Sovereign Finance

Rob’s comments below are in italics.Derek’s comments below are in normal font.Today is the first of May — the Celtic festival of Beltane. We’re at the halfway point between the spring equinox and the summer solstice. I mention it because, amid all the dark stuff going on, we need to remember to pay attention to what’s in front of us and around us.Right. I’ve made a similar adjustment myself. George Orwell wrote in one of his essays that whatever the bureaucrats, politicians and militarists do, spring is still spring and the earth is still going round the sun.The sun will still come up. Having said that, there’s been a lot going on over the last five days, and we feel like there’s plenty to talk about.There are many different threads, and they’re all interrelated. The first thing to note is that, despite the demonisation of Putin in the Western media, he is far more accommodating than any leader likely to replace him, as far as I can see.Something people must wake up to soon is that he is talking to everybody prepared to have a dialogue with him. The most notable example is the Iranian foreign minister, Arachi, who visited him. Putin gave him a substantial meeting and has since come out publicly saying they are standing with Iran. That’s pretty notable in itself.Apparently, Trump is now saying he had a 90-minute conversation with Putin. Given everything, it would be understandable if Putin had decided it was a waste of time talking to Trump. The criticism he’s getting from within Russia runs along the lines that he’s not proceeding fast enough in Ukraine and should be far more aggressive. There are also plenty of people inside Russian politics and the military saying that Germany, France and Britain — who are openly bragging about supplying Ukraine with drones attacking Russia — are effectively waging war and Russia should strike back.It’s an act of aggression, surely. We’ve been very lucky over recent years that the Russian leader appears to have a couple of brain cells to rub together, which cannot be said of our so-called leaders.Certainly not of anyone in the West, as far as I can see. The leaders of Britain, France, Germany, the Baltic States and probably Poland are all actively trying to talk their populations into contemplating war with Russia in the not-too-distant future. They seem to be actively promoting this.They’ve not read the room. It’s not going to happen.Well, Merz has just said he aims to rebuild the German military to a strength of 480,000. Who he thinks will sign up, I can’t imagine. If they try to conscript people on that scale, my reading is that there would be open refusal. Certainly, anyone of military age just doesn’t buy into it at all.These look like acts of desperation, but I also don’t think these leaders make their own decisions. They seem to take their orders from above. Keir Starmer has not made a single independent decision. You can see when something happens — he waits to be briefed and then sticks to that line.Somebody must have an enormous hold over them. One wonders what they’ll do with all those elderly pensioners the police were picking up for holding a placard.This is another thing, though. If you think they’ll stop at arresting pro-Palestine protesters, just wait until it’s something you do care about, because it’s coming.Yeah. Another thing: Kazakh oil has now stopped flowing to Russia. Not only are they not getting oil from the Gulf states, but they’re also not getting any from Kazakhstan, either, which has been a significant portion of their supply. The reason for the stoppage isn’t entirely clear.Germany has been in continuous economic and industrial decline for four years, arguably since the Nord Stream pipeline was blown up. What they’ve had to pay for energy since then — largely from the United States — is far more than before. We’re getting an object lesson in how much we depend on the energy sources and prices we’ve taken for granted.Did you see the Chris Hedges interview with Richard Wolff? Wolff was essentially saying this is the price of globalisation. He was talking about car manufacturing. In the early seventies, it was all based in Detroit; the supplier companies were small- to medium-sized firms located within about 50 miles. Everything was done within America.Whereas today production is spread across different parts of the world, so you rely on these shipping networks. As soon as those networks are disrupted, the whole thing becomes very fragile.Yeah. The population of Detroit has fallen from 2 million to 700,000, which is pretty dramatic. There’s an enormous degree of social unrest there as well.There’s a famous photo of the old railway station in Detroit — a huge building you can see from miles around. It’s a monument to what once was.Image: Derek Gauci, CC BY-SA 4.0, via Wikimedia CommonsThat’s interesting. The other thing about Kazakhstan is that many of the Ukrainian drone attacks on the Russian heartland have been routed through Kazakhstan. There must be intense diplomatic activity, with Russia pointing out that this constitutes a de facto act of war. If further drones come over and the Kazakh government doesn’t take responsibility for shooting them down, Russia will respond, which means a certain amount of debris will land in Kazakh territory.Getting back to failure to read the room: in Germany you wouldn’t have to try very hard. The AfD, Alternative für Deutschland, is now running at 28% to 30% in opinion polls — higher than the governing party. In the Western press they’re portrayed as far right, sometimes even accused of Nazi affiliations.I have reservations about whether party politics can solve any of this. These movements tend to get infiltrated. But it’s still an interesting read of public perception.Yeah, so do I. If you look at their manifestos and publications, one clear position is that they strongly favour renormalising relations with Russia, which seems only elementary common sense.You have to judge them by what they do, not what they say. That’s the proof of the pudding.Yeah. They’re also calling for cooperation rather than confrontation. Meanwhile, Zelensky keeps touring Europe, saying Ukraine should be the bulwark between Russia and aggression towards the rest of Europe. That’s not going to happen.Now that Orbán has lost the premiership in Hungary, the obstacle to the EU providing the 90-billion-euro loan to Ukraine is out of the way. However, apparently Zelensky will only receive 20 billion of it, and Ukraine’s economy is already 20 billion in deficit. The remaining 70 billion is supposedly being directed to European arms manufacturers, which clearly indicates what’s driving this.Yeah, just what we need.Meanwhile, Bulgaria has just had an election with a landslide victory for a party that wants to re-normalise relations with Russia. Once again, I share your scepticism about party politics and about what actually happens when people get into power versus what they promised.All political parties of any size get hollowed out by corporate interests. Those corporate interests are largely invisible in the background.Yeah. The United States has been shipping increasing numbers of troops and equipment into the Middle East. They’re now talking about deploying hypersonic missiles — the first time we’ve seen those from the United States. We’ll see how well they perform in reality and what difference they actually make regarding Iran.They’ll probably still get shot down by a hundred-dollar drone or something. That seems to be the pattern.Who knows? Anyway, I had a quick check on the BBC website yesterday, and I listened to Radio 4 news. None of those items I’ve mentioned so far were on the main one o’clock bulletin.Do you still pay a licence fee, by the way?I do, because we watch quite a bit on iPlayer.I really feel I should cancel it. It’s only the family that keeps me paying, but we really ought to stop funding them.There’s something in that. I’ll talk it over with Gina.Now, whatever you think of Trump, Putin is still prepared to talk to him. They recently had a 90-minute conversation. I have no idea what was said or agreed, or how much agency Trump actually has. Apparently, they discussed both Iran and Ukraine. One way or another, this will affect how things unfold, though exactly how is unclear.Apparently, all this movement in oil prices involves heavily manipulated futures contracts on paper. Anyone trying to buy real oil for delivery now is paying between $150 and $230 a barrel. The prices going up and down to placate American public opinion have nothing to do with what anyone in the real world is doing.With shale oil and fracked gas, it’s true that current US consumption is covered by domestic production, with a little left over. But even without that factor, the price of diesel there has doubled.The US companies will sell it abroad first, ahead of selling domestically at a lower price.Exactly. That was another point Richard Wolff made in the Hedges interview. The price has gone up anyway, and it’s going to go up a lot more. I wonder how much pain the average American will bear before it erupts into real trouble, bearing in mind the population is heavily armed.The problem both the Russians and the Iranians face is that any restraint on their part is interpreted by the Americans and their allies as weakness, rather than as an opening for more constructive dialogue.One thing that’s contributed to European complacency is that for the past 300 years, Russia has been trying to integrate itself into Europe and has largely been rebuffed or left in a weaker negotiating position. What Europeans don’t seem to have grasped is that Russia has progressively taken the view: if you don’t want to engage, fine — there’s a whole world to deal with that’s more convenient and more congenial.Russia’s got plenty of options given where it sits in the world.Yes. The post-Second World War independence movement across colonial territories gave those countries a nominal political break from their imperial oppressors, but in practice, it made far less difference than they had hoped. Many of the leaders installed were Western puppets, so even political independence wasn’t what it seemed. More to the point, those countries remained under Western economic control.What appears to be happening now is that the countries known as the Global South are slowly regrouping. The global financial system is definitely changing. The key question is whether the transition can be reasonably smooth or will result in a catastrophic breakdown. With the latest disruption to traffic through the Arabian Gulf, the likelihood of something cataclysmic, abrupt and violent is increasing.Yeah, it’s very concerning.Those are the key headlines from the last two or three days. I’ll leave it there unless you have further observations.I think maybe you should apply to BBC News as the kind of journalist they clearly don’t have at the moment!The only reference they had to the Middle East was a brief word from their economics correspondent, stating the blindingly obvious.Just to reiterate — we’re not all deep in gloom. There is a world that can work for everyone, and it’s worth fighting for. Hang tight. Keep standing in the light. Thanks, Derek.Right. Exactly right. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.It’s been about 10 days since we last spoke on the show. We thought we’d do a bit of a catch-up on what’s going on. We’ve had a ceasefire of dubious intent, some negotiations that were clearly theatre. What do we need to update people on?Well, let’s start with that. A lot of people breathed a sigh of relief when Trump said Iran had agreed to a ceasefire, that it was going to last a fortnight, and that they were going to reopen negotiations. He said that the Iranian 10-point plan seemed like a good starting point for discussion, though that sounded almost surreal to me. The Iranians’ 10-point plan is nothing new — it’s more or less what they’ve been saying from the outset: essentially a flat rejection of everything the Americans have suggested.It’s the same with Russia, isn’t it? If you look at the Russian demands, they’re just not compatible with the demands of the Empire.Yeah. Every single one of those 10 points is something it’s inconceivable to imagine America agreeing to without looking ridiculous, apart from any other considerations. Anyway, there were even public suggestions — in the Wall Street Journal, I believe — that the Iranian negotiating team should be assassinated. Mohammed Marandi said they fully expected to be sent to paradise on their journey back home. I hope they weren’t too disappointed to arrive in Iran instead!I’ve got the words of Hillary Clinton ringing in my ears, where she once said, “Can’t we just drone this guy?”Who was that in connection with?I’ve lost the specifics, but she was caught out saying something like that.Well, it’s fairly consistently what they’ve been doing anyway. I’m pretty sure everybody outside the US and its vassal states can see quite clearly that - although Iran was almost certainly not expecting anything useful to come out of the discussions - they did go into them seriously. They had quite a large negotiating team with specialists in all kinds of areas. They turned up fully briefed and fully authorised by the Supreme Leader to reach agreements.The first thing that happened, of course, was that Israel continued its absolutely brutal attacks on Lebanon, destroying whole blocks of apartment buildings in a dense city-centre area of Beirut. The BBC had the gall to describe these as Israeli strikes on Hezbollah command centres. That’s highly unlikely.Israel then said Hezbollah wasn’t part of the agreement. Trump said it wasn’t. The Pakistani mediators said it was. That immediately drew a question mark over whether the Iranian negotiators were going to leave the hotel in Islamabad and go to the actual negotiations.But, they got there. It turned out there were no face-to-face discussions at all. They sat in separate rooms while mediators carried messages back and forth. It went on for 21 hours. The US team consisted of JD Vance, who clearly had not been given the authority to decide anything or any clear briefing, because he had to keep ringing Donald Trump — and, according to some accounts, Benjamin Netanyahu too. He was accompanied by Witkoff and Kushner, both Zionists with no training as diplomats and not part of the US government.It’s not exactly the diplomatic dream team, is it?No. They’d already destroyed whatever credibility they might have had — not only in connection with Iran, but also in connection with Ukraine. So it was really doomed from the start. It was no great surprise when Vance came out and said they’d made progress on several points, but Iran had not agreed to their proposals, so it had gone nowhere. Which was entirely predictable.Then, as soon as they got back, Trump announced a blockade. He was not allowing any ships to pass through the Straits that had docked at Iranian ports. Quite apart from the fact that there’s no basis in international law to unilaterally make such a distinction, the Straits of Hormuz are of course territorial waters — either Iran’s or Oman’s. Territorial waters extend 12 miles from the coast. 