The more things change… August 2, 2024

A listener production. Jerm Marker. The S&P, the Isaac Stoffs. This is Motleyful Money.

Welcome to Motleyful Money, the podcast is back, baby. And back with a bang, I am Scott Phillips from the Motley Fool. He is Andrew Page, and he remains the founder, the managing director and the chief cook and bottle washer at a private online investment club called strawmen.com. Mr Page, hey.

Hello, how was your trip? Ah, mate, it was brilliant. I had such a great time. Yeah, it was awesome.

A lot of K's done, a lot of K's done, about 11 odd thousand K's. I was looking at it more, I've done some tracks. But yeah, had a very long way to go, drawing from the kind of south east side of Australia in northwest. But I had a ball with the middle of the country.

And can I say, I apologize for everyone who's living in a cold climate. I still don't care if I was home, because it's cold here at the moment. One of the best things when you get north of Catherine, it's just a weather change. So we had 30 degree days and 16 degree nights.

And it was just coming from a place where today is going to be a 9 degree maximum. That in and of itself would probably be enough. But yeah, amazing scenery, great people. Some stations we stayed at, pretty gorgeous, room itself, it's just beautiful watching the sunset over.

The Indian Ocean was kind of cool for me. So yeah, had an absolute, absolute ball. Yeah, I saw some of the tweets you put out there. I was like, wow, it's very jealous.

Hey, here's a fact to eat for you. This is a conference of the Earth. I just look us up and you were talking about it. 40,000 is kilometers.

So you basically did more than a quarter of a conference of the Earth on that trip. Well done. You should also, as much as you'd be right there. I just googled the conference of Earth and it said 24,900 miles or 40,075 kilometers.

That's across the equator, of course, because it's not a perfect year. There you go. Yeah, so that was cool. Yeah, a lot of direct route between Beryl and Broome, obviously.

So I ended up going down. I'd go down from here down into Mujuro, top of Victoria, then across in the south of Australia, Kuba Piedi up to Alice Springs in that way. And then actually, you know, coming back the same way, because I'm Rosewood Close in southwest Queensland, I wasn't quite sure whether I get through it. I was on a very, very tight schedule.

Had to get up and back in three weeks. That was just absolutely great. A few people actually came up to you while we were there and said, one guy said, she's your guy, Bloek, from the Motley Fool. I said, dude, are you really?

He said, yeah, that's six people. Including by the way, for all these things, people who were on the side of the road on the dirt track, the bungle bungles, which is also a must visit place. And I pulled over with another couple and I stopped and just looked at him and he said, well, not from you. I was like, I'm not a diesel mechanic.

So, how did you know? If you do the right for the Motley Fool, so fair enough. So, I'm not a diesel mechanic, I could not have helped. I'm not a diesel mechanic, I could not have helped.

I'm a single mechanic, but I'm a little bit of cut through. What do I miss him? How was your last few weeks? Look, you know, the thing is, I always feel this with the markets and investing.

It's very hard to pull away from, because you feel this, if I don't watch it, the universe is going to stop existing or something. Who just did this thing? You know, where it record highs? Everyone's still talking, we're going to do this in a second.

Everyone's still talking about inflation and the constraints. More things change, right? Yeah, the more things change, the more they say the same. So, I looked at my shares about twice a record while I was away.

I did miss it for a second. It was just, and I don't think it's happened. Something's good, something's bad, and I'm not good with the market. Yeah, it was only your point of feeling like you're actually right.

If it's there, you kind of feel you need to do it. When you're out of my range or it doesn't matter, you're busy on something else. It's not a break. It's not a break.

And sometimes it's good to take yourself out of the equation, because you avoid the knee-jerk reaction that's so easy to do. It's like, it's happened to me a few times where for whatever reason I've just missed something. And then you come back and you see what happened, and you see the big fall and then the recovery all big. In terms of, like, I started here and I ended, like, nothing changed.

It's just that the journey was really wild-winding between those two points. But again, it goes to show you that a lot of the time that what you are reacting to is best described as noise. And you don't, you know, Blaze Pascal's saying the hardest thing for a man to do is to sit in a room on his hands and do nothing. It's so true.

It's absolutely true. It's crazy. So, yeah, so it was a good break. Happy to be back.

Mr. Ouchats, I'm glad to get to do this again. Hopefully we'll add some value for our listeners. We'll probably will touch on a couple of things.

But right, we will start with inflation. It was this week, right? We have to talk about it. It was.

And I don't know. Well, actually, I'm going to shut up. What did you make of the inflation numbers? Do you know what's funny is that your own personal lens sets the scene for everything, right?

