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[00:00:27] And what we want to do is bring manufacturing back to our country.
[00:00:37] Vice President Pence, good morning, is very much involved with me on that.
[00:00:43] It's one of my most important subjects.
[00:00:46] It's what the people wanted is one of the reasons I'm sitting here instead of somebody
[00:00:49] else sitting here.
[00:00:50] This is the Debunking Economics podcast with Steve Keen and Phil Dobbie.
[00:00:59] While America is doing okay it seems they've weathered the pandemic and inflation better
[00:01:03] than many but there's a lot that's wrong with America as well.
[00:01:06] Many people in America are very poor, many are in prison, they die earlier than most
[00:01:10] western countries and are they losing their way in manufacturing being beaten at their
[00:01:15] own game by China?
[00:01:17] And when it comes to aircraft, the Europeans.
[00:01:20] So have they just got lazy apart from the Magnificent Seven outside software?
[00:01:25] Is there anything America is good at these days or is it a nation in decline?
[00:01:29] Well look at that this week on the Debunking Economics podcast.
[00:01:39] So there are lots of signs that the US is doing well.
[00:01:42] So the GDP per capita in 2022 was over $76,000 compared to less than $55,000 in Canada for
[00:01:50] example, $46,000 in the UK, $36,000 in France, $15,000 in Russia.
[00:01:55] So I'm glad they're suffering a bit.
[00:01:57] Unlike most places that US figure has been growing quite sharply so their GDP per capita
[00:02:02] is improving.
[00:02:04] Consumer spending is rising up 0.8% in February for example.
[00:02:08] They have an unemployment rate of just 3.8%, one of the lowest in the world.
[00:02:12] The inflation rate is now just a little over 3%, one of the first to come down.
[00:02:17] In the US equities market it's growing its share of all of the global equities to such
[00:02:21] a point that countries are now seeing their local share markets decimated and a lot of
[00:02:26] that is because of AI and Big Tech, the world's biggest growth sector dominated by the
[00:02:30] Magnificent Seven so Meta, Microsoft, Nvidia, Apple, Alphabet, Amazon and Tesla,
[00:02:37] all American.
[00:02:38] On the downside, they've got a high balance of trade deficits at $69 billion just for the
[00:02:44] month of February.
[00:02:45] It has a lower value of exports per capita than the UK, Australia and Germany so in
[00:02:50] 2022 they exported $8,760 per capita compared to $15,000 for the UK, almost $18,000
[00:02:59] for Australia and $25,000 for Germany and it has reserve currency which is seen as a
[00:03:04] bit of a safe haven with a lot of secure assets that can be invested in the US as
[00:03:09] well including US Treasuries but Steve we are also seeing gold prices now rising
[00:03:16] because Asian central banks have been buying it up so this could be a
[00:03:20] prelude to relying less on the US dollar so if the US dollar is being
[00:03:26] seen as less secure and reliable like for example if they had a geriatric
[00:03:31] in charge or a mad ego maniac running the country will the US continue along its
[00:03:36] merry way if the US doesn't continue to be the world's central currency how bad
[00:03:41] does it does it get if that stops being the case?
[00:03:45] Oh look I think that's a long way down the track because it's still obviously
[00:03:50] the dominant currency at the moment and it's the figures you're talking about
[00:03:55] they have comparative figures for America's growth versus the rest of the
[00:03:59] world it's nobody in commerce is going to be thinking about changing out of the
[00:04:07] dollar okay there's actually strengthening the dollar so yes if it lost
[00:04:11] if it lost its reserve currency status then it would certainly have some
[00:04:16] serious problems potentially because it's no longer that the world's premium in
[00:04:21] a manufacturing country it was after the Second World War it sort of lost
[00:04:26] that to Japan and then Japan lost its way with the bubble economy which gave America
[00:04:31] a bit of a fillip after the collapse of the Japanese economy in 1990 then along
[00:04:37] comes China now China yes it's having its property problems well and truly but
[00:04:43] you've got fundamentally the two economies both China and America are
[00:04:48] both running with strong fiscal policies you know large amounts of
[00:04:53] government spending large infrastructure projects and this is what I think the
[00:04:58] difference between America and the other Western countries is that Biden seems to
[00:05:03] be a bit of a black box you never know quite know what his motivations are
[00:05:08] whereas Trump you know far too much but it seems he's just basically saying
[00:05:14] look I'm not gonna I'll make the necessary words to make people think
[00:05:18] like concern myself about the deficit but I just continue spending on the
[00:05:22] program I've put together and from a modern monetary theory point of view from
[00:05:27] a simple money creation point of view that means the government's creating
[00:05:31] money and wow creating money helps capitalist economy turn over effectively
[00:05:35] so I don't see any danger of America losing the preeminent position of the
[00:05:42] international currency under current trends that could change with
[00:05:46] different trends but current ones and you're actually strengthening it rather
[00:05:50] than weakening it so and they have to actually don't they I mean if they've
[00:05:53] got a if they're exporting you know they've got this big balance of trade
[00:05:57] deficit but there's a lot of demand for US dollars if those US dollars aren't
[00:06:03] being created by the government where are they coming from well they're
[00:06:06] being created by the government the government is running a large deficit