12 plus 12 is 24, and they’re 21 miles wide. Every part of the Straits falls within the territorial waters of one or the other. Any stretch large enough for a ship to navigate is quite likely to be within 12 miles of the Iranian coast.So they’re entirely within their rights. There are many places in the world where a narrow waterway exists, and the adjacent sovereign state exacts some form of payment for passage through it under various pretexts. It’s not a particularly unusual situation.The Americans can’t bring warships close to the actual Straits because they’d almost certainly be attacked by Iran. The closest they could get is somewhere out in the mouth of the Gulf of Oman, which is far too large a stretch of water to supervise, even with the largest navy in the world. It’s completely impractical. We’re just about to start feeling the impact throughout the world of the shipping constraints that have been in place for the last six weeks.Yeah. It feels like the summer of 1940, doesn’t it?Exactly. I was just refreshing my memory of the Phoney War. The Second World War started when Germany invaded Poland on 1st September. Britain and France declared war on Germany on 3rd September 1939, in view of their treaty with Poland. It wasn’t until the following May that there was any actual fighting between the Allies and Germany. We were technically at war, but there wasn’t a war happening.The situation here — I’m amazed there haven’t yet been far more severe price rises than we’ve seen. The last time I looked, diesel was back to the two pounds per litre range. Petrol is considerably more expensive than it was six weeks ago. There’s been virtually nothing in the way of shortages, and people don’t seem to be taking it seriously.The reason there haven’t been any effects so far is that all current supplies were already en route when hostilities broke out. There’s been almost no passage through the Straits since then, and most of what has passed has been bound for China. China has issued some pretty robust warnings — couched in the usual general terms — against interference with its shipping on the high seas. A considerable amount of the ships allowed by Iran to transit have been bound for China, so it’s quite clear what they’re referring to.Incidentally, France actually joined China and Russia in vetoing the Bahrain proposal at the UN Security Council. The proposal was to censure Iran without providing any context whatsoever.I take at face value their position that they didn’t want this war in the first place. They didn’t start it. They’ve responded in a measured fashion, and the escalations have come entirely from the United States and from Israel.It’s how it gets framed in the media, isn’t it? All of these places “just happen to be under attack”.Yeah. So we’re about to start feeling the effects of that. The most immediate one is petrol shortages. Most of the world’s nitrogen fertiliser is either shipped from that region or dependent on natural gas shipped from there. There are going to be enormous price hikes in fertiliser, which are already occurring. We’re in the planting season in the Northern Hemisphere. This will feed through to food shortages and price rises in six to 12 months. That’s already baked in, regardless of what happens in the next few weeks.Regardless of the effectiveness of any naval action the United States takes, the major restriction on traffic in that area will be driven by insurance implications. London, European, and American-based insurers will either refuse to insure ships making those passages or vastly inflate the premiums for doing so. That alone will throttle the traffic, regardless of any naval action. Countries outside Western control won’t face the same restrictions — China, I’m sure, has its own insurance arrangements.The difficulty is that Trump’s ego won’t let him come out of this looking like a loser. He’s now put himself in a position where it’s very difficult to see how he can arrange anything else. He seems past the point of being able to provide any kind of window dressing. After all, the Vietnam War started with a contingent of 3,000 to 4,000 Marines landing. They were stuck with it for 10 years, suffered a catastrophic defeat, and lost over 50,000 American servicemen.This feels like Vietnam 2.0.It does indeed. That’s enough to be going on with, I think.The main message is: there’s a lot of chatter across various groups about prepping and being mindful of what’s likely coming, including potential price hikes and food and fuel shortages. So now’s a good time.Yeah. Stock up.Make sure you’ve got a few tins of beans as well. All right, thanks Derek.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.It’s the 27th of March as we record. We’re going to discuss what’s going on and what the likely impact will be.We’re now just at the end of the fourth week of the conflict in the Middle East — or Western Asia, as it’s increasingly being called.‘Middle East’ is a funny term anyway, isn’t it?It was obviously coined when London was the centre of the universe. So, we’re now at the end of the fourth week. The events of this week: last weekend, Trump gave a 48-hour ultimatum to Iran to open the Strait of Hormuz. He threatened to start attacking their power stations one by one if they didn’t comply.Iran replied that if he did that, they would systematically attack all the energy installations of the Gulf states — nominally American allies. Then, on Monday, he announced he was delaying the ultimatum for a further five days. Oil prices dropped on the markets at that point.It appears that a small number of people made hundreds of millions of dollars in profit on the trading that morning. There has been no attempt whatsoever to find out who was making those trades and how.Catch them and put them in prison.That would definitely be too much to hope for.That revised deadline was due to expire this evening. We were wondering whether there would be an invasion, given that these five days were enough for the marine contingents from the Singapore area to reach the Gulf of Persia.We were wondering whether there would have been dramatic events between recording this and its publication early next week. But apparently, this morning Trump extended the deadline by a further 10 days.This may or may not mean anything. Whatever Trump announces in any area, as we’ve all noticed by now, he’s quite likely to do something entirely different the very next minute — or even contradict himself.It seems that every time there’s any escalation from the Israelis or the Americans, Iran responds in a very measured way with an exactly similar answering strike.There’s some speculation that when the Marines arrive, they’ll try to invade Karg Island — Iran’s principal export terminal. If they do, they seem almost certain to be obliterated. They’d have to go through the Strait of Hormuz to get to Karg Island, which strikes me as the very least likely scenario. They’d almost certainly be sunk before they got there.That seems completely hypothetical, though there’s a great deal of speculation about it. Certainly, there have been attacks on Iranian refining and storage facilities.Both this war and the Ukrainian conflict are wasting incredible proportions of the limited petroleum stocks we have, along with processing facilities. Petrol prices around here have gone up 20 pence in the past four weeks — about a 15% rise.We’re going to see a lot more of that, and also supply difficulties. We have a much bigger problem with diesel than with petrol, certainly in Britain — and probably in the world as a whole.On the way here, at least two service stations on the motorway are now out of diesel. We’re going to be seeing shortages of pretty much everything.It’s a good time to make friends with your local farmer...A good time indeed — and not only that, to stock up on as many things as you can.The Ukrainians seem to be having rather more success with their missile and drone strikes on Russia, although they’re taking a pounding themselves as well. They’ve had substantial attacks on Russian refineries, storage facilities, and shipping facilities.Both of these events will substantially affect the global energy and delivery situation. This is also going to have a substantial effect on mining, because all mining machinery and haulage is diesel-powered. One way or another, this is going to torpedo the world economy in a completely unprecedented way.This underscores that you can’t disentangle energy from finance. We’ve talked a lot about energy on this podcast, and it’s for these reasons.One way to look at it: this appears to be a warning shot across the bow of the world economic community. Although this is a highly artificial shortage, the best way to see it is as a preview of what is coming over the next decade or two — or three at the outside — as we no longer have the bonanza of fossil fuels that has given us a couple of centuries of extraordinary economic growth and development.I still maintain some optimism that, before the century is out, the human race will have made the necessary adjustments to power society with solar energy. There are plenty of technologies available to capture that. China is, of course, leading the way, with about 50% of its energy needs coming from renewable sources.Have they localised the generation of electricity from solar?I don’t know the details of their structure, but they have enormous solar energy capacity. Because there’s such an enormous geographical area, it’s widely distributed — so when conditions aren’t conducive in one part of China, they will be in another. These feed into the Chinese grid.When you said ‘localise’, were you thinking in terms of what we’ve discussed before about distributed generation to supply the immediate area?Yes — so the electricity would have been generated closer to your home, with more of these facilities dotted around.I don’t know the details of how they’ve done it in China, but I would imagine they’ve covered as many possible bases as could be imagined.Otherwise you get the situation where entire woodlands are being chopped down to make way for solar panels. It’s mind-melting. Attaching these things to a building is something else entirely.As far as the Middle East conflict goes, there seems to be no way this ends other than as a complete humiliation for the United States. Every conflict it has had — which has been continuous since the end of the Second World War — has ended that way.In fact, for the entire period of its history, apart from a handful of years, the United States has been in some form of armed conflict.Same for Israel.The two sides have both publicised their terms for ending the conflict, and there’s absolutely no overlap whatsoever between them. Iran has made it clear over and over again that it doesn’t want a cessation which is going to be started up again in another six or twelve months — understandably so.Even if the United States said it was giving up, it would be up to Iran whether to reopen the Strait of Hormuz. All the signs are that it won’t. Even if it opened tomorrow, it would apparently take at least four months to restore fuel shipments to pre-war levels — and that might not be possible at all, depending on how badly the refining and distribution facilities have been damaged.The Gulf states have been paying enormous sums to the United States for weaponry, and have been providing them with bases on the grounds that the United States would protect them. It must be obvious to everybody that it’s had exactly the opposite result. Not only has there been no attempt whatsoever to protect the Gulf monarchies from Iran’s attacks, but the fact that the bases are there has simply made them a target.Bahrain appears to be on the verge of a revolution. Bahrain and Qatar have said they’re not getting any more involved in the conflict, for what it’s worth. The United Arab Emirates and Saudi Arabia both appear to be cooperating with any forthcoming American strike. If they do, I’m sure they’ll live to regret that decision.Meanwhile, the annual production of Patriot missiles is 750, and Israel has used 800 in the last month — or perhaps even the last week, I’m not sure. That has evidently not prevented a great deal of Iranian missiles from getting through.In many cases, they fired three or four Patriots — at somewhere well north of a million dollars each — at one incoming missile, and they haven’t even hit it. We don’t know the scale of the damage in Israel. They have hit the town near the nuclear development site. They didn’t actually hit the nuclear installation itself, but they’ve shown that even one of the most heavily fortified sites in the country cannot defend itself.More American aircraft are getting shot down, so they clearly don’t have the control over the skies they pretended to have. Iran has also made it absolutely clear that they’re in for the long haul and will continue to pursue this as long as it takes. Aside from the use of a nuclear weapon — which is a truly horrifying possibility — it seems that absolutely nothing can be done about it. Interesting times, indeed.It’s like Vietnam 2.0.It will be interesting to see what the reaction of the American public is once we start getting significant numbers of military casualties. There have probably been far more than have been publicly admitted, as it stands.That’s my outline summary of where we stand. The other development in the Ukraine-Russia conflict: in the attacks last night, or the night before, they routed their flights — presumably cruise missiles — over Poland, Estonia, and Latvia, on the way to attack Russian ports in the Baltic Sea.This puts Russia in a dilemma. If it shot them down, the debris would fall on those countries, and they would likely claim it as a Russian attack. If it doesn’t, those countries are co-belligerents in the conflict. That’s another alarming expansion of the conflict.Any further thoughts?My main thought is that it’s pretty obvious we live in a highly militarised society with a thin veneer of civilisation papered over the top — and you’ve only got to scratch it. The veneer has been ripped back. The mask has dropped, and the Freddy Krueger face is now fully visible.The policies are no different than they have been for the past 70 years. The difference is that there’s no longer any pretence of subscribing to civilised values. The nakedness of it is striking.The cost of defending against the most sophisticated, expensive armaments has dropped dramatically. War has never truly been a winning proposition, but now it would be very hard to make a case that it even pretends to be one.This happened in the First World War as well, didn’t it? All the tactics that had worked previously were suddenly nullified, and everyone ended up either going over the top or lobbing shells at each other. It’s not completely new. Perhaps the technology goes in cycles.The other thing that’s apparent is how incredibly poor value America has got from its privatised arms manufacturers, given that it’s spending more than the next seven nations combined, including those involved in these two conflicts. It’s clearly not achieving any significant superiority in return for that.It doesn’t benefit regular humans either. The trickle-down effects simply aren’t there.That goes without saying. We’re all going to be paying the price.The net effect is that a great many people who haven’t been giving much thought to these matters suddenly question the validity of the ruling élites — or even their sanity.There will be an opportunity to co-create the future we do want for everyone. We have to focus on that as well, because it’s very easy to focus on the doom, the bombs, and the explosions.That is the most important thing to take away. It’s time to continue to speculate on how human beings could live well with the technology we have at the moment.We’ll continue to do that as far as we can. It’s up for discussion with everyone. Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.Today is the 20th of March — the spring equinox, halfway between the shortest day and the longest day. I like to mark these things. Lots are going on in the world, and we thought we’d do a bit of an update.Yes. In the last couple of days, I came across a couple of quotes that, in different ways, were very pertinent to the current moment. One was J.P. Morgan — the original J.P. Morgan, founder of the banking dynasty. He’s credited with the remark that “The only real money is gold and everything else is credit.”We’ll see how that relates to the current situation, if it’s not blindingly obvious. The other was from Hannah Arendt, who said “Revolutions always seem impossible before they happen and inevitable afterwards.”Ain’t that the truth.Because I don’t know what shift is going to happen, but it’s plain that the current way of dealing with affairs at a global level is becoming more and more obviously untenable as the days go by. In this context, I thought I’d have a quick review of the book I wrote four years ago.It’s almost exactly four years this month since I published it — The Letter from 2100 — which is obviously a work of imagination. The first bit I’d like to share is from page 25, the beginning of the second chapter, which I called ‘Unravelling’. What I wrote then was:As the era of domination drew to a close, it became increasingly obvious to growing numbers of people that the entire global system was about to unravel. The only question was what form this unravelling would take. Would it be possible to preserve the positive accomplishments of human progress, or would it all be lost?Would the generation currently passing from childhood to adulthood live to a comfortable old age, still able to enjoy the comforts and amenities of industrial civilisation? Or would they — the small proportion who survived at all — see a return to the harsh feudal lifetime of back-breaking toil to scratch a bare meagre living from the soil?If the knowledge of our technology were to be lost, would it be possible to regain and reconstruct it, even in a dozen generations, or ever? As the multiple crises escalated, people reacted in various ways. Most commonly, it was denial. Many simply refused to acknowledge that the life they’d been born into really could vanish utterly, and immersed themselves in the daily struggle to get by. Many sought certainty in the dogmatic embrace of simplistic belief systems.It’s almost like you’re looking over my shoulder, Derek!Well, there we go. Then, towards the end of the book, on page 68, after running through various pillars of activity in the world as it stands — plainly not going to be sustained for very long — I asked:If none of these are possible, what are the options for human society?Other than something along the lines of the optimistic scenario I laid out, the previous seven chapters or so sketch a world that would truly serve humanity and which is, I assert, physically attainable by the end of the century. So, if that didn’t work out, what are the alternatives?One would be a complete collapse of the industrial technological system and the loss of the knowledge and know-how to create our machines and global communication systems. This would entail an order-of-magnitude drop in world population and a return to a more primitive and onerous lifestyle.Perhaps this would take the form of feudal agrarian communities governed by local warlords, rather like European society in medieval times. If some isolated communities of scholars managed to preserve enough of our scientific and technological knowledge, perhaps an eventual rebuilding of systems providing abundance, comfort and convenience would be possible — maybe in the course of a thousand years or so.If the collapse were more drastic, the fall in population more extreme and the loss of literacy total, the reversion might be to the level of Neolithic village life 12,000 years ago. Because we’ve now exhausted the easy pickings of minerals and energy, a reconstruction of technological civilisation would be far more challenging than it has been this time, even over the course of several millennia.A still more depressing possibility is the actual extinction of the human race. Finally, there’s the fantasy of a new world order envisaged by the World Economic Forum, where a global elite of a few thousand billionaires preside over the rest of the population, reduced to penury.Does that seem like an exhaustive list of possibilities — unless we can manage to navigate a return to sanity in pretty short order?Unless we take the reins fairly promptly. I wonder as well if this loss of knowledge hasn’t happened before. If you look at sites like Göbekli Tepe in Turkey, or ask how Stonehenge was built? We can only speculate.Yes, even Stonehenge or the pyramids. Or Great Zimbabwe, or Angkor Wat. Angkor Wat was built during this era. But the various pyramidal structures are plainly difficult to explain on conventional timelines.Yeah, it feels like the timelines are wrong, or the history is wrong. Something’s not right. So I wouldn’t rule out that this is something that has happened before — and could happen again, but on a bigger scale.That’s a whole other topic. We need to prepare for a proper discussion on that. Human beings appear to have been anatomically and cerebrally pretty much as they are now for two or three hundred thousand years. That’s possibly time for several cycles, considering it’s only taken 12,000 years to get from the Neolithic Stone Age to present technology.The fact that we’ve managed to exhaust the geological capital so thoroughly is a real challenge when considering whether possible high-tech societies have arisen and declined. Because if they’d done it the same way we have, there wouldn’t be any oil, coal, or readily accessible copper and other minerals. We’ve taken all the easy pickings.That’s another whole story. The relevance of the J.P. Morgan quote about gold is underscored by the fact that central banks have bought around 1,000 tons of gold in each of the last three years. That’s what is available on the public record — there are probably far larger figures below the counter.Against this backdrop, the Fed has been quietly creating $40 billion per month out of nowhere to buy short-term Treasury bonds that are either expiring or being dumped onto the market. That’s per month. These go down in the books under the heading ‘reserve management purchases’ — whatever that means.The point is that, in this year alone, the United States needs to roll over $9.2 trillion in expiring Treasury notes into new loans. That’s almost a quarter of the total of around $40 trillion. Every time we talk about the total US government debt, it seems another trillion has been added. Of course, they won’t be able to replace these at the same interest rates as those that expired.That will put further pressure on. The Federal Reserve has actually lost $245 billion in the last three years. They have various accounting and reporting policies which obscure this fact, but any other organisation with deficits on that scale would obviously be out of business.If you or I arrived with those numbers, we’d be in trouble!Yes, with a lot smaller numbers. Against this background, one can’t help thinking about the way the Iran war is unravelling. Quite apart from anything else, at some point the United States may simply not be able to afford to carry on. It’s a rather frightening prospect — what they might do in desperation, given the stockpiles of various weaponry they hold.Can we just elaborate slightly on how it does appear to be going at the moment, regarding the US potentially not being able to afford to participate in the long term?Well, they’ve got to pay all those servicemen for a start. The arms manufacturers are obviously delighted to be running at full capacity, although that capacity doesn’t seem to be as great as some of their adversaries, as far as we can tell. To do that, they need to be paid.At some point, printing money at an ever-faster rate will reduce its value in real time. We’ll be in a total hyperinflation scenario. So even if they are paying their servicemen and suppliers, they’ll be paying them with increasingly worthless currency.Those wages obviously don’t mean anything in real terms.Across the world, other countries which have been happy to hold US dollars are increasingly unwilling to continue doing so. They’re either dumping their treasuries for whatever they can get now, or simply refusing to repurchase when they mature.That is yet another aspect of the unworkability of the present situation. Plus, of course, there’s the credibility of the US government itself. The rest of the world, aside from its allies — or vassals, whichever you prefer — has obviously been highly sceptical of the US for a long time.As we close the third week of this conflict with Iran, apart from the economic damage inflicted — which we’ll look at in more detail in a moment — this cannot fail to be anything other than a total erosion of the illusion of United States supremacy. To have taken on a smaller third-world country and failed to achieve a quick, strategic, decisive victory is itself a complete failure.The negative consequences are increasingly felt throughout the world. We’ve hardly really started, but another month or so of this and it’s difficult to see how we can avoid enormous price hikes on fuel. We’re already beginning to see that. We’ll also be back to petrol stations running out of fuel, with queues up the street for the limited amount available.The blowback from this is enormous, and it’s not clear what end could be in sight. They’re sending 2,500 Marines from Singapore, which would take at least another week and a half to get there — and who knows what the state of the conflict will be by then.There’s been a very rapid escalation in the last few days, with the attack on the South Pars gas facility in Iran, which caused an immediate response — a strike on Qatar and Saudi Arabia. There’s now been another strike on the largest oil refinery in Kuwait.I don’t know how long it will take to repair the damage to all these sites. Even if the Strait of Hormuz reopened tomorrow, it would probably take months, if not a year or two, for production capacity to return to normal. This is all against the backdrop of many people judging that we’ve passed the peak of global oil production — and that the downward slope will be far steeper than the upward one has been.We’ve just squandered unbelievable amounts. Have you picked up on pictures of all these installations with vast flames shooting up into the sky?I’ve seen images, yeah. It’s mad.The lunatics really are in charge of the asylum at the moment.But at least they’re out in the open. At least we all know they’re lunatics — and we can all see it. Slowly, it’s dawning on the wider population too. Something Caitlin Johnstone was saying was that people are going to feel this soon in terms of inflation and the cost of everything. Perhaps that’s the thing that will change the situation.Yes. Trump does have absolute record-low approval ratings for any American president at any time, with the population at large. This can only get worse as the consequences arrive. There are also hugely embarrassing revelations in the Epstein files, which more and more people are digging into. Even though he’s managed to shrug it off so far, there’s a limit to that.So that was really the relevance of the Hannah Arendt quotation I gave earlier — about revolution seeming impossible. It’s not just America.The fall of the Berlin Wall seemed impossible until it happened.Exactly. The collapse of the Soviet Union seemed impossible until it happened. There are governments in Britain and right across Europe that are completely out of touch with the wishes of their populations and don’t seem to care. Something has to give somewhere.I mentioned the sale of US Treasuries by foreign holders. The petrodollar arrangement seems to be eroding by the week. More and more oil is being traded in other currencies, which is what they’ve been desperate to avoid. When you consider how flagrantly unjust an arrangement it was, it’s incredible they managed to hold it together for 50 years. But the wheels seem to be well and truly coming off now.That’s one of those shifting baseline things, isn’t it? When you’ve grown up with something, it becomes so normal that you don’t question it — why wouldn’t oil be traded in dollars?Anyway, there we go.So as usual, it’s a watch this space — but things are changing.