Sovereign Finance

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

We're going to do another weekly recap this week, which is useful for me because I tend to live my weeks with my head in the sand, buried in my own affairs. It's good for me to catch up and stay aware of what's going on. So, what is happening that we need to know about?

I wanted to discuss the general phenomenon of warfare, as it has a significant impact on the standard of living that we can all aspire to.

The point is that any war incurs massive financial costs, as well as substantial energy and resource costs. These are all diversions from other things that those financial instruments could accomplish.

From constructive things as opposed to destructive things.

Yeah, constructive things. The core of our topic on this podcast is wealth. As I've mentioned in the past, wealth also comes from the same root. So wealth is a measure of well-being.

Yeah, it's holistic. It's not just a monetary measure.

The fact that you can put a numerical monetary figure on it is not the point. The fact that you can put a numerical monetary figure on anything doesn't mean that it deserves to be called wealth. There have been suggestions that we should have a word, ilf, meaning things that detract from your wellbeing. It makes you ill in one way or another.

Obviously, weaponry, military equipment, explosives and ammunition are all examples of ill in that sense. Another example of ilf is the things that unintentionally get produced as a side effect from any process of wealth creation or anything that any of us do in the world. It creates a certain amount of waste, a certain amount of pollution, a certain amount of consumption of finite resources that could have been applied somewhere else.

Yeah, to use an economics term, there is an opportunity cost with all of these things you choose to do.

I must take bit of time at some stage to gather some statistics because the wars that are going on in the world now are comparable in terms of ammunition and explosives that are consumed as the entire Second World War.

We also need to consider this in the context that, at some point over the next few decades, we will reach a crisis in fossil fuel consumption. As we've discussed before, we've done very little in terms of strategic planning regarding how to transition from our current reliance on fossil fuels to something sustainable for the indefinite future. I, for one, believe that it's still entirely possible that we could be living on current sunlight energy and do this without reducing ourselves to a medieval or palaeolithic lifestyle if it were done intelligently.

However, to overhaul our entire infrastructure to reach that point is something that, in itself, is inevitably going to consume a lot of energy. If we were being intelligent about it, we would be applying the energy to rebuilding that infrastructure to gather some light, to use it and to organise ourselves in far more efficient ways than we're doing at the moment, which there's plenty of scope for.

A more decentralised way of doing things might be the only way because you can't necessarily store all the power. We saw that with Spain, in terms of big surges of energy.

Yeah, so instead of that, apart from things like all the billionaires flying around the world in private jets, we're squandering huge amounts of energy in destroying things.

On things that go boom…

Yeah, and killing people. Anyway, so that's all going on. In case people were wondering how this relates to the core topic, which is bringing our individual finances under control, this is an aspect that we need to be taking care of. The sheer insanity of the world has two crucial aspects of context to help us view what's going on.

One of those pieces of context is that we're reaching all kinds of overshoot situations, as modelled by the limits to growth, which we've discussed previously on several occasions. So far, the way that the world's population, food production, industrial capital, industrial production, levels of pollution, all of the things that were modelled in that model in the Limits to Growth are almost exactly on track for the reference run for the 50-odd years since that was published.

That's impressive.

What that run shows is that one or the other of those is going to go into collapse mode in the next quarter century.

Yeah, because the biosphere is not something that can be plundered forever, presumably.

That's it. Let's say the model is unduly pessimistic in that regard, and it takes another few decades. That's not impossible, but given its accuracy so far, we should consider it. Many of the ways politics is reacting involve people being unrealistic about coming to terms with it.

Another significant aspect of context is that I would argue the American Empire is now in the final stages of decline, as was the British Empire previously, as well as those of the Dutch, Italian, Roman, Portuguese, and Spanish empires. The Persian Empire, like many throughout history, has followed a cycle of arising, prospering, peaking, and then declining. That is the stage of the American Empire. However, what is truly alarming is that it still possesses far more military power, despite being in a stage of decline. We can’t know how it will act or what the repercussions may be.

Going back to these wars, that's one of the issues. Because it's not really Russia versus Ukraine, it's Russia against a proxy of the US empire. That's been going on for a long time. But you go further back into the conflict.

The bizarre thing, as I mentioned last week, is that in the mainstream news media, there is very little discussion. There are enormous actual developments every single day of the week in the Ukrainian conflict.

The heartening thing I find is that there are many well-informed and intelligent people in the alternative media who are receiving a very large hearing and following. Most of them have their main output on things like Substack. However, most of them have a significant following on YouTube for at least a portion of their content.

There are different people with varying perspectives, but there's a steady, persistent drip, drip, drip against the consistency of the propaganda we've all been subjected to since time immemorial. Sooner or later, cracks must appear as we discussed last week.

I find notable informed commentators include Douglas McGregor, Scott Ritter, and Daniel Davies, who are all former military personnel. All these people I mentioned, I listen to and analyse critically, not necessarily 100% slavishly believing everything they say, but informing myself to try and get a rounded, critical, realistic estimation. Those are all pretty good for the military analysis. They're all accomplished ex-military officers. Very knowledgeable, and it appeared to me to be very intelligent and also extremely honest and forthright.

Then you've Jeffrey Sachs, an economist who has worked with governments worldwide and with the UN. You've got Pepe Escobar, whom I find really amusing, really penetrating, and really well-informed. Danny Haifong, who has a video blog with interviews with a whole variety of people, including all the ones I've mentioned so far and the ones I get on.

Pepe Escobar is another commentator on geopolitics who's really well informed, really quite amusing. He's just travelled to China and Iran. He's going to go to Russia. Danny Haifong runs a daily video podcast featuring interviews with all these people, who are really well-informed. Brian Beletic is another really good, well-informed geopolitical commentator. Ben Norton and John Mearsheimer are very accomplished economists and geopolitical commentators.

Mearsheimer foresaw the Ukraine situation by about eight years.

Another good one is Larry Johnson, who's a former CIA analyst. Seems very clear, very honest. All of this is set against the background, which many people seem unconcerned about.

In a world where there are enormous stockpiles of nuclear weapons, it's not impossible that we could get triggered into an exchange, which at the very least would be the end of global civilisation and possibly the extinction of the human race, possibly the extinction of all higher life forms on earth. From the point of view of someone deciding to deliberately go ahead with launching a strike, but also with an accident or a miscalculation. This has happened dozens of times. It's a real possibility as long as these things exist and are primed and ready to launch.

Which makes the behaviour of the British, French and German leaders look particularly reckless. We've now had the announcement from Chancellor Mertz, the new German leader, that he's prepared to supply Taurus missiles to Ukraine and not to impose any limitations on the range at which they're used. Now, these are capable of striking deep into Russia.

Whether Russia's got the capacity to intercept them or not, I don't know. But if one were launched at Russia, that would almost certainly result in Russia interpreting this as a direct declaration of war by Germany and respond to it. Obviously, that could escalate the entire situation out of control. Nobody seems to be taking this seriously as far as I'm concerned.

Daniel Ellsberg outlined all of this in his book, The Doomsday Machine, didn't he?

Yeah, absolutely. One of the positive developments that has occurred since Trump's ascension to the presidency has been at least an opening of normal diplomatic contact between Russia and the United States. It leaves a lot to be desired, but it's better than nothing. It's bizarre, this idea that when tensions arise, you stop speaking to people. This is the very moment when we should be ramping up our speaking and, more importantly, our listening, trying to understand how the world appears to other people.

There's historical precedent; just look at Kennedy and Khrushchev, who averted a major catastrophe in the past.

Yeah. And a lot of luck to be honest. Which is another point. You know, they have this whole thing about the so-called nuclear football, which is a rather strange name. It's a briefcase containing the codes that accompanies the president. To the president of the United States, wherever he goes, a guy is trailing around with him carrying this briefcase. It's just pure theatre, yeah. There are any number of people who are in a position to fire at least one nuclear missile with or without.

This has been the case since the late fifties, or early sixties…

So we'll see what it is. Now, the other ridiculously reckless thing that happened is Ukraine launching several waves of over 2000 drones towards Russian cities. Very few of them got through. There was certainly at least one residential apartment building in Moscow that was hit. Some commentators theorised that these were to stretch and exhaust Russia's air defence systems in preparation for maybe a more serious strike.

Which, you know, once again, the consequences of this could be catastrophic. Then there was a response by Russia of a large number of drone attacks on Ukraine. This prompted a public outburst by Trump, saying that Putin's gone crazy.

In fact, these responses were all measured. There have been a few civilian casualties in Ukraine. It's not clear whether these were from actual strikes or whether they were falling debris from drones that were shot down by the air defences. All of the targets were of military significance. They were either ammunition centres, troop centres, or military aircraft bases. There was an enormous explosion in Odessa, which was a strike on a ship which was bringing in arms and ammunition to Ukraine. So, you know, those were legitimate military targets.

Now we've had the exchange of a thousand prisoners from each side. That's obviously a positive thing; it was brought on, and they paved the way for the next stage, which is to exchange memoranda on how they will see the path to progress towards peace. The Russians have announced that they're ready to send a delegation to Istanbul on Monday. It's not certain at the moment whether the Ukrainians will respond to that or not. However, it does seem highly unlikely that those talks will get anywhere, as the Russians have made their demands clear in the past.

Yeah, we all know where the red lines are.

It's highly unlikely that the Ukrainians will go, “yes, all right.” Of course, the demands are now larger. The Russians want effectively a demilitarised zone 300 kilometres along the northern border of Ukraine, precisely to preclude anything in that area being able to launch attacks towards Moscow. The extraordinary thing is, according to the Western media, the Russians are very devious and we can't take anything they say at face value. As far as I can see, their track record is pretty good.

Of course, this all goes back to 1991. You could argue that the Russians have been astonishingly trusting. When Gorbachev decided to disband the Warsaw Pact and dissolve the Soviet Union, the American James Baker stated that NATO would not expand one inch eastward. Well, of course, precisely the opposite has happened. In fact, nearly every single undertaking that the Americans have undertaken has been consistently broken. But now it's clearly reached the point that they're saying, “We're just not going to take anything on trust anymore.” It's hardly surprising.

This is the thing: look at the movement of troops and equipment around the globe, not what they're saying.

When Clinton went to Russia to meet Putin, in 97 or 98, Putin, tongue in cheek, said, “maybe I could join NATO?”. Clinton said, “Well, I'll have to talk to the team about that!” But when the Warsaw Pact was dissolved and the Soviet Union was dissolved. There was no longer any logical need for NATO.

So we have to see how this unfolds. Trump has been all over the show with the things he's saying. It's difficult to know whether he's really in the dark about what's going on, whether he's not got the concentration to regard it, whether his appearance of being a complete buffoon is to some degree an act or not. He's certainly an accomplished actor. He's been a television personality for 15 years, running the Apprentice programme. I saw that a couple of times, the British version with Alan Sugar. I just thought it was ridiculous. It was nothing like anything I've experienced in running a real business. It sometimes seems as though Trump regards being president of the United States as a continuation of a reality show, which perhaps in a sense, it is. He is obviously being pulled in many different directions.

He hasn't got, as we've mentioned before, a cohesive team. He's got people who seem to be quite sensible, like Wyckoff, and people who are severe warmongers, like Rubio and Kellogg. So it's been pulled in different directions. We don't know how much of whatever intelligence they have gathered is being presented to him. He's obviously got to juggle between keeping his supporters happy, which is going to be impossible, and dealing with the various components, opponents he's got in the political opponents in Congress, in the media.

He could well just be a useful idiot frontman.

