Rob’s comments below are in italics.Derek’s comments below are in normal font.

On last week’s show, we were talking about how to get rich. (If that sounds like a big statement and you missed last week’s episode, go back and see how we outlined what we mean by getting rich!) On this episode, we’re going to talk about how to measure how rich you are. In other words, what’s your dashboard? What do you monitor and pay attention to?

So, where do we start with this one?

Yes, I’ve cheekily entitled this “How Rich Are You?” because unless you can answer that question, you can’t tell whether you’re getting anywhere. What you’re not measuring, you can’t see, and what you can’t see, you can’t move.

Funnily enough, I had a very vivid dream the other night, where I was flying a small plane, something I’ve never done. I’ve been in a small plane once, which was quite fun, and I found that they mostly fly themselves, as far as being fairly stable.

Starting your own business does feel like flying a plane without prior guidance. Suddenly you go up into the sky and think, “S**t, how does this work??”

Absolutely. Yes.

So maybe we can cast a bit of light on that. In this dream I was flying the plane, and suddenly a big fog came down. An instructor, or a passenger, told me not to look out the window but to look at the instruments.

That’s a pretty good analogy for what I’m going to talk about. Unless we have up-to-date summaries of where we stand with certain aspects of our finances, we don’t know what’s going on. We don’t know what our options are, and we don’t know which of our behaviours are working in harmony with the long-term objectives we’ve set for where we want to get to at a certain point in life.

1. Your Balance Sheet

The first and most important of these display dials, if you like, is what’s called your balance sheet. All of these things we’re going to talk about in this episode are things that in a sane world you would have learned at school. They would have been part of the curriculum, part of what prepares you for life.

But most of us either never learn these at all, or we just pick things up at random if we’re fortunate. Although this is very simple, and you might think it’s obvious, the question is: are you doing this? Are you paying attention to it?

This first display, as I say, is your balance sheet, and it’s a very simple document. You have two columns in it. One column is your assets, and the other is your liabilities.

You summarise these by putting a monetary value on them. That doesn’t mean money is the be-all and end-all, but it’s just the measure of it. It’s the same as if you were measuring wire, cable, or fabric: you’d measure it in metres or feet, or whatever units you choose. That doesn’t mean there’s significance to that thing divorced from the context in which you’re doing it.

In your assets column, if you own a house, you’d put the house in. In the liabilities column, if you used a loan, like most people do, to buy the house, you’d put the current value of the remaining loan outstanding.

You have to maintain it, of course. You have to do the repairs and pay whatever rates, community charge, or property tax, depending on which jurisdiction you’re in. There’s all that to factor in. But overall, that would be an asset.

If you’re building up an investment account, whether it’s a pension plan or some other investment vehicle, that would also go in the assets column. If you’ve got a savings account at a bank or another institution, that would go in the assets column too.

If you’ve got any overdrawn bank accounts, that would go in the liabilities column, and if you’ve got any credit card debts, which most people have, that would also go in the liabilities column too.

At the end of the day, you add up all the assets, add up all the liabilities, and see the difference between the two. The difference between the two has various terms. It could personally be your “net worth”. If you’re talking specifically about the house, or some other property and the loan against that property, the difference between the two is generally referred to as the “equity”. That’s the same term used for a corporation, particularly one with publicly traded shares. These are often referred to as equity shares, because a share is a share in the equity of the company, which is the difference between its assets and its liabilities.

As a shareholder, you’d hope equity grows, ideally by increasing assets over time. When we talk about assets in this context, we mean the capital: the tangible items the corporation uses to pursue its business. These are the factories, machine tools, vehicles, office equipment, and so on.

Coming back to the personal account, if you have some system, which is pretty easy these days with personal computers and spreadsheets, you could easily keep a record of these figures. Update your numbers monthly, then look for openings for action or shifts in behaviour, based on whether your asset base is really growing. For a lot of people, it’s actually shrinking or going negative.

If you’re flying the plane and the plane is about to crash into the ground, then you at least need to know about that.

Absolutely, yes.

Incidentally, these principles of reporting remain exactly the same whether it’s for you as an individual, for an enterprise you’re running, for an enterprise you might be considering investing in, or for a nation-state as a whole. The same principles and documents apply in all of these circumstances. But if we start from a personal level, you can then see how each dashboard relates to the bigger entities.

So the balance sheet gives a static picture of your circumstances. The other two dials or displays are dynamic: they indicate the change over a period of time.

If you’re doing this monthly, the look-back period would be what happened over the past month. If you’re doing it yearly, it’s what happened over the past year. Of course, you could do it daily if you wanted to.

2. Your Cash Flow Summary

The first of these dynamic dashboards shows what happened to the cash flowing in and out of your control. Logically enough, this is called a cash flow summary.

Over the course of a month, you might have had a certain income, typically your salary or wages if you’re working for somebody else, or the cash you’ve extracted from the business for your own expenditure. If you’ve got investments bringing in income, if you own property you’re renting out, or have an investment account paying dividends or interest, that would all be cash coming in.

The cash going out is whatever you’re paying in various categories. You’d perhaps be paying rent or a mortgage repayment, paying off some or all of your credit card balances, and spending on food and household expenses.

So it’s a very simple dashboard. You’ve got one column with all the cash coming in, and one column with all the cash going out. The difference between the two is the amount of cash you’ve either got left over, or you’ve dipped into savings, or gone into debt, to fund.

Does that relate directly to your balance sheet? Well, it obviously affects it. For instance, if you paid out something to pay off the balance of a loan or a credit card debt, that would reduce your liabilities on the balance sheet. Similarly, if you put money into your investment account or savings account, that would increase those assets on the balance sheet. But a lot of the money that passes through doesn’t affect the balance sheet at all.

It mostly gets spent all day on extortionate groceries, or extortionate petrol, etc.

Exactly.

If you buy food and your family eats it, that hasn’t affected your balance sheet at the end of the month. If you go out and have a slap-up meal to celebrate something, that doesn’t affect your balance sheet either. If you spend a thousand pounds on a holiday, that doesn’t mean you shouldn’t do these things, but there’s a distinction between those expenditures and the ones that do affect it.

Similarly, in a business, if you’re paying for fuel and then driving around, that doesn’t affect the business’s balance sheet at the end of the month. Whereas if you purchase a new piece of equipment which you can use productively in running the business, that increases your balance sheet. Similarly, if you pay off some of the loans you have outstanding in the business, that reduces the business’s liabilities and has a positive effect on the balance sheet.

To summarise: if you’re spending a lot of this money on consumables, that’s not really going to affect the balance sheet. Whereas, if you’re following the advice we talked about last week, where you’re paying yourself first, moving 10% of your salary into an investment, let’s say, that obviously is going to affect the balance sheet. The balance sheet is just a snapshot in time.

Absolutely. For that reason, it’s constructive to have a separate display, which in personal circumstances I call the accumulation and dispersal summary. In a business, you’d call this the profit and loss account. This is actually much more important.

3. Your Profit & Loss Account

The cash flow summary is the starting point for preparing the accumulation and dispersal summary. It distinguishes two categories: factors that have a positive effect on the balance sheet and factors that have a negative effect.

In terms of an enterprise, income would be the revenues from sales, or any other types of transactions carried out in the course of running a business. You might hire out equipment, for instance, or rent out properties as part of the business.

These would all come in on the revenue side. Then you’d subtract expenses you’ve got nothing to show for. You also have the direct costs of providing the goods or services the business runs.

If you take out the direct costs of providing the goods or services you’re supplying, that gives you what’s called the gross profit. Then you take out the overheads or expenses, and that leaves you with a net profit, hopefully.

The way these all tie together: in the case of the profit and loss account, the gross profit is what you’re left with. You could distribute that to the owners of the business, or to yourself if you’re running it alone, as extra income. If you’re spreading it among shareholders or co-owners of the business, it’s called a dividend, because the total is divided up between the shareholders in proportion to the share of the business they own.

What’s left is what has affected the balance sheet, which, if it’s a healthy business, will be steadily increasing. At the very minimum, it will replace what needs to be replaced due to repairs, or be written off as it wears out and is replaced by newer equipment.

When we look at this from the point of view of an entire nation, the measure we’re always asked to look at is the gross national product. We’ve highlighted several reasons in the past why this isn’t necessarily the best measure of human wellbeing. This includes the fact that things which aren’t cash transactions don’t really appear in it. Some of the most important things in life might not involve a cash transaction at all.

Like childcare, for instance.

Also, spending to clean up the mess made in the course of whatever else you’ve been doing is treated as a positive rather than a negative.

The most important thing is that it’s not actually a measure of wealth, because it’s really a cash flow statement, a cash flow statement for the nation as a whole. Therefore, churning faster and faster by replacing things with shorter and shorter lifespans increases GDP.

But it doesn’t increase wellbeing. It’s blindingly obvious once you say it, but it’s almost impossible to engage in the public debate without GDP being taken for granted as an all-encompassing measure of wellbeing.

This is particularly important right now. There’s chaos going on in the Middle East, or Western Asia, as we’re now slowly learning to call it. Around the Gulf of Hormuz, the main fossil fuel and gas supplies are being restricted in their shipments to the rest of the world. Not to mention various other things like fertiliser, helium, and sulphur, used to make sulphuric acid, which is important in a huge number of industrial processes.

Where this is being restricted, we’re still in a slightly unreal situation. The full effects of this haven’t hit us yet, at least not in Europe, the US, and Britain, but any moment now they will. A lot of commentators are saying this is going to cause a recession, or maybe it should be called a depression, and they argue about the definitions of these terms.

Nearly all the definitions they come up with for what a depression or a recession is, or the difference between the two, talk about reductions in GDP. They’re talking about actual reductions in cash flow. They’re not actually talking about reductions in anybody’s balance sheet.

Or reductions in wellbeing.

That’s worth bearing in mind. It’s also worth bearing in mind as we make our plans for dealing with the likely events over the next weeks and months, as we record this on 21st August 2026.

Do any thoughts come up for you out of this conversation, Rob?

I’ve come to believe that GDP, gross domestic product, is really just a measure of how much of the natural world has been appropriated by the industrial system; how good a job it’s doing of converting common goods into private goods. We all know that the beneficiaries of private goods tend to be just a small subset of humanity, the so-called “elites”. Yes, GDP is used as the single primary metric, but for our discussions we want to look much more widely and consider true wealth, not just how much plastic has been manufactured today.

The other thought I had, as you were talking, was that we tend to think about things like balance sheets, profit and loss, and cash flow statements as relating to a business. If you’ve done a business degree or anything like that, that’s how it gets taught: in the context of a business.

What we’re saying is that these principles hold at an individual level too. They’re actually simpler at an individual level, because you’re not going to have the same range of complexities in your personal life. It’s simpler to measure these things; it’s more a case of actually doing the measurement. It’s maybe more important at a personal level, because surely the point of business is to take money off the table and into your personal estate or domain. It’s not to leave it in the business forever. The business is just a means of trading. So I’d maybe pay more attention to the personal level, of the different levels we’ve discussed.

Yes, there’s just one other thing I wanted to say today. It relates to this.

Build and Support Genuine Enterprises

How do you tell the difference between a genuine enterprise and a Ponzi scheme? A Ponzi scheme is something which pretends to be a business and isn’t. There are various forms, but in essence they’re all the same. The money taken in from investors, promising them a big return, is actually used to pay out previous investors. This gives them the impression that they have a healthy business.

That’s obviously entirely different, and relates back to what we said in a recent episode about the role of energy in producing wealth. Wealth is something people want, and we suggested energy is always involved, in some way or another, in creating that wealth, whatever form it takes. Creating wealth always involves a reduction in entropy.

In the case of a carpenter taking some lumber and turning it into a table, the table is obviously more ordered, so it has reduced the entropy. If you put iron ore, limestone, and coke into a blast furnace, and iron comes out of it, the iron is a lower-entropy form, a more ordered form, than the iron ore that went in.

The question to ask, when looking at any activity or operation, is: what wealth is being created? Where is the reduction in entropy, and is that reduction correlated with any useful, desirable results? The more we look around through that particular filter, the more we see that a lot of activity in the world, even if it’s not quite as blatantly fraudulent as the classic Ponzi scheme, may well be entirely unproductive in terms of increasing our affluence and well-being.

The enterprises and work that truly matter will stand the test of time. Things that are just moving money around a pyramid scheme ultimately implode.

Yes, indeed.

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Rob’s comments below are in italics.Derek’s comments below are in normal font.

Our topic today is “How to get rich!” Where do we need to start with this one?