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We were talking last week about the outbreak of war in Iran. There’s going to be an economic knock-on effect, and we thought we’d speculate about what it might look like.Well, I wanted to cover one or two events from last week. We’re now March 13th, which is day 14 of this war in Iran. In many ways, it has continued to develop in the predictable fashion it has so far, without any sign of sanity breaking out.Apart from summarising some of the key features of the last week, I also wanted to look at the likely economic effect. There’s also the more fundamental issue of what I see as a foretaste of things to come — patterns of energy consumption over the next few decades, which still don’t seem to have been taken seriously by those in positions of power, despite the fact that the writing is clearly on the wall for the energy consumption we’ve been taking for granted in recent decades.The public discourse around the closure of the Strait of Hormuz seems to focus mainly on the likely effects on oil prices. Even the less optimistic mainstream estimates seem to me to vastly understate the possible downsides if this situation persists for any length of time.The main point is that the Strait of Hormuz has remained effectively closed. The Iranians are letting their own tankers through, which would suggest that reports of mining are probably inaccurate. They have complete control over the strait and are not allowing any other vessels through. A cargo ship was attacked, and the last time I checked, six vessels had been badly damaged — the cargo vessel and five oil tankers.There were two very dramatic destructions of American-owned oil tankers off the coast of Iraq, which appeared to have been fully loaded. They spectacularly went down in flames, triggered by unmanned naval drones against which there seem to be very few effective defences. Trump has been saying that his forces destroyed the Iranian Navy. He may well have destroyed a lot of large, possibly obsolescent warships, including one that was completely unarmed and returning from a joint peaceful exercise with India.Trump made a couple of announcements in the last day or two, which temporarily reversed the climb in oil prices. One was that he was relaxing sanctions on Russia exporting its oil, which has enraged those who hoped to starve Russia of funds to force an end to hostilities in Ukraine. These events have now provided Russia with a massively larger income. There doesn’t seem to be much joined-up thinking in their policymaking.The other announcement was that Trump said they’d be releasing 172 million barrels of oil from the strategic reserves. Those reserves are already at their lowest level in 30 years, so this further depletes them. The easing in crude oil prices caused by those announcements has been very short-lived, and prices have bounced back up. As of this morning, the price of Brent crude has exceeded $100 per barrel.Looking at the energy implications of all this destruction and the energy consumed in running a war, it really does seem that warfare is reaching the point where it truly becomes a losing proposition any way you look at it. With modern weaponry, it is clearly much easier to destroy things than to make them. The costs of going into conflict are likely to outweigh any conceivable benefits. This has been obvious to many people for the best part of the last century, but unfortunately not to those controlling whether we embark on these adventures.Ultimately, it benefits Raytheon, BlackRock, Lockheed Martin, and various other weapons manufacturers.Yes, on a very short-sighted view.So we’re going to be looking at vastly increased petrol prices, which is what most people focus on. The implications of cutting the flow of oil and natural gas go way beyond that.It’s not just about filling your car, is it?It’s not just about filling your car. It’s about the whole way our industrial and economic system is configured, and the assumptions underlying it. A huge use of natural gas, beyond the obvious heating and energy production, is as a major component in the manufacture of fertilisers. A considerable amount of fertiliser is produced in the Gulf States and shipped out. Already, there has been a near doubling of fertiliser prices in the United States in just these two weeks. That will have long-term effects on farmers’ economic viability, their ability to produce food, and food prices.We rely on fertilisers because of big farm consolidation, which has made it more efficient to paper over soil degradation with more fertiliser. With smaller farms and regenerative farming, this wouldn’t be as much of an issue.Yes. If there is a human race at all by the end of this century, we will have to return to fully regenerative, fully organic farming. This isn’t some fanciful hippie idea — it’s simply an acknowledgement of reality.There’s another thing I learned in the last few days. A significant byproduct of refining the heavy grades of crude oil produced in these regions is a great deal of sulphur. Sulphur is an important industrial feedstock for several reasons, most notably in the manufacture of sulphuric acid. Sulphuric acid is itself a major feedstock for a number of industrial processes, most particularly for the extraction of copper and manganese.Worldwide copper production is already struggling to keep up with demand — another factor to consider when trying to re-engineer our energy supply to be more electric, since there is really no substitute for copper as an electrical conductor.A similar story for silver, perhaps. There isn’t enough silver in the world for everything they want to do.Exactly. Another factor in the Strait’s closure is that the Gulf states are almost entirely dependent on imported food, given that most of them are desert. Not only can no oil be exported, but no food supplies can be delivered if the Strait is closed. There will be a severe crisis across all those states.The other strategic implication is that the deal with the Gulf states was that America would place all those bases there to guarantee their protection. As we’ve seen, it has had quite the opposite effect.That’s going well, isn’t it?It has made them a target. Iran has said a couple of things — one being that it will open the Strait to shipping from nations that have expelled their Israeli and American ambassadors.That’s not likely to happen, is it?Spain, as I understand it, has already withdrawn its own ambassador to Israel. Under normal diplomatic protocols, if any country withdraws its ambassador, the other country is obliged to reciprocate. The Israeli ambassador in Spain should therefore be recalled soon. It would be a very serious reversal of a well-established diplomatic understanding if that didn’t happen.Another development this week is that Saudi Arabia has apparently rescinded the agreement made in secret between Kissinger, Israel, and Saudi Arabia in 1974. As we’ve discussed, Nixon withdrew the dollar from the gold standard. To limit the damage, they entered into an arrangement with Saudi Arabia: the Saudis would not repatriate the dollars paid for oil in return for gold, but would instead purchase American treasury bonds with those dollars. This has given the United States a free ride for the last 50 years.It’s an amazing thing to pull off. If you had something someone wanted to buy, you could say: “You can buy it on the understanding that you’ll lend me back the money you’ve just paid me.” A pretty gross diversion from normal economic operations.I wanted to look at the underlying energy implications of warfare. The most typical oil tanker today is what they call a VLCC — a very large crude carrier — which holds two million barrels of oil. One barrel of oil is equal to 159 litres and has an energy content of 1,700 kilowatt hours.To put that in perspective, your annual household electricity consumption might be around 5,000 kilowatt hours. That’s the equivalent of three barrels of oil. A tanker with 2 million barrels is equivalent to three and a half gigawatt hours — the equivalent of running a top-end nuclear power station for two hours. Every time one of those tankers is destroyed, that’s literally gone up in smoke.In the first 100 hours of the conflict, America launched 168 Tomahawk missiles. Each Tomahawk contains a half-tonne warhead and carries 2,200 litres of jet fuel. If you fill your car tank once a month and the tank holds around 50 litres, you might use roughly 600 litres of petrol a year. So by comparison, there is about four years’ worth of fuel in a single Tomahawk flight.Then there’s the warhead, which is half a tonne. A tonne of TNT has an energy content of 1,200 kilowatt hours, which is equivalent to 133 litres of petrol. So the warhead alone contains the energy equivalent of running your car for three months. That energy has to come from somewhere. These explosive manufacturing plants are chemical engineering establishments that start with a fossil fuel, pass it through a series of processes, and produce the explosive at the end. At each stage, energy is lost due to the laws of thermodynamics.Then there’s all the material that went into it — the steel, the aluminium, the electronic circuitry. Every single warhead exploded on any side represents a quantity of energy consumed purely for destructive purposes. The point is that we will clearly have to adjust to a way of life much less energy-intensive than what we’ve grown accustomed to. I’d like to do another session going through in practical terms what that might look like.Just buying local and making local goes a long way, doesn’t it? That feels like the natural state of things. I don’t need to go to the Co-op and buy apples flown in from South Africa when we have apples here.Exactly. There’s a whole set of issues around that. Thinking about our entire transport structure, there’s really no need for everyone to be running individual vehicles to the extent we do, only to sit in traffic jams a good deal of the time. Do you have any other observations?I’ve been enjoying Chris Hedges’ commentary on the situation in Iran. I might reference that in the show notes for anyone who wants to check out his interview.Did you watch his interview with John Mearsheimer?I watched that one, and one with Alistair Crooke as well. Both very good.All sound people. George Galloway has had some brilliant interviews and monologues, too. He’s very amusing and extraordinarily astute — he doesn’t mind playing the buffoon, but he’s very clever with it. That’ll do for this week. We’ll catch up again in a week’s time.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.Today, as we record, is the 6th of March. The war in Iran that has long been predicted broke out on Saturday?It was the day after we recorded our last piece. In the last episode I made a few remarks about the fact that it was looking increasingly likely that the United States was talking itself into open conflict with Iran.A number of fairly obvious consequences followed from that. Lo and behold, within a matter of days, the invasion did indeed go ahead, and it had almost exactly the immediate responses I predicted. We’ll go through that in a bit more detail.How many White House insiders happened to invest in oil and military companies right before these things happened?There is that. Although Robert Anton Wilson made a remark on a number of occasions, more or less to the effect that the more powerful an individual is, the less they are in touch with reality. The reason being that they are increasingly surrounded by people who are either too frightened to contradict the powerful actor, or are simply sycophantic by nature.They are trying to advance themselves by ingratiating themselves. The consequence is that they get no objective advice about anything and retreat further into a world of their own imagination.Catherine Austin Fitz recently said this in a conversation with Tucker Carlson. She said she has lived it all — having been very wealthy, moderately wealthy, and completely poor. She reckons that as you go higher up the wealth spectrum, people are less in touch with reality, with what is going on, and with what people think of them.Quite apart from Donald Trump’s obvious lack of intellectual strength, he has surrounded himself with similar intellectual mediocrities. He has also surrounded himself with people who seem utterly devoid of any moral principles. The most extraordinary thing to me is that events of this consequence can be set in motion without any coherent notion of the strategic goals you are trying to achieve.I wonder if World War I was instigated in the same fashion.Probably. There does not seem to be any clear definition of what the end of this exercise is intended to look like.It has all the hallmarks of “two weeks to flatten the curve”, hasn’t it?Absolutely. Another thing is that the negotiations going on with Iran were utterly cynical. There was no sign of any good faith — it was simply lulling them into a false sense of confidence ready for the attack.Ever since the 12-day war last June, it is pretty clear that Iran had been expecting this.If we were expecting this, surely Iran was expecting this.Not only that, they were well prepared in any number of ways. For instance, by comparison, if somebody had succeeded in assassinating Hitler, it would obviously have brought an end to the Second World War because pretty well everybody else had a more realistic grasp of the situation than he did.In Iraq, Saddam Hussein obviously had a very tight top-down grip on the country. In Libya, you could say the same of Gaddafi. Regardless of what you think of their policies, the intervention clearly did destabilise those countries.If you look at all of these attempts at regime change, there is not a single one you can point to that resulted in replacing a dictatorship with a healthy democratic liberal society. They either replaced it with another dictator, or more often, Syria being the most extreme case, it resulted in the total destruction of civil society in any form. Whether that was the United States’ intention in Iran, I don’t know. It almost certainly is Israel’s endgame. Although how they imagine they are going to have a safe little bubble of a society to their liking, surrounded by people they have spent decades antagonising and wreaking destruction on, I cannot imagine.One of the almost certain consequences that was easy to see in advance was that the Strait of Hormuz would be closed. This is exactly what happened. There have been seven tankers hit and either sunk or severely damaged. Fully loaded tankers are now apparently stranded in the Persian Gulf, valued at something like 10 to 20 billion dollars, which has already been paid by traders around the world to the authorities in the Gulf monarchies.The arrangement is that the contract is set up several months in advance and the funds transferred at that point. The buyers of the oil on those tankers have already paid for it. They are not going to get the oil, and I should think they are extremely unlikely to get their money back. The damage to American bases within the Gulf monarchies is obviously considerable.None of us can know exactly how much that damage is. It has obviously been far more severe than any of the American military personnel responsible for this decision could have imagined. It is going to go on. There is plainly no coherent political opposition inside Iran.Regardless of the humanity or otherwise of the murder of Ayatollah Khamenei, it was a tactical and strategic blunder of the highest order. Rather than decapitating the country and giving the population space to rise up against the government, it had exactly the opposite effect. The street demonstrations in Iran following that assassination are absolutely massive and clearly in support of his memory.Once again, the projection of him as some kind of evil ruthless dictator appears to be a highly partisan judgement.He wasn’t exactly carpet bombing cities in America, was he? Or ripping school children to shreds with military explosives?On the first or second day, one of the immediate targets was next to a girls’ primary school. There has been no sign of any remorse or apology, no explanation that it was not actually the intended target. That was an act of sheer barbarism.I don’t know to what extent the population of our country, or of any of the other supporters of America, goes along with this. Even within our own populations, there is increasing alienation from these actions and from our government’s spineless support of them. What’s your take?It is so difficult to know how much we live in our own echo chambers. From my home office here, what do I actually know? You try to triangulate different things you have read or seen. A lot of people just go with whatever is on the news.I think there is quite a big age divide here. Increasingly