Sovereign Finance

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

Today we're going to be talking about several frameworks you've got in mind for life operating an enterprise, all sorts of things. So, where do we need to start?

I thought I'd return to the focus, which is the core of what we set out to do with sovereign finance, which is to show some light on the whole nature of wealth and the creation of wealth. I've identified six foundational principles on which the operation of any enterprise applies. When we talk about an enterprise, we're primarily thinking of a business operation of some sort, but it could be any undertaking where people work together. It could be a charity, it could be a sports club or a social activity, or it could be a government.

I'll run through the six of those. From some conversations I've been having with people, I was reminded of something called the seven P's principle, which I'll talk about, and there's the five Y's methodology. So let's move on to the principles…

1. Ethical and Philosophical Foundations

The first principle is the ethical and philosophical foundations that you adopt. Now, each of us has, if you like, principles in life. For some people, it's “I'm out for all I can get.” For some people, having as nice a time as possible is important. For some people, it's...

As much freedom as possible, or as much time with the kids as possible, or...

Yes, each of us chooses our own ethics. Wise men have repeatedly advised adopting the golden rule: do unto others as you would have them do unto you.

That's broadly all major religious teachings, I think?

Yes, it's the core of the practical down to earth aspect of every religion as far as I'm aware. I was educated in a Christian environment. As far as it went, we started every day throughout my entire schooling with a religious service, which was entirely Christian. We had one period or more every week of religious instruction, which again was entirely religion. I don't think throughout the entire 13 years of my schooling, there was any discussion more than the most passing references to Buddhism or Islam or Taoism or any of the others, or indeed the fact that there were numerous indigenous religions.

You have to find them out for yourself.

When it comes to ethical teaching, as far as your behaviour with other people is concerned, I think they're all in agreement. You can look on Wikipedia and see the phrasing in about a dozen different contexts. The ethical principle is what we call the golden rule. Even if you're not religious, you might choose to adopt that. In my experience, it makes for a more pleasant life than the alternative.

I think we're all religious in some way. It's just that whether you adopt a, I don't particularly feel enamoured with institutionalized religion. However, I think everyone has a religious practice that pertains to ethics and behaviour.

Well, of course, even if you're an atheist, it's a question of faith. It's not that faith is monopolized by people who are theists or deists. The number one is to adopt a principle. It makes sense in business because your reputation follows you around. If you have a reputation for ripping people off, you'll find it harder to get customers over time. You'll have a less pleasant experience of dealing with your customers. So it's entirely a matter of enlightened self-interest.

2. Maslow's Hierarchy of Human Needs

The second principle is Maslow's hierarchy of human needs. If you offer a product or service, you won't get anywhere unless somebody wants it. They will want it because it satisfies one or more levels in that hierarchy.

It must scratch an itch somewhere in the pyramid.

In a couple of presentations, and also in my book, The Letter from 2100, I indicated that there was a revised version of that hierarchy, which he wrote in a later book about 20 years after his original exposition. I did a further revision of it myself and I’ll talk about that in a little while.

Essentially, if you're unfamiliar with the concept, the most basic level of the hierarchy is meeting your physical needs. You need air, you need water, you need food, you need adequate clothing and adequate shelter. You need some sort of healthcare and sanitation. If you haven't got those, to varying degrees, you'll be desperate to get those before you can satisfy anything else.

Then you have the need for safety and security. Above that, you've got the need for love and friendship, for self-esteem and for what he called self-actualization.

He then added another level at the top, called transcendence. After discussing it with several people, I revised it to be essential. Some people argue that the whole hierarchy of needs is completely inverted.

I don't think that's true because you need those first two levels before considering anything else. As soon as you've met your physical needs, your safety and security, and if you put transcendence next, the others will come much more freely.

Everything else falls into place much more nicely, everything else falls into place with much less friction once you've got that in place.

Yeah, exactly.

3. Conscious Capitalism

My third concept is what I call conscious capitalism. By that, I mean the fact that we all need capital if we're running an enterprise. At the very least, you need the space to operate it in the communication devices you use to communicate with your customers and prospects.

You'll need some sort of machinery or tooling for most practical businesses. You'll probably need vehicles to get around in, and you need to own those. You need to operate in a way that allows you to justify the investment in those and maintain the investment. I'll come to another aspect when I get to foundation number six: having a centre of proportion.

4. Right Accounting

The fourth foundation is what I call right accounting, which means you allocate expenses correctly. I want to fully consider the biggest possible perspective on the whole thing. For example, if we look at what happened with drink containers over the past 50 years, beer and milk bottles have been returned, cleaned, relabeled, and reused.

The bottle was manufactured once, it made many trips, eventually it was degraded in some way or broken or lost. It served its purposes. The same works for soft drink bottles. Then the manufacturers decided that they could make more profit by not bothering to collect, return, and wash and just buy a new bottle.

This is a bit of a swindle because it's the customers who are paying for the bottle, whether it's a plastic one that then gets thrown away and pollutes the environment in various ways or whether you have to pay your local council to be an unpaid servant of the system by taking your bottles to the bottle bank, which you have to drive to in your car.

The local authorities gather them all up and take them to a glass company, which melts them down and turns them into bottles.

Which is what you had in the first place!

There's obviously a lot of extra effort, money, and energy going into this.

It's quite a lot of energy to melt glass.

Indeed. What I mean by right accounting is looking to the future and a more functional social and economic system. All of those things would be considered, and they would all be fed into the policies that were followed.

5. Energy and Entropy

The fifth foundation is grasping energy and entropy. We obviously need energy. We need to put fuel in our cars. We need to draw from the electrical grid to power our devices, heat, light, warm, and cool our environments, and run our machinery.

Entropy is the amount of energy lost over time. It includes decay, disruption, corrosion, breakage, and wear. Some of it is dissipated at every energy conversion as low-level heat, making it unavailable for further useful work.

This is why, although energy is not created or destroyed, it needs to be constantly replenished with high-quality energy. This impacts the fact that we've had this great bonanza for the past 300 years of burning up this great stock of fossil fuels. We will be looking at that within the lifetimes of many people living on the planet.

It will be a bit of a scramble to make that transition, which would have been very easy if it had been embarked on 50 years ago when it was obvious to many people that this would become a problem. We also need to know that we need to operate within the broader context of the oil, gas, and coal industries and the geopolitics surrounding them.

I was thinking about energy from the perspective of an artistic endeavour. You, as the main input into your work, still need energy, and your energy peaks and drops throughout the day as well.

Yep, this is true, yep.

6. View Money as a Tool

The sixth foundation is viewing money as a tool, not as a deity, not as something to be worshipped, not as something that is the point of the exercise; it's something that is subservient to the practicalities of operating the end.

It's the means, not the end.

So those are the core principles of the core foundation. Any thoughts on that, Rob?

No, to me, that makes sense. We've obviously been having these conversations for a long time. I guess the question is, how are these trends changing? I mean, you mentioned that there must be a scrabble towards more renewable energy sources and doing those practically. I guess I'm interested in how things are changing in the current pivotal time that we're living through.

I think we need to be aware that over the decades, more and more of the energy we use has to come from current sunlight and not from three million-year-old sunlight that's been stored under the ground in concentrated form for us to rip through. We should adopt policies that ensure we are not more vulnerable than we have to be to the shocks that come about.

My other thought was that there is a move towards or higher prioritization of achieving self-actualization. I think more people are pursuing that in arranging their work and orienting themselves in it. One of the good outcomes of the last few years has been the realization that you can pretty much organise your work any way you want, as long as you're solving a problem for people and it's valuable.

The 7P’s Principle

As I was going to mention, the 7P principle is a jokey way of saying something that is actually pretty obvious, and we've all probably been guilty of ignoring it. The principle is Proper Prior Preparation Prevents Piss Poor Performance.

Or ‘measure twice, cut once.’

We've all been guilty of doing things in a slightly slapdash shooting-from-the-hip way. That's something to remember when you catch yourself doing it to take another look. See what you could have done to think things through in advance and plan things out, and then follow the plan. That also involves modifying the plan over time if circumstances don't seem to unfold in the way you've anticipated.

I have a client who talks about the importance of having what he calls confidential sounding boards. These are people you can go to who will triangulate and give you an impartial opinion. Having a few of those will hopefully lead you to make better choices.

Absolutely, good one.