[00:06:09] and hasn't hasn't cut back on it the obsession about you know the whole
[00:06:13] the debt ceiling nonsense is you know gone through that particular barrier yet
[00:06:18] again Biden just it seems to make them you know respect the debt ceiling blah
[00:06:23] blah blah and then continues on the other side once the political crisis has
[00:06:27] passed so which is only caused by hitting a numerical debt ceiling again
[00:06:33] so you've got you know a strong fiscal stance and very high interest rates
[00:06:39] which conventional economics is slowing the economy down and it would if
[00:06:44] that was passed through to individual borrowing rates and hit the cost of
[00:06:50] credit for the private sector but that's limited to some degree by the
[00:06:55] extent which Americans have used fixed rate mortgage loans rather than variable
[00:07:00] so you've got stimulus from the side of the government spending stimulus
[00:07:04] for the financial sector from the rate of interest on government bonds
[00:07:10] and the rest of the world particularly Europe is so obsessed about
[00:07:13] the beginning of a deficit down that their money supplies growing more slowly
[00:07:17] and wow so is their economy who to thought and yet this low value of exports
[00:07:22] per capita than the UK Australia and Germany so but that's that's that's
[00:07:27] that can be seen in another way and that is that in this one reason I use
[00:07:31] America whenever I'm doing an argument when using examples just a
[00:07:35] typical example almost always use American data because even though I
[00:07:39] rubbish the Americans for the extent which they fell through outsourcing
[00:07:43] and offshore manufacturing to the third world and that's the large reason
[00:07:48] why China grew so successfully was on the winning side of that trade
[00:07:52] but sometimes I'm not rubbish into that it's still the world's most
[00:07:55] self-contained economy and because it's so self-contained then it doesn't
[00:08:00] need exports you know as much as you know 30 years ago Japanese
[00:08:06] cars were superior they could they still made their own cars the Australian
[00:08:11] economy and that still applies today obviously and now we've got one of
[00:08:15] the world's premier manufacturers Tesla being American and it's only real
[00:08:20] rivals being Chinese yeah so but the bit if Australia you know things
[00:08:24] surpassed by the Chinese I should point out yeah yeah yeah yeah but what
[00:08:29] do you like Australia if if we could if Australia could no longer
[00:08:33] import cars and it would no longer have new cars period and that that is one
[00:08:38] reason you've got a high level export dependence on those other economy so
[00:08:42] you can grow courtesy of exports but if you have and this is what the
[00:08:45] Chinese economy before they fell for the Euro the German economy too
[00:08:50] you had a diversified industrial structure it could reduce almost
[00:08:53] anything and for that with that diversified structure also comes
[00:08:58] out as lower costs so all the stuff in the Neoclassicals rave on about
[00:09:03] comparative advantage actually put you in a worse situation America has
[00:09:07] fallen for that to some degree but because it has such a complete economy
[00:09:12] it's capable of surviving with a lower level of experts per capita yeah so
[00:09:16] I think what you're saying is if if if all of a sudden shipping stopped
[00:09:21] and there was no trade America would do alright the rest of us would be
[00:09:24] a bit stuff but America could continue on its merry way because it's largely
[00:09:28] a self-sufficient economy then you believe even when the on the oil that was
[00:09:31] the one big hole in there in their portfolio until fracking and our
[00:09:37] fracking is also large big holes but but at the moment at least it means
[00:09:42] it could supply its own gas so in gas and oil so it's it's got a
[00:09:48] capacity to absorb dramatic falls in its exports or rise in its imports and
[00:09:56] that's of course that that's where the reserve currency status comes in
[00:10:01] other countries like Australia the UK even Europe if they're running a
[00:10:06] trade deficit then they undermine the value the significance of their
[00:10:11] currencies America's as Janus argued and his the global Minotaur has to
[00:10:16] be in that situation to create the the American dollars circulating
[00:10:21] the rest of the world and enable the rest of the world to undertake
[00:10:24] commerce because we all use the American dollar so it's got this huge
[00:10:29] industrial base diminished but still large enough to miniproduce
[00:10:34] as most of its own needs and then it's got the reserve currency which
[00:10:37] means you can get away with running a deficit in trade in a way
[00:10:41] that other countries can't do no well in a way almost has to
[00:10:45] doesn't it if if the US dollars being used overseas there has to be a
[00:10:49] lot more US dollars and I think we gave the figure I mean I need to go
[00:10:54] back and check of one in 10 US dollar transactions actually
[00:10:57] involved the United States there's got to be way more US dollars
[00:11:01] than is required by the country itself to satisfy international
[00:11:05] trade between countries so all of that's got to be created by
[00:11:09] the US government somehow.
[00:11:10] Yeah and that well it's all by you know the banking sector I mean
[00:11:16] there's something to come out of if it's got to turn up in
[00:11:19] reserves I think they can be have to look at the dynamics of it
[00:11:23] all but it does require the government running a deficit
[00:11:28] and the deficit creates money this is the thing that the
[00:11:33] mainstream can't get their head around they do understand
[00:11:35] money creation so they're anti deficit but they're
[00:11:38] therefore again this is against the creation of fiat money.
