Sovereign Finance

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

You were just about to launch into a long spiel about Bitcoin and some reservations about it before we started recording. This has stemmed from some revelations about the Epstein files. Shall we start there?

Yeah. There was a very interesting interview released today by James Corbett with Aaron Day. It’s an hour-long conversation that goes into great detail. Anyone who wants that level of detail, I thoroughly recommend it. It also provides quite a lot of clarity about the whole principle of Bitcoin — what it was originally set up to do and what it has evolved into.

Aaron Day has dredged up a whole lot of material from the released Epstein files. It’s really interesting, the range of different things revealed in those files. With three million pages published, even with the redactions, it’s a huge amount of material. There’s a massive open-source collaboration of people going through it to tease out the information, because it’s not at all well organised or indexed.

The area he was focusing on was Epstein’s involvement with Bitcoin — essentially the attack to derail it from its original intention as a fully transparent, peer-to-peer payment method that enabled people to sidestep banks.

Yeah, something you could actually use to buy coffee with.

Yeah, in the early days, it really was possible to do that. There were many traders taking it in various places. It was very strong in Canada, for example, probably in the States as well. It was fast, and there were low transaction fees.

Personally, I had misgivings for reasons of the indirect experience I’d had. My son Leo had the idea of becoming a Bitcoin miner. He was fairly early into it, but not early enough to make it viable.

Originally, the generation and verification of transactions could be done by anybody with a laptop in the early days. If you were the one who verified the latest tranche of transactions, you were rewarded initially with 50 bitcoins, which would of course be worth millions now.

Every so often, the number of coins the miners received as a reward for completing a block decreased. This was touted as a virtue in that the number of bitcoins would eventually be capped. The argument was that this gave it a guaranteed rarity value, unlike pounds, dollars or euros, which can be created by banks and central banks on a whim.

After a while, the amount of computation required grew. Although it was, in principle, possible to do it on any general-purpose computer, it moved to specialised hardware. My son Leo bought one of these pieces of equipment with a view to becoming a Bitcoin miner.

Unfortunately, it took about a year or 18 months to arrive. In the interval between when he bought it and when he received it, the computation needed to stand any chance of verifying a block had escalated greatly. He ran it out in the shed, 24 hours a day. It used so much electricity that it heated the entire shed. As I recall, he attempted this for a few months, during which time he never verified a single block. So he used up a lot of electricity without any benefit.

This is why you get mining pools, isn’t it — where pools of miners share the rewards between everyone in the pool.

Yeah. Now, of course, it’s got to the point where you only receive a fraction of a Bitcoin if you do succeed. Miners can no longer support themselves from the Bitcoin they earn, so they have to charge transaction fees to people using it for purchases.

This has made it extremely expensive. Rather than being much cheaper than using a credit or bank card, it’s become enormously more expensive and therefore impractical for small transactions. Then in 2017, there was a distinct shift towards promoting it not as a regular means of payment, but as a speculation. As we’ve said before, it’s essentially like any other currency exchange speculation — some winners and some losers.

Two things might have evolved Bitcoin into a viable operation. One is if there was such substantial use of it in normal trade that it didn’t get swamped by the wild swings that occur when most transactions are purely speculative. Another thing that might have validated it would be if someone had set up a solid arbitrage system between Bitcoin and gold, which could also have stabilised it.

But to cut to the chase, this interview explained in great detail how Epstein was involved in funding the MIT group of developers, which solidified it in a way that it was no longer going to be what had originally been hoped for. This is definitely something to bear in mind.

Once you’ve separated it from the likelihood of becoming a replacement for fiat currencies — which is what early enthusiasts claimed — it becomes purely a speculative bubble. Just like any other bubble, it’s fuelled by people buying in the hope of selling later at a higher price. This works until people no longer believe the price will continue to rise, at which point it’s likely to plummet.

What I’ve always said is that it may well be worth having a speculative flutter with an amount that is small relative to your overall wealth, which you actually own and haven’t gone into debt to fund. As with any other speculation, it should be smaller than the amount that would cause real pain in the event of a total loss. That remains my position, subject to our usual disclaimers — I’m not making financial advice.

No financial advice here, yes.

So, having said that, that remains the position, even more so having discovered this. My own view of its viability was coloured by observing my son attempting to mine it — this was probably ten years ago, before the shift in emphasis towards purely speculative or store-of-value usage.

The interview with Stephen Keen, the Australian economist, was essentially stating the same thing. He said there was no real solidity to it. The amount of energy used to run the computers was enormous and only going to get larger. That is why the analogy with mining breaks down.

After all, if you sink a gold mine, it takes a lot of energy to dig the hole, excavate it, carry the material out and sort the slag from the gold.

The energy in true mining is front-loaded, isn’t it?

Yeah, but once you’ve done that, if the mine is successful, you have the gold and don’t have to keep piling energy into it. With Bitcoin, energy is indefinitely required to maintain the integrity of the chain. That, in itself, summarises the essential weakness of the whole system.

So once again — if you want a flutter, feel free, but don’t expect to retire on it.

We’ve talked in earlier episodes about the need for money that actually works, money that isn’t just created out of nowhere by a central bank that doesn’t have your interests at heart. So Bitcoin does tick some of those boxes. I also wonder whether Bitcoin has let a genie out of the bottle and got a bunch of people interested in making something work that will actually function as money. It might not be Bitcoin in its current form.

The idea is correct, though: anyone should be able to trade with anyone anywhere in the world using the same unit of measure, whether you’re in the UK or Kenya. You should be able to transact easily and quickly without intermediaries. So there are elements of it that are right.

Yeah.

When the dust settles — assuming society hasn’t destroyed itself in the meantime — before the end of this century, we will have a single global currency. In my opinion, that currency will very likely be calibrated in gold.

That’s what’s been used for thousands of years. There’s a principle called the Lindy Effect, which holds that something that’s been used for a long time is likely to be used for a long time in the future. Whereas something fairly new is unlikely to last far into the future.

The reasons why gold has been a perennial form of money are very sound. There’s a finite amount of it. The rate at which the world’s gold stock changes is small and fairly predictable. It’s universally attractive, durable, divisible and easily verifiable in terms of quality.

The downsides are that it’s hard to take self-custody, and it doesn’t scale well — you can’t go to a shop and hand over a gold bar. So you end up creating derivatives of value, a tokenisation of it. That system is then open to abuse, which is what happens with every single currency ever. They all end up worthless.

Yeah.

So what’s the solution? If we end up back on a global gold-backed system, how do we avoid this tokenisation making it worthless?

It obviously requires somebody to hold the gold securely, with that holding linked to the transactions conducted. For this to work, there needs to be some form of real-time, transparent auditing of the ledger. This is possible in principle. I’m not going to sit here and design a definitive global trading system, but those are the features it would need.

Also covered in that interview was an indication of Epstein’s involvement in setting up the Tether cryptocurrency. Tether is a form of cryptocurrency guaranteed to be backed by dollars. This means the Tether company is required to hold dollars, which they hold in the form of short-dated United States Treasury bonds.

The forces within the US Treasury and the Federal Reserve see this as a way to sell short-dated Treasuries to the Tether Company to back its cryptocurrency. They’re talking about raising two or three trillion through bond sales. They’re hoping this will rake their chestnuts out of the fire as countries around the world, which have been holding Treasury bonds for decades, gradually get cold feet and divest.

This strikes me as a policy of desperation. It might put the collapse of the dollar off for a year or two, but sooner or later, it will run out of steam too.

Do you think that’s also why there’s a desperate push towards war with Iran — part of the same playbook of kicking the can down the road?

Obviously any warfare is, as I’ve said, robbery with violence on a grand scale. The rational excuse for going to war with Iran would be to seize its oil and other mineral resources. Beyond that, the motivations seem to be providing a distraction from people’s justifiable concerns about more pressing problems closer to home — discouraging them from questioning the behaviour of those in power — and pouring ever larger sums of money into the pockets of arms manufacturers. None of it is very salutary.

No. As I said last week, they do whatever is most profitable. If war is most profitable, we go to war. If peace is more profitable, we have peace. There are no human considerations in any of those decisions.

Appalling. Yeah.

Just coming back to Bitcoin — people will always find a way to trade directly with each other. The ‘powers that ought not to be’ underestimate the ingenuity of ordinary people to trade directly and cut out the big central banks. We’ll find ways to do that, with or without Bitcoin.

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

As we record it’s Monday, 23rd of February. I want to comment on what seems to me the most critical cliffhanger in the world at the moment — the movement of two American battle groups closer and closer to Iran, along with lots of threatening rhetoric. It’s difficult to know what will happen. It seems quite suicidal to attack Iran.

They’re unlikely to destroy its retaliatory capabilities with the opening salvo. The retaliation — probably on Israel, certainly on American bases, and probably on the American fleets — is likely to be utterly devastating. How America would respond, and what that means for Israel, is anybody’s guess. Many of those things could be very hazardous to all of us. It’s difficult to view any of that with equanimity.

I’ve come to the assessment that they basically just do whatever’s most profitable. If it’s most profitable to go to war, they’ll go to war. If it’s more profitable to have peace, they’ll have peace. War would appear to generate trillions of dollars.

Well, as we’ve said before, in terms of the amount of real wealth at the end of the process, it’s a lot less than it was at the beginning.

Anyway, on the topic of putting together our Sovereign Finance worldview—if we’re looking at the money system, the obvious place to start would be the academic discipline that supposedly deals with these matters. That’s called economics, sometimes called the ‘dismal science’. That’s a misnomer, because in real terms it’s not a science at all.

The main reason I say it’s not a science is that we don’t discredit paradigms or theories when they fail to make accurate predictions. That’s what happens with any of the so-called hard sciences. To take one example: there was a time when the theory of combustion held that a substance within the material called phlogiston was emitted during burning. On the face of it, it looks obvious. If you set fire to a piece of wood, flames come off — it appears to be emitting something. So it was a reasonable theory.

But when people looked into it experimentally in a controlled, sealed environment, they found that at the end of the burning process, once everything had cooled down, some of the air had been consumed. It wasn’t that anything within the fuel was emitted. Rather, it was combining with something in the air, which they eventually discovered was oxygen. That’s the way a real science progresses. It makes predictions based on a theory or hypothesis.

It’s hypothesis, then evidence, then a new hypothesis. Plus no hypothesis can ever be beyond question. If you can’t question it, it’s not science.

Yeah, exactly. That alone rules economics out as a science. There are also various dogmas which appear to be sacrosanct. There’s the image of the rational actor who is trying to improve his own circumstances at everybody else’s expense, essentially motivated by egocentric considerations.

That’s probably where the adjective “dismal” comes in — it’s a very dismal view of human nature, that everybody’s trying to do everybody else down. There might be plenty of people who do that, but there are also plenty of people who are motivated by all kinds of things other than selfishness. That obviously needs to be taken into account in any model of human behaviour we’re trying to construct.

There’s another facet of economic theory: the idea of things seeking equilibrium in the marketplace. This is a complete fiction. The marketplace is in a continuous state of flow, and in particular, it requires a constant input of energy for anything to happen at all — something that is largely ignored. I’ll come back to that in more detail.

Market fundamentalists, as George Soros described them, hold up Adam Smith as a poster boy for modern capitalism. That wasn’t really the point he was trying to make at all. His writings are predominantly ethical, promoting upright moral behaviour rather than dog-eat-dog competition.

I’ll link back to the episode we did on Adam Smith and the various other economists, because a lot of these people are partially represented by a small number of things they said.

Yeah, exactly. When he spoke about the marketplace, he had in mind a literal market where people met once a week

I have a lot of issues with the word “marketplace” anyway. What on earth is this fabled marketplace that I’m supposed to be in?