The 5 WHY’s

The five WHY’s, I mean, there's a slight pun here because it's not the letter Y, it's the question WHY.

Five WHYs sounds like what my four-year-old daughter does in the kitchen when I'm trying to do anything. “Why are you doing that, Daddy?” It's the question I hear all morning.

Well, that's a good question. When something goes wrong, the question is, why did it go wrong, and what can we do to fix it? For instance, suppose you go, “Well, the car didn't start.” Why didn't the car start? It's got a flat battery.

If you don't go any further than that, you go, well, I'll charge the battery up, and then it'll be alright. The idea of the five whys is that when you get the answer to the first why, you go, well, why was that? So you go, well, why was the battery flat? Then you go, well, because power was drained out of it.

Then you go, well, why was the power being drained out of it? You go, well, there was a component in the engine management system or something leaking current even when it was all supposed to be turned off. Eventually, by the time you've asked the question why five times, it might be four or six, but usually, it's around that you get to the root cause of the challenge.

The original context was a manufacturing production line. I think it was part of the Toyota management system to identify the root of the issue rather than the symptoms.

Imagine if we asked the five Y's in healthcare rather than just treating symptoms. That would be quite something.

Absolutely, yeah. Watch this space.

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

Today at the time of recording is the 7th of February. Things continue to move at pace, so we thought we'd do a quick roundup of recent events in the last week and see what's relevant from a sovereign finance lens. Where do we need to start?

Well, I mean, I think the most obvious thing from this week is Donald Trump's bull-in-a-China-shop announcement, which seems to have shocked everybody that Gaza would make a great seaside resort.

Along with Greenland and Canada…

The suggestion that all of the Palestinians should go somewhere else, like maybe Egypt or Jordan, despite the fact that the rest of the Arab world has said, look, we're just not taking these people. They've got their own homeland. The suggestion that they should leave there because it's rubble is kind of bizarre considering that it's been reduced to rubble by Israel...

Uh, didn’t the rubble just show up all by itself?

I think it was Colonel McGregor's comment that even if Trump thought that, it was very stupid of him to say so out loud. So, that was ridiculous.

On other fronts this week, the Senate hearings for the appointees are going through.

Cash Patel gave a pretty good account of himself at the grilling he had as potential head of the FBI. I don't know what the state of the confirmation is. With Robert Kennedy, he's got through the hearing in the subcommittee that was examining him. He's now going to a full Senate vote on his position. There are some concerns that he's going to be sort of constrained even if he gets confirmed in the position. We'll have to see how that goes. I think this is the most interesting thing. Once again, Tulsi Gabbard gave a pretty good account of herself. I don't know whether that confirmation is confirmed yet or whether these things are still unfolding. There are certainly some very interesting appointments there. We'll have to see how that works out.

Of course, the other area is Ukraine. I saw on the Internet today that the Daily Mail has published a proposed peace plan put forward by Donald Trump. The commentary that I heard today is that it doesn't seem to include reassurances of freedom to speak Russian. It lacks freedom to pursue the Russian Orthodox Christian religion for ethnically Russian areas.

Which was kind of the issue in the first place?

Yeah. So, you know, without something covering that, it's not going to fly anyway. I mean, on the battlefield, it continues to be a war of attrition, really. It's truly tragic. There's large amounts of the country laid to waste. Astonishing numbers of young Ukrainians sacrificed to this madness.

Apart from that, an interesting book I've read this week is called The Russian Peace Threat by a guy called Ron Ridenour. It's pretty meaty, it's over 500 pages long. I'm slowly plodding through that. It was interesting to be reminded that for the first 10 or 12 years of Putin's presidency, he was actually quite well received in America. He met George Bush when he was president a number of times. He was essentially cooperative with American, even providing them with bases in some of the southern Soviet members of the Russian Federation.

So it's quite interesting to reflect how he's now painted in the Western media as an absolute villain. I mean, I don't think he's a paragon of virtue…

I don't think he's a saint, but yeah.

He doesn't seem to be any worse than any other leading politician. He certainly seems to be sharper, more consistent and more measured in his pronouncements than the majority of the American or British politicians.

So, ‘watch this space’ really. I think that's all I want to cover this week. Anything coming up for you?

I just wanted to ask you about your reading habits actually. Every time we have these conversations, you pull out about three or four books that you've read that are all about 500 pages long. I struggle to read anything much longer than a children's book at the moment! How often do you read, and do you skim?

I very rarely skim actually. Sometimes I do, but usually the books I read are worth reading in depth. I probably read an hour or two every evening. I read an hour in the morning after waking up and before getting out of bed. So it's a pretty solid regime. But I'm just fascinated by the information.

Historically, I've read very widely lots of novels. But virtually everything, 95% of what I've read in the last 10 or 15 years has been non-fiction. Most of it is reflections on the way that the world has been unfolding and the situation that we're in now. Because, as I say, I think we're living through a really fascinating period of history. It's a real cliffhanger because there's no guarantee that it's not going to end in absolute disaster! In a way, it's miraculous that it hasn't already.

People seem oblivious to the fact that we're pushing our luck to a greater extent all the time. So again it's a question of ‘watch this space’ really.

Yeah, I think at some point the root narratives of how we're behaving will be reframed. It's a question of whether we exterminate ourselves in the interim. Hopefully not. Hopefully we're due for a greater awakening and a course correction. I'm more hopeful, but I think business owners and so on, like entrepreneurs tend to be more optimistic.

You have to be an optimist to be an entrepreneur. Otherwise we wouldn't do it!

Yeah, that was more or less what I was going to say. A comment from one of my colleagues was, if we weren't optimists, we would never have got started on this!

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

Right, okay, so we've had another week of Trump's presidency. Lots of squeals of outrage from all directions. The Senate confirmation hearings are going ahead now. Predictably enough, Robert Kennedy's been given a hard time by several of the senators...

Several of the senators who are notably being paid by Big Pharma.

Most reports in the mainstream media seem to imply he's not handled these attacks terribly well. According to who you listen to online, that's the story some people are selling.

Other people are saying he's done a pretty good job of holding his own despite the viciousness of the attacks. Some video clips I've seen - it's difficult to know how representative this is without watching the entirety - he seems to have given a pretty robust response.

I don't know whether J Bhattacharya's hearings for the NIH have happened yet, but I expect there'll be a similar onslaught. There's been Tulsi Gabbard, who's nominated for National Security Head.

I think that's forthcoming.

There have been some pretty forthright attacks on her. We just have to see how the votes go, whether any of these get overturned. The mere fact that these things have been raised and aired in the open is significant.

Some people will remain stuck in their entrenched existing positions on both sides. I can't help feeling there's going to be a gradual movement of people more and more going, "well, hang on, what is going on with all this?"

If you rock the boat too hard and often it will create some ripples.

We've still got ghastly situations in Ukraine and Gaza. There's supposedly a ceasefire. As of this morning, 80 Palestinians have still been slaughtered by Israelis in the days since the ceasefire happened.

Netanyahu seems to be getting more flak within Israel. I'm amazed that the Ukraine conflict seems to get no airing at all in the British news. I would have thought this was one of the most critical things going on in the world.

I listened to radio for lunchtime news, which goes on for three quarters of an hour. Every day I've listened to it, there's been no mention of developments in Ukraine. Some people try to put a positive gloss on the fight back that Ukraine is performing.

Listening to the people who appear most level, most impartial, most well-informed, it seems the Russian advances are getting more consistent. There are obviously some small skirmishes which go in Ukraine's favour, but they're just occasional tactical reversals.

The overall trend is that Russia is taking more territory. That was one of the things I was surprised about. I don't know whether you saw that thing on Trump's first day in office where he was sitting at his desk signing presidential decrees at great speed.

With an overly large fountain pen…

He was bantering away to reporters, somebody asked him about Ukraine. He said, "Well, I'm going to make a deal with Putin. I don't know whether Putin wants to make a deal or not, but it would be a good idea if he did."

He claimed Russia's economy is in ruins, inflation is out of hand, they've lost a million Russian soldiers, Ukraine far less than that. I thought, could he really be that uninformed?

Yeah, that doesn't hold much water, does it?

The best estimates from people like Scott Ritter and Colonel McGregor are that Ukrainian casualties outnumber the Russians by somewhere between six, seven or eight to one. That seems much more plausible.

