Mark Blyth: Capitalism Is Crashing Again and Politics Isn’t Ready | Global Macro | Ep.94

Summary

• Macro Regime Shift: The guest argues neoliberal globalization has broken, pushing economies toward reindustrialization and state-led projects amid rising geopolitical fragmentation.
• Defense Spending: Europe is described as under-defended, with the UK urged to double down on its Aerospace & Defense base (AI, drones, shipbuilding) as a strategic growth pillar.
• Energy Transition Fault Line: The U.S. is set to pursue Hydrocarbon Dominance (oil, gas, even coal) while China proliferates Renewable Electricity via solar and EVs, defining a decade-long competitive divide.
• Housing & Real Assets: A chronic housing shortage supports a case for large-scale Homebuilding (state-built, quality rental stock) to boost skills, mobility, and growth while easing affordability pressures.
• AI Outlook: AI can lift productivity but poses a bubble risk concentrated in large-cap tech; job impacts may hit white-collar roles while care and trades remain essential.
• Demographics & Healthcare: Aging Demographics imply surging dementia and healthcare costs, underscoring labor needs (immigration) and long-term funding gaps.
• Inflation & Deficits: Recent inflation was framed as supply-shock driven (energy, supply chains) rather than purely monetary; deficit fears are secondary to credible growth paths.
• U.S. Relative Strength: Barring geopolitical shocks, the United States may outgrow other developed markets; a cheaper dollar aids rebalancing while Europe faces policy paralysis.

Transcript

We're literally turning the corner into the re the rebirth of 19th century imperialism. We're closer to great power conflict than we've been in a very long time. Europe is naked and defenseless and we're and and we're literally doing what they did in the 1930s. There's a brilliant book that you should read, everyone should read called Appeasing the Bankers: Financial Caution on the Road to War by Jonathan Kersner. And he basically shows how the Bank of France and Bank of England basically appease the crap out of the Germans because they might lose a few basis points on their guilts. I mean, this is where this type of thinking gets you. Imagine spending an hour with the world's greatest traders. Imagine learning from their experiences, their successes, and their failures. Imagine no more. Welcome to Top Traders Unplugged, the place where you can learn from the best hedge fund managers in the world, so you can take your manager due diligence or investment career to the next level. Before we begin today's conversation, remember to keep two things in mind. All the discussion we will have about investment performance is about the past and past performance does not guarantee or even infer anything about future performance. Also understand that there's a significant risk of financial loss with all investment strategies and you need to request and understand the specific risks from the investment manager about their product before you make investment decisions. Here's your host, veteran hedge fund manager Neils Kstrop Larson. Welcome or welcome back to another conversation in our series of episodes that focuses on markets and investing from a global macro perspective. This is a series that I not only find incredibly interesting as well as intellectually challenging, but also very important given where we are in the global economy and the geopolitical cycle. We want to dig deep into the minds of some of the most prominent experts to help us better understand what this new global macrodriven world may look like. We want to explore their perspectives on a host of game-changing issues and hopefully dig out nuances in their work through meaningful conversations. Please enjoy today's episode hosted by Alan Dunn. Thanks for that introduction Neils. Today I'm delighted to be joined by Mark Bllythe. Mark is William R. Rhodess 57 professor of international economics and professor of international and public affairs at Brown University. His research focuses on international political economy and he is the author of a number of influential books including inflation a guide for winners and losers austerity the history of a dangerous idea and angry nomics. So Mark it's a pleasure to have you on how are you doing? >> Very good. I mean it's a new year. Uh it's a a whole new way of dealing with international politics. There's so much to discuss. Let's go. >> Absolutely. And those books uh you've written, I mean they were written over the course of the last decade or two, but they seem particularly timely at the moment. Uh probably touching on all the major issues we have to get into today. The one that's killing me just now is uh when I was writing the book on inflation that you just referenced. What I was thinking about writing, I kind of got distracted into that book, was a book called Burning Down the House, which is about America's turn against uh all green investments and the relationship of that to the dollar and international politics and the whole thing. And if people are curious, you can go to the London School of Economics website for the I think it's the Center for Europe, I think it's called. And I did a talk there where I outlined basically what this book would be. And I did it at the start of 2025 and it's spooky. Everything I said has come true. Everything. To the point that if I write the book now, by the time it comes out, everything would move on. Like I mean I I it's it's instantly redundant because things have moved so fast. >> Yes. >> I was talking about things that I thought would take a 5year period. We're already done in a year. >> Yeah. >> So things have shifted. >> Okay. Well, encourage people to check that out. Before we get into the main topics, we always like to get a sense from our guests as to how they got involved in economics and markets etc. How I know you're from Scotland originally. How did you get in interested in economics? >> Uh it's a really good question. Um I give a little bit of this in a paper I wrote once. It's buried in an edited volume no one reads unfortunately. Um I remember being 13. I think I was 12 or 13. And uh you remember Panorama, the British TV show? >> Yes. >> So I'm 13. So it's probably about 1980 and it's the big revolution in intellectually and politically in terms of macroeconomics and there's this new thing, the new kid on the block called monetism. Monetism, right? And monetism is this new shiny thing that says we'll control inflation. And uh the old way of doing things, Keynesian and macro uh is is on the way out. And emblematic of this, I remember this distinctly, and a friend of mine tried to find it in the Panorama archives and couldn't, but I didn't hallucinate this. This is literally the origin story is uh they did a kind of like game show model. So you imagine like some young SPV, very 1980s word, comes out with his nice suit and a young lad, London Business School, and he's got a monitorous model. It's got six equations and no matter what data you throw into it, it says if you tighten the money supply, inflation disappears and everyone becomes a millionaire. I exaggerate slightly. And then they bring on this guy who's from I'm sure he was from Manchester and it was a Keynesian macro workhorse of structural models and it had something absurd like 6,000 equations in it mimicking this sector and this sector and imports and exports, whatever, right? And whenever you fed into it, it basically said inflation's going to stick around. the growth will be low and we don't really know what to do about it. And right in front of me was what was going on five or six years later when I got to university in the pages of the macroeconomics textbook whereby the transition hadn't yet been made from that Keynesian world into a kind of let's say what we'd now call new business real business cycles rational expectations world and monetism was this kind of weird bridge between the two and I remember watching that thing on TV and thinking to myself oh this is I This this this has to be I don't trust this guy in the new suit for a start, right? He's far too slick. He's far too confident. He's got a tiny stripped down model. I'm 13. What do I know what a model is, right? But it just didn't smell right. And it seemed like the other guy was genuinely had spent years building up this model and it was giving results he didn't understand, which seemed to me to be more actually intellectually honest. And I think that was the kernel. That's where it started and it's where I started to get interested not just in economics but economics is a thing in the world. So I try and explain myself this way to other to to other economists which is I'm not really an economist and it's true my PhD is actually in political science. >> Uh but I got really interested in economics as a thing in the world. And what I mean by that is it's not just a Milton Friedman had a great line about this once. Economics isn't just a camera passively recording events. It's an an it's an