large proportions of the under-40s just don’t slavishly absorb the mainstream news media. They might get it from social media, which can be an echo chamber of its own.We certainly don’t buy newspapers and things like that.No, but I am heartened by the quantity and quality of independent journalism online. Without even going onto Substack, Rumble, and fully alternative channels, even on YouTube — which is obviously censored to a significant degree — there is a huge amount of content against the official narrative.There is a huge amount of really high-quality journalism of the sort that, a few decades back, we could get on the BBC. It has been a long time since there has been anything of that impartiality or intellectual rigour.The consequences of the closure of the Strait of Hormuz will be absolutely devastating for the world economy. Last Sunday morning I went out at about nine o’clock to fill the car up. It was completely normal and petrol at the local station was still 134 pence a litre. There were no queues.Going out this morning, it has only gone up by three pence in the last week. But we are going to be back to two pounds a litre of petrol any day soon. We are also going to be in the situation we seem to have already forgotten about a few years ago, when large numbers of forecourts were simply closed and the ones that were open had cars queuing up along the street. That is only the most immediate effect. It will have a knock-on effect on the availability and prices of everything else.The liquefied natural gas plant in Qatar, which was the main supplier, has now been shut down. Even when it starts up again, it will take a great deal of time to stabilise that situation. There is also an aluminium smelter there that has been shut down, and that can take anything up to 12 months to get operational again. Aluminium smelting is a continuous process — once it is interrupted, the entire factory is full of solidified aluminium.It is not like a tap.No. We have not even really begun to see this, nor the knock-on effects on public sentiment once we all start to be affected personally.What I was saying about the assassination of Khomeini being a strategic blunder is that it not only rallied the entire Iranian population in a unified show of national solidarity. He was also the second-most senior cleric in the Shia religion for all Shia Muslims worldwide. Whatever misgivings they may or may not have had about America have immediately aroused their implacable enmity against the United States and its allies. How we come out of this is anybody’s guess, but it is not going to be to any of our advantage.No, that much is fairly obvious.The only hope I have is that the consequences of this move will lead the entire population of the planet to a wholehearted rejection of these methods for resolving disputes. We’ll have to see how that goes.Shall we leave it there for this week?Yes. As usual, we sign off by saying watch this space, and we’ll see where we are next week.The other thing I would say about that assassination: it was trumpeted as a major intelligence coup to locate his position. Of course it wasn’t. He publicly announced that he would not hide anywhere. He said he was in sympathy with other people who had nowhere to go, and he was not going to scurry off to a bunker. He was in his home, working. It not only wiped out him and his immediate advisors, but also his daughter, son-in-law, and granddaughter. Truly callous by any standards, as well as being counterproductive.I don’t know if you remember the film ‘Team America’, but I was thinking I need to go and re-watch it. It has just got better with age.I do remember it. It is painfully accurate, I’m afraid.Painfully accurate, yes — as characterised with puppets.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.You were just about to launch into a long spiel about Bitcoin and some reservations about it before we started recording. This has stemmed from some revelations about the Epstein files. Shall we start there?Yeah. There was a very interesting interview released today by James Corbett with Aaron Day. It’s an hour-long conversation that goes into great detail. Anyone who wants that level of detail, I thoroughly recommend it. It also provides quite a lot of clarity about the whole principle of Bitcoin — what it was originally set up to do and what it has evolved into.Aaron Day has dredged up a whole lot of material from the released Epstein files. It’s really interesting, the range of different things revealed in those files. With three million pages published, even with the redactions, it’s a huge amount of material. There’s a massive open-source collaboration of people going through it to tease out the information, because it’s not at all well organised or indexed.The area he was focusing on was Epstein’s involvement with Bitcoin — essentially the attack to derail it from its original intention as a fully transparent, peer-to-peer payment method that enabled people to sidestep banks.Yeah, something you could actually use to buy coffee with.Yeah, in the early days, it really was possible to do that. There were many traders taking it in various places. It was very strong in Canada, for example, probably in the States as well. It was fast, and there were low transaction fees.Personally, I had misgivings for reasons of the indirect experience I’d had. My son Leo had the idea of becoming a Bitcoin miner. He was fairly early into it, but not early enough to make it viable.Originally, the generation and verification of transactions could be done by anybody with a laptop in the early days. If you were the one who verified the latest tranche of transactions, you were rewarded initially with 50 bitcoins, which would of course be worth millions now.Every so often, the number of coins the miners received as a reward for completing a block decreased. This was touted as a virtue in that the number of bitcoins would eventually be capped. The argument was that this gave it a guaranteed rarity value, unlike pounds, dollars or euros, which can be created by banks and central banks on a whim.After a while, the amount of computation required grew. Although it was, in principle, possible to do it on any general-purpose computer, it moved to specialised hardware. My son Leo bought one of these pieces of equipment with a view to becoming a Bitcoin miner.Unfortunately, it took about a year or 18 months to arrive. In the interval between when he bought it and when he received it, the computation needed to stand any chance of verifying a block had escalated greatly. He ran it out in the shed, 24 hours a day. It used so much electricity that it heated the entire shed. As I recall, he attempted this for a few months, during which time he never verified a single block. So he used up a lot of electricity without any benefit.This is why you get mining pools, isn’t it — where pools of miners share the rewards between everyone in the pool.Yeah. Now, of course, it’s got to the point where you only receive a fraction of a Bitcoin if you do succeed. Miners can no longer support themselves from the Bitcoin they earn, so they have to charge transaction fees to people using it for purchases.This has made it extremely expensive. Rather than being much cheaper than using a credit or bank card, it’s become enormously more expensive and therefore impractical for small transactions. Then in 2017, there was a distinct shift towards promoting it not as a regular means of payment, but as a speculation. As we’ve said before, it’s essentially like any other currency exchange speculation — some winners and some losers.Two things might have evolved Bitcoin into a viable operation. One is if there was such substantial use of it in normal trade that it didn’t get swamped by the wild swings that occur when most transactions are purely speculative. Another thing that might have validated it would be if someone had set up a solid arbitrage system between Bitcoin and gold, which could also have stabilised it.But to cut to the chase, this interview explained in great detail how Epstein was involved in funding the MIT group of developers, which solidified it in a way that it was no longer going to be what had originally been hoped for. This is definitely something to bear in mind.Once you’ve separated it from the likelihood of becoming a replacement for fiat currencies — which is what early enthusiasts claimed — it becomes purely a speculative bubble. Just like any other bubble, it’s fuelled by people buying in the hope of selling later at a higher price. This works until people no longer believe the price will continue to rise, at which point it’s likely to plummet.What I’ve always said is that it may well be worth having a speculative flutter with an amount that is small relative to your overall wealth, which you actually own and haven’t gone into debt to fund. As with any other speculation, it should be smaller than the amount that would cause real pain in the event of a total loss. That remains my position, subject to our usual disclaimers — I’m not making financial advice.No financial advice here, yes.So, having said that, that remains the position, even more so having discovered this. My own view of its viability was coloured by observing my son attempting to mine it — this was probably ten years ago, before the shift in emphasis towards purely speculative or store-of-value usage.The interview with Stephen Keen, the Australian economist, was essentially stating the same thing. He said there was no real solidity to it. The amount of energy used to run the computers was enormous and only going to get larger. That is why the analogy with mining breaks down.After all, if you sink a gold mine, it takes a lot of energy to dig the hole, excavate it, carry the material out and sort the slag from the gold.The energy in true mining is front-loaded, isn’t it?Yeah, but once you’ve done that, if the mine is successful, you have the gold and don’t have to keep piling energy into it. With Bitcoin, energy is indefinitely required to maintain the integrity of the chain. That, in itself, summarises the essential weakness of the whole system.So once again — if you want a flutter, feel free, but don’t expect to retire on it.We’ve talked in earlier episodes about the need for money that actually works, money that isn’t just created out of nowhere by a central bank that doesn’t have your interests at heart. So Bitcoin does tick some of those boxes. I also wonder whether Bitcoin has let a genie out of the bottle and got a bunch of people interested in making something work that will actually function as money. It might not be Bitcoin in its current form.The idea is correct, though: anyone should be able to trade with anyone anywhere in the world using the same unit of measure, whether you’re in the UK or Kenya. You should be able to transact easily and quickly without intermediaries. So there are elements of it that are right.Yeah.When the dust settles — assuming society hasn’t destroyed itself in the meantime — before the end of this century, we will have a single global currency. In my opinion, that currency will very likely be calibrated in gold.That’s what’s been used for thousands of years. There’s a principle called the Lindy Effect, which holds that something that’s been used for a long time is likely to be used for a long time in the future. Whereas something fairly new is unlikely to last far into the future.The reasons why gold has been a perennial form of money are very sound. There’s a finite amount of it. The rate at which the world’s gold stock changes is small and fairly predictable. It’s universally attractive, durable, divisible and easily verifiable in terms of quality.The downsides are that it’s hard to take self-custody, and it doesn’t scale well — you can’t go to a shop and hand over a gold bar. So you end up creating derivatives of value, a tokenisation of it. That system is then open to abuse, which is what happens with every single currency ever. They all end up worthless.Yeah.So what’s the solution? If we end up back on a global gold-backed system, how do we avoid this tokenisation making it worthless?It obviously requires somebody to hold the gold securely, with that holding linked to the transactions conducted. For this to work, there needs to be some form of real-time, transparent auditing of the ledger. This is possible in principle. I’m not going to sit here and design a definitive global trading system, but those are the features it would need.Also covered in that interview was an indication of Epstein’s involvement in setting up the Tether cryptocurrency. Tether is a form of cryptocurrency guaranteed to be backed by dollars. This means the Tether company is required to hold dollars, which they hold in the form of short-dated United States Treasury bonds.The forces within the US Treasury and the Federal Reserve see this as a way to sell short-dated Treasuries to the Tether Company to back its cryptocurrency. They’re talking about raising two or three trillion through bond sales. They’re hoping this will rake their chestnuts out of the fire as countries around the world, which have been holding Treasury bonds for decades, gradually get cold feet and divest.This strikes me as a policy of desperation. It might put the collapse of the dollar off for a year or two, but sooner or later, it will run out of steam too.Do you think that’s also why there’s a desperate push towards war with Iran — part of the same playbook of kicking the can down the road?Obviously any warfare is, as I’ve said, robbery with violence on a grand scale. The rational excuse for going to war with Iran would be to seize its oil and other mineral resources. Beyond that, the motivations seem to be providing a distraction from people’s justifiable concerns about more pressing problems closer to home — discouraging them from questioning the behaviour of those in power — and pouring ever larger sums of money into the pockets of arms manufacturers. None of it is very salutary.No. As I said last week, they do whatever is most profitable. If war is most profitable, we go to war. If peace is more profitable, we have peace. There are no human considerations in any of those decisions.Appalling. Yeah.Just coming back to Bitcoin — people will always find a way to trade directly with each other. The ‘powers that ought not to be’ underestimate the ingenuity of ordinary people to trade directly and cut out the big central banks. We’ll find ways to do that, with or without Bitcoin.