So, meanwhile, we've got the continuing destruction in Gaza. Apart from America and its immediate satellites, the rest of the world's countries are watching in dismay and disbelief as all this unfolds. Of course, another notable development is that the last few years have seen Russia and China building alliances economically and politically with an increasing number of countries worldwide. We must consider the application of these sanctions and tariffs in that context as being completely futile. They're futile on two levels. Indeed, as far as Russia is concerned, it's already been sanctioned to death. There isn't really anything more to apply. But more and more, they're going, “Okay, the United States doesn't want to deal with us. We won't deal with them.”

All it has done is catalyse different people around the world forming separate partnerships outside of the system. It's just accelerated that process.

Additionally, consider the infrastructure in China, including civil engineering projects, bridges, tunnels, roads, and railways. They've just conducted a trial of their Maglev rail system, which can reach speeds of 622 miles per hour, surpassing the speed of an airliner. There's nothing in the Western world that compares with that. Anyway.

Ours are falling to bits!

In Britain, a lot of it's barely out of the 19th century. Anyway, there we go. Interesting. If we're all alive next week, we'll see where we go from there. We'll likely return to the core topic of this podcast. OK.

Sounds good to me. All right, thanks, Derek.

Thanks for reading Sovereign Finance! Subscribe for free to receive new posts.

A quick announcement: We’re holding a free live Sovereign Finance discussion on Sunday 22nd June, at 7.30PM on Zoom. We’ll discuss global trends, things you might do, and answer questions from the podcast so far. Register for free here.

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

We thought we'd examine current events from a sovereign finance perspective today. So, what has been going on?

Well, it's important to have these conversations in a podcast like this, which started out with a fairly specific focus, namely, finance. The point is that finance is just one aspect of the entire human experience and human activity, and everything is interconnected.

One thing I've been reflecting on is that our tendency to carve views of life into separate, discrete domains and subject areas is actually quite destructive. It's destructive to our understanding because everything really impinges on everything else.

We're all polymaths, deep down.

I hope so. It's certainly what I aspire to be. We've touched on this many times, but I'm convinced we're living through a pivotal time in human history. It's certainly not the case that there is nothing new under the sun. There are intervals when it could well appear like that.

It's the scale and interconnectedness of everything, isn't it? What's happening probably has happened before. If you think back to the Magna Carta Declaration of 1215 and so forth, there have been repeat patterns, but not on the global connected scale that we have today.

Well, it's funny you should go back to that. I was about to go back with an example which doesn't go quite that far, but in the 16th century, as nearly everybody knows, Martin Luther nailed up a notice on his church doorway, which was the spark that ignited the Protestant Reformation. It was 95 articles.

Each of these articles was something where he felt that the Church of Rome had diverged from the teachings of Christ. I don't know what the other 94 were, but the number one one was the sale of indulgences. The Church had instigated this practice of raising money by selling indulgences, whereby you could buy your way to a shorter time in purgatory before you got to heaven, which is absolutely ridiculous. It's one of the most barefaced scams you can imagine. Obviously, nothing to do with the teachings of Jesus.

You can buy your way into heaven.

Yes, on multiple levels! Anyway, so the point is that that sparked the religious divisions, which created a lot of bloodshed and a lot of burnings at the stake over the next couple of hundred years. In some ways, it has been reverberating down to today. But I was thinking of this in the present context because this is an obvious example of somebody wanting to upset the prevailing control of the narrative. Of course, it came shortly after the invention of the printing press.

The big thing that Gutenberg did with the printing press—I don't know whether it was the very first one, but it was the prominent one—was print the Bible, which made the Bible itself available to many, many more people. Up to that point, it'd all been copied by hand. It was costly, immensely valuable, and only held by the clergy who...

And they were only in Latin.

They were only in Latin. There's a two-edged sword to the fact that intellectual life in the Middle and early modern ages was conducted in Latin. One was that it made it a closed book, so to speak, to the population at large. However, the positive side of it was that it enabled intellectuals of all disciplines to communicate with one another, regardless of their own native tongue. But, as you say, it was only in Latin.

They kept it that way for longer than they might have otherwise done to stop the proles from reading it.

Possibly, possibly.

Yeah, but anyway, the point is that both the proliferation of Bibles and the availability of printing, which enabled other people's ideas to reach a far wider audience than before, unleashed a lot of discontent amongst the population at large against the elites.

It's interesting. I was reflecting the other day that I remember at school in the hymn book we had this hymn, All Things Bright and Beautiful, very twinkly, twee hymn tune. We were sometimes instructed to omit some verses when we sang the hymns.

Yeah, all things great and small.

So obviously, being the curious type I was, I read the verses we were not to sing. I can still remember to this day that the verse we were instructed not to sing was the one that goes, “The rich man in his castle. The poor man at his gate, God gave them their endowments and ordered their estate,” which is pretty much the narrative of the ruling classes. To a large extent, people bought it until they had some insight that, you know, perhaps there's another way of looking at things.

As we go down the ages, you see the same process happening, those at the top of the hierarchy control the dialogue, the narrative, the story, the context in which people accept as the way things are. Each time a new technology appears that disrupts their monopoly on that narrative, there's a scramble to recontain it. So that happened with printing. The governments required that all printing presses be licensed and that any pamphlet should indicate who printed it so that government goons could come round and harass it.

Presumably for your “online safety”!

Well, exactly. You know how this went down with newspapers, radio, TV, and then the internet, and they were slightly blindsided by the internet. There's a lot of pushback, yes, we need to ensure our online safety.

But you know, it seems to be whack-a-mole, and as fast as they cover up one outlet, another one appears. This is what has been going on now.

So, do you think that is different this time around compared to previous technologies?

Well, I'm watching this space. I’d love to believe in reincarnation because I don't think I will last long enough to see this through to the end unless it's...

Lots of people do, so, you know, to keep an open mind, I guess!

I'd love to be a historian in the early next century and look back on this time. But we at least have a front row seat to view it in real time. You know, just like in the time of the Reformation or the Industrial Revolution or anything else that people were living through when there was a sudden acceleration of the rate of change, it's pretty difficult to take stock of it. But that's what I wanted to talk about today.

The hold on the prevailing narrative is a good metaphor: it's like a dam. If you imagine a dam that has a huge reservoir of water behind it and has been there for a while, it's not been very well maintained or anything, and occasionally, little cracks appear.

Sounds like the Berlin Wall.

Yes, exactly. Then you have a bit more of a crack somewhere else and a bit more of a crack somewhere else, and sooner or later, the whole structure is so much weakened that it just collapses. It seems to me that several strands in the official narrative are now under such scrutiny that many people are having their faith challenged by things they've taken for granted. As soon as you get one of them challenged, you start looking at some of the others.

I'll come back to the question of Trump and where he's at and what he represents, but certainly his arrival as president of the United States for the second time has accelerated this process and some of it by initiatives that he's taken.

I've heard him described as the wrecking ball of the elites.

Yeah.

It's difficult to know where to start, but I wanted to just look at a couple of things that, personally, I regard as very positive from initiatives that appear to stem from him. One of them was the appointment of Robert Kennedy Jr. as the head of the Health and Human Services Department.

The other one was the lifting of the curtain on discussion of various topics with the department chaired by Anna Paulina Luna, who is initially looking into the John F. Kennedy assassination in 1963. These are two pivotal things and...

The fallout from that event is still going on.

Well, in a way, it explains the impotence of every president since Kennedy.

Yeah, we've got a hollowed-out state where I don't think the presidents actually make their decisions. That probably extends to Trump. Perhaps Kennedy was the last one, and he got bumped off for challenging the status quo.

Yeah, well, he got bumped off for several reasons. One is that he essentially declared open conflict with the CIA. One is that he refused to give United States air support to the Bay of Pigs invasion of Cuba. One is that he and his brother Robert, as attorney general, were prepared to take on the mafia and organised crime.

Another one was that he was gearing up to end the Vietnam War. So he'd antagonise organised crime, the CIA, and probably all the other secretive or semi-secretive intelligence operations. He'd antagonise the arms manufacturers and the military.

Of course, after the Cuban Missile Crisis, Kennedy and Khrushchev were so traumatised by the realisation that they had brought the entire planet to the brink of destruction that they communicated with each other. They wanted to back off and negotiate a way out of this.

So, it's very interesting. I was watching a clip today of the hearings of the Senate Oversight Committee on the Kennedy assassination. The witness was one of the doctors in the emergency room when Kennedy was brought in.

His testimony is just breathtaking. Presumably, he was no more than an intern at that time. I don't know how many of the other people in that emergency room are still alive today. But they brought Kennedy in, lying on his back on a gurney and they were trying to resuscitate him and they were trying to ventilate him and it wasn't working so they decided to do a tracheostomy and one of the things that came out of that is that the bullet hole in his neck was plainly an entry wound not an exit wound.

In other words, it had been fired from in front of him and not behind him. After they'd been trying to, they'd done the tracheostomy, they were trying to get the blood circulating, they were trying to get him ventilated. One of the other doctors said, basically, then lifted him up and saw the fact that the left half of his skull had been blown off and announced that there was actually no point in attempting a resuscitation. That's something which has never been publicly acknowledged until now, completely demolishing the prevailing narrative. So several things arise from this. One is: How much can you trust your government?

How much can you trust the agencies of your government? How much do you believe they are doing what they're saying they're doing and not doing what they're not saying?

That will be the beginning of the collapse in acquiescence to the official narrative for many people. I'll just refer to the Make America Healthy report, which was published yesterday. That's 68 pages long. I haven't read it in detail. I have read the summary. There's a very good summary by Robert Malone. It'd be interesting to see what alternative perspectives people have on it. But it's very measured and science-based. It's very much saying that we have an inexplicable chronic health crisis, particularly amongst our children.

We need to get some explanations for this. They lay out the various areas that need to be looked into, one of which is obviously food and nourishment, one is lifestyles, one is environmental pollution, and one is vaccinations.

You know, the fact that all of those are coming under scrutiny, that in itself is going to be a gateway to questioning authority, questioning received vision for a whole lot of people, especially those who have tragically had children who've been compromised or worse.

Yeah, I can tell you that as a parent of fairly small children, the childhood vaccination schedule is a wild rabbit hole to fall into.

Yeah, exactly so.

But you know, the point is that nothing should be off the table for questioning. If you can't question it, it's not science.

That is the big point. Meanwhile, we've got a whole bunch of other things going on in the world, which, one way or another, are going to impinge on our prosperity and finances. So this is not a wild digression from the topic of this podcast.

We've got the Russian-Ukraine conflict, the India-Pakistan conflict, the Israel and Middle East conflict, and all of these have the potential to spiral wildly out of control. I don't listen to mainstream news very much, but I catch up on the radio for BBC lunchtime news two, three, or four times a week. I'm astonished by that almost every single time I tune into it, none of those things are amongst the headlines. There are regular developments on all of those which are potentially catastrophic.

Well, it just shows it's a thinly veiled propaganda outlet and not a news service.

I don't know whether you know, but over the last day or two, the Ukrainians launched 495 drones. The Ukrainians launched an attack on Moscow, which was shot down. 63 of them reached the Moscow area. I don't know whether any of them proceeded to their targets or not. From the reports I've seen so far, it's not clear. But for one thing, this strikes me as completely and utterly reckless.

It's very dangerous, isn't it?

It also strikes me that Russia is being incredibly restrained in its responses. There seems to be a lot more intelligence being displayed on the Russian side than on the Western one. You know, we've had the on-again, off-again peace initiatives that Trump has intermittently attempted to promote. None of them seems to get anywhere. The Russians have repeated the same statement of their position that they have been stating since at least 2019, if not 2014. They're plainly not going to budge from that.

The peace talks feels a bit like filibustering.