engine driving them. And when you get to define how the economy works, what it is to be optimal in some situation, what policy has to be because anything else would be crazy in terms of economics. When you get to accuse an opponent in a debate of economic illiteracy, right? All of these are incredibly powerful weapons. And the ability to frame the world in a certain way, saying this is the way, the truth, and the light, and the only way things can be. I mean, that just is an astonishing political resource. And that's where that's what I've been interested in. That's how I got into it. And you could see this clearly with Mrs. Thatcher's premiership, particularly in the first term. The whole idea of selling council houses to turn people into petty capitalists, uh, doing stock market flotations of national assets to get people interested in the stock market. It was about, as some people might call it, changing people's subjectivities, changing their very sense of who they are. And that's well beyond technically mapping how the economy works. That's what it's really all about. That's really what's at stake. >> Interesting. Well, I mean, it's hard to know where to start given that backdrop, but I think a lot of the things you're talking about is are very relevant. And actually, one of the things I wanted to kind of kick off it is this shift from neoliberalism to well, whatever it is we're into now. We had >> Gary Gerl on um a while back and he's written a book the the rise and fall of the neoliberal order. So it's something um that that is definitely topical and obviously you talk about thatcher in the early 1980s and that was the rise of of neoliberalism and today and and I know you've written about austerity and and free markets uh and now we've moved into more I guess populism. So I mean from your perspective, how do you trace that rise and fall of neoliberalism and how do you define what we're moving into now in this new new regime? So this is all in the middle of Angryomics, the book I did with your fellow Irishman uh Eric Lon and I gave a kind of potted history of the way that the the global macro works and it comes from doing talks in tech conferences cuz tech people want to know about the economy and I want to know about whether tech people are full of nonsense or not. So there's means and trade for me to be going along and telling them about stuff and then I learn stuff from them. But to talk to these folks, I had to figure out a way of making it make sense to them. So I developed this analogy and I figured out it was a bit more than an analogy, which is think about capitalism as a as a laptop. And you get different types of laptop, but if you drop them on the floor and pop them open, they all have the same sort of basic configuration, right? Now think about an economy as various institutions as the hardware. So let's think about labor market, capital markets, regulatory regimes, etc. And then you've got the software which is the governing ideas, the operating system if you like that runs those institutions quite hard in a given historical era. And if you do, you can tell a very straightforward story about the the rise if you will of global capitalism particularly from the 1870s onwards. uh is a kind of uh international gold status regime, hard money, uh very little intervention from the state, very much lazy fair, free market, etc. As a set of coherent ideas and a set of robust institutions but just as computers over time have bugs in the software if you run them long enough, so does capitalism as a computer. And the bug in the software and the gold standard was deflation which ultimately crushes wages and then leads to the second international which leads to the reaction against socialism which leads to imperialism in World War I. So the big crash and sort of reset that comes out of this is the terrible 20s and revolutionary 30s and then we get into the 1940s and the postwar settlement and basically the lesson learned is right lads let's not do that again. So you got a radical limitation on the mobility of capital. You get a reigning in of finance. You get the construction of a whole bunch of not warfare states but welfare states where your basic idea is if we can get the investor class to remain at home and force them to invest at home under good terms we can basically create high levels of investment that pays for high real wages. Productivity increases then continue that on and we end up with sort of you know the type of regime that we had from the 40s through the 70s. Now that was great. It worked for a while. The first one was very capital friendly. This one was very labor friendly. And that was kind of the bug in the software. And the bug in the software, there was a few of them, but one of the big ones, of course, was inflation. And inflation is a tax on investment. If you think you're going to get 5% real 5 years, hence inflation goes to 10%, you might as well, you know, burn the cash out. >> So it it it doesn't work basically. So that was the bug. You got the system crash around inflation. And then you got the big reset. And the big reset in the 1980s, neoliberalism. See, we would get there was a reaction to the failure of that system. And what was that? That was a big hardware modification called let's let rip on globalization. So privatize, integrate, globalize, uh, financialize, deregulate banking globally and locally, open up capital markets, get rid of controls on foreign share ownership, etc., etc. So all that high level stuff, but then there's domestic privatization, labor market liberalization, uh huge kick to trade unions, etc. is the ultimate governors like really important. So it's a hugely different setup from what we had previously. And the bug in the software there was because you're relying essentially on uh on bank credit to fill in for a lack of real wage growth because this thing is a giant concentration machine that sucks everything up to the top is you build huge amounts of financial fragility into the system and leverage that goes tits up in 2008 and basically you ask the central banks to come in and fix it. Well, they've only got two tools. They can buy and sell assets raise and lower the price of money. They try both. that causes even greater inequality on the wealth side. Um this is in the US turbocharged with the rise of a tech boom at the same time which increases asset concentration even further and we basically stagger along in a world in which people are basically real wages have been static at the level since the 1970s. Meanwhile the economy's generated trillions literally trillions in wealth which has gone to an increasingly small number of people. Now the reaction to this has been various forms of populism. There was a left-wing one at one point. There's still one is is one to a certain extent. If you look at uh what's happened in New York, if you think about AOC and Bernie, those folks are still around. But the but as Carl Pyani said about the 1920s, the reaction to big economic collapses tends to be on the right rather than the left because the right can more easily pull on the notion of the nation and then the notion of the community that has somehow been betrayed by these elites, these global cosmopolitans. This is a very old story. We have lived this history before and unfortunately we seem to be living it again. So I think about neoliberalism. I don't actually think about the ins and outs of Milton Freedmer and any of this sort of stuff. The Mont Pearland society. That's all good and true and other people have written about it. I think about this as a series of basically largecale capitalist computer crashes of which the latest iteration has been neoliberalism. We basically are I mean if you think about the high point of globalization I've done some empirical work on this recently if you look at crossber FDI if you look at uh crossber M&A activity even if you look at trade but then control for directionality I mean the peak of globalization and that whole regime was around 2007 2006 before the crisis we're nearly 20 years out of that equilibrium we're basically doing what happened after world war I going through the uncertain 20s and into the revolutionary thoughts. >> What do you see uh comes next? I mean, how do you describe the world comes next? Because as you say, it's a bug in the software. That makes sense. And and also you touch on a point that we've been through these cycles before. There is a sense of recurring cycles and the >> almost that each regime sews the seeds of destruction. So yes, as you said, the the kind of the more interventionist policies of the '60s '7s, then that foster the desire for for capitalism, which then lead inequality, then that has to be addressed. So it's kind of there's a perennial uh shifting to try and solve the last problem. And we're currently, I guess, >> what do we we're trying to address um well uh >> well, the great paradox >> spending needs and sorry, go ahead. No, but if you think about the great paradox of the moment, I mean, the person