Yeah. Even 50 years ago, the stock exchange was a real marketplace where the same people met each other every day. You’d only survive in that if you were regarded as trustworthy. Now it’s become a complete abstraction. Many people never even meet those they’re conducting transactions with. It’s all done - not even over the telephone - but through a computer screen.

The danger for sovereign entrepreneurs as well is that “the marketplace” implies you’re just a vendor — just another supplier of a commodity. That isn’t what most of us are doing.

Yeah. In Adam Smith’s time, the marketplace was where people actually met. They were all part of the same community. Establishing a bad reputation for honesty or quality of goods would be self-defeating very quickly.

It was also a predominantly Christian society. Even if people weren’t deeply motivated by the golden rule — do unto others as you’d have them do to you — they’d have to make at least a reasonable show of it, or they’d be ostracised. None of those factors applies to the theoretical modern global economy.

Many early economists regarded the economic process as involving labour, capital, and land. After the Industrial Revolution, when the agricultural part of the economy became less dominant relative to the factory economy, the discussion narrowed as though only labour and capital were involved, and what might be an equitable or practical distribution of rewards between them.

Marx felt that labour was entirely responsible for the addition of value and should therefore receive a larger share of the rewards. In fact, all of these analyses ignore one critical thing: without energy flowing through the system, none of this happens. Labourers can’t do anything unless they’ve had enough energy — in the form of food — to provide the muscle power for whatever work is involved.

Empty sacks don’t stand up, as my dad would say.

Yep. Capital, in terms of industrial machinery, doesn’t do anything until you put the coal into the furnace, or whatever source of energy you have. This means it’s not an equilibrium system — it’s what’s called an open system.

Ultimately, it’s powered by the flow of energy from the Sun to the Earth, then released as lower-quality energy after whatever operations have been performed. It’s a continuous flow. It’s been supplemented for the last two or three hundred years by energy that came from the sun millions of years ago, stored in the form of fossil fuels. We’ve burned through those at a great rate, and still — as we’ve noted elsewhere — failed to properly account for the fact that as they become more exhausted, they’ll become increasingly expensive in energy terms to harvest.

Finally, an important part of the analysis, almost entirely missing from mainstream economics, is the insights of system dynamics. This is the study of complex systems with multiple interacting feedback loops. Some of those loops are reinforcing, creating increasingly large results as output increases. Others are stabilising ones, bringing things back into balance by feeding output back into the system — the classic example being the thermostat. If the room gets too hot, the heating turns off, and vice versa.

The equilibrium framing is mistaken. Energy flows through the system and must be replenished to keep it going. That’s why we need to bring these other factors in, if we’re going to build an economics that really reflects how things work and provides useful tools for strategising and selecting tactics.

It sounds to me like economics, as it stands today, largely just serves the existing power structure.

Exactly. Economists know which side their bread is buttered. They can’t afford to rock the boat, or they won’t get promotion and tenure. Those employed by banks or financial institutions are obviously there to serve the interests of the people paying their salaries.

Economic theory also has nothing to say about the role of banks and how banks create money.

That’s another major missing factor.

The other thought I had on the subject of energy — we’ve discussed in the past that money in its purest form is energy, assuming it represents people trading for goods and services rather than speculating. Most transactions going on at the moment are the latter. But that movement also implies energy moving around.

Yeah, exactly.

It feels to me like if you fix the money, you solve a lot of the problems. There’s just a lot of vested interest against fixing it.

Yeah. I was thinking about this the other day. We’ve talked at times about pensions and how far short they’re falling of how they’re supposed to work. It occurred to me that a major factor in the failure of the pension system is inflation.

If you imagine a world of stable purchasing power — as existed in this country for 300 years before the disruption of the two world wars undermined Britain’s financial position — the theory of pensions makes sense. You accumulate a fund over a lifetime by paying in regular amounts, which grows via compound interest into a sum large enough to provide an income in your post-work years.

The earliest payments into the account have the most effect on the final fund, because they’ve had the longest time to compound. But if there’s been a steady erosion of purchasing power over, say, 40 years of working life, then that longest-running portion of your fund dates from when your income was negligible in current terms.

When I started working, I was earning £1,600 a year, which was actually a very handsome salary — probably three times what a manual labourer would have earned. But if I were paying the benchmark 12% of my income into a pension fund at that time, even accumulated with compound interest, it would become a ridiculously small sum in today’s purchasing power.

I’ve got a lot of concerns about pensions at the moment. I also wonder whether, by paying into a pension, you’re just feeding the beast — whether the money is being invested into life-draining activities, weapons, and so forth.

Yeah, absolutely. Shall we wrap it up for this week?

Yeah, sounds good. As I said, I’ll link back to our previous episode, where we discussed various famous economists and what they said.

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

We’re talking about a book you’ve been reading today. What is it, and what do we need to know?

It’s called The Great Global Transformation, written by a chap called Branko Milanovic. I got it on a whim when Amazon recommended it — people who bought this also liked that — which, apart from being a clever upselling technique, is actually pretty useful at times.

Anyway, this author was a former economist with the World Bank. He’s an economics professor at City University of New York and also a visiting professor at the London School of Economics.

It’s a very data-heavy book, but the statistics are extremely well presented. There are plenty of good graphs and tables. One thing that drives me mad is when a book would really benefit from visual presentation and it’s just solid text. This author is clearly a very good communicator.

The main thrust of it is something we’ve discussed before — the shift in wealth and productivity, particularly to Asia, predominantly China, but also many other parts of the region.

I noticed at lunchtime that the honey I was using was made in China… It’s not like we don’t have bees here!

Yeah, that is ridiculous.

Well, I do get it — it’s cheaper to exploit people on the other side of the planet and ship it over to sell in Aldi.

Our village shop sells locally produced honey from a man just down the road who has 200 beehives. How you run an operation like that, I can’t imagine.

You have thick skin!

In more ways than one! Anyway, one interesting statistic in this book was the increase in the share of global production in China versus the United States. Measured in purchasing power parity, the two actually crossed over in 2015 — eleven years ago.

How do we define purchasing power parity?

It’s the opposite of measuring currencies at market exchange rates. According to exchange rates, the U.S. produces significantly more than China—about 1.5 times as much. However, if one dollar’s worth of renminbi buys you twice as many goods in China as a dollar would in America, then purchasing power parity adjusts the statistics to allow for that.

It also buys you twice as much honey, apparently.

Yes. So it’s obviously a more accurate measure of actual goods produced, rather than just a numerical figure.

The other interesting thing about the two graphs is that on the purchasing power parity version, the curves are essentially smooth — a steadily rising production rate in China and a steadily declining share in America. Whereas on the market exchange rate version, there are fairly wild zigzags. Throughout the 1980s, it appeared that America’s share of world production was climbing rapidly, and similarly in the latter half of the 1990s.

That’s highly artificial. It’s not reflecting anything happening in the real economy — it’s a reflection of the dollar appreciating rapidly on the currency exchanges. This shows how loose the coupling is between the real world of factories, farms, and work on the one hand, and financialised measures on the other.

It also surprised me that the gap is so large, since there should be arbitrage opportunities when currencies are misaligned with their actual purchasing power. The whole idea would be to bring those into line with one another. Of course, the reason the dollar has such strength is that it remains the world reserve currency — for now. As we’ve said several times, that could change extremely rapidly.

I’ll go through the book further, and perhaps next week I’ll have a few more insights to summarise. The other thing I was slightly sceptical about is that many of these statistics are expressed in terms of GDP. As I’ve said previously, I’m sceptical of GDP as a real measure of wellbeing, and we’ve given a number of reasons for that.

In this context, though, whilst I’m confident in my scepticism of it as a measure of wellbeing in developed, prosperous economies: GDP is often inflated by ever-faster obsolescence. The faster your washing machine wears out and has to be replaced, the higher the rate at which currency flows through the economy. That’s plainly not a serious advantage to anyone.

You get whatever you incentivise. If you incentivised longevity, your washing machine would never break — you’d just replace parts. But that’s not what’s incentivised or measured.

Absolutely. On the other hand, if you take a poverty-stricken part of the world where many people lack clean water, sanitation, indoor bathrooms, or anything beyond the most basic appliances, there is obviously enormous scope for improving their material circumstances. That improvement would correlate fairly well with GDP as a measure.

So perhaps the higher up Maslow’s hierarchy of needs you go, the less important GDP becomes?

Exactly. Those were the main points on that. As for world events, did you pick up on the scale of the police brutality in suppressing demonstrations against Herzog’s visit to Australia?

Yes.

It’s remarkable to me that such indiscriminate government-sponsored violence can be unleashed in what we consider a civilised country. What surprises me too is that they felt there might be some advantage to it.

Just shows their true colours, doesn’t it?

Even if they dislike people demonstrating against Israeli war criminals visiting the country, the far more astute response would have been to sit it out, wait for it to blow over, and let people forget about it the following week — rather than going out and clubbing and pepper-spraying inoffensive elderly people.

It’s worth remembering that Australia was founded by prison guards, not by convicts.

Yes. Anyway, those are my comments for this week — we’ll pick up a few more threads next week.

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

We were talking last time about marketing and sales for sovereign entrepreneurs who want a guide to how to market and sell themselves and their services to trade on their own terms. In editing the show, I reflected that we talked about a lot of tactics, but there’s actually a foundation: the best marketing is a business that markets itself. People go through the service, they talk about it, they talk to each other about it, and they leave great reviews.

Once you’ve got that basis, that alignment really stems from you doing work that is aligned with your purpose, values-driven, and, in some regard, mission-driven. Once you’ve got that foundation in place, then all of the stuff you’re doing with ads, with writing the book, with all of the other stuff that we talked about, is really going to amplify that. Whereas if you’re trying to amplify something that’s out of alignment, you’re just going to make problems for yourself and fund the Google Christmas party when you run ads. There’s more than enough of that happening already. So I just wanted to mention that because it’s been bugging me for a week or so!

Yeah, good point.

I wondered what you thought about that?

Well, when you say it, I thought, “Why didn’t I say that?” The reason I didn’t say that is because I thought it would be obvious, but maybe the obvious needs stating more than anything.

My motivation in running my own businesses, which I’ve now been doing since I finished my last employment in 1975, was that I didn’t want to be at the dictate of somebody else telling me what my schedule had to be, what I had to do, what I wasn’t allowed to do and all the rest of it. But beyond that, it was a form of self-expression.

A lot of us end up as accidental entrepreneurs, where we end up out of work for a time and go it alone, or in my case, I was a boneheaded entrepreneur because I just thought I could do it better myself! Then I got into business doing something that I thought I wanted to do, but actually it wasn’t really what I’m here to do. I’ve had to unpick that over several years. So business is the ultimate journey of self-discovery.

Yeah.

You might have to go on that journey, but once you’ve got that alignment in place with purpose and passion in service to others, marketing and sales will become a lot easier.

Well, the whole point about what we’re doing here is to save people the pain of finding things out the hard way! But anyway, yeah, good point. I’ll just say one more thing: the whole point is self-expression. When we were talking about sales, we were talking about meeting the real needs or desires of your potential customers or clients. So it goes without saying that you’ve got to have a clear idea of what you actually want to contribute.

You’ve got to really be in their corner.

Of course, you’ve also got to operate with the world as it is.

There’s this tension, isn’t there, between doing the work that you love and finding a commercial fit in the marketplace. You’re finding problems people are trying to solve and trying to marry that up with what you love doing. It requires a degree of art to marry those two things up, and it can take time. You might not get it right the first time.

Yeah.

Don’t Get Blindsided By Environment or Market Changes

Going back to my lessons from Hard Knocks, a key one I was going to mention is that you’ve got to have an eye on the world and how it changes around you. I was completely blindsided by that.