So, as everyone knows, we bought a house not too long ago. So, I was heading into this inflation read a little bit more tentative, a little bit more with the word for it, a little bit anxious than the other way. It was a far more academic kind of thing. And there was even a part of me that was that I was like, yeah, screw everyone who's been over leverage and said, if you're right, go to another, oh my gosh, please, please, please.

So, look, I was relieved to see it come in not too scary. It would have been a part of me that would have found it fascinating. Had it been a little hotter than what the RBA and everyone had expected, that was a lot of talking heads of saying, well, that kind of forces the RBA's hand. And we've talked around this a lot.

But I wasn't so sure. And I still am. I suspect the political reality, the economic reality of the devil's choice, right? We crash the economy.

Right, exactly. Yes, yes, there's narrow part. Or do we let inflation run a bit hot? And my long held belief is, and it remains the same, is that when push comes to shove, I don't know it was the fate of conflict that everyone assumed that it was.

Maybe if it was massively higher than okay, that's a different story. But if it had come in at 4.2%, on the trimming or something, I still don't think they would have done it. Particularly, I mean, again, you've got to look at this in the context that's outside of Australia. And the Fed is all but said, very strongly signaled.

We're going to cut in September. Right, yeah, that was overnight. And I just think, I think that they would have blinked. And I don't know, you've made this argument.

A lot of people have made this argument. And by the way, from the theoretical angle, I get it. You probably need to put rates up. I just don't think the reality of the situation would have seen them do it.

We won't know, at least not any given that they have gotten this figure that allows them not to do anything. Or gives them cover, not to do anything. Or certainly not to increase, which I think a lot of people, politicians, homeowners, everyone, is like, few. But, you know, all of that aside, it's still hot.

It's hot, man. It's a way up. Right? That's what gets my.

And it's sticky. It's super sticky. The devil is always in the detail. So you sort of think, oh, 4.4.

By the way, pretty much double what they would like it to be. It is significant. Even more generally, it's 50% higher than the midpoint of the range. Yeah, right.

That is a lot. But then you tease it apart and insurance through the roof, rent through the roof. A lot of these non-discretionary things through the roof. And inflation is such a messy, imprecise kind of thing.

Because we try and sort of, we have this basket and that reflects what we all pay. That's kind of not because everyone's unique and everyone has their own inflation metric. Like, what's my basket? Yeah, that's right.

My basket could be very different from yours. Very different from Jane's. Very different from Susie's. They're all completely different.

And it might be that the price of Cuban's, that's a bad example. I was going to say, you know, ivory back scratches or something has gone up to all percent. Guess what? It doesn't impact me at all.

But when insurance goes up, when rent goes up, when food prices go up, when fuel goes up, let's exclude fuel because it's volatile. Let's exclude it, veggies because it's volatile. But you know what I mean? It's sort of like, it's very tenacious.

I would say. It's a very good word, my persistence is another word. So I, and you talked about this for a long time, right? So I'm just jumping on your bandwagon a little bit.

But I'm back, so I'll say, during the week I said I tweeted out because that's what I did with this podcast. I said, I did the numbers yesterday. I was like, we're doing this on Thursday. So I did the numbers on Wednesday.

And the CPI basket has increased 19.4% since the beginning of 2020. By the way, I'm giving very, I'll keep it up. I said 2000. And I hit the round numbers.

2000. The CPI basket has increased 19.4% since the beginning of 2020. By the way, I'm giving very, I'll keep it up. I said 2000.

I hit the round numbers. 2000. I'm not the 20. So yes, 90.4% high, including the recent data since the beginning of 2020.

So four and a half years-ish. Exactly. Because it's tuned down. That's it.

Well, that's it. Has everyone's paying on up 20%? Right. And so that's the, this is where it is.

The other thing, by the way, is this is a bit of matters. Kind of matters. It's kind of a bit wonky, but compounding matters. Not only that, the dollar value of the price increase this time around.

It was 3.8% higher than the previous year, which had we met with inflation. But the same dollar value was would have been 4.4% higher, compared to price as they were in 2020. So the aggregate total, but the same value we're comparing from a higher base now. So it makes any dollar value look lower.

If you have $1000, you get extra 10 bucks, that's 1%. You got 10 bucks, you got 10 bucks, you got 10 bucks, you got 10 bucks, you got 10 bucks. The starting point matters. And so the total value is 9.4%.

That's probably more important. But just a reminder that leaving the percentage rate compounds, it looks like a 3.8%. But if we'd have had the dollar value increase all the products of last year four years ago, we'd have a 4.4% lift in prices. So the value of the inflation coming hidden by being compared to a lower base.