Either Trump has been grossly misinformed and is perfectly happy to take that at face value, or he's not really as uninformed and stupid as that. He made those remarks as a kind of grandstanding towards his American audience.

I think the latter. I think he's a showman.

If America really has put a halt to arms and ammunition shipments to Ukraine, that will very much hasten the collapse of their side in the conflict, which will make attempting to do a deal almost a moot point.

I think when you observe the movements of war machinery, the question is does one will fizzle out or collapse somewhere and another one pop up somewhere else? That seems to be the pattern.

Related to that fact is something we've touched on before - while this conflict has been going on, Russia has been steadily expanding its trade with China, India, and other countries in the global south.

There was an interesting YouTube video I saw, a talk at some conference given by a woman called Taylor Kenny. She was very articulate. The talk she was giving was about the loss of the primacy of the dollar in the international financial area.

She started by saying this was a very difficult topic to breach in conversation with most Americans. If somebody suggested this to her, she'd have said, "possibly, but not in my lifetime." That's what she said three years ago.

She's now saying this is looking more likely and imminent. She identified four factors contributing to bringing this about. One is the unsustainable levels of debt in America - the government, population, industry and banking.

Another is the weaponization of the dollar, which became abruptly obvious to many people at the beginning of the Ukraine conflict. When Russia simply confiscated all Russian funds, not only government funds but private funds of substantial Russian individuals.

This sent a shockwave through many other countries and wealthy individuals who thought "if that could happen to them perhaps my dollar holdings aren't safe" and started thinking in other directions. Putin referred to this in the Tucker Carlson interview.

There was a YouTube clip being streamed live. It wasn't live because it was from last year when Tucker Carlson went to Moscow and did that interview. The recording was being streamed continuously, apparently part of that interview which hadn't previously been aired.

One of the things Putin said was that the move to confiscate the Russian funds was an own goal. It was the Americans shooting themselves in the foot, for exactly the reason I mentioned. He also said being taken out of the SWIFT currency settlement system strengthened them.

What's the SWIFT currency settlement system?

That's the Interbanks International Settlement System.

The third thing Taylor Kennedy referred to was the geopolitical alliances, which is part of that same thing. It's the BRICS groupings, with more countries becoming affiliated, either as full members or associates.

Effectively the arrangement they're making is in a way a full circle prior to the Bretton Woods Agreement at the end of Second World War. The dollar became the global de facto standard where people would make arrangements with traders in other countries to settle trade in their own currencies.

That's what we're seeing. My guess is that over time there will be a move towards that and all those currencies will be calibrated in gold. This was basically how it operated right up to the Second World War.

The final factor she pointed to was technological enhancements. The increase in computing power, global communications and increasing sophistication in cryptographic techniques made this possible.

When the SWIFT system was set up, it was an enormous technical undertaking to deal with all necessary details and have it be secure. It's been the continuous standard because it has worked and because the costs and difficulties of setting up an alternative would be too extreme.

Now there's both the motivation to do it and also more technical availability of the necessary abilities.

I've been re-reading a couple of books lately. One is called Steps to an Ecology of Mind by Gregory Bateson, published in 1971. I bought it around then. It made quite an impression on me at the time.

One of the things he said was that the two most significant events in his lifetime were the Treaty of Versailles and the development of cybernetics. The Treaty of Versailles was in 1920 after the end of the First World War.

Funnily enough, I've just gone and bought the book that John Maynard Keynes wrote at the time with his impressions of the Treaty at Versailles, which is fascinating. What's your reaction to that, Rob? What do you think of those two as significant events?

He was saying that in 1966, at the age of 62. He'd have been about 16 at the time of Versailles. Cybernetics really dates from 1947 when there were series of conferences and then Norbert Weiner published the book of the same name.

Sounds plausible to me. I know a bit about both, but maybe not enough to feel confident in that assessment. But it certainly feels to me like the Treaty of Versailles was a massive overreach and complete lack of compassion.

The science of cybernetics is the foundation of everything to do with computers, automation, electronic communication and a great deal of science. It's also the foundation of neuroscience.

Once you realise that, the developments of the last 70 years are very much built on those foundations. The difference in the world over that last 70 years is undeniable.

The interesting thing about Versailles is that the war could have dragged on much longer. It wasn't going well from the Germans' point of view after the Americans came in. Woodrow Wilson proposed throughout 1918 at various intervals a generous settlement to achieve a just and lasting peace if the Germans surrendered.

That was the basis on which the armistice was reached in November 1918. They stopped fighting based on a 14-point plan which Wilson had laid out, which was generous and just.

At the conference, Clemenceau, the French negotiator, really wanted to destroy Germany. Over the five months of negotiations, Wilson was completely outflanked by the British and French and ended up with a very brutal settlement.

That resulted in the impoverishment of Germany throughout the 1920s. It resulted in the hyperinflation of the mark and the rise to power of Hitler. The Italians were also misled over what they'd been promised as a reward for joining the winning side.

The Arabs were also misled because they'd been promised that if they fought on our side, they would be rewarded by being decolonised, which didn't happen.

There's echoes of that when talking about Gaza.

The callousness and complete dishonesty of international agreements and negotiations was set as a standard there. That has now echoed down the years for a hundred years.

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

Today is the 24th of January, so we are on day five of the Donald Trump administration, its second time round. There's definitely a lot going on. What do we need to recap from a Sovereign Finance lens?

Well, I think there's a lot which will have implications for all of us, particularly with Trump's pronouncements. The word constantly used for Trump is unpredictable. I heard somebody commenting that unpredictable is great, so long as they're unpredictably doing things that you're pleased with.

I think there will be plenty that all sorts of people in different directions are pleased and displeased with about what he does. He's certainly made waves in a very few days. It almost gives the lie to something that I've often said.

I've often been very cynical, saying that the whole presidential election thing is pure Hollywood. It gives the masses an illusion that they have control over events when it doesn't make any difference because the president is at the behest of the deep state.

That obviously takes in the intelligence agencies, multinational corporations and the banking fraternity. They obviously call many shots. It was quite plain that establishment didn't really want Trump to get elected.

I don't know whether you saw pictures of the barricades around Washington. There are 10-foot high, serious-looking fences around the inner part of the city with all the government buildings in them.

I certainly got that impression.

Very few people are there, aside from government employees and National Guard all over the place. Given several assassination attempts, no matter who's behind them, there might well be another if he was too much in public space.

He's shot off many bold statements, some plainly ridiculous. I'd like to start by saying it's been a cliche that integrity is almost totally absent amongst professional politicians.

There's the old joke about how to tell when a politician's lying - it's when his lips are moving. The thing about having somebody quite as shameless as Trump - shameless is a very literal description.

That's right.

What he behaves like isn't necessarily a criticism of what he should be ashamed of. It's just that he's not affected by shame in a way most other people would be. He's made that cliche about politicians completely open and transparent.

The difference isn't that Trump is more unscrupulous than other politicians, but that he doesn't bother to dissimulate about it. Everything he says might be taken with a pinch of salt, because like all politicians, he says what particular constituencies want to hear.

Sometimes these are things he fully intends to do, sometimes things he means. Some things are completely beyond his control whilst others he's got not the slightest intention of doing.

It's difficult to know the mix, but there have been some pretty robust things. I think the most significant one is actually bullying Netanyahu into accepting a ceasefire deal.

That's top of my list of noticeable changes.

He's announced - it will be interesting to see whether this holds up or not, because it's certainly going to be very unpopular in some quarters. He's certainly going to get flak for it.

He's announced he's completely stopping arms shipment to Ukraine and sent an envoy to Moscow with instructions to secure a cessation of hostilities within 100 days. I think that would be great. The sooner the hostilities cease, the smaller will be the level of human tragedies.

If you've got any empathy for other human beings, it's frightful seeing the destruction.

Stop the military slaughter first. Women and children being shredded by... yeah.

Even active soldiers - I don't relish their being on either side. In a way, it's great when you see a tank demolished by a drone because that's another machine for dealing death taken out of commission.

You can't help feeling that for whichever side they're on, the three or four human beings inside that tank just died a horrible death.

An interesting thing about this conflict is that we seem to be getting closer to warfare being obsolete. When you can take out a five million pound tank with a 500 pound drone, it makes a mockery of arms production.

Sure.

The few video clips I've seen of this conflict bring home the sheer amount of military hardware poured in on both sides. It's astonishing they've got the capacity to actually manufacture this.