I had more or less accidental success for several years. That came from the fact that I was in a very unusual position. I had a fair degree of competence in both digital and analogue electronic design. I’d also had a background in computer programming during my time in various corporate environments.

I was developing software at that time, a torturous process on big mainframe computers. So I knew about computer programming, and then microprocessors came along. That was a natural development on the hardware side, given the digital electronic design I’d been working on. I also had a grasp of the principles of writing computer code as software.

There were very few people who had both electronics knowledge and software capabilities because they were just entirely different fields until the arrival of the microprocessor. In most environments, people would be doing either one or the other.

So things went brilliantly because there were plenty of problems that could be solved cost-effectively with this technology. There was very little in the way of finished products. Not even very much in the way of tools to help you with the design and implementation.

As well as having that mix of skills, I also had the ability to talk to people and listen to them and engage with them and figure out whether or not I could address their problems, which was again quite unusual for people who were tech boffins.

So with all of those things, it was an automatic success. I thought I’d discovered the keys to the kingdom. I was going to be set up for life. What I didn’t realise was that the world around me was evolving all the time. I only had about 10 years of things going that swimmingly well.

First of all, there was an economic downturn that wiped out the ability of many of my potential customers to buy what I was offering, no matter how much they wanted or needed it. Secondly, these skills that I had became commoditised. The third thing is that there were a lot of already off-the-shelf solutions to the things that would have had to be custom-built before.

There were already things that made it very easy. For instance, you could go a long way by setting up a spreadsheet and putting a few macros into it without needing the next level of expertise in software design. For all these reasons, I could no longer command the same premium.

Had I been aware of that, I could have easily pivoted to my strengths. I could probably have focused more on getting the deals together and subcontracted out the day-to-day implementation. But I didn’t realise that, and so I had a very rough few years and got really demoralised.

I’m getting huge echoes of what’s going on today in a lot of places. That would be like still coding websites by hand when you can get AI to do it. A lot of people have had the rug pulled from under them.

Keep an Eye on Macro Changes

There’s also the bigger situation in the world as a whole. Looking around today at current events it’s similar, but more extreme. We’ve still got the ceasefire being ignored in Israel while a frightful human tragedy unfolds in real time that we can actually see and stream - to the extent that we’ve got the stomach for it.

Do you want to talk about the documentary you mentioned before the call?

Yeah, it’s a dramatisation of the slaughter of an entire family that happened in Gaza. It’s called The Voice of Hind Rajab.

Hind Rajab was a six-year-old child who was left alive in the car which had been gunned down by the IDF. It had 350 bullet holes in it. A rescue centre had managed to contact the child after being contacted by a relative in Germany.

So they were speaking to her. Some of the movie is an actual live recording of this child going through the attempt to rescue her. I won’t go into any more than that about it. But it was a very harrowing experience for an hour and a half. But I was glad I went through it. Because even though I get the picture, I know how bleak it is, this brought it home to me on a completely different level.

It was an hour and a half for a set of events that in real life took four hours for the people on the ground to go through. So it was fairly close to real time, except that it was actually in reality about a third of the time span that it unfolded to play out. So that, I guess, underlines the tragedy, because you’re faced with that. You think, this is appalling. How can human beings do things like this? You realise that this is exactly what has happened tens of thousands of times over.

The people who are perpetrating it are either convinced they’re doing the right thing or completely oblivious to the suffering.

It’s a broken overarching narrative.

Yeah, which we’ve got, you know, the insanity breaking out, the obviously warlike threats towards Iran. I thought it would have been obvious after the events of last September that Iran is not going to take another attack lying down. The consequences for so many people are going to be so appalling.

This comes back to the fact that whatever we do in our own lives, we depend on a functioning planet. That functioning is really quite a fragile system. One of H.G. Wells’ novels was The War in the Air. In that, he wrote it around 1905. So it was a prophetic novel.

In that, at the end of the novel, the world economy had completely unravelled. All of the cities had collapsed. People were eking out a bare existence subsistence farming wherever they could.

Obviously, that was unduly pessimistic with the next two wars, because although there was a great deal of ruination, it didn’t actually destroy the whole of human society’s functioning. But there’s no guarantee that any escalating conflict now wouldn’t have that effect and send us back at least to the Middle Ages, if not the Stone Age.

You have to look, you have to look these things in the face though, don’t you? That’s the point that we’re trying to make.

You get nowhere by being an ostrich and sticking your head in the sand. All that happens is that it’d be more of a shock. Of course, the more people ignore it, the more the perpetrators of all this are emboldened and empowered to keep raising the ante, which appears to be happening.

We’ve got so-called peace negotiations in Ukraine, which has to be pure political theatre. There’s no indication from either sides’ stated positions that they’re really working towards any solution. Anyway, the big event, of course, has been the partial, incredibly ham-fisted release of various bits of evidence that the American government departments had on the Epstein saga.

In the mainstream media, the focus is on the salacious details. According to which political party you depend on is which politicians are embarrassed. The focus is on this type of thing. But what is really coming out is much deeper. For one, the interconnection between this absolute depravity and the so-called intelligence services. Those are one factor in the unfolding chaos and suffering in the world, whether it’s from actual warfare or from the economic disruption we’ve been through.

There are resources in the world that could actually have everybody on the planet living in a tolerable level of prosperity. That’s not happening. The reason that it’s not happening is quite deliberate actions by a small number of people. That network is tied in with the things that Epstein in particular, and all of the people associated with him.

One way or another, the number of rich and powerful actors that were within that network is becoming more and more obvious. It’s highly likely that there were plenty of people whose names are now coming out as being in some way or other associated with him, in some way or other communicating with him, in some way or other colluding with his activities.

Not all of them are necessarily sexually depraved in ways which defy the imagination, but they all must have known the kind of things that were going on; nobody who flew on his aeroplane, visited his island, or his Manhattan townhouse, or his ranch could have been unaware of what was happening, because it was blatantly obvious.

Obviously, none of them had a problem with that. The only problem they have is being embarrassed now that their connection has been revealed.

Someone recently made the point that we shouldn’t be surprised by this, since it has been happening for thousands of years. I was just reading a review of Suetonius’ history of the lives of the Caesars. The late-stage Roman emperors were just doing exactly the same things as we’re seeing here.

The rich and powerful people are either involved in activities like this—

It’s classic End of Empire behaviour…

Or they’re completely comfortable with the fact that the people they are associating with are doing it. They couldn’t care less. I think that is a real revelation to a lot of people - the fact that it’s becoming exposed in the public domain. More is coming out as people comb through the details.

I saw someone else making the point that in order to become a billionaire, you’ve got to be what people describe as a sociopath. That is a genuine abnormal psychological profile, but it’s a profile that perhaps one to three per cent of the population have, where they don’t have the empathy that the rest of us do. But they have an amazing ability to fake it, which enables them to get away with things that wouldn’t occur to the other 97 or 99 per cent of the population.

Not all psychopaths become billionaires, but it’s a fair statement.

There seems to be a lot in that category.

It’s a fair statement that if you put it the other way round, anybody who becomes a billionaire probably had to be a psychopath to start with. If they hadn’t, they would have satisfied any normal human range of desires once they got past a net asset value of maybe 10 million. For a lot of people, it would be far less than that.

Yeah, I was thinking a bit as you were talking about Richard Koch, author of the 80-20 principle, who by all accounts is at least a fractional billionaire. I’m hesitant to automatically tar everyone with the same brush, but it seems there’s a thread.

So, yeah. Anyway, the big superpower of these elites, up until now, has been keeping things out of the public view. You look at the way that every communication breakthrough that there’s been throughout history, you know, once the printing press was invented, that was obviously an enormous amount of threat to the way that the ruling elites had managed to stay secretive.

Because of that, there was a huge backlash. Then you needed a press license to operate a printing press. You needed to put who printed it on everything that you printed so that if the powers that be didn’t like it, they could come round and shut you down.

Then, when it expanded to regular, full-blown newspapers, they had to gradually take control of them again. With radio and television, same thing. Then of course, there’s been the internet. I think they were blindsided by that. There’s definitely obviously censorship, but—

But a decentralisation effect that they’re now trying to rein in with all of the online safety stuff. Which may be trying to close the gate after the horse has bolted.

It’s basically an arms race between the people who are trying to control it and the people who are getting around the controls. You know, it may yet happen that all this does get bolted down. But right now, a lot of information that they would not have wanted is getting through.

In a way, I was saying that with the release of these files, it’s been so ham-fisted that there are clearly identified people who have undoubtedly been indulging in criminal behaviour, so it’s a black and white case. That was not supposed to happen, according to the law passed by Congress that forced this to be released reluctantly to the extent it has. In fact, all it’s done is inflamed the demand for more transparency over that and for people to be held to account. So where this is going to end, I don’t know, but either way the veil of secrecy has really been ripped off in a big way.

It’s mad how we’ve been brainwashed into accepting that there are official secrets that we’re not allowed to know about.

Yeah. Anyway, so we live in times of great change. Who knows where it will end up, but it’s wonderful to be an observer and, to some degree, a participant in these changes.

Yes. Indeed.

I think people underestimate the impact we can make, because it is easy to assume that the people in control of all the centralised media channels have all the power. Actually, the cumulative effect of people starting a podcast and talking to each other, does make a difference. I think we have to stand by that.

Yeah, yeah. The people who are still swallowing the mainstream narratives are simply living in a parallel universe. They probably have no idea how many people there are who no longer share that cosy view of the way the world is.

Eventually, the cognitive dissonance does become too great though. They start to question something. So everyone’s welcome. Everyone’s welcome when they’re ready.

Yeah, there are different triggers for different people. Okay, well thanks. That turned out to be a bit of a longer ramble than we had expected, but interesting times indeed.

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

We’ve had the World Economic Forum meeting in Davos recently and various other events. We thought we’d review what’s gone on from a Sovereign Finance lens. Where do we start?

Well, I just wanted to point out that in the last few days, gold has broken the £4,000 an ounce mark. It’s down slightly from that, but the short answer is it’s up 50% since five months ago. It’s up by about 25% over the last three weeks, which is pretty dramatic. Once again, as I would always say, this is not the rise in the price of a substance. It really is a reflection of the currency’s decline in value.

Right, because people are more interested in gold when they lose confidence in the currency.

Yeah, it’s not an investment in the sense that it’s going to actually provide anything, but it’s a hedge against inflation is the simplest way of putting it. The central banks are making no bones about the fact that they’re stocking up on gold and replacing large amounts of their dollar reserves with gold. This is now being openly discussed. As we’ve said several times over the last few months, a feedback loop is at play. The decline of the dollar and its position in the world is likely to enter a positive feedback loop, accelerating the process much faster than many people would have expected. That was the subtext of a lot of what was going on in Davos.

All of those Davos meetings, as long as we can remember, have been a mutual admiration society of extremely wealthy people. They reinforce confidence among the “elites” in how things are moving. Of course, these people are essentially globalists: not merely being realistic about the fact that we live in one world, but that they would like a unified global power structure with them in charge.

Does that make us “localists”?

What’s the buzzword for it? The principle of subsidiarity. It would be the opposite of that, I guess: making every decision at the lowest level that it is possible to make it.

Which was how the United States was envisioned, wasn’t it?

Yeah. For the last 75 years, since the end of the Second World War, there’s been a constant set of assumptions amongst the financial and political elites. One of those assumptions is the dominance of the United States dollar as the safe harbour, if you like, to rush to when there’s any uncertainty. As the backbone of the international currency system. As a solid reserve in the accounts of central banks everywhere. The funny thing is that it made sense when the dollar was locked to gold at $35 an ounce.

That relationship has been severed for an awfully long time.

Yeah. Once that was severed, you would have thought that would have been the end of it. But it has managed to hold on for twice as long as it was actually “as good as gold”. That’s one of the assumptions that we’ve been working on for the last 75 years.