I hope that maths is a little bit instinctive for people because it's a little bit hard to describe. I do do it on Twitter if you want to. If you want to, I can just digest that if you want to. But it's a reminder that, at your point, he's the other thing, we've normalized 3.8% is good.

I mean, I do a radio interview on Thursday morning with that. Richard Pono, it's a great guy. And he's got to say, well, 3.8%, that kind of feels pretty good. And 7% was over an 8% a long ago.

And thankfully it wasn't 4%. So I've always pretty good, isn't it? And I kind of said, well, yeah, it's good that it was not worse than expected. And it's good that it's down where it was a few years ago.

But 3.8% is stupidly high. I mean, if we have another 4%. I've been hitting my hand with like a slate chamber and I've just gone down to like a nail hammer. And it's better.

It doesn't hurt quite as much. It doesn't hurt quite as much. I think as if next year's another, say next year goes to 3%. Let's say we're lucky we get to top the range by 2 months time.

That takes 9.4% to 22.4% over. It would be 5.5 years. I mean, you've made the point a lot. Inflation coming down to me prices come down to us.

It's the rate of increase. It's more. And it really matters. I don't want us to start to believe 3.8% is normal or good or acceptable or fine or low enough or any of those things.

Now, I don't necessarily want to see people paying a mortgage, wait a minute, wait a minute. That's necessarily that. So I'm not suggesting that just because I made those points means they should. So it just right up.

But I got something I'm really sure they shouldn't at least in the temporary period because for every quarter they let this drag out for every month, again, go to 2020 and say what we've done differently. What if we could get inflation down to 10% over those over those five years? Would we have traded a short recession for halving inflation? I don't know.

But at some point you do the maths and go, actually maybe yeah. I mean, if like it always goes up, we know that price goes up pushing power force. You need wage increases. And as invest you want, price increases and even increases to cover that stuff.

So that's I'm just saying no inflation. That's a pipe train. But at some point, what would you trade off for the impact? Maybe not a recession, just slightly higher unemployment, terrible for those people.

Here's the thing. You can't avoid there's no such thing as falling employment without massive inflation itself because you end up with scarcity of resources, which is exactly what pushes. That's what we just got through. We know what happens in those circumstances.

So I don't know. It's easy for me to say, if I'm losing my job, I don't have less inflation. And I've been taking a talk on Twitter about people saying, well, I'll happily pay more at the till for me and my mate can keep their jobs. I kind of get that.

But at some point, that's still too sober. At some point, there is still a question of how much otherwise we let inflation go and let it be 10%. If we can have 2% more people employed, I know at some point because it compounds a lot of what it tends to be at once. If people say that, seemingly the inflation will hire this year, that would keep unemployment lower.

And it just misses the duration problem here, which is if we had to pay 10% more for everything and we could therefore there after forever have two% unemployment, I would sign on the little one right now. But we have a 10% more this year. The next year is going to be high as well. The next year, I think it's going to be higher.

So you're going to be paying a little bit more to keep someone in the job this year. But next year, you're going to do the same thing. That you're going to do the same thing. It doesn't work.

And that's part of the problem. And the other thing that irks me a bit too is that we spend endless column inches and discussions about how we kind of fix it. But there's nothing, zero on how we got here. So imagine if you go, I know Medeco's make this point often.

It's sort of like, hey, doc, I've got this problem. How can you fix it? And obviously, that's the conversation. But the broader conversation should be, well, here's how you could have avoided it.

Because that would prevent prevention is always better than QR. And the reason that we can't go back in time, obviously, but we're going to be here again at some point. And so it's like, well, why? Why is it that over a very short period of time, I've lost 20% of my purchasing power.

And you know, if you want it, not for those that don't know, I'll repeat it just so far. And we just gave everyone free money. We created money out of Finair and we gave it to everyone. So you've got, on one hand, we've got all the stuff in the real world, the services, the goods that we have.

And the other time, we've got this ledger that we call money that measures that. And we change one without changing the other. The only thing that can correct is prices go up. And my life is- It's literally supply demand 101.

You put the curbside, it's like, if you haven't done it in economics, Google supply demand curve. And then push the line up and see what the prices are. That's all they can do. Yeah.

I mean, let's just give everyone an Australia a million dollars. We're all millionaires. What does the amount of food and cars and houses also double? I mean, it's so obvious.

And yet the next time that there is a wobble, mark my words, the political pressure will be thus that we go help us out. And it's like helping a junkie by giving them another shot, another needle. And it's like, well, it does solve your discomfort. Absolutely.

Right now. But it does absolutely nothing to address the problem. And I just want to make that point because that is the problem, right? And again, I look, COVID was wild.