As we were saying the other week, we're supposedly on the verge of running out of fossil fuels. We haven't put a Plan B into place for operating our societies without them. We're squandering them in warfare on a scale that eclipses everything else.

It dwarfs any of the nearest industrial applications by a long way, both in terms of pollution, terms of any metric of inputs or outputs.

It's destroying wealth rather than creating it.

It destroys wealth, also that we as taxpayers are effectively paying for it. I was complaining just before we got on the call about my tax bill. I think what really grates is the fact that it's going to pay for stuff like this.

Absolutely. In that context, as we've said, I noticed you picked up one of my George Bush moments in our last call when I talked about our Prime Minister going to Kiev and swearing enduring friendship. I meant Ukraine, I said Iran.

If I read the transcript rightly, I said Sunak could go on. So I slipped to prime minister as well.

They're all pretty much the same. You can exchange one with the other, I think.

They are astonishingly the same considering they're allegedly from opposite ends of the political spectrum. There's been a huge fuss this week about a so-called Russian spy ship wandering around British territorial waters.

There's speculation that it might be trying to sabotage undersea cables. It strikes me as a bit rich that we've got our politicians pompously criticising Russia.

Also, didn't we, collectively as the West, blow up a quite significant pipeline near Russia not too long ago?

Well, there was that, not only that, we've had British-made missiles, which almost certainly were operated and targeted by British personnel, firing deep into Russia.

It's like being on a war footing and then pretending that you're the victim. It's what Israel's been doing as well. It's on a war footing and then acting like it's a victim.

We've got that complete dissociation from reality. They're saying we need to increase our defence budget, so your tax bill will be even bigger next year. They're saying it must get up to two and a half or three percent GDP.

How much more do we cast out for our benefit to send to arms manufacturers? Even if we did that, would we be anywhere near ready to have any battle with Russia? If we multiplied our military expenditures by a hundred or thousand, we probably still wouldn't match Russia.

The whole thing is lunacy. Very worrying. He certainly didn't get anybody's vote with a mandate to go poking the bear like that. So, we mentioned that Trump has forced Israel to the ceasefire.

However badly that's going to be kept and however unsatisfactory an agreement, the mere fact that people in Gaza are celebrating has got to be positive. The fact that he's declared a cessation of arms shipment to Ukraine is positive.

The fact he sent an envoy to Russia - the interesting thing about that 100 days is that Russia has made a statement that Ukraine couldn't hold out for three months without being supplied externally by arms.

I don't know, probably.

The religious service was part of the inauguration. Bishop Marianne Budd made forthright comments about not victimising immigrants who were providing essential services to the country, with Trump and his entourage in the audience.

Ten out of ten to her, I say. I saw a great snapshot of Trump and Melania with her looking not pleased. I don't know whether it was a candid snap or just one convenient to juxtapose.

Russia has said Ukraine wouldn't hold out for more than three months. So the 100 days is just beyond that. They would look to be in a very weak negotiating position.

Trump has said he's going to make a deal. He hasn't really got any negotiating leverage, I would have thought. Russia would just demand what they said before the invasion rolled in. It's certainly what was on the table at Istanbul that Boris Johnson went and vetoed.

Same as what they said three years ago.

Recently, trying to get a handle on these events, particularly Ukraine and Israel, I've been listening to quite a few videos of Scott Ritter and Douglas McGregor. McGregor's a retired Marine Colonel and Scott Ritter was part of the arms inspection team.

He's an ex-colonel, isn't he?

He was head of the arms inspection team in Iraq, determining that Iraq didn't have weapons of mass destruction.

Another promising thing is that Trump has said very firmly, reiterating it this week, that he's going to open the archives and produce papers relating to the John F. Kennedy assassination and Martin Luther King assassination.

Robert Kennedy as well.

Did he mention Robert Kennedy as well? Okay. Assuming that actually happens, that will really open up something which has been festering for a long time.

There's also a connection to the Hunter Biden laptop story and the 50 or so personnel who suppressed that at the time losing their security privileges. So yeah, there's a storm brewing I think.

Regardless of how it works out, you can't get away from the fact that many things totally taboo in the public sphere are now being openly talked about.

The same goes for appointing Robert Kennedy at the HHS and Joe Basinari at the NIH. It would be very interesting to see how the Senate confirmation hearings go on those.

If they get blocked by the Senate, it will still drag a lot of stuff into the public domain. Even if they're not in those official positions, they will have a profile. Their credibility cannot be anything but reinforced by how these things come out.

On the more lunatic announcements he's made, the talk about taking over Panama, Canada and Greenland seems completely barking mad. Panama they possibly could bully, but it's difficult to see how they could pull it off.

Another thing he's been making noises about is bullying other countries into remaining in line with treating the dollar as a reserve currency and being forced to trade in it.

It's ironic, I've always thought that if I want to buy stuff from China, I've got to change my pounds to dollars to send the dollars to China. It's a question of trying to stuff the genie back into the bottle.

Dollar's a sinking ship I'm afraid.

The dollar is a sinking ship and the BRICS nations with their newly joined members and associate members now account for 40% of the world's economy and 55% of the world's population.

They've got all the resources they need to trade with each other and simply ignore America and the rest of its Western allies. So once again, there's not anything that there can be any leverage with them.

Feels like a watch this space situation doesn't it.

I think that covers all the points that were at the top of what I've suggested so far.

The one other thing I wanted to mention was, you know, there's this elephant in the room about what's gonna happen with debt and the national debt being so high.

It's not just the national debt, it's also the personal debt. In the United States, the last time I looked - it's probably even bigger already. That was another thing from this week. The day after Trump got into power, Janet Yellen, chairman of the Federal Reserve, said the debt ceiling needs to be increased again.

The government debt in America, last time I looked, was 36 trillion. That's 36,000 billion. The total debt in the United States, once you've added in corporate debt and individual personal private debt, is around 55 trillion.

Suddenly don't feel too upset about my tax bill.

In 1971, which as you'll remember from previous conversations, is significant because it's when Nixon took the dollar off the gold standard. In 1971 the total American debt was something like 1.7 trillion. So it's gone from 1.7 to... No, actually that was the total debt in 2007.

Right. Okay. That's a dramatic increase.

I think it's north of 80 trillion total today. The interesting thing is that from 1971 to 2007 it followed almost exactly a perfect exponential growth. The kind of growth you get if you put bacteria in a petri dish with plenty of nourishment and plenty of room.

The opposite of a compound interest situation.

The thing about exponential growth is that it has a standard doubling time or standard tripling time or standard 10 times time.

From 1971, for the first few doublings, it was a six or seven year doubling time. Then we hit the global financial crisis and the debt stopped growing. There were even attempts to pay down the debt, which seems sensible.

We're told debt is a bad thing - you borrow and then pay it back. But this isn't what's been happening in a global sense. Effectively, Paulson, who was head of the US Treasury at the time, forced the federal government to agree to the Federal Reserve creating extra money out of thin air just to keep the party going.

From 2007 to 2009, there was a slight decline and it brought the entire world financial system to the brink of collapse. From 2009 up to the present time, we've resumed an exponential curve.

The doubling time has slowed from six or seven years to 15 years because of that contraction at the time of the global financial crisis. We're back on track. We might not be doubling quite every six years, but even doubling in 15 years from 2011 would bring us to 2026.

Something has to go. When you have a situation like this, you're eventually going to get to the point where everything is owed to one person or one consortium.

Yeah, it's really like historical precedence that this happening in different civilizations in the past.

The thing that's certainly different is that now it's a completely global phenomenon. In the past, it was confined to a particular nation or empire. It was always the case at the end of every imperial period that the currency went into hyperinflation and became worthless.

That was the case with the Romans. You could say it was the case with the British. It was the case with the Spanish and Portuguese.

In the ancient world, there was this concept of a debt jubilee, mentioned in the Bible. It said that every seven lots of seven years, there should be a jubilee when the debts were cancelled and the slaves were freed.

Hammurabi declared a debt jubilee. Solon in Greece declared a debt jubilee. They did this not out of benevolence, but out of realism and practicality so society wouldn't completely collapse.

So a bit of long-term thinking…

Some people arguing for currency reform are saying the problem is with fractional reserve banking. Certainly fractional reserve banking in the present context is unworkable, but it's not inherently unworkable.