Another assumption was the unity of the European nations, at least the more prosperous Western European nations. Another was that transatlantic cooperation would exist between those prosperous European nations and the United States. Another was United States hegemony over the rest of the world, either through its economic stranglehold or its military power. That’s being projected on its fleets all over the oceans and its military bases all around the planet.

Finally, you know, again, something we’ve touched on several times is that the United States is now, whichever way you cut it, in the end-of-empire part of the cycle. Every single empire in history has followed the same trajectory, starting out as a previous one was declining. Gradually ramping up faster and faster, then reaching a plateau of complacency. Then things start to unravel and fall into a steeper and steeper decline.

The British Empire had, to all intents and purposes, about 350 years of dominance, culminating in a period when it effectively dominated the globe. Just like every other empire, it was pretty brutal towards the populations of its vassal states. Every empire is essentially grand larceny on a huge scale, enforced with brutal naked force. But it took 350 years for it to reach the end of its cycle.

In 1913, I don’t think many people could have realised where it would be by 1925 or 1930, let alone by 1946. Then we had the gradual coming to terms with reality as we severed ties with all our colonies. We turned them into members of the Commonwealth, which, of course, has not actually improved the lot of most of the population there either. The point being that in that end cycle, they become deranged. Certainly, this is the only way to view global events now, as the behaviour of the United States seems increasingly irrational.

Of course, there are a lot of people who think that Trump is the cause of this. It’s better to look at it in terms of him being the symptom, not the problem.

If they got rid of Trump and replaced him with anybody else, would it be any better? It might be handled with a bit more subtlety, that is all.

It’d still be the same s**t.

Yeah, it would be the same old thing. At Davos, we saw many presentations from various people, either trying not to face up to this or, frankly, admitting it. There was Mark Carney, the Canadian prime minister and former governor of the Bank of England, so - a globalist through and through. He said it was the end of the rules-based order. He had another phrase about values-based realism, but it’s just another cliché trying to paper over the cracks.

There is a potential for international legality, which is called the United Nations Charter. It was set up at the end of the Second World War, as we know, with the idea that this would never happen again. Of course, the promise of the European Union was that it would prevent warfare between the European nations. It would deliver peace and prosperity. We’re increasingly seeing that the European Union is visibly failing to deliver prosperity. It’s far from delivering peace. It seems to be uttering more and more warlike proclamations.

Part of the reason for the EU’s fragmentation is the loss of cheap Russian energy. There’s also the demographic collapse. The population age has peaked. We’re now getting a far larger proportion of the population being of an increasingly elderly age, such as myself. That means that there are fewer and fewer younger people.

Whether the retired people are supported by state pensions which are coming from taxation on the people who are working, or whether they’re arrangements through investments through pension funds that are invested in industrial concerns or invested in government bonds which have to be again funded from taxation, the bottom line is that the support of the no longer working part of the population has to come from the people who are. Once population peaks and goes into decline, we lose that ratio. That is happening right across Western Europe.

As I said, we’ve got political fragmentation, with more and more nationalistic rabble-rousers coming to prominence across Europe. The existing leadership, as we’ve pointed out, is not only devoid of strategic thinking but has also failed to carry the support of the electorate. The only trouble is that the alternatives coming to the fore seem even worse than the current incumbents.

The Labour Party didn’t really win the last election. It was just that the Tory party lost it. It’s looking increasingly likely that both the Tories and Labour will lose the next election, with the Reform Party under Nigel Farage being the likely alternative.

Farage is being teed up by the powers-that-ought-not-to-be as the next PM.

Yeah, it looks very much like it. It seems out of the frying pan into the fire to put it bluntly.

Yeah.

Up until now, the Davos crowd has taken for granted that global integration was well along the way and would solve all other problems. All of a sudden, over the course of literally the 12 months since the last meeting there, this is no longer looking at all plausible.

Meanwhile, on the other side, as we’ve discussed before, a parallel system is being set up by the BRICS nations. Various other combinations of Asian and the global south generally. Increasingly, they’re setting up a parallel system that will override the dollar-based global banking system. In the background, of course, we’ve got the four major areas of serious conflict in the world: Iran, Venezuela, Ukraine, and Israel.

The takeaway here is that the playbook, which has worked very reliably for the US empire over the past 70 years, is suddenly ceasing to function. We mentioned a week or two ago about Venezuela. They tried various measures to destabilise the country and bring it into line. None of them had really worked. Culminating with the kidnapping of Maduro, rather than causing the regime to collapse, it actually seems to have solidified the solidarity of the population behind their government. We could say the same thing for Iran.

This was one of the things that was admitted, not only admitted, but declared proudly at Davos by the American Treasury Secretary. Iran had been subjected to economic warfare, for want of a better term. He was openly admitting that that was one of the prongs of the attack on Iran. Then they had the attempt by Israel to decapitate the leadership, which didn’t have the desired result.

There seems to be an increasing assumption that the US will make another attempt to attack it. But the results are not entirely predictable and are certain to be catastrophic. The only question is how catastrophic and to whom. My guess is that in some conflict, Iran is the most likely one, there will be some massive loss of life of American servicemen on a scale which probably eclipses even that of Vietnam.

Yeah.

It depends. That could provoke an open revolt among the American population over the government’s mismanagement. But of course, it also carries a risk of catastrophic escalation, including nuclear escalation. Israel is obviously going to be attacked in response to any further action against Iran. Israel is probably the most likely country to unleash a nuclear weapon. Once one has exploded, there is no way to know how far it will propagate. So, alarming times.

One other announcement this morning, I don’t know whether you picked up on it, is that there has been an announcement of a truce between Ukraine and Russia not to attack each other’s energy facilities. There’s been a lot of unofficial announcements on both sides that this was in the pipeline. Now Zelensky has announced that he will honour this truce. Nobody says for how long or under what circumstances it will end.

I don’t think that there’s actually been a presidential or government announcement from the Russian side that they’re doing that. But the assumption seems to be that this will be the case for the next day or two. Then, of course, it will be broken, and each side will blame the other for its failure.

That was going to be my comment, is that a lot of these things are theatre. If you give it a couple of weeks then look back, how much has actually stuck? Usually not much.

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

We’re going to talk about marketing today, which is my wheelhouse and probably yours as well. Many people are always in search of the next marketing secret or hack. So what do we have to say about it?

Whatever you’re doing in business, unless you’re finding customers and they’re actually making a purchase from you, you haven’t got a business at all. I’ve titled this segment “Marketing and Sales,” which may cause some dissonance for many people. Usually, the phrase is put as sales and marketing. But it’s worth bearing in mind that marketing comes first, and the sale is the end of the process.

Sales

That said, many people are intimidated by selling. Part of that is the misconception that it’s an adversarial contest in which the winner is the person who makes the sale. A good shift in mindset is to realise that as long as you’ve got an honest product that is appropriate for the customer, the actual winner in a sales transaction is the purchaser. The purchaser has got something they wanted or needed. The seller has only got money. The money’s only of genuine value to them when they exchange it for something they actually want or need.

So in that individual transaction the value should be greater to the buyer.

Yeah. So having said that, the marketing comes first. What marketing is doing is providing a stream of customers, of prospects who are ready for the sales conversation.

I have a client who says that a lead a day keeps the downturns away.

Yes, it does. Anyway, so as the sale is the simplest part, I’ll just discuss that because we can dispose of that fairly rapidly. As I’ve said, what is important is that you’ve got an honest product at a price which appears fair to the prospect, a price that feels appropriate to their circumstances and their needs. If they’ve been prepared by what you’ve done in the marketing process by the time they’re having the conversation, if they are genuinely matched to what you have on offer, the product will practically sell itself.

There’s a really brilliant book called The Secret of Selling Anything by Harry Browne (Amazon link). Although it’s a rather cheesy title, it’s the exact opposite of what you might be expecting. It’s not full of slick tricks and techniques to bamboozle or coerce people, which is how many people view the sales process. It’s basically a very detailed exposition of giving people what they want and making sure the value is highest to the buyer..

Essentially, Browne says want to conduct an honest conversation with the buyer. The best way to start is to ask them what their most pressing problem is. Presumably, if they’ve been through any kind of nurturing process, they’ll know the sort of thing that you’re offering and the sort of issues that it addresses. So they will answer in that context. Then you explore it. You explore whether the price you want for it is fair to them and whether your product actually meets the need or desire they currently lack. Then you explain how your product meets that desire or need. The sale will only happen under those circumstances.

There are a few other things. A great list called the five power disqualifiers by John Paul Mendocha. Do you remember him?

Yeah, John is one of Perry Marshall’s colleagues. I was literally just trying to pull up what the five power disqualifiers were. Yeah, from memory, it was something like, do they have the bleeding neck problem? Do they have the decision-making capability? Do they have the money to pay for it? Do they buy into your unique selling proposition?

If you run through the list of disqualifiers, you’ll save yourself a lot of wasted time by talking to people who are not going to buy for one reason or another. One disqualifier it to find out whether they really have the authority to make the purchase decision. Many salespeople spend a lot of time talking to people who are perfectly happy to talk to them, but haven’t got the authority within the business to make the decision

So the full five power disqualifies are:

* Do they have the money?

* Do they have a bleeding neck? A bleeding neck is a dire sense of urgency, an immediate problem that demands to be solved right now.

* Do they buy into your unique selling proposition? Perry says, if you’re just going into a market, the question is what big benefit will they buy into? What deal would they snatch up in a hot second? What benefit do they want that other guys are not promising?

* Do they have the ability to say, yes, we’ve just been over this. Major decisions in our house are made not by me, but by Linzi.

* Does what you sell fit their overall plans? If your service requires major brain surgery on the part of the customer. He ain’t gonna take your offer unless brain surgery is literally a lot less painful than the alternatives.

Right. Okay, so that deals with sales.

Marketing

Now, marketing really covers everything involved in acquiring, developing, and retaining a customer for repeat business.

That was Peter Drucker’s definition, wasn’t it? That marketing is everything to do with making and keeping a customer.

Yeah. So let’s talk about the arrangements we’ve got to, to harness potential customers and get them engaged with you. Obviously, a starting point for that is advertising. We’re all aware of the myriad forms of advertising that you have. An important thing to understand is the necessity of split testing.

You can come up with the most brilliant creative you can imagine. Unless you actually test it against some alternatives, you’ll never know whether what you’re putting out actually resonates with the target audience. This has been made much easier with the internet, because it’s very quick and easy to put out alternative wordings, see which gets the best response, try alternative versions of the sales page, see which gets the best response, and gradually dial it in.

This is something which really smart advertisers have recognised for over a hundred years. There are a couple of classic books on this. One is Scientific Advertising by Claude Hopkins and the other is Tested Advertising Methods by John Caples. A little bit of a caveat on that: the fifth edition of Tested Advertising Methods was totally revised by people who had no idea really what John was getting at.

Yeah, I’ve got a copy of the fourth edition.

So you want to look for a secondhand copy of the fourth edition or earlier, which is what John actually wrote.

Claude Hopkins in particular was a pioneer of the discount coupon for groceries and the like. The obvious reason for the discount coupon is to encourage people to try it at a lower price and feel they’re getting a bargain. But the real purpose of the discount coupon was to include a small code somewhere on it. When the coupons came back, and the retailer was reimbursed for the discount they’d given to the customer, it’s worth noting that this is a win-win-win situation. Assuming that the product is one that the customer likes when they try it out for whatever reason, they’re a winner. They’re a winner because they’ve got it cheaper than the first purchase, which has reduced the risk involved.