Yeah. So, meanwhile, on the economic front, which again gets closer to the real focus of this podcast, it seems that the rest of the world is steadily gearing itself up to being able to act independently of the American-led financial and economic system. There's very little work the rest of us can do about it. We've got our own leaders apparently having taken leave of their senses.

The idea that Britain or France or Germany can actually come out in conflict with Russia seems unrealistic, it seems reckless and on the wrong side of history. You know, it looks like we're backing the losers, and we're doing it without any resources of our own, which are up to the task. We haven't got a military of this scale that could make any meaningful contribution. I don't think we can produce arms. The other thing, which of course is mystifying in this sense, is that apparently the United States is still sending weapons and ammunition and military hardware to Ukraine. Again, there's a bit of uncertainty about whether that is happening or whether it's been stopped or how much longer it can go on, but if they wanted to stop the conflict, that would be the first thing to do.

Yeah, this is what Caitlin Johnson says, isn't it? Don't look at what they say, look at the movements of troops and warfare equipment around the globe. If you keep an eye on that, that tells you what's really going on.

Three of the people I look to for an intelligent commentary on geopolitics are Colonel Douglas McGregor, Scott Ritter and Daniel Davies, a retired Lieutenant Colonel. They've got brilliant podcasts. They're on YouTube a lot and seem very clear, intelligent, well-informed, and worth listening to. Not necessarily, you know, to believe them hands down flat out, but to certainly take into an attempt to provide some overall assessment with whatever other sources of information you want to bring into it. But, interestingly, Scott Ritter says that back in January, he had tentative hopes that Trump would make a significant difference to the approach.

He's now become deeply disappointed, which is pretty much what I thought. You know, quite a lot. I noticed that many people whose perceptiveness I would respect seemed to have a lot of faith in Trump in the run-up to last November's election. I wondered how this would hold up, and it's already holding up very poorly.

Yeah, all of the voices that were sceptical about him, I'm thinking of Whitney Webb, I'm thinking of Caitlin Johnson. They were pretty much on the money.

Yeah. I watched carefully in the early days of his presidency, thinking perhaps he's not as stupid as he looks. I've come round to the view that he probably is. Apart from being a ridiculously needy, egotistical narcissist. He's not very well educated. He certainly isn't a sophisticated thinker. He doesn't seem to hold any consistency from one moment to the next.

Who's pulling the strings then? Because that's always the big question I get asked. Who are “they”?

Well, who knows? Partly, it's his advisors around him. In the run-up to the election, he either chose or was nudged to choose a whole variety of people who would not be, shall we say, very sympathetic to his ostensible agenda. The other thing is that nothing that's happened so far has diminished the power of what you might broadly call the deep state, by which I would mean an alliance between the intelligence services, the banking industry, the arms industry, the military and corporations.

They seem to be still pulling the strings. But in the meantime, scepticism amongst the wider public is growing. I would imagine that we must reach a tipping point at some point.

Yeah, this seemed pretty obvious to me going into the election cycle last year; it seemed obvious that voting is the plastic steering wheel that Maggie Simpson has in The Simpsons. I was surprised how seriously everyone took it. Like, how many times do we have to go through this?

Indeed. Okay, well that's where we are for this week.

A Quick Announcement: Join us on Zoom on Sunday 22nd June For a Free Discussion

A quick announcement that Derek and I are going to have a live Sovereign Finance discussion on Sunday, June 22nd, at 7.30 PM on Zoom. Registration is here. Do we have a topic in mind for that, Derek?

Basically this is an opportunity for anybody to raise any comments or questions they have regarding any of the things that we've discussed, either on this podcast or any of the previous ones or any thoughts that you might have or any questions you might have about the whole way that the financial system works and what's available to you to optimise your own path through the rest of your life.

Yeah, what plan do you need to make? That's the big question, isn't it? So yeah, we'll publish details with this episode and with the Substack emails that go out. But hopefully, we'll see as many people as possible there. All right, thanks.

Okay, great. If you haven't already registered to be a member of this podcast, I urge you to do so so that you don't miss any announcements about what we're doing.

Thanks for reading Sovereign Finance! Subscribe for free to receive new posts.

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

We're going to reminisce about your past today and explore some of the lessons from working in finance. So what happened and where do we need to start?

When I came down from university, I got a job in a firm of stockbrokers. It was one of the large firms, had about 40 partners and 400 staff. Its primary business was for institutions, for pensioners funds, unit trusts, fund managers of all sorts.

One way or another, I concluded after about 18 months that this wasn't a life I wanted to pursue for various reasons. However, in the course of that, I did actually get quite a lot of insight into that entire world. I have also kept an eye on the way that it's developed over the years.

This was 1969, 1970. It was a very different world then. It was much more leisurely. The office hours were 9.30AM to 5.30PM with a healthy one hour lunch break. Really keen, ambitious people came in at nine o'clock instead of 9.30 to catch up on current financial events, but not anything like the tempo that exists in that world these days. Also, I think to a large degree, it was essentially an ethical environment. I mean, there were a few wide boys, but the majority of people working in stock broking and in merchant banking and in fund management were genuinely trying to do a good job. They were genuinely providing a useful service.

For instance, the whole thrust of this was to provide people who wanted to have effective savings and investment plans over the course of their lifetime for those to perform well. In particular of course for people who wanted to contribute either themselves or from their employers into a fund which would provide them with an income in retirement. They managed to do that in an effective way.

Certainly with all the employers schemes, they were defined, they were what were called defined benefit schemes. They provided for two thirds of, typically two thirds of your final salary, assuming you'd spent a full time, working lifetime in that scheme for the rest of your life.

The mechanics of this is pretty simple. There was an accumulation phase and a drawdown phase. The accumulation phase was obviously over the course of the years that you're working. You paid a proportion, maybe typically 10% of your gross earnings into the fund. The fund was invested to grow according to the laws of compound interest over the course of the lifetime. Then when you retired, it was put into an annuity, which is essentially like a life insurance policy in reverse, whereby the value of the fund was put into that annuity. That provided a certain percentage of the fund every year for as long as you lived. Of course some people lived for quite a long time, other people didn't survive very long after retiring. But it averaged out so that worked out. There was no asset at the end of that.

There was a big shift where instead of being the so-called defined benefits scheme, such as that, people were persuaded to pay into defined contribution, which obviously is exactly what it says. You define how much you're paying into it, but you were left at the whims of the performance of the financial markets as to what you actually got in the end.

A great many of us have found that we didn't get nearly as much as we were expecting. There are various reasons. One is the changes in the taxation treatment of pension schemes that was slipped in by Gordon Brown when he first became Chancellor of the Exchequer. In order to balance his budget, he needed to raise more taxation. The Labour Party promised not to raise taxation. So rather than doing it in an honest way, he raised the taxation by cancelling the benefits of pension schemes banking on the fact that people would not notice this because it didn't affect their immediate financial situation on a current basis.

However, if you're taxing the income which is being accumulated in the fund over the years, that makes a significant difference. Because it's relying on compound interest, it means that there's going to be a lot less in the fund. The other thing is that the large corporations which comprise the majority of the shareholdings that in the funds are invested in are not nearly as generous with dividends as they had been historically. More of the profits from the corporation are being transferred to executives and directors of the companies. More of it is going into the so-called financial industry that's managing these things. So it's a lot less beneficial for the typical normal person who's looking forward to a retirement income.

I used to have a client who was an independent financial advisor. He described it as being like the ‘goo’, the financial industry that sucks everything up if you just leave it.

Partners of a successful stock-broking firm or merchant bank had pretty substantial incomes. They might have been earning five or 10 times the earnings of a doctor, for example. But they weren't earning 100 or 1,000 times the income of a doctor, which top financiers are doing these days.

The number of people in that segment of the economy has ballooned out of all proportion. I think there were 2000 members of the stock exchange in those days. They probably have a staff of about 10 times the number of principals. For instance, my firm, as I said, it had 40 partners and it had a staff of about 400. If you were small stockbroking with two or three partners, you'd probably have 20 or 30 staff. So that would have meant that there were a total of 20,000 or so people working in stockbroking, probably a similar number in merchant banking. A similar number in life insurance and various other kinds of fund management. So perhaps 60,000 people working in the financial district. Whereas now if you look not only have you got the city which is full of skyscrapers instead of the four or five story buildings that were there back in the day. You've also got the enormous financial district over in Canary Wharf in Docklands. I don't know how many hundreds and hundreds of thousands of people are altogether involved in this industry. They're all earning far larger than average wages in other segments of the economy.

You have to ask yourself what they're actually contributing to. It's worth mentioning also that banking and stockbroking were arguably performing a useful service at that time. Okay, they were taking a small cut, but they were connecting people who had capital with enterprises which needed the capital to invest in their factories and their motor fleets and their machine tools and whatever it was they needed to run the business.

There was a beneficial effect all the way around. Whereas we've seen over the subsequent decades, more and more of it is just some form of essentially gambling, computer, essentially a gigantic casino where one person's gain is another person's loss. So that's been my perspective over the years from seeing Inside the Beast.

And that's now our biggest export.

I was thinking as you were talking about the doge happenings in the US, the Department of Government's efficiency and looking into these things and realizing that it's not very efficient and why do we have all these people. It sounds like at some point the system's going to break and a similar thing maybe has to happen.

Well, it certainly seems to be. I mean, there's no doubt that in government, especially national government, there's enormous wastage of another sort. Nevertheless, the bull in China shop approach to trying to get to grips with that which Elon Musk and Donald Trump have been applying is probably not going to get a happy outcome.

What else can people do? Is it a case of looking after your own finances where possible and taking responsibility for things more?

Once you grasp the essential principles, you need to see what is possible. This is getting into the realm of finance, but the only thing I can suggest is that you actually find a financial advisor who thinks outside the box.

A lot of so-called financial observers advise, they're glorified salesmen.

Most just sell products. They don't charge fees, they get paid to sell products. They set their fee out at the commission that they're incentivised to sell certain products. So it's not independent.

It's essential to get some orientation as to what are the possibilities as far as the taxation arrangements. These of course vary from country to country and from time to time. See what schemes there are which enable you to retain some control over it. Then learn enough about these things to be able to make an intelligent decision. See what the underlying assumptions are of the way that the fund needs to grow to meet your objectives. Be monitoring it all the time to measure up whether or not it's doing that.

Yeah, and I think a good financial advisor should help you figure out how much you actually need to do the things that you want to do as well, because you can't take it with you at the end.

Yeah, exactly so. Okay

Just on that, had a client, I think it's worth finding someone local as well, or who really understands the local environments. I had a client a few months ago who is a financial advisory in Dublin. So they specifically serve the Republic of Ireland. They say that Ireland apparently has like the most complex legal environment that you can ever imagine. So it's like they specialise in that. So find the right person, I guess.

Yeah, that makes sense.

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

We're going to take a swipe at current events, current goings on, because as usual, things are running apace. We're also going to touch on inflation, which is coming back into the realm of relevance. Where do we need to start?

Okay, I think we've had things running at a pace on numerous geopolitical fronts. It's been more of the same. America is now saying they're pulling out of attempting to broker a deal for peace in Ukraine. It was a bit of a thin claim in the first place considering the responsibility America had for provoking the situation. It did seem initially that progress was being made. It's now stalled. Trump seems to be getting more unpredictable. From the word go, everybody said the one predictable thing about him was that he was totally unpredictable.

Yeah, crocodile tears.

The picture emerging is that what he says appears to be whatever thought has flitted across his brain, determined by whoever he spoke to in the last five or ten minutes. It's also pretty clear that there are people in the team he's assembled who are clearly pulling in very different directions. JD Vance has made comments about the fact that it's now down to Ukraine and Russia to talk to one another and sort something out.