The thing that makes it unworkable now is the severance of the world financial system from any anchor in reality, which historically has always been gold or sometimes silver.

Can we just define fractional reserve banking for anyone listening to this podcast for the first time?

Essentially it means that if a bank has got a million pounds in its reserves, and we'll come back to what is meant by reserves, but the money it actually is holding in its vaults, then it can lend out a multiple of that, typically maybe 10 times.

If it's got a million pounds in its reserves, it can create loans of 10 million. In days gone by, that meant it needed a million pounds worth of gold in its vaults to lend 10 million pounds.

If that 10 million pounds was being lent to productive businesses to build their factories and buy their machine tools and getting their stock to create more wealth, those loans weren't necessarily bad. If they're being used for completely frivolous purposes, it's not good.

Like tanks that are being blown up by 500 pound drones. For instance.

There was an anchor there. When the dollar ceased to be tied to gold and became the world's reserve currency, it was already a proxy for the equivalent amount of gold. You could take your dollars to the US Treasury and get a 35th of an ounce of gold for each dollar.

When you no longer could do that, the dollars themselves became the reserves. If a bank has a million pounds in reserves, it makes 10 million pounds worth of loans. Those loans either get deposited back in that bank or they get deposited in another bank.

Every time new loans are created, they actually create more reserves. When you have that situation, it cannot do anything other than grow exponentially.

The future of World Finance will be a single global currency because we trade globally whether we like it or not. It makes no sense to have all these different currencies. It will be anchored in something which is almost certainly going to be gold.

So anyway, that's my theory. I don't know whether I'll live long enough to find out whether it comes to that or not.

Yeah, it feels like there's quite a few bumps in the road before we get to a workable solution.

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

We're going to do a bit of a recap as we approach the end of January. We keep saying every week on the show, if you don't like what's going on this week, come back next week because the world might be different.

We were having a chat before the call, we established that I've been head down in my bunker, not paying attention to worldly goings on. So what should we be aware of?

Ceasefire In The Middle East

Well, in Israel, the Israelis and Hamas have signed a ceasefire. The Israeli cabinet has just had a meeting today after some shilly-shallying and agreed to it. So this does seem to be in place.

This is something that Donald Trump sent over an envoy to insist they go ahead with, which is interesting because Biden could have applied the same pressure at any time in the last year. He could stop sending them ammunition.

Anytime he wanted, a very quick phone call.

So we'll see how that works out.

The worry with Trump is that he might ramp up aggressions against Iran, just move the shift of focus somewhere else. All of this remains to be seen, doesn't it?

There is a lot of alarming talk about getting into a battle with Iran. With all of these things, you've got to take everything with a pinch of salt. Anything on the official news will be spun in the direction that people in charge want portrayed.

I get a distinct impression that Israel is punching above its weight with the number of different directions it's going in. They're not only attacking Gaza mercilessly but also the West Bank occupied territories.

They're moving into Syria as well as Lebanon. There's a lot of ambiguity because the other side of Syria, they've got Turkey, whilst Turkey's not really a friend of Israel. Then there's the issue between Turkey and the Kurds.

The Americans were supporting the Kurds. The whole thing doesn't appear to have a coherent strategy to me.

Bit opportunistic.

Yes, then there's this war in Ukraine. We've just had news today that Sunak has been to Kiev, announcing that we're friends of Ukraine. The UK is going to play its part. There's even an announcement that we'll be friends for 100 years.

Can you imagine if in 1920, anybody in any government anywhere in the world thought they could make commitments for 100 years' time where we've been now? That's ridiculous.

That's it.

The Russians are really calling the shots in Ukraine. This talk from some of our politicians about keeping the fighting going to be in a stronger position - the longer the fighting goes on, the weaker the Ukrainian government's position becomes. It's a war of attrition.

There appear to be many desertions in the Ukrainian army. I couldn't blame them if I were in that position. The Russians have got swarms of drones attacking NATO tanks used by the Ukrainian army.

They're destroying them left, right and centre, capturing larger amounts of territory every day. The only thing that really worries me is that it could spiral into a much wider conflict.

The potential for unintended consequences is always a risk, isn't it? I keep coming back to the fact that there was going to be a peace deal signed at the outbreak of this conflict. Boris Johnson went over on behalf of the NATO alliance and sabotaged that. Here we are with millions of deaths later that were avoidable.

The Russians are going to be demanding at least what they offered then.

Then, so what was the point?

Right, I was going to mention a couple of books I've read lately. One is called The Collapse of Globalism by John Walston Saul, a Canadian political commentator and journalist. The other is The Energy Imperative by Herman Scheer.

Herman Scheer was a social democrat, member of the German parliament, a big campaigner for renewable energy. That second book was published in 2010.

The Collapse of Globalism was originally published in 2005 with a second edition in 2009. You'll remember when we were talking the other week I mentioned the Empire of Illusions, that also was 2009.

The Collapse of Globalism?

Looking back on books about the state of the world from that time, 15-16 years ago, 20 years ago in the case of the first edition of The Collapse of Globalism - apart from an afterword he added, I don't know how much of the text was updated.

People were saying things which appear entirely sensible if anybody was saying them now. They were saying it then, to anybody who actually read this and reflected on it would make perfect sense at that time.

Here we are, we've drifted along. It seems like the entire world situation has been marking time or drifting sideways, not actually getting anywhere. The book on the collapse of globalism made a very interesting point.

It was just a throwaway line, but quite significant in the discussion. He said there's no reason why globalism in the sense of a unified view of the world should be collapsed with neoliberalism.

When people are talking about globalism, they've got in mind the international movement of capital. They've got in mind outsourcing to low labour, low regulation countries, manufacturing goods which are then consumed in the world.

The extortion, the extraction, the consumption.

It's an unworkable situation. If you go back to the 1950s and 1960s when the Western world was functioning pretty healthily, there was full employment. Due to union pressure, the labour force was being rewarded better than ever throughout history.

They were in a position to buy the output of all that industry. It was explicitly Henry Ford's agenda, at least publicly stated, that he intended to sell cars cheaply enough whilst paying assembly workers well enough to buy them.

That was happening through the 50s and 60s. Now, most drastically in America but also in this country, the entire manufacturing base has been hollowed out. We have to buy mostly from China, Vietnam and India.

Japan is now in the Western camp, suffering from the same things. With wages driven down in the United States and Britain, larger levels of unemployment in both countries, there isn't the buying power to purchase these things.

How many people who work for Tesla driving home in a Tesla that they own?

Very few I would imagine.

Essentially the argument of the book was that this was an unworkable situation. It had become contradictory, a classic reduction to absurdity. It couldn't go on much longer.

We're now 15-16 years ahead from when that second edition came out, 20 from when the first came out. The same international structures are still hanging on. That inevitable fracturing of it in some way is almost certain.

The End of the ‘Fossil Fuel’ Era

Returning to The Energy Imperative, the key argument is that, like it or not, we're getting to the end of the fossil fuel era. The sooner we wake up to that - he was saying this back in 2010. He died that year, the book came out posthumously.

People might not like the fact that the fossil fuel age is drawing to a close. We need to operate with reality, not wishful thinking. What's essential is that we harness currently available power from the sun.

We need to set things up so this provides all our energy needs. The energy arriving on earth from the sun is 20,000 times the amount that the entire human race currently consumes for everything.

We now have the technology to capture that in various ways. He was arguing very strongly for distributed energy production. If you look at poverty-stricken areas of Asia and Africa, there's no way we'll cover those with electrical distribution grids.

Feels like a key point, doesn't it?

Every house, every farm, every village could have its own generation capacities. There'd be no need for a grid.

The ultimate form of distributed energy creation like that is having a diesel generator in your backyard. We're not going to have the diesel generator, but you might have something on a more local level.

You could easily have each household with a methane digester. This would get rid of all food waste, gardening waste and sewage without causing downstream problems by pumping it into rivers and sea.

It would generate methane for cooking, domestic heating and electricity generation. A mix of those things is entirely feasible. Everywhere in the Western world we could probably have as comfortable a lifestyle on 50% of current energy consumption.

The inefficiencies in every direction are enormous. We've hinted at one of those in recent talks regarding built-in obsolescence and throwaway items, throwaway pens, throwaway lighters.

It's extraordinary how we've gradually over a few decades come to accept spending a pound on a lighter to get effectively a penny's worth of fuel refill, or spending a pound on a pen for a penny's worth of ink.