The retailer is pleased because he’s made a sale he might not otherwise have made, perhaps bringing in the customer. He’ll also buy some other things while he’s there. The retailer also wins because they get a share of the cash when the vouchers are redeemed. The supplier is winning because he’s expanding his customer base. But more importantly, he’s getting feedback and intelligence on which of the adverts he used to offer the coupon worked, because each coupon carried a code indicating which advert it was.

You could run a lot of different adverts across different media. You could see which ones were most effective in terms of the return he got on his advertising spend. Once again, this is a classic technique that has been around for over 100 years and has been supercharged by how we can deliver messages on the internet.

You can even do it for phone calls. You could have multiple phone numbers that can be tracked to different sources. Or you say, ‘ring up and ask to speak to Derek or John’, or someone who doesn’t exist. Then you know that if they ask for John, they came from that ad.

Yeah, you know where they came from. So that’s a core skill to master in this area.

Another important concept is the ladder of awareness. Depending on what your product is, it might be something the prospect is already aware of or already exists, and that’s the question. You have to move them on to: why should he choose your version of this product rather than any other?

Going back down the scale, there are some products that the customer doesn’t even know exist yet. So informing him about the product’s existence is something you do. According to what your product is and how aware they are of it, the kind of communication you need to start having with them is determined. Do you want to say a bit more about that?

Yes, I do. So if you go to Google and run a search and look at the ads, most of them speak to solution-aware people. But in any market, there might be a much wider pool of people who are less solution-aware or aware that their ankle hurts, but are not aware of ways to fix the problem. Although not even problem-aware. They’re just like hobbling around in the street. You might be able to reach them with an ad, but it’s going to be an interruption.

Eugene Schwartz did a great job outlining the different levels of awareness in Breakthrough Advertising, another book we can recommend.

Yeah. That book was out of print for a long while and secondhand copies were very expensive, which is an indication of the value they held.

I think Brian Kurtz revived it, but it’s still quite expensive. But there may be PDF copies somewhere.

Right, but it’s a worthwhile investment if you’re serious about business.

Having attracted a potential customer, there are various mechanisms that you can use to get them to start communicating with them. Popular ones are surveys or quizzes. Very often, this is the start of a process of drawing somebody into a conversation where, further down the line they’re going to reach a point where they’re ready for that sales conversation.

Yeah, there’s an app called Scoreapp that a lot of people use. Daniel Priestley developed it. Once people know you are in your world and are in the consideration phase, then it’s a great tool.

Yeah. Then of course there are mailing sequences. For all that we’re deluged with emails now, email is still a very worthwhile way of nurturing clients. Depending on what your product is and what your price point is, and how well qualified the prospects are, it’s definitely worth also considering physical mailings. They’re probably far more likely to be read than an email.

It’s also not that expensive at bulk mailing rates, especially if you compare the cost of sending someone an A4 letter compared to the cost of an average click on Google. It’s actually much cheaper to send them a letter once you have their mailing address and their permission. So the permission is still essential. This is for nurturing your inner circle, not necessarily for attracting new people.

Yeah. Once again, it wants to actually be an informative, interesting letter rather than a glossy brochure.

I send quite a lot of what is called ‘folded A3’ letters that fold down to four pages that are sent as a newsletter with a mix of articles and promotional content.

Yeah good. Of course, one of the very best things you can send people is a book.

You have one too that we co-created a few years ago, called The Letter from 2100: A Possible World for your Grandchildren.

You’ve got several books out, haven’t you?

Just one now called Simple Story Selling, which is constantly under revision.

Of course, the great advantage is that a book lends you fast credibility. We could do a fill episode on the mechanism of getting a book out and for sale on Amazon. This is something which was impossible to do without investing several thousand pounds and having half a garage full of cases of books which you might or might not sell. Whereas now it can be done effectively at zero cost on a print-on-demand basis.

There are a number of print-on-demand services, but of course Amazon is the big one. You can also buy authors’ copies at an extremely steep discount and send these out as gifts. Although a lot of unsolicited mailings go into the bin, very few people are going to throw away a book.

Of course, the whole point of the book is not necessarily to make a killing on your sales as an author, although that could be an unexpected bonus. But the main point is the book extol the virtues of your product and explains what it is and how it works, woven into an interesting narrative. You can have several calls to action, ideally one at the end of each chapter and one to round off the book, where you advise people to get more information by going to your website or taking some other benefit-driven action.

It comes back to testing as well. It’s harder to do, but you can test your calls to action. You can also switch out the call to action in your book every now and again. As long as you’ve got a steady drip of sales coming in or books that you’re sending out to people, you can start split testing different calls to action within the book.

Right. Those are all the marketing topics that came to mind for sovereign entrepreneurs. Obviously, we could run an entire conversation on marketing and sales every week for a year.

The marketing approach we’ve outlined in this conversation is geared towards expert service providers. It’s not the only marketing mix, but it speaks to the sovereign person we’re trying to reach here.

Anything else you want to say before we wrap this up?

I have a golf analogy for sales and marketing, where if you’re not doing much marketing and just relying on sales calls, it’s like trying to hit a hole in one. From a sales perspective, it’s very hard to sell to a cold prospect. Whereas if you’ve got enough marketing elements working to knock the ball forward toward the hole, your sales conversations will become much easier.

So by the time you get in a sales conversation, you’re standing on the green, ideally right next to the hole, just tapping balls in. That’s where you want to be in a sales conversation.

Very good analogy.

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

We were originally going to cover entrepreneurship, sales and marketing in this conversation. That is coming next time, but we felt compelled to comment on some goings-on. So what are those goings-on that we need to talk about?

Right, well, there are five that are worthy of comment. Obviously, one is the ongoing situation in Venezuela. The second one was a speech from the Iranian representative to the UN Security Council. The third one is Trump’s latest soundings on Greenland. The fourth is Trump having done another U-turn over who he says is responsible for failing to reach a peace treaty in Ukraine. It’s now gone back to being Zelensky’s fault.

The fifth is a speech Putin gave to ambassadors from 32 other countries in Moscow. As far as I can see, it hasn’t received any media coverage. So let’s dive straight in.

1. Venezuela

It’s still a mystery how they pulled off the arrest of Maduro….

It could all be theatre. It smacks of theatre, doesn’t it?

It does. Having got him to New York, he’s now going to wait two and a half months until he gets the next bit of his trial. I don’t know what conditions he’s been kept under. It seems like a very high-risk move without it being at all clear what outcome they want.

It’s clear that the United States would like to simply steal all of Venezuela’s oil and any other mineral resources it has. But it doesn’t appear to have been thought through. It wasn’t clear what they were going to have as a result of the immediate abduction. The vice-president, who is now acting president, has made it absolutely clear that they’re not turning themselves into a vassal state. They haven’t got an alternative government plausibly lined up. The ridiculous opposition leader who was given the Nobel Peace Prize for no noticeable reason and has now donated her medal to Trump is in no position to form a government.

It’s not at all clear that if American oil companies sent in their executives and technicians to improve the infrastructure and extract the oil, they’d be safe, or that their safety could be ensured. So it’s difficult to know where it goes from here.

This is actually the fifth attempt to destabilise Venezuela and bring it under US control. They started off by imposing sanctions a few years back. They then attempted to have a regime change, putting forward Juan Guaidó. Having said that, the 2024 election was invalid; elections seem to be getting less and less credible everywhere in the world.

More and more people are realising that we’ve been given a plastic steering wheel to try and steer the car with.

It looks a bit like it. Then they tried diplomatic isolation. Finally, they had a system of conditional export licences for Venezuelan goods, none of which was enough to pressure Venezuela into falling in line. It does seem that the major impetus for feeling they had to do something comes back, yet again, to dollar hegemony in international trade, specifically in oil. Once again, Venezuela had made it clear that it was about to start accepting alternative currencies and to use the Chinese financial settlement system to conduct the deals.

Then, of course, we’ve had the blatant piracy of attacking and capturing oil tankers on the high seas. It seems that if the United States wanted to destroy any credibility it has as an honest operator on the international stage, it couldn’t be going about it more rapidly.

I saw a Pirates of the Caribbean AI-generated meme with Trump’s face on it. There’s a lot of banter going around the internet at the moment.

Yeah, replacing Johnny Depp’s face with Trump’s. It’s almost too easy, isn’t it? Okay, so that’s a question of ‘watch this space’. Any attempt to invade a place which is three times the size of Vietnam and similarly mountainous and jungle-covered would obviously be catastrophic for any forces that the United States could bring to bear. Bluntly, it seems like yet another failed attempt to rerun the playbook, which has worked so well for the last 50, 60, 70 years: drum up some protest, work behind the scenes to get a disgruntled opposition group with enough power, weapons and training to rush in and take over, then provoke some triggering event. This also appears to be what is happening in Iran.

I was going to say that. That sounds very similar to what we’re seeing in Iran. We’ve had open admission from certain people in power that there are Mossad agents on the ground.

2. Iran

Yeah. This is extraordinary. Once again, there are broadly two... There’s no doubt that there have been a lot of demonstrations in Iran. In the Western media, they seem to have been portrayed as protests against the government in general. The alternative narrative is that the first wave of demonstrations was a protest demanding that the government address the rapid inflation caused by the rial’s devaluation.

They just circulate photos of protests that may or may not even be in the correct location or the correct time. You can’t believe anything you see.

The reports I find credible from Iran say they were entirely peaceful. Then there was a flare-up of violence, which included the burning of mosques, which doesn’t seem likely to have been instigated by Iranian anti-government protesters, bearing in mind that it’s a very solidly Islamic country. As you say, there have been actual honest admissions by people in the West that Mossad agents were involved. That seems highly plausible.

In other words, it’s the same thing we’ve seen in all kinds of things, from the World Trade Organisation meeting in Seattle years ago to the student fee rises protests when the Conservative government came in about 10 years ago in this country. You get a few people in there who are not actually part of the protest group, but they’re there to stir up trouble and create violence.

Yeah, I suspect that stage name ‘Tommy Robinson’ falls into that category.

Yep.

So then there have been very large demonstrations. The agent provocateur factions seem to have quietened down. Incidentally, there are again two narratives about the jamming of the Starlink signals in Iran. This is being portrayed as an attempt at censorship to prevent the protesters from getting accounts of the demonstrations out to the wider world. The alternative explanation is that they were shut down to prevent coordination of the agent provocateur factions. Anyway, be that as it may, the violence subsided.

There have then been very large demonstrations, which again are portrayed as anti-government. But there seems to be a strong case that they were actually pro-government demonstrations, demonstrations of support and solidarity. At the UN Security Council, the Iranian delegate made a very forthright and clear statement about the entire thing. Once again, this doesn’t seem to have been widely reported, though it’s easy enough to track down on YouTube. It’s well worth investing 10 or 20 minutes in listening to.

It’s important to actually listen to people and form our own assessments of their integrity and their plausibility.

Otherwise, your worldview gets hijacked by powerful interests.

Yep. So there’s no doubt that the United States is genuinely rattled by the amount of Chinese infrastructure being installed in South America, including ports, railways, and energy facilities. There seems to be very little they can do about it. Again, over time, we’ll find out whether this can be taken at face value as Chinese support for improving the lot of those countries and for building a mutually beneficial relationship, or whether claims of some underhanded motivation can be justified. But it’s worth watching.

3. Greenland

Trump’s been nattering about Greenland on and off ever since he was inaugurated. It seemed to me totally implausible that they could actually act on this. It seemed like empty rhetoric, but all the indications are that he’s fairly serious about this. The thing that I am continually puzzled by is wondering how many of these things that Trump comes up with are, first and foremost, his own brainstorms, and how much of it is him putting the public rhetoric on the surface of decisions that have been made behind the scenes by other actors.

As this is an audio-only podcast, I can tell the listeners I have a large grin on my face at this question!