General Kellogg still seems to be in the picture despite all his contributions to diplomacy appearing completely out of step with anything else in the American administration. He's talking about having a demilitarised zone between the two parties policed by European forces. Russia isn't going to agree to that for one moment. He's also suggested conceding Crimea to them and possibly the other occupied areas in Ukraine to Russia. Zelensky has said flat out that he's not going to accommodate that.

What else have we had? Putin has said he was offering a 72-hour ceasefire over the course of the victory celebrations, 8th to the 11th of this month, which are currently going on. Ukraine appeared not to be engaging with that offer at all on their side. They've done things which seem flagrantly reckless, particularly launching an enormous wave of drone attacks towards Moscow. As far as I can tell, virtually all these have been shot down without causing significant damage in Moscow.

There was a pretty explicit threat to attack the victory parade, considering heads of states from over 100 other countries, including powerful ones like China, were attending. That would be an act of complete recklessness. The parade has gone off successfully without incident, which is a huge relief.

It's also interesting that the Russians refer to the Second World War as the Great Patriotic War. They point out they lost over 27 million citizens in the Second World War, a far higher death toll than any other country. They also did more to overrun the Nazi war machine than any other combatant. Putin made a forthright speech about that today at the victory celebrations.

The speech is worth listening to because he said something along the lines of, it was nice that our allies opened a Western front to divide the task of conquering the German army. Of course, the US, Britain and Western allies regard the D-Day effort and invasion through France into Germany by predominantly American and British troops as the decisive act. We think of Russia's participation being a useful contribution. The verdict of history will be that it's the other way around.

The fact that the majority of world leaders have come to Moscow for this parade speaks volumes about the perception of Russia by the rest of the world. Whether they perceive that as an expression of righteousness or simply a realistic assessment of where power is flowing, it's certainly a statement. The reaction of European leaders to refuse to participate in that celebration seems utterly petty minded to me.

There have been strong statements that Russia and China are very much singing from the same hymn sheet. They're supporting each other and working towards a more collaborative world. Xi Jinping is spending a full four days on a state visit to Russia to tie up many details again. It speaks volumes.

China and Russia are becoming more closely allied in response to the actions the United States is taking and the actions Western allies in general are taking. They're clearly supportive of many other countries who've been the victims of European and North Atlantic imperialism. The tide is definitely flowing faster.

Against that background, various sources are questioning whether there really are the gold reserves in the American treasury that it claims to have. People are asking whether there is anything in Fort Knox. Even if there were the 150 million ounces of gold supposed to be there, without a full audit of the bookkeeping, you wouldn't know whether they actually have title to it or whether it's been sold or pledged to other countries.

This is quite extraordinary. At the end of the Second World War, when they set up the Bretton Woods financial institutions and tied all currencies at fixed exchange rates to the dollar and tied the dollar to gold at $35 an ounce, the theory was that Fort Knox would be audited every year. It's actually been audited a couple of times in the 1950s but hasn't had a full audit since then. There was a when this conversation,

Sounds like a house of cards, doesn't it?

surfaced a decade or two ago. They did what was basically a publicity stunt of taking a bunch of congressmen and women to Fort Knox and showing them around. They took them down to the vaults floor, unlocked one of the vaults and showed them a lot of big piles of gold. They all went away saying they were thoroughly satisfied. It was pointed out that room would have held maybe a million ounces of gold. There's supposed to be 150 million altogether so that might have been all there was for all anybody knows.

Even if the full content were there, it wouldn't actually guarantee that it still belongs to the United States Treasury. That's one of the things. Another thing I find very interesting is that partly prompted by one of the promises Trump made, which he has partly delivered on, was to have full transparency about various issues that have been the subject of so-called conspiracy theories. It's ridiculous that the term conspiracy theory is used. in a

Especially by people who are conspiring with each other to impoverish the rest of us!

The point is that a conspiracy is simply a secret arrangement between a group of people to commit a crime. This happens all the time. Almost every crime involves more than one person except maybe pickpocketing.

Every crime that's committed is arguably the result of a conspiracy. So conspiracies happen and if somebody alleges that a certain thing is a responsible conspiracy, that's not saying very much. It certainly doesn't presuppose that it's fantasy. The question is, is this a genuine conspiracy or a made up one.

Yeah, there's some good ones and some not good ones, just like anything in life. The time between conspiracy theory and conspiracy fact seems to be shortening.

I think many people are interested in different things. Some are interested in the JFK assassination, some in the Robert Kennedy Senior assassination, some in the Epstein assassination, sex rings, some in various other things that have gone on in the past. Because there's now much more discussion, many people are realising there's all this other stuff going on which is pretty suspicious.

Getting back to immediate present events, we've had a pretty scary flare-up of conflict between India and Pakistan. Neither appear to be run by cool-headed, rational individuals, both are nuclear armed. There are definitely alarming potentialities there.

I think that's probably the end of course. We've got the Houthis striking out at Israel. Most airlines have pulled out of flights there for the time being following the attack on Ben Gurion Airport in Tel Aviv, which apparently made a 25-foot crater but didn't do any terminal damage to the functioning of the airport. The political and psychological fallout is that air travel to Israel has been pretty much suspended.

Trump claims the Houthis have capitulated in response to the bombings. They've said they won't attack any more ships, possibly apart from Israeli ones, in the Red Sea. Trump's trying to spin this as a victory, but they're going to continue attacking Israel. We don't know whether there's going to be an attempt to get into a war with Iran. If there were, that would plainly be disastrous.

Okay, so that's where we stand with the state of the world at the moment.

Inflation

What did we have to say about inflation? I noticed when I opened the tin of beans for the kids last night that the amount of sauce in the beans seems to have increased recently relative to the amount of beans. I wonder if that was your observation.

I haven't opened tins of beans lately, but I could well imagine that's the case. I certainly noticed there were far fewer oatcakes in the last packet I opened. I noticed that many packs of tea and coffee that had been 250 grams were now 200 grams. So even when there haven't been explicit price rises, there have been sneaky ones.

I'm going to have to do a real analysis. The most useful analysis would be to look at the prices of various things, not in terms of money figures, these are almost inconsiderable. I'm thinking about across the course of my lifetime.

In the 1950s, prices were really stable, but it became apparent to me that things were typically three times as expensive as the prices had been apparently before the war. Then chocolate started getting smaller, packets of biscuits started getting smaller, but it was essentially on a fairly modest scale. When you look at it over the course of 60 years, which probably to young people seems like a long time span, after you've lived through it, it doesn't seem so long somehow.

We know it's understandable that between the beginning of a war and the end of a war, money should be worth a lot less. After all, there've been many resources wasted in the war. There's been a lot of expenditure of money that was essentially being borrowed from the future to conduct the war. That's the more or less inevitable result of it.

Considering we haven't been at least directly at war over that 60-year period, it's quite astounding. You have to look at it in big picture terms to get the whole scope of it. It was the norm in the 1950s and 1960s that one wage earner in a family was enough to provide housing, food, clothing, utility bills for an entire family. Whenever there was a second partner of a marriage also working, it was a matter of choice. It was a matter of them wanting a higher lifestyle. Now, for most people, it isn't a choice at all. To cover the outgoings of a family, it takes two people working flat out.

Let alone to keep up with the Joneses, to go on the holidays, to do all the things that everyone else seems to be doing. I'm not too pressured about these things, but many people are. Yeah, it's expensive.

Yeah. I was thinking that even before you get to that, you're just paying your bills and getting a roof over your head. The mere fact that for many people, the prospect of owning their own property is becoming less of a realistic objective.

Yeah, I think often now people inherit money and that then forms a deposit that gives them the lump sum. You're still in a situation where you rent it from the bank on a variable rate mortgage. You still pay a tremendous amount of interest on that.

The implications of the collapse of the dollar system are going to result in a very steep decline in what Americans and people like Britain and Europe, whose economies are really pretty tightly yoked to the American financial system, are going to see the value of that continue to go down.

We might all be on the tins of beans for a while!

Yeah. So watch this space.

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

Things on every front appear to be getting more chaotic. Nearly everything I am going to run over today are things I have mentioned before over the last few weeks and months, but it seems that the temperature is steadily rising.

It is like groundhog day. I think the main development, if you can call it that, over the war in Ukraine is that the latest word from Trump is that essentially they are washing their hands of trying to broker a deal. There are various things about this.

One of them is that there is a certain amount of hypocrisy in America, regardless of who was in the driving seat at the time it happened. There is a certain amount of hypocrisy in America claiming to play the role of a blameless broker because the American so-called security services obviously played a large part in stirring the situation up in Ukraine in the first place 10 years ago.

Is one of those 1984 things, is it not, where the Ministry of Defense is actually the Ministry of War. The Israeli Defense Force is actually an attack force etc.

With the Israel-Palestine situation, there is no change really apart from it gets more and more intense. As far as I can tell, the majority of the rest of the world apart from Britain, America, Australia, and a few close allies is pretty well united in sympathy for the Palestinians as well they might be. It is plainly just a wholesale slaughter of a civilian population and refusal to allow any humanitarian intervention.

I guess the main significance of this is a continual erosion of sympathy for the West amongst the world as a whole. This is reflected also in financial dealings. The rest of the world is taking serious steps to disengage from the dollar dominated world trading situation.

That is closer to some collapse than anybody could possibly imagine. Certainly anybody could have imagined, let us say, a year ago. China almost certainly is well advanced in setting up an international trading settlement system, which will really render the swift interbank transfer system redundant.

The imposition of trade sanctions on the rest of the world is something that might have worked 25 years ago, but is no longer significant in today's world when America has very little to export apart from weapons. It is looking to me as though the weapons systems that Russia is producing are rapidly pulling ahead of those. Anyway, getting back to the war in Ukraine, the attempt to have a peace conference in London last week collapsed because Zelensky said it was unacceptable to concede any part of the 1991 borders of Ukraine and to accept that the population of Crimea wished to be part of Russia. The Russian government and Crimean population are absolutely adamant that that stays.

With the peace talks collapsing, we are back into an utterly vicious warfare, which it appears to me Russia is making the run in. They have got enormous advances on just about every front. We are going to get to a point where Ukraine cannot continue. That seems to me to be the only possible outcome.

Other things I think are pretty significant is the uncovering of information about a whole variety of things. Trump's administration has been on the whole disastrous and erratic. However, one thing which I think is a very positive move is the increased transparency regarding several issues.

We have referred to this before. There is the J.F. Kennedy assassination, the Robert Kennedy assassination, the Martin Luther King assassination.

Possibly 9-11, potentially.

Now, revelations about 9-11. There are far more open conversations. We have had this publication on the White House website regarding an admission that the COVID virus was almost certainly developed in the Wuhan Virology Lab. There were blatant attempts to cover that up, which have now collapsed. There are also serious reservations about the safety of the mRNA vaccine platform. It is extraordinary to me.

All of this is old news to people paying attention, I guess, but it feels like the Overton window of acceptable discussion is being shifted.

I think it would be very interesting. Different people will have had different issues in which they are heavily invested in the official narrative up till now. I have been essentially agnostic about more or less everything in public life, which means literally that in the last analysis, I do not know things that I am 95% or more certain about. I still got a certain amount of elasticity if new information or new revelations or new events cause me to rethink these things. However, it seems that a lot of people take in trends, position and hang on to it with absolute grim determination. I do not know how readily they are going to deal with the cognitive dissonance of suddenly having to come to an alternative viewpoint. That is probably the biggest cause for uncertainty in the world. Also one way of looking at it would be grounds for cautious optimism.