To play devil's advocate, if you're not replacing stuff as often then the profit incentive for manufacturers is going down. But I don't think that's unsurmountable. There can still be a profit incentive there of refilling pens or repairing washing machines. I think there's a workable solution. It just needs rethinking, reframing.

I often think of Alice in Wonderland where Alice is running with the Red Queen. She says we don't seem to be getting anywhere. The Red Queen says you have to run this fast to stay in the same place.

I don't know what Lewis Carroll had in mind for that metaphor. Maybe it was apparent to some people in the Victorian era that with all this machinery and industry, to keep the machine going, we were all working just as hard.

That's definitely the case now. It's within our capabilities that we could all work less, have more durable goods, have time for leisure and creativity, whatever other forms of self-expression.

Retain a Sense of Awe and Wonder!

I was saying to somebody the other day, things look pretty perilous. Even I sometimes get down at times. But when I look at how amazing the universe is, what an extraordinarily finely balanced system it is.

Even if this is one unique place where it's happening in the universe. When you look at the scale of stars, galaxies and solar systems, it's inconceivable there aren't myriads of planets with similar things happening.

The chances of any being close enough to visit or come visit us seem totally remote. The mere fact that this universe has created this thing, formed all these elements in the hearts of stars, distributed them as dust through interstellar space.

It's formed solar systems and planets out of that dust. Some planet like this one is just in the right place with the right conditions for life to develop. Once life gets started, it becomes more complex.

Eventually it gets to where we can have human beings with everything that humans have created. The technology is there waiting for us to discover, invent and utilize.

The two-edged sword is that it can be used for destructive and painful ends, or for benefit. It's inconceivable to me that you could have this amazing universe with that capacity, developed to this extreme state only to piss it up the wall.

Well, that's like what Solzhenitsyn said in the Gulag Archipelago, that the line of evil runs through the middle of every human heart. We're all capable of great things and terrible things. That's a fractal principle that extends up to society as a whole. I agree, it's worth maintaining a sense of awe and wonder.

It's easy to get wrapped up in the negativity of what's going on. We need to put as much energy as we can muster into thinking about what we want to create. What's the world that works that we want to create?

Any time from the end of the Second World War when people came out of that nightmare, we just had two nuclear bombs go off. People could see the dreadful potential of that.

From then onwards there have been people saying we need to stop doing it like this, this is silly. Silly is obviously an understatement for things happening in the world at the moment.

Silly is about as much as you can say. It's ridiculous that people could put that amount of energy and effort into perpetrating those things. It's ridiculous that a critical mass of the population hasn't grasped the gravity of the situation.

They haven't grasped the potential both for the downside and upside of what we have in front of us. It seems necessary to have this rammed in our faces to this degree for people to get the point. Who knows when enough people will get the point? Interesting times.

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Key: Rob’s comments are in italics, Derek’s comments are in normal font.

We're talking today about a book that personally has really helped me on my business journey. It's a fast book to read and that book is Profit First. Why are we covering ‘Profit First’ and what do people need to know about it?

Right, because this is the best summary that I've found of an actual concrete proposal for methods of doing your accounts, which makes it really simple, particularly anybody who's in a one-man business situation or anything close to that. Ordinarily, traditionally in business, you need a chief financial officer, somebody who is the internal accountant for the business and that person has got the responsibility for summarizing the total financial situation at any time that you need to run the business.

If you're in a startup situation or ongoingly as a more or less sole operator, you probably don't have the luxury of being in a position to employ somebody solely to do that, particularly as they tend to command quite high rates of pay. On the other hand, spending too much time on those kind of issues is a distraction from your core operation to run the business as best you can.

If you're an entrepreneur or a specialist in some area which you probably are if you're running your own business, you quite likely don't have the temperament to get terribly excited about doing a lot of number crunching and spreadsheets and so forth.

That's not why people start their business in the first place, is it?

It is not, no. Many years ago, I had a company that I'd created, wound up by a high court writ from the VAT man because we hadn't paid the VAT. My accountant's comment was only the VAT man would be stupid enough to waste more money by winding up a company that obviously has no assets.

The point is I got into that situation precisely for the reason that I just spoke. If you are registered for VAT either because it's strategically beneficial or because you have to because you've exceeded the £85,000 or whatever it is currently threshold, then this can bite you fairly badly if you don't allow for the fact that a certain amount of your revenue is the VAT that you've collected on their part and you will have to pay typically every quarter.

Regardless of that, if you're running any business that is other than very minor, you are going to have to put in a tax return at the end of each tax year and you are going to have to settle the payments. It's just as well that you don't lose sight of at least approximately how much you're going to need to do that. Now the core method.

Just on that, I remember one January very distinctly having to find what was approximately three times my average monthly earnings within about a four week period. Then also pay my accountants to do my end of year return. That was not a fun January. I wouldn't wish that on anyone.

Typically the way that businesses have operated is that they've had one business account, all the revenues go into their payment. The payments are made from that account and then this is the role of the Chief Financial Officer to actually produce some sort of report saying of the money that's in that account, what headings it's allocated to.

The principle, the core of the methodology that Mikhailovich describes in this book is that you have several bank accounts and then twice a month, he suggests doing this on the 11th and the 25th of each month, you sit down and you allocate the money from the revenue account to the various other bank accounts.

His suggestions are that there should be certain percentages depending on the size of your business. For example, if your real revenue is in the range of zero to £250,000, which I think for typical small business that would be where you start. There would be one account for what he calls profit which should be 5%, one for the owners compensation which should be 50% and one for tax which he suggests should be 15% and one for operating expenses that should be 30%. The 30 plus 15 plus 50 plus five adds up to the hundred.

When your business is running smoothly, all of your income coming into the business from your invoices and sales goes into the revenue account. Then when you do your twice monthly allocation, you transfer that into the other four accounts in the prescribed proportions.

If you're already running the business, when you set it up, you take the revenue account and then twice a month you distribute it between the other accounts. For example, the operating expenses account would cover all of your things like accounting fees, stationery supplies, office equipment, things like that and you would pay for those out of the operating expenses account.

In addition, if you have a business that has a certain amount of either subcontractors or employees or materials needing to be bought, then you would need another account for those. Your actual income coming into the business, first of all, needs to go to account that deals with those matters and then what is left is what he calls real revenue.

That is revenue net of the immediate cost of delivering the services or the goods that you're in the business to do. It's that real revenue which is split up according to that figure. The reason he calls his book Profit First is that that profit account is one that you have to allocate something to because otherwise you haven't got a business.

You've simply got a job with yourself as boss. There must be a profit. Once a year you can look at the profit account. You might decide to declare a dividend and give it to yourself and use it to go on a holiday with or something like that or buy yourself some treats or you might decide to reinvest it in expanding the business.

Either way, you're clear that that is something separate from your compensation, the payment that you pay yourself as the owner for working in and on the business. Is that clear so far?

Makes sense to me.

If you're already in business, there's an exercise that you can perform to find out what is so right at this moment by running those numbers as though you were splitting them into those separate accounts. This in itself is a wake up call. You might find that you're not doing nearly as well as you thought you were.

Once you've done that exercise, then when you do each of your fortnightly allocations and you pay any bills that are needed to be paid, that in itself is a worthwhile discipline because it will build up your credibility and your reputation with any suppliers you've got. As you do that, you'll see what percentages you have managed to transfer into those accounts and you'll know whether you need to increase or decrease it.

That gives you immediate feedback for the tactical and strategic decisions that you need to run as a business.

Yeah, I found a lot of huge benefit from just having a tax accounts. That's the main account that I really do this with at the moment. I can definitely see as your business scales and grows and your business touches the lives of more people, this becomes critically important.

In years gone by, when it was entirely possible to get a real rate of return in the way of interest on a bank account, anything that you're not needing to call on for some period of time, you could put it in an interest earning account and get some benefit.

In the present economic climate, you could do worse than buying gold with it. There is a 10% spread between the buying and selling price typically of gold coins or other forms of bullion. There is a certain amount of volatility so it's not entirely devoid of risk but certainly you wouldn't have gone too far wrong by doing that over any time over the past 20 years.

I mean, gold is not an investment as such, but it is probably a more secure form of savings than most bank accounts. That's a different topic. I'm being slightly flippant there, but...