Of course, we now know that the Europeans have protested about this because they say Greenland really belongs to Denmark. Although Denmark, of course, has no more claim on it than the United States does, and they haven’t behaved particularly supportively or generously towards the island’s native population. Nonetheless, this has led to greater fragmentation between Europe and the United States. We had a suitably unimpressive speech about it this morning from Keir Starmer.

4. Trump’s n’th U-Turn on Ukraine

Then, fourthly, the latest on the Ukraine situation is that Trump has now been saying that the obstacle to peace is Zelensky. I would say that’s fair comment, but yet again, it’s a bit like a weathervane in a whirlwind. The fact that he says this today doesn’t mean it’s what he’s going to say tomorrow, and it certainly wasn’t what he was saying yesterday. I’m sure the Russians have just decided that they did their best to engage in some dialogue.

I thought back at the time of the Alaska meeting that this was really the dawn of a more sane opening of dialogue, normal diplomatic exchange, and communication and cultural exchanges between the West and Russia. But clearly there’s no sign of it. Once again, the best way to put it is that it was pure theatre.

5. Unreported Putin Speech

Finally, there was a speech by Putin, which if you rely on mainstream media, you wouldn’t know about. But once again, it was delivered to a meeting of the ambassadors and some supporting staff from 32 countries in the Kremlin. He gave a very forthright summary of the background to the Ukrainian situation, noting that they have made an offer to extend the Strategic Arms Reduction Treaty, which is set to expire. They’re waiting for a response from the US regarding that.

It reviewed again the point that they were very firmly promised in 1991, when they dismantled the Warsaw Pact and the Soviet Union, that NATO would not advance towards them. That has been honoured in the breach continually since then. They’ve made it clear that... So once again, it’s really worth tracking that down and listening to it, deciding how it corresponds with any estimate you make of the realities on the ground and where that leaves us for moving forward.

So everything is still in flux. It’s difficult to see where we’re going to end up.

P.S. Our comments on the WEF meeting in Davos will come next week.

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

I’ve come across some numbers regarding the United States’ current financial position. Now, of course, the debt numbers we’re talking about run into the trillions. Bear in mind that a trillion dollars represents in round figures the lifetime earnings of a million people.

I will put a link into the episode we did on big numbers, where we explored the true scale of millions, billions, and trillions.

Yeah thanks. So now we’re talking entirely in trillions. The US stock market valuation (equity stocks in United States corporations) is $42 trillion, and $22 trillion of that is held by overseas investors. So if they start to have reservations about the dollar’s ongoing purchasing power, this could itself trigger a stampede.

Then you’ve got the US government debt, which is now up to $38.6 trillion. It seems to add a trillion every time I come back and have another look at it! Once again, a substantial portion of that is held by foreign investors.

I had to go back and see how much China holds. China, of course, has to tread a fine line. It doesn’t want to get left holding the baby if the value of the dollar goes into free fall. At the same time, it obviously doesn’t want to be blamed for crashing the global financial system by holding a fire sale. But it’s been steadily reducing its dollar holdings by amounts that are pretty big movements when we’re talking about national currency reserves.

When the music stops you don’t want to be the one left without a chair.

That’s right. For those figures there, of course, you’ve got a vast amount of US consumer debt as well. That also runs into the trillions. But the context is that the United States’ GDP is about $31 trillion a year. But bear in mind that much of that is imported goods, paid for with dollars created out of thin air. A lot of it, as we’ve discussed, is either financial transactions or replacing things that become obsolete or worn out, rather than the creation of any novel wealth.

But either way, those liabilities, if you add them all up, vastly outweigh the actual economic activity going on in the United States.

I was motivated by this because there are various discussions about, well, yeah, this will take years to play out. But I thought it was worth revisiting the hyperinflation in Germany in the 1920s. At the time of the Versailles conference, it was apparent to people who were really on the ball that Germany would never be able to pay the reparations imposed on it for the cost of the First World War.

That much was obvious to me as a 13-year-old sitting in history class 80 years later, too.

Yeah. It appears that spinning up the printing presses was a colossally naive move. The alternative view is, of course, that the German finance minister was not at all stupid, and he was not economically naive, and he knew perfectly well what he was doing. This was to essentially inflate the debt to the point of non-existence.

In fact, even after that conference, the German economy appeared to be holding up quite well. The stock exchange was still rising. That continued until December 1st, 1921, when the German stock market peaked and began to decline. It took less than two years from that point to the point when they threw in the towel, discontinued the Reichsmarks, and issued the new currency in Deutschmarks. This was in November 1923.

So from the beginning of December, when the economy turned round, it took 23 months for the fall to happen. By the time they abandoned the Reichsmark, the exchange rate, which I hadn’t picked up on, was actually $4 trillion to one Reichsmark.

I’m not sure what the exchange rate was. I’ll check up on that and we can add a note to the page when we publish this. But in round figures, it would have been somewhere around parity. All of the currencies were broadly similar at the beginning of the 20th century.

The exchange rates were in single digits, whether one, two, three, or four, depending on the direction. So these astronomical amounts persisted in some European currencies before the euro was introduced. I remember thinking, you know, why are these Spanish pesetas such tiny amounts? What about the lira, which was running at 2000 to the pound when I was travelling in Italy. If you needed change from a 100 lira note, they gave it to you in sweets. Of course, this was all because of the collapse of the currency values during the war. The French franc had been broadly in the same ballpark and was replaced by francs at the rate of 100 to 1 after the Second World War.

So basically, the German currency went down and down in value until it was literally one-trillionth of its value at the beginning of the First World War. That is essentially what happens when confidence is lost, and it is lost through the process of currency debasement.

For instance, the $38 trillion US federal debt had gone up from $14 trillion in 2007. So it increased by a factor of about two and a half in less than 20 years.

I’m deeply suspicious about the accusations of incompetence as well. I think it has been allowed to happen.

Well, when you’ve got debts on this scale, it’s obviously physically impossible for them to actually be repaid in reality.

Yeah, because there’s not enough wealth in the world. The GDP of the world wouldn’t scratch the surface.

If they attempt to, they’re now caught between a rock and a hard place. They can’t repair it, and any attempt to have another round of so-called quantitative easing will accelerate the evaporation of confidence worldwide. So we could certainly be looking at something far less than the two years it took for the German currency to collapse in the 20s. Bearing in mind that we live in a much more rapid world in every respect now.

The feedback loops are everywhere.

Yeah. Which reinforces my prediction that we’d see something dramatic sometime this year. The other thing, of course, is that all the time, American government securities are being retired at the end of their time, and they can no longer sell long-dated bonds. So it’s all being refinanced by short-dated ones, and the prevailing interest rates are going higher and higher.

Which ties into what I was talking about recently: the market interest rate is determined by both the basic rental of money, which has historically been about two and a half per cent. Plus factors to allow for your evaluation of the likelihood of default and your estimation of the likely buying power of the currency when you repossess it at the end of the loan period.

It comes back to confidence, doesn’t it?

How that process had been short-circuited by the ongoing creation of new currency. It looks like that levitation effect has now run out of steam, and so all the feedback loops are going to be going in the opposite direction.

This is the situation we’re in, and it also explains the hysterical and reckless attempts to do things like attempt to seize Venezuelan oil. Which one way or another is not going to happen. There’s no doubt that the American oil companies would like to go in there. They’re not going to go in there if any people they send in to manage the oil wells and the refineries are in danger of getting sorted, and there’s no way that the Americans can provide security.

So that is the main thing on my mind when I look at the global financial situation. Of course, you know, we’ve now got the Singapore Gold Exchange opening vaults in Hong Kong and Saudi Arabia. At some point in the future, we’re going to see convertibility of the Chinese Yuan into gold. At some point, that’s going to become a fixed rate.

This will be a full circle back to the situation of America at the end of the Bretton Woods Conference in 1946, where because the dollar had a fixed exchange rate to gold and America had the gold, and nobody doubted it at that time. The dollar was as good as gold, which is why it became the reserve currency and people were prepared to hold it.

Plus, there was the deal Kissinger made with Saudi Arabia: they would always sell oil for dollars, would not present them for conversion to gold, and would invest them in US government bonds and other US securities. Which was a confidence trick that held up for 50 years and is now running out of steam. So the only question is how rapidly and what form the ensuing chaos takes.

We were talking last week about the various promises that Trump made, pre-election, and we omitted one…

Which was perhaps the most important one: the promise to audit the gold in Fort Knox. At the end of Bretton Woods, it was asserted that the American Treasury’s gold holdings at Fort Knox would be audited annually. In fact, they were only audited once over the next 10 or 12 years, during the Eisenhower presidency. They haven’t been since. There was a publicity stunt within the last decade. I can’t remember exactly when they took a bunch of American politicians on a sightseeing tour of Fort Knox, opened one or two vaults, and showed them cages full of gold bars.

Nobody actually checked whether it’s real gold. Nobody actually checked whether there was anything behind the front row. Nobody looked in more than a very tiny proportion of the total vaults in the building. Nobody even counted the number of bars in the ones they looked at. So it was purely a PR exercise.

So nobody knows whether there’s anything significant there at all or what relationship it has to the nominal holdings of the US government or the US Federal Reserve balance sheets.

We let the fox guard the hen house and have neglected to audit how many hens remain in the hen house after all this time!

Yeah, exactly so. So interesting times.

The other thought I had as you were talking about the dollar was I remember when I spent six months in South America about 17 years ago. The South American currencies are notorious for hyperinflation, and it was advised at the time to carry some dollars with you at all times. If you couldn’t get money, you’d usually be able to spend dollars as a backup medium of exchange. It feels like all of that doesn’t really hold that much water anymore.

Exactly. Yeah. It’d be interesting to know what people do regarding that now.

There are some countries like Honduras and El Salvador that are moving towards Bitcoin, perhaps in Argentina as well. Which is because people are so fed up with having multiple currencies quickly become worthless that there’s more incentive to look for a different approach. Which I am watching with interest.

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

Editor’s note: this episode contains two discussions covering current affairs, one from 12th December 2025, and one from 5th January 2026. (The Editor got distracted by Christmas!) We’ve published them together as one backs up the other regarding our stance on the dollar. There is an audio interlude between the two segments on the audio version.

Comments from 12th December

We’re wrapping up some recent current affairs today. What’s been going on that people need to know about?

Well, one of our themes has been that we’re plainly at an end-of-the-empire situation with the United States. The US has been the predominant world power since the end of the Second World War. It’s been a remarkably short run as empires go, because it’s clearly in decline.

Empires do some pretty crazy things as they die as well.

Yeah, they usually do. What makes this situation unique is that we’re now literally in a position to end life on this planet. Certainly all higher life forms, or even if it didn’t go that far, the complete destruction of the human global civilisation, possibly the extinction of the human race. We’ve never been in that situation before. How we navigate this is obviously critical, and it’s obviously out of our hands. The more people who have a realistic assessment of the situation, the more likely it is that pressure will mount to navigate it safely.

I just wanted to indicate a few of the areas where it’s showing up. It’s like Groundhog Day. We keep saying it’s the situation as it has been, but it’s getting more extreme. You’ve got the Israeli government continuing its devastating destruction on the Palestinian areas of its own state, also lashing out into surrounding states like Lebanon and Syria. It’s a matter of time before there’s another attack on Iran, although you’d have thought that the decisiveness of the response last time might hold that off. Who knows?

The other ongoing conflict is, of course, Ukraine. The way that it’s developed on the ground over there in the last month or two has come as no surprise to me because I’ve been following this. It was quite obvious that despite the accounts we’ve had in the Western mainstream media trying to put the best gloss possible on it, Russia was making the running. However, this has now become so obvious and so unavoidable that it’s no longer possible to pretend otherwise.