It's easy in hindsight to say we could have should have- I get all of that. Because I mean, when this was all just unfolding, I remember it in early 2020. We didn't know. This could have been like the movie Contagion as far as we knew.

And even the economics, I couldn't say we made different choices at the time. We might be never grilling those choices more than the ones we have made. The counter was always hard, but it doesn't, as you say, absorb us of the need, the obligation to go back and say, what do we do and what do we get? And look at the, again, I have to point to the U.S.

because it is the, I just economy. It is, it sets, it sets the context for the rest of the world. They just passed 35 trillion in debt, not mentioning the un-, the off balance sheet liabilities, like pensions and stuff like that. Also, eye watering.

The annual inflation, interest bill is a trillion dollars. So to just service the debt that they have. And, and, and, okay, so that's one thing. Now, if the growth of the economy was greater than the rate of interest, actually, that's perfectly, mathematically, that's perfectly sustainable.

But it ain't. So there's that. And the other thing is as well, is that because they're in such a big deficit, structural deficit have been forever. I think Clinton was the last one who had surplus.

Yeah, that's right. Yeah. Right? And it's not like, oh, it's close.

Massive deficit. So, how is that going to be better than ours, too, by the way? So we have a structural deficit, too. We managed to slice surplus for, for instance, like, like, we just want to be, and the biggest structural deficit.

So they've got, it's not like they can grow their way into that sort of result. We, we probably can if we manage it, we probably won't. Because, as a matter of the, the actual opportunity, because they're already doing pretty well. It's, it's, and so, I mean, it's, it's just mass, right?

There's, there's no subjectivity to this, or I think, you know, you and I can't debate the two plus two equals. Well, we can't. If I'm, if I'm on the affirmative, I'm right. Facts matter.

Two plus two does equal four. And this is unsustainable. Now, the timing is always difficult, but, but basically, so to meet that shortfall, they sell more bonds. I used to raise more debt.

Now, traditionally, that's been places like China and Japan is the biggest soldier, I believe, of the paper. And I was, but they're, they're, they're, they're, want that anymore as much as we used to. So the federal reserve buys it. In other words, they create money to buy it.

So another way, it's an overused and not, you know, the patents will, will pick away at some of the, at some of the technicalities of it. But, you know, I think it's, it's, it's pretty accurate to say you're just printing money to, to pay the interest, which is kind of like, magic. Let's, let's, let's, let's, let's bring this to a main that you and I are listening stuff familiar with. You've got shares in Scott Phillips enterprise.

Right. He sells widgets and he's making a huge loss. And to fix that, he decides, actually, I'm going to pay all my employees in script in shares, right? So all of a sudden, your cash flow situation gets a lot better.

Problem solved, right? Problem solved. Except that all the other shareholders are going to go, wait a second. You're diluting me, actually significantly diluting me.

And in a structural way that's, there's no path out of this or no intention to turn that ship around. Everyone instantly gets it. It's absolutely outrageous. You're just, you're, you're, you're, and that's what's happening with the money.

That's what, that's literally what's happening with the money, right? We're just, we're creating new units of account here to, to pay the interest on our debt. It's just, there has been, there has been no country in the history of the world over any substantial period of time. I think actually correct myself.

I think Japan is some weird outlier exception. But in 99% of cases, so far, actually there and, well gosh, we could have a whole podcast on that. Where the debt to GDP has gotten above like 120%, and it hasn't resulted in some kind of collapse. Now, okay, that's not great for the people of Venezuela or Lebanon or, and we're the westest gloss over that.

It's not really, well, us people who live there, like, no, it's a thing. It's a bunch of the west, but yeah, exactly. It's easy for us to go. It's not interesting, you know, but like, no, no, no, it's, you know, like, this is very, things get very real.

To a lot of people. This is why people rob banks to get their own money. This is why people, destroy the risks of economy. You know, inflation costs you decades of living standards, hyper-fishing costs you're a century of living standards.

Oh gosh, you're talking about, so we're talking about 3, 4, 5% inflation giving us 20%, you know, over 5 years. When you've got like 10%, how does the mass change there? It doesn't feel like it's that much. You know, people think hyper-inflation is, you know, why are Germany, well, that is hyper-inflation, but it doesn't need to get to that extent, right?

For things to get really, really crazy. And, and it, oh my gosh, I just, for me, I would love to get back to rather than tinkering around the edges, rather than trying to sort of bankrupt homeowners and stuff to try and fix the problem. I think we kind of just need to take a bit of a reflection on how we got here, where we're going, and address it, and stop, stop the bleeding, you know, step one, stop the bleeding, right? Anyone who knows first that, step one.

