← The Peter McCormack Show
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- [00:00]
A
Let me tell you why I said MMT is kind of sly, because sometimes they say things that are technically true but economically ridiculous or even false. So MMT basically says if we let the government print money, it can't run out of money. Everybody knows this, and their mother, everybody knows. Nobody has ever questioned the fact that if you let someone create money, they can run out of money. Right. The question has always been, is this a good idea? Right. Most people think it's not. I did a sort of poll, I think, on LinkedIn, because I think I asked money, I asked people, if we let the government create money as much as it wants, can it run out of money? And people just immediately said, that's ridiculous. It will cause inflation, it will cause a mess. Nobody said, oh, wow, this is. I hadn't thought of this. This is the sort of nugget of wisdom, of newly found wisdom that actually the government can be broke and stuff.
- [00:55]
B
You know, well, you can't run out of money technically, but it can run out of good money, useful money.
- [01:01]
A
Yeah. And that's why when I say they're sly is because they often say something is technically true and economically doesn't make any sense.
- [01:13]
B
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- [01:37]
A
All right.
- [01:38]
B
Morning, Emmanuel.
- [01:39]
A
Good morning.
- [01:39]
B
How you doing?
- [01:40]
A
Good, good.
- [01:40]
B
How are you? I'm good, I'm good. So you sent me an email.
- [01:43]
A
Yeah.
- [01:46]
B
You think the UK is making some of the same mistakes that Argentina's made?
- [01:52]
A
Well, I don't know if to put it that way, but I've heard a few things that are a bit concerning, you know, that sound a bit too familiar, I would say. And it's almost like, you know, this is getting a deja vu in some ways. Yeah.
- [02:05]
B
Well, you grew up in Argentina.
- [02:07]
A
I did, yeah.
- [02:08]
B
When you look at the UK economy and you look at the decisions our government is making, does it look like we are sleepwalking into some kind of disaster?
- [02:20]
A
I mean, maybe so. I think we may be on that path, but it's early stages, you know, and I think it's early days. There's a chance to stop that for sure. But, you know, before we speak about money, because I think you'll want to Speak of money and inflation. I can tell you something about Argentina that upset me a lot when I was still living there. That kind of even pushed me out of the country. That was the, you know, Argentina became bad for business. Many decisions were made that told people, this isn't a good place to do business. And I think that was very, very bad for the country. So it's not just inflation. There were lots of things that, you know, I'll give you one example. They, they evicted an airline out of the airport, right. Right. After the airline signed a lease for 10 years and built a hangar at the airport or restored a hangar. So they invest millions into the facilities to maintain the planes. And then the government decides to kick them out. Right. Because they nationalize the airline, the Argentinian airline. They don't, you know, it's terribly unprofitable. So the way to make it competitive is to let's just kick out other businesses. And the government celebrated this. They posted on Twitter accounts, tweets that would say, like official Twitter accounts of the government saying it's only 30 days until we kick them out with very nasty language. And you see people celebrating this. I told myself, well, who's going to want to do business in Argentina when the rules can change like this, when you can get evicted this way? Right. And this anti business sentiment is very tempting in the beginning. Right. There's a rhetoric of let's protect our national industries, let's protect the national airline. But then you can sleepwalk into turning your country into a place where nobody wants to do business. And then what you get is stagnation. Right. And there seems to be a little bit of that in the uk. Right.
- [04:34]
B
Milei said the opposite this week. He invited competition into Argentina.
- [04:39]
A
Yeah.
- [04:40]
B
And it was questioned about what impact would that have on Argentinian businesses. And he said, you're thinking about it wrong. We need to think of the Argentinian customer. That will bring prices down because competition brings prices down. That puts more money in the pockets of Argentinians who can spend elsewhere, which will lead to entrepreneurs creating other businesses and other opportunity.
- [05:03]
A
Yeah, I think, look, I've been, over the past few years, I've understood, I think, the meaning of economic growth a lot. I've traveled a bit to Eastern Europe or Central Europe to give talks and stuff. I know when there's this little airport in the middle of nowhere with Wiz Air flights or Ryanair flights to London, Luton. Right. I went to this place in Romania, a little town, you can get there so easily. It's connected to the World, they didn't say we don't want foreign airlines stealing our flights. Right. In Argentina, it was illegal to even have low cost airlines until 2018. The government set a floor on the price of flights and this was to prevent competition against the bus industry like long distance coach travel. So imagine this in 2018, the average British person has been on a thousand holidays in Benidorm or whatever. Just so grateful for Jettoo, for Ryanair. But not just that, ideas travel around. You can bring a professional from another country to give a talk, to do some contracting work. The world becomes connected. So yes, perhaps that wasn't great for British Airways, but this competition helped the country develop because people can move around, they can go to places, they can bring in people. Argentina is kind of locked away from the world. You can't travel. Travel is for the super rich. You want to go anywhere in the country. 20 hour bus ride contrast, 3,000 miles long. And they're actively preventing the development of connectivity in the country just because they don't want competition. So I think it's not just about the prices going down for the locals, it's about the economic opportunities that come with having different products, with knowing different things, with traveling to different places.
- [07:08]
B
When the government in Argentina is hostile to business, do you believe that is a lack of understanding of economics or do you think that is corruption?
- [07:20]
A
It's probably a mix of the two. But I also think there's a political ideology in Argentina that started in the 1940s that became very dominant in the Peronista.
- [07:33]
B
Yes.
- [07:33]
A
So you can't blame everything on this, but there's a sort of almost uni party, you know, because people who have. Or when there was a hiatus from the Peronist government, they kind of did the same, maybe to a lesser extent or a few things differently, but there was still corruption or a military dictatorship. It was never. They never got out of that. That scheme, let's say. But Peronism famous because there's a musical where Evita sings Don't Cry for Me Argentina even though she never said that. But anyway, there's this whole ideology. I don't know if it's corruption or if it's lack of knowledge about economics, but it's almost as if they had an alternative explanation to everything. Right. So inflation is because of evil businesses or it's greedflation. Another thing that was a bit familiar the last couple of years I started hearing people talk about greedy supermarkets. Yeah. So greedy supermarkets, increasing prices, that I've heard it all before. But when you see this political ideology in Argentina will have an explanation for inflation. Will say why we should be. Some people call it protectionism. I would say it's more isolationism. It's not even let's protect an industry that's good and prosperous. It's like let's disconnect Argentina from the world and let's just do our own thing, have our own industries to sell stuff to ourselves. It's all very, very isolationist, I would say. Right. And when you say they're anti business, I think that it's very self serving to the political class. Right. Because when you protect the bus industry you get lots of votes potentially from Melvin bus drivers.
- [09:25]
B
When I was in Buenos Aires, I was taken on a walk around the city center and at one point we came across a street that was being repaved. They were putting down new paving stones. And he said to me, these are relayed every year or every couple of years. I said what? He said, because it keeps people in work. And when you keep people in work, they keep voting for you.
- [09:50]
A
Right, yeah. I mean that sounds very familiar. And I would have to say I would sympathize with that view. I feel like when you speak to anyone from Argentina, there will always be two versions of the same story that are very, very different. So I'm inclined to agree with you, but a lot of people won't and that may be changing now. I think people got tired of this alternative explanation. But something I always say about inflation is that in Argentina it's almost as if every episode of inflation happened for a different reason. And it was always very unfortunate. There was something external, a drought. People have blamed inflation on a drought. And I compare that to a story of one of my British friends who lost his passport four times in a row within two years. Right. And he has a perfect explanation for each time. So one time it was stolen, another time the jeans, like the pocket was a bit shallow or whatever. And they're all technically correct, these explanations. But you think people don't lose their passport four times in a row. So you're probably doing it wrong. So the alternative explanation of inflation in Argentina is that yeah, there are triggers. Maybe the drought initiated inflation, but then they have a tendency to, to print money pretty much automatically whenever they find themselves in that situation. Right. There's a good academic article on it and it seems it's been the, you know, it happened in Venezuela too. There's a period of bonanza, we expand the government when oil prices are high. In Argentina, it happened in early 2000 when Soy was exported at very favorable prices and the government was collecting a lot of tax from that. And they expand the government to pretty much twice the size. So it wasn't a minor expansion of the government. Right. And then when the good times ended, what do you do? Do you scale back on the government? Do you balance your budget? Not really. What they tend to do is just print money, if you want to put it in an informal way.
- [12:06]
B
What if your job as a government, if your primary job is to defend your position as a government and defend power.
- [12:14]
A
Yeah.
- [12:15]
B
You will use those levers of power, one of which is money creation.
- [12:19]
A
Yeah.
- [12:19]
B
And job creation and vote harvesting.
- [12:23]
A
This is, you know, the political cycle. And this is why most people, most economists think that giving a government the power to create money to fund its spending is a bad idea. And it's a political question. And you had Stephanie Kelton on the show, and she kind of advocates for doing that. Let the government have more power of when and how money is created. And I mean, the treasury, which is. That's how it worked in Argentina. Right. So the treasury would tell the central bank directly, I want a loan. Give me a loan. The central bank would create money and put it in the bank account of the Treasury. It's a loan that's not really a loan because it was always repaid by getting a new loan. But that would be illegal in the UK and in a context of high inflation, the central bank would not want to do this. I'm not going to help you spend more because. But in Argentina, despite inflation picking up, this continued to happen. Right. More and more. And it's political, and I think everybody knows this. There's almost like a movement now to kind of forget about the political risk of letting governments create money. Right.
- [13:46]
B
Well, I think inflation is the most important thing that voters need to understand right now. In the uk When I went out to Argentina, I found that people understood inflation considerably better than people in the uk. I think inflation is one of those things that you hear about on the news. Maybe there's a report that the government has just missed its target of 2% inflation. It's 2.2 or it's beat. It hit at 1.8, but you don't really have a need to understand it until it materially affects your life. In Argentina, with inflation so high, you could see your money melting.
- [14:26]
A
Yeah. It's like icicles. Yeah.
- [14:28]
B
Yes. But in the UK, at 2%, it's quite cynical. And so you don't really understand it, especially if your wages are going up, maybe your kid gets a slightly smaller house, go out to dinner and it's slightly more expensive. It's really, it's kind of like a dark shadow. But I think now in the UK people are starting to question it because inflation is really starting to impact people. Lots of people are saying now I'm getting to where it's the end of the month, haven't got any money left. I can't believe the price of a cup of coffee. It cost 15 pound for a steak in a supermarket. A year ago it was ten pounds. And so now we're at the stage where people in the UK are starting to ask and question inflation. But in the UK I think we're dealing with about somewhere between 7 to 12% inflation a year. I ignore the CPI. Okay, but in Argentina and you have lived through 100% inflation.
- [15:36]
A
Yeah.
- [15:37]
B
Can you try and explain what that means to people? We're living through 10% inflation.
- [15:43]
A
Yeah, well, it's pretty chaotic. What I would say the first thing that happens is that things start to. The prices increase at different rates and there's winners and losers. So not everybody loses with inflation. I mean probably everybody does, but not at the same rate. So we use. There's a relative of mine who bought a flat as an investment, a retirement kind of plan and at one point, because you sign a contract for a year, at least for a year at a certain price and it was a student in the flat and how much do you update rent buy every year? You know, and at one point she was collecting the equivalent to 30 pounds a month from rent, which is nothing. But she was paying 30 pounds a month for her Internet subscription. So imagine it's like Virgin Media, I pay £30 and I own a flat and I collect £30. Right.
- [16:54]
B
Doesn't make sense.
- [16:55]
A
It doesn't make sense and it's this chaos and there's a question, do people become poorer over time or not? Or who becomes poorer? What does this do to economic growth? The last question. But the adjustment is very chaotic and prices are all over the place and people don't even remember the price of things anymore. It's pointless to even store in your head the price of things. You just go to supermarket and you see what's going on. There's a lot of chaos. It causes lots of issues with anything long term. So if you want to, I mean mortgages are pretty much non existent in Argentina, they're picking up now. But if you want to buy a house in Argentina, first of all US dollar cash, and this is How a legit transaction. You don't need to be a drug lord. A legit transaction is you go with a suitcase filled with, you know, maybe $60,000.
- [17:50]
B
I was told a story when I was in Argentina or somebody buying a house, and they said they saved in dollars. And then when they went to do the transaction, the money was taped to their body because they didn't want to have it in a bag because they didn't want to get it stolen from them. They take the money to their body, and they went to the house, went to meet the person, and they paid in cash. Dollars.
- [18:12]
A
Yeah, that's the way it's done. Once I called a friend who was in Argentina, right? And he was like, oh, what are you doing? How are you? And he's, oh, I'm waiting in the car because I escorted my other friend to the real estate agency because he didn't want to go alone because he had $60,000 in a bag, you know, and so I kind of went with him, and now he's inside doing the, you know, the transaction to buy the house. Yeah.
- [18:34]
B
So on this podcast, you are definitely hearing me talk about bitcoin a lot. Well, why? We live in a really strange time with governments driving inflation with their reckless spending and endless money printing. There is a way out of this. There is a way to protect your money, and. And that is by stacking bitcoin. I've made loads of shows about bitcoin. You can go and research this, you can go and read the books, but the truth is, it is the hardest money ever created. If you are interested in protecting your financial future, it's time for you to get on the bitcoin train. I have. I've been stacking bitcoin personally and through my businesses since 2017. It's protected me, it's secured my family's future, and it also strengthens all of my businesses. So if you want to start stacking bitcoin, where do you do it? Well, for me, it's with Gemini. They're a fully licensed, full reserve exchange and custodian. So they give you a secure way for you to buy and own your bitcoin. There's no risks and no funny business. So if you're serious about stacking bitcoin the right way, head over to gemini.com, which is g e m I n I dot com. So high inflation doesn't just steal your purchasing power. It causes chaos.
- [19:38]
A
It causes a lot of chaos. Yeah, a lot of chaos. And I've seen, like, I have A relative who has a cushy job for very good company, let's say, and her salary gets updated every three months, indexed to some good index. She doesn't suffer as much as other people. Every three months, automatically paycheck goes up. Other people, they work cash in hand jobs, which is very common in Argentina. There are no rules there, you know. And they do increase how much they pay because they have to, but. But you never know when that's gonna happen. If you are a solopreneur, you have your own small business, you don't know what to do. You have your clients of 15 years, what are you gonna do? How much do you increase your services? Cause you don't know their situation. You don't know if they have seen pay raises that match inflation or not. But then the other kind of chaos that is absolutely insane is that when people have any spare cash, if you're lucky enough, you need to get rid of it asap, right? Because it's like having icicles, right? So what do you do when you want to save money in Argentina? And that's something I saw firsthand when I was still living there, right? This desperation to buy US Dollars. Right? Argentinians are very dependent on the US dollar. There are reasons for this, historical reasons. But the first thing people want to do is it started, I think 2007, 2008, I was in high school, prices start going up. People notice this, the government starts lying about inflation. The stats are tampered with. This is well known now. And what they did exactly to kind of falsify the statistics. So you live in a society where everybody accepts that the government is not publishing truthful inflation metrics, which means you also don't trust anyone to even tell you what the inflation is or will be. So any spare cash, I want to get rid of it. So I want to buy US dollars. And that makes inflation worse because the currency is devalued when everybody wants to get rid of it. And that makes imports more expensive. It kind of compounds the problem. So 2011, I was still living there at the time. The government makes it illegal to buy foreign currency. You can buy your dollars, you need an authorization from the tax bureau. So you go to think of hmrc and based on your income, they allow a certain amount of foreign currency you can buy, but sometime later they just make it completely illegal for the goal of saving. So unless you, you actually need to, you need to travel, for example, and you can go and with your tickets and get this authorization, but only seven days before your trip. And they will give you potentially a limited amount of money that you can buy, right? I went with a friend to. Who had an authorization for a trip to Brazil. He was going to go across the border. And we went to the Bureau de Change, you know, to the. To the foreign exchange desk. And it was. I would like to tell you a story because it's just insane. So people are queuing up before it even opens, like an hour earlier. And people from the office, they walk out the street and tell people, this is the situation. The IT system we need to use to run your authorizations, type them in and kind of approve them before we can give you money. It works 10 minutes a day. So the market opens after 10 minutes. It crashes every day, right? So what we're going to do is no operations, no money will be given to anyone. We're going to collect the stack of papers of everybody in the queue, right? When market opens, we're going to try to approve as many transactions as we can because we want all the manpower to do that. And then once the systems crash.
- [23:54]
B
We'Re.
- [23:54]
A
Going to start giving you the money, right? And it's quite. I was pretty young, so imagine what that does to a person when pretty much everyone says the government's doing something shady. This is obviously, it's been programmed. It can't just randomly crash every day after 10 minutes, right? So he's like, you live in a place where people don't trust the government. They're doing essentially illegal stuff. Or maybe they could say, you know, we do let people exchange money, but there was just an IT issue, right? So when this starts, they have a stack of paper and there's chaos everywhere. Like, it's very interesting to see everybody trying really quickly to approve those transactions. And the stack of paper kind of falls over or there's a mess. And my friend who was in the middle of the queue, it kind of ends up at the bottom and the system crashes before he gets his approval, so he can't get the money. So he was, you know, I'm going to give up. So he did what most Argentinians did at the time, which is to go to the black market called the blue market, right? People called it the blue market, the blue dollar, the blue dollar. And the blue dollar is the exchange rate of the blue dollar is advertised on tv. You open, you know, the news channel will say, the weather in Buenos Aires tomorrow. And this is the price of the official dollar, and this is the price of the blue dollar. It's a very official unofficial Market. I think it also spoke to the corruption that there is in Argentina because you walk down the street in Buenos Aires and people are just yelling, change, change, change. I just go to an office and you just. So it's very visible. So if they wanted to stop that market, they could. But it's probably some commissions being paid. I don't know what's going on, but there's a very overt black market and that's how Argentinians do it. And I moved out of the country in 2014 and sometimes when I traveled back, you know, people would tell me, francis, bring, bring some cash. And I'll just. Whenever you're in Argentina, you want to spend money because you will want to, you know, buy stuff during your trip. Just sell me your foreign currency. I don't care what it is. It's. If it's euros, it's dollars, it's British pounds. Just bring me currency and I'll buy it for the blue rate and then I could spend. People were desperate to get a hold of foreign currency. They started traveling to Uruguay, just take a ferry to withdraw money from an atm, right? This became a problem. So the government added a tax to withdrawals of cash abroad of 30%. Then they added another 35% on top. That is, it's kind of a tax on account of your, like an advance of your income tax. So at the end of after a year, when you settle your income tax, you'd be able to kind of offset what you paid. But essentially you need to wait a year to get that money back that you paid. So it's like 30%. You can't recover it. Another 30% of 35, that it's kind of. You're not going to get it back or inflation is going to eat it away. So the mental gymnastics in Argentina. I was speaking to my parents the other day, actually, who are still in Argentina, and I wanted to understand a bit more how they felt about inflation, what it did to their daily lives. My dad says something, he doesn't know anything about economics, but he says something that's literally an economic theory. It's called the shoe leather cost. It's people, they run around so much to do extra things that their shoes get worn out. We had to do all of this. And people walking around going to try to get cash from an illegal. They call them the caves. You just go to this place, but they don't have any more cash, so then you run to the other one. It's like all of this effort made that benefits no one we don't waste that energy in the uk. Right. You're not running around trying to convert your pounds. Maybe now there is inflation picking up and stuff, but the idea that your life revolves around, running around to get rid of your cash and so much energy.