Well, as we’ve said before, wealth in the narrow sense of bean counting doesn’t cover most of the important things in life. But what I wanted to talk about is the more banal fact that some people go through life and end up far wealthier, in terms of cash and assets, than they started with, while most people paddle to stay in the same place throughout life. Many people these days are steadily getting deeper into debt, which is much easier to do than it was in the recent past.

So, what’s the difference between those two groups of people? I’m not talking about windfall wealth -

Most billionaires inherit their wealth…

There is that. But if you’ve inherited great wealth, this discussion is probably irrelevant to you and you’re probably not listening to it. I’m not talking about vast plutocratic degrees of wealth. I’m talking about getting to the position some people call being ‘financially independent’.

Becoming financially independent is where you can cover everything you need and want to do, and no longer need to be beholden to a work structure. It doesn’t mean you necessarily stop working and spend your life playing golf, or sitting with your feet up watching TV. It’s where it becomes optional whether you do any income-earning activities.

Most people assume they’ll get to that point. It’s called retiring, or having a pension. Some people aim to do that a lot earlier than the sixty-five or seventy that might be regarded as a normal retiring age. Some do retire in their forties, or even earlier.

So what’s the mechanism by which you can get to that point? This is so simple it’s almost embarrassing to spell out. The simple, systematic method is to spend less than you earn and put the difference to work for you.

It’s also about knowing how much is enough, depending on what you want to do.

That would be all part of the planning process. But that basic mechanism, simple as it is, is something we haven’t been taught in school. We probably weren’t taught it by our parents, and if we were, we probably didn’t take any notice. Some people pick up on it early, some too late, and some not at all.

The path of least resistance, certainly for me and for most people without any external framework or discipline, is to spend your income as it comes in until there’s none left. Then you wait for the next instalment. That doesn’t leave you any cushion for unexpected misfortune, whether that’s an interruption to your income or an emergency expense.

If you were wise and enlightened in this respect, you would at least build up a cushion. That’s the distinction between savings and investment. Savings are liquid funds: cash, bank accounts, or something a little more inflation-resistant these days. But still fairly liquid, like gold or silver coins, which at least maintain their value as currency depreciates, and which you can use for emergencies.

Systematic, long-term investment is distinct from that. Assuming you want to reach a certain point and then be financially independent, that involves systematically putting away a percentage of what’s coming in. The rule of thumb used to be around ten or twelve per cent, which can seem like a big dent in your earnings if you’re used to living hand to mouth.

A lot of people think they could do that once they’re earning a bit more, but that’s an illusion. There are always people earning ten or twenty per cent more than you, and always people earning ten or twenty per cent less, and somehow they manage to survive. So you could survive on ninety per cent of your income and systematically put the rest away.

I’ve heard that termed as “paying yourself first”.

Yes. Although paying yourself first is a misleading term. It doesn’t mean indulging yourself before paying your creditors. It means paying your future self before your present self, which is the healthy way to look at it.

It’s disastrously easy to spend slightly more than you earn each month. We’re all surrounded by easy credit we’re enticed to take. Whenever we’re a bit short, or struggling to meet an extra expense, it’s the path of least resistance to dig into that. Then compound interest works against you rather than in your favour.

Coming back to putting the money to work: if you’ve put, say, ten per cent of your income aside into a fund that’s getting a return, the important thing is to plough that return back into the fund. Most people do this through a pension plan or an investment scheme, where it’s handled behind the scenes and treated as a magic process. But even if you’re going to hand it over to the professionals and take no part in it, understanding the principles is very empowering.

At least you understand what options and decisions they might be taking, and take an interest in that. It might give you leverage in choosing which investment vehicles or advisers you use. I’ll underline again that I’m not offering anybody financial advice here. I’m offering an understanding of the underlying principles so you can make informed decisions yourself.

Make it your business to know your business, and understand how your money is being invested. A pension fund, for instance, is probably going to invest quite heavily in bonds and things like that?

Yes.

Which perhaps aren’t really worth the paper they’re written on any more.

I was about to go into that. If you were investing directly, you’d broadly have a choice of three things. You’d have equity shares, that is part ownership of an enterprise. Or you’d have bonds, which are effectively loans to a government, part of a government, a foreign government, or possibly a corporation.

To get the capital to run their business, a company might raise part of it from shareholders, the owners of the business, or they might borrow it. We’ll look at that in a separate segment, when we talk about how an enterprise covers its capital requirements. By capital, I’m not referring to the abstract sense, in terms of the investment vehicles that have a claim on it. I’m referring to the actual tangible objects you need to run the business. If you’re a plumber, you need your van, your tools, and your stock of pipes and fittings. Those are recurrent outgoings, and that’s the business’s capital. You might have that yourself, or you might borrow it from somebody.

If you’re a small independent entrepreneur, probably the only place you can borrow it is from the bank. But if you’re a large corporation, you can offer bonds to investors who want something more predictable than shares. If you own shares, there are two ways this can provide a return. One is when the company declares a dividend at the end of each year or quarter and gives shareholders a share of the profits.

If you’re building up a retirement fund, each time you get a dividend you use it to buy more shares, either in that enterprise or a different one. Similarly, with government bonds, part of taxation goes towards paying the interest on what’s outstanding.

Most countries in the world have taken the path of least resistance: issuing more and more bonds so they can spend on government outlays without asking taxpayers for income that covers it in real time. They’re kicking the can down the road.

The system is set up for short-term thinking in that regard.

Absolutely. It wouldn’t necessarily be so. The considerations for whether to borrow money are exactly the same under responsible stewardship, whether for a country as a whole or for a business enterprise.

If somebody’s running a successful business and could sell more than they’re currently producing, opening an extra factory or buying more machine tools could increase production, sales and income. In those circumstances it might be entirely responsible to issue bonds to fund that extra manufacturing capacity. That borrowing would be repaid over time, with the interest funded from the extra sales. If the projections are accurate and the sums are right, that should leave even more to be distributed among the shareholders.

The other way equity shares can benefit you is if their value rises over time. Take a situation with sound, stable money and a lack of inflation, as in England throughout the nineteenth century and into the early twentieth. Any business that reinvested a portion of its earnings would experience the same compounding effects.

It would be entirely valid for the company’s valuation to increase, because a sound investment would increase its capacity to make more sales and profits. That would leave more available to reinvest or distribute. But we’re living in peculiar times, where the stock market is rising, and everybody is excited about it.

This is all part of the monetary expansion we’ve seen. If banks are creating more and more money out of thin air, that money has to go somewhere. A lot of it goes into funding ever-increasing government debt, or into the stock market, farmland or housing, simply driving up paper valuations without any real substance behind them.

So there’s no substance behind it.

Exactly, you’ve got it. There are two key figures for looking at the value of an equity share. One is the dividend yield, which is fairly obvious. If shares selling for a hundred pounds pay out five pounds a year, the dividend yield is five per cent.

The other is the price-to-earnings ratio, the ratio between the share price and the profits being made. The real profit a company makes is probably more important than how much it distributes as a dividend. If it’s making ten per cent profit, it could distribute all of that as dividends. Its capital stock would then remain constant, apart from steady depreciation.

There’s no long-term benefit to them in doing that, though, is there?

Exactly. If, instead of declaring a ten per cent dividend, they declared a five per cent dividend, they’d have another five per cent to reinvest in expanding the business. Either way, as a part owner, you’d get the benefit of that profit, whether distributed to you or ploughed back into the business.

Alternatively, they could invest all ten per cent in expansion. Tech start-ups often have massive room for expansion and scope for increasing turnover, so they’re happy to reinvest everything and pay no dividend at all. People are content to hold those shares in expectation of steady appreciation over time.

This has become completely out of proportion. The historical price-to-earnings ratio in a stable environment has typically been twelve or fourteen times the profits an enterprise makes over a year, assuming those profits stay reasonably steady or rise modestly.

If you think a company will do fantastically well next year, you’d be prepared to pay a higher price on the expectation of those earnings. But many companies at the moment, especially tech companies, are trading at ridiculous multiples of their current profit. Unless those future profits realise that expectation, there will be a price correction. This particularly applies to what may be the latest overhyped bubble: the artificial intelligence enterprises.

This also happened in the dot-com crash….

Exactly that. People expected that simply operating a business on the internet, when that was a novelty, would automatically bring stratospheric returns. In a very small number of cases they did, but in the great majority they didn’t. That was so extreme that a lot of those valuations went to nothing.

Just on the price-to-earnings ratio, it probably doesn’t help that a lot of the financial trades happening every day are speculative. That also drives the price higher if people are speculating it will go up.

All that speculation will reverse if expectations change. The other thing I’d like to say about bonds is that typically there isn’t the same expectation of capital appreciation. In a period of high interest rates, that depresses the price of bonds already in the market, so they trade at a lower rate.

There was a really extreme example when I was doing investment analysis for a stockbroking firm, around 1969 to 1971. This was a time of really high inflation. There were significant undated British bonds, issued in the heyday of the British Empire, when people were happy to purchase government debt with no redemption date at all.

These were regarded as the safest of all safe investments, because it was considered that the British Empire would go on forever, and the value of the British currency would remain stable forever. Neither of those came about. These undated British bonds typically carried an interest rate of either two and a half or three and a half per cent.

If the government was trying to raise funds from a new issue in 1970, they’d have had to offer about fifteen per cent interest to attract buyers. That meant if you were holding historic bonds paying two and a half per cent, you could only sell them for about £16 per £100 block.

For the money you invested, you’d still be getting roughly the fifteen per cent prevailing rate needed to cover the expected loss in the value of the pound by the time you sold those bonds.

So you’d need more bonds to create the same outcome.

Yes, you’d need six times as many in that case. The people who were buying them in 1970, at £16 per hundred nominal, did much better than the people who were selling them, because they’d been getting fifteen per cent on their money ever since. That continued right up until about ten years ago. Then the British government, in another piece of classic short-sightedness, thought: why are we paying 2.5% on all these undated British bonds? They sold them and reissued new bonds at 2%, or 1.75%; whatever the going rate was during the quantitative easing period.

That was when central banks were creating money out of thin air to paper over the cracks of the global financial meltdown. Now we’re back up to probably twice that rate, and it would have been far more sensible to hang on to those undated bonds.

What I wanted to illustrate is the reverse calculation between bond valuation and the prevailing interest rate. Those 2.5% per cent bonds, at a time when the prevailing rate is five per cent, are only worth £50 per £100 block nominal.

It goes the other way too. If the prevailing interest rate falls to 2%, that’s only possible when new money is flooding into the system, as happened between 2008 and 2010. In that case, the 2.5% bonds would rise to a £120 per £100 block. That’s the inverse relation.

These days, with interest rates fluctuating wildly, bonds are no longer the safe, predictable, uncontroversial investment they once were. That pretty much covers what I wanted to say on this episode. Anything arising out of that for you, Rob?

Just a question. Obviously a lot of money has been “printed”, or created, since the Covid pandemic. We had all the furlough payments, all the bounce-back loans. That was money magicked up from nowhere, so a lot of money has been added to the system. Has that made this situation with bonds worse?

This is why we’re now running into the perfect storm, particularly with the highly leveraged government economies in the United States, in Britain, and in most European countries. Government indebtedness there is well over 100% of the country’s current gross domestic product.

Which is mad when you think about it.

Utterly mad. Bonds that are expiring at lower rates of interest can only be refinanced at far higher ones now. That’s one of the factors feeding into a destructive feedback loop, which is going to bring a bigger financial cataclysm for the Western world than has ever happened so far in history.

It’s like the game of musical chairs, isn’t it? You have to keep the music playing, keep the money-creation machine going. Otherwise there’s nowhere to sit.

Yes, indeed. And the music could stop any day now.

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Rob’s comments below are in italics.Derek’s comments below are in normal font.

Today’s topic is how wealth is lost. Both of us probably have plenty of first-hand personal examples of this, but ignoring my jokes, what do people need to understand?

Right. So far, we’ve covered how wealth is created by people doing productive work. We also discovered the role of energy in that process. The work might be physical work done by human beings or draft animals, by harnessing natural energy as we discussed, or by consuming fossil fuels. Either way, energy goes into a process that leaves you with something more useful to some group of people than you had at the start.

As history goes on, it’s fair to say that the general trend over human history has been an increase in wealth in the world. But it’s not a smooth process. Sometimes it gets retrenched, and the wealth created is offset by wealth lost in some way.

There are two ways of looking at that question. One is the individual amount of wealth you have and how you might lose some of it. You could lose it by squandering it, wasting it, or having it stolen from you.

Regardless of that, there is going to be a general erosion with the passage of time. The background to that process is something we touched on when discussing energy. We talked about the second law and the inexorable rise of entropy, that is, disorganisation and the unavailability of energy that passes through a process without a hundred per cent efficiency. Some of it converts into energy that’s unavailable for producing useful work.