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.As we record it’s Monday, 23rd of February. I want to comment on what seems to me the most critical cliffhanger in the world at the moment — the movement of two American battle groups closer and closer to Iran, along with lots of threatening rhetoric. It’s difficult to know what will happen. It seems quite suicidal to attack Iran.They’re unlikely to destroy its retaliatory capabilities with the opening salvo. The retaliation — probably on Israel, certainly on American bases, and probably on the American fleets — is likely to be utterly devastating. How America would respond, and what that means for Israel, is anybody’s guess. Many of those things could be very hazardous to all of us. It’s difficult to view any of that with equanimity.I’ve come to the assessment that they basically just do whatever’s most profitable. If it’s most profitable to go to war, they’ll go to war. If it’s more profitable to have peace, they’ll have peace. War would appear to generate trillions of dollars.Well, as we’ve said before, in terms of the amount of real wealth at the end of the process, it’s a lot less than it was at the beginning.Anyway, on the topic of putting together our Sovereign Finance worldview—if we’re looking at the money system, the obvious place to start would be the academic discipline that supposedly deals with these matters. That’s called economics, sometimes called the ‘dismal science’. That’s a misnomer, because in real terms it’s not a science at all.The main reason I say it’s not a science is that we don’t discredit paradigms or theories when they fail to make accurate predictions. That’s what happens with any of the so-called hard sciences. To take one example: there was a time when the theory of combustion held that a substance within the material called phlogiston was emitted during burning. On the face of it, it looks obvious. If you set fire to a piece of wood, flames come off — it appears to be emitting something. So it was a reasonable theory.But when people looked into it experimentally in a controlled, sealed environment, they found that at the end of the burning process, once everything had cooled down, some of the air had been consumed. It wasn’t that anything within the fuel was emitted. Rather, it was combining with something in the air, which they eventually discovered was oxygen. That’s the way a real science progresses. It makes predictions based on a theory or hypothesis.It’s hypothesis, then evidence, then a new hypothesis. Plus no hypothesis can ever be beyond question. If you can’t question it, it’s not science.Yeah, exactly. That alone rules economics out as a science. There are also various dogmas which appear to be sacrosanct. There’s the image of the rational actor who is trying to improve his own circumstances at everybody else’s expense, essentially motivated by egocentric considerations.That’s probably where the adjective “dismal” comes in — it’s a very dismal view of human nature, that everybody’s trying to do everybody else down. There might be plenty of people who do that, but there are also plenty of people who are motivated by all kinds of things other than selfishness. That obviously needs to be taken into account in any model of human behaviour we’re trying to construct.There’s another facet of economic theory: the idea of things seeking equilibrium in the marketplace. This is a complete fiction. The marketplace is in a continuous state of flow, and in particular, it requires a constant input of energy for anything to happen at all — something that is largely ignored. I’ll come back to that in more detail.Market fundamentalists, as George Soros described them, hold up Adam Smith as a poster boy for modern capitalism. That wasn’t really the point he was trying to make at all. His writings are predominantly ethical, promoting upright moral behaviour rather than dog-eat-dog competition.I’ll link back to the episode we did on Adam Smith and the various other economists, because a lot of these people are partially represented by a small number of things they said.Yeah, exactly. When he spoke about the marketplace, he had in mind a literal market where people met once a weekI have a lot of issues with the word “marketplace” anyway. What on earth is this fabled marketplace that I’m supposed to be in?Yeah. Even 50 years ago, the stock exchange was a real marketplace where the same people met each other every day. You’d only survive in that if you were regarded as trustworthy. Now it’s become a complete abstraction. Many people never even meet those they’re conducting transactions with. It’s all done - not even over the telephone - but through a computer screen.The danger for sovereign entrepreneurs as well is that “the marketplace” implies you’re just a vendor — just another supplier of a commodity. That isn’t what most of us are doing.Yeah. In Adam Smith’s time, the marketplace was where people actually met. They were all part of the same community. Establishing a bad reputation for honesty or quality of goods would be self-defeating very quickly.It was also a predominantly Christian society. Even if people weren’t deeply motivated by the golden rule — do unto others as you’d have them do to you — they’d have to make at least a reasonable show of it, or they’d be ostracised. None of those factors applies to the theoretical modern global economy.Many early economists regarded the economic process as involving labour, capital, and land. After the Industrial Revolution, when the agricultural part of the economy became less dominant relative to the factory economy, the discussion narrowed as though only labour and capital were involved, and what might be an equitable or practical distribution of rewards between them.Marx felt that labour was entirely responsible for the addition of value and should therefore receive a larger share of the rewards. In fact, all of these analyses ignore one critical thing: without energy flowing through the system, none of this happens. Labourers can’t do anything unless they’ve had enough energy — in the form of food — to provide the muscle power for whatever work is involved.Empty sacks don’t stand up, as my dad would say.Yep. Capital, in terms of industrial machinery, doesn’t do anything until you put the coal into the furnace, or whatever source of energy you have. This means it’s not an equilibrium system — it’s what’s called an open system.Ultimately, it’s powered by the flow of energy from the Sun to the Earth, then released as lower-quality energy after whatever operations have been performed. It’s a continuous flow. It’s been supplemented for the last two or three hundred years by energy that came from the sun millions of years ago, stored in the form of fossil fuels. We’ve burned through those at a great rate, and still — as we’ve noted elsewhere — failed to properly account for the fact that as they become more exhausted, they’ll become increasingly expensive in energy terms to harvest.Finally, an important part of the analysis, almost entirely missing from mainstream economics, is the insights of system dynamics. This is the study of complex systems with multiple interacting feedback loops. Some of those loops are reinforcing, creating increasingly large results as output increases. Others are stabilising ones, bringing things back into balance by feeding output back into the system — the classic example being the thermostat. If the room gets too hot, the heating turns off, and vice versa.The equilibrium framing is mistaken. Energy flows through the system and must be replenished to keep it going. That’s why we need to bring these other factors in, if we’re going to build an economics that really reflects how things work and provides useful tools for strategising and selecting tactics.It sounds to me like economics, as it stands today, largely just serves the existing power structure.Exactly. Economists know which side their bread is buttered. They can’t afford to rock the boat, or they won’t get promotion and tenure. Those employed by banks or financial institutions are obviously there to serve the interests of the people paying their salaries.Economic theory also has nothing to say about the role of banks and how banks create money.That’s another major missing factor.The other thought I had on the subject of energy — we’ve discussed in the past that money in its purest form is energy, assuming it represents people trading for goods and services rather than speculating. Most transactions going on at the moment are the latter. But that movement also implies energy moving around.Yeah, exactly.It feels to me like if you fix the money, you solve a lot of the problems. There’s just a lot of vested interest against fixing it.Yeah. I was thinking about this the other day. We’ve talked at times about pensions and how far short they’re falling of how they’re supposed to work. It occurred to me that a major factor in the failure of the pension system is inflation.If you imagine a world of stable purchasing power — as existed in this country for 300 years before the disruption of the two world wars undermined Britain’s financial position — the theory of pensions makes sense. You accumulate a fund over a lifetime by paying in regular amounts, which grows via compound interest into a sum large enough to provide an income in your post-work years.The earliest payments into the account have the most effect on the final fund, because they’ve had the longest time to compound. But if there’s been a steady erosion of purchasing power over, say, 40 years of working life, then that longest-running portion of your fund dates from when your income was negligible in current terms.When I started working, I was earning £1,600 a year, which was actually a very handsome salary — probably three times what a manual labourer would have earned. But if I were paying the benchmark 12% of my income into a pension fund at that time, even accumulated with compound interest, it would become a ridiculously small sum in today’s purchasing power.I’ve got a lot of concerns about pensions at the moment. I also wonder whether, by paying into a pension, you’re just feeding the beast — whether the money is being invested into life-draining activities, weapons, and so forth.Yeah, absolutely. Shall we wrap it up for this week?Yeah, sounds good. As I said, I’ll link back to our previous episode, where we discussed various famous economists and what they said.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts and support my work. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We’re talking about a book you’ve been reading today. What is it, and what do we need to know?It’s called The Great Global Transformation, written by a chap called Branko Milanovic. I got it on a whim when Amazon recommended it — people who bought this also liked that — which, apart from being a clever upselling technique, is actually pretty useful at times.Anyway, this author was a former economist with the World Bank. He’s an economics professor at City University of New York and also a visiting professor at the London School of Economics.It’s a very data-heavy book, but the statistics are extremely well presented. There are plenty of good graphs and tables. One thing that drives me mad is when a book would really benefit from visual presentation and it’s just solid text. This author is clearly a very good communicator.The main thrust of it is something we’ve discussed before — the shift in wealth and productivity, particularly to Asia, predominantly China, but also many other parts of the region.I noticed at lunchtime that the honey I was using was made in China… It’s not like we don’t have bees here!Yeah, that is ridiculous.Well, I do get it — it’s cheaper to exploit people on the other side of the planet and ship it over to sell in Aldi.Our village shop sells locally produced honey from a man just down the road who has 200 beehives. How you run an operation like that, I can’t imagine.You have thick skin!In more ways than one! Anyway, one interesting statistic in this book was the increase in the share of global production in China versus the United States. Measured in purchasing power parity, the two actually crossed over in 2015 — eleven years ago.How do we define purchasing power parity?It’s the opposite of measuring currencies at market exchange rates. According to exchange rates, the U.S. produces significantly more than China—about 1.5 times as much. However, if one dollar’s worth of renminbi buys you twice as many goods in China as a dollar would in America, then purchasing power parity adjusts the statistics to allow for that.It also buys you twice as much honey, apparently.Yes. So it’s obviously a more accurate measure of actual goods produced, rather than just a numerical figure.The other interesting thing about the two graphs is that on the purchasing power parity version, the curves are essentially smooth — a steadily rising production rate in China and a steadily declining share in America. Whereas on the market exchange rate version, there are fairly wild zigzags. Throughout the 1980s, it appeared that America’s share of world production was climbing rapidly, and similarly in the latter half of the 1990s.That’s highly artificial. It’s not reflecting anything happening in the real economy — it’s a reflection of the dollar appreciating rapidly on the currency exchanges. This shows how loose the coupling is between the real world of factories, farms, and work on the one hand, and financialised measures on the other.It also surprised me that the gap is so large, since there should be arbitrage opportunities when currencies are misaligned with their actual purchasing power. The whole idea would be to bring those into line with one another. Of course, the reason the dollar has such strength is that it remains the world reserve currency — for now. As we’ve said several times, that could change extremely rapidly.I’ll go through the book further, and perhaps next week I’ll have a few more insights to summarise. The other thing I was slightly sceptical about is that many of these statistics are expressed in terms of GDP. As I’ve said previously, I’m sceptical of GDP as a real measure of wellbeing, and we’ve given a number of reasons for that.In this context, though, whilst I’m confident in my scepticism of it as a measure of wellbeing in developed, prosperous economies: GDP is often inflated by ever-faster obsolescence. The faster your washing machine wears out and has to be replaced, the higher the rate at which currency flows through the economy. That’s plainly not a serious advantage to anyone.You get whatever you incentivise. If you incentivised longevity, your washing machine would never break — you’d just replace parts. But that’s not what’s incentivised or measured.Absolutely. On the other hand, if you take a poverty-stricken part of the world where many people lack clean water, sanitation, indoor bathrooms, or anything beyond the most basic appliances, there is obviously enormous scope for improving their material circumstances. That improvement would correlate fairly well with GDP as a measure.So perhaps the higher up Maslow’s hierarchy of needs you go, the less important GDP becomes?Exactly. Those were the main points on that. As for world events, did you pick up on the scale of the police brutality in suppressing demonstrations against Herzog’s visit to Australia?Yes.It’s remarkable to me that such indiscriminate government-sponsored violence can be unleashed in what we consider a civilised country. What surprises me too is that they felt there might be some advantage to it.Just shows their true colours, doesn’t it?Even if they dislike people demonstrating against Israeli war criminals visiting the country, the far more astute response would have been to sit it out, wait for it to blow over, and let people forget about it the following week — rather than going out and clubbing and pepper-spraying inoffensive elderly people.It’s worth remembering that Australia was founded by prison guards, not by convicts.Yes. Anyway, those are my comments for this week — we’ll pick up a few more threads next week.