[00:11:41] Now what both China and America are showing a creation of fiat
[00:11:45] money spurs a large amount of both public and private sector
[00:11:48] activity and those two economies you know China's looking
[00:11:52] fragile could receive the final collapse of its property
[00:11:55] bubble but but they've had an rates of growth that are far
[00:12:01] greater than the European countries which were obsessing
[00:12:03] about the deficit are not creating a great deal of fiat
[00:12:06] money there's not much credit money being created as well
[00:12:09] after the we're still in the the tail end of the impact of
[00:12:13] the global financial crisis on private sector borrowing so we
[00:12:16] have a monetary basically the monetary taps have been
[00:12:19] strangled in the rest of the world they're still running
[00:12:22] fairly effectively in America and China and that's one
[00:12:25] reason hey presto when you measure them yes it's in
[00:12:28] nominal dollar terms but they're still growing you know
[00:12:31] that the nominal dollars to an economic activity so
[00:12:36] I don't see any dilemma for America coming out of losing
[00:12:40] its reserve status it's other issues that are going to be
[00:12:42] important. So on China I spoke to a China expert for another
[00:12:46] podcast he said don't get too carried away or too
[00:12:48] up you know too concerned about this this property debt in
[00:12:53] China in that it was actually you know the collapse of
[00:12:55] these companies was actually implemented by the government
[00:12:58] because they worried that it was it was all getting
[00:13:00] carried away and he needed to be stopped and of course
[00:13:03] you know who will suffer will the the banks will you know
[00:13:07] pay for the default on debt who owns the banks oh yeah the
[00:13:10] government. The government does yeah and then that and that's a
[00:13:13] huge factor in its favor you know you've got a private
[00:13:16] monetary system which makes private loans but fundamentally
[00:13:19] that private money system is government owned and if it's
[00:13:22] not government only a bloody wall government controlled
[00:13:23] because the last thing you want to do is have the
[00:13:26] communist party knock on your door saying you didn't
[00:13:28] follow the most recent directive from the central
[00:13:30] committee. And meanwhile they're investing in the
[00:13:31] technique you know in the technology sector they're
[00:13:33] investing in areas where they don't have to play catch
[00:13:36] up because they can be in the same place as everywhere
[00:13:38] else which is now why they are selling more electric
[00:13:40] cars than anyone else anywhere in the world and you
[00:13:43] know I'm sure they'll do it in lots of other sectors
[00:13:45] as well. So just on you know this US dollars being
[00:13:50] spent overseas a lot of it comes back of course when
[00:13:53] people buy government bonds 40% of US government bonds
[00:13:57] due to treasuries are held by foreign investors. So what
[00:14:03] is there in it for the United States and it's not just
[00:14:05] the United States but they are leading so Japan's bonds
[00:14:09] now you know 30% of those are held by foreign
[00:14:13] investors as well and that's sort of like a you
[00:14:14] know a facet of the last 20 or 30 years and the
[00:14:19] euro area their bonds have sort of risen up to
[00:14:21] around 40% as well. So but the US is still at
[00:14:25] the top of the pack I think in terms of foreign ownership.
[00:14:28] What's in it for the US in doing that or can they just
[00:14:31] not stop it happening? We can't stop it happening
[00:14:32] because what you've got going on there is bond sales in
[00:14:35] the secondary market and this is the sort of thing which
[00:14:37] I mean a classical economists think they know
[00:14:39] this stuff they don't they're clueless with the way
[00:14:42] they analyze the monetary system but when the
[00:14:46] government spends more than it takes back in
[00:14:49] Texas which we call the deficit that gap creates
[00:14:54] reserves on the one side of the bank balance sheets and it
[00:14:57] creates deposits on the other side so it creates money.
[00:15:01] Then the reserves the reserves used to earn no interest
[00:15:04] and still earn less interest than bonds do.
[00:15:07] So the the sale and if the government is simply running a deficit
[00:15:11] all the time then its account at the central bank will go negative
[00:15:15] because you have you know spending going out which is greater than
[00:15:18] tax coming in and you weren't you weren't
[00:15:21] issuing any bonds let's say then at some point the spending being
[00:15:24] greater than tax would mean that the government's account the
[00:15:27] treasury account of the central bank could go negative.
[00:15:30] Now every government in the world pretty much is past laws requiring that
[00:15:33] central bank account not to go negative that's what bond sales do
[00:15:38] so when the bond sales occur the the the the
[00:15:41] the financial system as a whole has enough reserves to purchase the
[00:15:47] bonds whether it's this way there's
[00:15:50] so many bonds outstanding already that there aren't enough reserves
[00:15:54] available to buy the current deficit and this is
[00:15:57] you know even a deficit of 10% of GDP let's say
[00:16:01] which is about twice the American level that would mean one percent of
[00:16:05] if you did just a monthly auction that it'd be less than one percent
[00:16:08] of GDP and turns to the level of sales. So all you need is reserves at that
[00:16:12] level and of course there's bonds which are 100%
[00:16:15] all the central bank has to do is buy some of those bonds off the private
[00:16:18] banks to create the reserves therefore the bonds can be purchased there's no
[00:16:22] such thing as bond vigilantes and many bonds won't be sold.
[00:16:26] The but the next point is once the banks have bought that they then
[00:16:33] what the primary auction they then sell those bonds not all of them but a
[00:16:37] fair slab of them to other buyers and that can be
[00:16:41] anybody so the so the bonds that are turning up in foreign
[00:16:44] countries are most likely those which are sold on the secondary market by
[00:16:48] the banks and primary dealers themselves. To investment funds that are looking and
[00:16:51] going well this is a secure place to stick our money can't go wrong with
[00:16:56] US Treasuries or maybe even foreign central banks not foreign central banks foreign banks
[00:17:01] as well looking for a safe place to part their money.
[00:17:05] So but if that's so what so the effect of that though is if these bonds are
[00:17:09] being sold overseas then that is US dollars being repatriated back to America
[00:17:16] Exactly isn't it exactly so and they come back and they end up in the financial sector of course
[00:17:21] so this is actually fueling the financial sector out far with the feed the industrial sector than
[00:17:25] the financial but that's the impact of those bonds being sold internationally.
