The early days of Bitcoin its proponents argued that this could be the global currency to replace fiat money. Governments the world over were issuing too much currency, leading to inflation, whilst imposing arbitrary regulations that would be impossible once authorities lost control of money.

Steve says for that to work Bitcoin would need to be capable of the instantaneous transactions we are used to with the billions of banking transactions that happen every day. What’s more, the limited supply of Bitcoin means increases in productivity are likely to result in deflation p- a bigger enemy to the economy than rising prices.

Instead Bitcoin has become just another asset class. The initial argyument that it served as a useful hedge against a downturn, in the same way gold does. Except now Bitcoin has started to mirror movements of other assets, like shares. And speculators are buying into it, often in highly leveraged positions. Risky?

Still the argument remains that Bitcoin could be a workable currency. One that consumes a lot of energy in the process. When energy becomes really scarce, says Steve, Bitcoin will be the first thing to be turned off.

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Several listeners have written in to get Steve’s views on the path being taken by Mark Carney to rescue the Canadian economy. Initially it looked like the country was rebounding strongly from the pandemic, but in the last couple of years the growth has slowed and then declined. That was before President Trump hit them hard with tariffs and then said he’d like them to become part of the US. 

In some ways he is trying the same approach as the UK – to balance the operational side of government spending but inventing in infrastructure beyond that balanced operational budget. That would be fine if a large chunk of that investment wasn’t going to defence. There’s also very little attention to the most fundamental issue for Canada unaffordable housing. Proudly the most unaffordable in the world. Hard to get people to spend when a huge chunk of their income is disappearing into mortgage payments.

There’s another fundamental problem with Carney’s approach. As Steve points out, it almost every policy it relies on outside influence, rather than domestic resolutions.

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This week Phil and Steve look at cost-plus inflation, driven by rising wages. Right now its being given as the reason that services inflation is remaining sticky and that’s why many central banks are reluctant to reduce interest rates. Steve says it’s a far more sensible assumption than the neoclassical belief, promulgated by Milton Friedman, that inflation is always and everywhere a monetary phenomenon.

It's not just workers who can put prices up, of course. Companies can increase their margins, and we saw a fair bit of that post-COVID. Burt what of the tech-driven future, where wage negotiations will be harder. Basically, we’ll be lucky if we have a job. Does that mean the tech bros call the shots and wage driven inflation will be a thing of the past?

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Before he was the UK Prime Minister at war with the Nazis, Winston Churchill ws the UK’s Chancellor. He played it very straight, with a preoccupation with balancing the budget. He also took the Uk back onto the Gold Exchange, despite warnings from Keynes that the move would be deflationary.

In 1928 he reinforced his neoclassical credentials, saying very little additional employment and no permanent employment can be created by state borrowing and state expenditure. That is, of course, the exact opposite of the idea of a job guarantee, but is Churchill partially right? Can a job guarantee ever create jobs that will enhance productivity?

This week Phil and Steve look into job creation and Churchill’s fear of using government spending to protect the labour market. It was a time when even Joh Maynard Keynes didn’t get everything right. For example, he argued that the multiplier effect would add new money and new employment from government cash injections. But how can you multiple the injection if no new money is created? And it ignores the real benefits jobs can create, behind the money gained from those directly employed, whether by the government or the private sector. 

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