who's weaponized this the best is President Trump. And President Trump fully recognizes, you know, the the sort of the if you will, how to weaponize this as a politics. Um, and he he points out, you know, that basically what's happened is, you know, this and you know, the MAGA allies, etc., the global elite, they don't care about you. They've run off with everything. Blah blah blah. But then it gets turned and it's like China forgetting to mention that sort of what actually happened was American firms left and went to China. So if you want to blame anyone, blame the American firms, right? Um that uh you know the the one of the massive problems here is wage stagnation. Everyone talks about a cost of living crisis. The president poo poos it. Why? Because he's part of the concentration machine that's making things go even more up to the top. So there's this weird sort of like instability in that coalition. And you see this with the fragmentation around Marjgerie Taylor Green, how Bannon struggling to control MAGA now that we're basically back to 19th century imperialism. You know, there's a lot of contradictions in this. So, so to get back to your question, you know, where does this all go? It's incredibly uncertain. I mean one part of this and a very simple way to think about it and this is the book that I was intending to write but I think it's already out of date and other people have been telling the story already is the United States has not just decided it doesn't like windmills one of the reasons behind Venezuela obviously is control of oil supplies and they just take an attitude that like either they don't care they don't believe or they think they can find some technological hail Mary to climate change now the figure is something in the region of for every 1.2 2 gigatons or what 12 g whatever order of magnitude one very large number of gigatons the earth's surface goes up by 0.1 degrees so it's cooking it's just physics right arguing about this stuff is like arguing with physics physics doesn't give a so you know you can deny it you do whatever and what we've now got is a government that said we're going to double down on carbon we have executive orders that are bringing back big beautiful coal that this is the 18th century Right. If you think about the hemispheric land grab, Venezuela, sat traps in Argentina, cooperative allies in Chile, the threats to Canada, the the the faint to Greenland, which I'm quite convinced will happen and will break NATO. Uh all of this is about basically we're going to run a carbon powered continent. Meanwhile, China is basically covering the rest of the planet in panels and EVs. And that's basically the fault line that's going to define the next decade. how that plays out that's anyone's guess cuz all of it is very fragile. >> Well, as you say, like climate change, you know, it's a structural um challenge to be addressed. I mean, we have have other structural challenges here at the moment in terms of dispense spending >> and I guess what's interesting about these kind of structural shifts uh demographics as well third one aging populations is they come at a particular time of already high deficits. Right. >> I mean, obviously you've written a book about austerity before. Um, I mean, from your perspective here and now, okay, bond market vigilantes haven't exactly come back yet, but they're maybe lurking in in in the background. And certainly deficits, you know, are at a level that would normally be associated uh with a recession, particularly in the US. You only got a seven or eight% deficit in a recession before. Now, it's the norm, >> right? >> How does this get resolved? So on the one hand there needs to be huge spending on on structural factors and at the same time there needs to be uh deficits need to be addressed uh and austerity is not politically palatable at the moment. >> Well it's not just politically palatable. Let's start with the austerity point and then go to the deficit point. Right. In that book on austerity, my assumption was the following. That if you don't do something that obviously self harms, which Europe went ahead and did, which is to cut public spending at a time when the private sector is oversaving because it's in recession. All you will do is shrink GDP and you'll end up with more debt rather than less. That's what they did. Congratulations. They lost a decade of growth. We know this doesn't work. So if you were to do this now with bigger deficits and a heightened moment of populism, that would just be a suicide note. So let's just take that off the table right now. Second thing is my mistake in that book was I presumed that growth rates if you didn't do this or even if you did it but stopped doing it would actually rebound. And what we did was we built a kind of global system that we described earlier whereby once we broke it and filled it with liquidity and essentially made the cost of capital free which brought us crypto sparks and other things that basically create assets for the top and liabilities for below. We gave up on real investment and ultimately we had a decade of austerity in Europe and growth rates didn't rebound. So now we do have a problem. I mean, Italian growth rates are so low and their debts so high and they don't have a printing press that if it wasn't for basically the ECB backstopping them, the bond market vigilantes would be all over them. France can't pass a budget. I mean, you know, these are real constraints, particularly for people who aren't sovereign. Now, I don't want to run down the MMT line of all you need is a printing press. I'm a great believer in the current account, right? So, you know, you don't have to go there. But again, when you get to the United States, I mean, I'm I'm nearly 60 years old. I've been in the United States for nearly 40 years. I can't tell you the number of times people have said to me the deficit is unsustainable. I mean, we've been saying this for 40 years. It's like, really? Are we going to do this again? Right? We forget about the the demand side for this. It's the same with the UK. Every time a guilt auction happens, it's three times overs subscribed. >> But is there a tipping point? I suppose it's a question. >> Where would you go? Where would >> I know I mean I suppose another perspective on this on market vigilante. You're basically taking a short position on something which means you're going to have to cover that short position with a long somewhere else in the system. If you think everybody's in debt, where's your hedge? Is it gold? >> Well, gold is obviously it has been. >> So, we'll just bid gold to 20,000 an ounce. >> Okay. What does that solve? Now, my point is I just find it bizarre that at this point in time, yes, there are real issues. France needs to pass a budget. We have aging populations. But, you know, we're we're literally turning the corner into the re the rebirth of 19th century imperialism. We're closer to great power conflict than we've been in a very long time. Europe is naked and defenseless. And we're and and we're literally doing what they did in the 1930s. There's a brilliant book that you should read, everyone should read, called Appeasing the Bankers: Financial Caution on the Road to War by Jonathan Kersner. And he basically shows how the Bank of France and Bank of England basically appease the crap out of the Germans because they might lose a few basis points on their guilts. I mean this is where this type of thinking gets you. So you know I just I just want to resist it. >> In the case of the US obviously there is a capacity for for for higher taxes. I mean >> absolutely you can pay more taxes, right? >> Yeah. I mean taxing as the percentage of the economy is a lot less there than in in Europe. But but that aside, um I mean as you touched on Trump, MAGA, global affordability, um it it has become the buzzword. Um you've written about inflation, but obviously not it's not necessarily inflation that's even a problem at the moment. It's high prices, >> right? It's the level. It's not the delta. That's exactly it. Right. >> How does that get resolved or does it or how does that play out? >> I mean, so there's a funny thing. And I don't know if you had heard an echo of this over in Ireland, but in 2022 23 when inflation was really tearing along, maybe it was 23, 24, there was this thing about the disconnect. And what they talked about with the disconnect was the fact that people like me would get on TV and mansplain. Well, you know, we've looked into the numbers and it seems that the underlying rate of inflation is now 3 gillion%. And we expect it to go to 3.7 gillion% and and here's what happens. And if we look at core, but what core tells us is this. And everyone's going to the supermarket going, "How much do you want for eggs? This is absolutely outrageous." Right? Groceries level has gone up 24% since the pandemic in the United States. So a quarter, right? Things have gone up and they don't go down, >> right? That's the crisis. Now, what is it that my tribe does? We look at