But if you're just important, but if you're losing what you're putting in, we'll miss the point. Now, how about we stitch up this massive gaping wound on the side of this person's head before we put some more blood into it, right? Or at the same time, but do it, do it, do it, do it, do it, do it, do it, do it's crazy, yeah. And that is what we are doing.

So my point is, is like, okay, these other, it's far, far, far, far, unquote, developing, you know, global, south, whatever term you want to use for economies. I don't gloss, I think it's horrendous in fact. It's literally robbing people, and it's always the poor that suffer, it's always the wealthy that make up. But when it happens to the United States, as is happening to the United States, right?

And now you've got the preferred presidential candidate, who's got zero fiscal responsibility. No, it's not. It's not getting better. Democrats are no better either, frankly.

They'll be spending like drunken sailors. Oh, there's no going to be aflation reduction act, which is basically just spending money. Yeah, exactly. It's ridiculous.

And like, oh my gosh, it is, it is, it's just so, it's so stupid. I'm not saying there's an easy path out of it, right? I really am not saying that. But we have to confront the issue.

When you're in a hole, you stop digging. It's the other way of putting all of this kind of stuff. That's, yeah. I go on the rant because that is not the conversation that you will see today.

It'll be 22 year old journalist goes out, finds someone in Facebook who's some cafe owner or some high-owner, you know, something a hard time. We'll talk about this and the RBA's mean and rar eyes and all. Like, not the delegitimizer, but there's so much, there is, you are missing the forest for the trees here in such a massive way. And if we can't even understand or diagnose the problem, how can we possibly hope to get out of it?

I think I'll take a breath. No, no, you're right. I'm going to go, I'm wide attention on it and try and explain it, my thoughts on it. And we've got to some point, but we've fallen into a political and social expectation that they can no longer be losers and things can no longer be hard.

And that makes me sound like the senior-old grandpa saying, hit the kids they deserve it, I was fine. I'm not saying any of that sort of stuff. What I'm saying is the politicians will say, I feel you're paying, I will make it better for you. I will make everything okay.

Jerry, powerful message, by the way. Jerry, that's all. That's why they say it. I'm not saying the other thing is that the taxes can be no losers from the taxes because when we deal with the economy, we can't do it in such a way, I honestly, we need to be, this is so, my point about inflation again, I made this one too, during the week, is I'm not saying the other should increase rates.

I know that we've heard a lot of people and it's by far away not the best strategy. The government's got a lot of bang on that before I went to that again, necessarily. It's a good point though, 100% agree. It is important.

But in either case, to your point, at some point, the RBA really should say we have to fix the problem. When we have the, frankly, the media stories, we all kind of the same thing. I'm talking about good people who are, you know, although we can't do that because it might hurt homeowners. We can't, as if the decision to raise rates would hurt homeowners, but somehow inflation is victim free.

The idea that I can't make a decision that's in your best interest because you might not like it. And so as a result, I'm going to let bad things happen to you because I didn't cause them. I get to pretend it wasn't me. You don't realize it was something I didn't do because the counterfactuals are hard to prove.

So I'm sure it will look more popular by saying I can't raise. And in fact, I got a 5%, but at least homeowners are happy. And I wasn't the person who did it. Inflation is disembodied.

No one ever calls it inflation, but no one is perceived to have caused inflation. So it's not anyone to blame. So we as a society think inflation is better than rates because rates are done to us. Inflation is something just happened to us.

And the perceived action and responsibility for that and the inability for anyone. It's like, you know, you don't have to talk about low before and you've been critical. I thought I'm fairly. But the whole, you know, when he gets the messaging wrong and the optics wrong and seems like he's not sympathetic, I will say again, I don't recommend sure Bullock should be the school nurse who makes you feel better patch on the head.

And so I'm terribly sorry and it's all full out there. And we want to know that they understand it right, of course. But any kind of crap, I'm worth this. I know exactly what the impact is going to be.

And then I do it unwillingly. And the fact that I feel I didn't smile enough and apologize enough and seem to go and meet bloody homeless people because, you know, he was told that he wasn't caring enough. And it's all just rubbish optics. I said, yes, I don't rubbish optics.

I think at some level, we can't even do the right things because they're the right things. I'm not expecting them to do this dog and pony show or to avoid making hard decisions just because it's possible someone like it hurt. And not because I don't care. They get hurt because we know the alternative is actually worse.

That's the thing. There is no door see where we have all the ideas to do is actually the thing that makes inflation go down and rates go down. So they don't have that doesn't exist. So they've got to choose between two bad options.