That is low-level heat in the environment generally, which we can no longer harness. Physically, there’s also a similar process at work. It’s a process of decay, corrosion, or wear. You have a brand new car or washing machine, and as you use it, the bearings slowly wear away and become less efficient. Eventually they have to be replaced, or if they can’t be, the whole thing gets scrapped.

That’s one of the processes by which wealth is lost. The same thing can also be enacted deliberately by human agency, through vandalism or destructiveness. The most extreme example of this, which is happening all around us at the moment, is warfare.

War is the ultimate destruction of wealth. You only need to see the effects of bombs. At one moment you have a human structure that a lot of wealth and work has gone into creating - that gets reduced to rubble in an instant when something explodes.

There’s an irony there, because that bomb itself represented a lot of energy. A lot of energy went into the chemistry to make the explosives, and into manufacturing the device, the delivery system, and the control systems. All of that energy, instead of being harnessed to create wealth and push against the rise of entropy, instead of producing a locally reduced entropy representing some useful artefact, has been harnessed to accelerate enormously the increase in entropy and randomness, the annihilation of whatever it was that was created.

It’s great for GDP (Gross Domestic Product) though, isn’t it? It takes a lot of money and resources to build the things in the first place. It takes energy to blow the things up, and then it takes resources to rebuild everything afterwards! So it’s a triple win for GDP.

You’ve put your finger on an almost allegorical illustration of the failure of GDP to be what it’s always assumed to be, a reliable proxy for human wellbeing. It’s obviously about as extreme an example as you could get of GDP being not only misaligned with human wellbeing, but actually contrary to it.

Yes, tell that to all the people under the rubble in Gaza or somewhere.

Exactly, quite so. Allegedly, we’ve had steady economic growth, as measured by increases in GDP, over the last fifty years. It must be becoming more and more obvious that this hasn’t produced any tangible benefit for the majority of the population. That’s true even to the extent that the growth is real, and even to the extent that it hasn’t been distorted by underestimating the effects of inflation. Whatever increase in wealth there has been has clearly gone to a tiny sliver of the wealthiest people.

Yeah, it’s a wealth pump. That’s what Jeremy Lent describes it as in Ecocivilization.

It is, absolutely. It’s a continuous transfer from the population at large to that tiny elite.

These wealth pumps have been going on for thousands of years, but never quite on this scale and level of sophistication.

That’s about the size of it. Anything more before we sign off for today?

A few thoughts came up as you were talking. We were talking about one of the roles of money being a store of value. At some point you have to use it or lose it, though. You can’t take it with you at the end. It’s going to be subject to entropy, either wasting away of its own accord or through an external shock from outside.

Referring back to Jeremy Lent’s book, Ecocivilization, he reckons there were big changes in the way we viewed wealth when humans moved from being hunter-gatherers to living in agricultural societies. He says that if you find indigenous tribespeople who still live at least partly in the old way, they don’t store wealth in the same way. They share things more.

There’s a famous example of a tribesman who says he stores his meat in the belly of his brother. Our culture fosters this mercantilist hoarding of things, and maybe there’s an element of flow, where things go out and come back in. There’s almost a tidal element to the flow of wealth. It goes out and comes back in. Going out isn’t necessarily a bad thing, because the tide will come back in.

Yes, indeed.

Comments on Current Events (31st July 2026)

Well, in current events, there is no sign in the conflicts going on in the world of any rational strategy on the part of the Western actors involved. We’re still in a perilous situation.

It’s worse than ever. It’s almost like they’re trying to frame Russia and Iran as the same enemy now.

There does seem to be a merging of the two conflicts, which is very interesting, because they were regarded as entirely distinct until this week.

History doesn’t matter to people who work in the news!

Yeah. Since the apparently suicidal entry of Saudi Arabia into the conflict, they aggravated Ansar Allah, the Yemeni group described in the mainstream media as the Houthis, by bombing Sanaa airport as a plane was about to land there. Ansar Allah responded, entirely predictably, by closing the Bab-el-Mandeb strait at the base of the Red Sea, to prevent Saudi shipping getting in or out. They also attacked the oil terminal and the refinery on that coast.

Then, to make matters worse, Saudi Arabia, in conjunction with the United States, attacked the militia in Iran. Saudi Arabia is now going to have a severe cash flow problem, being unable to export any more oil. This is going to aggravate the problem that was already coming to the boil with Iran’s blockade of the Strait of Hormuz. Japan, South Korea, and various parts of Asia are already feeling the pain from this.

We seem to have been effectively insulated from it in Britain, Europe, and the United States for the moment. But the effects of this are going to hit hard over the coming weeks, and the knock-on effect is very unpredictable.

All of this is aggravated by the fact that the United States has really run down its stockpiles of munitions, which is a good thing from the point of view of the conflict having some sort of end in sight. Because of their bloated, profit-oriented weapons manufacturing system, they cannot possibly replenish them at anything like the rate they’ve been using them up. This is another factor that’s going to affect how things unfold, and it doesn’t seem to have been taken into account in the decision-making process.

In addition, the financial underpinning of the United States, both the petrodollar system and the enormous indebtedness, is under pressure. There’s also the need to roll over expiring treasury bonds at higher interest rates, which is going to impact the financial foundations of the way the United States has operated in the world over the last seventy-five years.

It seems to be operating on a bubble that’s mostly made of hot air.

Absolutely. Then there are the midterm elections coming up. Unless the electoral process is actually derailed in a serious way, it doesn’t look to me as though the existing Trump administration can gloss things over enough to avoid an electoral disaster. So that’s obviously a factor. Trump is obviously being pulled in various directions, or whoever is actually taking the decisions, whatever combination of people that is. There seems to be no coherent way out of the corner they’ve painted themselves into.

As usual, it doesn’t massively matter, because someone else will come in and just continue the same policies.

Yeah.

These people serve their purpose for the empire for a period, and then their shelf life expires, and someone else comes in. As we’re seeing in the UK, Keir Starmer’s usefulness to the empire clearly expired, so they brought in a different puppet.

Yeah. One of the first things Burnham has done is agree with Zelensky to set up a drone manufacturing factory in England. Again, this is working on the blithe assumption that Russia is going to be increasingly provoked without actually taking any action.

We shall see. I guess to round things off, you don’t have to look very far in the world to see examples of wealth being lost or squandered.

Exactly.

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Rob’s comments below are in italics.Derek’s comments below are in normal font.

We are continuing our discussion this week about the topics for our forthcoming book, Unravelling the Money Puzzle. Today we’re talking about how wealth is created, which by our definition is quite distinct from how money is created and requires energy. So where do we begin with this one, Derek?

Well, you remember in the last episode I put forward the suggestion that we define wealth as things people want. You might want a table, a house, a car, or a meal in a restaurant. You definitely want food on a regular basis. If anybody else has any other suggestions, we’d love to hear from you. We talked last time about Maslow’s hierarchy of needs, which is a good place to categorise the things that people want.

That might be useful to reflect on in all kinds of ways. You might like to look at that hierarchy and see how many of those things you’ve got that you’re happy with, and how many you’ve still got work to do on. Having said that, if you’re running a business, you might want to look at which things on that list your potential customers want, and how many of those you could deliver to them. That’s probably a useful way of looking at it.

So whatever these items are that constitute wealth, we could safely say that wealth comes into existence through something that, in the broadest possible terms, we could call “work”.

W-O-R-K: The dreaded four-letter word we all taught to fear…

Yes, although there’s no reason why we should fear it. When we were talking about money, we suggested it was a system of tokens which facilitated the exchange of time spent — and obviously that means time spent productively. In the world we live in, there are a lot of things that pass for work which are highly dubious as to whether they deliver anything useful. Let’s assume the time we trade with one another using money is time spent doing productive work, producing something that somebody else wants.

It’s quite easy to see this in the case of a craftsman. He might take a whole bunch of timber and turn it into a table, a useful object which somebody might desire, on our definition of things that people want. That table would be a form of wealth, and that person would be prepared to trade something for it — either directly, something they’ve worked on themselves that the carpenter wants, or, more usually and conveniently, money tokens which the carpenter can then exchange for things he wants.

I’d like to look at the concept of work in a bit more detail and see how this ties in with energy. For anybody who’s an engineer or a working scientist in any of the physical sciences, what I’m going to say here will be second nature. But for the great majority of people who weren’t particularly interested in physics at school, or didn’t do the subject at all, or forgot whatever it was that —

Or remember it being taught badly. That was my memory of it.

Right. In the original definition, work consists of applying a force and moving it through a distance. The simplest example would be picking up a heavy object and moving it to a higher location.

Or pushing a wheelbarrow, for instance.

Pushing a wheelbarrow, anytime you’re applying a force and moving it along. Work is the product of those two things: the force applied, and the distance moved. Energy is the capacity to do work. For most of human history, most work has been done by muscular energy — either human beings, or domesticated animals such as horses, mules or oxen, harnessed to a cart, or to a windlass to hoist things up.

If you trace that back, where does the energy come from? It comes from the food they eat. Where does the energy in the food come from? That comes from sunshine absorbed in the leaves of plants, which they either ate directly or were eaten by animals whose meat they then ate. In the larger picture, that’s the result of a flow of energy from the sun.

Prior to the fossil fuel age we’ve been living in for the last three hundred years, there were also water mills and windmills as sources of energy. Once again, these are derived from sunlight hitting the earth. Wind comes from the sun differentially heating air in different parts of the country, creating currents from one place to another. The streams driving water wheels ultimately come from sunlight shining on the oceans, evaporating into clouds, precipitating as rain, gathering into rivers and running downhill under gravity.

That was the way it was. Now energy is a hot topic because of current events in the world — the hysteria we’re seeing over the supplies of oil, who controls them, and all these kinds of things.

Compared to having a watermill or an ox in your garden, we’ve become quite reliant on energy sources from far-away places.

Exactly so. This energy also comes from the sun — just sun that shone on the earth three hundred million years ago or so, absorbed in the leaves of plants which then fell, decayed, were buried in the earth and turned to coal, or, through one or two other organic processes, into oil and natural gas. We’re now burning through these at a tremendous rate, and on some timescale within the lifetimes of the youngest people alive today, they’ll become exhausted, and we’ll have to deal with that.

Buckminster Fuller had a metaphor of energy slaves. He said everybody in the modern world has the equivalent of a few hundred energy slaves, in the energy we consume by putting petrol in our cars, fuel in our heating systems, and drawing electricity from sockets. The total amount used is, for most European nations, something like 125 kilowatt hours per person per day. We could probably get everything we actually want with considerably less than that, if we applied ourselves to doing things as efficiently as possible.

But what I want to look at is why we need this continuous flow of energy. It comes down to two laws of what I’d call energy conversion — conventionally, the two laws of thermodynamics. That makes it sound obscure and complicated, but thermodynamics is just a fancy way of saying heat and movement. It was called that because heat and movement are what people were interested in when these laws were investigated in the nineteenth century.

If you’re developing steam engines, you want to know how heat and movement work.

Yes. Steam engines were just coming to the forefront, and how efficient an engine could be made was a red-hot topic, no pun intended. Most of us immediately think of James Watt in connection with steam engines. He wasn’t the original inventor, but his main contribution was to make engines — developed by two predecessors of his — considerably more efficient, in terms of the physical work you got out relative to the coal you put into the boiler.

Two Laws of Thermodynamics

So what are these two laws? The first, which probably almost everybody remembers, is that energy is neither created nor destroyed, but converted from one form to another. You might think, well, if energy is neither created nor destroyed, why all the fuss? Why are we fighting each other over access to oil? The answer is the second law, which, funnily enough, is almost never taught at school level — even if you specialise in science right up to A level, there’s barely a mention of it.

The second law has various ways of being stated, but the simplest is this: when you convert energy from one form to another — for example, chemical energy in coal to heat when you burn it in a boiler, or heat to movement when that boiler generates steam and drives a piston to turn a wheel and drive machinery, a proportion of it is lost for useful purposes every time.

We all intuitively know this. There’s a certain amount of energy in the petrol we fill our car tank with, and that energy gets the car moving. As we drive around, the tank gets emptier. The same amount of total energy still exists in the world, but by the end of our journey it has been turned into heat, passed from the engine to the radiator and out into the atmosphere. It’s turned into heat by the turbulence of the car driving through the air, by the friction of the tyres on the road, and by the brake discs warming up as we apply the brakes to stop, again diffused into the air. All of this energy, although it still exists, is not in any form we can use.

Or in my case, the kids put the windows right down on long car journeys, and the energy is converted into a combination of noise and drag on the car.

That’s right, all of these things. There’s another interesting aspect — this is probably one of the few scientific laws we all know intuitively, even though we’re not taught it.