There is an enormous sense of release in embracing the truth on any topic. There is definitely an inattention involved in trying to compartmentalise information so as to hold on to an existing narrative. Getting back to the mRNA vaccine. The information coming out week after week strengthens the reservations that one must have about that entire platform. Jay Bhattacharya, head of the NIH in the States, has just made some extremely forthright comments about the fact that these cannot possibly have been able to be authorised with any degree of confidence. I am still getting reminders from the National Health Service to get another COVID booster or get the RSV vaccination, which is also an mRNA product.

It beggars belief that medical professionals can still at this point be recommending these treatments.

They just follow protocols. It is just protocol driven and until the protocols change they just stick to saying well the protocol says this so this is what we recommend. There is no real critical thinking in it.

Our own government is pledging to support Ukraine. We cannot even maintain our own hospitals or schools or welfare systems or libraries or public services. Somehow or other, we are going to find hundreds of billions to spend on weapons, which are beyond our capacity to produce anyway in any realistic time scale. So watch this space.

Very good. If you do not like the analysis from this week, back in a week or two and we will see where we are again! It is interesting that we are in approximately the same place.

The intensity of it seems to be ramping up. I think certain truths are going to become completely unavoidable.

All right, thanks, Derek.

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

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Well, it's been a pretty hectic week since Donald Trump announced his swinging tariffs on the rest of the world. Using this word tariff is a bit of obscurity. These things used to be called import duties. They're not paid by the foreign governments, which is the implication that he wants to convey. They're paid by anybody within the United States who's importing goods from any of these other places. So it's yet another tax. It does mean that all of the things which are imported are automatically going to be more expensive.

Probably anything that is made domestically will rise anyway as they'll have less price competition from the imports. We can expect healthy increase in inflation. We can expect the outgoings for the majority of the population to be increasing. Meanwhile, this is apparently coupled with yet more tax breaks for the extremely wealthy, which will give very little benefit to the rest of the population. The most common impression I get is that people are baffled by, as well as being alarmed, as well as being critical, they're baffled by Trump's behaviour. It seems that he's firing off policies without any due thought for the consequences. It's also extraordinarily inconsistent. For example, I thought it was a healthy development that he'd forced the Israelis to have a ceasefire a few months ago.

Of course, the Israelis were then routinely breaching that ceasefire. They've now abandoned the entire process towards negotiation, which appeared to have got started. To some people, this may not be a surprise. I don't know whether I'd describe it as a surprise or not, but it was certainly a disappointment to me. However, it does seem that Trump's enthralled to the Israeli lobby in the States and to a lot of significant donors to his campaign who are Israel supporters of one sort or another.

Yeah, you've only got to follow the money, I think, to discover that to be true.

The American taxpayers are continuing to fund the manufacture of arms which are being shipped to Israel. There's more saber rattling with Iran. I don't know whether they're loosening up for an actual attack on Iran, but it would not likely end well if they did.

The real disappointment to me is that I took at face value that he was intending to broker a peace deal in Ukraine. Having apparently made a start on that process, he's now been backing off from it. He's launching rhetorical attacks in public towards Russia in general and Putin in particular, which is not a way to conduct any sensible diplomacy. The effect of the imposition of the tariffs has been predictably that some of the other parties have responded by reciprocating the arrangement and putting tariffs on American goods. I think that if you look at the amount of trade, aside from weapons, the United States makes very little for export.

The export trade from the United States to China, for instance, is negligible. So how that's going to work out, we just don't know. Another thing is that the idea that this will force jobs to be created in America as all the manufacturing comes back home is definitely in the realms of fantasy. The American workforce hasn't got the skills to compete in the contemporary world. They haven't got the factories, they haven't got the equipment. It would take years, if not decades, rather than months to reverse that, if indeed it was a viable operation.

Things like automobiles, for example, having their final assembly at a plant in America, now contain components which come from all over the world. There appears to be no thought at all about the effect that has on the viability of those motor manufacturers. The thing I'd like to flag up is that we should perhaps take a step back and look at this within the context of two things which I said we'd be dealing with in the third section of the forthcoming book. That is the uniqueness of the present moment in history. One of them is, of course, the coming to an end of the American Empire. Just like every other empire, it goes through various stages. I think it's now further advanced on the downward slope and moving more rapidly than most people imagine.

Yeah, to quote Chris Hedges, Donald Trump is the symptom, not the cause of the current chaos.

Were you referring to Chris Hedges recent conversation with Richard Wolfe?

No, I've not watched that one yet. He's probably said the same thing a few times.

This is particularly about that aspect of it. One of the points that Richard Wolf makes is that in the latter days of an empire, the empire managers or rulers or elites seem to lose their minds. They do all manner of completely irrational things that are almost certain to be counterproductive. We can certainly see that at play.

The other thing as context for a wider view of these events that I think is important to bear in mind is that if you follow the models that were created by the Limits to Growth team, you'll see that we're still absolutely slavishly following what they called the Business as Usual Run or the Reference Run or the standard model. It was assumed that if policies are not changed in the light of this systems dynamic model, then certain things would happen. We would go into overshoot with industrial production, we'd go into overshoot with the global human population, we'd go into overshoot with the release of pollutants into the soil, the water and the air. This would result in a massive and traumatic correction sometime in the second quarter of the 21st century. All of those graphs have been remarkably on track now.

I would say that the critics of either the model or the team or the assumptions behind it have been thoroughly contradicted by the course of events. This year, depending, is either last year of the first quarter or the first year of the second quarter, depending on how you do your counting. Either way, we're going to be moving into that second quarter. Sometime within this, we're going to see drastic discontinuities. It's the refusal to face up to these discontinuities, which is the backdrop to all of the geopolitical events we see, the scramble for raw materials and remaining sites of mineral extraction, remaining sources of fossil fuels and the rest of it.

Yeah, it strikes me that the political controllers, let's say, have been hollowed out by corporatists' interests. That appears to be the root cause of it. Until we fix that, until that implodes or however that plays out. I don't know how else it runs.

So interesting times. Watch this space and stay safe as best you can.

Just going back to tariffs, I'd like to explore because presumably there is an argument for tariffs, but maybe in a more selective way that isn't on raw materials coming in and things that might be used for production in a factory in the United States or in a local country.

What almost every country has done as they develop economically and industrially is to protect their own internal industries by means of import duties on goods from elsewhere.

That still happens in the manufacturer of arms. It's a protected industry.

It is still a protected industry. I mean, it's funded by the government, which has got very deep pockets, especially as it's got unlimited powers of borrowing at the moment. It was very interesting comment by Richard Wolff in that conversation with Chris Hedges, where in contrast to what has often been said, it's often been said that America is trying to throw its weight around as though it was still the 1990s. This was no longer the case. China is in a totally different position from what it was in 1990s. So is India. For that matter, the Russia of today is not remotely resembling the Soviet Union.

People are still thinking of it with a stereotype of the Soviet era. There's definitely that blind spot in the American establishment as a whole. An interesting thing that Richard Wolfe said is that the world is not the same now as when Trump was last in office five years ago. That's how rapidly things have moved.

The most significant move really was that the United States inadvertently catalyzed the acceleration of Russia and China's moves to reduce their dependency on the American financial system, on the dollar as a reserve currency and of the Swift interbank currency movement system. I would have thought that in two or three years, a bunch of very smart people working very hard and basing what they do on what's already known could easily create a system that would do that job. I think the chances are that they've already done that. So that'll be something to watch out.

They're not yet talking about having a global gold based standard, but what they are doing is saying that they're creating bilateral agreements to trade in each other's native currency rather than in dollars. When they do that, there's got to be some balancing and clearing system, which is going to depend on gold. That is one of the reasons why central banks all around the world, whilst heavily denying it, have been building up their gold stocks.

Anyway, so interesting times. Watch this space and try and keep a focus on the fact that as the line in the Bob Dylan song, the wheel is still in spin, so don't speak too soon. We don't know how this is all going to work out. I still am absolutely convinced that it's within the bounds of possibility that we might be making a transition to a far more satisfactory world. That's the thing to keep an eye out for. See what signs you can see of that happening and see what you can do to slot into the unfolding new era that we're moving into.

Try to focus on the positive rather than the negative. It's very easy to fall into a negativity spiral in all independent media channels, often very focused on the downsides. I think we should be aware of the bad things that are going on, but keep an eye on what we can create and do want to create as well.

A very interesting book I'm reading this week is Dance to the Tune of Life by Denis Noble. It's primarily about biology and specifically about evolution and genetics and molecular biology. A key point that he makes there is that the attempts over the past hundred years have been to try and understand life by reductionist models. That is that you understand how things work at a finer and finer grain level until you get down to molecular biochemistry and then you say that explains everything else that happens. Whereas from a systems viewpoint, there obviously are phenomena at higher levels that can't be reduced.

An obvious analogy in the physical world is that in thermodynamics, you are considering large assemblies of molecules all moving at different speeds. The average energy of them gives you a measure of the temperature of that object. You don't need to track the trajectories of each one to have a model which operates at the level of macroscopic objects that is meaningless at the level of molecules. The same clearly applies to biological phenomena. The whole point is that there is definitely causation in the upwards direction from the molecules to the cells to the tissues to the organs to the organisms but there is also causation in the opposite direction.

Causation moves downward from the level of the organization which actually affects the way that the chemistry in your body works according to intentions that are created in your mind. The same thing applies obviously at the next level up when we're talking about entire societies or countries or governments or the global society. There are causation channels in both directions.

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

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We're going to continue today with our tour of our forthcoming book, Demystifying the Money Puzzle. This week, we're going to examine the nature of an enterprise, which is something we take for granted and maybe shouldn't?

Yeah, according to the Oxford dictionary, an enterprise, the two meanings they give is an undertaking, especially a complex one. The second meaning is a business. I think that's the way that we would normally interpret the word enterprise. But I want to look at it in a slightly wider context than that.

Certainly will be mainly focusing on it specifically in the context of being a small business, but it also could be any operation where people collaborate to achieve a specific result. If you go back to the definition I suggested of wealth of being things people want, ultimately any result, if it's a desired result, it's going to be something that somebody wants.

So in the broadest terms, that could be wealth. That's certainly what the purpose of any business is, or at least any honest business, whether it's small or it's big. But it's also the purpose of a charity to achieve a particular result to do something which is of some benefit to some people. It could be a club or a society, something where people come together to enable a dramatic event or a sporting event.

Of course, that doesn't necessarily need to be a team of people, but even if you're operating as a sole entrepreneur, you're still going to have suppliers. You're still going to have customers, you're still possibly going to have contractors, you're going to have to rely on some sort of delivery service, whether in the real world or virtually.

So it's definitely an interaction between people. Even the government of a country could be described as an enterprise in this way. If you're perhaps not an entrepreneur, perhaps you're an employee of somebody, it's necessary, I would suggest it's beneficial for you to have some idea of what the objective, the aim of that enterprise is that you're working within.

For one thing to be sure that you're happy with it. For another thing, you can get clear about the contribution that you're making to the success of that enterprise.

I think the best enterprises are clear actually on what they're trying to do. As a result, there's fairly clear values and you can either align yourself with those values or not. It's quite a natural filtering mechanism.

Yeah, exactly.

1. Principles or Values

So having said all that, we're going to go into more detail into what I call the six foundations of an enterprise. The first one of those is your principles or values, effectively your ethical and philosophical styles. If you're not clear about that, you can't assess whether your behaviour is in alignment with that or not.

Unless you've got a foundation in that, you won't have clarity about what you're doing, you won't have enthusiasm for what you're doing. So what you're trying to value in life has got to be central to the operation.

This harks back to Maslow's hierarchy of need as well, doesn't it?