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We were talking last time about marketing and sales for sovereign entrepreneurs who want a guide to how to market and sell themselves and their services to trade on their own terms. In editing the show, I reflected that we talked about a lot of tactics, but there’s actually a foundation: the best marketing is a business that markets itself. People go through the service, they talk about it, they talk to each other about it, and they leave great reviews.Once you’ve got that basis, that alignment really stems from you doing work that is aligned with your purpose, values-driven, and, in some regard, mission-driven. Once you’ve got that foundation in place, then all of the stuff you’re doing with ads, with writing the book, with all of the other stuff that we talked about, is really going to amplify that. Whereas if you’re trying to amplify something that’s out of alignment, you’re just going to make problems for yourself and fund the Google Christmas party when you run ads. There’s more than enough of that happening already. So I just wanted to mention that because it’s been bugging me for a week or so!Yeah, good point.I wondered what you thought about that?Well, when you say it, I thought, “Why didn’t I say that?” The reason I didn’t say that is because I thought it would be obvious, but maybe the obvious needs stating more than anything.My motivation in running my own businesses, which I’ve now been doing since I finished my last employment in 1975, was that I didn’t want to be at the dictate of somebody else telling me what my schedule had to be, what I had to do, what I wasn’t allowed to do and all the rest of it. But beyond that, it was a form of self-expression.A lot of us end up as accidental entrepreneurs, where we end up out of work for a time and go it alone, or in my case, I was a boneheaded entrepreneur because I just thought I could do it better myself! Then I got into business doing something that I thought I wanted to do, but actually it wasn’t really what I’m here to do. I’ve had to unpick that over several years. So business is the ultimate journey of self-discovery.Yeah.You might have to go on that journey, but once you’ve got that alignment in place with purpose and passion in service to others, marketing and sales will become a lot easier.Well, the whole point about what we’re doing here is to save people the pain of finding things out the hard way! But anyway, yeah, good point. I’ll just say one more thing: the whole point is self-expression. When we were talking about sales, we were talking about meeting the real needs or desires of your potential customers or clients. So it goes without saying that you’ve got to have a clear idea of what you actually want to contribute.You’ve got to really be in their corner.Of course, you’ve also got to operate with the world as it is.There’s this tension, isn’t there, between doing the work that you love and finding a commercial fit in the marketplace. You’re finding problems people are trying to solve and trying to marry that up with what you love doing. It requires a degree of art to marry those two things up, and it can take time. You might not get it right the first time.Yeah.Don’t Get Blindsided By Environment or Market ChangesGoing back to my lessons from Hard Knocks, a key one I was going to mention is that you’ve got to have an eye on the world and how it changes around you. I was completely blindsided by that.I had more or less accidental success for several years. That came from the fact that I was in a very unusual position. I had a fair degree of competence in both digital and analogue electronic design. I’d also had a background in computer programming during my time in various corporate environments.I was developing software at that time, a torturous process on big mainframe computers. So I knew about computer programming, and then microprocessors came along. That was a natural development on the hardware side, given the digital electronic design I’d been working on. I also had a grasp of the principles of writing computer code as software.There were very few people who had both electronics knowledge and software capabilities because they were just entirely different fields until the arrival of the microprocessor. In most environments, people would be doing either one or the other.So things went brilliantly because there were plenty of problems that could be solved cost-effectively with this technology. There was very little in the way of finished products. Not even very much in the way of tools to help you with the design and implementation.As well as having that mix of skills, I also had the ability to talk to people and listen to them and engage with them and figure out whether or not I could address their problems, which was again quite unusual for people who were tech boffins.So with all of those things, it was an automatic success. I thought I’d discovered the keys to the kingdom. I was going to be set up for life. What I didn’t realise was that the world around me was evolving all the time. I only had about 10 years of things going that swimmingly well.First of all, there was an economic downturn that wiped out the ability of many of my potential customers to buy what I was offering, no matter how much they wanted or needed it. Secondly, these skills that I had became commoditised. The third thing is that there were a lot of already off-the-shelf solutions to the things that would have had to be custom-built before.There were already things that made it very easy. For instance, you could go a long way by setting up a spreadsheet and putting a few macros into it without needing the next level of expertise in software design. For all these reasons, I could no longer command the same premium.Had I been aware of that, I could have easily pivoted to my strengths. I could probably have focused more on getting the deals together and subcontracted out the day-to-day implementation. But I didn’t realise that, and so I had a very rough few years and got really demoralised.I’m getting huge echoes of what’s going on today in a lot of places. That would be like still coding websites by hand when you can get AI to do it. A lot of people have had the rug pulled from under them.Keep an Eye on Macro ChangesThere’s also the bigger situation in the world as a whole. Looking around today at current events it’s similar, but more extreme. We’ve still got the ceasefire being ignored in Israel while a frightful human tragedy unfolds in real time that we can actually see and stream - to the extent that we’ve got the stomach for it.Do you want to talk about the documentary you mentioned before the call?Yeah, it’s a dramatisation of the slaughter of an entire family that happened in Gaza. It’s called The Voice of Hind Rajab.Hind Rajab was a six-year-old child who was left alive in the car which had been gunned down by the IDF. It had 350 bullet holes in it. A rescue centre had managed to contact the child after being contacted by a relative in Germany.So they were speaking to her. Some of the movie is an actual live recording of this child going through the attempt to rescue her. I won’t go into any more than that about it. But it was a very harrowing experience for an hour and a half. But I was glad I went through it. Because even though I get the picture, I know how bleak it is, this brought it home to me on a completely different level.It was an hour and a half for a set of events that in real life took four hours for the people on the ground to go through. So it was fairly close to real time, except that it was actually in reality about a third of the time span that it unfolded to play out. So that, I guess, underlines the tragedy, because you’re faced with that. You think, this is appalling. How can human beings do things like this? You realise that this is exactly what has happened tens of thousands of times over.The people who are perpetrating it are either convinced they’re doing the right thing or completely oblivious to the suffering.It’s a broken overarching narrative.Yeah, which we’ve got, you know, the insanity breaking out, the obviously warlike threats towards Iran. I thought it would have been obvious after the events of last September that Iran is not going to take another attack lying down. The consequences for so many people are going to be so appalling.This comes back to the fact that whatever we do in our own lives, we depend on a functioning planet. That functioning is really quite a fragile system. One of H.G. Wells’ novels was The War in the Air. In that, he wrote it around 1905. So it was a prophetic novel.In that, at the end of the novel, the world economy had completely unravelled. All of the cities had collapsed. People were eking out a bare existence subsistence farming wherever they could.Obviously, that was unduly pessimistic with the next two wars, because although there was a great deal of ruination, it didn’t actually destroy the whole of human society’s functioning. But there’s no guarantee that any escalating conflict now wouldn’t have that effect and send us back at least to the Middle Ages, if not the Stone Age.You have to look, you have to look these things in the face though, don’t you? That’s the point that we’re trying to make.You get nowhere by being an ostrich and sticking your head in the sand. All that happens is that it’d be more of a shock. Of course, the more people ignore it, the more the perpetrators of all this are emboldened and empowered to keep raising the ante, which appears to be happening.We’ve got so-called peace negotiations in Ukraine, which has to be pure political theatre. There’s no indication from either sides’ stated positions that they’re really working towards any solution. Anyway, the big event, of course, has been the partial, incredibly ham-fisted release of various bits of evidence that the American government departments had on the Epstein saga.In the mainstream media, the focus is on the salacious details. According to which political party you depend on is which politicians are embarrassed. The focus is on this type of thing. But what is really coming out is much deeper. For one, the interconnection between this absolute depravity and the so-called intelligence services. Those are one factor in the unfolding chaos and suffering in the world, whether it’s from actual warfare or from the economic disruption we’ve been through.There are resources in the world that could actually have everybody on the planet living in a tolerable level of prosperity. That’s not happening. The reason that it’s not happening is quite deliberate actions by a small number of people. That network is tied in with the things that Epstein in particular, and all of the people associated with him.One way or another, the number of rich and powerful actors that were within that network is becoming more and more obvious. It’s highly likely that there were plenty of people whose names are now coming out as being in some way or other associated with him, in some way or other communicating with him, in some way or other colluding with his activities.Not all of them are necessarily sexually depraved in ways which defy the imagination, but they all must have known the kind of things that were going on; nobody who flew on his aeroplane, visited his island, or his Manhattan townhouse, or his ranch could have been unaware of what was happening, because it was blatantly obvious.Obviously, none of them had a problem with that. The only problem they have is being embarrassed now that their connection has been revealed.Someone recently made the point that we shouldn’t be surprised by this, since it has been happening for thousands of years. I was just reading a review of Suetonius’ history of the lives of the Caesars. The late-stage Roman emperors were just doing exactly the same things as we’re seeing here.The rich and powerful people are either involved in activities like this—It’s classic End of Empire behaviour…Or they’re completely comfortable with the fact that the people they are associating with are doing it. They couldn’t care less. I think that is a real revelation to a lot of people - the fact that it’s becoming exposed in the public domain. More is coming out as people comb through the details.I saw someone else making the point that in order to become a billionaire, you’ve got to be what people describe as a sociopath. That is a genuine abnormal psychological profile, but it’s a profile that perhaps one to three per cent of the population have, where they don’t have the empathy that the rest of us do. But they have an amazing ability to fake it, which enables them to get away with things that wouldn’t occur to the other 97 or 99 per cent of the population.Not all psychopaths become billionaires, but it’s a fair statement.There seems to be a lot in that category.It’s a fair statement that if you put it the other way round, anybody who becomes a billionaire probably had to be a psychopath to start with. If they hadn’t, they would have satisfied any normal human range of desires once they got past a net asset value of maybe 10 million. For a lot of people, it would be far less than that.Yeah, I was thinking a bit as you were talking about Richard Koch, author of the 80-20 principle, who by all accounts is at least a fractional billionaire. I’m hesitant to automatically tar everyone with the same brush, but it seems there’s a thread.So, yeah. Anyway, the big superpower of these elites, up until now, has been keeping things out of the public view. You look at the way that every communication breakthrough that there’s been throughout history, you know, once the printing press was invented, that was obviously an enormous amount of threat to the way that the ruling elites had managed to stay secretive.Because of that, there was a huge backlash. Then you needed a press license to operate a printing press. You needed to put who printed it on everything that you printed so that if the powers that be didn’t like it, they could come round and shut you down.Then, when it expanded to regular, full-blown newspapers, they had to gradually take control of them again. With radio and television, same thing. Then of course, there’s been the internet. I think they were blindsided by that. There’s definitely obviously censorship, but—But a decentralisation effect that they’re now trying to rein in with all of the online safety stuff. Which may be trying to close the gate after the horse has bolted.It’s basically an arms race between the people who are trying to control it and the people who are getting around the controls. You know, it may yet happen that all this does get bolted down. But right now, a lot of information that they would not have wanted is getting through.In a way, I was saying that with the release of these files, it’s been so ham-fisted that there are clearly identified people who have undoubtedly been indulging in criminal behaviour, so it’s a black and white case. That was not supposed to happen, according to the law passed by Congress that forced this to be released reluctantly to the extent it has. In fact, all it’s done is inflamed the demand for more transparency over that and for people to be held to account. So where this is going to end, I don’t know, but either way the veil of secrecy has really been ripped off in a big way.It’s mad how we’ve been brainwashed into accepting that there are official secrets that we’re not allowed to know about.Yeah. Anyway, so we live in times of great change. Who knows where it will end up, but it’s wonderful to be an observer and, to some degree, a participant in these changes.Yes. Indeed.I think people underestimate the impact we can make, because it is easy to assume that the people in control of all the centralised media channels have all the power. Actually, the cumulative effect of people starting a podcast and talking to each other, does make a difference. I think we have to stand by that.Yeah, yeah. The people who are still swallowing the mainstream narratives are simply living in a parallel universe. They probably have no idea how many people there are who no longer share that cosy view of the way the world is.Eventually, the cognitive dissonance does become too great though. They start to question something. So everyone’s welcome. Everyone’s welcome when they’re ready.Yeah, there are different triggers for different people. Okay, well thanks. That turned out to be a bit of a longer ramble than we had expected, but interesting times indeed.