Yeah. It’s the law of entropy, isn’t it? Something complicated or complex will always even out. It will always move to something simpler when it’s able to. If you build a sandcastle and leave it on the beach, you’ll see small grains of sand falling off it constantly until it’s all gone. It’s the same process.

Yes. The reason we all know this intuitively is that it gives an arrow to time. Time is the direction in which entropy is increasing towards the future. Entropy is a measure of disorder, of randomness, of the unavailability of energy to do useful work. The second law, stated another way, says entropy always increases in any closed system.

Entropy is all around us too, pretty much everywhere. Living organisms create order out of entropy for a period.

Yes, and that’s an interesting point. I want to make a couple of observations first, and I’ll come back to that.

One is that the arrow of time makes it obvious, if you watch a film, whether it’s running forwards or has been spooled backwards, because if it’s running backwards things look absurd.

If you knock a glass off a table, it falls to the floor, smashes, and the pieces scatter and come to a standstill. The energy at the end of that process is exactly the same as at the beginning. There’s a certain amount of energy by virtue of the glass’s height above the floor in the gravitational field. When it’s knocked off, it falls, moving faster and faster, converting what’s called potential energy into kinetic energy, the energy of motion.

When it hits the floor, it shatters, the pieces skitter around, and come to a standstill. So what happened to that kinetic energy? Initially it was converted into the work of breaking apart the solid structure of the glass — it took energy to wrench apart the bonding between the molecules holding it into shape. Some was converted into the energy of the pieces skittering across the floor, which came to a standstill through friction, heating them up. By the time the fragments had stopped moving, most of that energy had become heat.

The energy represented by the glass’s height and weight could have done some useful work. In a grandfather clock, for instance, you wind the weights up so they’re at the top of the column, and throughout the next day they gradually fall and operate the clock’s mechanism. In that example, the process didn’t do anything useful; it just accelerated the glass, which then came to an abrupt halt and was turned into heat. We all intuitively know that.

The other thing is that we all remember the past, and have no capacity to remember the future. That’s actually part of the same process, because in order to store information — we don’t know exactly how; it’s still a mystery. No neuroscientist alive really knows the mechanism of memory in human beings. But we do have a reasonable idea how memory is stored in a computer. It takes electrical energy to organise the structure of electrons, or the magnetic domains, which represent the storage of memory on your computer.

Because that’s an energetic process, it involves a conversion of energy, and some heat. We all know, to a greater or lesser extent, that our computers use up electricity and give out heat. That heat represents the offsetting of the decrease in entropy achieved by ordering the bytes of information in your computer’s memory or disk drive.

That comes back to what you were saying about living organisms apparently flowing against this flow of gradual disorganisation. Look at an egg going through its propagation process, a chick evolving inside the shell. The initial structure of the white and yolk was pretty amorphous, and the chick is a highly structured object with clear functionality and intentionality.

That appears to go against the flow, which is one of the reasons it was suggested in the past that there’s some kind of vital force, because it seems to contradict that obvious process we’re all aware of. In fact, all living organisms need the energy that comes in from their food — in this instance, already encapsulated in the egg. That food, as we illustrated earlier, ultimately comes from the input of sunshine.

The energy in the food is consumed in the metabolic processes which build and maintain the structures of living organisms. A certain proportion goes to that useful work, and a certain amount is dissipated as low-grade heat. Low-grade heat is the ultimate sink of energy, and so we have this flow.

According to the second law of thermodynamics, entropy always increases within any closed system. Living organisms are not closed systems because they take in energy and matter from their food. The Earth is not a closed system either; it continually receives high-quality energy from the sun’s radiation, and loses the same amount every day, dissipating low-frequency radiation into deep space from the dark side each night.

If it wasn’t losing energy at the same rate it was receiving it, the Earth would be getting hotter and hotter. That’s one of the challenges we’re facing at the moment, and one of the things there’s a big debate about, despite the core facts being pretty unassailable. Whatever the mix of reasons, the composition of the atmosphere has been changing over recent decades and centuries, and we’re not losing heat quite as rapidly as we’re receiving it. So the atmosphere is warming up, with consequences, many of which aren’t too healthy for us.

The final thing I’ll say is this: I’d like you to contemplate the suggestion that in all creation of wealth, there is actually a reduction of entropy. Some kind of order is always created. Take the example of the carpenter making a table. The carpenter does his physical work, or his work with power tools, to shape the wood, fix it together, and assemble it into something which clearly has more order, more structure, than the timber he started with.

Or even just creating this podcast episode, and then creating the book we’ll produce from this series of episodes. That’s the same process at work.

Exactly so. If you write a poem, a novel, or a computer program, it takes energy for your fingers to operate the keyboard, energy for the computer to turn the keystrokes into whatever encoding of characters that is, and energy to store those characters in the computer’s memory and transfer them to more permanent storage on your disk. All of that energy is consumed, reducing the entropy, going against the essential flow of the second law, and creating waste heat to offset that so the total entropy of the entire process is increasing and the second law isn’t violated. But without a source of high-quality energy flowing into the system one way or another, none of this could happen.

You can’t do good work without good energy. Empty sacks don’t stand up, as my Dad says!

Absolutely.

Just to tie this back to what we were saying at the start about what wealth creation is — all wealth creation will, in some capacity, create order out of chaos. Adding zeros to a bank account is not real wealth creation: that’s just stealing everyone’s value. As you were talking I was also thinking about Nassim Nicholas Taleb’s book, Antifragile, where he says that, in comparison to the glass you might drop from a height that shatters on the floor, living things, which are open systems to a degree, can bounce, can learn, and can become stronger.

Yes, and can take action to land less destructively.

So I guess actions for people to think about are in the work, because we’re all doing work all day. It doesn’t have to be dirty work, as I alluded to at the start; it can provide value and service. It’s about being a bit more conscious of it, and figuring out how we can do the best, most useful work possible in our time here.

Absolutely.

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Rob’s comments below are in italics.Derek’s comments below are in normal font.

Wealth is one of those terms we all think we know. When you dig into it, it’s quite hard to pin down, isn’t it? Or we just equate it to “money in the bank”. Maybe there’s a slightly wider perspective on it as well.

Yes, I thought we’d start by examining that question, because it’s something we take for granted.

When we were talking about what is money, one of the main aspects we discussed was that money is a claim on wealth. So right away, that indicates that money and wealth are two distinct things. If money is a claim on wealth, it can’t actually be wealth itself.

We tend to think of wealthy people as having lots of money. When we talk about the statistics of Bill Gates or Jeff Bezos or Warren Buffett, their wealth is actually stated in terms of an amount of money, and very often they probably haven’t got any actual money at all; it’s all in other assets. Interestingly, most of the expenditure that the ultra-rich have is not done by cashing in their other forms of wealth, because that would dilute what they own. That’s the real bedrock of it.

What they do instead is borrow against that wealth at extremely low interest rates, compared with what’s available to the rest of us. They spend that, and eventually, when they die and their estate is settled, some of those assets will be realised and it will repay the loans. It’s partly one of the reasons why they very often pay almost no tax at all, because on the face of it their income is close to zero. The income that derives from their wealth, usually in the form of shareholdings in their enterprises, or real estate or land, along with all the rents from that, goes into trust funds rather than being paid to them directly. That would have been the straightforward way of doing it, which would have incurred enormous income tax bills.

Wealth is Things People Want

So if money is a claim on wealth, wealth is the actual thing itself. I’ve just mentioned two or three examples of the kind of things we think of once we step back a bit: shareholdings, large holdings of treasury bonds, houses, apartment blocks or farms. But I’d like to look at it in the broadest, simplest terms possible. I’d like to make this suggestion: wealth is things people want. How does that seem to you, Rob?

Yes, because the value is only in the eye of the beholder, surely?

Exactly. Which of course raises the question, what sort of things do people want? It also flags up the fact that wealth doesn’t actually need to be anything permanent. It could be something semi-permanent like furniture and appliances. It could be something pretty permanent like farmland or houses. Or it could be something entirely transient, like a holiday or a meal out at a restaurant.

I’ve been thinking it could be something personal. As this is the Sovereign Finance show, if you don’t have the time and space to be sovereign, you aren’t really wealthy. If you never have time to do school run, or have time for a nice homemade meal with your spouse, are you wealthy? So there’s a lifestyle element to it as well.

Yes, and that is indicated really by the etymology of the word. Wealth comes from the same root as whole, heal and hail, from which we get words like health and well-being. Wealth in a way is the abstract noun from the word well, just as health is the abstract word from the verb heal. They’ve clearly got very similar roots in language. Wealth, as it’s generally used in everyday language, has drifted a long way from that.

A good starting point for answering the question of what people want is to look at Maslow’s hierarchy of human needs. In the original version he created in the 1950s, at the base level we have our physiological needs: our need for air, water, food, clothing and shelter. At the base level you have non-negotiable physiological needs, things you’re not going to survive without.

Image credit: User:Factoryjoe, CC BY-SA 3.0, via Wikimedia Commons

Once they’re taken care of, the next level is the need for safety and security. It’s pretty compelling if you’re living in fear of what other people are going to do to you, or whether wild animals are going to break in and eat you in the night.

Above that are the social needs: the need for love, affinity and companionship. Above that, he suggested there’s a need for esteem, both the need for self-esteem and the need for respect from others. At the top of his original formulation, he put self-actualisation. In its broadest terms, that’s what we eventually settle on and decide for ourselves are the things that matter. It might be creativity, travel and new experiences, or artistic expression.

It’s making your life the fullest expression of you, and doing that from a position of strong self-understanding.

Yes. There’s another element he added in a later revision a decade or two on, where he put something called transcendence at the top.

Image credit: U3199117, CC BY-SA 4.0, via Wikimedia Commons

The way he characterised that is the very highest and most exclusive levels of human consciousness: behaving and relating as ends rather than means, to oneself, to significant others, to human beings in general, to other species, to nature and the cosmos. You might regard that as the focus of what’s generally regarded as religious or spiritual.

That’s an important point, because it’s something that’s been in abeyance over the most recent modern period, when people have generally become more atheistic and materialistic. Even where they’ve been overtly religious, they probably haven’t had that empathy with other people, or, in a lot of cases, the sense of awe at the cosmos and the wonder of the whole thing. If we’re ever going to make our way through the chaos of the current era, a renaissance of recognition of that aspect of human life is going to be important.

Yes, it’s having a sense of wonder as well, isn’t it? A sense that we don’t actually have all the answers. Although I wonder if the pendulum is swinging back in that regard.

I have no doubt about it. The only question is whether it’s going to swing back fast enough and comprehensively enough to avert the obvious disasters we appear to be facing at the moment. All we’ve got is this moment now, and there’s no point getting unduly depressed about things which haven’t happened yet.

But one point that’s been made to me by various people, particularly some with Buddhist backgrounds or other spiritual perspectives, is that maybe I’ve got that upside down, and maybe transcendence comes first. I’ve thought about that, and there’s quite a lot in it. But what I’d say is that it can’t come quite first. We still need to address the physiological needs, because if you haven’t got food, water or air, you won’t be reaching enlightenment.

You need bread on the table first and foremost. It’s back to the aeroplane analogy: you put your own mask on first, and then you put someone else’s mask on. You don’t go around putting everyone else’s mask on.

Absolutely. So it’s a useful thing to reflect on. Suppose we had our physiological needs and our needs for safety and security taken care of. Suppose we had, as a next priority, the drive for transcendence. Then possibly all of the other things further up the pyramid would come much more easily and naturally.

Another thing worth contemplating, if we look at wealth this way, is that unless you’re in a position where you can entirely grow your own food, you do need some money for the transactions to get your food, a roof over your head and your clothes. You may or may not personally need money to buy yourself safety, given that there are bad actors around and we need police services of some sort, which have to be paid for. In the society we live in, that’s managed through the distribution of money.

But if you look at those other levels, the social needs, the needs for love and affinity, the needs to express yourself creatively, you could go a long way with many of those without money coming into the picture at all. This is something we build on as we look at alternative lifestyles, at creating a life on your own terms.

We covered this a bit last time as well, where if you’re dealing more with people at a community level, you maybe don’t need as much money, because you can barter more.

Or you can just do it out of reciprocity.

You can do it out of reciprocity. You can put it into the network and then take it out of the network when you need to as well.

Yes, and I don’t want to be a boring old fart about it, but I’d say that over the course of my lifetime there’s been a distinct decline in that. For instance, I was a diving coach for fourteen years, and I did that entirely as an amateur. I didn’t even expect to have expenses paid by anybody else for travelling around and getting whatever kit I needed. That was fairly common. These days, more and more, even with children’s sports, it’s increasingly expected that somebody who coaches will be financially reimbursed, and that the sports people or their parents will hand over money for it. Whereas in the past, it was taken for granted that people would do that as a form of self-expression, if you like, and as a form of contribution.