[00:17:30] The on seller of the bonds whether that's a bank or a non-bank financial institution
[00:17:35] sells the bonds and gets reserves as a result of the you know what they deposit accounts
[00:17:42] if they're a non-bank reserves if they're a bank and then the banks that get the reserves bank
[00:17:50] are then encouraged to buy more bonds and the non-bank financial institutions get reserves
[00:17:55] are encouraged to buy other financial assets. So you know it feels the financial engine in
[00:18:00] America which is a bit like fueling Beasel but that's what they do.
[00:18:06] Right but what happens if because China obviously is buying up a lot of these
[00:18:10] bonds or has historically starts to wind back what if there's less interest in buying US bonds
[00:18:17] particularly from you know from countries that think that the US has got too much control and
[00:18:22] they want to diversify more what happens then does that make any difference at all to the
[00:18:28] stunning of the US and it just makes the US financial sector a little less well off.
[00:18:32] Yeah but also what it will mean is if that has any impact upon the reserve rate of interest
[00:18:38] the rate of interest rate that banks charge each other in the overnight market then the central
[00:18:42] bank comes in and does some of the buying and this is the I mean the huge hole I mean you remember
[00:18:48] the old song was a hole in the bucket dear Elisa dear Elisa the hole in the bucket of the
[00:18:53] neoclassical attitude towards government debt is that if there if there was any ever any problem
[00:18:58] the central bank could buy 100% of the outstanding bonds literally can do it because all they've
[00:19:05] got to do is say oh the total value of the bonds outstanding as let's say it's a 30 trillion dollars
[00:19:12] it's not quite that much about 25 I guess but they're 30 30 trillion we're going to put the
[00:19:17] number 30 trillion and all the relevant bank accounts of the reserve accounts of the banks
[00:19:21] at the central bank whether that's directly if they're actually dealing with banks or indirectly
[00:19:26] if they're dealing with a non-bank financial institution that have bought bonds off the
[00:19:30] banks put 30 trillion and all those accounts and then record oh dear 30 trillion worth of bonds the
[00:19:36] Federal Reserve now owns what's happened to the government's debt problem yeah all right so what
[00:19:41] you're painting is a picture in all of this of infallibility do you know that America no I wouldn't
[00:19:48] say infallibility but I'd say in vulnerability yeah all right well when we come back I just want
[00:19:54] to look at what you know what could potentially be going wrong because I'm whether actually all
[00:19:58] of these good points is making a country that's a bit lazy and is that part of the problem for
[00:20:02] America as well so that is more of an issue yeah so look at all that when we come back on the
[00:20:07] D Banking Economics podcast it's me and Steve Keen back in a second with LinkedIn jobs we tap
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[00:21:13] this is the debunking economics podcast with Steve Keen and Phil Dobby
[00:21:19] so in the first part we're talking about you know what a fantastic opportunity the United States has
[00:21:25] and we know how well it's doing in big tech for example how so much of the world's investment
[00:21:31] now is in just seven companies which are all American companies and how stock exchanges
[00:21:36] around the world are suffering because of that and you know the fact that the US keeps on
[00:21:41] issuing money it's got in more than enough money to continue to see growth in the economy
[00:21:47] but in this next part I want to look at whether actually we're actually seeing that growth happening
[00:21:51] so has America become lazy because of its position and I think there's lots of evidence that there is
[00:21:58] so I mentioned electric cars a few times so Steve and they don't like electric cars as much as the
[00:22:03] rest of the world is fair to say so USC electric vehicle purchases in 2023 were half that of
[00:22:10] Europe 1.6 million for North America compares to 8.4 million for China as well you know and you've
[00:22:17] been to the States you see how they like these big gas guzzling large vehicles and I think the
[00:22:24] fact that they are destroying the planet is part of the attraction for them but they're making
[00:22:28] less cars that's the interesting thing so last year the US made 10.6 million cars in 2016
[00:22:33] it was 12.2 million shouldn't that number be going up wouldn't you have thought that you
[00:22:37] know as there's particularly as there's a demand for you know this transition to electric vehicles
[00:22:41] and they're making less than you know many other parts of the world proportionally
[00:22:45] that electric you would have thought that they would be stepping up production wouldn't you
[00:22:49] you know this is I mean this is a classic technological shift and and partially this
[00:22:54] comes down to the nature of manufacturing and corporate management over the last 40 years
[00:23:01] because the obsession and corporate management we're seeing it with Boeing right now
[00:23:05] was to outsource everything pay the minimum possible wages to your workers
[00:23:10] rush stuff through production systems and so on and because you're relying upon a diversified
[00:23:15] bunch of suppliers you can't change things particularly quickly but what's happening with
[00:23:21] with the Musk initially and now the Chinese as well they're vertically integrated and so if
[00:23:26] they want to change something of design it's not a case of having to contact 50 suppliers to
[00:23:31] try to negotiate that they all change manufacturing the parts they put together in a coherent way
[00:23:38] pardon me it's simply telling the production line down the end we've changed the production line
[00:23:42] tells the further this is the change we're making what do you guys have to do to adapt to it
[00:23:46] so vertical integration has worked extremely well for Musk and it also says to be working
[00:23:51] for the Chinese vehicle manufacturers that have come along as well and technologically they're
[00:23:56] leaving the rest of America behind well I mean Musk is leaving America behind as well isn't
[00:24:00] it because he's starting to you know put production facilities outside America but how much behind so
[00:24:06] well last year 11 million just under 11 million cars as I said in the United States 30 million