the delta. We look at the rate of change in the level. The fact that the level hasn't has gone up and stayed up is actually isn't of interest to us. >> Yeah. >> Now that's that's your disconnect and you wonder why people don't believe us, right? We should be utterly concerned about the fact the groceries have gone up 25%. Nothing much has changed, right? We haven't lost a quarter of the agricultural labor force, right? So maybe there's something to this argument that when you have two firms that control the entire cereal market and people kind of lose their price anchor, they might be able to push things up a little bit and then when people get used to paying eight bucks for a smaller box of cereal, they just do, >> right? I think that's where this is. The other one is, you know, housing. Starting with that privatizations, but going across the world, we basically decided we were only going to build houses for people who could afford them. And if you do that, you're going to have a housing crisis. If you don't have a big state-owned rent rental sector, ultimately you will have a housing crisis. We've been brewing this since the 1980s. Uh if you go to a place like Canada, Canada's Toronto, hugely expensive city, incredibly difficult to live there. You'll be 120,000 Canadian and basically you're struggling to make ends meet. Why? But despite that, they've built literally somewhere in the region of about $200,000 condo units. Yeah. But they're all $4,000 a month rabbit hutches. So, how do normal people access this? And are they near schools? No. Are they near shops? No, they're not. Right. They're down on the waterfront cuz that looks cool in the brochure when you're selling to your investors. So, yeah, we made an absolute ars of this globally as well. So, you know, yes, there's a lot of anger out there and it's very justified. >> Yeah. I mean, it begs the question. I mean, you could say, where do economics go wrong? I mean, is it that macro is it that that there's this this preoccupation with macro and looking at variables like the general level of inflation, unemployment, like that they're not really the issues? Obviously, inequality, the the number of people with a with a house, the the actual price of groceries. I mean, have macro have economists just got the wrong dashboard. Is that fair to say? >> Uh, I don't know if they got the wrong dashboard, but they might look at the wrong indicators because they're incentivized to look in different ways, right? I mean, I've got an example of this, right? back in I think it was 1989 or 1999 maybe it was early 2000s the Brits and think about this as the high point of like globalization markets can do everything things seem to be going well inflation's disappeared real wages were actually rising it was looking like it was good right and the Blair government commissioned a review on British food security and you know what they concluded is a country that imports twothirds of its food right ltt TT, let's leave it to Tesco. >> Okay, >> that's the food security, right? So, if you're in a world whereby, oh, well, that's markets. They're amazing. They do everything, right? And it seems to be tracking along and it's all good. It's like central banks and inflation control. We have anchored people's expectations. No, 500 billion Chinese people joined the global labor force and prices collapsed. That's what happened. You're just claiming credit by standing on the sidelines with your signaling models. um that when you you know when you when you look at it that way they're looking at the wrong things and and also I mean there's a very simple thing here is like the administrative class of which I am part right we no longer live near normal people we don't send our kids to the same schools as normal people you know we think we have a crisis if our income falls below 300,000 and there are people trying to get by on 30 and that's the vast majority of people and you know and our crisis are completely different from theirs so we're blind to the fact that basically a grocery basket going up 25% with stagnant wages is a huge societal problem. We just we're we don't see it. But what is the solution? I mean around the world the solution to the affordability crisis seems to have been more fiscal supports which yeah justified politically and and morally I guess. Um but obviously there's nothing to address uh deficits or or put put finances on the stable. Do you think that's fair enough? Is that the right response? You think? >> Well, again, you know, sort of like pivoting back to deficits on this. I mean, ultimately, if you continue to run this for another 5 years and you start to have food riots and you're talking about deficits, >> they will come and burn your house down with justification. Right now, you know what's the answer to this? Like we've been running a global experiment on winner takes all for the past 40 years and we're we're doing zero about the fact that ultimately this is what's going on and you know and this goes beyond sort of simple policy regimes or or what we do in a given moment right the gold standard go back to that that was a concentration machine that's what gave us socialism 1.0 0 right then there's the collapse of the 30s which gives us fascism as a reaction to the collapse of everything that has its own genocidal solutions that thank god didn't work and we defeated it then you have a kind of social democratic era that works for a while but ultimately is bad for capital so capital rebels against it then you've got this incredibly pro- capital regime that just is another concentration regime where it all goes to the top and you know these are the giant macro things which are driving this and you know to to to me to sort of like stop and Oh, you know, got to check about those deficits. It's like, you know, the house is burning down and you're like, Jesus, I better save that rug. I mean, one of the uh curious um I suppose transitions we've seen in the last while. I mean, you talk about okay, they shift to socialism, then they shift to a fascism. This time, we haven't seen really a strong >> shift back to the left. it's more to the extreme right more than anything. >> What does that mean for us from from an economic from a policy perspective? Is that more worrying or >> it's way well it's less worrying in the sense that basically with onethird of every country obese and old and unfit and ill our chances of like marching into somebody else's country are massively reduced. Um so you know there is that. Um but you know but the serious point is who's benefited from the concentration regime? Not just the very top, the top 10%. How do assets compound over a lifetime? Who are the people that vote twice as much? The old. So what do you get? You get regime maintenance policies that will never touch wealthers. It's like, you know, you want to do a good one. Like let's think about this one. Uh dementia care. This is something that's going to bust every health system across the developed West. We all know it, right? So when Theresa May comes in and says maybe we could have a little tax to prepare for this, you're out. You're done. Right. That's it. The Aussies have been smart about this. The Aussies set up a sovereign wealth fund. And the sovereign wealth fund, the future fund is is basically hypothecated for future healthcare expenditures. They're actually thinking ahead. The rest of us are absolutely in denial about this cuz we can't vote against the boomers, right? That's that's how this really begins to stick. Why is it that basically millennials and younger are freaking out about the future and about housing and everything else? because it is ludicrously expensive, because their wages are low, because we ran a regime that allowed firms to take everything. In the US, corporate profits are 12% of GDP. >> Historically, it's 4 to six. We've trebled it. That's going to 5% of the population at most, >> right? When you just break it down, it's like really simple. >> But I suppose my point is that what you say is correct. And we had Occupy Wall Street. We we've had uh and I suppose we had bomics which was somewhat progressive but why has that kind of >> progressive agenda that hasn't resonated more with >> saying the US >> because the other coralate of this that gets weaponized is migration >> and the left is completely unable to talk about maybe just doing an open border policy for 20 years and assuming it would all work out was probably a bad idea. Maybe taking a global upsurge in refugees and dumping them in the poorest communities in our countries miles away from the wealthers who make the decisions was probably a bad idea. Right? And they just completely screwed the pooch on this one and still don't have any good answer to it. >> The right always have an advantage because they can talk about us. Us the citizens against them, the elites. And in a world where it's absolutely transparent where the money is and the people who have the money are not like the majority of us, that's such an easy card to play. >> I