People do want to do it though. You do it for a love of the activity or for a love of the people involved. But if things are so tight that you don’t have the space to do that, sometimes people simply can’t.

I was thinking as well, as you were talking, about the schools my kids go to and the PTA groups, the parent-teacher associations. They’re all staffed by volunteers, all people volunteering just for the love of their kids. So there are plenty of examples.

Yes, I’m not saying it’s gone entirely. I’m just saying there’s been a drift away from people being prepared to help out on a voluntary level.

I wonder if it’s come back a little bit since all the lockdowns?

It may well have. Let’s hope so. Let’s hope it’s one or two things came out of that time.

Capital

Finally, there’s this term capital, and I’d like to reflect on what it means. Once again, as the word is generally used, one thinks of it as more or less synonymous with money. Whereas if you’ve got money purely as money, it’s not doing anything until you actually exchange it for something of value. If you exchange your money for capital, what is that? I’d say capital is a specific type of wealth. Capital is wealth which has the capacity to create more wealth.

Farmland would be the historic example of that. If you have farmland, you can grow crops on it and graze animals on it, and from that you create wealth in the form of food. In ancient cultures, you’d have things like windmills or water mills, facilities where people bring grain and turn it into flour, which is more useful, so that’s an increase in wealth. You might have a blacksmith’s forge, where horseshoes, tools and implements can be made.

Work is going into all of these things to increase that wealth as well.

That’s something we’ll be discussing in more detail. In all of those, you’ll note that energy is involved. In every case, you’re going to have some form of human labour involved, some form of human activity. That’s a performance of work. It requires energy. Energy is the capacity to do work, and in the case of wind or water mills, you’re harnessing wind, which ultimately derives from the sun. The wind blows because the sun heats parts of the atmosphere differentially, which creates pressure differences and air movements. If we were remote from a star and not receiving that radiation, there would be no wind.

Similarly, there’d be no evaporation from the oceans into the air to form clouds, which then precipitate as rain, gather into streams and rivers, and run downhill to turn the water wheels. All of that derives from the sun. It’s worth reflecting on that, and on what it is about the energy coming into the equation that results in wealth being created. But we also need, in a lot of cases, some kind of tool to do it at all, or a tool to make it more efficient.

So there’s a certain amount of work done in any creation of wealth. As I say, we’ll look in more detail into the role that energy plays in the creation of wealth. That obviously opens up a whole lot of issues which are entirely typical at the moment, bearing in mind that the major sources of energy we’ve been accustomed to using for the last three centuries are now becoming a lot more contentious, to say the least.

Any loose ends you see that we should tidy up?

Yes, I’ve been thinking that wealth, to me, feels like a capacity for future value creation, where value is in the eye of the beholder, not in your eye. I also think wealth is transient. We come into the world with nothing, and we leave the world with nothing. That’s true for you and me, and it’s true for the billionaires and trillionaires. So maybe we overstate the importance of the cash in the bank, whatever it is right now. We should view it as a transient thing, one with a flow element to it. It’s like the tide: wealth comes in, wealth goes out. That’s almost like a natural state of the universe, maybe.

Good. Okay, thanks for that. We’ll leave this one here.

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Rob’s comments below are in italics.Derek’s comments below are in normal font.

As we said last time, over the next series of episodes, we’ll discuss chapters from our forthcoming book, Unravelling the Money Puzzle. The first chapter is “What’s in it for you?” So why would you bother?

What’s In It For You?

Why would you bother with this? Essentially, we’re all pitched into life in the society we live in. Money is pretty much essential. Robert Anton Wilson once described it as bio survival tickets. Clearly, if you want a roof over your head and food on the table, you need to have money to do that in the society we live in.

I like that. I’ve learned since I’ve got older that there isn’t actually that much difference between monopoly money and real money.

Well, this is one of the things we’ll cover in the next section, where we look at the issue of what money is. Essentially, we’re not given any formal education on it at all. Whatever we learned, we learned from our parents, and for most of us, we didn’t have any formal lessons from them about it. We picked it up in between, out of the implications of what was going on around us.

Or, in my case, I ignored everything my dad tried to pass on to me and had to learn it all the hard way instead.

That’s a pretty common experience. Certainly, I don’t remember any lessons on it in school. The only time I can remember it being discussed at all was when one of our teachers remarked in passing that the pound note, as we had it in those days before they went over to pound coins, actually still said, “I promise to pay the bearer on demand the sum of one pound in gold,” over the signature of the Governor of the Bank of England. The teacher said, well, actually, that’s not true these days. The reason it wasn’t true is that they suspended the convertibility of pound notes into gold in 1933, when they finally threw in the sponge on pretending that the First World War hadn’t destroyed a lot of value in the country. A pound was no longer worth what it had been. But that’s another story.

Anyway, one of the boys asked, well, in that case, why is it worth a pound? Which was a very sensible question. The teacher replied, “Well, if you’re not sure about that, you can always give me any that you’ve got.”

Which was typical of that particular teacher, totally missed the chance for what could have been a very constructive and informative discussion around that. At the time, I just thought it was a preposterous brush-off. I suppose you could take the view that he was subtly getting the point across that it’s because we all believe it’s worth a pound, and that somebody’s going to give us a pound’s worth of goods, whatever that might be.

It’s a shared story that if we stop believing it, it collapses tomorrow.

So we come out into life, and most people’s experience is that it’s a constant juggling act. We feel we’ve done all right if we get through the month without having got worse off. Of course, a lot of people in the present day, in pretty much all of the developed economies, are actually finding that they’re not getting wealthier; they’re getting less wealthy.

Just to go back a few steps, why was gold used in the first place? Gold has been used across the ages. Is it just because it’s a scarce, finite resource?

Well, it’s a scarce, finite resource. It’s incorruptible in the sense that it doesn’t corrode, rust or tarnish. That’s what makes it attractive. It’s been known since antiquity how to ascertain its purity, and it’s what they call fungible, meaning that one lump of gold is exactly like any other.

We tokenise it because it’s quite inconvenient to carry lumps of gold around.

Well, this is getting on to the topic of the next chapter. At the moment, we’re just saying why this is important to you. It’s basically important to you because, plainly, some people have a flair or expertise for accumulating it, and most of us don’t. This makes me feel that it probably suits the people who have that flair, that expertise and possibly that obsession, that the rest of us are not so well informed. It makes it easier for them to take advantage of us. I don’t think I’m being paranoid when I say that, or even if I am, it doesn’t necessarily mean I’m mistaken.

Just because you’re paranoid doesn’t mean they’re not out to get you.

Exactly. I’m just running through the notes I made about the points. We’re covering them pretty rapidly.

Another impression most of us have is that it’s very difficult and complicated. In the course of the investigations we’re going to be sharing, it will come across that it’s almost embarrassingly simple in a lot of ways. The things you really need to know don’t require much sophistication or exceptional mental powers to grasp. When they’re brought out into the open and examined, they’re very easy to grasp, and once you’ve grasped and internalised them, that will empower you going forward. So that’s what we’re up to with this educational project. What you’ll get from following this through to the end is that you’ll become confident, relaxed and effective in dealing with your finances, which very few people would say, in all honesty, that they are at the moment. You’ll get the clarity to avoid being taken advantage of, and you’ll probably be quite angry when you see some of the ways you have been being taken advantage of. You’ll get clarity on how to build prosperity over the course of a lifetime. So that’s what’s in it for you from following it.

What Money Actually Is

Now I’ll go on to the next section, taking a look at what money actually is. Before I do that, are there any other points you want to raise, or any other questions you want to ask, Rob?

No, just to say that I think there was a hole in my education. I think we have to unlearn certain mental habits around it as well. It’s not just about learning; it’s about unlearning some unhelpful thought patterns around this too.

So the next section will address the question: what is money? It used to be a bit more obvious what the answer to this question might be than it is now. At the time I was growing up, which seems increasingly like ancient history, money for the most part was something completely tangible. It was coins and notes. There were one-pound notes, ten-shilling notes and five-pound notes. The ten-shilling note is worth fifty pence in today’s currency.

Slowly, we picked up on the fact that money could be balances in a bank. We thought of the bank as a big storeroom where the money was kept in a safe place. There were lots of banks up and down every main street in every town, and people were going in all day long, either depositing money or withdrawing it. So it was quite easy to look at it just as though it was a kind of storeroom.

Like a big piggy bank.

Yeah, whereas now increasingly it’s something entirely abstract, it’s figures on a screen. There’s been this huge push over the last five or six years, particularly to steer us all away from tangible forms of money and toward intangible ones, on the grounds that they’re more convenient. Of course, it’s convenient until it isn’t - when the system breaks down or when you become a victim. This has been happening quite a lot, in terms of people who felt to be troublesome to the ruling elites in some way or another being debanked. There’s absolutely nothing they can do about it, because it’s an extra-legal procedure. A number of people are grappling with court cases over this, and in the meantime, it’s almost impossible to function normally in the society we have.

I think Nigel Farage had one of his accounts closed, didn’t he? Although he’s clearly back in line with the establishment narrative because he’s back in the fold now.

He did. I don’t have a great deal of sympathy for him, but I don’t think it should happen to anybody.

The Canadian truckers’ protest was the other thing that came to mind.

Exactly.

Anyway, what is money, in essence? I’ll start with the classic definitions, and then we’ll see how this works out.

1. A Medium of Exchange

First and foremost, money is regarded as a medium of exchange. Now, what does that mean? The typical way it’s explained is that, in primitive societies, people operated by barter. Somebody would take goods they had produced or otherwise acquired and swap them for other goods, which is obviously very cumbersome.

There’s considerable doubt over that narrative as a literal historical sequence. Part of the confusion comes from the degree of obsession we have these days with money, and the degree of obsession we have with looking after our own individual interests over and above others. In very primitive societies, much of what went on was much more like a gift economy.

It was the local community as well. It’s not like you were buying from someone in a different country.

Yeah, or someone you’d never met before and never expected to meet again. But people were much less rigorous about making sure they covered their own interests. They were much more prepared to just be generous, providing something to their neighbours and fellow villagers, and expecting that when the boot was on the other foot, they’d be taken care of. It was very common throughout the world, in all sorts of cultures.

All the Scottish clans used to do that, didn’t they? This principle of hospitality.

Yes indeed. So, what does it mean, a “medium of exchange?”

Suppose a farmer wants a table, and the carpenter thinks the table is worth three bags of wheat. If they were operating on a strict barter system, they’d do a straight swap, and chances are the carpenter doesn’t want three bags of wheat. So a convention arises in the village, in which some system of tokens is brought into play. It could be anything - let’s say they agree to use seashells to keep track of things. They all agree that ten seashells are worth a bag of wheat. The farmer could find three people who each want a bag of wheat, give them a bag of wheat, get ten seashells from them, and then take his thirty seashells to the carpenter. The carpenter gives him the table, and then he’s got the thirty seashells and can swap them for whatever he wants. He could take five of them to the butcher and get a joint of meat for his Sunday lunch. He could take one seashell to the candlemaker and get a box of candles, and so on.

The interesting thing about looking at the story that way is that you see, where there’s a transaction, contrary to the assumption widely made these days that the seller is the winner because they’ve got the money, when you look at it from the perspective of this story, clearly it’s the farmer who’s the winner, because he wanted a table and now he’s got the table. The carpenter’s only got his thirty seashells, which, until he actually exchanges them for something he wants, leaves him down in terms of tangible assets.

2. A Store of Value

This brings us to the second traditional use of money, which is as a store of value. This means the farmer doesn’t have to cash in his seashells immediately. He can keep some of them as a buffer for a rainy day, so he can purchase something later.

Humans have been doing this ever since we switched from hunter-gatherer societies to agricultural societies.

3. A Unit of Account

And the third use of money, according to the traditional definition, is that it’s a unit of account. Now what does that mean?

Let’s say it’s May, and the farmer wants some horseshoes, and four horseshoes are worth a bag of wheat. But he hasn’t got a bag of wheat, because the harvest isn’t until August, and he’ll have the bag of wheat after he’s carried out the harvest. So he can say to the blacksmith, okay, we can make a note of the fact that I owe you one bag of wheat, and I will pay you that in August. That’s obviously related to the store of value, but it’s, if you like, a time shift from the future to the present.

It’s a consistent measure, isn’t it?