- [28:11]
B
Not yet, but these are warning signs for the UK and you can see the early signs. So anybody who has significant savings in a bank account at the moment is essentially melting away at a much slower rate than maybe was in Argentina. But people aren't keeping large amounts of money in a standard interest bearing account. People are thinking about, where do I put my money for the long term? We also have a government that is increasingly looking at different places to tax you. Can I take it from your ISA benefit? Okay, so you can't save for the long term as much. Can I take it through your employer? Can I take it from your farm? They're increasingly looking for more places they can take money from at a time where we don't have growth.
- [29:05]
A
Right.
- [29:06]
B
So I feel like Argentina, what happened in Argentina should be a significant warning for voters in this country.
- [29:15]
A
Yeah, look, I, I saw a Reddit thread once, someone asking why are Argentinians so miserable when they're not poorer than other neighboring countries? It was a person who went on a tour of South America and technically Bolivia, Peru, they are poorer in terms of gdp, but Argentinians seemed more miserable. This is the question this person was asking, and I've noticed that too, people are so upset in Argentina. And I think I understood some of this from a book I read a few weeks ago, British guy, you may want him on your show, called Stephen Deakin. And what he says is that sometimes. So when the pie is growing, which is the case in Bolivia, Right. So they may be poorer, but there's a typical path of growth that develop in countries or emerging countries are going through. There's this sense of someone can become richer and it's not at the expense of someone becoming poorer and stuff like that. When the pie is shrinking, which has been the case in Argentina since 2010. So depending on how you look at it, either flat GDP or even negative. So it's a country where the pie is shrinking. Let's think for a second what GDP means, because I think people use the word GDP a lot and sometimes we don't understand what it means. It means the amount or real GDP means the amount of stuff that is produced in an economy. When an economy shrinks, fewer things are being produced. Right. So there's literally less stuff like we can think in terms of everything, like doctor's appointments, like coffee. You know, if we aggregate all the activity in terms of things, there are fewer things available. Right. So the pie is shrinking and that causes a lot of misery because people feel like, I mean, you're literally getting poorer and if someone gets richer, someone needs to get even poorer. Right. And I think that was. That was a big problem for the morale, you know, of people in Argentina.
- [31:21]
B
Yeah, well, so I think that's what's happening in the uk. I think the pie is staying about the same size, but its distribution is unfair. So inflation is very good for me. I'm an asset holder. I think it's vile and I don't want it. But I benefit from inflation because more of that pie is coming to me, but the cost of that is less of the pies going to maybe working people or middle class people. And so I think even with the pie stay in the same size in the uk, I think it's making people more miserable. And I think there's an impact on hope and ambition and consideration for opportunity. And I know in Argentina and your evidence of this, that there was a significant brain drain of young people because young people felt like, well, this. I can never own a house. I can't. There's no opportunity. And young Argentinians went to America, to Europe, to Australia. Mm. We have the same here now. Bright and ambitious young people are maybe going to America or Dubai and other places apart from the uk.
- [32:32]
A
Yeah. So I, you know, most of my friends left the country. A lot of my relatives have left the country. I know someone who. They did a high school reunion sort of party and they did it in London because it was more convenient to everyone. Yeah. So, I mean, in Venezuela the situation has been a lot worse. But.
- [32:54]
B
But Argentinians don't really want to leave Argentina.
- [32:56]
A
Right.
- [32:56]
B
There's a very strong family culture. I've been there, I've had the barbecues.
- [33:01]
A
Yes, yes.
- [33:02]
B
What do you call those barbecues?
- [33:03]
A
Asado. Yeah, barbecues. Yeah, yeah, yeah. That's very. Yeah. I think people are very, very sad to leave. It depends on the person.
- [33:11]
B
Right.
- [33:12]
A
And how old you were when you left. And. But I feel like Argentinians leave not because they want to leave or because they don't like the country. They love to travel around. There's lots of natural wonders in Argentina. I think it's very Italian. I think that thing of the family together and gatherings. Yeah, that's very, very important in Argentina. So one of my relatives brought a German boyfriend, so it's a Relative who moved to Germany. She has a German boyfriend, brought him to Argentina. And he went to, like, a family gathering. Oh, you're back. Let's. Let's have dinner. And this guy, the German guy, he had to leave at one point. He was like, I can't cope with it, with the noise, with the mess. People are so. They love those gatherings with 20 people. They're loud, they love that. You know, there's a sense of, like, we get together. This German guy was like, oh, my God, this is so. People are, you know, it's the stereotypes of, you know, Latinos being very, very family oriented, very spontaneous. That's. That's all pretty true. And they're very informal. I think that they love that. They love that. And to them, it's sometimes a bit of a shock to move to places where things are a bit more, you know, you don't have spontaneous barbecues. You don't. You know, I had a barbecue every.
- [34:31]
B
Evening when I was in Argentina.
- [34:34]
A
Yeah. How did that go?
- [34:35]
B
It was amazing. I mean, the barbecues are amazing. I had meats that I didn't. I'd never had before. What's that? The part of the intestine of the.
- [34:43]
A
Yeah, the white.
- [34:44]
B
It's like a white meat. Yeah, Incredible.
- [34:46]
A
I mean, it's literally the intestine.
- [34:48]
B
Yeah, yeah, yeah. But there's a name for it.
- [34:50]
A
We call it Chinchouli. Yeah, it's like a very odd name. Yeah.
- [34:53]
B
So good.
- [34:53]
A
Yeah.
- [34:54]
B
But that family nucleus was there. But it was explained to me the family nucleus was attacked by inflation. I mean, we see it here. So Connor's just brought this up. Who's leaving Britain? Look at the two big spikes there. 16 to 24 and 25 to 34.
- [35:10]
A
Yeah, yeah. And I think, yeah, the Argentinian situation was very similar. I think that's the age gap. I mean, I left when I was. I was 21. I was pretty young. I was 21 when I left, 22 when I arrived. It was a very interesting birthday. How old were you when you started thinking about leaving? I think I was probably 17, 18. Because I think if people haven't done.
- [35:37]
B
It yet, there's a lot to have.
- [35:39]
A
It on their mind. Yeah, I can tell you something. Look, I had been lucky that I'd been abroad a couple of times when I was younger. I think I was 14 when I went to France, because my mom had a friend who lived in France and I just stayed at her place. It was very uncommon for people in Argentina to be able to travel. You know, we had Free accommodation. I came to London at the time for the first time, and I saw that there was a different kind of life here, you know, and it was in small things. So it wasn't about trains running on time and everything, because sometimes Argentinians think that Europe is like everything runs perfectly. It was more about people being connected, people being from different places. When I arrived in London and I saw people from everywhere, and I remember just a guy singing on the street randomly. And to me, that was like, why is this guy singing? And nobody even, you know, flinched or anything. And to me, that was fascinating and I was lucky to be able to see that. And I think when I, you know, after that trip, I kind of kept thinking, you know, in Argentina will live in a. In a different way. But I think I started considering leaving Argentina when there was this government that did all these odd things, like, as I said, expropriating businesses and stuff. Because my feeling was it wasn't even just about inflation, which it didn't seem like a good thing. Right. But I got the impression that they were making lots of very odd decisions. And I can share another decision that was, to me, very, very odd. And I thought, what's going on here? After another attempt to expropriate some land by the government. So essentially, this. I'm going to keep the story short, but the people whose land was about to be expropriated, perhaps it was a good idea to expropriate the land, I don't know. But they issued. They got a judge to issue an injunction. They essentially said, you can't touch our land until this is settled in a court of law. Pretty much expected. Right. So the president gets very angry. She had tried to do lots of things and judges stop her. So she tries to reform the justice system. So I see an erosion of institutions. Right. Which I think we need to be very careful about in the uk, which is happening. I mean, hopefully not, but yeah, it is happening. Yeah. Like what?
- [38:12]
B
Like jury trials is just a perfect example.
- [38:15]
A
Yeah. So as a cautionary tale, in Argentina, there were attempts to reform the justice system, and one of them was injunctions. No longer possible to issue an injunction against the government, except maybe in some circumstances. And even when you're able to do that, it will last six months, the protection. But no court case is settled in six months. So essentially, again, this is very bad for business because it means I don't have a protection against the government if they're doing something unfair. But there was another part of this law that was pretty insane, which Said the following. The committee that appoints judges. So this committee will now be elected in the general election. So you literally have people who will be campaigning with political parties. Right. So you will elect, say, a conservative member of this committee or a labor member of the committee. So it's essentially a political election of justice, which violates, if you want, the independence of the justice system. But you say, of course. But again, Argentina, there's always two narratives. All the people who say, this doesn't make any sense. And then you have all these other people who build all these, create all these stories of why that's a good way to do things, why we shouldn't be looking at what Europeans do, what Americans do. We need to do it our own way, you know, And. And they had a lot of support. And the law passed, and then parts of it were blocked in by judges themselves. So that this is unconstitutional. Right. It came to an advantage to have a written constitution, which there isn't in the. In the uk. Right. So I saw this assault of institutions that I thought, this is very bad for business. Right. For economic growth, because who wants to do business in this place? Would I want to launch a business in Argentina where, you know.
- [40:15]
B
So you were compelled to leave.
- [40:16]
A
I was compelled to leave because I felt, you know, I think I felt like an outcast because I thought so many people around me think that all of this is right, but this is.
- [40:27]
B
Happening here in the UK as well.
- [40:29]
A
I mean, maybe it's starting to happen. I'm trying to be positive. Yeah, But.
- [40:33]
B
But yes. Starting to be happy. Happen, happen. Which is why statism is such a dangerous position to hold, which I've held myself, personally, I've been guilty of. Because when you are revolting against the government, you're not just revolting against the MPs, but you're revolting against the people who will vote for them and defend the decisions they're making. And so we're seeing this in the uk.
- [40:59]
A
Yeah. I feel like I want to remind the British people of how this country has a history of solid institutions, and I don't want them to be eroded. I'll just give you one stupid example. There's lots of countries in the world that they hold. They store their gold reserves at the bank of England. Right.
- [41:19]
B
Venezuela does it.
- [41:21]
A
I think Argentina too, now.
- [41:22]
B
Yeah, Venezuela. And we refused to give it back to the Maduro.
- [41:25]
A
Oh, okay.
- [41:26]
B
Yeah. Maduro tried to reclaim the gold and we refused to give it back.
- [41:29]
A
But that means that there's a lot of trust in the bank of England and the institution of the bank of England. Because would you store your gold reserves in Argentina? Probably not. Because you will, you know, one day they will change the rules and they will keep it. That's, I would be afraid to keep the, you know, my gold reserves in Argentina. And that tells me that people trust this country. And look, there's another thing that I've been thinking a lot about. There was an episode of inflation in the 80s, late 70s, late 70s, pre Thatcher. Yeah. So this is also in the US it was in just the UK there were actually a few developed countries where inflation picked up. And one of the most, let's say accepted theories of why inflation wouldn't go down, talking 14%. I think again there are different explanations, but one of the most accepted ones, let's say the neoclassical explanation is that there weren't clear rules of how inflation would be managed. So people thought there would be discretionary actions that would be taken by the central bank, let's say a little bit of surprise inflation when unemployment goes up to try to inject some money into the economy and create more employment, at least for a little while. And but what this, this told people was that when you can do whatever you want, like when there's discretion over monetary policy, there's an inflationary bias. Everybody knows the actions that could be taken. They're not going to try to reduce prices, they're going to try to increase prices. So this called self fulfilling inflation, right. Because people expected that discretion, it couldn't go either way, it would probably go the inflation way. Right. Disinflation took place when there were clear cut rules. This is how we're going to operate, right? This is inflation goes up, we increase interest rates. So there were very clear rules. In the US there was a famous, famous Paul Volcker disinflation, right. Very tough. So the guy's like, you can kick and scream and yes, there will be unemployment, but this is the rule that we will follow. Right. And it seems that clear rules help tame inflation because people know what to expect. But you need to be credible, it needs to be unwavering rules, right. What I see, which in Argentina that until recently that didn't exist. And even now people think, you know, how long will the rules last? But anyway, in the UK I heard Liz Truss, I think she was on this chair, yeah. Kind of complaining about central bank independence in the UK and I thought that was a little bit dangerous because when she said it should kind of be accountable to the treasury, right. The central bank. And I think that's kind of dangerous, right? Because if, I mean, maybe Liz Truss, she thinks that she would make good use of this, the power to intervene the central bank. But do you trust if we let Rachel Reeves tell the central bank I want a loan and pay this interest rate for it, Give it to me.
- [44:40]
B
I wouldn't trust Rachel Reeves with a piggy bank.
- [44:43]
A
Okay, yeah. That's how it worked in Argentina. The treasury would tell the central bank. There's an Excel spreadsheet where you can literally see how much money was created directly and put in the bank account of the. You know, in the US There's Donald Trump saying he wants to fire Jerome Powell and because his interest rate policy, he should lower interest rates. So there's this idea, and I'm hoping this doesn't become very popular, that central bank independence is not good, that the government should be allowed to intervene the central bank, more or less. And I think what's dangerous is that the moment you allow some discretion, there's this inflationary bias. People believe that that discretion will be used in a chaotic way and it will produce inflation. Right. And people start increasing prices preemptively. And, you know, chaos starts even before the rules are implemented or the change regime is implemented. Just to explain what happened the other way around in the disinflation in the twenties in Eastern Europe, Hungary, Germany, Poland, you know, there was hyperinflation that stopped abruptly. Austria, also a good example, inflation. If you look at the prices, it's like the curve's going up like that, and then it just collapses immediately. The inflation stopped when the new rules to have, let's say, more sound money when they were announced, not when they were implemented. There's a very good paper on this. So the moment people saw that there would be a regime change, even if not right away, prices stopped increasing. So there's this question of the credibility of the rules that are used. And there's a very good paper by Thomas Sargent, and he quotes experiences or people, you know, saying what happened at that time. And it was so similar to what Malay has been doing. If I read a passage from that paper to you where it says we, you know, government civil servants, it was slashed in like, I don't know how many public servants were laid off. You know, a lot of it sounded like, you know, getting your budget in order, you know, and making very tough decisions. And that brought inflation down at that time, you know.
- [47:16]
B
And I think the chaos is already.
- [47:20]
A
Here in the uk do you think so?
- [47:22]
B
Yes. But not everyone's realized, okay, so we're seeing significant numbers of businesses start to close down, seeing employment, unemployment rates go up. And for, for every business that is closing down, I don't know how many are there that evening looking at their books and going, can we get through next month? Can we get through the next three months? Maybe we can get to the summer or maybe we can remortgage the house. At the same time, others are just leaving the country. We've seen young people, but we use it. Losing 45 millionaires a day. And I think there's a myth that millionaires are anti tax. I think they are anti high tax with no benefit to the country. I know lots of rich people who would happily stay in the uk. We are seeing chaotic budgets, we are seeing many. We've had so many U turns from this government that I think the government is at the point now where they are struggling to maintain and control the debt and they're not willing to change the rules of which they operate. Which is why we've got ever increasing attacks on businesses. That's why we've got ever changing increase in bureaucracy, we've got infringements on our civil liberties. And so I think the chaos is.
- [48:46]
A
Already here.
- [48:49]
B
Sadly, because of the way the government is. Rather than try and fix this, which would be painful, they're going for the least painful route, which is just a little bit more heroin. You don't want to get off drug.
- [49:02]
A
Yeah. I mean, I've heard people have asked me, do we need to hit rock bottom like Argentina in order to make a change? Right. Or can that be done before that happens? Right.
- [49:18]
B
But it is like an addiction. Yeah. It's much easier just every day just to carry on with your addiction.
- [49:25]
A
Yeah. I heard someone say once, you know how it's very asymmetrical. So when you grow the government, that's easy. Shrinking the government, not easy. Right.
- [49:34]
B
Not if your primary goal is to maintain power.
- [49:37]
A
Yeah. Yeah. Look, that's what was so surprising of what the campaign led by Malay in Argentina. Right. Because he said something that people hadn't heard before in Argentina and I think maybe in the world, which was, this is going to be tough. I'm not going to sugarcoat it. This is going to be awful and there needs to be an adjustment, as he called it. And yeah, it's going to be horrible, but after a while it's going to get better, you know, and Argentina needs a long time before it becomes a prosperous country. Whenever there was an alternative, let's say in Argentina to the Peronist regime, it was Never like that. It was people saying, we can implement gradual policies, trim things a little bit here and there.
- [50:30]
B
This is boiling the frog.
- [50:31]
A
Yes, pretty much. And it didn't work. So there was. From 2015 to 2019, there was an alternative. So after 12 years of the government of the Kirchner family, there was people elected, let's say, an alternative. It was the government of Macri at the time. And I think he was a bit of a wuss in the way he acted, to be honest, if you want to put it bluntly. He started publishing Real Statistic of Inflation. So he did a few things that were improvements compared to. And he also made it. He opened up the currency exchange market. So there were a few reforms in the good direction, but then he didn't do the things that were probably necessary to fix the issue. And inflation kept going up. Money printing did not stop at that time in 2018, I think when it became clear that he was going to lose the election, like the reelection, there was a drop of 30% in the peso in foreign exchange markets, because people thought the old regime was going to come back, and it did. And the new regime came back. And I mean, people, I think, thought at the time, it's a lesser of two evils. These people, we know they're not good. But the alternate was even worse. So let's just go back to the thing that doesn't quite work, but we'll be fine. And, you know, they kind of. They gave up, I think. Right. And. But things got so bad afterward. Right. So the inflation. And I left the country at that point, and inflation went to 100% and 200%. Right.