mean, think about the inability of like the British Labor Party to even talk about these things. And when they do, they stumble into this kind of Toryesque policy of Rwanda shorn of shoving everyone away that doesn't really do anything about the fact that, and this is your demographic point, at the end of the day, you need them. M >> and here's why you need them. It's very simple. Uh an economy stripped down to zero. I'll be very neocclassical for a minute. Is the number of people, the number of hours worked, and the quality and quantity of capital they work with. So unless you want AI to replace a third of all jobs because you're running out of workers, your productivity is going to crash. And if your productivity does crash, then you're going to have to work more hours. But given the fact that you want to work less hours and in the UK 800,000 people have decided to have a bit of a lie down since the pandemic that you can't actually get enough people in the labor market. Then you think about the damage that's been done to your domestic labor supply through the collapse of skills training, really shitty jobs, zerohour contracts, massive stress on single earners, particularly single women and single women with kids, right? You've got a highly stressed underpaid workforce. The only way you can balance this out is if you bring new people in. And the right have an answer. No, we'll stop that and that'll solve all our problems. >> Well, as you say, we've got this problem, looming problem of um you know, healthcare, dementia. Totally. >> Charles Goodart, I don't know if you read that book, that that was critical observation he hadn't had of that been inflationary. But obviously there's there's the basic need for for the workers and you see it I see it here in Ireland, you know. all the healthcare workers are from overseas. Um, and the problem's only getting bigger and worse. So, you've got these inherent tensions, you know, immigration being one, the old versus >> the young, >> the young being another one, and then the the the asset holders versus uh those who have not. >> Mhm. >> You know, we keep coming back to how does it get resolved? What is the flare point, do you think? >> So, is there a is there a a peaceful political way to resolve this? I mean there's a book from a few years ago by a historian out Stanford whose name escapes me called someone like the four horsemen and he basically points out the only time you ever solve this stuff is when you get plague famine pestilence or war. It levels the playing field. >> I hope that he's wrong. Um you can look back to sort of like the period 1940s 1950s as a big let's not go down that road moment. It is possible to do other things. But when you do that you really have to redesign the system. You have to break it. You have to stop it being a concentration machine. You have to do big institutions of redistribution locally and globally. And nobody is in favor of this. Nobody even wants to try this. You have a left that's intellectually and and fiscally paralyzed. Like they wake up in the morning thinking about a deficit while the house is on fire. And then you've got a right that doesn't give a about the deficit. Never has. Only talks about it when the left is in power, right? Openly says as they did in the Bush administration, "Dicits don't matter. We've proved this time and time again." And then when the when the the to even call Biden the left is hilarious. But when the other side gets in, it's like, oh, the deficit and the debt, it's the most terrible thing. And then people fall for this garbage every time. Meanwhile, the house is burning down. I really don't know where this goes. This is why I can't write the next book. >> I genuinely don't know where this goes. I fear for the paths it could take. >> Yeah. like the path of least resistance is always to spend more money, allow inflation to be higher uh you know politically and and that's effectively the the route that that that's you can do this if your growth rate's higher and this is something you got to say about the Trump administration right Trump administration in 2017 had a face off with the Federal Reserve and said don't you dare tighten the Twitter battle and it's not because they gave in on this one but the Fed's own research said maybe we could run the economy a little hotter. We don't always, oh, look, wages are going up. Quick, raise interest rates. Maybe we can back off a little bit. And they actually did. And what you got was sustained wage growth and a higher average growth rate in 2018 and 2019 prior to the pandemic. Trump comes back in, does the big tax cuts, which are really going to kick in this year, etc., etc. US growth rates tracking above 3%. Everyone in Europe would murder for 3%. If you've got 3% and you're running 4% inflation, basically your debt eats itself. If you're running 1%, you got 100% debt to GDP and all these tensions. You're Europe and you've got a lot of trouble. Problem if you think that basically slashing public spending now is the solution. Good luck putting the fires out. >> No, it's true. I mean, and this is the the Trump I I guess optimistic scenario. you've got AI, you've got productivity growth, and that you you'll have stronger economic growth and and debt is sustainable because of that. I mean, if we do get better productivity growth from AI, um that has social consequences as well. Obviously, we're seeing that at the margin. It's hard to know how big an issue it is, but certainly anecdotally, it seems to be, >> but it seems to be further up the income scale, which is why people are paying attention to it, right? So, so here's the the pop quiz I always ask people in this one. What's the fastest growing job in the United States? Has been for a decade. What do you think it is? >> I I heard you on another podcast. It's some kind of head healthcare worker. >> Right. Exactly. Because if you do it basically by percentage increase, it's data scientist, but it's like 200,000 to 400,000. If you do it by volume of jobs, like millions of jobs, it's not a surprise. It's elder care nurse. There's no AI for that There just isn't. Right. There may be some apps that help you remind yourself to like, you know, not walk across the road cuz you don't know where you are or something, right? But that's pretty much it. So, you know, again, the sort of the long-term effects on this on sort of productivity. If it is, it's going to basically take a slice through college graduates and that's going to really piss off the middle classes. So, you know, that that's going to be interesting to see how this one plays out. But, you know, ultimately it really is just it's the same old story. You know, you're right. You print more money, right? and you get inflation. Well, you know, I mean, I just did a book on this. Actually, monetary inflations are actually and monitors hate me for it. If you want to read the review we got in the Wall Street Journal, right? Um, yeah, money can cause inflations, but so can giant supply shocks. And what we had in 2021,223 was two giant supply shocks. America outsourced its ability to produce most things and they stopped getting them. QED prices went up. Europe lost its gas station. QED prices went up. Money was involved, but oh, they were running the printing presses. Actually, Germany had higher inflation in the United States. There was no Biden stimulus checks in the United in in Germany, right? So, you know, inflation comes from multiple sources, not just deficits. I mean, we're stuck, we talk about this in the book, in the inflation book, we're stuck in this 1970s mentality, as if the world's still 1970. And we will live in a post-industrial digital economy. It's completely different. Why would we expect things to work out the same way? >> Well, I guess that yeah, you the economy is structurally different, but that's the concern that we're heading back to the 70s. And the 70s being a period of higher spending, you know, um central banks without credibility, without an a mandate to really address inflation, now >> but can they do it anyway? I mean, let's think about what happened in this inflation. Not one central bank raised their policy rate above the actual rate of inflation. There was no vuler shock. Nobody said, "Let's make loads of people unemployed because they knew it'd be politically disastrous." Absolutely. And and the idea that basically the signals from the central bank credibly reduced inflation. No, the supply chains came back and you found Qatar >> like let's be honest about what actually happened, right? So yeah, I mean the whole sort of like technology of central banking and the justification for it worked well in the nice years, worked well in the great moderation because there was nothing to do >> and the minute the volatility returned, you know, it's I talked about this at the Bank of England to people at the Bank of England. I think these guys have been handed a poison chalice. We expect them to do everything and they've got two tools which are quite blunt when it