[00:24:11] in China I mean China wasn't really making cars five years ago not through any great degree
[00:24:16] now it's making 30 million them a year which is twice what Europe makes Europe made 18 million
[00:24:21] last year which is still a lot more than the United States so I mean this big car manufacturer all
[00:24:26] of a sudden seems to have lost its way yeah I mean and this is something which I mean I remember
[00:24:31] being involved in seeing the first the free trade zones in China in 81 82 and their entire
[00:24:37] intention was focused on getting the engineering now from America as well as
[00:24:42] developing their own local capitalist class that had both extremely successfully but the
[00:24:47] culture in China is dominated by engineers the culture in America is dominated by economists
[00:24:52] hiding to nothing that the engineers are going to win and and and this is that that
[00:24:59] orientation applies and the government it applies in the private private sector as well
[00:25:03] so I think I'm ever seeing actually a clip of Musk actually being asked a question about
[00:25:09] but I think the leading today's leading Chinese automotive manufacturer and he's giggled
[00:25:15] and then the person said why are you giving me said have you seen their cars
[00:25:18] the thing is they've done exactly the same thing that Musk is doing with SpaceX
[00:25:23] iterative design and five years later you're not laughing anymore no well I'm driving a Chinese car
[00:25:29] I'm driving a Chinese Volvo and electric Volvo it's a very smart car it's got all the tech in
[00:25:35] there it's you know the drive is smooth I mean it's an it's an impressive vehicle
[00:25:41] and yeah so you what China now has I mean of course all grew up thinking
[00:25:48] China means inferior goods that's changed now hasn't it and the innovation is there as well
[00:25:53] so that's that makes them a force to be reckoned with the funny thing is I mean if you go back far
[00:25:57] enough in history that they would actually stood for refined goods and this is you know they're
[00:26:01] done I'm not saying that China's got a century and a half long memory maybe they have but
[00:26:06] the reason we used to call crockery China is because the best crockery was made in China
[00:26:12] when when the British wanted to export to China to get these you know Chinese silks and China is
[00:26:18] crockery and so on they didn't have anything that China has wanted except opium and they then
[00:26:24] enforce the opium and selling of opium inside China which led to the opium wars with China
[00:26:29] trying to prevent the opium coming inside the country for its own benefit
[00:26:33] and the Americans and British fought to keep the opium trade open and that helped destroy a large
[00:26:38] part of China's culture and so on so yes it's a change you know China's goods are crap they were
[00:26:44] crap because of the crap where they were treated by particularly Britain but also America and
[00:26:49] and France and so on in the colonial period and they're basically re-establishing their
[00:26:53] preeminence they had back in the olden days so in some ways this is a return to normie
[00:26:58] so purchases of electric vehicles 16 percent of all new cars in the UK are now fully electric in
[00:27:05] i think in in europe it's 12 percent in norway over 90 percent of all cars are either pure electric
[00:27:12] new cars are either pure electric or hybrids haven't got the pure electric figure but anyway 16
[00:27:17] percent in the uk is the interesting one because in the united states it's 7.6 percent now we know
[00:27:22] if donald trump comes along he's going to say my goodness 30 million cars a lot of them
[00:27:26] electric coming from china we're only managing to sell 11 million cars i know what i'm going to do
[00:27:32] i'm going to impose this 100 tariff on cars from china and the effect of that is going to be well
[00:27:37] there's not a lot of interest in electric vehicles anyway so they'll just that that electric
[00:27:41] vehicle market will just dry up some people will buy a Tesla but a lot of people continue using
[00:27:46] petrol and diesel cars in the united states because they've got lots of petrol which they or gas
[00:27:51] which they which they can get because they've got the reserves there from from their fracking so
[00:27:57] you can see how that's going to go so they so um you know they're going to do what they can to
[00:28:02] prop up their their own industry not helping the climate a great deal though are they in the
[00:28:07] process no i'm well i don't think anybody's helping the planet the planet will help itself
[00:28:12] in a short while that'll it'll sort all the troubles out but uh yeah the i mean they're
[00:28:19] it is crazy the extent to which americans are still in the gas-guzzling mindset
[00:28:24] so the european approach to electricity and electric vehicles and modernity is very much
[00:28:29] out of step with american thinking but you know it's we're coming back to the strength of the
[00:28:34] american economy and it's it is a weird mixture because it's got away with running its productive
[00:28:42] capacity down as much as it has because it's so big to begin with in the first place and
[00:28:49] and that that is why you got those figures for the low you know proportion of exports per head or
[00:28:57] exports compared to GDP yeah it's it's just a sign of how big america was in the first place
[00:29:02] but in some ways that they're going to continue it they've got to turn that outsourcing around
[00:29:07] again and get get back to vertical integration and and start producing domestically what they've
[00:29:12] ended up importing but they've lost the skill base and this is this is a huge problem whereas
[00:29:17] the chinese have got an enormous reservoir of well-trained engineers both in government and the
[00:29:23] private sector who can build these infrastructure projects and come up with things like you know
[00:29:29] within five years go from producing no electric cars and being a laughing stock to being the
[00:29:34] world's largest manufacturer of electric stars and having some very satisfied customers
[00:29:38] so if you look on the fred database at total manufacturing production for the united states
[00:29:44] and compared to other countries like the uk for example you know which we will often diss for not
[00:29:49] being you know manufacturing based economy if you look in the united states though around the year