- [52:21]
B
Closed down the banks.
- [52:23]
A
Which banks?
- [52:24]
B
When was Le Carolita?
- [52:27]
A
No, that was in 2001.
- [52:28]
B
Oh, that was earlier.
- [52:29]
A
That was earlier.
- [52:30]
B
That's when they just stole everyone's money. Pretty much closed down the bank, said, we're having your money.
- [52:33]
A
That was very dramatic. I remember seeing. Watching it on TV and seeing the protests. And I remember vividly I was. I don't know how old. I was like nine. Yeah. I remember a person throwing a sink, like, you know, from the balcony. They probably did some renovation and they had like a spare sink, like a tap, and the sink just threw it on the people. Right. And it didn't hit anyone. But it's like. And I'm a child watching this. And I know there's been more drama in other places in the world. It's like, maybe you know, not as bad as other types of upheavals, but it is, you Know when we were challenged and my family was very affected by the crisis in 2001. I have relatives who open a business. They borrowed money for the business, all US dollar denominated. And then all of a sudden, your debt is multiplied by multiple times because it's converted to pesos at a certain rate. That was very unfavorable. It was absolute chaos. Yeah, it was. There were I don't know how many presidents within a span of a few weeks because they kept resigning.
- [53:38]
B
You know, it was like.
- [53:39]
A
It was very racist. That was 2000, right?
- [53:41]
B
Okay, okay.
- [53:42]
A
So, yeah, yeah, yeah.
- [53:43]
B
I mean, look, I trust Argentinians as much as anyone on an understanding of inflation. Not just a definition, but the lived experience of inflation. What it does to a country, what it does to the people, to hope. Yeah, but you've been here in the UK for a while now. Your spidey senses regarding inflation have been.
- [54:06]
A
I. I've been living abroad for what is 11, 12 years now. And I feel like, is it deja.
- [54:14]
B
Vu feeling in some way?
- [54:16]
A
So what I will tell you, the deja vu for me is in terms of institutions, mostly that's the deja vu with inflation, specifically what happened in 2001. I think there are different explanations of why that happened, and I think it's probably half and half. There's probably some truth to a supply issue, and there's also some truth to the overdoing QE kind of thing. Right. Overdoing quantitative easing. So the latter part sounds more familiar to me. The first one, we could say, okay, one off energy supply. My biggest fear is the narrative of gridflation. This is supermarkets. We need, you know, price controls. That was tried in Argentina. It never worked. It leads to empty shelves.
- [55:03]
B
So rent controls.
- [55:05]
A
Rent controls which were just lifted and the supply of property went up by a ridiculous amount. Something like 150%. I couldn't believe that.
- [55:14]
B
So it's the institutional rot.
- [55:16]
A
The institutional rot, it's very deep. It goes very, very deep in Argentina.
- [55:21]
B
But that is a strong signal here. When you see the institutional rot here. Yes, that's a strong signal.
- [55:26]
A
That is my fear. And I'm afraid people may be complacent about the role that institutions have had in making this country rich. And they're gonna forget why that's important. I was at a house party a few weeks ago, a friend's birthday, and there's this guy I've never met. And we start talking and he tells me that out of the blue, you know, Angela Rayner. There was this issue with the tax she didn't pay at the trough. Yeah. So she said, this guy said, just out of the blue, he was telling me, you know, what happened with Angela Rayner, poor woman, it was only 40k that she owed. And the only reason she was scrutinized is because she's a woman. So my feeling, I don't want to make a statement specifically on what happened with Angela Rayner or the tax, but this attitude of trying to excuse corruption, greed or some sort of wrongdoing, you know, because he sympathizes with the party.
- [56:28]
B
Right.
- [56:28]
A
Because if it was, I think it was a Tory minister, he would definitely denounce it, you know, regardless of the gender of the person. But it's, you know, we're protecting potentially some sort of wrongdoing because it's the party that we like and it's my team. It's my team. And they're the good ones because it's, you know, the labor is the one who wants to do stuff for people. Right.
- [56:48]
B
And who wants to be labeled a misogynist.
- [56:51]
A
Right? Yeah. Yeah. Well, not this guy, clearly. And he was excusing and excusing, excusing Angela Rayner. And I smelled it was a bit familiar from what? In Argentina, corruption runs very, very deep to a ridiculous level. I think they even need to make Netflix shows on this. Do you know the story of the nuns in this convention? And so the. I don't remember the year there is in the middle of the night, these people, there's a convent next to his house. And people who live in the house, they call the police because a guy jumped over the fence into the backyard of the convent. There are three nuns living there. And they're. What's going on? And the guy is bringing in bags into the backyard of the convent. So they call the police. The police arrive and they detain the guy. And he has $8 million in cash wrapped in bank of Argentina kind of official envelopes that only the bank has access to or something like that. And he has a gun illegally obtained. So they detained the guy. And he works for the Ministry of the Department of Public Works. He's not a very senior official, but he's a bit like kind of, let's say mid level ranking official and a big corruption scandal. And you would think that the entire government would collapse. It didn't. The guy, when he was being questioned, he said it was related to the president at the time, it had to do with money that was going to go to the hands of the president, who is now in Jail. So the president has been convicted of corruption and she's in house arrest at the moment, but at that time, and there's a saying in Argentina, very, very sad, which is, well, they do steal from us, but they do stuff. They. Or they get stuff done. I know you can laugh all you want, but, but it's.
- [58:51]
B
Yeah, it's not a ha ha laugh. It's like, fuck sake.
- [58:54]
A
Yeah, yeah. I think the institutional rot goes so deep that people don't believe that it is conceivable to have a politician who isn't corrupt. So it's a question of let's get the least corrupt one. Right. And corruption is pretty overt. I think that the president's gardener owned a helicopter and a transportation company. The guy who was trimming the hedges around her house. Right. So, yeah, lots of very, very shady stuff going on. And people kind of turn a blind eye to that because they don't see an alternative. And corruption seems to be at every level now. There's a big scandal with a football association, you know, going on. So it's private thing, but there's still a lot of. Apparently a lot of money got missing and the director got very rich. And, and I think, yeah, I, I don't think we have that level of corruption in the UK or I want to believe.
- [59:50]
B
Do you think maybe the case of that in Argentina is that everybody has to find a way to survive? So I remember I went to a restaurant and they gave me my bill, but they also gave me another price for cash dollars.
- [60:08]
A
Right.
- [60:09]
B
Which, you know, subverts the system, which doesn't work for them.
- [60:14]
A
Yeah.
- [60:15]
B
And, and so that, you know, if you've got zero trust in the system because everybody is corrupt within it, why should you participate?
- [60:26]
A
Yeah.
- [60:26]
B
And so it's almost like the entirety of Argentina became a kind of gray market. And so I, I know this is starting to happen here in the uk. People are trying to find ways to do things when they run their business in cash because otherwise their business will fail.
- [60:46]
A
Right.
- [60:47]
B
So it becomes part of, I guess, different levels of subvert in the system and corruption become normalized. Because if they're doing it, why can't I do it? And now I'm doing it. I'll excuse them.
- [60:59]
A
Yeah. But even beside corruption, this thing of making it difficult to do business. Right. It's also probably not good for the country in the long term. I remember when corporation tax was increased. I remember Rishi Sunak, he said something like, well, but it's below average. And I was like, well, Isn't that a good thing that it's below average? So do you want to increase it to have an average? And I think it's very tempting to increase taxes because, I mean, there's a whole narrative of why that's a good thing. But in the long term, I think you can see why it's no longer an appealing place to do business.
- [61:43]
B
Our country is openly hostile to entrepreneurs.
- [61:46]
A
Hmm.
- [61:47]
B
Is openly hostile to entrepreneurs. It's attacked medium sized, small, medium sized businesses now for, I mean, I can't put a timescale on it, but I would say over the last decade it's openly hostile. And if you're openly hostile to entrepreneurs, you're openly hostile to wealth creation, you're open hostile to job creation and you're openly hostile to your own country.
- [62:12]
A
Yeah. And maybe people have forgotten how economic growth is accomplished.
- [62:16]
B
I don't think some people know.
- [62:19]
A
They don't know. Yeah.
- [62:19]
B
I just don't think they know.
- [62:21]
A
Yeah.
- [62:21]
B
And this is a problem with the party like the Labour Party is that they are a party made up of student politicians, lawyers, charity workers and union members. They're not a party made up of people who sat there on a Friday night looking at their take ins thinking, how do I make payroll next week? How do I drive growth? They don't understand wealth creation, they only understand wealth extraction. They don't understand the consequences of this. That's why none of them should be anywhere near government.
- [62:52]
A
So one of my friends, I'm quoting someone here, he says that labor is the party of the public service. So it's not the party of the working people, it's the party of the public service.
- [63:03]
B
They were once the party of the.
- [63:05]
A
Working people, the working class.
- [63:06]
B
They're now the party of the non working class.
- [63:09]
A
Yeah, yeah. And that was, you know, in Argentina that was pretty much the case. So what happened during the Kirchner administration was that the government grew enormously, Right. And even senior officials were paid enormous salaries. Right. That's actually one of the ways in which Malay cut down government spending was reducing his salaries of people at the top of the managers. They were even exposed that because people didn't know you had all these people at the tax bureau making, let's say, the equivalent to 10,000 pounds a month after tax, which would be enormous in the uk. In Argentina, that's ridiculous. Right. You got all these people making all that money, Right. And the public service became very, very big. Right. You have all these ministries, they did some crazy things there was. They handed laptops to every Student in the country for free and teachers. So I think there were about 10 million, if I remember correctly, or a few million laptops that were just handed out to people. Right.
- [64:12]
B
Here's a laptop. Vote for me.
- [64:13]
A
Sorry?
- [64:14]
B
Here's a laptop. Vote for me.
- [64:15]
A
Yeah, well, I mean, that's how I see it. Obviously, you have the other parallel reality where that's good for education. The program was called Connected Equality. Right. So you can see the appeal to that, you know, social justice. Social justice. And, yeah, they, you know, the public service grew a lot.
- [64:37]
B
We should talk about mmt.
- [64:38]
A
Yes.
- [64:39]
B
And why it's a scam.
- [64:40]
A
Okay.
- [64:42]
B
You have a book coming out. I wrote an article where I called it Modern Marxist Theory.
- [64:47]
A
Yeah.
- [64:48]
B
It was a bit provocative.
- [64:49]
A
Yeah.
- [64:51]
B
Stephanie Kelton wrote a book called the Deficit Myth. I think she's a scammer.
- [64:56]
A
Okay.
- [64:57]
B
Personally?
- [64:57]
A
Yeah.
- [64:58]
B
And I think she's economically illiterate or she's literate in a version of economics which suits government money creation, but ultimately makes the rich rich and the poor poor. Your book is hopefully the antidote to her book.
- [65:15]
A
Yes.
- [65:17]
B
But MMT is justified, particularly by the socialists or the social justice warriors of the country, the people from the left. I'm pretty sure Zach Polanski will be a big proponent of mmt. Do you want to.
- [65:33]
A
He's already been like. He's spoken. He's definitely learned things from mmt. I read someone say that he's been learning mmc. So he didn't use the words MMT himself, but he clearly kind of endorsed the theory.
- [65:45]
B
Well, he talks about money multipliers as well.
- [65:47]
A
Yes. That's very Keynesian. Yeah, yeah.
- [65:49]
B
No, I mean, he's.
- [65:51]
A
But he said the public debt was something like. It's just. I don't remember the words if it's a number or it's just made up or it's just a concept. He said something in the lines of that.
- [66:00]
B
Yeah, yeah. He said something that if he doesn't understand it, he doesn't understand why people may maybe was stopped buying our bonds. He doesn't understand what it would do for the value of our currency. I mean, I think he is a dangerous individual. Dangerous because he's stupid.
- [66:16]
A
Okay.
- [66:16]
B
But we should talk about mmt, because there are people out there who hear about this.
- [66:20]
A
Yeah.
- [66:21]
B
Who. About magical ideas that the government can just create money, and when they can create money, they can create jobs and that multiplier. So it's really important. I think MMT is a lie.
- [66:34]
A
Okay.
- [66:34]
B
Personally. But can you explain to the listeners and the watchers and the viewers what MMT proposes.
- [66:43]
A
Yeah. So, but in simple terms, in very simple terms, mmt, I think it says pretty much three different things. But the first thing is that the government doesn't have to worry so much about money, right? So debt is not quite the problem. We think it is like a burden to future generations and stuff like that. Saying things like the country is broke, it doesn't make sense. All of this is because countries like the UK or the us, they have their own currency. So if we change the rules, because the current rules wouldn't allow it, but if we change the rules and let the treasury take control of the central bank and let's say, wipe out the debt, we could literally just at the click of a button say we're going to create X billion pounds to pay off the bonds that the government owes. That is technically possible, so we shouldn't worry so much about money. And all this narrative of there's not enough money to pay for this or that or debt is a burden, all of that is a bit of a mirage, that's what they say. But again, all of this only makes sense if there's something you can do with that information. And this is perhaps the most important part of MMT that says that if we loosen the purse strings a little, we let the government spend in a different way, create money in a different way. We can achieve things that we can't achieve right now. We can virtually eliminate unemployment and poverty and poverty, we can eliminate poverty, we can eliminate unemployment, we can transition to zero carbon emissions, all of these things.
- [68:23]
B
We can all be millionaires.
- [68:24]
A
We could all be millionaires. I mean, I mean, maybe, I don't know what they would have to say about that, but this is a free lunch. So what they're selling to you is a free lunch because they're saying there is something that is unutilized, there's an opportunity, low hanging fruit that is not being used. And very importantly, there's a trick to not cause inflation by doing this because otherwise people would argue this is the Argentinian recipe. But no, MMT says government can print money to do things like eliminate unemployment without causing inflation. So that would be, from a point of view of policy prescriptions, what MMT says, right? So let's relax about money, right? There are quite a few issues with mmt, but let me tell you something that makes MMT pretty dangerous because I think they're very sly in the way they communicate and hold on, there's an.
- [69:20]
B
Implication there that they know they're wrong and they're promoting something they know is wrong.
- [69:26]
A
In which sense.
- [69:27]
B
Well, if you say they're sly, yes. Do you have to tell a lie to convince.
- [69:33]
A
Look, Stephanie Kelton, for example, she says a literal lie in her book that she has been, she's been, she's been made aware of. So in addition to all this, MMT often analyze institutions. They say this is how the bank of England works, this is how the Fed works. And many of their conclusions are wrong because they've analyzed institutions incorrectly. They believe they have the best analysis out there. But for instance, they made a really stupid mistake. And Stephanie Kelton made this mistake in a paper in 1998, I think, where she said that tax receipts that the government collects in the US disappear. The money disappears, it is destroyed. So it's impossible to actually use taxpayers money to fund government spending. It's physically impossible because the money disappears. Well, the money does not disappear. It's just recorded in a bank account with a different name. She just got confused. People have told her, you're wrong. There was a paper that was published saying you're wrong because of this. And she replied, she published a response to that that was completely incorrect. It was not a good response. So she's been made aware of that mistake. And in her book the Deficit Myth, she literally echoes that. She repeats the same mistake years, 20 years later, after. So they do. When I say they're sly, I think.
- [70:57]
B
Well, hold on, incentives here. Does, does the argument destroy her argument? And if so, does it destroy her place in society as seening as the most prominent or one of the most prominent people promoting mmt, which gets her invites on podcasts, which means she sells books, which means she has an income.
- [71:22]
A
I think if we want to give them the benefit of the doubt, a lot of people don't even do that. But if you want to give them a benefit of the doubt, you can divide MMT into different compartments. Some of them you can discard them. Like all of their analysis of current institutions. You can just say, let's let the government print money. Let's assume that's possible instead of analyzing what the current situation is. So you cross out that box of in institutions. So we do a hypothetical exercise and I do that in my book. So I give MMT the benefit of the doubt. Let's say, okay, let's accept, we'll let the government print money. Can we eliminate unemployment? How do you explain inflation? How do you explain how you're not going to cause inflation by doing that? Is your theory of inflation good? Because the onus is on them. How are you going to not turn this into Argentina? They have an explanation for it. So let's scrutinize that explanation. So I think we can.
- [72:15]
B
And the explanation is what? How do they not drive inflation?
- [72:18]
A
It's fascinating. The explanation is the following. There are lots of idle resources in the economy. There's a lot of productive capacity that is unused, right? And if you print money to reactivate that part of the economy, you have more production of things, right? So you have more money chasing more goods. So inflation does not occur.
- [72:48]
B
So they're saying it's not inflation, it is the mechanics of supply and demand which raises the prices.
- [72:54]
A
And this is technically true. So if you increase the economic capacity of a country, right. And at the same time you increase the amount of money, and if you write down the equation with a couple of assumptions, you will see that, yeah, you don't expect prices to go up when there's more supply, at the same time that there's more demand. Right? So this is technically true, what they say, but they make a few mistakes in the analysis. So, first of all, they seem to overestimate the actual amount of slack, as they call it, that exists in the economy. There's an MMT' er who recently said, in Europe there's 25% slack. That seems crazy to me. Do you believe that Europe could produce 25% more stuff? Right. And I think sometimes they just look at unemployment as a sign of slack. To them, any level of unemployment beyond, let's say, a minimal 1 2% frictional unemployment, anything above that is a sign of total idleness. But they forget that economic production also requires other things. If the government will build a hospital, it will need workers, let's say unemployed workers. That's more, you know, idle resources. But what about the materials? You know, you would have not to compete with the private sector for the same material. So you would have to have piles of concrete sitting idle, you know? And the other thing that MMT doesn't do is explain why there is so much idleness in the economy. Right. And even how in practice they will only mobilize idle resources and nothing else. Right? So it's pretty bad in theory, it's pretty bad in practice to trust the government that I'll let you print money and you will carefully only be able to pinpoint things that are magically unused, machines that are turned off, unemployed people that will never get a job. They have no place in the private sector, because otherwise you're competing against the private sector for the same jobs. So it's almost like there needs to be a whole parallel unused economy where they can go and grab those resources. Now another problem that MMT has is that theoretically you can do this as a one off thing. Let's say I print this much money. Let's assume that increases economic production right at the next period of time. If that level of production has been restored and it continues at that level, that's okay. But MMT ers say that you need to constantly keep doing that and that doesn't work. You, you know, if you do it in a one off way, let's say because there was some sort of recession and you inject a bit of money in the economy and that's it. But if you're constantly every month printing more and more money then economic production, you can't just, you know, if you exhausted this alleged 25% of idle resources, there's not another, what do you do afterward? There's not another 25% that's going to pop out of the blue. Right. And then they start contradicting themselves. You know, some people, some MNTErs say that they say crazy things like look at one of them. If you let inflation pick up, you let inflation go up without any, let's say monetary policy or interest rates or whatever you do to try to quench inflation. This will motivate producers to invest in increasing capacity, let's say invest in new machines because they see demand going up. People want to pay more for my stuff, so I will just invest in new machines. And that will increase the pie. So it will create economic growth. So inflation will run its course naturally because of, I mean it's insane.