comes to doing those things. >> Yeah. Well, as you say, I mean that was the tool for the 2010s. Central banking was the only game in town. The result was asset growth >> only because we made it the it was a policy. >> That's right. Yeah. Right. We do have a fiscal side of the ledger. But what we've said is you're not allowed to do that. You can't do that. And if you do do that, bad things will happen. Leave it to the central banks. >> Yeah. >> Now, if you want to know where all the debt came from, let's be honest about this. Has there been high spending in periods? Absolutely. But if you look at all the debt to GDP ratios, they blow up in 2008, 2010. Oh, I wonder what was going on then. I wonder who were we bailing out at that point. And they went up again in co, right? The notion that we've been spending like drunken sailors on migrants. It's just It's these two structural facts. You touched on the UK and labor and their inability to articulate a I suppose I don't know you sort of coherent policy but certainly there's a sense of of an economic malaise in in the UK at the moment. >> I mean is it just Brexit or are they um are there more I mean you mentioned >> yeah Brexit didn't help put it that way right so let's get the guy who did Brexit to run the shop cuz that will clearly work. um what they had is they basically went along an open financial economy with London as the London as the growth engine. London generates 34%age British GDP. Uh pretty much all the other regions, Scotland marginally now and again is GVA positive. They see underlying core of GDP. Everybody else essentially lives off transfers. So you've hollowed out your entire economy. And how do you do that? Well, let's think about the world 50 years ago. Bolton may not have been the most attractive place to live, but it was a functional place. And Bolton made stuff and it then sent stuff on a train to a place called Birmingham. And Birmingham assembled the stuff and then a bloke in London financed it and you shipped it somewhere. Fast forward 50 years, London doesn't give a crap about Bolton couldn't find it on a map. Bolton doesn't make stuff anymore. Birmingham occasionally makes things, but it's really about football, tourism, universities, and a few other things these days. And what London cares about are the other globally connected cities where you bake finance. Now, if you go to London, everything's fine because that financial model, that growth model that works on that now local scale is there, but it's not earning enough money to basically do the transfers to the rest of the United Kingdom. >> And you don't do anything anymore. I had a conversation recently with a guy, very successful software developer, really wants to do something for our mutual hometown of Dundee and I sent him this piece of research that basically pointed out that like Dundee is Bowling, right? Dundee is like, you know, name a dozen towns in the north of England. This is Northern France. This is where you're getting the populace reaction. Because what we did, we said, was why don't we take our capital and move it abroad? Why don't we just import stuff that we make cheaper cuz it's more efficient and then somehow the labor market will adjust and it did adjust. Adjusted to unemployment, not long-term unemployment and working at Asda. >> That's what we did. We did it to ourselves. So, you know, is there a short-term policy fix with this? Hell no. This is 40 years in the making. >> Is there a long-term policy fix? >> Yeah, there is. and you're seeing it which is essentially the reassertion if you will of different types of national sovereignties and the desire to rebuild industrial capacity. It may not be efficient from the economic point of view but Britain has one strategic sector and one strategic sector only is defense and basically and they won't do it because they're they're idiots but basically you should double down on this as much as you can. You should take advantage of the fact you're outside the EU's regulations uh on data. You should basically have AI, drones, everything like that. You've got contract from the Norwegians and others to build frigots. You actually have a sustainable defense sector. Go along on that. What else should you do? Do what the British government's done several times before. Build housing. And I don't mean handwave reforms to the to the home counties that so they don't get annoyed. Build 3 million houses. Go out and do it. Then keep it on the state's balance sheet. Build them as highquality housing. And when you do that, you actually reduce your debt. Why? Because if you're building this at four and financing it at five and your income six, that's net income reducing your debt. So you keep it on the state's balance sheet. What else do you do? Well, just those two things. Think what it would do is skills. We don't need I trust I'm an academic. I I graduate lots of people from universities with social science degrees. We could do with a few more HVAC guys. We could when if you try and get an electrician at your house, how long does it take and how much does it cost? Right? If you actually had housing that was quality that people could build and learn skills doing, that would also free up labor mobility. If you invest in your defense, which you're going to have to cuz the Americans are about to take Greenland and NATO is over, right? Then you can see where this becomes a productive thing. Really great book for people to have a read of. It's a big book came out a couple of years ago and it's very precedent for the moment. It's by a historian at Harvard uh old guy now well into his 80s uh called Charlie Meyer and it's called the project state and what he does is he tells a kind of history of the world through Europe from 45 on where he says look it's it's we must understand what happened here it wasn't just that sort of like technology and entrepreneurs and social forces states had projects they did things the cold war was a project to stop another state project, right? The Italian state was a project to suppress domestic communism. The French state was a project to balance out urban and rural. And everybody knew what was at stake and what the goal was and how you ran it. And in the 1990s, we just went, we don't do that anymore. Let's just go with this whole market things. And you get exactly what happens. You get concentration, de-industrialization, deskkilling, and inequality. Well, around the world we are seeing a bit of a snap back towards industrial policy. We're seeing it obvious in the US. We've seen it in definitely in Germany, a little bit in France as well. Um, I mean, it sounds like you see that that is a good thing. Um, I mean, in the US context, >> I mean, it's hard to know exactly what the the objective of of Trump's tariffs are. I mean, various explanations are put forward, but certainly the re reindustrializing, reinvigorating manufacturing is part of it. But you know some people will say well yeah that's fine but I mean a lot of those jobs won't come back because robots do the manufacturing. >> I think that's right. I think I think there is a real where like again we're not in the 70s right you can't re the big to me the big weakness of Liz truss wasn't basically the insanity of that budget. It's the fact that you don't get to deregulate the banks twice. >> Right. Yeah. >> Right. You you don't get to do thatcher again cuz we've done it. And once you've done it, you have to deal with the consequences of this, right? Not do it again, right? And part of the thinking on industrial policy does have the nostalgia that like we can go back to like the French did planning and all the rest of it. And yeah, you can and there's lots of sectors where this works. I mean, hell, look at China. 5 years ago, there was no such thing as green tech exports. Now, somebody showed me a video the other week of Aleppo in Syria. They're rebuilding after the civil war. It's a drone shot. Every single roof is panels. >> Like every single roof, they won't have a grid. It'll be distributed, right? Um when Europe took Qatar's gas or this rather the share of Qatar's gas that was going to go to Pakistan because we outbid them. Pakistanis didn't have enough to run their grid. So autonomously and quite apart from the state, large chunks of Pakistani society said, "Let's just get our hands on some panels." 