And I just think while we pretend to allow the media, honestly, and journals and governments and politicians or whatever and expect some sort of make me feel okay, mommy thing. I think it's honestly, I think it's a lack of maturity and I think, to a point, it's horribly powerful, which is why it's used and we wonder why people aren't doing it. And then why can't politician fix all of my problems and promise to solve everything for me. Rather than, you know what, this is going to suck.

We're a really, really crappy economic circumstance right now and we're going to make some hard decisions to get it fixed. And it's going to hurt some people, but so are the other choice. Our job is to hurt as few people as possible as little as possible to get to the other side. And so this is what I'm doing.

And yes, it sucks and I wish it was different, but it's not. So my job is to do the right things, not the things that make you feel like I'm patting on the head and calling you darling and making you all okay. And that's what really, I think front, again, I don't want to sound like the, you know, coronation or anything, I know, get off my lawn. But it's kind of, it just is that.

And it's not all personal back in my days. It's not right. It's just literally, there's two bad choices. The FBI and the government should be responsible for choosing the least worse one, getting on with it.

And they're not. And that's the government in particular, it's not too much. But the absolute, like when Jim Sharma says, when everything we can to fix inflation and they're spending more money and they're sort of domestic deficit, I'm not being political at all. But it is, there's absolute garbage.

It just genuinely is. And people are getting worse. People are worse off because they don't want to do something about it. They're a fuck, you are paying more at the till because the government chooses not to act.

That is, that is to me, a maths before you were made. That is just straight back. It is just just is. And I'm sorry if you don't like that.

I'm sorry if you're a labor voter. I'm sorry if you like Jim Sharma's, I think he's been cut out by the politics rather than rather what he thinks he knows you should do. But that's what we find ourselves. We often find there, I don't want to, again, because it's too much of a minefield.

But the politicians leave office and they're like, are they brilliant? They're really smart and articulate. But when they've got their reins of power, it's like you're bumbling idiot. And the reality is that the political pressures are just immense.

So it's like either play the game and you're there or you don't allow it on the field and you can't do anything. So politics is the out of compromise. But that's the reason. I'm sure if you went bush with Jim and you had a few beers around a campfire.

I don't know the guy, but I'm pretty sure he's a very intelligent man. And he would go, oh, yeah, you're 100% right. I totally agree. But what can I do?

I can't believe I can't because it was it. So I do that. A couple of things I want to really make the point is that this is, this is a finance podcast. We talk about economics and the rest of it.

But I've often said, you know, economics and politics and society, they're all joined at the hip. The reason that we have a rise in populism is because of the economic situation. So this is far beyond some, you know, technical sort of weird sort of bespoke economic discussion amongst finance nerds. It's sort of like, no, this ultimately leads to like really, really bad people because the bad people know that you just have to make big promises.

People are so desperate and they'll inform that they'll go along with anything. And, you know, people in positions of comfort as many of us are here in Australia. Look, I was just like, why would anyone vote for that guy? Well, it's different, right?

It's different when you're there and you're in form. It's like, oh, well, this guy's saying he's going to make things really hard, but don't worry. It might get better down the future. This guy's going to give me some money now.

I'm not going for that guy, right? It's sort of, that's the point I wanted to make. The other point I wanted to make here is that the trouble that we get to here is that this whole system is built on trust. There is a reason that people are happy to buy US bonds at a much lower interest rate than the Argentinian bonds.

I apologize for picking on the Argentinian tier, but it's a good example, right? That's a good example. That's not what's actually what's going on. It's a fact, right?

And I put it to you. I put it to anyone who's listening. It's like you've got $10,000 to invest. You can buy an Argentinian bond giving you 12%.

I think it's more than that, right? Or you buy a US bond giving you 4%, which one do you want? Now, one paper, one is significantly better. Why don't you go for the higher interest rate?

Because there's no trust. There's no trust in the people who are controlling the money. My point is that when the further down this path we go with fiscal and monetary lack of duty of care, what ultimately gets impacted is trust. When the trust is gone, everything is gone.

It's gradually then suddenly just goes. I'm not buying that. Look at what happened in the start of last year with the UK guilt market. The UK guilt, we're not even talking pinnacle Western democracy here.

And the whole thing just, again, I swear, put itself. Yeah. Why? Because trust, this trust said something dumb without any comment.

It was a dumb term. Oh my gosh. Not just on a pick on hurt. Well, I will pick on hurt.

Everyone around, sorry, in that party. And the market is a really good truth device, I think. And everyone just, I am not touching that. I'm getting rid of this piece of paper.

Because you're going to pay me back in funny money. I don't want it. You can say anything. You like all the rhetoric and all.

I don't want it. And then the government had to step into it. But it just kind of fixes it a little bit. But when that trust starts to go, it's very, very, very hard to win back.