- [76:27]
B
So they believe that inflation will drive productivity?
- [76:33]
A
Yes, some of them, some of them say inflation will. There is a tiny bit of truth to something they say, because what, And I will tell you why they're sly, because they often use something that is at least partially true. So there is, even in mainstream economics, people agree that when you have high unemployment that fosters more unemployment because people, they lose their skills, they get demotivated. So it's not good to be in a state of unemployment. So if you try to reduce that unemployment, then you avoid that path of kind of decline of more and more self fulfilling kind of unemployment. Right. So to them it's like let's print money to reduce unemployment and that will stop this path of increased unemployment. So it kind of. Yeah, so they're saying it will foster productivity, but it hasn't worked in Argentina.
- [77:26]
B
Right.
- [77:26]
A
So we haven't seen investment machines, the economic capacity of the economy grow.
- [77:34]
B
I think there's two other things that particularly concern me with the MMT crowd. The primary one is the belief and faith that politicians act altruistically for the net good of the country. When I think it's provably right, they act in the best interest of the party. Every politician's job is to win power and defend power. And if we give them free, free reign to create money, they will of course direct that money towards the unions, the special interest and the voters who will re elect them. So that's the first thing that you cannot trust government to direct that money in the correct way. Should we deal with that one first?
- [78:28]
A
Yeah, yeah. I think one of the main criticism of MNT is effectively how naive it is in terms of the political economy. Right? Look, there's an example in my book, because mmt, they want to give the central government the power to do all this, but not the local government. So why don't we actually let the Southwark Council or Westminster Council also create money or NGOs, right? Everybody knows, it has been known for a long time that when you give someone the power to create money, they may not use it very wisely. And politicians, they want to get reelected. This is very old, the fact that we're going back to this discussion, the reason why we've moved to central bank independence, hopefully that will persist, but it is because we don't trust politicians to do that, right? This is very, very old. And let me tell you why I said MMT is kind of sly, because sometimes they say things that are technically true, but economically ridiculous or even false. So MMT basically says if we let the government print money, it can't run out of money. Everybody knows this and their mother, everybody knows. Nobody has ever questioned the fact that if you let someone create money, they can run out of money, right? The question has always been, is this a good idea? Most people think it's not. I did a sort of poll, I think, on LinkedIn, because I think I asked money, I asked people, if we let the government create money as much as it wants, can it run out of money? And people just immediately said, that's ridiculous, it will cause inflation, it will cause a mess. Nobody said, oh, wow, this is. I hadn't thought of this. This is the sort of nugget of wisdom, of newly found wisdom that actually the government can be broke and stuff.
- [80:27]
B
You know, well, you can't run out of money technically, but it can run out of good money, useful money.
- [80:33]
A
Yeah. And that's why when I say they're sly is because they often say something that is technically true and economically doesn't make any sense. I'll give you another example from Stephanie Kelton on your show. She said something like, government. The government can be bankrupt, can be broke. Now let's unfold that a little bit. Because technically, the government can be broke in terms of. It can always give you the amount of money that it borrowed from you if it's allowed to create money. That is a fact.
- [81:08]
B
But now, domestically.
- [81:10]
A
Domestically, only domestically. And if you have your own currency now, that could still be a default on their payment economically because the money could be worth less than what it was before. Right. So you can pay your debt technically and not economically. And let's do a thought.
- [81:29]
B
It's a nominal gain.
- [81:30]
A
It's a nominal. So let's do this thought experiment. Peter, I borrowed money from you 10 years ago. You gave me a million Argentinian pesos. Right. And we agreed I was going to pay you back. Now, 10 years later, 1.5 million Argentinian pesos. And let's say I technically pay my debt to you. Right. But economically, I'm still defaulting on my payment because what you can do, 1.5 million, is a lot less than what you had in mind.
- [82:00]
B
Yes. Just for people listening, you're paying back the nominal plus interest.
- [82:04]
A
The nominal. Exactly.
- [82:05]
B
But my purchasing power is a lot lower.
- [82:07]
A
Exactly. Your purchasing power is a lot lower. So a country can be broke if it can fulfill its promise that once it pays the debt to people who lend the money to the government, they will be able to do with that money what they thought they could do. So if a pensioner buys a government bond and they think, in 20 years, I will use this bond to buy this and that, and then they can buy that. You're essentially, economically, you are defrauding these people. You're defaulting on your debt. Not technically. I just give you your money back. And what MMT's do all the time.
- [82:43]
B
It'S just a bad deal.
- [82:44]
A
It's a bad deal. And MMT ers, the way they're slight is that they always say things that are technically true. So people feel like they've been lied to. I saw this on Twitter a lot. People say they believe that my government has been lying when they said they didn't have money because we have our own currency, we can create. This is ridiculous. Yeah. Technically, they can pay whatever they want if they are allowed to create money. This doesn't mean they can Pay their debts economically. And this is how it's so sly, because it's so seductive.
- [83:16]
B
This episode is brought to you by Ledger, the most trusted Bitcoin hardware wallet. Now, if you're serious about protecting your bitcoin, Ledger has the solution you need. Their hardware wallet gives you complete control over your private keys, ensuring that your bitcoin stays safe from hacks, phishing and malware. And I've been a customer of that since 2017. Love the product. Use it for my bitcoin. I use it with my Castle multisig for protecting the football club's bitcoin too. Now, with Ledger's sleek, easy to use devices and the Ledger Live app, managing your bitcoin has never been more secure or convenient. And whether you're a longtime holder or new to the world of bitcoin, Ledger makes it simple. Keep your assets protected. So if you want to find out more, please do, head over to Ledger.com and secure your Bitcoin today. That is Ledger.com which is L E D G-E R.com that is Ledger.com Let me talk about the second problem because it's a contradiction of those who promote MMT who often discuss inequality and poverty. But with MMT, the newly money created money isn't distributed evenly. There is the cantillion effect of those closest to the spigot benefit the most. Yes, and you will get inflation with.
- [84:35]
A
I mean, not according to them, but.
- [84:37]
B
Yeah, well, some argue that you, you will, but as long as you've got growth, you know, but you will get inflation, they're just factually wrong. And inflation will make the rich richer and the poor poorer. MMT will drive inequality, it will make inequality worse.
- [84:57]
A
So let's pretend I'm an mmt'.
- [84:59]
B
Er.
- [84:59]
A
So I'm Stephanie Kelton. So I will tell you a few things. It's always the same story. They will tell you first that they want to use that newly created money for a job guarantee program. The government will give a job to anybody who needs a job. So we will actually use that money to eliminate unemployment. Right. Lots of issues with this proposal, but it was like, no, the money is going to go to the hands of the people who need it most. They will use it for all sort of. Well, there was a proposal in the US to use MMT to implement this green new deal that would, you know, there would be energy transition, socialized healthcare, like single payer healthcare. So it's all for the people, you know. And another thing that I'm, I can assure you they would bring up straw man sort of thing. They would say, but look at Japan. They have been trying to get inflation up, but they can't. Look at the UK and the US they've been trying since 2008 to get inflation up and they can't. Our economies are suffering. Inflation is not going to happen. So we're going to create money to reactivate the economy. So they will dismiss the inflation problem and they will tell you that the money is going to go to the hands of people who need it the most. I'm playing devil's advocate here. Yeah, yeah.
- [86:26]
B
But if they have a job guarantee program, there's no guarantee of productivity behind that job.
- [86:33]
A
Well, I mean, so there's no value creation. I think you would have a lot of fun reading their proposals because one of the things they literally say is that, well, what kind of job will this person do? Visiting the elderly in care homes. So that's kind of the kind of job they propose. And then they say that productivity is going to go up because people are no longer unemployed. So employers will be more willing to hire these people because they haven't been unemployed. There's an economist, Richard Murphy, I'm pretty sure. Robert Murphy. Yeah, Bob Murphy. He says something like, who will want to hire these people who've had the cushiest job ever? It's like you don't believe that they're not unemployed. They're kind of almost according to them, this is all productive work. And funnily enough, I'm going to tell you something I find really funny of because has this ever been tried, this sort of job guarantee program? And they cite as an example of a successful program, one that was run in Argentina after the 2001 crisis. It's crazy that they're citing Argentina as an example of anything. And I do remember this program vividly because it was after the 2001 crisis and it was very different. So this is not. They didn't give a living wage to people. It was kind of pocket money only to one person per household if there was a pregnant woman in the household or a disabled person in the house. So it wasn't like a universal job scheme like MMT wants to do. But I think about 70%, 60% of people never actually did any work because the government couldn't actually put that together. It's very difficult to have this pool of job guarantee people and then actually get organized to give them productive work to do. Right. And they never met. So what did they do? What did they do after? Well, they converted that into a sort of unemployment benefit sort of thing without any type of work. It's just giving the money to the people. So essentially it's a failed example of a job guarantee program. But MMT recite this as an example.
- [88:45]
B
Of how the job guarantee program really is just welfare.
- [88:50]
A
I mean, I'm inclined to say that in practice it would work like that. Yeah. But that's not what they will tell.
- [88:55]
B
You because there's no productivity behind it. There's no wealth creation.
- [88:58]
A
Oh, well, look, this is another funny thing. And this is, you know, this is a funny thing. In one of their articles, an MMT says there's so many things these people could be doing, the people in the job guarantee program. And there's a paragraph that I found really funny, something like, have you seen the state of our public swimming pools and parks? Or something like that? And I thought, wow, first word problems. Is this, like, I don't know, I found it really funny because it seems like this person thinks we're going to put all these people to make our swimming pools nice. I thought it was completely detached from reality, from what poverty actually looks like, you know?
- [89:42]
B
Well, I just don't think these people understand what the creation of value really means.
- [89:47]
A
No, probably not. Yeah, because the. So what does that mean to you? What does the creation of value mean?
- [89:54]
B
It means that somebody would voluntarily want to purchase something with their own wealth. It's the private sector. It's the free market. The free market creates wealth, it creates prosperity. Yeah, I, I attribute very little value creation from the public sector. Because it's mandated.
- [90:17]
A
Yeah.
- [90:18]
B
The private sector, the free market is our decision either to hold something of value or exchange something. Value of value for value.
- [90:27]
A
Yeah. So when you look at economic theory, right. What is in standard economic theory? What is economic growth? Right. How. How does that happen? And one way in which it happens is more investment in capital. So this is stuff that helps us produce stuff to understand what capital means. A machine. Right. A house is actually a newly built house is capital because it helps produce a service which is shelter. Right. Another way to grow economically is to know how to better use that capital. This is known as human capital. Right. Do we know better techniques, better methods to use those machines? Malay has. There's a government department. He merged lots of departments into one and he called it the Ministry of Human Capital. It's no longer, I think the Ministry of Education is human capital. So he borrowed this from standard economic theory. What you could see in terms of the government, there could be potentially a role. I'm not speaking politically here and what you'd like or do not like the government to do, but there's a case for. There could be infrastructure investments by the government that help produce stuff. Again, economic growth is producing more stuff. So if the government helps build roads or motorways, you could build. Potentially. Think of that could be conducive to economic growth because it's easier to produce things when you can transport things more effectively. Then you could argue. A more libertarian person would argue this could be done privately, but infrastructure has a role to play. Some other people would say health. If people are unhealthy, then they can produce. But I think it's important to remember where economic growth comes from. Like, you know, machines, techniques, ingenuity to produce things more quickly. That was what the better, faster, cheaper. Exactly. That was what the Industrial Revolution did. Right? It was. You know, I remember when I moved to London, I went to the. I lived close to the Regent's Canal, and they have this little museum called the Canal Museum. And I learned so much about the canals. And back in the day, it was a very sophisticated piece of technology that they built across England to transport goods. Because pulling them on a barge, using a horse, that's why they're called the towpaths right next to the canals, is because it was a horse that was used to pull the goods that was much more efficient than carrying them by land. But then when the steam engine appeared, all the canals were, you know, they became obsolete, let's say, because it was much more efficient to use railway to. I mean, in Argentina they would probably want to protect the canal industry. Right. That's what they do.
- [93:24]
B
Right.
- [93:25]
A
But I think it's important to remember. Yeah. Where economic growth comes from. And I don't think MMT understand any of this. Or they promote the. They think that having. They have a very Keynesian view of things of let's. If you hire a person to dig up a hole and another person to cover it up, you know, that will make people happier and they will be more employed, so they'll have more income and that will foster growth, grow the pie, and that will grow the pie somehow. And I mean, if these people were digging up, they were building a road, you could perhaps argue that somehow it could contribute.
- [94:04]
B
But they're not creating something of value. No, not when coffee is created. We created something of value that I want to consume and I'm willing to pay for. And when we create a mobile phone, we're creating something of value. And you know, some of these things lose value over time there's a leakage, but some of them increase in value over time. When you pay a guy to dig a hole, another guy to fill it, no value is being created because nobody wants to buy that service in a free market.
- [94:32]
A
Yeah.
- [94:32]
B
There's nothing to own, then there's nothing to appreciate in value.
- [94:35]
A
Yeah. I mean, all these theories are related to the work of Keynes. Right.
- [94:40]
B
That's where even Keynes said money creation should only really happen in emergency scenarios.
- [94:46]
A
Yeah. Yeah. I think two MMT ers, we live in a constant state of emergency. I think Stephanie Kelton says the only time in the 20th century where we had full employment was during war and peacetime. There's never full employment. Right.
- [95:06]
B
But there's a really interesting point there. If we have full employment during war, what happened to a country after the war? What was the state of the uk? The UK was unproductive, heavily in debt, to pay for that war because these people weren't creating something productive.
- [95:26]
A
Yeah, It's a very naive way of analyzing economic issues.
- [95:31]
B
I don't think they understand value.
- [95:34]
A
Well, I think a lot of them align to maybe the Marxist theory of value, potentially where, you know, any entrepreneur is kind of stealing or the value is created by workers. Like I wouldn't be surprised if they said something like that. Yeah.
- [95:49]
B
Where's the economics and politics of envy? That's where it comes from. Yeah, but if they were right, we could abolish HMRC and the irs. We wouldn't need to tax people.
- [96:01]
A
Well, and that's the title of my book. Right. The title of my book is if you can just print money, why do I pay taxes?
- [96:07]
B
That's a fair question. Why am I paying taxes?
- [96:10]
A
And actually MMT has a good answer to that.
- [96:13]
B
I think they control inflation.
- [96:16]
A
That's one of the way. Yeah. So one of the. There are at least three different reasons why taxes would still exist. The first one is it can be used to control inflation. Obviously from a political point of view, this wouldn't work. I mean, which politician would increase taxes because they fear inflation would go up and it's even impractical to increase taxes. But anyway, so there's a role to it.
- [96:39]
B
But also we have an election in three years. Some party will come and say, hey, we're going to get rid of all taxes. We don't need taxes.
- [96:46]
A
Yeah, well, you know what, that. Maybe this is a tangent, but this textbook thing happened in the Massachusetts Colony, 1690. I think this is actually a very interesting story because MMT's have told the first half of the story. So the colony needs to be. Yeah, very slight. The colony needs to pay the soldiers who just came back from a failed attempt to invade Quebec, I think. And there's no money. Literally, the colony has no money. So how do they pay the soldiers? Right. And they couldn't offer any land to the soldiers. That was kind of already, you know, they actually didn't have the right to do that. They didn't have any more silver, which was used as money. So they literally print pieces of paper. They say, this is worth this many shillings. How do they get people to actually accept this? Because it's literally a piece. This is the first instance, I think, of fiat money in history. And they say, we're going to accept this as payment for taxes in the future instead of grains that were used for silver. And there will be a discount. So if you accept this money, the day you have to pay taxes, you can pay, like you can get a 5% discount. Right. And it worked. And this is. MMT says that taxes legitimize the currency. That's another role of taxes. They exist because they drive demand for money, because people have to pay taxes. Right. So it's one of the main uses of taxation to them. But the second half of the story is actually quite interesting, right? The money's accepted and starts circulating around the economy, so it becomes actually fiat money, the obligation to pay taxes. It was actually, they said, whenever we redeem these bills, they were called bills, we're going to burn them. So it's destroyed. So whenever we want to pay something, we create the money, then we burn it. But people started complaining about the burden of taxation. So they kind of deferred tax collection, which means the money was not eliminated. So the government kept spending more and more by issuing more bills and not really withdrawing them. So there's more and more bills circulating. What happened? Inflation. Surprise, surprise. Up to the point that the British government said, you're forbidden to use this paper money. You need to go back to the silver standard at the time. So it's essentially a story of using taxes to legitimize money. But because of political reasons, the taxes were not levied the way they should have been. And then inflation. This is literally what people would say MMT could do. Right.
- [99:26]
B
Is, you know, I call inflation theft. I think you call it a tax.
- [99:33]
A
Some people call it an inflation tax. Right?
- [99:35]
B
Yeah. Hidden tax.
- [99:36]
A
Yeah.
- [99:38]
B
I consider it theft. But one of the things I don't think.
- [99:42]
A
Why do you consider theft?