20% of Pakistan now runs off the grid. It's the fastest solar transition in human history. So all this stuff is there. All this stuff is possible, right? And it's all kind of like, you know, wired into it. Now, you know, can you can you and should you do industrial policy? Yes, because the United Kingdom can't defend itself. >> I mean, this this is literally a question of life and death at this point. Let's leave it to Tesco has reached its end and completely failed. >> So, we're going to do this. Will some of the jobs be taken by robots? Yes. But elder care nurse won't, HVAC engineer won't, plumber won't, sparky won't. >> So why then say let's not try. >> But take the case of the UK. I mean is there even the policy flexibility to do that? I mean does it require spending? I mean that is there fiscal space to actually do that. >> Oh the fiscal space I mean again it's this thing like every treasure every treasury auctions three times over subscribed. Why do you keep coming back to this? It's just not true. What the markets want is a credible growth story. Why is it that guilt yields are higher than other yields simply because of one thing? Embedded inflation is higher. So they want to basically have a margin to protect to that's fair enough. But obviously you did touch on the list tobacco which was obviously >> and that was a lack of a credible story. All you need look if you told markets here's what we're going to do. Obviously United States is about to short us. You won't get any of your money back on a 30-year bond if the United States is occupied by Russia. Clearly, we need to actually the United Kingdom is occupied by Russia. We need to do something about this. So, here's what we're going to do. Here's the bits. Here's how it fits together. And we're going to do it over multiple parliaments. We've got cross party agreement. This is the way we're going to go forward. If you did this, the bond market be like, "Sure, have another 20%." And also, why do we have to just finance it through debt? I mean, there's huge amounts of financing you can do in the United Kingdom through, for example, reforming the the so-called self-employed sector, which is one giant scam as far as I can figure out. Uh, you got massive tax avoidance. You've got all these shelters, the Edinburgh Partnerships, the Scots Law Partnerships. I mean, there's so much avoidance. I mean, Jesus, go down a high street and you see tax avoidance. Turkish barber, Kurdish Barber, American Sweet Shop. What is all that crap? They're just tax avoidance and money laundering scams. What's missing is political will to do it. >> Where I mean why has a coherent economic package of policies not emerged? It's a a lack of >> because they've got no imagination and they've been told by the in the morning this is I think the British government works. Basically the chancellor gets a call from the treasury saying this is how much you can spend today. As if they're running a corner shop. Then the Bank of England gets on the other phone and says, "And if you try and spend more than that, this is what we'll do with interest rates." And they go, "Right, well, our job done then is to sit and adhere to the fiscal rules." And these are rules that were written for a higher growth, low volatility environment. And now you've got low growth and high volatility. And you're trying to hit a moving target. Good luck with that. I'm a pretty good shot. I couldn't get near it. >> Yeah. I mean moving to Europe, I mean we have seen Germany taken a radical change uh in policy. They they obviously released the debt break. They've committed to higher infrastructure, >> defense spending for I mean basically along the lines you're talking about. I mean >> it sounds like you think that is the correct route to go. >> I I it's the only route to do. What else are they going to do? I mean the half the bridges in the I mean people forget the Merkel era, right? You know Merkel did this thing stabilitate, right? you know I'm going to stay nothing changes right when you know what you know what a situation where nothing changes is called being dead right and for 15 years in terms of public investment and private investment to large part Germany was dead but my god did they balance the budget to this day you go into a hotel in Berlin and try and run a zoom call it's a disaster the digital infrastructure is non-existent they they just simply forgot to invest like they confused used debt, shield, guilt and investment and they saw them as radically different things and somehow investment happens when there's no investment. But to investors to take on some debt in the hope of a return when the private sector does this, everyone goes, "Oh, you're a genius, mate. Well, it's brilliant." Right? Public sector does this. Oh my god, it's terrible. We have to stop this immediately. >> You mentioned um Trump, NATO, Greenland. It sounds like you think it's inevitable. I mean, okay, how does that impact um the international order? What happens after that? Well, could be badly. Um so, I mean, they've been quite explicit about this and and the new national security doctrine that came out just about a few weeks ago basically ex says this is what we're going to do, but it was quite clear from day one. I mean, you know, I didn't have Canada on my bingo card, but when you think about it from basically the point of view of of the the MAGA folks, their definition of the world is the following. Um, we sold our souls to China. You didn't basically allowed American firms to do what they did. But nonetheless, China's now a peer competitor. Uh, Europe's useless. They've been basically leeching office for years. They don't do anything. They have huge non-tariff barriers. They don't allow our whiskey and motorcycles in the country. Well, we have to take theirs. Uh, a lot of this is self-interested and jaundice and downright wrong, but nonetheless, that's the way to think about it. So, how do we rebalance this? Well, basically, we're not really big believers in sort of the post-war democratic rules-based order. We think that's part of the problem. Uh, we allowed the WTO to go under. We are quite clear that we are concerned with tariffs both for revenue and also perhaps as a way as Scott Bessim keeps it of addressing global imbalances. These are people who think the trade balance runs the financial account and not the other way around. And if that's the case, what do you want? Well, you realize now that you're at a technological point where China is not just a pure competitor. If you were to sail the navy to Taiwan, they would sink it. And then what do you do? You go straight to nuclear dominance as your last option. All right. If we were to back off from that but still have influence. What would we need to do? Well, they're going to pave the world with panels. We can't compete on that basis. What are we going to do? We'll double down on hydrocarbons. We are going to basically be the hydrocarbon continent. We're going to basically control global oil supplies. Yes, many people may be shifting off of it, but we can use our tariff policy to make sure people buy our oil. For example, Japan 150 billion. South Korea 100 billion. I think Europe what was the figure that was insane figure 450 billion over like 2 years it was like if you add those three together it's more than America produces in hydrocarbons but the direction travel is clear right if you want to be our friend you need to buy our oil and that's going to screw up your green transition and that's our point of competition with China if the Americans manage to get Taiwan to build high-end fabs in Arizona once they do they don't have a and this government's in charge they don't give a crap about Taiwan and what we've done with Venezuela is to basically not just bring back the Mondroct run. This is the 1970s. You get to run. These are sat traps. When you have a regime we applaud like El Salvador, Argentina, you get our help in cooperation. If not, we're going to actively undermine you. Greenland is there basically because of the um defrosting of the north of the of the polar ice cap and the shipping routes around that control those shipping routes plus also rare earths. We stopped doing that and we outsourced the whole thing to China. Turned out that was a bit of a mistake. It's hard to do that stuff because of environmental laws, even in Trump's America. But it's bloody easy to do it in a big sat trap called Greenland. Um, Canada's basically an oil and parts and woods supplier. And then everything else runs hemispherically. China gets to run basically Southeast Asia. If the Indians want to buffer them a little bit, we'll sell them some weapons. And Europe, frankly, we're bored with and we think they're all parasites and they can just either sort themselves out with the Russians or go under and that's basically it. So that is the the world view as outlined in this document of >> regional blocks. >> Take it seriously. This is what they think this is better long-term for America. And there's a certain point of view where you go all right. So what would be the rationale for that? Well, if it is the case that global warming is real, um you're not going to solve this problem even if everybody panled the earth. There's already enough stuff out there that's like it's a bit of a problem. Sea level rise is baked in, etc. We're going to need transformative technologies. You're going to have to basically do carbon capture. You're going to have to suck it out the air and store it somehow. And uh you know, we can uh pretend that that's not true or we going to have to do geoengineering, whatever. Again, this is what these guys think, right? So, we're going to concentrate on the frontier technologies. We're