And so what is at stake? This isn't about, oh, gosh, I hope my mortgage doesn't go up too much. The fundamental thing at stake here is geopolitical stability. The very fabric of our society.

It sounds hyperbolic, right? But it's like things could get very, very dark, very quickly. When people on mass start to lose faith in the system, the people sort of controlling it. And the very fluid with, we sort of swim in is lacking a loser's credibility.

You have a reset. And by the way, this isn't like, oh, really? Is that what the academics say? No, this is what history says.

And this is what history says. Not just in, oh, it happened once in 1639 and then again in 19, no, like repeatedly. Dozens of times, even in the last couple of decades around the world, it happens again and again and again. And we, in the West, in our incredible position of privilege and luxury, go, yeah, but that's there.

It wouldn't happen here. It's like, well, guess what? It's happening slower. But it's happening.

We're on the exact same path. And the stakes couldn't be higher. So I'll end on that bleak message. I'm going to go for a second, mate.

We'll move on. The other thing worth remembering is that the RBA is trying to avoid a recession. And that's important. And then we say, ish.

And the real estate is because you look at the ABS numbers, we've been a per capita recession, a per person recession for more than a year. And it's not, our recession is worse. Because businesses get less customers than people often get worse. Our recession is worse than a per capita recession.

But it's effectively only worse because the per capita recession gets worse. That's how this would end up. Now, there's changes to population, go through immigration policy and stuff. So the numbers may not look different in the future.

But what we all think we're trying to avoid a recession because they're, one of the economy's on recession, everything's okay or good or positive or something, whatever it is we think. The average Australians share of GDP. Now, averages are still equally messy. There's a distribution question about who's getting a lot, who's not getting much.

But the economy might be growing, but per capita per person, the economy is shrinking. Australia is producing less per person than me where a year ago. That's been the case for the last four quarters of the previous numbers up all the other day. So, what?

I don't know. That's a big deal. That is a huge deal. We've all got less purchasing power and we're all producing less.

It's not a good scenario. Whatever growth we think we're getting is being propped up largely by imported demand, which is not necessarily even a bad thing. I think you and I talked about the four round. But in a situation we've got housing vacancies in less than 1%.

Inflation at 4%. House prices going through the roof, still rents going through the roof, still. Other products going through the roof at a non-point, 4% increase in total prices over the last four and a half years. And we're making less stuff.

By the way, there also is productivity is awful. I don't buy the view that productivity is a government problem necessarily. No, I don't know how it has a role to play to do what it can to help businesses be as productive as possible. Sure.

Sure. That's getting out of the way. Can I not have 12 forms to fill out? That would be really nice.

And some infrastructure spending doesn't matter, right? A breeder, a faster road. I mean, they all feel little and inconsequential. But Adam together on an economic, a total economy level and you start to get some big numbers.

So, governments have a role. Productivity is not easy to solve. The challenge is, and this goes back to inflation about you saying we're paying more. You can pay more for stuff and somebody will say, well, that doesn't matter if price goes up as well, because it stays the same.

That's also true in the short term. But if wages go up without productivity going up, businesses make less money. You can even say that's fine because they make it too much money. Okay.

That's good for you. And then what? And then what? It starts to break down when the economy is not growing in real terms.

That is per person and after inflation is accounted for. You can't just make both numbers go up and say the same. Price goes up 100% and my wage goes 100% and everything is okay. It just doesn't work that way.

So this is the real risk with the stuff that's allowed to keep going. So, the idea should try to avoid a recession if it can. As I said, when businesses start to go backwards, they're going forwards now because there's more people buy their stuff. That's been a nice solve for a first-round economy.

It has been, as Ram said, when I was just in the core issues, we're pretending it's okay by preparing it over, but at least people saying jobs because businesses are getting more revenue. And yes, a recession would make that worse. So there is something to fear from a recession that's worse than a per capita recession. But don't believe for a second that we're okay as long as the economy is growing, because it's simply not the case.

We are getting more, less for our money. We are making less per person and productivity is fine. It is not. It's not a healthy state of it.

Our kids will be worse off than we are. It's the first time I think in a long time where that can be said to be true. I'm going to disagree with you. I think about what I'm an active optimist.

In other words, we've got to make some changes. You made the point before, and I've got governments and central banks and frankly the rest of us have to have real conversations about fixing the problems. If we don't fix problems, we will absolutely continue to have this path. That is the challenge in front of us.

I think enough smart people, enough people who care, enough people who are informed enough, part of the reason we do this podcast, on Twitter a lot, is to try and somehow add a little tiny speck of extra context information to an economic conversation. I think it's completely within our grasp to solve all of these problems. Not solve perfectly that we can't create utopia. We can solve the fundamental problems that risk things getting worse.