- [99:43]
B
Because I think it steals your time. Because I think Money is a proxy for time. And so what is the reason we have a pension or we save? Well, we save because hopefully, worse, we can retire at 65, maybe 60, even 55. We're trying to buy time at the end of our life where we don't have to work. Particularly if you don't like working. Some people like working, but let's assume you don't. But I consider money a proxy for time. And so the more money you have, the more time you have, the more optionality you have on your time. Whereas if, you know, if you, if you're working three jobs just to try and get by, you don't have much time to do the things you want to do. And if your savings are being eroded by inflation, what's actually happening is that's stealing time. That's taking time from you.
- [100:32]
A
Yeah.
- [100:32]
B
And nobody would vote for inflation if they understood it steals their time. And so that's why I consider it theft. I consider it theft of a portion of your life.
- [100:43]
A
Yeah. And nobody actually chooses to have that tax. Right. It's not, you know, people don't. Don't choose to bear an inflation tax.
- [100:54]
B
And that's the. I think that's the thing where it really got me, like when I understood inflation as a devaluation of my currency, it's like, oh, that's fucking annoying. I can't buy that thing I want there, or I can't. But when I realized actually money is a proxy for time and inflation takes away my time, then I consider that theft. Because you're literally stealing the free time I want in my life or the free time my children will have. And so I always equate inflation to time. Now and then to me, I consider it a crime. I would fucking throw all these people in jail.
- [101:35]
A
I mean, I can see that. And I think, you know, I think Argentinians are more aware of this time phenomenon. Right. Let's just do a thought experiment. You got like, you know, Alice from Argentina. She gets her wage paid on the first day of the month, and she runs to the supermarket and spends at all, at least as much as she can to stockpile things in the home. And then whatever is left, she goes and buys US dollars in the black market, Right. By the end of the month, she has this many supplies at home and this many dollars. And then there's Bob, another guy from Argentina, who decides to kind of buy things as he needs them. Throughout the month. He gets his wage, and at the end of the month, he buys US dollars. One of them is worse off at the end of the month because of the timing of the. Because the person who doesn't run to the supermarket is worse off. And people find this very unfair because the timing of your purchases, that you're capacity to even get a hold of US dollars and all of that, it's a very strange tax, inflation, or theft, if you want to call it that way. Because it's essentially a fee charged to anyone who's stupid enough to have any cash or any money.
- [103:07]
B
Right. Fiat money.
- [103:09]
A
Fiat money, yeah.
- [103:10]
B
It's different with bitcoin.
- [103:11]
A
It's different with bitcoin.
- [103:12]
B
It's the opposite.
- [103:13]
A
Do you think so?
- [103:14]
B
No, I know so, like I bought by. Over the last eight years, I've gradually moved my money into bitcoin and that is appreciated in value because bitcoin is scarce. It's like gold. It's just digital gold is scarce, whereas fiat money is not scarce. And so my bitcoin has appreciated the value of my savings. Therefore it's bought me time. Like, I could retire today if I want. If after this, Emmanuel, I was like, you know, fuck this, don't do this anymore. I can just retire. And it's only because of bitcoin, because money should appreciate in value. Have you. There's a really great book by a friend of mine called Jeff Booth.
- [103:52]
A
Okay.
- [103:53]
B
Called what is it? The Price of Tomorrow.
- [103:57]
A
Okay.
- [103:58]
B
And he explains that in the economy we have, whereby we like technology being deflationary, like everything gets better. The first mobile phone, we had phone and text, and now we have maps and books and everything on it. And it's still relatively cheap. Like technology is deflationary. It makes everything better, cheaper and faster.
- [104:20]
A
Yeah.
- [104:20]
B
And so in an economy that didn't have debt, that would mean our money should increase in value.
- [104:27]
A
Yeah.
- [104:27]
B
Because we have to work less for it. Okay.
- [104:30]
A
Yeah.
- [104:31]
B
Because we live in a debt based economy. We have a deflationary technology environment and an inflationary monetary environment. And so I think you should read his book.
- [104:44]
A
I think you would, I think. Have you heard of George Seljan, this American? He says the same thing. For a long time he's been saying that the rule should be that when productivity increases, which is what you're saying, then things should become cheaper.
- [104:58]
B
Yes.
- [104:59]
A
Right. Because they're easier to produce. Right. Your phone is maybe not the best example of that because the quality has become so impressive. TVs, TVs or even what else is.
- [105:10]
B
You know, 10 years ago you would buy, say you had £3,000 for a TV. You could get, say a top of the range 52 inch high DEF1. You can't buy that TV today, it's £1,000. And then there's like this ultra high DEF1 because it's deflationary. Technology is deflationary. Okay. Money's doing what it's meant to do there.
- [105:30]
A
Yeah.
- [105:31]
B
Okay. But look at health care, food, I don't know, there's various things in it that have got. Just like housing, it's got significantly more expensive.
- [105:45]
A
Yeah.
- [105:46]
B
There's no logical reason for all these things to get more expensive apart from we have a debt, a debt to service.
- [105:52]
A
I think with housing you may also argue that there's a problem of supply. Of course it's a problem like a separate.
- [105:58]
B
Yeah, but there's a problem with supply. But there's also a problem whereby because we've made the money infinite and you can't store it in a bank and appreciate in value, people bought second homes and third homes and so they became a store of value.
- [106:16]
A
Yeah.
- [106:17]
B
Because what Jeff says is when the money isn't scarce, everything else is.
- [106:23]
A
Okay. Okay. Yeah, I have to look into that.
- [106:27]
B
You'll like that book.
- [106:27]
A
Yeah. Do you think so?
- [106:28]
B
Yeah, I think you'll really enjoy that book. And then you'll come back and go, okay, I understand Bitcoin, I need Bitcoin because bitcoin is scarce.
- [106:35]
A
So I think that some of the things you said there would be accepted by every mainstream economist. So it is known to every economist that when technology improves, if the money supplies kept constant, the velocity of money remains more or less the same, prices would go down. Right. So pretty much everyone accepts that. When you say improvement in technology, we spoke about this earlier. It's producing things more easily. You know, it could be human capital, it could be better machines, you know, more machines and capital investments and stuff. That is deflationary. Everybody knows that. The thing is that the status quo at the moment is that economists want a little bit of inflation. Why I can play devil's advocate again. I can tell you what they would say so.
- [107:23]
B
And tell you. I want to know what you think.
- [107:25]
A
Okay, so what I think, I mean.
- [107:31]
B
I tell you what I think.
- [107:32]
A
Yeah, go for it.
- [107:34]
B
This is why we can't have. I'll tell you why we can't have deflation is because the people who hold the debt.
- [107:42]
A
Yeah.
- [107:42]
B
Get to choose whether we have inflation or not.
- [107:44]
A
I mean, but yeah.
- [107:45]
B
And within an infl. Like for people listening, if you hold debt, inflation is good for you, especially if it's above the interest rate because it Reduces the value of that. But if we have deflation, as people experience, when you said in Argentina you bought the house and say if you bought it in dollar terms and the peso is devaluing, you can't afford to pay that off. When we have a deflation, the government cannot pay off its debt. Or all those people in the economic system, the money men around the world who control the money and the distribution of money, who basically rule the world, they leverage debt. And if we have deflation, they're not going to be able to pay off their debt. So they want inflation. So inflation is demanded by the people who control the money, who have access to the debt.
- [108:36]
A
It's mostly, yeah. People who owe money.
- [108:39]
B
Yeah. People who own money, including the government and the people who owe the most amount of money know how to use that money to collect assets they know how to leverage. Sorry, I just want to go on my soapboxes. They know how to leverage that money to collect the assets, to own the properties, to own the houses, to own the gold, to own the Bitcoin and they leverage the debt to do that. They get a depreciating currency and they buy appreciating assets. Why are they turkeys aren't going to vote for Christmas people?
- [109:07]
A
I think this is not new even for. I think one of the explanations you'll get for the 2% rule from even mainstream economists is that deflation would make people have negative equity in their houses. It could happen. What if your price of your house goes down? Right. And they're terrified of that. They're terrified that it will cause lots of issues. Right. So they are indeed protecting, protecting debtors. So that's, this, that's not a heterodox, heterodox take on what's going on. It's pretty much, I think, accepted that they don't want people's houses to, to be cheaper.
- [109:48]
B
I don't think they're thinking of people houses. I think they're thinking, well, catastrophe that deflation would cause in a, in a debt based economy. But maybe debt is the issue.
- [109:59]
A
Yeah, yeah. And I think they're also, they're also terrified of if there is deflation, people will just hoard their money and they will not want to spend because they want to speculate that I will just buy this later on when it's cheaper. Right.
- [110:12]
B
Why is that a bad thing? Well, because the opposite is true at the moment. I found this in Argentina, you know, blew my mind like when I went there knowing about the inflation and I went pre Malay I expected to see abject poverty, miserable. I expected to see a, like a. Just a terrible situation. And what did I see? I saw restaurants full. And when I went, I went out to dinner every night. And I would always ask, I say, I can't believe the restaurants are full. And they're like, well, there's no point saving the money. We might as well for today. And so what happens is, is that people just spend the money. They might be nihilistic or they might just be making a calculation that I might as well go out for dinner tonight because this money's going to be worthless in a month or two months, three months. And so you are having to spend the money. And is it a bad thing to go, do you know what? I'm not going to buy this car today. I'm going to wait a year. And, you know, maybe if I save that money, I can buy something better. And then maybe that causes a shift in the economy that rather than just produce like we have, I don't know, places like H and M just fast produce shit like clothes that cost fuck all and that people buy and then throw in a, you know, in a skit that maybe we would have better quality things because the quality of everything's gone to shit. You go out for dinner, the ingredients are generally shit. You go buy clothes at most places.
- [111:34]
A
Funny with inflation, because you notice prices go. I saw this in Argentina, prices go up. But then also the container of the pot of, you know, it's just gets smaller.
- [111:43]
B
It goes to value creation. Like, if you want, like if, if you're producing something, you should produce the highest quality. Look at the buildings we used to build. You walk around London, look at the best buildings, the beautiful old architecture. You know, there's things that took time. If you go out to Barcelona, I can't remember the name of the cathedral, the Gaudi cathedral. Yeah, yeah. I mean, they've been building what that for 300 years. Beautiful. Like time and effort into creating quality that people go, you know, I will give you my money rather than just bleh, I'm just gonna buy all this shit?
- [112:21]
A
Yeah, I think this is a contentious topic, right? And I think you actually asked Stephanie Kelton that question, why is saving a bad thing? And I think it's a fascinating topic, right, because. And I think economists, sometimes they mean different things by the word saving. So it's very controversial. What does saving means? Right.
- [112:41]
B
It's deferred purchases.
- [112:44]
A
Yes, but there's a difference between hoarding cash and saving into, let's say Channeling your wealth into productive endeavors that help capitalize on economy, help the economy grow, Right? So if you what it. Let's say the Keynesian famous paradox of thrift, right. Would say that everybody, at the same time, they stop spending, but they keep the cash. Right. It's not like I. It's not. I defer my consumption of holidays, but I use that money to help build factories somehow by buying stock or by lending money to businesses. If I just keep the cash. You know, the Keynesian explanation is that that is not good. So hoarding cash is not good because economic production goes down, at least for a while, because then you need to kind of pair that with sticky wages and sticky prices. Right? Because if people start hoarding cash, they're not buying stuff, and then things become cheaper automatically and wages go down. It's kind of the economy goes back to the same place it was before. But what many economists will tell you is that wages and prices are sticky. Nobody likes to especially lower prices or wages because it's difficult to do for societal reasons due to contracts and stuff. And all of a sudden people hoard cash, then the economy shrinks. So this is again, playing devil's advocate a little bit. This is why central bankers don't like the idea of people hoarding cash. I think most modern economic models kind of say this. You know, they say it's, it's just not good.
- [114:30]
B
But hold on. In a full, in a full reserve system, you're not hoarding cash, you're saving it. And the bank can put that to use to create productivity.
- [114:38]
A
I knew you would bring this up. Yeah. So the typical Austrian, let's say, rebuke of this line of thinking is like, if people hoard cash, this helps channel more, it helps banks issue more loans, and it kind of helps this, like you said, the real economy, building machines. Right.
- [114:59]
B
Or, you know, building stuff of value.
- [115:02]
A
Building stuff of value. The Austrian thing is I hoard cash that helps the bank give a loan to a factory and they will build a new machine or they will expand their capacity. The problem with that is that we do not live in a world of full reserve banking. Right. So we could do.
- [115:22]
B
I mean, it's a choice.
- [115:23]
A
Yeah. Oh, yeah, absolutely. Yeah.
- [115:26]
B
The majority of inflation in a country like the UK comes from money creation in the banks themselves. Argentina, its creation from the government, the central bank. But like in a country like ours, but that creates preference to those who have the credit to be able to get the loans, to be able to buy the properties and start the businesses.
- [115:48]
A
Yeah.
- [115:49]
B
I mean, I just think, look, we've tried this inflationary environment. What's happened? Look at wealth inequality globally. Something isn't working. I mean, I would compromise and say, let's go back to a gold standard or a Bitcoin standard. I mean, look, you say about hoarding cash, people may say, I hoard bitcoin. No, I don't. I defer purchases or I buy time for me, my children, my future grandchildren. We defer our spend to things of value.
- [116:19]
A
Yeah, yeah. That is, I think the standard view is. I think most mainstream economists, they think that money has a role in terms of being a store of value for a little while. So they don't want 30% inflation, let alone 300% inflation, like in Argentina. They want people within a year to be able to kind of have the same amount of money, but they actually, by design, they don't want money to preserve its value over time.
- [116:51]
B
Right.
- [116:52]
A
Because of this inflationary bias, because of they're terrified of deflation. So what I would say is the following. You could disagree with those rules, right? And a lot of people do. Like George Seljean.
- [117:05]
B
I did. That's why I buy Bitcoin.
- [117:07]
A
Yeah, yeah, yeah, yeah. But then we could understand that they're probably doing a pretty good job at making that system work in terms of the 2% a year inflation, right? So they have a record of actually achieving that inflation that they want. So it's not like it's accidental, right? It's.
- [117:25]
B
Yeah, but you say that because we maybe have periods of 2% inflation, but we always end back at periods of 15, 20% inflation or worse in other countries. So we keep the can down the road as long as we can, but we always come back to massive high inflation. And what happens during those periods of high value wages? Who gets fucked? It's the common man.
- [117:48]
A
Especially when it's surprise inflation, right? When it's like people weren't expecting this.
- [117:52]
B
It's not the people over that period of time you've collected the assets, they benefit. They're good and they leverage their assets.
- [117:58]
A
Yeah, but that's why inflation hurts the poor the most, because the poor, they hold their wealth in cash because they need to use it to buy things. Right? The rich hold a very small portion of their wealth in cash, right?
- [118:12]
B
So, yeah, they hold it in scarce assets, which is why perhaps we should still be on a gold standard. I mean, why would we come off a gold standard? We came off before the US but why was it. It's because the government wants to create Money. Why? Because it can't live within its means. Now, look, if you as a private individual at home suddenly had a magic money printer in your bedroom, you're going to use it, take a little bit of money. Nobody knows. You can go and buy that Ferrari you want. Yeah. Great.
- [118:40]
A
Yeah, Yeah. I think to a lot of people it's very hard to believe that a gold standard would be respected. So it is a little too tempting to.
- [118:48]
B
Because it requires prudence and responsibility and discipline.
- [118:52]
A
Yeah.
- [118:53]
B
All the things in life.
- [118:54]
A
Yeah.
- [118:54]
B
That the wisest people who've written the wise books from over the past few centuries would tell you, like.
- [119:02]
A
Yeah.
- [119:02]
B
The discipline required. Like, if you want. I'm not in good shape. I want to be in good shape. It requires discipline around food and diet and exercise and attending the gym.
- [119:12]
A
I think there's a narrative that discipline is not necessary. And this is what MMT does, you know, and this idea that it's just so mean. You're so mean. Why don't you let the government spend more? Why have all these rules, you know? And it's almost as if.
- [119:30]
B
Look at the poverty rate in the UK when we create so much. There's inflation isn't even. It's unfair. It benefits the wealth. It benefits me. Inflation, fucking great for me. It's absolute. Like, bring it on. But I don't really want it on because look at what it does to society. Look what it did to Argentina. Hollows out the culture, destroys the family nucleus. And then what does government have to do to protect it? They have to create social justice. They have to create the things you can say. You can't say special groups. Like, it just. It creates this bullshit. And I'm just like, I'm so over it, but. Because what we do with money creation is that we give it to the most unimpressive, spineless people that we produce, which is politicians who use it for their own benefit in the defense of power. You should not like money and power. There's like a magnetism between the two. Like, why would we give that to those people? I was. We.
- [120:36]
A
We.
- [120:36]
B
Why did we separate church and state?
- [120:39]
A
Yeah.
- [120:39]
B
Because it's pernicious influence. Well, we should separate money and state.
- [120:44]
A
I mean, I understand where you're coming from.
- [120:46]
B
Yeah.
- [120:47]
A
Good luck. Good luck.
- [120:48]
B
Because I am trying it. Bitcoin separates money and stake. You talked about gold and people trusting. This is why I think you like bitcoin. You can be sovereign with Bitcoin. You can hold it yourself. There's no middle man.
- [120:58]
A
Yeah, I understand. I understand. That. Yeah, yeah.
- [121:02]
B
The thing is about a bitcoin standard. The problem with the gold standard is it's a policy choice. It has to come from government as a policy choice. Okay. And storing large amounts and using small. It's very difficult on a bitcoin standard. It's a personal choice. I live on a bitcoin standard. I price. Did it today, didn't we, on the way? I price things in bitcoin. Want to buy that house? No. I think bitcoin's going to go up. I think the government's going to keep printing money. So I'll defer that purchase. I'm buying time and I'm buying. Yeah, deferred.
- [121:35]
A
The thing is like the government will still collect. Like this is to the point of, you know what MMT says the government will still collect tax using their own fiat money. So it's not like people can just choose to replace the fiat standard with, you know, bitcoin standard.
- [121:54]
B
But I still do. But I have.
- [121:56]
A
Yeah, but if you know how to perform it, hopefully. It hasn't been the case in the last few months though.