[00:29:54] 2000 well let me just blow it up so I can see it yeah around the turn of the century manufacturing
[00:30:02] production just flatlined in the united states it's not been growing at all if you look at it
[00:30:07] for the uk it's still growing so there's something going wrong when your manufacturing
[00:30:14] production just flatlines and has been for two and a half decades but that's where america is
[00:30:20] yeah like that that's where I think the financial issue and the whole impact of being the reserve
[00:30:24] currency is is a poison shallots because it gives the financial sector enormous strength and we're
[00:30:30] talking about you know ways in which that applies earlier in the show about the sales
[00:30:34] of bonds and so on and the amount of cash that comes back when the bonds are bought by overseas
[00:30:39] countries and companies that are then used by the american financial sector for yet more
[00:30:43] purchases of assets and so on so it gives enormous strength to the financial sector but it cripples
[00:30:48] the manufacturing and this this is you know again my greatest laments is the fact that
[00:30:54] canes lost out to harry dexter white in breton woods because if that hadn't happened we might
[00:30:59] have had the bank cause in international currency and we wouldn't have this bloated american financial
[00:31:05] sector and at the same time you wouldn't have the desiccated american manufacturing sector so
[00:31:12] i'm wondering whether over 80 years time we're finally starting to learn the lesson that harry
[00:31:17] was wrong and jm was correct and with that with that loss goes the you know goes dissipation
[00:31:24] disappears doesn't it as you say because you haven't got it you haven't got engineers in
[00:31:27] chance you've got the and then this is what this is one reason like i know the em i've avoided talking
[00:31:33] about the mmt line exports or a cost import for a benefit for a long time because i i didn't
[00:31:38] want to kneecap the incredible success mmt has had at changing people's attitudes towards government
[00:31:44] spending and how government spending is financed that's fabulous but the the exports
[00:31:48] are a cost import for a benefit it's classic static trader a trader advantage you know you get
[00:31:53] a physical thing back and return for a piece of paper that's a trade in your your favorite it's
[00:31:58] a trader's perspective not a money perspective which is it not a money perspective that's correct
[00:32:03] it's it which is weird but doubly weird is that it ignores the impact upon innovation and training
[00:32:11] because if you're getting if you're you know sending overseas pieces of paper and getting
[00:32:16] machinery back you tend to forget to train people who can make machinery yeah whereas the
[00:32:21] reverse applies in china are the incredible capability to design an engineer and manufacture
[00:32:27] and and that that gives it a greater not just growth potential which you know i think is going to
[00:32:32] become a dirty word in coming decades but self sustainability capability and that's vital well
[00:32:39] maybe they're ahead of the care of them you know because they're demonstrating
[00:32:42] gear you know zero growth in manufacturing right now but if you look at the airline
[00:32:48] so do you mentioned uh you mentioned boeing or boing there might be a appropriate name
[00:32:55] make the plane down a rubber so that when they crash they could yeah or just yeah rubber plane
[00:33:00] so when they crash they just bounce back up again i'm a bit uncomfortable we we we we
[00:33:04] we need a new band called boeing crash opera that will yeah yeah they were an Australian
[00:33:09] band when they might be a lot of people boom crash opera boom crash opera that was it yeah
[00:33:14] boeing crash opera for a while a school band Australian band for a while ago but anyway
[00:33:19] if you look back in recent history i mean boeing an airbus sold a similar number of planes each year
[00:33:27] but now it seems like the wheels have fallen off at well actually it's anything that hasn't
[00:33:31] fallen off quite literally in some cases it's the only thing that hasn't fallen off is it
[00:33:35] it's the only thing that's been bolted on properly and so the thing that was an engine cover
[00:33:39] the other day as well so it's just yeah engine cover flew off yeah so anyway last year boeing
[00:33:45] 1314 orders for aircraft compared to 2084 for airbus so they've got problems at boeing as well you
[00:33:54] know given that they've historically have been very similar numbers so again you know here's an
[00:33:58] example America losing its way of an industry that it was once very dominant in yeah and I think
[00:34:03] that's an important lesson of when you let the marketing types and not the marketing MBA types
[00:34:08] take over a company one fun incident from my earlier life before I became an academic I used to be a
[00:34:14] journalist for a computer magazine and ended up interviewing Wayne Ratliff who is the designer
[00:34:19] of D-Base 2 which in the days was the dominant database language for my pro PCs and he literally
[00:34:27] got off the plane fuming about MBAs because he said Harvard MBAs are taken over Ashton Tate
[00:34:34] which is the company that distributed D-Base 2 and all they wanted to do is get revenue in through
[00:34:39] the door and what what Wayne wanted to do was get away from the very simplistic database structure of
[00:34:45] D-Base 2 and go to what's called an entity relationship database structure where the
[00:34:51] you have entities you know person and product and the relationship is sale and the relationship
[00:34:57] itself contains the data it's a very sophisticated approach to database design
[00:35:01] companies are going to be called Emerald Bay and he could not get the the MBA so no no no don't do that
[00:35:07] they just add more databases so D-Base 2 can handle two databases D-Base 4 I think was four
[00:35:12] then you got D-Base 10 that can handle 10 databases but you still had to have the poor
[00:35:17] bloody programmer going through all the you know if the loop to loop internal loops external
[00:35:22] loops etc etc raised a program in the language so I know it very well whereas the entity
[00:35:27] relationship is far superior what happened to Ashton Tate and D-Base 2 they're both
[00:35:31] the debase they've both folded they've both disappeared so by focusing upon profitability