Yeah, but the points of your business is to take money off the table. If you got surplus, you could convert it into, into whatever. That could be gold. It could be something else.

Whatever kind of savings you think of. Okay. So that's an overall summary. Anybody who is in business, this book would be an excellent investment. I think I've given you enough of an overview to have a sense of where he's going with that. We could take it from there.

I think just as a comment, the thing I really liked about it was that the system he talks about in the book is applicable to a modern business, but it's actually the replication of a much older analog system. He talks about his mother and her being paid a fairly small amount of wages, but he said that she used to have different pots for different things, like a pot for groceries and a pot for car repair.

She just siphoned off money into different pots. He realized about 30 years later, it's like, that's the system she knew. It's not like he invented anything. There's an element of diligence about it as well as a diligent sort of practice from incorporating it into your monthly workflows.

Yeah. In these days, when we can have real time access over the Internet to the balances in our bank accounts, it means that simply by looking at the amount of money in those various accounts, you know exactly where you stand. Whereas if it's all in one account, as I say, you've got to do some sort of analysis process to arrive at that.

I think as well, people tend to underestimate how much they need to be earning gross. Whereas actually, you're splitting all of your money off every two weeks into different accounts, there's no way to hide basically. You can see whether you're doing enough or not. That in itself is a good thing.

Yeah, absolutely. There's no reason why you can't, as you indicated, why you shouldn't be doing this in your private life. Even if you're an employee, it could give you immediate clarity if whenever you get your salary check, you split it up between the different categories of what you have to do.

I think we've all got a tendency to be over optimistic.

That's the nature of the business owner. It's optimistic. There was a difference between how I operate my business on this and then how I operate my personal finances.

Every year in July, my current insurance bill goes out. I know it's gonna go out. I know that they're gonna try and put the renewal premium up. Every year at the end of May, I'm surprised at the fact of how fast it's coming up again, whereas it would be pretty easy to just siphon off £30 a month or whatever and put it to one side. It's the same idea.

I don't know about you, but the quotation I got for renewing the house insurance this year was pretty well double what it was last year. If that wasn't bad enough last year, it was pretty well double what it was the year before.

It had basically quadrupled in two years. I suspect insurance companies take the mickey in terms of knowing that inertia rules and most people are simply going to carry on renewing. In years gone by, you used to get some kind of concessionary rate for being a long term customer.

Now, in a lot of cases, it seems to be the reverse. They take advantage of the fact that most people are going to...

They just bleed you for as long as you stay in the same place.

Yeah, so I did get a better quote, but I'm wondering, apart from that opportunism, whether this is a better indication of the rate that inflation is going at the moment. It's not inconceivable that the insurance claims had doubled between this time last year and now and that they doubled between then and a year previous to that.

Not necessarily that there are going to have been more burglaries, although there may well have been, but simply that the costs on an annual basis of buying whatever was necessary to settle the claim had in fact gone up by 100% year on year. Certainly the notion that the official statistics tell us about the rates of inflation don't strike me as in accordance with my own experiences.

There's been plenty of groceries and things that have gone up 20% from one month to the next. Okay, anything else to say on this topic or will I do for now?

No, no, I think, I think we'll obviously just endorse the book and yeah, let's leave it there.

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In this episode, Rob and Derek reflect on the significant economic changes of 2024, particularly the rise in inflation and its impact on everyday life. We discuss the growing divide between the financial world and the real economy, the limits to growth in a finite world, and the implications of warfare on energy consumption. The conversation also touches on the increasing awareness among the public regarding these issues and the potential for societal change in 2025, particularly concerning trust in ruling elites and the future of money in a digital age.

Takeaways

* Inflation has significantly impacted everyday prices and services.

* The real economy is increasingly disconnected from the financial sector.

* Understanding limits to growth is crucial for future sustainability.

* Warfare consumes vast amounts of energy and resources.

* Public awareness is rising, leading to potential societal change.

* Disillusionment with authorities may peak in 2025.

* Digital currencies pose risks and challenges for personal freedom.

* Cash remains a vital part of the economy despite digital trends.

* The need for community support is essential in urban settings.

* Awareness and critical thinking are key to driving change.

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This conversation rounds up goings-on in mid-December 2024, including events in Syria.

This episode is audio-only, please use the ‘transcript’ button above to read an automatically generated transcript.

Thanks for joining us in 2024, Sovereign Finance will be back in January!

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Kay: Rob’s comments in italicsDerek’s comments in normal font

Our topic today is farming, some of the changes coming in the agricultural sector and BlackRock's potential involvement and firms like BlackRock. I wondered if I should just start.

This topic was requested by a listener who pointed us towards one of Daniel Priestley's LinkedIn posts. I'm going to start by reading that out just as a starting point…

Yesterday UK Prime Minister Keir Starmer announced the British economy could only grow with the help of massive PE firms like BlackRock (who have a reputation for being aggressive, monopolistic and extortionate).

This is how BlackRock could do considerable damage to British family farming in 7 easy steps ...

1. They will start buying up small plots of agricultural land at double the normal price. They will issue a directive to all of their energy companies simultaneously to aggressively acquire plots for carbon capture. These third parties will start bidding against each other and force the value of agricultural land up.

2. Initially farmers won't believe their luck - "these city folks are mad! if they want to buy an acre for £50K, who am I to say no to these fools" is what you'll hear down the pub.

3. These crazy prices will set record high comparisons for agricultural land. When a farmer dies, their farm will be valued using these new metrics and the next generation will discover the farm they thought was worth £3M is worth £9M and they don't have anything close to the money needed to cover the tax.

4. In swoops a BlackRock subsidiary with a "Agri Debt Finance Tax Relief" product to lend them 20% the "value" of their farm so they can pay the taxes.

5. The debt will come with conditions (a covenant) that the farm has to adopt and maintain certain practices. It has to use certain BlackRock owned fertilisers, software, machinery and labour solutions that get the farm ready to interface with a larger conglomerate.

6. When a farm cannot make its debt payments, it is sold at auction. BlackRock subsidiaries are instructed NOT to buy these farms at auction. They have a special arrangement to buy the unsold farms at a rate that covers the unpaid debt plus outstanding fees and taxes to government... basically what the farm was originally worth.

7. A BlackRock subsidiary then takes over the farm, consolidates it with a massive group of farms that uses illegal immigrant labour to staff the farms (which will be another government program they institute to deal with the immigration crisis). The government will subsidise the labour costs as part of this plan making the farms wildly profitable and making small family farms unable to compete.

To anyone unfamiliar with the mind of a Private Equity General Partner, this will seem totally far fetched. To anyone who's had even the smallest dealings with the PE world, you will recognise this as a standard playbook for extracting value at a large scale. Mark my words, save this post and watch it all play out.

What's your take, Derek?

Well, I think that's 100% spot on. Within the last couple of weeks, BlackRock announced it has a $100 million hedge fund specifically targeted at British agriculture. The background includes one of the most surprising moves from the budget - the inheritance tax relief for family farms was effectively eliminated. Did we talk about this?

I think we discussed this two weeks ago, but it might be worth revisiting…

The situation involved an inheritance tax exemption for family farms so farms could pass to the next generation intact. This has effectively been eliminated. The budget presented a threshold for inheritance tax at a million pounds.

Most of the population probably thought, “well, if they've got a farm worth more than a million pounds, they might as well pay inheritance tax!”

All in the value is in the farm though, isn't it? It's all tied up.

It's all tied up. The farmhouse alone in many places would be worth a million pounds on the open market. Then you've got barns, farm machinery, fields. Agricultural land has roughly tripled in price in the last 10 years.

A thousand-acre farm, which isn't big by any means, would have farmland value of seven million. This BlackRock Agricultural Fund isn't only investing in farms potentially, but already invests in fertiliser and pesticide companies. It's quite obvious that any farms that come under their control would be integrated into all of the agriculture, which is going completely in the wrong direction for a sustainable future.

Immediately prior to the budget, Keir Starmer entertained Bill Gates and Larry Fink at 10 Downing Street. Lo and behold next week came a budget with this ridiculous measure, then BlackRock announced their British agriculture investment fund. lackRock announced that they have this fund to invest so-called in British agriculture. You'd have thought that they'd at least be subtle enough to leave it a couple of months before making that announcement just so it wasn't quite so obvious!

Anyway, the post has gone viral, cropping up on forums and discussions. I found a reference to it on Facebook.