- [122:03]
B
Dude, I again, discipline and prudence is about long term, like timescales. I went from 12 and a half stone to 16 stone over nine years. Okay. It's a little bit, you know, 100 calories too much a day here, an extra beer there too much. And I look, I look in the mirror every day and I look the same. I look at a picture from 10 years ago, I look the same fatter because of ill discipline. And money is the same.
- [122:31]
A
Yeah, it's discipline. So I'm inclined to agree with it. Sounds so mean when you put it that way. I want to see unwavering rules. Right. So Malay style, I mean, hopefully. But the question mark is still there because Malay's government has two years left. So if he doesn't win the reelection, what comes after him? So that's why he wanted to get rid of the central bank in Argentina. So at first I didn't get it because I thought he says money printing is what's causing inflation. So why don't you just stop money printing? That's it. Why do you want to go as far as getting rid of the central bank? And an economist from Argentina told me he doesn't want to let the next politician go back to the money printer.
- [123:15]
B
He wants to go and get his ranch. He said he doesn't want to be a politician.
- [123:19]
A
I mean, he just moved to the tool shed. Did you know that?
- [123:21]
B
Oh, no, I didn't. But I read the thing where he was saying he wants to go and get his ranch. He wants to write and teach.
- [123:27]
A
Yes. And what's going to happen when he leaves? What if the next administration wants to go back to the old regime?
- [123:33]
B
Well, they always will. There is a natural, like.
- [123:37]
A
But that's why you need solid institutions. And he doesn't believe that. You know, his solution to that was let's get rid of the Argentinian peso. Look, I want to tell you a story. So how it happened in el Salvador in 2000.
- [123:49]
B
I've been.
- [123:49]
A
I've been to El Salvador. Yeah.
- [123:51]
B
I've interviewed the president to what? I've interviewed Bukele.
- [123:54]
A
Oh, wow.
- [123:54]
B
Because they were the first country that made bitcoin legal tender.
- [123:58]
A
Yeah. Although they had to kind of pull back.
- [124:01]
B
But anyway, they're still accumulating, still Bitcoin country.
- [124:04]
A
So do you know why?
- [124:05]
B
Hold on. Do you know why they had to pull back?
- [124:07]
A
Imf, imf.
- [124:09]
B
Yeah. Those motherfuckers.
- [124:10]
A
Yeah, yeah, yeah, I've heard. Yeah. So when they dollarized, it was in a period of low inflation. So inflation had gone down in El Salvador. That's why. It's a fantastic case study. Right. Inflation was high. They stopped the money printing. Inflation comes down. Right. So he's like, why do they want to get rid of the currency? Right. And there's a guy, he was called Manuel Hines, kind of engineers a dollarization plan. And the reason was the following. Despite inflation coming down, interest rates were super high. Banks were charging a lot of money for a mortgage. And the reason for that is that pretty much everyone believed that there would be a new administration that would go back to the money printing. So we're not going to give you a loan for like 5% interest. So it was like 25%. So what these people thought was, let's dollarize the economy. Let's get rid of our own national currency. Because there won't be a chance to go back to the money printer unless you go back to having a national currency, which is difficult. So during a period of low inflation, they got rid of the currency, interest rates came down, and it hasn't had a national currency since then. So it's been 25 years. But I find that a very interesting case study of how expectations about the future matter so much. And that's why it's so dangerous. When Liz Truss says, oh, the central bank. He complained that the governor of the central bank is appointed for. Is it eight years in the U.S. it's even longer. But there's a Reason for that? They don't want your interference. They just want to be left alone. And I just find the story of El Salvador pretty interesting.
- [125:54]
B
I've got another great way to explain. Explain bitcoin to you.
- [125:56]
A
Go for it.
- [125:57]
B
Why do Argentinians want dollars?
- [126:01]
A
Argentinians.
- [126:02]
B
Well, this is simple.
- [126:05]
A
I will tell you a few of the reasons, but one of them is.
- [126:08]
B
That'S the primary reason Argentinians want dollars.
- [126:13]
A
Argentina had its currency pegged to the US dollar for a long time.
- [126:18]
B
Yeah.
- [126:19]
A
So they have a history of thinking in US Dollars. Houses are bought in US dollars, like we said. But also they want to be able to spend that money quickly. So when Argentinians, they save, they try to get rid of their pesos. Very often it's because they want to go on that holiday to the beach at the end of the year.
- [126:43]
B
So what do they convert their pesos into?
- [126:44]
A
So they convert them into US dollars and then they go back.
- [126:47]
B
Yeah, but why? Why do they. Why do they want dollars?
- [126:49]
A
Because compared to bitcoin, and I think this is.
- [126:52]
B
No, no, just why do they want dollars?
- [126:53]
A
Because they can very easily convert it back, spend it back.
- [126:59]
B
That's not. That's not the answer. Why do they want dollars? If I want to go on holiday in six months and I got my pesos here and I can have dollars, why do I want dollars?
- [127:08]
A
Because the value of the dollar is pretty much maintained over time. Yeah, but they could choose other relative to the peso.
- [127:16]
B
Yeah. And I. Look, I know some people in Argentina buy bricks and they buy, like, roof tiles, and when they've got enough, they build on the house. Yes, but you know, they want the dollars because they want that holiday.
- [127:28]
A
Yeah.
- [127:29]
B
To be okay. So it's to preserve the value of their money.
- [127:32]
A
Yes.
- [127:33]
B
Okay, well, we have inflation in the UK and we have inflation in America. Why do I choose to hold bitcoin over pounds?
- [127:45]
A
I mean, because you believe that the value of the bitcoin would be preserved. But I would ask you why?
- [127:51]
B
Because it's scarce.
- [127:52]
A
Is scarcity enough for something to retain its value?
- [127:57]
B
No. There has to be utility.
- [127:58]
A
What's the utility of bitcoin?
- [128:00]
B
Well, it depends. For me, right now, it is like all money. Like, we only use pounds because we trust each other. It's still just a piece of fucking paper.
- [128:09]
A
Right.
- [128:11]
B
Similar with gold. I mean, I know that people say it's utility, like, bollocks. It's believed that it's scarce.
- [128:18]
A
Yeah.
- [128:18]
B
And so people hold gold because it's scarce. Well, bitcoin is held because it's scarce. And we have a collective agreement that this is a better form of money, that I trust bitcoin as money more than I trust pounds, because I don't have to trust the central authority with the pounds. I have to trust the central authority who for decades, fucking centuries have proven that if you give them the ability to create new forms of money, like to add money into the system, they're going to debase my currency and steal my time. Well, I don't have to trust the central authority on Bitcoin because there is no central authority. And more and more people are realizing, well, I need a form of money. Well, if we collectively agree this bitcoin is a form of money and. But we do. It's growing. Okay. I don't know anyone who's gone into bitcoin, stuck around for a few years and gone, do you know what? I'm done. I'm out.
- [129:09]
A
Yeah, but nobody's using it as a form of money.
- [129:12]
B
I'm using it as money I buy for things in bitcoin. But also you can.
- [129:17]
A
I mean, there's a total number of transactions that can be performed. That is pretty low.
- [129:22]
B
I see. So that's the whole seven per second myth.
- [129:25]
A
Okay, so how do you answer that?
- [129:29]
B
There's multiple ways. Firstly, you have something called the lightning network, which is the second layer, has.
- [129:33]
A
Lots of technical issues. It's failed multiple times. Keep trying.
- [129:37]
B
I use the lightning network all the time. I've never had a failed transaction. But even Hal Finney said early on with bitcoin, he said, if we have 8 billion people using this, do not expect there to suddenly be everyone transacting on chain. He said he had a belief that you would have bitcoin backed banks and so you could issue a currency off the back of it, but you'd have bitcoin stand. And the great thing about bitcoin is you can verify the money. So say with my bitcoin, say if one day is worth a billion, I could open a bank and I could back the currency I create by that bitcoin. And you can verify.
- [130:11]
A
But this wouldn't be. This would be fractional banking.
- [130:13]
B
Again, no, it's not fractional because I'm full reserve and I can prove how much bitcoin I have.
- [130:19]
A
Yeah, yeah. I mean, hopefully that would work well. Yeah. So I've heard this two layer sort of money, right? The bitcoin is used to settle transactions, which is what happens today. Right. So at the end of the day, banks settle transactions that took place during the Day by using reserves. Right. Which is the type of money that we don't have access to. So I see the argument. So my, I am a bit skeptical of bitcoin, as you can see. I'm listening to a lot of people. Part of my skepticism is because. So what anchors, let's say, I mean, there's obviously this network effect that you're citing the day everybody adopts bitcoin. But let's say we don't know if that's going to happen. But what gives bitcoin, let's say, a minimum value. Right. We know that if you buy stock of a company, you're literally entitled to a portion of the dividends. And you kind of pretty much know that the price of the stock can go below a certain level because it would be a free lunch, essentially. So there is a minimum value for a share of a business based on the dividends that you would collect. So this is literally you own a piece of the productive pie. Same if you own property. You have the right to collect rental payments for people. So there is a minimum price of a house that is anchored on the. The rental income that you collect. If somebody told me that tomorrow the price of bitcoin will go down to 10,000. Right. I still don't know why that wouldn't happen. So why is 10,000 unimaginable other than the fact that people have been paying, let's say, 80,000.
- [131:56]
B
But it could, it could. If. If enough people went out to the market and sold their bitcoin, then that could happen. But enough people went out and sold their Tesla shares, that could happen. If enough people went out and sold their gold, that could happen. That's just law of supply and demand.
- [132:11]
A
Yeah, but Tesla shares, you own the right to dividends. Right. So at one point, if you start trying to sell for a very low.
- [132:17]
B
Price, people aren't buying shares for dividends anymore. Equities have become a store of value themselves. Because the stock market is a Ponzi scheme.
- [132:25]
A
Well, very often they don't pay dividends, but they reinvest their earnings. Right. This is retained earnings and they grow the business and.
- [132:33]
B
Or they do stock buybacks to increase the value.
- [132:36]
A
Yeah.
- [132:37]
B
The stock market has become a place where rich people save their money because they can't save it in a bank. But what I'm saying to you, missing the key point, I'm saying to you is the money we use is based on the faith we have in that currency. In Argentina, there was no faith in the currency because of the government. So they would get the dollars. I've got a higher faith currency, which is Bitcoin, because there's no central authority that can debase it. And once I've realized that, and like I say, the more people that realize that, the more people realize that this is a better form of money because it cannot be debased, because there isn't a central authority.
- [133:10]
A
Yeah, I think the fact that it cannot be debased is a fascinating technological invention that I'm really impressed by because it's very. When you explain Bitcoin to people, right, you have all these computers at the same time performing a job that unless you really have a lot of power to alter all of them at the same time, you won't be able to change the amount of Bitcoin in existence. So that's what makes it interesting, the whole actually the blockchain technology where it sits. So I'm with you on that. I think that it's very impressive to have the possibility of a digital good that is scarce by design. It's impossible to alter. And I can see why that's valuable to a lot of people. Now what, what bitcoiners have, haven't been. Haven't yet successfully convinced me of is that this will achieve that great adoption that will make it the, the go to currency, you know, to. So, because I want to see a utility of Bitcoin, the idea that Bitcoin is valuable because it's a store of value, because it's, it's scarce. To me that's a bit circular. No, no, no, I need more than that.
- [134:16]
B
No, no, because there is no central authority.
- [134:19]
A
Okay, that's, that's. Yeah, that's saying that's scarce because there is no, it's permanent scarce.
- [134:24]
B
Scarcity is just one of the rules of, of the consensus. Yeah, but if there's no central authority, there are other cryptocurrencies.
- [134:31]
A
So what about all the others who. They also don't have a central authority.
- [134:34]
B
Like Ethereum, but they pre mined them and then they change the rules after. Like if code is law, then I have to accept finality transactional finance. If I send Bitcoin to you by mistake that I meant to send to Connor, I accept it's gone. I can't get that back. I can come to knock on your door and say, can I have my Bitcoin back? You can tell me to go fuck myself. Can't do anything about that. Ethereum, there was a hack after it launched and they rolled back the code. Yeah, because it's not Meaningfully decentralized. The great thing about Bitcoin coin is it's meaningfully decentralized, okay? And the incentives are that there's no benefit to anyone to increase. The only people who benefit from increasing the supply of Bitcoin are the people who don't own Bitcoin because it will reduce the price.
- [135:23]
A
And would you want governments to adopt bitcoin? Is that what you would you want?
- [135:27]
B
I want government. I want to limit the power of government as much as possible. I want the smallest viable government that could defend life, liberty and property. Okay? That's what I want. That's all that government should do to me. I don't want government involved in redistribution and setting what morality is, because there's always weird incentives at play. We separated church and state for a reason, and we should separate money estate for a reason because of the frailties of human decision making and the greed. So look, if government adopts bitcoin, great. I mean, they're adopting Bitcoin and they're confessing that their own currency sucks. Okay, great. But I just really want individuals to adopt Bitcoin. And you don't have to. You can just get a little bit to get yourself going. But the reason I own bitcoin is because I'm separate from the government. I am sovereign. I custody it. They can't access it. They can't steal it from me. You put a gun to my head, you can't get it off me. I can move around the world, it's with me. But there is no central authority who can debase that currency. So that means to me, it's the best currency there is because it cannot be centrally inflated. Name me another currency that can't be inflated. Even gold. The price of gold goes up, but suddenly, oh, we can get that gold at the bottom of the ocean. We'll be fucking mining it from asteroids at some point. There's a lot of gold in the universe, a lot of gold on this planet. Bitcoin is absolutely scarce. They cannot be more than 21 million. And so when I price things in bitcoin, over time, things get cheaper. The house I've got a mortgage on now, which I sold some bitcoin to pay the deposit. If I'd have waited three years, I'd have no mortgage. So it's like, who do you want to put your trust and faith in? I don't trust government. There's not a single government ever that deserves our trust. So I don't have to put trust in anyone with bitcoin, And I think that's the final piece of the puzzle from what you're doing now. Look, look, I get it. But it's like bitcoin is like this weird thing. It's like the price goes up and down, it's all over the place. The great invention of bitcoin was to create something that was decentralized. It was like that slice of, you.
- [137:41]
A
Know, I studied computer science.
- [137:43]
B
Okay, so you understand.
- [137:44]
A
I am a software engineer by day, you know, and when I was at uni, there was this geeky classmate who was mining bitcoin with heavily subsidized energy prices. Actually, he crushed it.
- [137:58]
B
Yeah.
- [137:58]
A
What year was that? It was, I think 2000. Could it be 2011? Potentially. Okay, so probably 2013, maybe 2011. 12, I would say he probably was.
- [138:10]
B
Mining with a GPU. His computer.
- [138:14]
A
Probably. Yeah, yeah. I don't recall now because it was a long time ago, but he did have this contraption in his home, you know, like it looks very geeky. Yeah, he was mining bitcoin at home and.
- [138:26]
B
Yeah, but my bitcoin bet is a gamble. A lot of people think about bitcoin now and they try and find faults with it now. And I try and say, listen, look, what the inventor of bitcoin did is they came up with the perfect form of money, right? The best form of money. Not perfect, but the best form of money. But they had to be distributed. And how do you distribute this form of money? You can't even give it out. So you just create the system, this way of mining it. So it's distributed and it's front loaded. So the risk takers, the earlier you take the risk, the more benefit you have. I don't think bitcoin is going to be global money in the next year or two and it's going to be volatile. But I'm okay with that because this is my bet is my bet is on humans. Globally is the same bet that Argentina has made on the dollar over the peso, that over time people can get fucking sick of governments stealing their currency and stealing their time through debasement. They can say, I want an alternative. And you know what? To start with, they might buy 1,000 pound of Bitcoin, right? And in four years time that bitcoin might be worth, I don't know, 10,000 pound or whatever. And they're like, wow, I saved that money in bitcoin and it's gone up in value. That's why, well, more people are not trusting government and they're debasing the currency by the way, you're in a room with three people who've been through this journey here. I don't know about Wilbur, but Kurt's been through it, Connor's been through it, and everyone, like, I don't know a single person who, who started accumulating bitcoin and they do their first tour of duty, which is like four years afterwards, they go, oh, yeah, I was wrong. I'm going to sell my bitcoin.
- [139:56]
A
But at the same time, you don't have to.
- [139:59]
B
You can buy gold, you can buy silver.
- [140:01]
A
We might do another podcast in 10.
- [140:03]
B
Years and we'll see how we're going. This table will be gold plated by them, by the way.
- [140:07]
A
Gold plated, yeah.
- [140:08]
B
And I will be carried in on a. By my slaves.
- [140:12]
A
But I think it's, I think it's fascinating to. And making those predictions is good because then you can go back in a few years. I have this wage going on, this guy on LinkedIn, he told me that software engineers would disappear as the job would disappear in two years. And I have the date on my calendar to kind of go back and see how it went. I think we're already one year along that. Because I said it's not going to happen. They will change the job market, but it's not going to happen. But it would be great to see in 10 years, since you're saying this, what happens to bitcoin, you'll be able.
- [140:45]
B
To say, I told you so. We will.
- [140:47]
A
But I'm not saying I told you. This is. I'm not taking here. It's more like. It's more like healthy skepticism. I want to understand both sides of the debate. I'm saying it's a bad idea. What's your method to outpacing inflation?
- [141:01]
B
What do you choose? Personally?
- [141:02]
A
So personally, what I would do is I would buy real assets. I want to own a piece of the productive pie. So I would own companies, I would own property. Potentially I would be a bit skeptical of investing in property in the UK specifically because I think there's a. They want to, like, because of the whole housing situation. They will try to, you know, tax second properties more and stuff like that, but I would invest in real assets because to me, the real economy matters a lot. And by, by real, I mean the economy of stuff. So we always need to understand there's two economies at the same time. There's. One is the production of stuff that people consume. Like you said, value. Right. I want to, I want. Even if it's dumb like you want to watch a TV show, that is stupid. But you actually pay for that, and that's okay. I want to own a piece of the production pie.
- [141:56]
B
You're talking about physical assets?
- [141:58]
A
Yeah. I mean, they can be like if you own shares.
- [141:59]
B
What about virtual assets?
- [142:01]
A
What is a virtual asset?
- [142:02]
B
I don't know. Say you're playing some online multiplayer person game. I don't play that. And say, I don't know, there's a limited edition Sword of Gelder that's like, somebody might want that because within that game, that to them has real value.