Yeah, and incidentally, having got to this point, I’d say the most common form of currency over the past 5,000 years has in fact been grain of one sort or another - wheat, corn or rice. That’s why all the Lords of the Manor had tithe barns, and the peasant farmers brought in their yearly taxes or rent - however you want to describe it, it comes to the same thing - and they paid those taxes or rents in the form of grain. That was not because the Lord of the Manor wanted to eat all the grain himself - plainly he couldn’t do that - but he would obviously consume some of it, and he used some of it for paying his retainers and his suppliers. That was the primary form of money for most of the time. The interesting thing about that is that it loses its value over time. The intention is that it will last you round till the next harvest, but you don’t expect it to -

So as a store of value, it fails.

In Summary

Yeah. So in summary, money is a system of tokens which represent a claim on wealth, which raises the question: what is wealth? Perhaps we can all think about that until we get to the next section next week, and then we can examine it in more detail and go on from there.

So, just to recap on some of the things we talked about. Seashells, for instance, are a good medium of exchange, a poor store of value, and not a great unit of measure - because, do you find a bigger seashell than another one? There’s no standardisation there. So that’s probably a good thing to remember.

One shell might not be the same as another. Yeah, and so - although for day-to-day transactions in a lot of village societies over the past few millennia, grain would have been used - obviously for larger purchases people would have used precious metals. Of course, the metals known to antiquity were gold, silver and copper, which is why our entire token money today is split up into those denominations. Gold was rarer and less subject to corrosion - in fact, to all intents and purposes not subject to it at all - than silver and copper, which were more common and more ready to tarnish.

Yeah, and it sounds like some of these earlier forms were more decentralised, in terms of not having a single central provider. It sounds to me like rulers throughout the ages have sought to control the money supply because, if you control the money supply, you control the people.

Yeah. These are all topics which will become clearer as we look at different aspects of this investigation as time goes on.

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Rob’s comments below are in italics.Derek’s comments below are in normal font.

We thought we’d do a bit of a roundup of recent goings-on today. What do people need to know?

Well, in the week since our last recording, there have been more or less daily reversals in the apparent American stance regarding the discussions with Iran.

It was more or less a surprise that we actually got the memorandum of understanding signed by Trump. No sooner was it signed than Israel continued the fighting in Lebanon, despite the fact that the number one item on the memorandum is a complete cessation of hostilities, including in Lebanon.

The strait was reopened, but it’s already been shut again in response to that. As of today, this is what I mean by the rapidity of reversals. The moment you think one thing has actually developed, the next minute, we’re back to where we were before. Each time there’s a failure to live up to what has already been explicitly agreed, it erodes the credibility of the United States even further.

It just makes it appear like a circus, doesn’t it? All done to probably manipulate the stock value of certain companies, I would suspect.

Yeah. Originally, there was going to be a signing ceremony, initially in Islamabad, then it was moved to Geneva. It has since become apparent that there was a Mossad plot to assassinate the Iranian negotiators. That’s why the agreement was actually signed in separate locations.

The Iranian side signed separately, and Donald Trump signed in Versailles. That is ironic, because that’s where Germany agreed to the humiliating terms that ended the First World War, which of course was responsible 20 years later for the outbreak of the Second World War. So a slightly ironic gesture.

Even though it’s been signed, and even though the Iranian Supreme Leader expressed his reservations about whether America would continue with it, he agreed to go along because a majority of the governing council had decided this was the best way forward. Because of the immediate reopening of hostilities by Israel in Lebanon and the subsequent closure of the strait almost as soon as it was opened, apparently about a dozen tankers got out, nearly all Iranian ones. Now we’re back to square one as far as the Strait is concerned.

The negotiations are now about how to reaffirm America’s seriousness about this agreement so that the strait can be reopened. We’re still in this phoney war state, which has gone on far longer than you or I would ever have imagined. Certainly in this country, we’re not yet seeing actual shortages at the pumps. We are seeing price rises in the shops, which is more or less inevitable given the rise in diesel fuel prices, which is much sharper than the petrol price rises.

In America it varies by state, but price increases have been quite painful and will continue. One reason we’ve been insulated from actual shortages, rather than just price changes, is that there was obviously a lot of petroleum in transit on tankers when the straits were closed. These have taken time to reach their destinations and be discharged, providing something of a buffer.

All countries have also been drawing down their reserve stocks - to the point that these are now close to exhaustion. Some people reckon there’s less than a couple of weeks before there’s nothing left from that source, and then the pain on the world economy will really begin to bite.

Even if the strait opened tomorrow and production from the mothballed oil fields was ramped up to full capacity with shipping going flat out, those who understand these matters better than I do estimate it would take three times as long to recover as the three months the strait was shut. So it’d be nine months before we got back to where we were before.

Which is essentially what we’d said back in February and March, wasn’t it? It may just have taken a bit longer than we thought to become apparent.

Yeah. Once again, there’s been a complete asymmetry between the seriousness with which the Iranians are approaching these negotiations in Geneva and the frivolousness the Americans are displaying. Foreign Secretary Agarci and parliament speaker Cardibuff simply walked past Vance, Witkoff, Kushner and all the photographers sitting there waiting for a photo opportunity, all set up to show them grinning and shaking hands. They just weren’t going to go along with that pantomime.

Some people are depicting this as a deliberate snub, but it was simply that they wouldn’t stoop to that masquerade. They then walked into another room, where they were greeted by the Prime Minister of Pakistan, who warmly embraced them. They continued to ignore the Americans, and Vance looked completely disconcerted, clearly out of his depth.

The Iranians then refused to enter the discussion room until all reporters had been cleared out. All of this was entirely predictable. It’s astounding that the Americans didn’t realise they could have avoided all of that public embarrassment by treating them with the respect they deserved. They could have kept the press circus out entirely.

Yeah. I was thinking about Caitlin Johnston’s comment the other day. The US Empire seems to think the entire world is its property. Anyone living in those places who responds to US naval bases or whatever is deemed to be committing an act of aggression, even though it’s in their part of the world. Until that mindset changes, the US Empire’s attitude towards these negotiations won’t change.

Yeah. So it’s going to be a rocky few months. We just have to watch this unfolding day by day.

The approval ratings of the Israeli regime amongst the American public have been plummeting, and this is likely to continue. Particularly when the full effects of this conflict feed through to affect people’s own day-to-day lives and financial stability. Trump is in a difficult position.

He doesn’t seem capable of controlling himself. Part of the reason the talks got off to such an appalling start is that he published yet more rants on social media before proceedings had even begun, almost like dealing with someone who can’t control what they blurt out.

Yeah, it all feels like a big show. I was reflecting last night on the fact that the Iranian football team played two World Cup matches in America. Surely that reflects the fact that some elements of this are theatrical. If you were genuinely at war with someone, would you have that country’s football team playing on your home turf?

Even that was done incredibly incompetently. They made life as difficult as possible for those players, with delays, harassment, and so on. If you’re going to allow it, you could at least do it properly.

So sometime soon we’ll get back to the original idea of this podcast: to provide an outline of how the money system works, how to get to grips with it, and how to apply that understanding to working within it to your own best advantage. We didn’t intend this to be a current affairs channel, but we didn’t expect world events to unfold quite like this. These events will affect the financial position of all of us and the options available to us in life.

That’s right. Would you say, for someone thinking of starting a business, it is worth hanging fire for a month or two and seeing how things play out? What kind of volatility do we think is going to come up?

It depends on what your business is. I’d been working on developing various electronic devices and audio effects for musicians. I’d projected quite considerably forward with plans to have things manufactured in China. I’d got prototypes done that way and opened negotiations with suppliers about scaling things up if it worked out well. I’ve just put all of that on ice because of the uncertainty.

Not knowing how much you’ll be affected by events entirely beyond your control is unsettling. The best business would be something local, providing services to people immediately around you, face-to-face, offering things they’d find harder to get or much more expensive to get through the larger corporate structures we’ve taken for granted.

Things they can’t just buy on Amazon.

Yeah exactly. OK, until next week.

Good thoughts. Thanks.

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Rob’s comments below are in italics.Derek’s comments below are in normal font.

We’re going to chat today about a book you’ve been reading - Ecocivilization: Making a World that Works for All by Jeremy Lent. Now I’ve been rather crafty here, nudging you to read this because I know you’ll read it much faster than I will! That way we can have this conversation and you can tell me what it’s all about!

Yes, it’s almost the book I wish I’d written myself. I’m staggered by the depth and breadth of his scholarship and his attention to detail.

It’s very much along the themes of quite a lot of things we’ve probably spoken about, and of my own book, The Letter from 2100: A Possible World for your Grandchildren. The idea is that we’re at a crisis point in human global society. We’re either going to pull through it into an unimaginably great situation, or we’re going to have a catastrophic collapse. There’s no real third alternative, as far as I can see.

Ecocivilization is not a rose-tinted spectacles job, saying everything’s going to be all right. It actually goes into a lot of detail and points out some possible pathways.

The overall structure of the book is in four sections.

The first one is “How Did We Get Here?”, pointing out that we as a society are careening towards a precipice. This is obvious to anybody who hasn’t been living in a hole in the ground for the last five years or so. There are crises of all sorts, and it looks as though if one doesn’t get us, another one will. He flags up “The History They Didn’t Teach You in School” - that’s the title of one of the chapters in this section, and it’s brilliant. There’s a whole bunch of insightful stuff there.

The second section is what he means by an ecocivilisation - a world that works for everybody. Obviously, that has to have respect for human beings as an absolute cornerstone of what’s involved, along with respect for the planet and the entire living systems, without which we won’t survive anyway. That section provides a theoretical outline of what to aim for.

The third section is the biggest part of the book. It’s called “Envisaging an Ecocivilisation”.

It has eleven or twelve chapters. One covers the world economy, and the other structures industry and enterprise to serve the common good. One is on agriculture, and the way that needs to be revised so it provides nourishing food for every human being, a fundamental necessity that the present system doesn’t achieve at all. He’s also got a chapter on wealth and what he calls the commonwealth, or the commons.

There was an important insight in that chapter about the royal seal being put on the Magna Carta by Henry the Third, a couple of years after the barons forced King John to acquiesce to it.

At the same time as the Magna Carta was sealed, there was also a Charter of the Forest, which is of personal interest to me. That charter reassigned to the common people the areas which had been fenced off as rural hunting grounds - the New Forest was one of them.

They’ve now introduced car parking charges all over the forest, even little two-line strips on the side of a lane outside the pub in the village. I don’t know how much impact that’s had on the pub’s trade, but it’s about time somebody reminded them that this was actually granted under royal seal.

We almost need a Magna Carta 2.0, don’t we? Just remind me, when was Magna Carta sealed? That was around the 1200s, wasn’t it?

1217. It was acknowledged in 1215, and actually put under royal seal in 1217. It’s quite interesting - I’m surprised nobody’s flagged up that the right to jury service has just been abolished by the government. Anyway, that’s another story.

If you go to legislation.gov.uk, you can look up Magna Carta, and it’s still there. So it’s a piece of active legislation.

That’s not much help if they’re ignoring it!

They can’t get rid of it, so they’re just ignoring it and gaslighting everyone.

Pretty much. Another point - there are all sorts of interesting sideways snippets of information in this book. One is that when the UN was established after the Second World War, Albert Einstein said it wouldn’t work. He said the trouble was that the Charter grants sovereignty to individual countries without providing a mechanism to make them adhere to it, which is exactly what’s been happening since.

The next chapter is on finance - transforming money to work for us all. We’ll probably have a detailed run-through of what he’s suggesting in another episode. It’s very much in line with a lot of the discussions we’ve had on this channel.

There’s a chapter on technology, and one on infrastructure - the networks of communication, physical and informational. On governance, there’s the obvious fact we’ve discussed at times: that democracy in its present form isn’t really delivering the goods, however great an idea it is in principle.

The law is a very interesting one, because it’s not something I’d given much thought to. We naturally assume the law is what it is, without analysing how it came about and who it’s designed to benefit. There’s a chapter on global governance, looking at a system that would integrate the entire global system. What’s written in the UN Charter would be a good starting point, if there weren’t the opportunity for any sufficiently strong actor to decide to ignore it.

There’s also a chapter on the living earth - mutually beneficial symbiosis with the rest of the biosphere - and a chapter on culture and community, talking about education.

There was a very interesting thing I didn’t know, flagged up in that chapter, about the way the education system we all take for granted was set up. The modern education system resulted from Prussia’s humiliation after being overrun by Napoleon. Did you know that?

I’d heard about this - they needed soldiers, didn’t they? People who follow orders and don’t think too much.

That was about it. In 1806, Napoleon conquered Prussia, and a philosopher called Johann Fichte said it was necessary to revise the entire education system. He said that “The new education, on the soil whose cultivation it takes over, completely annihilates freedom of will, producing strict necessity in decisions and the impossibility of anything else.“

That set the pattern for the way schools everywhere are run, and that we take for granted: you sit down, you do what you’re told, you don’t talk, you don’t decide what you want to learn, and you’re drilled into compliance. That produced enormous technical advances in Germany on the one hand and, just over a hundred years later, led directly to the First World War.