[00:35:36] and returns and sales rather than engineering and excellence they screwed a great company and a
[00:35:42] great a great nobunate nascent products and this seems to be happening across America the
[00:35:49] MBA dominance and the moneymen rather than the engineers taking over that's probably the
[00:35:54] greatest coup on the history of American capitalism and the worst something else which is ignored is
[00:35:59] the rising inequality in America so those in the upper income tier if you had a upper middle and
[00:36:05] lower they're counted for 29 percent of all the income in 1970 that rose to 48 percent in 2018
[00:36:11] according to Pew Research lower income accounted for 10 percent that's not really changed the
[00:36:16] change actually come in the middle and middle and higher income earners middle income earners
[00:36:21] accounted for 62 percent of all income that's now fallen to 43 percent so middle America is losing out
[00:36:27] to the higher one-third of the population in terms of of income and if you look at the genie
[00:36:33] coefficient which of course you know is a measure of the relative inequalities within
[00:36:38] the country so zero means everyone has the same wealth and one or 100 percent means that one
[00:36:43] person's got it all and everyone else has gone nothing well America is at 40 percent so the
[00:36:48] worst it is the higher the number the higher the degree of inequality so America's at 40 40 percent
[00:36:53] or 0.4 the UK and Germany on 32 percent Holland is less than 26 percent I mean there are worse
[00:37:00] places South Africa's at 63 percent but this inequality is bad in America and it just seems
[00:37:06] to be getting worse and there doesn't seem to be public policy which is addressing that because
[00:37:11] and I think it's part of that is the American psyche that everybody should be able to get ahead
[00:37:16] and if you've fallen behind then that's your problem but the good news is that you can get ahead
[00:37:22] even though it's impossible everyone still believes they have a chance yeah I think that's a large part
[00:37:26] of it as well I mean and like I'm thinking fine there's also you know the elite doesn't really
[00:37:32] worry about the the working class so it's even Paul Samuelsen once described America as being
[00:37:37] characterized by rampant capitalists with a cowed working class so you'd think that it'd be coming
[00:37:44] out of the mouth of a Marxist rather than a person who'd you know constructed the neoclassical
[00:37:49] letter first of today but that's his his you know realistic statement at one stage and
[00:37:55] that basically means you're disparaging the poor that's the poor that's your own problem as you
[00:37:59] were saying in the inverse earlier whereas if you go to China and and and you go to Europe
[00:38:06] not as extreme as China but most other countries have some belief in a shared a collective
[00:38:11] reality even only Schwartz negate he's only swarming I got a speech saying about don't call me
[00:38:17] a self-made man whereas the mythology of self-made man still dominates America equally it means you
[00:38:23] got a self-made failure but when you have societies that talk about a need to make sure
[00:38:28] everybody we have your collectively in this we need to make sure everybody has opportunity
[00:38:32] you get more opportunity coming out of that as a result in Europe and China then you get
[00:38:37] in the so-called land of opportunity America one in Europe we've got a sense of community which
[00:38:41] they don't have in America and I'm sure I'll get shot down by Americans listening to this podcast
[00:38:45] but I feel like you know there's the sense that you belong in your place a lot more
[00:38:50] in this country and that means looking after everybody else in the community in which
[00:38:53] you live and then I recommend searching an army schwarz negator or whatever they call it
[00:39:02] closure speeches at American University saying how much he was made by the
[00:39:05] contributions of other people including the people he met at Gold's gym when he turned up in
[00:39:09] America as an 18 year old bodybuilder so I'm not a self-made man yeah that's amazing but
[00:39:16] yeah so this this belief in individuality I think is a large part of what's making America
[00:39:22] dysfunction both for individuals and the collective yeah all right and then it is this idea as
[00:39:27] well isn't it in America that everything has to be done by private enterprise and that doesn't
[00:39:30] always work so life expectancy in America is 80 in the UK it's 83 in Sweden it's 84 you know where
[00:39:37] I'm going with this Spain it's 85 five years more than America and yet health spending per
[00:39:43] capita in America in 2022 was $12,550 in the UK it was less than 5,500 so we are spending they
[00:39:53] are spending well over twice as much as the UK but they are dying three years earlier that's
[00:39:59] that's free enterprise for you yeah that's the cold hard numbers yeah and there are there are so many
[00:40:06] elements like that it's there are areas where you know you want the innovation to occur definitely
[00:40:13] but there are times when you look at the argument about it's all between a buyer and a seller and
[00:40:18] you get to you know work out a market plus that doesn't involve exploitation when you face a life
[00:40:23] threatening illness and I have had that experience you don't look for the cheapest
[00:40:27] person you look for the one who's got the highest reputation there's no way you've got any bargaining
[00:40:31] power in that situation so you're powered a fortune unless there's a government system to meet to
[00:40:36] to mean that everybody pays a similar amount with some potentially some flexibility that's what
[00:40:43] the rest of the world has America's called that socialist the rest of the world recognizing
[00:40:49] the power and balance in health all the rest of the world calls it socialism and actually
[00:40:53] says well you know that's not a swear word actually that's what we are we don't wear
[00:40:56] clothes in America it is a swear word nothing wrong with the way of socialism if it keeps the
[00:41:00] cogs of society turning is there and then the other one in America 737 people out of each 100,000
[00:41:08] people are in prison in England it's 148 in Australia it's 125 despite that so you know
[00:41:17] 148 pair 100,000 in prison in England compared to 737 in America despite that
[00:41:25] pair 100,000 6.4 people are murdered in America compared to one in the UK Australia has a murder