Yet the so-called leaders of Britain, France and Germany continue to deny this. They think that somehow or other they can roll it back. They continually try to find a way to confiscate the frozen Russian assets, which are mostly held in a Belgian bank. The Belgian government is resisting that. The logic of doing that really defies common sense because the idea was that when Russia had been defeated, these could be legitimately confiscated. I don’t know whether legitimate is quite the right word.

There’s no logic whatsoever if you assume that there’s any chance that Russia might not be defeated. The chances of it being defeated look increasingly remote. Also, the unmistakable support that the Europeans are giving to the Ukrainians really amounts to the reality of their being in conflict with Russia. Of course, we’re all hoping that it remains contained. Russia doesn’t actually strike out at our own countries, which it could make a very strong case for doing.

Recent developments have been the attacks on Russian oil tankers. Most of the ones that have been attacked have been empty, as far as I can figure out, and on their way to pick up a shipment. There have now been five that have been badly damaged, probably rendered unusable. The logic behind this was supposedly that if they could strangle Russia economically by cutting off its oil exports, it wouldn’t be able to continue to maintain the war in Ukraine. There hasn’t been any sign.

So the sanctions didn’t work, so we’re going to try and sink all the ships instead.

As I say, they’ve attacked five so far. I don’t know how many tankers they have in total, but I believe it’s somewhere in the region of 1,000 or 1,500. They’d have to sink a lot more before it would have any real impact on Russia’s economy. But it’s obviously a flagrantly illegal act under any interpretation of international law, as is the sinking of half a dozen to a dozen small Venezuelan boats because they were transporting drugs destined for the USA.

Yeah, that’s a cover story for implementing the geopolitical change they want to enact.

This has been taken a step further. I don’t know whether you noticed, but one of these boats was heavily damaged and its hull was still floating in the water. It’s on video, which has gone around the world, that two passengers were seen clinging to the hull of the boat. Another attack went in there and killed them in cold blood. That is an absolutely black and white war crime under the Geneva Convention.

Even if the original attack was justified, which it clearly isn’t—assuming that there was a strong case that they were smuggling drugs, which is highly unlikely because the United States coastline is 2,000 miles away and those boats don’t have that range—but even assuming that, the right thing to do obviously would be to intercept them, search them, collect the evidence and put them on trial. Give them an appropriate punishment, which isn’t the death penalty for smuggling drugs anyway. Certainly not in international waters.

This has taken another notch up with the American commandos dropping from a helicopter onto a Venezuelan oil tanker and capturing the tanker on whatever pretext, which is simply an act of piracy. This is visible for the whole world to see. So America seems to me to be eroding its own credibility faster than it’s achieving anything useful.

Yeah, I sometimes wonder what goes through the minds of those commandos. They must just blindly follow orders.

You have very little option but to follow orders if you are in the military.

It’s not a—I don’t mean this to be patronising—it’s not a thinking man’s occupation.

That’s the way I would look at it.

If you turn the tables on any of these situations, if these things were happening to the United States boats or oil tankers, it would be the end of the world. It would trigger a chain of events that could be catastrophic.

Yeah, we’re still in the phoney war stage. We don’t know what’s going to happen. The usual way these situations work out is that the CIA have paramilitary forces in the country and they execute a coup against the leader, which could well happen. However, what would happen after that is anybody’s guess. Maduro obviously does have enemies. No leading politicians fail to do so, but he obviously enjoys enormous support from the majority of the population.

Any attempt to set up a puppet government there would be extremely troublesome, to say the least. So there we’ve got it. The other thing from the economic realm is that the stranglehold the United States has had over world finances, because there was really no alternative, has now decisively come to an end. The entire BRICS group now has sufficient trade among themselves that it no longer needs the United States or the Western world in general as a marketplace.

It no longer depends on them for supplies of anything because China’s manufacturing and technical sophistication is rapidly outstripping everybody else’s. They don’t need them for the financial arrangements because they’ve set up a parallel system that will almost certainly work better anyway. The necessity of holding dollars as the reserve currency has more or less eroded over the past year or two.

China steadily reduces its holding of US Treasury bonds of one sort or another. It’s replacing that either by gold or by holding the currencies of its trading partners. So, in a way, we’ve come full circle to the way the system of international exchange worked before America essentially monopolised it in the aftermath of World War II.

I was thinking that maybe this was the primary change that happened after World War II.

Yeah, it was. The Bretton Woods system really locked the rest of the world into subservience to the United States. At the time, that made sense. It was by far the most economically powerful nation in the world. It was by far the richest. It was owed money by most of the European countries. It had gold backing to the dollar, which rendered the dollar literally as good as gold. That lasted less than 30 years, 25 years until Nixon closed the gold window.

Now that it can no longer rely on that and no longer enforce the dollar as the purchasing mechanism for oil, it could unravel very much more rapidly than anybody expects. I don’t know at what point it would become the case that it can no longer pay all these military personnel stationed all over the world in any currency with meaningful buying power. But that would handicap its ability to exert military force.

The unknown quantity is whether it would do something utterly destructive in response. For all that, I’m still of the opinion that we’re going through some kind of birth process of a more positive era for the human race. Time will tell whether that was fruitless optimism or whether there is some hope of that.

I think it has to be, otherwise we won’t be here. There isn’t a middle way. I don’t think we can continue in this manner.

It’s not doing us any harm to be aware of what’s going on as long as we don’t let it drive us into depression, which I’m doing my best to avoid.

Yes, keep standing in the light.

Comments From 5th January 2026

I’ve noticed every January that the ‘False Matrix’ or ‘The Empire’ doesn’t waste any time kicking off the next psyop. There are always bushfires or a war. In this case, the president of Venezuela has been abducted. We don’t have a shortage of source material for 2026 so far, but we thought we’d do a bit of a roundup of goings-on last year and how they relate to events happening today.

One of the things I wrote in my journal around a year ago, either when Trump was elected or when he was inaugurated, was that I didn’t think it would take long for many of the people who were enthusiastic about his win to become disillusioned. That assessment has been vindicated in spades to a far greater degree than I could have imagined. The team he’s assembled around him seems like a mixture of raving lunatics and complete incompetents.

Trump’s team seems remarkably short of talent and somewhat demented in some of the ideas. Some of them looked pretty credible during the Senate hearings to confirm them, but have turned out to be very disappointing in reality. Bondi is an obvious example. Cash Patel, the FBI chief; his assistant, Dan Bongino, has resigned already, quite wisely.

I was also reviewing many of the promises he’d made. In general, we don’t expect politicians to honour their promises, but the pledges of openness about all sorts of things would have been really positive. The assassinations of John Kennedy, Robert Kennedy Senior and Martin Luther King… We’ve had a certain amount come out about Kennedy, which confirmed what many people had strongly suspected anyway.

I didn’t exactly fall off my chair in shock.

It seemed to create remarkably little outrage, presumably because most people who actually cared about that already knew most of it. But the fact that it’s been openly admitted is quite significant.

It feels like the year they stopped pretending to care about these things. They stopped pretending to hide. They stopped pretending they’re doing all these things in the name of ‘freedom’ and ‘democracy’. They’re coming out and saying openly now that it’s about the oil.

It’d be very interesting to see whether they’re impervious to the consequences of being open about these things. The big one is obviously the Epstein scandal. It’s difficult to see how Trump could have expected that to go okay, given what he obviously knew. I don’t know whether he expected the revelations to be highly selective or what. But the fact that everybody’s anticipation was raised by it, and then we’ve had a series of extremely implausible evasions and delays.

Then what comes out—did you pick up on the fact that many of the redactions in there, which were absurd anyway, didn’t actually work? Apparently, they were done by overprinting with black highlights in Microsoft Word. It didn’t take long for a number of people to figure out that by saving it as a text file, you could see what was in the text beneath the blocking. Had you picked up on that?

No, I hadn’t.

The incompetence is staggering. Of course, it’s been more embarrassing than if they’d just revealed it in the first place. It’s difficult to see how we can avoid bringing prosecutions against many of the people who, from what has come out in the limited releases so far, are now clearly revealed to be involved in flagrantly criminal activity.

Although the anti-Trump people have made a big deal about how much of him there is and embarrassing pictures and so forth, I haven’t myself come across anything which is actually incriminating to him. Although we’ve got a few extra pictures, many of the ones are the ones we’ve been seeing with remarkable regularity over the past year anyway. But these are merely embarrassing rather than anything else. Clearly, we’re dealing with somebody who’s basically immune to any feelings of embarrassment.

It’s quite interesting also that one of the more minor promises of revelations has dropped out of sight. What happened to all the stuff about the unidentified aerial phenomena? We were supposed to receive revelations about what they knew or had uncovered regarding those. It’s just been quietly dropped from the agenda, without anyone much noticing or commenting on it.

It could be wrong, but it felt like a distraction to me.

I’m surprised they didn’t make more use of it in that case!

We’ve got the Ukraine war rumbling along. The peace negotiations don’t appear to have been done in good faith.

It’s the same in Gaza.

It’s difficult to believe they were anything other than theatricals. Give the appearance of doing something without actually expecting anything different.

It’s pretty clear they lie about everything.

The other thing is the assassination of Charlie Kirk. Such official explanations as we’ve had have been widely regarded as implausible, which has just fuelled further wild speculation. It has certainly done nothing to damp it down. More and more is coming out of him, plainly speaking out against the official line in all manner of ways.

It feels like he broke ranks somehow. It was definitely a professional shot that took him out. It wasn’t from the direction we’re told.

It looks very much as though it wasn’t even a bullet. It was a flechette of some sort.

The big picture has got to surely be that what we’re seeing is a classic end-of-empire situation. Every empire on the way down doubles down on things it’s done things that have worked in the past and are beginning to backfire. We’re seeing this in a massive way.

As far as the Venezuelan abduction is concerned, ‘abduction’ is the only word that will do...

I was trying to think of the right word for it. It’s a kidnapping.

Well, kidnapping is as good a word as any. A flagrant disregard of international rules by any standards and international law. A public relations disaster as far as I can see. The entire world is almost united in condemnation. Even countries like Britain are making lame attempts to distance themselves without actually criticising. It didn’t work out well with that.

It’s a mystery why the air defences didn’t take out the helicopters, whether that’s incompetence or some form of collusion. Who knows? They can hardly give him a secret trial. I’m sure he’s articulate enough to come out with lots of embarrassing proclamations in the course of whatever hearing they put him through, particularly as the alleged offences are actually totally implausible.

He might just hang himself in his cell in the five minutes that the CCTV is not working…

Well, let’s hope not. That probably won’t help America either. I don’t know what they really anticipated. The deputy who has stepped into the role as acting president was expected to roll over and cooperate, but clearly she’s started out by making a robust statement that she wasn’t going to.

The senior officers of the military have already made a clear statement that any interference will be resisted. Reports I’m hearing indicate that the population has become more united against any foreign meddling. Of course, one side effect of all this is that, overnight, many more people who were previously just going along with the standard account of events are now questioning it. They’re now taking another look at a whole succession of regime changes that the United States has orchestrated all over the world over the last 70 years—or maybe over 100 years.

They didn’t even bother with the standard CIA-backed coup this time. Or maybe they did and maybe it failed, but who knows.

Well, they certainly didn’t manage to drum up any significant apparent protests against the regime ahead of time. Then, of course, in the last week, we’ve had the drone attack from Ukraine targeting Putin’s country house, where he may or may not have been at the time. Right while Zelensky was in Miami, presumably holding peace talks with Trump. So there’s more insanity than anything rational in every direction.

Meanwhile, we’ve got the governments of Britain, France, and Germany, in particular, and several others in Europe who are plainly out of step with their populations on a number of counts. Not doing anything whatsoever to tackle the very real problems that we have in these countries. Hitching themselves to a foreign policy, particularly in relation to Ukraine and in relation to Israel, which has absolutely no support whatsoever amongst their own subjects.