going to basically use our comparative advantage in oil and gas. China can use what seem to be the um the the technologies of the future, but they're actually just the technologies of the moment. And ultimately, you know, we will survive this. and we will prosper. That's their long-term hedge. Cuz the alternative is essentially like fractionalization and decline. And regardless of whether it's MAGA or the liberals, the American ruling class cannot cope cognitively with the idea that they're not in charge. You just can't. >> From a kind of capital markets perspective, you know, this is a radically different world. I mean, obviously in terms of free markets, etc. that we live through for the last 20 years. I mean, what are your thoughts on the head that impacts the dollar, if at all? Um, >> these guys want a cheaper dollar and they're already getting it. It's already what is it down 20%. >> Yeah. >> I mean, that's what 10% maybe last year. 10% last year, maybe a bit more. Yeah. >> So, uh, >> but I mean, in terms of the reserve status, is that something? >> Well, I mean, it's kind of a rock and a hard place for everybody else, right? I mean, we'll make it worth less and you'll still buy it. Why? Because what are you going to do? Just buy more gold and great. And as gold goes up, what do you do? liquidate some of your gold to buy some dollars so you can buy oil. I mean, you know, and Europe can't do it. Europe would literally need to become rather than exportmeister, which they've been living off for the past decade, they need to basically become much more consumption orientated, spend a hell of a lot more domestically, reorientate their entire industrial structure so that they import more because that way people would hold euros. There just aren't enough out there to make it worthwhile as an as so so basically Americans are like suck it and see right you know we'll lower the value that'll help us rebalance that's your our currency your problems John Connelly all over again >> I'm conscious of time we're nearly up on an hour I mean we've talked a lot about the challenges which are fairly obvious um and we we've brushed on some of the possible solutions I mean putting it all together I mean taking an economics a political economic view for the next five years, are you more optimistic? Obviously, there's lots of reasons to be cautious, but for from an economic growth perspective, do you think it'll be higher or lower? Do you think inflation will be higher or lower? Do you think any of these social problems will will get addressed? >> Um, I think that the United States, if things don't go bad geopolitically, which is an increasing possibility, um, will continue to grow at a higher rate than than the rest of the world, the rest of the the rich world, I should say. Um and um Europe's going to be basically, you know, still in trouble, still in paralysis. I mean, you know, the exact my favorite example at the moment is France. I mean, when your government can't agree to pass a budget, Spain's in the same position, right? You know, that that you you got a problem right there before you go anywhere else. Uh but it's increasingly uncertain and fraught how much we can rely on us. I mean, markets are just big dumb stupid adding machines at the end of the day, right? And um things go up so buy more because things go up right and you know when what is it 70% 60% of your growth is driven by mag stocks etc by the magnificent 7 um if AI bust proves to be true then that's a huge problem for the US cuz 20 top 20% of people who own 80% 70% of the stocks whatever it is um essentially will go oh my 401k and then at that point they will uh not stop they'll stop spending and then you could risk a real recession and a real collapse in growth. So, you know, the AI bubble popping is a real issue. Um, I mean, fundamentally, we're just at the point now where, you know, should can markets continue this way? Yeah. Nothing happened. I mean, yeah, sure. Uh, but, you know, as as as McMillan said, events, dear boy, events, I mean, that that's what we need to look out for. And the problem with events is you don't know they're coming cuz they're events. But what we're doing is we're loading up the bar the we're loading up the chamber of the revolver of events with random events and and that's that's the thing that I worry about. One thing we do like to get people's perspective on particularly first- time guests is you know advice to people who are interested in reading more about economics and learning more. I mean you touched on some interesting books there. The project state was one. >> Any other things that were very influential on you? Obviously you've written with our guests or or sorry our listeners will go and check out your books but anything else that you would point people to that that are have been influential for you? Yeah I mean it's if you really want to do something quite historical uh but very contemporary go back and read a book that captured everybody's imagination in Britain in about 1994 called the state we in by Will Hutton. >> Right. Yeah. >> And it's and you know what it's the same thing. It's almost as if nothing's changed, >> right? And just reflect on that because we went through boom and we went through bust and we've been through, right? And the world's obviously a very different place, but you can read that book as if it's published now. >> Interesting. >> Right. So, that's one. Um, in terms of long-term stuff that like I think are just absolutely classic books, there's a two brilliant books by the economist uh Albert Hirschman. Uh the first one is called the passions and the interests and it's a bit of a detour into sort of philosophy political theory. It's only about 110 pages long and it's in big print. It's basically an essay in the classic old sense. It's beautifully written and what he does in that book is basically say in order to have capitalism you need to have people who think like capitalists. And getting people to think like capitalists was not normal. Carl Pyani makes the same point but he does it in a much shorter beautiful way. Uh it's kind of like Fuko with it. any of the jargon. Uh, and basically it's about how liberal subjects are created and the arguments for them. The the subtitle of the book is arguments for capitalism before its triumph. And if you read that, you will read things that you hear coming out of the mouths of politicians today and you and they have no idea that they're channeling an arguments from 3 400 years ago. Uh, and the other one from Hirshman is called the rhetoric of reaction and it's a fabulous book because you get to play Hchman bingo once you've read it, which is anytime that you hear an argument, oh, you can't do that or this will lead to terrible things. You can actually put it in four buckets, which is perversity, jeopardy, uh, futility, jeopardy, and um, futility, jeopardy, perversity. Right? So, here's how it goes. Um well, you know, you say that you want more immigrants because if we don't have immigrants, the economy will shrink, right? But if you do, British society will be torn apart. Jeopardy, right? Uh well, you know, the problem is the deficit's huge and we're going to have to face it at some point. And if we don't face it, ultimately there'll be inflation and that's even worse than what we've got now. Jeopardy probably with a bit of futility if you don't do it. You get my point? You can basically dump any and all arguments into these things. Now, it doesn't mean they're wrong, but it means you should always give them a good sniff because these are what he calls the rhetorics of reaction. And it's always good to have your rhetoric radar on. >> Interesting stuff. Well, definitely good um suggestions for people to check out. Um and obviously people can uh follow your work. Um obviously I've mentioned your books. Um, I think you're somewhat active on social media. >> Yeah, I was for a while and then I discovered that if I stop being active on social media, I can write a book. So, yeah. I mean, and it's also I mean, I used to love Twitter 10 years ago, but now it's just like it's just bots and right, so that's annoying. And then when you go on Blue Sky, I hate to say, it's just sort of like liberals bickering with each other. So, I don't know. I think it's a bit of a dead space. I still post stuff out if I'm going to give a talk or if I I do like for example when you send me the link to this >> I will say to everyone and if you want my 1hour New Year's rant here it is and that will get a lot of traffic but I don't actually engage in social media cuz you're actually arguing with a bot. >> Yeah. Okay. Well certainly will appreciate you posting this out. But certainly >> but um thanks very much for coming on. fascinating to get your perspective and uh definitely all of the topics that you research and write on hugely relevant today. So, thanks again and from all of us here on top traders unplugged. Uh stay tuned for new more content. 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