But we have to do it. I'm not prepared to say it's all over. We can't do it. Can't fix it too bad.

But you're right that if we don't do it, the trajectory is pretty awful. It's very hard to move on. We keep putting the same things like that. It's another bugbear of mine is this idea that we can centrally control productivity.

What government initiative invented this theme engine? What public policy shapes the internal combustion engine? The Haber-Bosh process, which is how we produce nitrogen, revolutionised farming and shot productivity insanely through the roof. It's one of probably the most significant discoveries that no one talks about.

I know of the impact of it, but I've never heard of it. It's got the name of it. It's a revolutionary breakthrough. Lithium battery technology to all the internet just go more into modern times.

These things happen because people tinker away and they figure stuff out. It's not something that can be dictated. To your point, you're right. We can foster it.

We can encourage it. We can get the hell out of the way to do all of this kind of stuff. I'm just always needing to punch the wall when I'm watching. Some politician gets up there and we need to do more about productivity.

You can't do any. You can't just, you know what, we would really enhance productivity? Cold fusion. That'd be great.

That'd be great. It's very easy to say. Yeah, that's right. Someone do it.

These things happen naturally. Why do they happen? Because people are creative. People are intelligent.

People are working. They're all kinds of... It just happens. You can't plan for it.

It doesn't happen in a linear state. Things get discovered. And then they get rolled out. Do they get rolled out because there's a policy to roll?

No, it gets rolled out because it's better. Did someone knock on your door and say, Scott, you should really get rid of the horse and drive a car? I'm like, thanks. I don't need to talk about it.

We're mad about it. We also want to have a car from now on. No, I'm just going to do it because it's like, he better. That's how productivity, that is the core root of productivity.

It's human ingenuity. So just get the heck out of the way, right? Stop talking about it and shaking your fist. It's madness.

It's a word that I think 90% of politicians and talking heads in the media throw around without having a foggy as clue as to what it actually means. That's very true. I'd like to see a headdresser improve their productivity. That's what I was going to say.

Or a plant. We're going to get to the rest of our podcast some point. But you're right. That's why it's harder at the moment.

I'm very wary of the person who's going to need six computers or at the end of history. The individual will always be far more impressive than you expect or you worry. You might be otherwise to be the case. The famous person who's the IBM president wasn't interested with the rest of the world wide need for six computers.

But a lot of the improvements we've made over the last couple of centuries are mechanising things that are otherwise done by hand. And that will continue. We'll make houses with robots one day. Fast-put technologies on the ASX is actually making some progress recently.

But yeah, good point. Good point. Headdresser, maybe you can go into a room in the robot culture. But the challenge for our productivity wise for the country, I'm always telling this, is just that when you have a certain level of wealth, you become a service economy.

Which is wonderful. It's what you should want, right? Because services jobs are paid more. It means we're enjoying a more luxurious high quality of life.

We're not in a field somewhere with a hoe. Right. You're doing a hoe. That's exactly what I'm doing.

And so you're not doing a service job right now. We're helping people invest. Why? Because they're going to have money left over.

Why? Because we're rich enough. I haven't picked up a shoveling a long time. I'm not going to leave a hole in my place.

But once you have that, think of it. How does a headdresser, a plumber, a nurse, an aged care facility, how do you become more productive? We don't want nurses looking after seven or ten or fifteen patients. We want them having one to follow the ratios.

That's much harder for a service economy to become more traditionally productive. And by service, I mean specifically here, personal services, which is increasing. Now, accounts become more productive, investors become more productive. I'm saying there's no, there's no, there's no, there's no, no insight into it.

But we're 99% of us, we're laborers using our hands and then it's a hoe and then it's a shovel. Then it's a horse drawn plow. Then it's a tractor. Then it's a common harvester.

Then it's a road train that can take X number of cattle to market 100 kilometers away. The sequential removal or replacement of labor with machines works to a point. And then you start replacing not machines with people, but you tend to those jobs shrink. The new jobs are people jobs that are less prone to be able to be improved.

Plattos, the first curve, you get to a point now where you can have a modern agricultural operation, which can produce so much food with like a dozen people. Does that mean that there's no more productivity enhancements in terms of farming? No, there's a lot of cool stuff that we've been talking about. Blowing in fruit has been taken at this point.

Maybe, I think this gets over, particularly putting it to very much over eggs, but maybe we're at the stage now where a lot of the thinking tasks can be enhanced through AI and that kind of stuff. So maybe that's a productivity boon. But yeah, you're absolutely right. Just to say the word and to look backwards and look backwards and that's what's happening in the past and that's what will happen again in the future and we need more machines.