2. The Hierarchy of Needs

Well, funnily enough, the second foundation was actually going to be the hierarchy of needs. Anything that you're doing, if it's going to have customers or consumers or whatever you, patients or clients, it's got to be something that meets some level of need that they perceive.

If you're clear about the kind of nature of those levels of need, you can then decide which level you want to address. The basic level of need, for instance, is the physical needs for air, food, water, living accommodation, tolerable temperature, clothing.

So all of those would be very obvious things where if you were in an enterprise which was supplying any of those, you would be assured that there would be a demand for it. Then as you go on up the scale, you look at the social needs that people have, the needs for self-esteem, the needs for education of one sort or another.

These could be all things that you supply. Also, on the other side of it, if you're aware of that hierarchy of needs, if you're aware of what you want to fulfil at the various levels within there, you can ensure that you structure your enterprise or your working life such that it is in harmony with that and it supports and feeds that.

In his book Simplify, Richard Koch describes the most successful businesses as being either price simplifiers or proposition simplifiers. So McDonald's being the classic price simplifier, can operate at scale, can deliver the Big Mac cheaper than anyone else. It feels to me like if you're catering to the lower levels in Maslow's hierarchy of basic security, maybe you're more likely to have a price simplifier type business. Whereas if you're helping people to achieve self actualisation, then maybe you'll probably more like to be a proposition simplifier, making it easier, making it faster, making it more autistic, making it a joke to use.

Yep. In fact, it's a fair comment to say that if we're talking about small scale individual entrepreneurial situations, you're unlikely to be in the price simplifier type of operation.

3. Conscious Capitalism

So a third foundation is what I call conscious capitalism. It's actually, you like, capitalism with a human face. Capitalism means that the ownership of the means of production is in private hands rather than as is usually conceived the alternative being for it to be in government times, which is socialism.

So if you're running an enterprise, you expect to own the assets that you need to operate the enterprise. You expect that they're going to be your property. Perhaps if you expand that, you draw other people into it, there's no reason why they can't have an appropriate share of the ownership. We'll talk about various structures to support that and also various pitfalls of doing that.

4. Right Accounting

Another foundation, particularly in the era that we're in in the future is what I call right accounting, which means covering both the obvious internal accounting of the business but also the externalities of it.

I won't get into too much detail at this point, but I mean an obvious example for instance is that there's been this huge trend to disposable packaging. In years gone by milk bottles went back to the dairy and were reused until they were no longer usable. Beer bottles went back to the brewery, even soft drinks, bottles, the same story.

There's been this trend to have no deposit bottles. They go to the bottle bank. If you look at it, this is obviously something which is a much more costly way of doing it. It's much more wasteful of energy and of materials. It's going to be more costly and the people who are paying for that of course are the general public.

So the cost of manufacturing the bottles has really been put onto the customer rather than the company itself.

I remember in Peru buying some beer and it was for argument's sake the equivalent of two dollars to buy a bottle of beer and then you got about one dollar back when you brought the bottle back. It seemed like a good system and funnily enough because I was traveling and trying to stretch my budget I did take my bottles back.

Right, if you hadn't some kids would have come round and picked them up and cached them in...

In fact, that's probably what I should have done!

Yeah, of course, that's the way it was in my childhood and adolescence. The beer bottles always had a few pennies deposit on them and that was enough motivation for most people to take them back. Similarly when the brewery delivered a crate of beer to the pub, they take away a crate full of empty beer bottles and take them back and wash them.

There's a modern example, isn't there? When they started charging for carrier bags in supermarkets, even though it's only five pence, it would have made you think about taking bags with you.

Once again, that's relatively new practice that developed when all the supermarkets gave out free bags, people stopped taking shopping baskets with them. In the days gone by, it was a matter of course that people would take a shopping bag or a shopping basket when they went shopping and it slowly drifted away.

The other thing I'm thinking of with those externalities is looking at large scale at the accounts of a company, of an entire country, for instance, we take account of the energy that is consumed. It's balanced by the fact that the reserves of say coal or oil are being drawn down.

So there's actually a negative side in the balance sheet, which is largely ignored. More and more, we're going to have to come back, do a full circle to looking at that. That brings me to one of the other foundations, which is energy and entropy.

5. Energy and Entropy

The creation of wealth involves doing work in some form or another and energy in its most basic definition is the capacity to do work. We'll look at the entire flow of energy through an operation and through an individual. We're alive because we're taking in high quality energy in the form of food.

We're processing that, we're passing out waste products and we're dissipating heat. In the course of that, some of that is just to keep us alive, but some of it is to perform the activities that we're performing. If they're constructive activities, they will be producing an end result.

Any end result which is produced involves a reduction in the entropy, a reduction in the disorder and reduction in chaos. We'll look at that in a lot more detail. We will also put it within the wider context. Everything we do ultimately is a result of the energy that flows from the sun to the earth, is absorbed by the earth.

Some of it is turned into usable forms by largely in the biological world by photosynthesis, and that provides energy in the form of or one or two stages of remove to us which enables us to perform whatever tasks we're performing.

Again, there's a hog back to Maslow, isn't there, of having the bases covered.

Yeah, absolutely.

The sixth foundation is the nature of money as a tool, not as an end in itself.

The Roles in an Enterprise

So we'll be looking at the various roles that exist within an enterprise. The first thing that you think of is what the enterprise is actually doing. If you're a plumber, it's connecting pipes together. So that's the operation of the enterprise.

If you're a manufacturer, it's taking components and turning them into some kind of artifact which does something that the bag of individual components wouldn't have done. That's the first thing that we, that immediately comes to mind when we're contemplating a small business or any other kind of operation is what it's actually doing.

But there are several other important areas. One of them is administration. Whatever you're doing, there has to be some sort of organization to actually support the primary operation. There's going to be a financial aspect of it and we'll, I think, hope, simplify things to the point that there's clarity around what needs to be done without making more of a meal out of it than is necessary.

Then there is the marketing and the sales. Those are two separate areas. What I mean by marketing is arranging for people to have a sales communication with. Sales is the actual communication which results in a purchase or some other transaction. Anything to say about that?

I've been recently been describing marketing as a communication solution to the problem of distance. Like if you're operating face to face, if you're in the market stall, you've got full traffic coming past, you don't need any marketing because it's just an ongoing series of sales conversations. The further away people are and the further they are in the awareness of the problem that you solve, the more the need for marketing goes up.

I mean, of course, even if you have a market store, you might do take some action to let people know where and when you're going to be there to encourage people who are interested to make sure they're there in those times and places.

Yeah, you can have a customer list. There's things you could do.

Another thing I'll say about the roles of business is that, particularly if you're, let's say a one man band, you really have several hats on. One of those is as a worker where you're actually doing the operation of the business itself. One is where you're a manager where you're, even if you only got yourself to manage, you've still got to, for instance, decide how you're going to allocate your time.

You've got a role as a director, which once again, even if there's only you doing the managing and the working, the role of a director is to be more strategic, is to decide things like where do I want to be this time next year? How do I plan my operation to support that longer term objective?

Finally, you have a role as a business owner. In a large complex business, you might have sleeping partners who have financed the business and have got a share of the ownership. If you've done it all yourself, you should be getting some return for what you've brought to the business by way of capital.

Capital is a form of wealth. It's a form of wealth that generates more wealth. In the context of a small business, it would be the premises to run the business from possibly a vehicle to move around or to deliver goods. It would be any tools or machinery you need to operate it and so on and so forth.

We'll cover all those. That more or less summarizes what we'll be covering in the nature of an enterprise, section two of the book. Next week on our talk we'll summarize what we're going to cover in the third section which is the peculiarities of our age.

Everything that we've said in the first and second parts of this book is kind of perennial and would apply at any time.

I was gonna make that point actually, that I think to collaborate with other people to achieve a greater outcome over potentially quite a long period of time, I think that's a very human endeavour. I think people have always done that. We've literally got evidence that people have done that in the form of the pyramids and so on. So I don't think there's anything new. It's just applying the same principles to hopefully achieve a bigger outcome or maybe make your life a bit easier by going down a fewer wrong turns.

I'll just briefly that I believe we're passing through an inflection point, a discontinuity in history. There are, if you like, long periods of relative in equilibrium when it really seems as though there's nothing new under the sun.

But in fact, each generation that goes by, there's sort of slight shifts of various sorts, but this has been very slow, particularly in more distant periods of historical time. If you think about feudal societies for hundreds of years, the same sort of activities were being carried on.

By and large the families of people tended to do the same as their parents had, whether it was being the Lord of the Manor or being the cowherd or being the blacksmith. Whereas there have been a few brief periods when something dramatic shifted.

One of those being when we settled down on the land and started cultivating plants and domesticating animals rather than hunting and gathering. Another one was the formation of larger scale operations with the city-states. This was entirely different from the purely village level agricultural society that had existed for the previous few thousand years.

Then of course the big one about 300 years ago was the Industrial Revolution. Within the last 70 years of course we've had the Information Revolution. Those have been inflection points and it's my belief that we're now in the middle of, in the process of a dramatic shift.

Certainly some of the things look very bleak, they look very chaotic out there. I believe that that is a symptom of a transition. It could well be, it hangs in the balance, but it could well be that this is a transition to something more wonderful than human beings have ever seen.

Let's hope so.

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

So last time out we were outlining our forthcoming book, Unravelling the Money Puzzle, and we thought we'd continue tugging on some of those threads today. What's on the agenda?

Well, as I said last week, we gave an outline of the structure of the book as a whole. I mentioned that there are going to be three sections. One is about the nature of money itself, the forms it's taken, what's the common feature, what functions it serves and how well the present form serves those functions. Broadly you could say this is the realm of the discipline of economics, so I think this section of the book we're going to call demystifying economics because I think you'll find that it mostly is a mystery to us.

We're familiar with economists as talking heads on TV stations. Usually those economists are either people who work for a bank or some other financial institution, or they're government bureaucrats, or they're academics. I don't know about you, but my experience very often is they have their few minutes of talk or being interviewed. At the end of it, I very often find that I'm not much better informed about what they were talking about.

Exactly. It's been described as the dismal science.

I go further than that and say it really is definitely a pseudo science. It doesn't count as a science at all because the key thing about science is that you form a hypothesis, you collect evidence for it. When the evidence seems to be sound, you make predictions. If the predictions come through, it gets adopted as a theory. Economics seems to come up with predictions all the time, which almost immediately in some cases turn out to be falsified by the way events actually unfold. So I think that rules it out.

It's interesting, we talk about the Nobel Prize for economics, but in fact, that is more of a PR stunt by the profession than anything else. In the Nobel Prizes that were set up in the will of Arthur Noble, there was no prize for economics. The strict name is the Nobel Memorial Prize for economics. It was funded by, I think, the Swiss National Bank to give a fig leaf of respectability to the profession. Some of the prize winners have been notorious for having overseen various financial catastrophes.

Like all of the social sciences, it arguably suffers somewhat from what might be called physics envy. Because physics is an exemplary science and is strongly mathematical, there's a feeling that a great deal of mathematical sophistication is required for contemporary economics. Whereas in fact, unless you've got a sound underlying theory and you're confident of the data that you're feeding into the equations, the results of those equations however they land will not be worth much.

So garbage in, garbage out indeed.

So we'll be looking at a few economists, what they've said, what we can take away from that and have some confidence in and what we should be a bit more skeptical about. We'll be taking a look at the fundamental question of what is money. We all take it for granted. We don't think too much about what the substance of it is, mostly what purposes it serves apart from the fact that obviously we need it to buy things we want.

We'll see how different forms of money have been in use over various times and places in history. We'll see how well or how badly it serves the purposes that it's intended to. Related to that is the question of what is wealth. Now, that's not the same as money. It's obviously calculated or measured in terms of money as a rule, but clearly it's something distinct because one way of describing what money is, is to say that it's a call on wealth.