- [142:20]
A
But still a real asset. It's not physical, but whenever someone wants to pay for stuff, it's a real asset. So a real asset gets cash flows. In the future, you have the right to a certain cash flow.
- [142:34]
B
Why does that sword give me a cash flow?
- [142:37]
A
I don't.
- [142:38]
B
So if I buy this virtual sword.
- [142:41]
A
What can you do with that sword?
- [142:43]
B
I can run around the game. And I'm the guy with the special one only Sword of Gelder.
- [142:50]
A
I mean, unless someone wants to pay to buy the.
- [142:52]
B
Yeah, yeah.
- [142:54]
A
Do people want to buy this sword? Do people commercialize?
- [142:56]
B
Yeah, yeah. So virtual assets are still real assets. They're just physical?
- [143:00]
A
Absolutely. And you think if you work in software, you build a virtual asset, you're building a virtual product, and then people want to buy that potentially.
- [143:09]
B
I'm going to tell you something a great Argentinian told me.
- [143:12]
A
Yeah.
- [143:12]
B
Do you know John Pfeffer?
- [143:14]
A
No.
- [143:14]
B
Okay. This is brilliant. Okay, so I've got how many boxes of CDs at home, Connor?
- [143:21]
A
A lot.
- [143:22]
B
I used to buy so much music, Right?
- [143:24]
A
Okay.
- [143:25]
B
Racks of seat. I used to have these racks I got from Ikea, and it was just like this wall of CDs, and I put them all in alphabetical order. I was like, cool. And then when Spotify came along, I stopped buying CDs and now they're sat in a bunch of boxes and they aren't worth. They're just not worth anything.
- [143:44]
A
Right?
- [143:44]
B
And I don't know what to do with them. Like, my heart can't get rid of them. Some are autographed I want to keep. But they're not worth shit, right? John Feather said to me, he said, yeah, in a couple hundred years, when we're all flying around at our millennium Falcons, do you think a yellow rock is going to be a value? Do you think that's going to create base value? Or do you think we will have a virtual version of that yellow rock? He's talking about gold versus Bitcoin. You would Agree that gold has value and there's a reason to hold it. Well, he said we will not be transferring yellow rocks around because it will not be efficient. All that bitcoin has done is digitized scarcity into a world where we don't have scarcity with government issued digital money. So we've created better money.
- [144:42]
A
I understand. Yeah. It does consume a lot of electricity though, the whole mining and. Right.
- [144:47]
B
This is so interesting because these are all like the arguments I've like heard for years.
- [144:52]
A
I know both of the, I've read, you know, the bitcoin standard. Like I know both sides of the story. I'm just being contrarian.
- [144:58]
B
What is wrong with consuming energy?
- [145:02]
A
I'm not saying it's wrong, but it's wrong. But there's a limited amount of energy that you need to use it for other things too. Right. It's not just for mining.
- [145:09]
B
So isn't there an incentive to create more energy?
- [145:14]
A
That sounds a little bit like mmt. So let's. When inflation picks up, there's an incentive to.
- [145:18]
B
Because somebody's buying that energy. The mining, the miners are buying that energy in the market. They're paying whatever they pay. And so if there's a customer out there buying that energy, shouldn't there just be more energy creation because there's customers want to buy it?
- [145:32]
A
Yeah, a lot of people want more energy, just not just the bitcoin miners. Right. We all wish there was.
- [145:36]
B
But what is wrong with bitcoin miners?
- [145:39]
A
No, nothing wrong. It's just competing for a fixed amount of energy.
- [145:43]
B
So a Christmas tree is in Christmas lights at Christmas. Like what's the argument there?
- [145:49]
A
You said it was very inefficient. Gold transportation of gold. Is it more efficient in terms of the energy even I haven't seen the numbers. Right. Is mining bitcoin thermodynamically more efficient than the, you know, the. All the power that's. Or you know, is bringing gold from A to B more efficient from a physical point of view? More inefficient from a physical point of view.
- [146:11]
B
Have you seen gold mines, large gold mines, what that does?
- [146:13]
A
No.
- [146:14]
B
Yeah, you should dig up some of those. One of the things you should look at is what the integration of bitcoin mine has done at the ERCOT grid in Texas. Do you know about this?
- [146:23]
A
No.
- [146:23]
B
This is fascinating. Okay. I mean, explain this very badly. Other people do it better, but demand response is very important. You switch on the light and the light comes on and you have to do all the predictions. But suddenly if there's like, I don't know, say a surge in requirement for electricity. Like, how do you deal with demand response? And so the bitcoin miners are plugged into the energy grid there and say there's a surge in demand, they can just switch off. So bitcoin miners buy up the excess capacity because you have to overproduce electricity. You understand that, right? So like wind, you have to overproduce to ensure you have the right amount of capacity for the network. And so when you overproduce them, what do you do with that excess capacity? Will you curtail it? 1.5 billion or something ridiculous. 7 billion we curtail in the UK. Yeah, well, the bitcoin miners will go there and say, well, we'll buy that off you. So it makes the production of green energy more efficient, but also it makes energy grids themselves more efficient. And like, yeah, if you were, I don't know, I think traditionally someone like ercot, they would go to, I don't know, a paper mill or whoever is a large user of electricity and say, hey, we've got a lot of demand, we need you to turn off. And they have to power down. Bitcoin miner, flick of a switch and they're off.
- [147:37]
A
Okay.
- [147:37]
B
They actually pay bitcoin miners to turn off sometimes to balance the grid. Okay, there's utility for you.
- [147:45]
A
There you go, balancing the grid.
- [147:47]
B
Yeah.
- [147:49]
A
Well, thank you for that.
- [147:51]
B
I did expect to finish this interview with a rant about bitcoin, I'm sure.
- [147:55]
A
Oh, it's great. I love the discussion and it's good to have a productive discussion about those things, I think. Yeah, I like to hear everyone.
- [148:03]
B
Yeah. Like I just come back, look, I fucking hate the government. I don't trust politicians for shit, and you give me anything to subvert government. I want it. And bitcoin means I can subvert their debasement of the currency and get fucking upset.
- [148:15]
A
I think a lot of people assume that because know I wrote this book on MMT and I, I obviously don't like mmt.
- [148:21]
B
They think you're a bitcoiner.
- [148:22]
A
They think I'm a bitcoiner. And I'm. And I'm not. Not a bitcoiner. I'm just still learning about all of this before I. I make a decision.
- [148:32]
B
You can't learn it until you own it. You know, like, you know, if we had a game of poker here.
- [148:37]
A
Is that just because you want to.
- [148:39]
B
No, no.
- [148:39]
A
Buy bitcoin so your bitcoin goes up.
- [148:41]
B
Dude, I'm already. No, no. People Say that they're like you. Honestly, I can't spend the money I have now. Like, I'm good. I could retire. I don't want for anything. Like, I just want to have a steak on a Friday and hang out with my kids. Like, I don't need anything. If we had a game of poker, you, me, Wilbur, Connor and Kurt, right? And we sat down, we put 100 quid each. No, no, let's say more. Let's say 10,000 pound each, right? You can know how to play poker. You're going to try and bring your A game, right? Yeah, yeah. You want. That's 50,000 pound up for grabs.
- [149:12]
A
Yeah.
- [149:12]
B
All right. Replace that with matchsticks. Do you play the same game?
- [149:16]
A
No, why?
- [149:18]
B
You know, skin in the game, right? You can never really understand bitcoin until you have skin in the game. You need some because it, because there is a. There's a need then to understand it.
- [149:31]
A
There's real consequences. Yeah, okay.
- [149:35]
B
You know, every, every, everybody in Argentina is a part time financial director because they have to manage their money. Yeah, yeah. Well, when you're a bitcoiner and you own bitcoin, you have to learn it. And so when you read the bitcoin standard or you read it differently, I.
- [149:53]
A
Think that's one of the reasons that Argentinians haven't looked too much into bitcoin.
- [149:58]
B
Oh, they have, dude. Listen, when I was in Argentina, I met, you know, the money changes. No, you know, like when you're in Argentina, if you, if you don't want to use the cash machine because you get the shitty rate previous, like one of the guys like, oh, dude, we can get you cash. And had a guy come up on a motorbike.
- [150:13]
A
Yeah, yeah, but that's for your. He wanted bitcoin.
- [150:15]
B
You were also visiting with the connection.
- [150:20]
A
My hometown, smaller place. Think of a pensioner who wants to or you know, a person who wants to. They don't even know where to even learn about bitcoin, where to even buy bitcoin. It's still geeky to them. So the act of going to the cave, as they call it, which is literally around the corner, you go into this shady place, they just give you some and dollars. You can literally touch them and put them under the mattress. So the idea that they have to learn about this technology, know how to use some sort of app or exchange, and you're asking effort from people who. The dollar does it for them.
- [150:53]
B
I'm not thinking about those. These are the, these are the people that. The only reason A high street bank exists are for old people. Really now.
- [151:00]
A
Okay.
- [151:00]
B
I don't. I use an app. Will we ever go to a bank?
- [151:04]
A
Yes.
- [151:05]
B
No. Okay.
- [151:06]
A
No, I get that.
- [151:07]
B
So the future exists for the younger generation. Right. And so I'm not here teaching old people. Some people have done it, you know, some people have done it, but it's not for them.
- [151:18]
A
I think also in the UK we're very digitalized. Nobody uses cash. I don't use cash. And Argentina, people still rely a lot on cash and like you're speaking maybe for the position of it place where people, they use banking apps. And Argentina, it's so arcane, like.
- [151:36]
B
Sure, yeah. But do you. I've been to 55 countries. Right. Where do you think I find it harder to explain bitcoin? The uk, Argentina or Venezuela?
- [151:48]
A
Definitely the uk.
- [151:49]
B
It's the hardest.
- [151:50]
A
Yeah.
- [151:51]
B
Because we're still being bored as a frog. When I went out to Argentina and I was explaining bitcoin to people, they're like, this is money the government can't steal. I was like, yeah, yeah, fucking. Where do I get it? Okay, so when you've been stolen from slowly a little bit over time, you maybe don't even notice it when they're robbing you hard. But either way, they're still stealing from you. They just, they're just not stealing from me. We should redo this in a year.
- [152:16]
A
Totally.
- [152:17]
B
I want you to read my friend boy Vijay's book and I want you to read.
- [152:20]
A
Send it over.
- [152:21]
B
Yeah, well, and I'll get you Jeff Booth's book. I think you'll enjoy that.
- [152:24]
A
I love reading books. Yeah.
- [152:25]
B
I've taken over this interview.
- [152:27]
A
No, that's great. It's very, very entertaining. Yeah.
- [152:30]
B
Is there anything we haven't touched on, but we should have.
- [152:33]
A
Yeah.
- [152:36]
B
You got a book coming out in April.
- [152:38]
A
Yeah, I do. I do have a book coming out. It's called if you can just print money, why do I pay taxes? You can pre order it and you should. So everybody listening to this, just go. And I'm still a newish author, so I need help to like, come on. Yeah, yeah. I do have four books. Yeah. This one, I think it's an important book for me. It's published by a very well known publisher, this is Wiley. They publish the bitcoin standard, actually. And I've learned a lot about economics myself. So I'm very geeky, very nerdy. So it's great that a good publisher accepted me to write this book, you know, because I don't have a PhD in economics. So it was a lot of hard work. It was very fun. There are lots of anecdotes about Argentina. And I will be debunking MMT point by point. And you should all get a copy. You can go to Amazon, to Waterstones, like any place where you buy books, it should be available.
- [153:39]
B
I want to read your AI books as well.
- [153:41]
A
My AI books.
- [153:41]
B
I think we should make a show on AI because I have so many.
- [153:44]
A
Questions, so many questions. We should do a whole. And you would love my book. So Silicone, where I. It's a critique of the technology industry because I lived it from the inside. This, you know, this epidemic of idleness in the industry that was so working, where people didn't seem to be working hard. Most of my friend. I have a friend who had two jobs at the same time secretly, because he wasn't doing much, paid very well. And a lot of people I know were in that situation. I was in that situation myself, reluctantly. You know, when you. You get a new job, you're excited. And then all of a sudden there's this team of people building some technology that doesn't make any sense, but they got a lot of money to build it and there's nothing to do. And people are just, you know, grasping at straws. And that's what got me into economics, because I started interviewing people, asking them, why is this happening in the tech sector? Some people were skeptical. And then Twitter fired 80% of the workers.
- [154:44]
B
And it was better.
- [154:45]
A
I mean, perhaps, but it didn't collapse. And a lot of people say, like, you can't run the business with like 80, you know, with 20%, actually 10% in the end of the workforce. So a lot of people started listening to me. Yeah, perhaps as an epidemic of idleness. Right. And when I spoke to people, I spoke to investors, you know, a lot. And the topic of interest rates came up repeatedly. People telling me interest rates have been very low for a long time, which means we can get good bank for investments. So we are pushed toward taking more risks. So you have all these VC funds getting a lot of money and they invest in startups. And I had the impression that a lot of this didn't make any sense. And when you look at mainstream economic theory, it doesn't have much to say about that. And then you look at. There are two completely opposite heterodox economic theories. There's the Austrians and the Post Keynesians. Completely opposite. You had Steve Keenan in the show, we call him a Post Keynesian, but both of them say that Artificially low interest rates cause issues. In the case of Austrians, they will tell you it causes malinvestment. So people, they invest in stupid stuff, which I would anecdotally be inclined to say, kind of sounds very familiar. And then postcards and say it causes excessive credit. So people take more and more credit and at one point it's like a sort of Ponzi scheme that collapses due to excessive credit taking. And I wanted to know what's happening and that's how I landed on MMT at one point, because it was, okay, what are these people saying? So I wanted to know what everyone was saying about economics. Yeah, but I think, you know, to, to your point of even what's going on in the UK and we've had stagnation since 2008. So if you look at any, any graph, it's like there's a kink in the curve. It goes, it's going up and then it flattens.
- [156:48]
B
When was that? 1971. That was 2008, after the financial crisis.
- [156:53]
A
Yeah.
- [156:53]
B
Well, they're like, we could just create money.
- [156:56]
A
And I'm like, I wonder what happened. You could argue that a lot of the money creation and QE was a response to the stagnation, actually. So the stagnation was happening for some other reason. People don't want to invest anymore. They don't want to. Companies are just reluctant to actually invest. So the central bank is trying to pump money into the economy and even then you don't get people to invest. So that would be a mainstream explanation. But I want to get up that.
- [157:23]
B
What the fuck happened? 1971 website. I got to show you a brilliant website.
- [157:25]
A
What happened? What happened?
- [157:26]
B
1971, I'm going to show you brilliant website.
- [157:27]
A
Yeah. Oh, is that when the gold standard was.
- [157:29]
B
Yes, but this website, you're gonna love it.
- [157:32]
A
Yeah, I can imagine how it. Yeah.
- [157:34]
B
So look at this. This is net productivity and hourly compensation. Stay up. There's com. Like it started to. There was like some deviation before there sims, Right?
- [157:47]
A
Yeah. It's very interesting because you pump this.
- [157:52]
B
Money, you come off a standard, you pump, pump this money into an economy and where does it go?
- [157:57]
A
Exactly. So my question from my. This is completely anecdotal. My question is, when you see so many people, it's like in the technology industry, I have the impression that there are two choices sometimes open to you. Either I work for a big company where I don't do much. Some people are going to get offended by this because they, oh, I work so hard. I've Met so many people who don't. Actually, it's very easy life when you work for one of big companies, very little to do, or you work for a startup where you're building a product that doesn't make any sense most of the time, but investors still want to give it a go, even if the flaws are obvious, Right? So either way you're not being very productive. So if the way to reactivate the economy to get people to invest is to invest in things that don't make much sense, how are you going to generate economic growth? So I wonder if I had time, I would like to do even mathematical models to try to see can we model this sort of mal investment? Right. Those are issues with incentives. Let me tell you something I discovered during my research for my book Silicon. You know, in the uk, there are incentives for private individuals to invest in sort of venture like innovative startups. And there's this tax rebate. Essentially you can deduct your investment from your taxes, right?
- [159:15]
B
Eis, yes.
- [159:16]
A
So you deduct the investment from your taxes, so it's essentially free for you. It's either do I pay tax or do I give money to a startup? If the startup goes well and you ever make money from it, you're also taxed at a really low rate. So it's essentially what they create is a system where there's no downside for you. It's upside. I've heard people say. So I know a guy who works as a matchmaker, so he essentially gets people, he gets them investment opportunities. And you know what they tell him? I don't care where you put my money, just put it somewhere because, you know, worst case scenario, it's the same best case scenario, I'm going to make money from this. I feel like there's a whole, this idea that we can create economic growth by randomly doing lots of things. Let's invest in all sorts of companies because at one point, one of them will be the new, you know, the new unicorn, Airbnb. I don't think that's calculated risk, you know, I'm all for calculated risk, you know, but I don't think that's what it is. It's. To me, it's almost like throwing darts, you know, at a dartboard and hoping you'll hit the bullseye at some point. And with all these incentives, they're just, you know, making people throw more darts. Seems like the dartboard is getting larger and larger. And I don't see economic growth being created by these companies. If that's where the money is going. That's what I've seen personally. The creation of no value for. You know, there's a company. This was a few years ago. There's a company called Juicero.
- [160:50]
B
Yeah, I remember that.
- [160:51]
A
Yeah.
- [160:52]
B
Yeah. I met the guy who created it. What was his.
- [160:53]
A
Did you? Yeah, I don't remember the name.
- [160:56]
B
Yeah, talk to him on Instagram. Oh, I forgot his name.
- [160:59]
A
Yeah, yeah, yeah. So investors gave them 120 million to build a product that.
- [161:05]
B
A juicer.
- [161:05]
A
A juicer that cost $700 to buy.
- [161:08]
B
A juicer with no mess.
- [161:10]
A
With no mess.
- [161:10]
B
Yeah, Because I got a juicer at home. He's got all the pulp and the shit. We just put it in a pod.
- [161:15]
A
Yeah.
- [161:15]
B
It was like the Nespresso for juicers.
- [161:17]
A
The Nespresso for juicers. But it had some obvious flaws, which is coffee is kind of difficult to make. You need a specialized machine with this juicer that was actually $700, a lot more expensive than an espresso machine. And you paid $7 per capsule.