[00:41:35] rate we're even lower than I think it's 0.8 so got lost by another thing you know I can't
[00:41:41] figure this out at all it's obviously just the American psyche about how being able to carry
[00:41:45] guns but you know many more people being murdered many more people in prison and that
[00:41:52] situation's not improving either yeah I mean this this comes down to the inability of the west
[00:41:57] in general I think to think in terms of a balance between extremes so you either
[00:42:03] you're left-wing or you're right you're conservative or you're progressive you're
[00:42:06] a socialist or you're a free enterprise person they don't seem to see any potential for
[00:42:10] combinations of those and I love once having mixed economy we used to call it yeah but even
[00:42:17] as a mixed philosophy the Buddhist philosophy the under of yin and yang there's no perfect
[00:42:22] extremes aren't perfect it's the balance between the two I remember once seeing a little movie
[00:42:27] explaining the growth of a Buddhist philosophy where it came from and apparently the story
[00:42:32] goes sitting beneath a tree some famous tree somewhere in Asia he heard overheard a master
[00:42:38] teaching a young not guitarist but whatever the device was stringed instrument saying no if you make
[00:42:46] it too tight if you make it too loose it won't make a sound at all if you make it too tight it'll
[00:42:51] cause a you know ugly sound the balance is in the middle and that's what gave would have the
[00:42:57] idea of balance and that's partly eastern philosophy the western philosophy we get left
[00:43:02] versus right now extremes and and the thing the extremes function less well than a balanced
[00:43:07] system yeah so where does you know climate change aside where does America sit in 10 years time
[00:43:15] it's you know if it's still you think it'll still be the world's reserve currency so it will still
[00:43:20] be a the financial sector is all right but if we continue to see this slide in manufacturing and
[00:43:25] we still see this rising inequality if we see this crime rate continuing which will only get
[00:43:30] worse of course as inequality increases what happens to America yeah well it's again a sheer scale
[00:43:37] is is you know size and everything but it's a dam side bigger than number two so the fact that it's so
[00:43:42] self-contained so still self-contained will give it a capacity to reverse direction on occasions if
[00:43:49] if needed but overall I think it's going to continue losing out to China in terms of technological
[00:43:56] innovation and the only hope it's got is reshoring a lot of its production facilities
[00:44:03] which is happening to some degree now but they're going to find that they simply can't build those
[00:44:08] facilities up as fast as they'd like because they haven't got the trained workforce anymore
[00:44:12] because of all the outsourcing they did so I think that's the main
[00:44:16] damage that America has done to itself it doesn't have the engineering that it needs to
[00:44:22] build up its base capacity again which you think it will need to whereas China's got that
[00:44:28] base so China's capacity to innovate and produce new commodities or move in a different direction
[00:44:35] for energy systems and so on I think is much higher than America's so you know I think this
[00:44:40] we're seeing the end of the American century it'll still be dominant politically and militarily
[00:44:47] because of little things called nuclear weapons but it's lost that dominance over the
[00:44:53] overall philosophy of the planet and what about it's going to seem gold prices rising a great
[00:44:57] deal and that is because central banks in BRICS countries have been buying up gold
[00:45:05] which sort of you know it's got people talking about whether that's to build up reserves I mean
[00:45:10] it's a mistake on their part obviously but building up reserves to back a reserve you know
[00:45:16] a currency that they're going to use as their means of exchange rather than using the US dollar
[00:45:21] I mean if I mean does that seem likely and it's a possibility I mean the the oil countries
[00:45:26] have often spoken about about that desire to get away from having Saudi Arabia's in on this
[00:45:30] supposedly yeah so yeah so I mean if China is buying a whole load of oil from the Saudis and
[00:45:38] buying in whatever this new currency is going to be called or even just buying it in the yen
[00:45:43] I mean what does that do to to demand for the US dollar I mean it's it's it's it's
[00:45:48] going to hurt a little bit doesn't it? Yeah it could potentially mean the Euro-Solar falls
[00:45:52] because the the Foreigner I say that I could as you were saying earlier the need to have
[00:45:56] like 90% of American dollars circulating outside America but if you knock out the oil trade and
[00:46:01] they get a deal between the Chinese and the Saudis on that front and a range of others
[00:46:06] and equally with Russia for minerals and so on then you drastically reduce that demand and yeah
[00:46:11] the dollar dollar will fall now that actually costs of costs of imports in America increases
[00:46:16] but then it's perhaps less of an issue if they are so self so so so self-sufficient I mean it
[00:46:21] makes their exports cheaper so if they reindustrialize they can export cheaper. They need to do that but
[00:46:27] you know talk about giving themselves a handicap. The handicap being that they are the reserve
[00:46:32] currency. Yeah that handicap and then using that to their advantage and then as a result of it
[00:46:39] wiping out not wiping up drastically reducing their capacity for manufacturing and innovation
[00:46:44] and that's when Boeing is the classic example of that I think that Boeing going down is a
[00:46:50] sign of how far American manufacturing has gone down. But they must be worried about that so you
[00:46:55] assume as you say these things can turn around can't they? It's just a question of recognizing the
[00:47:00] extent of it all and coming up with a policy and looking at how you rebalance things which is
[00:47:05] what we've been talking about and that seems to be a bit of a problem that the country suffers
[00:47:08] from. Anyway interesting discussion we'll see how America does traverse the next decade. It's
[00:47:15] going to be interesting to watch. Good to talk this week Steve. See you soon.
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