I would argue that being in business is a good antidote to the inability to think for yourself. It’s quite a long road, but an important one.

One of the insights in that first section, “The History They Don’t Teach You at School”, is how deliberate it was to impoverish the population at large as a way of disciplining them. There was a Scottish merchant and magistrate who actually wrote, without any sense of irony:

“Poverty is therefore a most necessary and indispensable ingredient in society, without which nations and communities could not exist in a state of civilisation. It is the source of wealth, since without poverty there would be no labour; there could be no riches, no refinement, no comfort, and no benefit to those who may be possessed of wealth.”

You could apply that to today.

Absolutely. Over the course of my lifetime, I’ve seen how steadily leisure and space to think have been eroded.

There was another insight from George Kennan, the American diplomat - he was the ambassador to Russia for a while. One of the things he wrote was:

“We have about fifty per cent of the world’s wealth, but only six point three per cent of its population. In this situation, we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relations which will permit us to maintain this position of disparity. To do so, we will have to dispense with all sentimentality and daydreaming, and our attention will have to be concentrated everywhere on our immediate national objectives.”

Which is pretty much still how the empire operates today.

Exactly. That was eighty years ago, and we’ve now seen the results of pursuing that incredibly narrow objective all around us. Before we get too gloomy, section four of the book is “How Changes Happen” - models of societal transformation, with examples of specific things where quite dramatic changes have come about. The other chapter in that section is “Making Changes Happen: Moving Towards an Ecocivilisation”. Once again, his main point is that it’s not a done deal. We’re in a very perilous situation.

The actual crisis thrown up by the logical working-out of the way we’ve been structuring things may well be the context within which there’s a possibility of transforming into something entirely different. He points out numerous little ways this is happening right now, and has been happening over recent decades. Any one of them might be regarded as small beer, impossibly out of scale with the magnitude of the problem, but taken all together, they’re building up a cumulative effect.

So, for an initial summary, how does that sound?

That sounds great. I was also thinking that the amount of hope you have for the future probably depends on how much faith you have in young people. I have equal amounts of faith and despair - who knows?

I’m certainly surprised by the lack of vigour amongst young people in agitating against the system. Maybe it all just seems hopeless to most people. But who knows - it’s a possibility.

We’ll see. There’s definitely a sense of apathy, but there are also lots of surprises. Young people don’t seem to be taking on the traditional narratives we’ve been fed, which are no longer holding up anyway. So, who knows?

Good - I’ll link to Jeremy Lent’s Ecocivilization book, and I’ll endeavour to read it myself.

I’ll be able to fill you in on more details once I’ve finished it and done a more thorough summary.

The other thought I had is that we were talking about AI last time, and this sounds like quite a different tack. A lot of people are looking for tech solutions - the idea that tech and AI will save us. We were saying last time that we don’t think that’s the case. We think it’s a tool that could be useful to you as an entrepreneur, but we don’t think it’s going to save the world.

If you look at where the money is going, it’s all going to AI and data centres. That’s where the big players in the world are putting their bets. So we as individuals and entrepreneurs need to put our bets elsewhere.

P.S. Jeremy Lent’s Substack can be found here.

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Rob’s comments below are in italics.Derek’s comments below are in normal font.

Derek and I know each other through an American consultant called Perry Marshall. Perry was originally a marketing guy but has transitioned into an all-around business expert. You attended one of his seminars this week, specifically on AI. We thought we would unpack what you had learned and how we, and anyone listening, might apply that.

Yeah, absolutely. It was a really inspiring, really interesting day, with a strong focus on AI. Frankly, I’ve been very cautious about the whole AI thing and somewhat sceptical of its value.

We use it a little bit, don’t we? We use Claude to clean up the recordings and generate transcripts. I’ve been very impressed by how that goes and how much better it is than anything on offer until a few years ago.

I’ll add some comments on that. When we started the podcast a few years ago, getting the transcript into a readable version took a lot of work. These days, it’s literally 20 minutes before I go to parkrun on a Saturday, courtesy of the tools available.

Yeah. I then give it a second check. Other than where I’ve expressed things poorly, all it’s required from me are minor spelling and punctuation changes and a bit of reformatting. I’ve had less and less to do, more or less week by week.

One of the reasons I was sceptical about AI is that it’s yet another technological innovation which has produced a disproportionate amount of hype. A lot of people who’ve been swept up in that hype are going to be disillusioned, because it’s unclear to many what it is and what it isn’t.

There are two levels of hype. One is “this is going to transform humanity,” but nobody seems to be suggesting how. “This is the future of great prosperity,” but nobody seems to be saying in practical terms what that prosperity will actually look like.

And who for?

Who’s going to get the benefit? Exactly.

There’s also a philosophical dimension to the hype. There’s a lot of speculation about whether AI will become fully conscious, whether it’s going to overtake the human race.

I’m absolutely clear that whatever it is, it’s an algorithmic system running on computers, and that is never going to be conscious. That’s a very big philosophical debate, but I’m crystal clear in the basis I have for being certain of that.

Did you see that Richard Dawkins got ripped to shreds for saying he thought Claude was conscious?

That was so funny. I cannot imagine how he thought he would enhance his credibility by putting that out. Don’t get me started on Dawkins. It’s very much on the side of people who are still trying to say the universe is a great machine, that we’re all bits of machinery, and there’s nothing transcendental. I had a brief word with Perry about the Turing test. Do you know about it?

I’ve heard of it, but I couldn’t tell you what it was.

Alan Turing, the guy who, to all intents and purposes, created the underlying intellectual framework for computing, was also a major player in breaking the Enigma code in the Second World War, a major contribution to defeating the Germans.

The Turing test was Turing’s contribution to the debate about whether a computer could be conscious. The test is basically this: if you could have a dialogue between a person and a computer and the person couldn’t determine whether the entity they were conversing with was human or a machine, then the computer would have passed the threshold of consciousness. According to that criterion, we’ve actually passed that point, and Perry and I agreed on that.

I got the output of Perry’s group, what he calls the Superconductor, a sort of AI business consultant. You do a quite challenging questionnaire and get a report back. The report blew my socks off. I could not tell that it hadn’t been written by a more-than-averagely competent, insightful business consultant.

Yeah, and this is going to completely derail a lot of middle-class jobs for people doing this kind of work.

We’ve seen this progressively, haven’t we? The point is, it still isn’t conscious. Broadly, the main reason is summed up in Roger Penrose’s book, The Emperor’s New Mind. Did you ever read it? It’s absolutely spot on. In summary, what Penrose says is that because of Gödel’s theorem, that’s Kurt Gödel, it’s impossible to create a formal system for mathematics that is both complete and consistent.

What it comes down to is that there will always be mathematical statements which are true but not provable. Gödel showed this by constructing one. At the same time, he showed that the human mind was capable of convincing itself of the truth of that, which a computer could never do. There’s an argument sufficiently obscure that many people who are disinclined to accept that point of view simply don’t get it.

They say, “Who cares whether a computer can prove Gödel’s theorem or not?” Anyway, I digress more than I needed to. But it explains why I’ve been put off by speculations about whether AI could be conscious.

It can certainly be intelligent. If you define intelligence as the ability to extract a simple summary from a complex argument, for instance, you can bring up a whole bunch of definitions. But that’s not the same thing as consciousness. So, my big takeaway from Wednesday’s discussions was that this is yet another tool.

The thing about any tool is that you can use it for good or ill. That brings up another whole aspect of the overhyped discussion. Is AI a force for good or a force for evil? The answer is neither. In the hands of someone motivated to do evil, it can enhance their ability to do evil, which is unfortunate but a fact of life, just like any other technology.

You can use them for good or for evil.

Yeah. That was another very interesting thing, because as anyone who knows Perry will know, he is essentially as strongly grounded in ethical principles as you can be.

There were two special guests at the seminar. One was Scott Chang, the guy who developed the Superconductor programme. It was great to meet him and converse with him personally. I’ll be taking up the offer he gave to seminar attendees, an hour’s consultation. After that, I’ll apply it to the project we’ve got to get this book out, which has been a long time coming.

He was there, and there was also another guy called Finn, who founded a business called Solar Quotes for selecting solar power installations. It’s essentially a lead generation website for contractors. He recently sold the business for multiple millions and is now enjoying his retirement.

What he said was that the biggest factor in his success was running the business not to maximise short-term profit, but to build something of lasting benefit that provided the best possible deal for customers. He structured it so that was genuinely the case.

They had one of those rock-solid guarantees that could bankrupt you if you weren’t doing things the right way. If any installer that a website client had booked gave an unsatisfactory job, they would, at their own expense, rectify it to the customer’s satisfaction. You can’t get a more ballsy guarantee than that.

I asked him what the philosophical basis for that commitment was, and he said, “It’s just the golden rule.” This touches on what we’ve said before: the strongest thing you can do to build a successful business is to operate according to that principle. It’s depressing how few people in business appear to have that as their overriding priority.

Scott Chang, had been a mortgage broker and was one of the few not to go completely out of business overnight when the 2008 financial crisis hit. Mortgage broking is famously another business area operated by complete sharks and charlatans, but Scott operated according to the same principle. It would have been very easy in the early 2000s to make a great deal of money getting people into mortgages that turned out to be immensely profitable for the lender and ruinous to the customer.

The devil will always place short-term opportunities in front of you to tempt you away from the longer-term goals…

Of course, you don’t have to be a Christian to hold that principle. Any ancient wisdom tells you the same thing, whether it’s Taoist, Buddhist, Hindu or whatever.

So it was quite interesting from that point of view. It’s a creativity accelerator, if you like. It’s only as good as what you put into it.

This has been the thing for a long time, hasn’t it? Garbage in, garbage out, or good input in, good output out. The work we do for this show, in preparing the written versions, generally involves good input.

Yeah. I’m looking at that in a whole new way. Scott gave me one or two pointers about how to approach the project we have on constructing this book. It’s more or less what we had been thinking of doing, but I had been struggling because of not being quite clear about how to go about it..

Incidentally, I put one chapter I manually cleaned up into the shared document you created for this purpose, so you can have a look and tell me how close I’m getting. With the insights I’ve now gained, I’m going to take that approach and feed material in, with instructions, to one or the other of the AI tools.

I’ve got ChatGPT on the £20 a month subscription. You’ve got Claude. We can see how one or the other works, and if there’s any way to find synergy between the two, that’ll be an interesting project in itself. I’m quite upbeat about exploring this going forward.

I’m now seeing it in very much the same way that I see the CAD system I use for designing electronic circuitry. I use KiCad. I downloaded and installed it as a 70th birthday present to myself. Despite having tried it two or three times before, it clicked on that occasion. Within a week, I was getting a schematic in and turning it into a circuit layout.

Having done that on the old system and knowing how much work it took to produce a sophisticated, fully featured design in the pre-CAD era, I find the difference astounding. It could literally shrink at least a man-month’s work into a day or two for one person, whereas you’d have required a team of different specialists to do that before. It’s a force amplifier. We’ve all seen it with producing accounts on a computer. Can you imagine going back to writing it out longhand in a bound account book, adding it up with a desktop calculator and checking it half a dozen times to track down why it didn’t reconcile?

Yeah. I don’t suppose you saw the interview between Alistair Crooke and Catherine Austin-Fitts on the Solari Report?

I didn’t see that one particularly.

Alistair was talking about China and their use of AI. He was commenting that their adoption has been more factory-floor-type, focused on robotics and automation. The principle of doing more with fewer people, where it makes sense, increases value and produces things at much lower cost. He was saying what China is doing is much more low-key.

Yeah.

They’re not making as much hype about it just to inflate the stock market value of a handful of AI companies, which is what I think is going on here. He says we’re going to be left behind.

For anyone listening, can we just talk about the book a bit more? What’s it going to be about?

Announcing: Unravelling the Money Puzzle

Okay, good. Provisionally, we’re going to call it Unravelling the Money Puzzle. We’ll probably do a bit more research into the title we eventually settle on, but I think that summarises it. There will be three sections.

The first is the basics. What is money? What’s it for? How do we use it? How is it created? It will also cover what wealth is, because the one-line answer to “what is money?” is that it’s a claim on wealth. How do you create wealth? How is it lost? How is it transferred from one holder to another? That’s essentially the subject matter of what is called economics, and we’re also going to demystify a lot of the confusion around economics.

The second part is a practical guide for entrepreneurship, the guide I wish I’d had when I started out trying to run a business. I’ve been learning by making decisions which turned out not to be as well-judged as I’d hoped. From that experience, I hope that anyone setting out to run a business would benefit from some of my suffering.

