovation and if you if you wanted
[00:35:17] [SPEAKER_04]: to have an innovation without waste you wouldn't have an innovation at all so it could happen
[00:35:20] [SPEAKER_03]: to you two year you could be seeing the growth you're just going to change this spending role
[00:35:24] [SPEAKER_03]: which they are obviously trying to get back to as quick as possible this three percent rule
[00:35:29] [SPEAKER_04]: which is just catastrophic for the EU I think of self-emotional people whipping their own
[00:35:34] [SPEAKER_04]: backs as an image or the you're up under the mass trick trade it well it's we started out
[00:35:41] [SPEAKER_03]: with a simple explanation we we've invented there as well we've gone on a bit of a journey
[00:35:44] [SPEAKER_03]: along the way but all of the numbers point to that really do you just support that one argument
[00:35:49] [SPEAKER_04]: only they do I'm get rid of the mass trick trading reintroduced national currencies for the
[00:35:54] [SPEAKER_04]: European Union use the euro for international trade and have the central banks doing a
[00:35:59] [SPEAKER_04]: hundred percent lost free conversion at national borders you know and then bang you
[00:36:06] [SPEAKER_04]: or they have international accounts which do work for you you know the naval Europe
[00:36:11] [SPEAKER_04]: to function as a as a national economy which was the whole idea but for Christ's sake don't
[00:36:15] [SPEAKER_04]: have a a national currency when you don't actually have a national government go well in other
[00:36:20] [SPEAKER_03]: words go back to days of the acu is really what you think isn't it before the before the euro yeah
[00:36:26] [SPEAKER_02]: well catch again next week thanks Steve I can add by the debunking economics podcast
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