When we look at that, we can maybe look at what's available in the world in the way of wealth and what's available in the way of money and how they match up. That would be quite an interesting thing to see.

We need a more holistic view of wealth. It's one thing having a tremendous bank balance, but if you don't have any good relationships with the people about you, or you have zero time to pursue any hobbies and interests, are you really wealthy? It seems a bit lopsided.

Yeah, indeed. In terms of the tangible forms of wealth, houses, cars, computers, and the form that investments may take, we'll be looking at where wealth comes from, how it's created, where it goes, how it's lost or how it's destroyed. In conjunction with that, we'll be looking at the particular form of wealth called capital. We'll be elucidating what that is.

It's also relevant, I think, to take a look at the role of energy in the creation of wealth and the maintenance of wealth and why that's necessary and why they're involved with one another. So that'll give a rundown of what will be in this section of the book. Anything for you there, Rob?

Yeah, I was thinking about the role of money. I mean, to my mind, money is a means of exchange, but it should also be a fair means of exchange. I think for the people who control the money supply, I think it's also a means of control.

Yeah, absolutely it is. Being aware of that in itself will release you to some degree from the grip it has if you're unaware of that. That's really the intention with this entire project. If you are aware of all of the topics that we're going to cover in this book, you'll be less susceptible to being exploited.

The Boy Scouts motto comes into play doesn't it? Be prepared.

Yep, that's it.

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

I wanted to give a summary of my plan for the book and for the listeners to this podcast today. If you've been listening for the last year or so that we've been running this, we'll have already covered some of the material that will go into it. We will probably go through it again in a more systematic, structured way.

Provisionally, we've decided to call the book Unravelling the Money Puzzle. The book is meant to fill a very important gap in your education. We're all thrown into a world where money is a big preoccupation for all of us, in some cases voluntarily, in a lot of our cases reluctantly, but it has to be dealt with in some way or another. I often feel a bit like we've been pitched into a game where nobody's explained the rules of the game.

We all have a bit of practice as kids. We get given a certain amount of pocket money, and we have to budget for it, but without anybody explaining what that involves or how to go about it, it probably doesn't leave us with much ability to deal with the complexities of life. I will say that those complexities have got a great deal bigger throughout my lifetime. Nowadays, almost everybody, as far as I can see in the Western world, accepts being in debt to a greater or lesser extent and possibly a crippling extent as a more or less inevitable circumstance of life. As recently as, let's say, 60 years ago, that wasn't the case for most people. I'm talking about my own experiences in England. The same applies across Europe, the United States, and the Western world.

Are we including taking out a mortgage and things like that in that category of debts?

Well, I think I'll come back to that. A significant number of people did have mortgages in the 1950s and 1960s and probably even back to the 1900s. We'll be covering in greater depth how that worked when it was a workable situation and how it's working now that it's turned into a gigantic swindle.

Incidentally, not everybody is trapped, even today. I do know one person who bought a house, believe it or not, in London, Greater London anyway, about five or six years ago, I should think, and she and her husband have paid off the mortgage entirely.

It is possible not to be totally suckered by the system, but not many people have the leverage to manage to do that. Anyway, apart from mortgages and to a much smaller extent, bank loans for a very large purchase, like probably a motor car, were the only ones for most people. But apart from that, people weren't in debt.

That was not because they were particularly vigilant about it or self-disciplined. There simply wasn't the opportunity. There wasn't the mechanism. Most people dealt entirely in the cash economy. They got their wage packet on Friday. That had to last until the next Friday. When there was no more money in their wallet or their pocket, there was no opportunity to spend anything. The exceptions for that were very minor. Many working class communities had a local shop, which would allow well-known, regular, known-to-be-reliable customers to run up a tab if they ran out of money by Wednesday.

That was to the advantage of the shopkeeper, who would sooner sell a bag of sugar on Wednesday than lose the sale. It was obviously to the advantage of the customer, but if they didn't pay up on Friday, they wouldn't get anything else out of the shop until they did.

The system expires if you don't honor it.

Exactly. There was a slightly larger scale version for middle-class people. Most reasonably sized towns had a department store. The department stores were locally based businesses in those days, they've all gradually been absorbed into the massive chains, some of which have subsequently gone bust as we know. There was an account system customers who were deemed to be reliable, which usually meant at least having a bank account, which the majority of the population didn't, and who the bank would give a coded reply to the inquiry as to whether they were reliable, that was a satisfactory reply. They could make purchases over a month and then be sent an account at the end of the month. They'd have to settle the balance on that before the next month. Once again, if they didn't, there would be no more. If it got dragged out, eventually, the bailiffs would come around. There was probably a bit of flexibility for customers who were well regarded to make large purchases. If they wanted to buy a complete suite of furniture or something, the department store manager would be happy to sell that to them and give them perhaps two or three months to settle. But it was an informal arrangement, case by case, and a very small part of people's transactions. So, as I say, the rules of the game have changed dramatically.

There has been an enormous facilitation of people, mainly in the form of credit cards, to draw them into debt and then pay exorbitant interest rates if they don't settle. It's not only made very easy, but they're constantly enticed to run this up.

As I said, the rules of the game have changed dramatically, and we’ll cover how in the book.

The book will consist of three sections. The first one is demystifying economics. This is, you like, to give you an idea of what makes sense in the realm of the theory of money, what money is, what purpose it serves, and how well it serves that purpose or fails to do so. We'll also discuss things like wealth, capital, and how wealth is created and destroyed.

That leads to the second topic of the book, which is the creation of wealth. Wealth is created by collaborations of people in what is called an enterprise. When I use the word enterprise, we immediately think of a business, probably a small business. I'm using the word in a very general term. One dictionary definition is a group of people cooperating to achieve a specific outcome. That covers a business, a charity, a social grouping, a sports club, and a government.

Certain principles of running an enterprise apply to all of those things. I think most of us have a kind of intuitive grasp of some of them, but we're going to spell them out in explicit detail so that you get a real understanding and then you can think about it. You can think about all the enterprises that you're involved in in your life. Even if you're not running a small business, you're involved in an enterprise your employer runs. You're involved in an enterprise in so far as we supposedly participate in some form of democratic government. We're involved in an enterprise if we're in any club or social grouping or charity. Having an explicit grasp of those will be of immense value to you. It's extraordinary; all the topics covered in this book are not part of our formal education system.

Of course, if you're running a self-employed small business, you might well be all of those roles, but it's a pretty good idea to have a clear idea of the role and be clear how much time you're spending on each of those things, how much attention you're giving to each of those things, what your rate of return for the time that you expend in those things because of course if you're running a small business one of the things you might find is that if you get a grasp of the going charging rate for your thing, you'll find it's reassuringly much more significant than what you would be offered as a wage or salary for doing the same work. But it took me a lot of hard knocks to realise that it needs to be because all kinds of things must be carried.

If you're an employee, you get to the end of the week and you get your pay. If you're a small business, you may or may not get paid in any given period. You can guarantee that you have to do a lot of work in those other areas that have not got an immediate invoice attached to them yet, which are essential. So all of that has got to be covered.

If I can add to that, I think a job is almost like a preconceived container of value as defined by someone else. That definition of value might not actually match your real value, which is why a lot of people feel like they don't get paid according to their worth because it's someone else's definition of the value that you're going to provide from your time.

Exactly so, yep.

Of course, they wouldn't be providing the position for you to work in unless they perceived it, rightly or wrongly, as being of more value to them than what they're paying you. I might have mentioned then that I worked as a test engineer in an electronics factory. I went for the interview, and they said, “Well, we think you're probably overqualified for this job; we've only got this amount of budget for it.” I said, “OK, that's fine.” It suited me to have something at that point. They said it would be a month trial on either side.

Anyway, I reached the end of the month, and they'd been very impressed with my output. So I went to my immediate manager because, coincidentally, this was when I got the tip-off that there was a job going in the recording studio. I went for the interview and got that job. So I went to my manager and said, “You know this month's trial on either side? I want to terminate it when the month expires.”

Needless to say, he was quite upset. He went and saw his boss, who was even more upset. He went and saw his boss, who came round to me and said, “I don't suppose it makes any difference if we offer you some more money.”

Instead, they could have structured it so that we can pay for the first month and we will review the situation with you depending on your performance. That's the kind of thing that very rarely happens in large corporations. I've been shocked by the lack of attention to their self-interest by people running corporations. It seems to get worse the larger they are. Has that been your experience?

Yeah, I think it's short-term rather than long-term thinking to incentivise and keep the right people.

Part of the problem is that in most corporations, at any level, until you get to the executive suite, people have very little stake in the company's prosperity.

So, the book's third section is, in a way, the most important one for your future well-being over the next decade or two or three or however long you have left on this planet because the third section will deal with the peculiarities of our age.

Everything we've covered in the first two sections will be perennial principles, things that could have applied any time from ancient Babylon up until the present. Of course, there will be more of those which are perhaps more specific to the industrial age, more again into the information age, they're perennial principles. But we're living through an extraordinary time in human history. We will be covering what is peculiar about this, what has led up to it, what is unsustainable in the literal dictionary meaning of that word, what the options are, and what the options are for humanity in general and for you.

Any comments on that?

Yeah, and I think the options for what humanity are, the options for humanity in general, I think when I speak to so my dad about this, he's like, well, you can't do anything about it. I'm like, yeah, but if everyone thinks that, then we end up in that situation, and then that becomes true. Whereas maybe your decisions have more of a butterfly effect than you realize.

Absolutely.

Not only that, there is the phenomenon that has been speculated about by the wisest of people for literally thousands of years and which Carl Jung had, which he called the collective unconscious and which Rupert Sheldrake called the morphic resonance field and which many thinkers and philosophers and mystics and seers and wise people have contemplated for years. We certainly see some extraordinary examples of it. I'm told, you know, some of these things that could be urgent urban legends. I don't know, but milk was delivered in bottles with foil tops for many decades. Suddenly there was a blue tit who decided that they could pick through the foil lids of the bottles and drink the cream off the top of the milk. Very rapidly blue tits in widely different parts of the country or continent started doing the same thing. On the face of it, there's no mechanism for doing that.

A bigger scale example is that we were all taught that the beginnings of the agrarian civilization started in the Fertile Crescent in the Middle East, up the Nile, the Tigris and the Euphrates and down the River Jordan in the fertile river valleys around there. The extraordinary thing is that after human beings theoretically had the capability of doing that for at least 50,000 years, possibly 100,000, possibly 200,000, over that kind of geological time scale, there was very very little physiological evolution of the brain or the nervous system or anything else. Yet, at the same time, give or take a thousand years or so, a similar insight appeared in the Indus Valley in India, in the Yangtze Valley in China, and in the civilizations of Mexico and Peru. There was no conceivable way that any messages could have been exchanged between those in any tangible external sense.

This is one of the things that gives me hope. I think so many more people are thinking along the lines that we've just been mentioning that at some point, that will become a critical mass. The other thing that shows that we're boiling up for a bigger change than most people can imagine is if we look at the events happening now. You probably heard me mention the phrase reductio ad absurdum? That’s certainly what we're seeing in this country with Keir Starmer's posturings, in France with Macron's posturings, and in Europe generally with Ursula van der Leiden's pronouncements: people who are completely disconnected from reality. Starmer's been pledging billions of pounds in weapons and ammunition and munitions to Ukraine, been offering to send a peacekeeping force to stabilize the situation once the hostilities stop. All of these things are complete fantasies. They're not going to happen. We haven't had the money to run our hospitals, schools, and universities. See, yeah.

And those things are what people want.