Even if you’re not thinking of running a business or setting up a side hustle, if you’re employed by somebody else, that person is ultimately running a business. It would be genuinely helpful to anyone, in any capacity, to have insight into the skeleton of a business and its processes. It might also give them insight into whether they want to be in that company at all.

Just on that second section, self-understanding is a key part of that. I’ve tried to create multiple businesses that were right for other people but not for me.

Yep, that’s a common pitfall. Those first and second sections are perennial, evergreen if you like. The same thing could have been said at any point in history.

The third section deals with the current global human society, the predicament we’re in, and the transition we’re going through. It’s becoming more obvious every day that the days are numbered for the way the world has been operating, certainly for the last 70 years, possibly for the last 300, possibly for the last 6,000. The inherent contradictions are boiling up to the surface.

It’s very important for us to have the best possible map of what’s going on, what is possible and what is not, as we make our way through the current transition of human society and its structural features.

Yeah, very good. One question I meant to ask you about AI: all these data centres keep popping up now. The so-called climate crisis doesn’t seem to apply when it comes to water usage for AI centres. To me, the AI centres seem more about creating forthcoming programmable money and population control than about helping you do things faster.

Well, we could have several episodes exploring the implications of that alone. The other thing I’d be interested in is getting some estimates at some stage of the amount of fossil fuels being destroyed in the two major conflicts currently going on in the Middle East and in Ukraine.

Bearing in mind that well before the end of this century, we’ll reach the point where that bonanza of cheap energy is no longer available, it seems these conflicts are actually knocking years off the time we have left.

Yeah, looks that way.

Okay, on that note. Thank you, Rob.

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Rob’s comments below are in italics.Derek’s comments below are in normal font.

You were telling me before we hit record that you’ve been reading a book called ‘Going to Tehran’. You were saying that if the people in the American establishment had read it, it would have saved everyone a lot of heartache!

Yes, it’s called ‘Going to Tehran’. It’s by Flynt Leverett and Hillary Mann Leverett, obviously a married couple. They were policy advisors or analysts in both the Bush and Clinton administrations.

When was this book written?

The book came out in 2013, with a slightly updated edition since.

It gives a very detailed, impartial description of what the Islamic Republican government of Iran has been through since it was created 47 years ago. It explains a lot about the experiences it’s had and why it’s taken the position that it does. It totally undermines the prevailing Western narrative that they’re all lunatics, fanatics and extremists.

The religious regime may not be one we would choose, but it does seem that a large majority of the population are very happy with it. The events of the last year or so have led many younger people — particularly those who didn’t live through the Shah’s rule — to reassess. The Shah, of course, was installed by American and British intelligence services in 1953, overthrowing the democratically elected Mossadegh government. He then ran a very brutal tyranny with a great deal of torture and assassination of anyone who rose up against it.

Didn’t the Shah go to boarding school in Switzerland or something? He was groomed and then put back into position.

He was totally a Western puppet. He was installed because Mossadegh wanted to nationalise the oil extraction processes. Mossadegh wasn’t even going to restrict its use; he just didn’t want it sold off at a knockdown price. He wanted a fair return to the country for the resources being extracted. It’s the same old story.

The recent events have caused many people who were looking to the West, thinking the grass might be greener, to reassess. Anyway, well worth a read. I’m only about 20% of the way through it myself at the moment.

Just while we’re on books — you obviously read a lot. Do you read 20% of a book and then dip back into it later, or what’s your preference?

Usually, if I decide it’s worth reading, I stick with it until I’ve got right through. How about you?

I’m trying to get better at giving up on books that aren’t excellent. So I’m trying to get a bit smarter about it.

I very often read the first page or so and the last page or so of each chapter to get an instant summary. It obviously depends on how they’re written, whether that’s a useful exercise. A lot of writers do open each chapter by giving a rough idea of what they’ll cover.

A lot of them also finish with a brief summary of what they’ve covered, which is good presentation practice anyway. If they do that, you can get a pretty good idea of whether you want to go into the full depth and detail. Sometimes I do that exercise and conclude I’ve pretty much got the drift.

Anyway, very interestingly, Robert Kagan — it’s very difficult to label him. I was inclined to say “right-wing,” but “right-wing” and “left-wing” no longer make much sense.

‘Right-wing’ just means he says things the establishment doesn’t agree with, doesn’t it?

Not in this case — he is the establishment. He’s the husband of Victoria Nuland, who was Assistant Secretary of State at the time of the 2014 overthrow of the Ukrainian government. So he’s a militarist, a warmonger.

I remember her. He’s part of the swamp.

In this article, he actually says that the Iran conflict is the biggest defeat in US history. So you’ve got somebody from the core of the American establishment effectively taking it for granted that the conflict is lost, whatever happens from now on.

He says the only way it could be resolved is by a land invasion and occupation. I don’t know whether he’s saying this to strengthen the military’s resolve to go ahead and do that.

It seems blindingly obvious that any attempt to do that would result in an even more humiliating defeat — and a more decisive one.

Of course, Trump was probably hoping, with this visit to China, to get some sort of support in getting the Strait of Hormuz reopened. They gave a very polite reply without actually suggesting they do anything. Have you been following the China trip at all?

I saw that he was there. To be honest, if something is really meaningful, I rely on you to tell me about it!

Well, I’m glad I’m doing something useful.

I don’t know what he expected. As somebody suggested, it was partly about stroking his ego — I’m sure it did that to some extent. There was a reception, flag-waving, bands, 21-gun salutes, a huge ceremonial banquet, and sycophantic speeches praising each other. What actually happened in any of the closed-door meetings, we don’t really know.

There haven’t been any announcements of grand progress on any front, which is no surprise. China has been as robust as it could while remaining polite in laying out its position. Before it even started, they said they had four red lines: discussions of Taiwan, democracy and human rights, their political system, and any interference with China’s right to development. So if Trump had thought he was going to make any assertions about any of those, they were off the list to start with.

In fact, Xi made a very coded reference to Taiwan and to the necessity of avoiding conflict. There are clearly very strong elements in the American political establishment that want some sort of proxy war against China to restrict its future prosperity and its ability to rival the United States, which is almost too late, I would say.

Taiwan is to do with semiconductors, right?

Well, the history of Taiwan is that the Kuomintang retreated there after losing the civil war against the communists in 1948. For quite a long time, the United States took the position that this rump of non-communist politicians in Taiwan was the actual legitimate government of China. At some point — possibly around Nixon’s visit — they had to abandon that and accept that mainland China was the real China.

The position since has been what they call the “one-China” policy — that Taiwan is actually part of China. There are strong elements within Taiwan that want a clear separation. It’s quite a muddled situation. As long as they don’t cause any trouble, the Chinese are perfectly happy to sit it out and wait.

Meanwhile, America has been selling increasing quantities of arms to Taiwan. In one light, that might be regarded as yet more profit for the military-industrial complex. By doing that, however, they’re plainly playing up to the separatist factions — there’s no point otherwise. Taiwan’s not going to have a fight with anybody except mainland China, so selling them weapons can definitely be seen as an invitation to pursue that.

The American position is that they would intervene to protect the democracy of Taiwan if China attempted to take it over by force. I can’t see there’d be much appetite on either side for armed conflict, because there’s a great deal of kinship between them — literally. There are many mainland families with relatives in Taiwan, and many Taiwanese families with relatives on the mainland. It would really take something to stir things up to that point. But of course, this is the playbook we’ve seen everywhere.

It’s too big a fish, basically. Xi’s message was that we should be careful not to fall into the Thucydides Trap, which surprised me. You don’t expect Chinese leaders to be versed in classical Greek history.

What Thucydides was referring to was that when one powerful state was growing to the point of becoming comparable to another, war would be inevitable. Xi was saying as clearly as he could — without spelling it out further — that it would be far better if the US and China could avoid going to war with one another.

He then went on to give a very diplomatic warning against any interference or provocation regarding Taiwan. We’ll see whether we get any more concrete announcements.

The other thing is that not only have we got the Strait of Hormuz closed, but Ansar Allah — generally referred to in the Western press as the Houthis — have effectively closed the strait at the mouth of the Red Sea to US shipping. Most Western shipping companies have more or less abandoned the Suez Canal route because they simply can’t afford the very real possibility of losing a ship and its cargo.

The insurance premiums for passing through that route for a fully laden container ship are now up to three-quarters of a million dollars.

How much is the cargo worth if the insurance premium is three-quarters of a million dollars?

A figure I heard was around 10 million. But that three-quarters of a million represents pretty much the entire net profit of the voyage, so it makes paying the premium uneconomical.

Routing around the Cape of Good Hope adds an extra 14 days to the journey and an extra three and a half thousand dollars in fuel. All of that will feed through to the costs of anything imported into the Western world, which of course is most consumer goods and appliances from China, Vietnam, and various other places in that region.

So there’s another front which has been somewhat eclipsed by Ukraine and Iran — the North African states: Mali, Chad, Niger, collectively referred to as the Sahel. These are all former French colonies, and there’s been considerable realisation in those areas of the extent to which they’ve still been economically subjugated even since nominal independence.

Those governments are standing up to the French. They’re making their own currency arrangements rather than ones controlled by the French central bank, and they’ve been supported in that by the Russians.

Now there’s been considerable agitation — so-called separatists, so-called freedom fighters — breaking out and striking against the government. This is almost certainly agitated by the French and also, of course, by the CIA. It’s a further rupture point in the international order that has held for the past seven or eight decades.

All of these things seem more obvious than they used to be.

Exactly. The short answer is that control of the narrative — which has been taken for granted, particularly by the US and the Western world in general — is breaking down. They could do these things and get away with them. Now it’s becoming clear.

What else has happened this week? There was an Israeli attack on yet another freedom flotilla trying to provide humanitarian supplies to Gaza. Israel attacked the flotilla 1,000 kilometres from the Israeli coast, so completely in international waters. They used planes, drones, and warships, and even included a prison ship in their attack force.

Some of the operators of that flotilla had been arrested and brutally treated by the Israelis. This is all in full view of the world. Everything Israel is doing reduces whatever respect the world as a whole has for them. The same applies to US actions — it can no longer sugarcoat the reality of what’s going on.

Meanwhile, our own governments are demonstrating that they’re increasingly out of touch. Labour got an absolute hammering in the local government elections and in the Welsh and Scottish elections. Starmer has resolutely refused to resign, but there’s growing pressure on him. It’s ironic — I saw a clip of what Starmer said when the Conservatives were in power and he was in opposition. Did you see that?

I’ve seen the meme that’s based on it, yeah.

He gave a very pompous speech. I can’t remember which Conservative Prime Minister was in office at the time of that dismal local election performance — was it Cameron?

David Cameron, yeah.

Starmer pompously said he should recognise the will of the people when it’s been expressed as clearly as that and do the decent thing. Now the boot’s on the other foot.

Of the people within the parliamentary Labour Party being touted as conceivable replacements, they all seem totally implausible to me. I did not know anything about this Wes Streeting fellow, but I cannot imagine him as prime minister. I thought it was Tommy Robinson at first — he’s got a very similar physiognomy, a very similar haircut, and a very similar accent and mode of expression.

The interesting development today is that Josie Simon has resigned her seat in parliament, which means there’ll have to be a by-election. Andy Burnham could stand in that, become a member of parliament, and then stand as a credible candidate. Not that I hold much hope for conventional politics, regardless of who’s in charge — it’s 99% theatre.

It’s a matter of time until Big Nige gets in as PM, and he’s a corporate-captured person as well, isn’t he?

Maybe. Maybe all of the Reform candidates who’ve gone on to local councils will make it abundantly clear what a bunch of incompetents they are, and people will think twice about voting for them where it’s really going to count. That’s all I could hope for.

It’s clear we’re not going to vote our way out of this. My stance is that if it made any difference, we wouldn’t be allowed to do it.

Okay, so that covers the things that have stuck out for me this past week. As we were saying, we’ll try to get back to some of the core topics we started this podcast to talk about — the nature of finance. Obviously, all of this will affect our finances one way or another.

At least for the next couple of years, we’re going to have to get by consuming far less energy than we’ve been accustomed to. That might not be a bad thing; it might be a worthwhile focus on the measures we’ll need to take and the adjustments we’ll need to make to live in a world no longer awash in fossil fuels.

I’d be more on board with that if our leaders were leading by example and not flying halfway across the world to have a cup of tea in China.

Fair enough. Let’s call it a day for this week.

All right, thanks Derek. Over the next few episodes, we’ll revisit certain topics we’ve covered in the past — like bonds and interest rates — but look at them through the lens of what’s happening now. We’ll cover that over the next few weeks.

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