On the positive note, one thing is the collapse of the hold that the elites have had over the narrative and have taken for granted. The result of their activities of the past year, and the rise of genuinely independent journalism online, has been that more and more people are questioning. There is more and more open debate about what is going on.

It looks that way to me.

Interesting times.

Good. Any predictions for this year, or just watch this space, as we usually say?

Well, my prediction for this year—my key prediction—is that there will be a dollar crisis of greater magnitude than most people could have conceived sometime in this year.

We’ve been hinting at that for quite a few episodes. My crystal ball happens to be broken, but if I were a betting man, that’s where my chips are!

How that’s going to spill over to the various, for want of a better word, Western Alliance countries, we just don’t know. It doesn’t look good.

Well, they’re certainly in a hurry to push through the digital ID infrastructure. And presumably central bank digital currencies tied to that. So the race is on.

I think they probably underestimate people’s ability to create black-market-type workarounds for anything they do in that way.

Well, you just create a parallel economy, or people find other ways of trading or exchanging value. If you find other ways to exchange value, those ways are not taxed.

That is a big one.

Good. Well, let’s leave this one here. We’ll keep an eye on how things progress over the next few weeks. Just to say, for anyone listening, if you have any questions for Derek about anything we discussed in 2025, hit us up in the comments. We’ll address it in an episode soon.

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

We’re going to get back to a core topic today: the nature of money. At some point in the sovereign finance journey, everyone realises that the money that you thought was real in your pocket isn’t as real as you were led to believe growing up. So what else do we have to say on this?

First, at the end of the day, money is a tool. It’s a tool that can be used like any other tool for good or for ill. If you’ve got a knife, you could use it to prepare your dinner, or you could use it to stab somebody.

If you’ve got a hammer, you could use it to construct things, or you could use it to break things up. The same goes for money. It’s a tool that can be used to generate prosperity. We’ll say in more detail in a minute about how to do that, or it could be used to exploit and to expropriate, which is a lot of what’s happening at the moment. But it is value-neutral as a thing in itself.

So what is money’s purpose? Its purpose is to smooth the path of the accumulation of wealth. How is wealth accumulated? It’s accumulated either by creating it, that is by, let’s say, manufacturing something, or by growing food or other products from the ground. The accumulation of wealth is furthered by trade. Once somebody’s manufactured something, it’s of limited utility to them, assuming they could have made all of whatever product it is they wanted for themselves. Beyond that, the value lies in trading it with someone else to get something they want. Money is obviously the means by which they can do that.

Other ways wealth is increased are by moving things and people around. Things that are abundant in one region of the world have a much higher value where they’re more scarce. So moving them from where they’re abundant to where they’re less abundant is a form of trade. Money facilitates that. Operationally, the obvious nature of money is as a medium of exchange. There are two or three other classic definitions, but I wanted to examine its essential nature.

It seems to me that the essential nature is that it’s a store of energy. If you think about it, any work that we do requires energy. If we’re moving things around, we’ve got to use our muscles to move them. If we’re growing vegetables, the vegetables are essentially harnessing energy from the sunlight. The physical effort that’s gone into planting them and tending them and harvesting them is also an expenditure of energy.

Of course, some commodities are actual literal direct stores of energy, a sack of coal or a tank of petrol, a charged up battery. These are literally stores of energy. They are worth something. The money that could be used to purchase them is, if you like, a store of the energy of whatever work was done to earn that money. Is that a useful way of looking at it to you?

Yeah, so it sounds a bit like the fuel in your tank being a store of energy that originated from sunlight. We’re pretty distanced from this in terms of money actually being that store of energy. Thinking about all of the money that is going off to Ukraine in places that’s just been magicked into existence out of nowhere. I don’t think much energy went into creating that!

Exactly. That provides an insight into the system’s dysfunctionality, because what you have there is money that did not have the energy put into earning it in the first place.

So coming back to the classic economic definitions, I’ve already mentioned that it’s a unit of exchange. If I’ve got a violin, I need to eat. If I’ve made the violin, that’s a certain amount of energy gone into the construction of that violin. I can’t necessarily directly exchange that for a year’s supply of potatoes, for example, nor would I want to. I’d like to convert that into something fungible that I can use to buy my potatoes, pay my energy bills, maintain my car, and do whatever else I want. That’s the most immediate and direct way.

It’s also a store of value, in that I might do some work now, be paid for it, and not necessarily want to spend it immediately on other things. I’d want to put it to one side and be able to expend it at some later time that suits me.

For instance, you might want to wait until someone drives into the back of your car so that you need to buy a new car in a hurry. Not that that might have happened to me this week!

Yeah, exactly. It’s a unit of account, which means that, say, in a village situation, a farmer requires a set of new shoes for his horse but doesn’t have the wherewithal to purchase them immediately. So he makes an arrangement with the blacksmith that he can have the shoes now. He’ll pay them in a couple of months after he’s brought in the harvest. So the money represents the amount of the transaction to be settled at some future time.

Finally, money is a unit of measure. It’s to answer questions such as: How much profit did we make this year compared with last year?

Having tremendous rates of inflation can’t help with that measurement.

Well, this is exactly the point I was going to make. The unit of exchange, as long as you’re expending it as quickly as it comes in, inflation really cancels out. But any time there’s a delay between the two, as there is in this situation where you’re using it as a store of value or a unit of account, it’s clearly not fit for purpose. This is true in a situation where we have inflation, particularly inflation running at the rates that it has been over the past year or so. It’s likely to continue into the immediate future.

The same thing applies to its use as a unit of measure. If I’m trying to answer the question, how do my earnings this year compare with last year? If I’ve increased it by 10% but the actual purchasing power of the money has decreased by 20%, that’s not an accurate measure of change because the goal posts have shifted. So the periods of time when we’ve had stable currency, which was, for instance, the case in the United States between 1945 and 1971, or in the case of Britain between the late 1600s and 1914, was a time when the money system worked.

Within that environment, it served all its purposes. As we’ve seen and as we’re learning experientially right now in a situation where we no longer have that stability, it no longer serves that purpose. It undermines the actual smooth operation of commerce in all its aspects.

Money in my brain is associated with this idea of flow. If you think about the infinity sign, the number eight on its side, like it comes in and it goes out. Anything that impedes that flow will damage the long-term viability of whatever we’re using as money.

Yeah. Okay, so that was my reflection for today. It’s something that it does well to bear in mind because in general, we don’t actually go any further than the abstract notion of taking money for granted.

Everyone has an emotional connection to money as well.

Yeah, there is that too, which is not constructive.

No, that’s right. Do you think Bitcoin could eventually become money?

Well, I’ve been thinking about this. I recently saw an article about electricity generation in China. There was a sideways comment in that article about Bitcoin. It’s the first time I’ve noticed anyone saying out loud and explicitly what I’ve been beginning to feel about Bitcoin.

For one thing, the analogy of Bitcoin mining is actually flawed. It’s supposed to be an analogy of the mining of gold. Obviously, if you dig gold out of the ground, you can then trade that gold for anything you want. But it’s taken a lot of effort to pull that gold out of the ground. But once you’ve actually got the gold, it is persistent. It continues. It doesn’t require anything else other than making sure it doesn’t get stolen and moving it, if necessary, from one place to another to make transactions with it. It doesn’t require an ongoing effort.

Bitcoin mining was arguably an analogy of that when new coins were being created. But the supposed inherent advantage was that there was a finite quantity. We’re now getting to the point where virtually all of the coins that can be brought into existence have been. It requires the same amount of computation, which requires an enormous amount of energy going into the special purpose computers that do those calculations to verify each transaction.

As there are no new Bitcoins coming in, that has to be paid for by charges in the transactions, which undermines its long-term potential as a serious element in global trade. It doesn’t have the scalability to replace all other transaction mechanisms.

So its only real attraction is that anyone investing in Bitcoin is hoping that someone else will value it more highly and sell it. That is the classic characteristic of a Ponzi scheme.

That’ll go bust at some point.

I would suspect so. There’s obviously a great deal of effort going into maintaining the illusion. Another aspect of it which is concerning is the fact that originally this was propagated as being an anarchic freedom loving attempt to generate something that would be outside the control of the existing powers that be. Of course, now we’ve got major financial institutions and major banking institutions moving into it. China has apparently banned the trading of Bitcoin internally. So that is a factor.

Anyway, the point is that this article as a sideways comment actually suggested that the only merit of Bitcoin was that people were expecting somebody else to come along and be prepared to pay a higher price for it. Certainly, it is essentially a monetary exchange system, which even more than all of the fiat currencies in the exchange systems of the world, is highly volatile. The amount of speculative transactions completely dwarfs any transactions in relation to purchase or sales or commerce.

So I’m not making any predictions. I know I’d be speaking well out of turn. Everybody’s got to make their own decisions. It’s always been the case that sound advice for Bitcoin or any cryptocurrency is to treat it as a speculative investment. Don’t put any portion of your assets that you seriously depend upon into them.

So that remains the advice really, whatever happens. But the main point of this article was to highlight the progress of electrical generation capacity in China. This has really been quite extraordinary.

Probably the opposite of what’s happening here as well.

What’s happening in the Western world apart from various bits of disruption, has been fairly constant over the last 25 years. Electricity generation in the United States has been relatively constant at 4,000 terawatt-hours per year over the past 25 years. At the beginning of that time in the year 2000, China’s generation capacity was around about 1000 terawatt hours per year. It’s been climbing steadily. It crossed over that 4000 mark with the United States in about 2008.

It’s continued on the same trajectory. It has now surpassed 10,000 terawatt hours per year. What is also interesting is that very nearly 50% of that is from renewable sources. So, although it’s still burning substantial amounts of coal in coal-fired stations and has a number of nuclear stations, the main expansion is in wind power, water power, and solar generation.

So that is a serious indication of the wave of the future. To what extent we’re going to have an all-electric world is something, again, I’m pretty sceptical about. But some mix of all of these things. Of course, long before the end of this current century, we’re going to have exhausted the economically viable supplies of virtually all of the fossil fuels except for coal. Of course, coal is both the dirtiest of the fuels and the least flexible in its use.

Well, just quickly, what do you make of the assertions that oil and gas are actually renewables. Do you think that’s not true?

I don’t think it’s at all true.

There are pathways to liquid and gaseous fuels from sunlight, most of which involve an electrical phase. As we stated before, every transfer of energy involves some loss. So the more stages you go through, the fewer you get to. We talked a couple of weeks ago about hydrogen and how it wasn’t really a terribly practical storage mechanism. It isn’t an energy source; it’s an energy storage system, but it’s not an efficient one in any manner.

For a highly portable energy store, liquid fuel is probably unbeatable. So when we no longer have sources of that from what was stored over millions of years underground, we’re going to have to generate it from current sunlight. I would think some pathway from solar generation of electricity through to chemical processes to produce ethanol or methanol is probably the most promising. That would involve drawing carbon dioxide out of the atmosphere, which would then be released in the same quantities when the ethanol or methanol is converted back, whether by burning or by developing fuel cells.

The future of vehicles, I would bet, over the next half a dozen decades would be essentially electric vehicles with regenerative braking. So you get a good deal of the energy that’s gone into the motion back into a battery to do it. Rather than the battery being the motion energy storage, it’s the secondary one, just for regenerative braking. The primary energy carrier is done by ethanol or methanol. We develop a fuel cell to generate electricity, which drives the motors that power the wheels. That’s quite an exciting prospect.

Yeah, the batteries in electric cars are obviously a big problem.

Yeah. Okay. Well, that will do for today unless you’ve got any other things you wanted to bring up.

No, I will link to the article about China and electricity and Bitcoin so people can check that out as well.

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