Yeah. Even if we did have the money, that would be a better place to spend it. Another thing boiling up, if you look at the Ukraine conflict, is how futile it is to send this sophisticated weaponry.

It's a racket, isn't it? I think it's a form of taking money from the public domain that may not even exist yet. It's creating money in the public domain and siphoning it off to the private domain.

Yeah, absolutely. But it's reaching a point of absurdity. It's reaching a point of self-contradiction, which has to be becoming so in your face that it is more or less inevitable that more people will notice it.

Of course, the other major fiasco of the week was Zelensky's meeting with President Trump. There are two different narratives about this. One is that they're ashamed of, especially if they're American and beholden to the Democratic Party. They're ashamed of the disgraceful way that their president treated this brave freedom fighter. The other narrative is that Zelinsky came across, he had no idea of how to play the very small hand of cards he had to be fair, but he had no idea how to deal with the situation, brushing up against the guy who is arguably the most powerful person in the world, and certainly one of the biggest egos.

Once again, the mainstream media's view is somewhat skewed because they showed the end of the interview when Trump, according to some people, lost it, and, according to other people, they gave him some home truths and advanced it much the same way.

I've seen people who've analysed the whole thing. I haven't got 20 minutes to watch the whole thing all the way through, although it does make great theatre. I've seen some analyses and some clips from earlier on. The point is, Zelensky, for a start, just turned up in his combat fatigues, which is a conceit anyway.

He must sleep in his combat fatigue, so it's part of his act.

Yeah, it is. It was totally an act, and it was inappropriate for a heads of state diplomatic meeting.

Many Americans saw it as a deliberate insult, so it was not very well judged, even though that is his act. Then, in the earlier part of the meeting, he repeatedly interrupted Trump, contradicted him, and made demands in a very insolent manner rather than polite requests.

Trump was very gracious. He fended it off, made light of it, and then eventually just blew a gasket. Now, it's actually given him the excuse to do what I think he wanted to do anyway: cut off the munitions and weapons supplies and cut off the intelligence, which should bring the war to a much more rapid conclusion than it otherwise would.

Well, that has to be a good thing. I'm less confident about the situation in Gaza. If you want to know what the empire's up to, I would keep an eye on that location.

Yeah, I do not know either, but I suspect that there might be unintended consequences anyway, which are far more telling than anything intentional. I also think that a larger picture may be force majeure.

Okay, I think that could wrap it up for today, could it?

I think so, yeah. No, I think that's a good overview of the book. I'm excited to read it, even though I'm going to be contributing a lot of the input. Yeah, I'm looking forward to it. If anyone is listening, we'll update you in due course when we will launch a date.

Yep. Of course, by following this podcast and/or reading the transcripts, you can see the book unfold in real time over the next few months. Okay. Until next week then. Thank you, Rob.

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

I've got a short quote from Caitlin Johnson to share today. We both follow Caitlin, she's at https://caitlinjohnstone.com.au/. She says in one of her articles:

Market forces are not guided by wisdom, they are guided by greed and fear, and by the unresolved early childhood trauma of the Musks and Theils and Bezoses of this world. Capitalism is a great way to guarantee more production and consumption, but it is completely useless for curbing ecocide and restoring planetary health.

As long as ecocide remains profitable under a system where mass-scale human behavior is driven by profit, ecocide will inevitably continue. What we need, then, is a completely different system. One where we move from competing with each other at the expense of our biosphere to collaborating with each other and with our ecosystem. Collaboration-based systems are inherently incompatible with the competition-based ones we live under today — but they are also the only way we are going to be able to continue living on this planet.

That seems to summarise much of what we've been discussing over the last year. I think that is the change that we want to hopefully do our part to push towards.

Absolutely. Last week a joke popped into my head that I was told when I was about eight. I don't know how often I've thought of it since then, but not many. It's quite funny at an eight-year-old level, but it's also got a profound point that was probably lost on me at that age. So the story is that

There was this guy who was employed to paint a line on the ground for the border between Russia and Georgia. He was going along and suddenly found a house right in the middle of where he was going to paint the line. So he knocked on the door and said, I'm painting the border between Russia and Georgia. It goes right through your house. Can you let me carry on? The guy said, no, I don't want half of my house in Russia and half of it in Georgia. Can you go around it?

The guy goes, all right, which side would you like me to go? He said, well, go around the house on the Russian side. The guy says, all right, I'll do that. But I just have to ask you why you chose that side and not the other? The guy said, well, I couldn't face the thought of living through all those Russian winters.

The point being, of course, the more profound point, I mean, obviously it didn't make any difference to what the temperature was when they drew the line. The more profound point is that all of these borders are arbitrary.

All the rhetoric about the territorial sovereignty of Ukraine at the moment is nonsense. It would be great if ethnic Ukrainians and ethnic Russians could recognise that they're all human beings and live together, or if enough of them could do that, that the minority who fought in terms of separation could be prevented from inflicting indignities and attacks on the others. Given that they haven't, it seems that one of the things which is missing from the public dialogue in the Western world is the fact that in Crimea, there was an overwhelming majority in favour of being part of Russia. That was ratified by the Crimean Parliament. Similarly, with the regions of Luhansk, Donetsk, Zafrosia and Khursan, there have been considerable indignities and restrictions placed on Russians and actual attacks by the Ukrainian army. Those people wanted to be in Russia rather than in Ukraine as well. The phrasing of the discussion in terms of the fact that these are areas that Russia is annexing seems to me backwards.

It seems to lack any historical understanding of the history of these regions anyway.

Positive Events This Week

Yeah. Anyway, to positive reflections on the week. The mere fact that there's been a very detailed meeting between a Russian delegation and a US delegation in Saudi Arabia has got to be positive. The idea that you can engage in megaphone diplomacy and not talk to each other, not try to understand what their perception of the situation is, seems to be a recipe for chaos and lunacy to me. So the fact that this talks going on at all, and, of course, Trump has been usually blunt and undiplomatic, but the howls of protest and outrage in the American press were predictable.

And the European press, but they've been largely sidelined, I think.

Yeah, yeah. Meanwhile, of course, the Europeans had their own meeting in Paris. A bit of chest-thumping. It seems to me that both the UK and the European Union are hanging on to a completely outdated perspective of how the world is. I'm concerned as a British citizen that our Prime Minister seems to have taken it upon himself to suggest that we send troops over there.

The idea of us effectively opening hostilities against Russia is frankly chilling. Apart from the obvious lack of wisdom of going into any conflict on what is clearly the losing side.

Haven't seen various people try this over the last few hundred years and come off much worse??

I think both Napoleon and Hitler were better equipped militarily than Britain is now.

Anyway, I don't know how it's going to work out. The other thing which has been two pretty striking speeches this week, one from Robert Kennedy Jr, his opening address to the staff of the Department of Health and Human Services.

It's well worth a listen. It's a 20-minute speech. Every point is spot on. He emphasised the need for openness, transparency, and open debate and pointed out that this is the essence of what makes science workable. He said he's going into it without any preconceptions of his own. He's also said that there's no area which is going to be off-limits for discussion. So I think it'd be interesting to see what comes of that.

It's very interesting, I think. The other thing I noticed this week was I noticed that Trump, obviously Trump says a lot of things, so it's hard to know what is serious and what is not. That's always the issue, but he did make some comments about denuclearisation.

Yeah, well, I think these two wars, especially the war in Ukraine, I mean, Gaza has been more of a massacre than anything resembling a war. The war in Ukraine has flagged up the futility of warfare as a way of resolving matters. The expense must be astronomical.

What is also beginning to be said now is that half of the money and weapons sent to Ukraine have been embezzled. So, if that comes out, it will put a different perspective on things. Of course, the other big announcement was that there is this commission being set up to reveal all of the secrets that have been kept from the American public regarding the JFK, RFK and Martin Luther King assassinations, the COVID pandemic, the 9-11 attacks on the Twin Towers, numerous other things. I think whatever one thinks about the flawed nature of the individuals involved in this current administration in the UK, there are positive things happening in a matter of weeks that most of us have been resigned to giving up hope for.

I don't know where it's going to go. I don't know what Trump expects to achieve throughout his presidency. I don't know what he imagines he means by making America great again. I feel that some of the things I've said before are beyond his capability to deliver apart from anything else. I don't know how rapidly people who were his enthusiastic supporters are going to get demoralised by that or whether we'll see so many positive effects from some of the things that have been set in motion that it will be liberating. I personally expect that there will be all kinds of unintended consequences particularly of releasing those secrets from the past. Many people will have severe attacks of cognitive dissonance over one of those issues or another.

The parallel I keep thinking of is Gorbachev introducing Glasnost and Perestroika, which was sorely needed in the Soviet Union. The whole country was dysfunctional due to government over control and secrecy.

Gorbachev had no intention of bringing down the Soviet Union, but the Soviet Union collapsed because once they started coming straight about some of the things that had been going on, it totally destroyed the population's confidence in the credibility of their government. I cannot but expect that we'll have a similar sort of.

We might well be living in a house of cards. Yeah, who knows.

Yeah, who knows? Anyway, once again, a lot of the events are happening so rapidly that it's impossible to assimilate them as we go along. It'll be very interesting to see what the perspective is with the view from a little way into the future when things have settled down.

Comments on Gold

Finally, there are a couple of things that have come up in the past week. One is that the Bank of England has now slowed down the rate at which it honours requests for withdrawals of gold from its vaults. We would have to wonder whether this indicates that there might not be as much gold in there as has been claimed. Similarly, Elon Musk has said that there must have been a recent audit in Fort Knox. Of course, I'm sure he knew full well that there hadn't been any kind of audit since, I think, the 1970s. That was only a partial one. I believe the last full audit was done in 1953.

That's amazing, isn't it?

There may well be a big shortfall in what is claimed to be in there. This has implications for world finance, particularly given that China, Russia, and other nations in the Brexit Consortium have been steadily building up their holdings as fast as they can over the past decade. There could well be a very serious shake-up in the purchasing power of any fiat currencies in the Western world.

Which is going to happen anyway, but it might happen sooner in a more traumatic way than people think.

Much more abruptly. So, I think that's a roundup of what we have to go on today. Circling around to that quote that you started from Caitlin Johnstone, I mentioned the five whys last week. I talked about it mostly in the context of a business situation or some kind of production bottleneck or equipment failure where you have this technique. When something has not worked out well, you say why was that. Then you get an explanation. Then you say: why was that. You get an explanation. You keep saying why until you get to the root cause of it.

If we look at any one of the major challenges facing the human race, whether it's the increase of any particular form of pollution, whether it's the exhaustion of supplies of some critical material or of the energy sources that we're relying on. Or warfare, which is plainly counterproductive and painful. If you keep asking why, I would suggest that at the end of any of those enquiries, the root cause is that human beings are steeped in the illusion that they are separate from other human beings; separate from the web of life on this planet; separate from the functioning of the planet as a whole, separate indeed from the entire universe.

It's that illusion of separation which has to go. Some people approach that from a spiritual point of view, some people approach it from a scientific point of view. According to quantum physics, any particles which have had any interaction with one another are entangled in such a way that you can do quantum measurements of one of those particles. It will give you instantaneous information about the other one, so from any of these points of view, you could look at it from an evolutionary point of view.

We do have a common ancestor. The biochemistry of all living organisms is based on a common foundation, and their matter is constantly exchanged. That shift of perspective will be necessary as a precondition for resolving any of the specific challenges we're facing now.

My estimate is that far more people are aware of that to some degree than there ever have been, and there is far more interest in that topic from one of those directions or another. I don't know how close we are to reaching the critical mass tipping point where this becomes the prevailing understanding. I think we're living through fascinating times, so watch this space.

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