- [161:31]
B
Yeah. Doug Evans. Doug Evans, is that.
- [161:33]
A
You could actually.
- [161:34]
B
I like Doug.
- [161:34]
A
You could actually squeeze the capsule with your hand and the juice that came out was very simple.
- [161:38]
B
Yeah, exactly.
- [161:40]
A
But this is just like. This explains a little bit, this irrationality. And look, in 2021, listen to this, because you're going to love this. In 2021 is that year where there was a lot of money creation, right? Yeah. 2021 was the record year of VC investment in history. That was insane. So we're talking twice the investment as the previous year, which was already twice the investment as the year before. There was a spike of money going into startups. Right. And in 2021, there were 700 unicorns and there were new unicorns. So that's two per day, which doesn't sound right. Imagine having two new Airbnb a day. It's obviously. There's always. There's obviously something weird going on. And this was a period of a lot of, you know, new money pumped into the economy. And I wonder how much of this, maybe perhaps overdoing qe, ended up making it a little too easy, or the people just channeled so much money, perhaps newly created money, to all of these creative endeavors that were in reality just random, silly attempts of building products that didn't make sense, you know, and that's. I think that's very sad, you know?
- [162:55]
B
Well, there is a Bitcoin answer to this.
- [162:58]
A
That's the year where Bitcoin.
- [163:00]
B
Yeah, no, but just look, when you. When you make Money so easy to access and you devalue it so much and you run a debt based economy. You're just going to find ways of people are going to grift it. You're going to get access to that low interest rate money from the government, no risk investor everywhere. And they do rounds of investment and then they float in the stock market and there's like no, there's no actual value been created like Snapchat. I'm still pretty sure Snapchat has never made any.
- [163:29]
A
I don't think we've made a profit.
- [163:30]
B
Yeah, yeah, but it's made a lot of people fucking rich.
- [163:34]
A
Yeah, it just needs to walk. It happened with WeWork, right? So the founder of WeWork, you know, he. There was the famous IPO of WeWork. It's a business that never made any sense from a business point of view because they were trying to treat it like a tech unicorn when it was a real estate business. Right. And there was an IPO coming up. And just two or three months before the IPO, the founder makes 700 million by making private deals with his shares, right? So yeah, he sells half of that was selling his shares privately and the other half was getting loans from banks using shares as collateral. And this happens kind of behind the scenes. And then the IPO is this famous disastrous IPO that had to be canceled, but not just like. There's another thing that's actually even more interesting about that story is that after that he launched a new business and he got some of the most he was record high investment into his business from venture capitalists. You know why I think that is? I think it's because the guy knew how to tell a good story, right? He did, clearly, because he did. But he also, he, you know, he.
- [164:42]
B
Knows how to make early investors rich.
- [164:45]
A
I mean that's what the investors want. They want him to tell a good story so that the. Yeah. Provided that people walk out of the investment early enough they make money from it. Right. So it's like a. Yeah, but like.
- [164:56]
B
If you came to me and said I want to start a business, I need £10,000 and I say I had a hundred thousand pound in the bank, I'm like, okay, go on and see what you do. If I have to sell my bitcoin, I'm like, you got to fucking prove to me. When is the return? Five years. Okay, you've got about bitcoin in five years. Yeah, this bitcoiners are very good at investing wisely, okay. Because they understand the value of their money.
- [165:18]
A
I see.
- [165:19]
B
Yeah. We're going to come back to this. I want, I'm going to. I'm going to get your other book. So I want, I do want to do the AI one, because I've got so many questions.
- [165:27]
A
Cool, cool.
- [165:28]
B
We will do that again. Okay. Where. Where do people find you, man?
- [165:32]
A
They can find me on. I'm on LinkedIn. I'm on X. Yeah. So that's the two places where they can find me. I'm new to X, so I have. I've started posting very, very recently. I've been following you. It's brutal. It's. I'm discovering it's very educational because LinkedIn is very civilized. X is not civilized.
- [165:52]
B
Well, X is the free market for conversation. And do you know what? I have had periods. I literally, when it was Twitter, I came off because, like, I was beat up. And all you have to learn is words mean all. Who cares? Everyone's throwing this out there.
- [166:10]
A
Yeah.
- [166:11]
B
Don't take it personally. And then it's fine.
- [166:12]
A
No, and I've been into. I've had lots of conversations with mmt', ers, people who support mmt and I've tried to. And it was very educational for me to see how they think.
- [166:23]
B
They come at you, they're called.
- [166:25]
A
And I feel it's so. It's. Again, it's very sly because what they do is you prove them wrong and they come back with an argument that is technically correct, but maybe uses a word in a completely different way. So you're talking about some. Yeah, you're right, but you're talking about something else. But they keep doing more and more of that. And they tried to convince me that the uk, the current treasury and the uk, the operations are such that the government could create as much money as it wants without changing any rules with the bank of England. I know someone who works for the Treasury. I was telling me, well, that's not quite how it works. And then I did some research and the argument doesn't make any sense. It's true that sometimes the treasury will get an advance from the central bank that is settled during the day. But to them it's like saying that I can create as much money as I want because I can use a credit card. It's like, yeah, if I don't pay my balance at the end of the month, the bank is going to stop doing that. But anyway, they believe that no rules need to be changed. It's very easy to move toward an MMT world. And I tried to kind of. And interestingly I got a few replies from Warren Mossler, who was the financier who kind of invented mmt, you know.
- [167:34]
B
Interesting.
- [167:35]
A
And I think he thought I was supporting MMT because I was kind of. I had a few technical arguments about how things work, but then he stopped replying when he noticed.
- [167:45]
B
Yeah, the very simple answer is they're socialists and socialists are warriors. Always wrong.
- [167:49]
A
Always.
- [167:50]
B
And everywhere have.
- [167:51]
A
You sound like Malay.
- [167:52]
B
Well, they just. They just destroy everything. They just. They just. It's the politics and economics that envy. And I am a huge fan of heavy melee. I think his Davos speech the last three years is always the highlight.
- [168:10]
A
Wasn't there a new one if you haven't listened?
- [168:12]
B
Yeah, it's fantastic. And I wish I. Honestly, I wish I understood it and could speak like him, but.
- [168:19]
A
So how do you feel? Tell me, as a person who hates the government and loves bitcoin, how did you feel when even. When did you hear about Malay?
- [168:29]
B
Well, that's what. I went there, made a documentary because it was prior to him. So I went to make a. Doctor, me and Kurt went to make a documentary about inflation. We interviewed his economic advisor. There was another woman we interviews. What was her name? Captain, I already remember.
- [168:43]
A
Diana.
- [168:44]
B
Diana Medino.
- [168:45]
A
Just ring a bell.
- [168:46]
B
But we went out and we.
- [168:47]
A
What year was this?
- [168:48]
B
This was the year before he was elected.
- [168:51]
A
And.
- [168:54]
B
And I just. My. My view was Argentina has tried inflationary economics for a long time and it took it from, what, the sixth richest country in the world to wherever, whatever number it was. And inflation has just had a terrible impact on the country. And on that. And the bit that hurt me most was just people were saying their kids have moved away and. Yeah, like that family nucleus was destroyed. And I spent time with families and live the evenings they have, where everyone sits around, talks and drinks wine and eats barbecue. And I just. I loved the culture and I saw inflation as an attack on the culture.
- [169:31]
A
Yeah.
- [169:32]
B
You know, it still was time, but it's an attack on the Argentinian culture, which is a strong culture. And so I left with hope for Malay and I feel like.
- [169:42]
A
Was he campaigning? Yes.
- [169:44]
B
Yeah, he was campaigning. He had his chainsaw out.
- [169:47]
A
Yeah.
- [169:48]
B
And. And I. I want the UK to have its Malay moment.
- [169:53]
A
A lot of people seem to do.
- [169:54]
B
Yeah, Yeah. I want somebody to come in to this country and just rip the band aid off and say, look, this socialist nonsense is.
- [170:02]
A
Yeah. So I think there's a narrative that's kind of brewing in the UK that rings a bell to me too. There was Robert Gendrick Is that what it's called? So when he defected to reform, first.
- [170:13]
B
Thing he brought up in his speech.
- [170:15]
A
What did he say?
- [170:16]
B
Well, so the first thing he stood up and did his defection speech, his press conference, and the first thing he talked about was economics.
- [170:23]
A
Yeah. So what caught my attention is that he said that the Conservative Party didn't have the stomach to do the things that actually needed to be done, which were more dramatic. And that's what Malay settled. So there was.
- [170:38]
B
I don't think reform has the stomach for it.
- [170:40]
A
I don't know. Yeah. I don't know what that.
- [170:42]
B
Yeah.
- [170:42]
A
Do you don't think so?
- [170:43]
B
No, I don't think so. I think once they get into power.
- [170:47]
A
It'S going to be the Yudi Party again.
- [170:48]
B
It's going to be because. And then they'll do some things. I just think they change the pace of decay and who they pointed at.
- [170:54]
A
Yeah.
- [170:54]
B
I don't think they're going like Milei came in and said, look, poverty will go up and then it will come back down. Yes, there will be a settlement period. And as I remember, like the first couple of years, he was under a lot of pressure.
- [171:05]
A
Yeah.
- [171:06]
B
You know, it was tough.
- [171:07]
A
Yeah. Yeah.
- [171:08]
B
But what's happened, like the supply of properties has increased and the prices of rents have dropped. Poverty's now dropped. Did it go up to like 55? And it's dropped Inflation steady.
- [171:20]
A
Another interesting thing, I have a friend who, he studies the fundamentals and publishes macro analysis of. And he was saying that the exports are looking very good. Right. So there's been a pretty big increase of exports, especially to India. It's like 60% up. So it's pretty dramatic. But something quite interesting happened is that the currency at the moment is not particularly favorable. It's not like Argentina is so cheap that people are buying. And the way he interpreted this is that India feels like it's a good time to actually strike deals with Argentina because it's more stable. Right. We're going to import from Argentina because we believe that there will be more stability. Right. And I think, you know, because it's not exports because it's super cheap, so it's exports when it's not super cheap, you know, and that's new. That's pretty new and new development. And so I can tell you I'm very surprised about this conversation we're having today because to me, Argentina was a bit of a basket case. I had no hope for Argentina when I left the country, I left. Yeah, there was inflation, but there was also the institutional decay and the support for that. People supporting having politically appointed judges. So when you're in that world, you're like, goodbye. Nobody ever spoke about Argentina except football. So if you were, you check in at the hotel and people tell you, oh, you're from Argentina. I've, I love Messi or Maradona before that. Nobody would bring up the Argentinian economy, right? Ever. And I remember, I think it was 20, 23, probably when Milei was campaigning, that I checked into this hotel and it was in Austria. And the guy says, oh yeah, from Argentina. Is that the place with the crazy chainsaw guy? Yeah, you know, and I have the feeling that the world is looking out Argentina. And this is because a lot of people are terrified that it could go well, you know, that this could work.
- [173:23]
B
Terrified. They're terrified because they want. They want. So we've had now what in the uk, like Thatcher was probably the last great prime minister. We had to understand economics. We've had decades of these morons, socialist or just incompetent idiots. But what we've allowed is the country to be looted. That's what happened. This is all it is, right? You know, when, when you run a debt based economy, you're allowing the hard working people of the country, the lower class and the lower middle class to be looted. You haven't had money and their time stolen. And we've tried this and the majority of people have got materially poorer because we've made the rich richer. Okay? That's what we've done. And so people don't want this shit anymore. You go to, you go to Davos and you watch Millay's speech and it's not, he's not talking, he's talking like an expert, like, I wish I was an expert. I'm just a dumbass from Bedford who's like trying to figure the world out. He talks so well. He talks about the papers he's read and the theories and he can explain what's gone wrong in Argentina. He can explain why socialism failed. He explained the morality of entrepreneurialism. You know, he just, he. And then you go and see our wet wipe Keir Starmer speak and you're.
- [174:52]
A
Like, just off, I think to Argent for Argentinians. I mean, he was an outsider when he was campaigning. I don't think a lot of people bought his proposal, like proposed policies. It was a lot about, let's give a chance to something dramatically different from the first time, for the first time, you know, and last time I went to Argentina, it's been a while. I went there right after he took office and my impression was that people had hope that things could change.
- [175:27]
B
That's it.
- [175:28]
A
And it was a question. I'll tell you what everybody told me. I mean, some people were against him, but a lot of people told me, look, I don't know if I have no idea if this thing is going to work or not, but at least there's a chance that something could be done differently because the alternative is to continue that kind of Venezuela path that we've been following for years. And they were giving him the benefit of the doubt. And I will tell you something I found, I found fascinating to. Super, super fascinating, which was the. It was the midterm election in October last year, right? So in Argentina there's a midterm election where you, they renew half of, let's say half of parliament. Imagine like, you know, there's, there's general elections and midterm elections like in the U.S. now, the narrative was he's going to lose horribly. Right. And why? Well, first of all, because there was a local election where he didn't do well, like a by election. It was a sort of by election. And the other thing is austerity, not necessarily with those words, and I'm not a big fan of the word austerity, but there's austerity, the typical story that the incumbent government, if they implement austerity measures, everybody hates it and they're never reelected. And that's why it's impossible for a government to reduced the deficit. Right. And a few weeks before the election, I'm at Waterstones and there's this book called Austerity, right? So I buy the book. It's a bit academic book by this Italian guy, Alexina, and the thesis of the book, there are a few things, but he says that austerity implemented as tax increases historically has been recessionary, but implemented as a reduction of government spending has not been recessionary except like maybe there's a little bump and then it goes up again. And another one of the things the book says is that beware of this idea that a government can be reelected because there are many instances in history, and they're named in a book where a government was actually reelected even though they implemented austerity especially, that meant government cuts, not tax increases, right? So I read this book and maybe there are exceptions to the rule that you can't train the government because otherwise you're not going to get reelected. And a week later there's the election in Argentina and everybody Expected Malay to lose. A lot of my relatives were actually almost clinically depressed with this because they thought we're going back to the old regime. So this is again, decline and our family members moving away because that's, you know, my family is now a little bit, like you said, there are people in Australia, in the uk, Denmark, Germany, we're all over the place. So this very sad thing of decline, back to this decline. And they got very depressed. I think even if Milei has had his own issues, there have been accusations he's a controversial guy, but everybody assumed he was going to lose. And then he won by a landslide. He didn't win by a little bit. He won the midterm election. It's not he like at the party. Right.
- [178:36]
B
Because he was.
- [178:37]
A
But. And to me, that was it told me, is this time different? Right? Could Argentina have turned the tide? Is it now? Are people really electing change now? Even if they don't like the guy, Even if they really don't want the previous administration, the piranhas who've been, you know, managing the country since the 50s. Maybe it's no longer an option, and I hope it isn't. And I had a conversation with this entrepreneur from the U.S. he told me, will Argentina ever give us our money back? Because he's speaking of this currency swap, very controversial sort of lifeline that the US gave to the Malay administration.
- [179:22]
B
Because.
- [179:23]
A
Argentina has a history of not paying its debts. It's not exactly debt. But anyway, this guy said, will we ever see that money again? Because Argentina never pays its debt and stuff. I was like, you don't.
- [179:36]
B
You know.
- [179:36]
A
You know what? This time I wonder if things may have changed and maybe you will actually get your money back. And they did not just. Not just that, they actually. So they only used two and a half billion, two and a half billion, but they've already reconverted that. So the currency swap is still on, so it can still be used. So it's not like it's on over. But Argentina has literally just repaid that debt. I want to send a message to this guy and say, hey, actually, look at that. Like, this is a bit unexpected. Again, institutions, we go back to the role. What Milei wants to do is to fix institutions. He wants people to. I mean, he passed a package of laws that kind of tried to say it will be easier to do business in Argentina in the long term. Right. That's kind of the goal of his law. And he's trying to fix institutions. Right. And we'll see what happens. Because Argentina always has surprises.
- [180:29]
B
You know, we, we need it here. I, I hope someone steps forward, someone's smart.
- [180:34]
A
Do you think there's a chance of that?
- [180:35]
B
Yeah, I do, but I, I, I worry that has to get really painful for people to actually want it. This, you know, it has to get to the point where even the socialists don't want it anymore. Like, you've got the champagne. Socialists live in the nice areas who love immigration and who love wealth redistribution because this doesn't really touch their lives. But, but we've seen people become more conservative as it touches their lives, but they find it hard. Like there's this, there's this, like, you know, I have these conversations with people. There's like a thing in one person, specifically Connor, who like you can tell, they understand all your arguments, but they're worried what people will think of them if they act conservative. And I just worry that people, it has to get a lot worse for people.
- [181:18]
A
I see.
- [181:18]
B
So we need that right charismatic figure who can explain things, economic concepts in the right way to help people understand. And then hopefully they'll come forward and like we will have to go through a period of pain to recover and build a strong and prosperous comment. I hope we get it. I don't know who that person would be. I wish I was smart enough to do. I'm just a dumbass. But I would vote for that person if they came.
- [181:40]
A
Yeah. You know, something I heard during Malay's campaign, so in 2013, 13, what people were telling me was that the people who traditionally benefited from the piranhas, government, people who, who got government handouts, who work for the government. Right. When inflation went to, you know, 200%, these people stopped trusting even themselves. Even if they personally, they, they, they were worse off. Like what I heard from the ground, you know, because I do speak to Argentinians a lot. They told, I think even people who were traditionally benefited from, from this regime are no longer buying it. They want to change themselves.
- [182:16]
B
There's like a morality to this. Like I benefit from inflation. But when you, if you're doing well while everyone around you isn't, it's fucking shit. I don't want to do well at the cost of other people. I want to have my purchasing power increase, but cause other people to have theirs decrease. I don't want to be able to buy a Ferrari because somebody can't buy their groceries. It's gross. I want to make my money from building. I like building things. I built this podcast, building a football club. I like building things Yeah, I would want change, man, but hopefully we get it. Emmanuel, listen. Great. This is great. I love this. Great to meet you. Good luck with the book and I think we'll do this again soon. And good luck to you, man.
- [183:03]
A
And awesome.
- [183:04]
B
Thank you to anyone who stuck around to the end. I think we've gone for nearly three hours. Three hours.
- [183:09]
A
Right.
- [183:09]
B
See you all soon. Peace out.
- [183:11]
A
Thank you very much. Yeah.