More people realise these things are happening. We must reach some threshold of awareness before anything changes, but sooner or later we must get some pushback.

Well, I've been following the farmers' protest in the Netherlands regarding nitrogen-based fertilisers and climate change limits. It's part of a wider trend we discussed before this call, going back a hundred years.

This mirrors the Great Depression playbook. In 1930, America comprised small plots with individual family farms. By decade's end, most farmland belonged to gigantic agribusinesses.

Big business and banking achieved a dual victory. Every small town had its own bank in 1930. Banks lent money to farmers to modernise their techniques through modern agricultural machinery.

The Great Depression hit, worsened by weather systems and the Dust Bowl. Unsound agricultural practices aggravated everything - stripping hedgerows that formed windbreaks, making vast monoculture fields.

Yeah. It's the opposite of regenerative farming, wasn’t it?

Farmers struggled with loan repayment payments to local banks for machinery. Local banks foreclosed mortgages, repossessing farms and machinery. Small banks across America found themselves with farms and machinery they couldn't manage.

The banks faced a liquidity crisis. Big banks bought the little banks, then sold acquired farmland to big agricultural conglomerates. That's how the transfer occurred. So we're looking at a fairly blatant rerun here.

It's amazing how often these things happen in different circumstances, though perhaps not on this scale. It comes down to controlling money, food, energy.

We need local-level control where people have vested interests in their surroundings and land. That has to happen, doesn't it? Otherwise, do we have a long-term future as a species if we don't care for the land?

We certainly don't. Life on Earth will continue regardless! The human race could easily go extinct. The other threat we face, which nobody seems bothered about, is nuclear war.

Yeah, the earth will be fine. I'm just not sure we will be.

Our friend in the Salisbury campaign for nuclear disarmament drafted a letter to the local paper. Surprisingly, they published it prominently, highlighting Britain's reckless participation in aggravating Russian conflict.

The answers lie in shining light on these issues through conversation. We're looking to change the root metaphors guiding our decision-making. Productive discussion can change "us versus them" and "man versus nature" metaphors.

I noticed something today. I went to drop off a parcel at Morrison's Daily, a small high-street shop in their chain. All supermarkets have them - Sainsbury's has a local version, Tesco has local stores.

Thirty years ago, these shops were all completely independent. They've been absorbed into larger chains. Now a few big retailers effectively share monopoly control over former competitors.

This follows any large quoted company's imperative to keep growing. They must keep expanding profits. Of course, some methods to expand profits are legitimate, others highly dubious. As legitimate ways become exhausted, profits expand by consuming smaller competitors.

It's got to reach a point where those processes themselves have got no further to grow. Eventually, we're going to have some kind of reckoning. Exactly what kind, we don't know. But I think that you and I are a stand for the fact that out of this, it's entirely possible that a completely different and more humane, sustainable way of organising human affairs is going to come out of it.

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Key: Rob’s comments are in italics, Derek’s are in normal font.

Our topic today is Labour's plans for the British economy and how those plans appear to be highly divorced from reality. Which sounds like a big topic. Where do we need to start with this one?

The best place to start might be Rachel Reeves' statement in the budget. She said the only way to deliver economic growth is to invest, invest, invest. The first thing to say is that it's taken as an assumption, without debate or question, that economic growth will solve the problems.

Whether or not that's true, the next question is whether economic growth is actually possible, particularly in Britain currently. This would be very interesting as we talk about the budget.

Depends how many missiles you make, I think!

I've never seen many reports when they do a budget on what you or I would determine that to be. If we were doing a household budget, it would clearly state proposed expenditure and income sources.

The only budget reports seem to focus on tweaks to money collection methods, with little breakdown of actual spending. Another element in general conversation is the “cost of living crisis”, as though this is something like the weather.

I hate that term, despise the term cost of living crisis. Just call it what it is—the cost of lockdown is the hyperinflation associated with very damaging economic policies!

The trade restrictions and immense bureaucracy costs in trading with Europe since leaving the European Union haven't helped either.

Blowing up the fuel supply from Russia probably didn't help.

That probably wouldn't have helped, thanks to our friends, the Americans. Furthermore, funnelling enormous amounts of money into sending weapons to Ukraine doesn't help, not to mention the possible hazardous consequences.

Have you seen any indication whether we receive money from elsewhere in return for the weapons we ship over there, or are taxpayers paying for that?

I’m fairly confident it's the latter. It’s worth saying actually, the governments do not have their own money, they have our money. Or money that they've just made up out of nowhere.

Money imagined into existence degrades the value of the money the rest of us have, so it comes from us either way. The other reason for the cost of living crisis is the vast wealth transfer from us to billionaires during COVID.

This happened during the financial crisis due to mortgage manipulations in 2007 and 2008.

Keir Starmer stressed his objective has always been about fixing the foundations of the country—a nice vague term. This government has pledged to deliver one and a half million new homes by 2029.

Presumably for all the immigrants that have arrived over the last year, like a million plus in 12 months?

Well, presumably they'd have more than one per household if it's for them. This rate hasn't been achieved since 1977, when something more resembling a Labour government was in power.

The real house-building boom occurred under the post-war Labour government, building council houses for about £1,000 each. They were solid, well-constructed houses rented for about £1 weekly.

I don't know who will build these one and a half million houses, where the money will come from, or what living in them will cost, assuming it happens.

I'll tell you that - Taylor Wimpey et al are going to build them, and the money is going to come from us!

They're going to cost a fortune.

That's going to cost half a million pounds plus, yeah.

They've argued planning rules are the single biggest obstacle to economic success—so-called neoliberalism in its outset. They suggest stopping government interference with people who want to rip everybody off.

The future requires responsible thinking. Fixing foundations means considering the future responsibly. The benefits won't materialise immediately. Labour's challenge is modernising Britain's economic foundations—transport hubs, energy supply, planning rules, market regulations.

Since the 2008 global economic crisis, Britain's productivity growth has slowed from a claimed 2% to 0.4%. The measurement method for productivity growth remains unclear. Growth in GDP serves as a poor proxy for human well-being.

Claiming 2% growth assumes accurate inflation figures. To achieve 2% real economic growth, you must account for inflation. Official figures typically claimed around 2% inflation until last year.

Yeah, it's not apples to apples.

If they're claiming 2% economic growth in 2006-2007, raw figures must show 4% increased economic activity minus 2% inflation.

If official statistics underreport inflation at 2% instead of 4%, zeroing that out from raw figures shows no growth. With real inflation at 6%, despite showing 4% increase, the economy actually contracted by 2%.

I think you can manipulate these figures to show whatever you want to show...

Politicians should acknowledge economic growth hasn't really happened and isn't necessarily desirable. We should focus on what constitutes a viable life for everyone.

The latest buzzword is 'modern supply-side economics', coined by Janet Yellen as American Treasury Secretary. Supply-side economics suggests freeing up people's ability to pay rather than fixing goods and services delivery.

This coded message implies reducing taxes, especially for the rich, allowing people to decide how to spend their money.

Through the miracle of trickle-down economics, we'll all magically get richer in the process.

This breaks from the Keynesian approach of creating demand by putting money in people's pockets through real actions. The Americans did this in the 1950s building interstate roads, similar to Hitler's autobahn construction in the 1930s.

Hidden agendas existed in these cases. Hitler wanted autobahns for efficient troop movement. However, the economic logic remains sound. In the 1930s, crops rotted because people lacked money to buy harvested food.

Keynes proposed government projects like Germany's approach. This benevolent use of government money-creation paid workers who could spend in local shops.

Keynes never advocated irresponsible money creation. His idea suggested government intervention during economic crisis would generate increased taxes to repay infrastructure project debt.

The post-war council house-building boom produced tangible benefits. Recent government investment programmes show little comparable benefit. HS2 raises questions about life improvements.

It seemed like a massive scam to me, just the price of the project and the route it was taking. There's already a serviceable network in place.

Many people had houses compulsorily purchased unnecessarily. Has it been completely abandoned now?

I don't know actually. Yeah, haven't heard anything for a while, but yeah, the costs involved were crazy.

That money has gone somewhere. It's a mixture of traditional thinking and pie in the sky, but we'll see what happens next.

Assuming we survive the next couple of months, Trump's potential power transition could prove interesting. Even if Kennedy were blocked from becoming Health Secretary, it would open public debate about medical interventions.

So watch this space.

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