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We’ve had the World Economic Forum meeting in Davos recently and various other events. We thought we’d review what’s gone on from a Sovereign Finance lens. Where do we start?Well, I just wanted to point out that in the last few days, gold has broken the £4,000 an ounce mark. It’s down slightly from that, but the short answer is it’s up 50% since five months ago. It’s up by about 25% over the last three weeks, which is pretty dramatic. Once again, as I would always say, this is not the rise in the price of a substance. It really is a reflection of the currency’s decline in value.Right, because people are more interested in gold when they lose confidence in the currency.Yeah, it’s not an investment in the sense that it’s going to actually provide anything, but it’s a hedge against inflation is the simplest way of putting it. The central banks are making no bones about the fact that they’re stocking up on gold and replacing large amounts of their dollar reserves with gold. This is now being openly discussed. As we’ve said several times over the last few months, a feedback loop is at play. The decline of the dollar and its position in the world is likely to enter a positive feedback loop, accelerating the process much faster than many people would have expected. That was the subtext of a lot of what was going on in Davos.All of those Davos meetings, as long as we can remember, have been a mutual admiration society of extremely wealthy people. They reinforce confidence among the “elites” in how things are moving. Of course, these people are essentially globalists: not merely being realistic about the fact that we live in one world, but that they would like a unified global power structure with them in charge.Does that make us “localists”?What’s the buzzword for it? The principle of subsidiarity. It would be the opposite of that, I guess: making every decision at the lowest level that it is possible to make it.Which was how the United States was envisioned, wasn’t it?Yeah. For the last 75 years, since the end of the Second World War, there’s been a constant set of assumptions amongst the financial and political elites. One of those assumptions is the dominance of the United States dollar as the safe harbour, if you like, to rush to when there’s any uncertainty. As the backbone of the international currency system. As a solid reserve in the accounts of central banks everywhere. The funny thing is that it made sense when the dollar was locked to gold at $35 an ounce.That relationship has been severed for an awfully long time.Yeah. Once that was severed, you would have thought that would have been the end of it. But it has managed to hold on for twice as long as it was actually “as good as gold”. That’s one of the assumptions that we’ve been working on for the last 75 years.Another assumption was the unity of the European nations, at least the more prosperous Western European nations. Another was that transatlantic cooperation would exist between those prosperous European nations and the United States. Another was United States hegemony over the rest of the world, either through its economic stranglehold or its military power. That’s being projected on its fleets all over the oceans and its military bases all around the planet.Finally, you know, again, something we’ve touched on several times is that the United States is now, whichever way you cut it, in the end-of-empire part of the cycle. Every single empire in history has followed the same trajectory, starting out as a previous one was declining. Gradually ramping up faster and faster, then reaching a plateau of complacency. Then things start to unravel and fall into a steeper and steeper decline.The British Empire had, to all intents and purposes, about 350 years of dominance, culminating in a period when it effectively dominated the globe. Just like every other empire, it was pretty brutal towards the populations of its vassal states. Every empire is essentially grand larceny on a huge scale, enforced with brutal naked force. But it took 350 years for it to reach the end of its cycle.In 1913, I don’t think many people could have realised where it would be by 1925 or 1930, let alone by 1946. Then we had the gradual coming to terms with reality as we severed ties with all our colonies. We turned them into members of the Commonwealth, which, of course, has not actually improved the lot of most of the population there either. The point being that in that end cycle, they become deranged. Certainly, this is the only way to view global events now, as the behaviour of the United States seems increasingly irrational.Of course, there are a lot of people who think that Trump is the cause of this. It’s better to look at it in terms of him being the symptom, not the problem.If they got rid of Trump and replaced him with anybody else, would it be any better? It might be handled with a bit more subtlety, that is all.It’d still be the same s**t.Yeah, it would be the same old thing. At Davos, we saw many presentations from various people, either trying not to face up to this or, frankly, admitting it. There was Mark Carney, the Canadian prime minister and former governor of the Bank of England, so - a globalist through and through. He said it was the end of the rules-based order. He had another phrase about values-based realism, but it’s just another cliché trying to paper over the cracks.There is a potential for international legality, which is called the United Nations Charter. It was set up at the end of the Second World War, as we know, with the idea that this would never happen again. Of course, the promise of the European Union was that it would prevent warfare between the European nations. It would deliver peace and prosperity. We’re increasingly seeing that the European Union is visibly failing to deliver prosperity. It’s far from delivering peace. It seems to be uttering more and more warlike proclamations.Part of the reason for the EU’s fragmentation is the loss of cheap Russian energy. There’s also the demographic collapse. The population age has peaked. We’re now getting a far larger proportion of the population being of an increasingly elderly age, such as myself. That means that there are fewer and fewer younger people.Whether the retired people are supported by state pensions which are coming from taxation on the people who are working, or whether they’re arrangements through investments through pension funds that are invested in industrial concerns or invested in government bonds which have to be again funded from taxation, the bottom line is that the support of the no longer working part of the population has to come from the people who are. Once population peaks and goes into decline, we lose that ratio. That is happening right across Western Europe.As I said, we’ve got political fragmentation, with more and more nationalistic rabble-rousers coming to prominence across Europe. The existing leadership, as we’ve pointed out, is not only devoid of strategic thinking but has also failed to carry the support of the electorate. The only trouble is that the alternatives coming to the fore seem even worse than the current incumbents.The Labour Party didn’t really win the last election. It was just that the Tory party lost it. It’s looking increasingly likely that both the Tories and Labour will lose the next election, with the Reform Party under Nigel Farage being the likely alternative.Farage is being teed up by the powers-that-ought-not-to-be as the next PM.Yeah, it looks very much like it. It seems out of the frying pan into the fire to put it bluntly.Yeah.Up until now, the Davos crowd has taken for granted that global integration was well along the way and would solve all other problems. All of a sudden, over the course of literally the 12 months since the last meeting there, this is no longer looking at all plausible.Meanwhile, on the other side, as we’ve discussed before, a parallel system is being set up by the BRICS nations. Various other combinations of Asian and the global south generally. Increasingly, they’re setting up a parallel system that will override the dollar-based global banking system. In the background, of course, we’ve got the four major areas of serious conflict in the world: Iran, Venezuela, Ukraine, and Israel.The takeaway here is that the playbook, which has worked very reliably for the US empire over the past 70 years, is suddenly ceasing to function. We mentioned a week or two ago about Venezuela. They tried various measures to destabilise the country and bring it into line. None of them had really worked. Culminating with the kidnapping of Maduro, rather than causing the regime to collapse, it actually seems to have solidified the solidarity of the population behind their government. We could say the same thing for Iran.This was one of the things that was admitted, not only admitted, but declared proudly at Davos by the American Treasury Secretary. Iran had been subjected to economic warfare, for want of a better term. He was openly admitting that that was one of the prongs of the attack on Iran. Then they had the attempt by Israel to decapitate the leadership, which didn’t have the desired result.There seems to be an increasing assumption that the US will make another attempt to attack it. But the results are not entirely predictable and are certain to be catastrophic. The only question is how catastrophic and to whom. My guess is that in some conflict, Iran is the most likely one, there will be some massive loss of life of American servicemen on a scale which probably eclipses even that of Vietnam.Yeah.It depends. That could provoke an open revolt among the American population over the government’s mismanagement. But of course, it also carries a risk of catastrophic escalation, including nuclear escalation. Israel is obviously going to be attacked in response to any further action against Iran. Israel is probably the most likely country to unleash a nuclear weapon. Once one has exploded, there is no way to know how far it will propagate. So, alarming times.One other announcement this morning, I don’t know whether you picked up on it, is that there has been an announcement of a truce between Ukraine and Russia not to attack each other’s energy facilities. There’s been a lot of unofficial announcements on both sides that this was in the pipeline. Now Zelensky has announced that he will honour this truce. Nobody says for how long or under what circumstances it will end.I don’t think that there’s actually been a presidential or government announcement from the Russian side that they’re doing that. But the assumption seems to be that this will be the case for the next day or two. Then, of course, it will be broken, and each side will blame the other for its failure.That was going to be my comment, is that a lot of these things are theatre. If you give it a couple of weeks then look back, how much has actually stuck? Usually not much.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We’re going to talk about marketing today, which is my wheelhouse and probably yours as well. Many people are always in search of the next marketing secret or hack. So what do we have to say about it?Whatever you’re doing in business, unless you’re finding customers and they’re actually making a purchase from you, you haven’t got a business at all. I’ve titled this segment “Marketing and Sales,” which may cause some dissonance for many people. Usually, the phrase is put as sales and marketing. But it’s worth bearing in mind that marketing comes first, and the sale is the end of the process.SalesThat said, many people are intimidated by selling. Part of that is the misconception that it’s an adversarial contest in which the winner is the person who makes the sale. A good shift in mindset is to realise that as long as you’ve got an honest product that is appropriate for the customer, the actual winner in a sales transaction is the purchaser. The purchaser has got something they wanted or needed. The seller has only got money. The money’s only of genuine value to them when they exchange it for something they actually want or need.So in that individual transaction the value should be greater to the buyer.Yeah. So having said that, the marketing comes first. What marketing is doing is providing a stream of customers, of prospects who are ready for the sales conversation.I have a client who says that a lead a day keeps the downturns away.Yes, it does. Anyway, so as the sale is the simplest part, I’ll just discuss that because we can dispose of that fairly rapidly. As I’ve said, what is important is that you’ve got an honest product at a price which appears fair to the prospect, a price that feels appropriate to their circumstances and their needs. If they’ve been prepared by what you’ve done in the marketing process by the time they’re having the conversation, if they are genuinely matched to what you have on offer, the product will practically sell itself.There’s a really brilliant book called The Secret of Selling Anything by Harry Browne (Amazon link). Although it’s a rather cheesy title, it’s the exact opposite of what you might be expecting. It’s not full of slick tricks and techniques to bamboozle or coerce people, which is how many people view the sales process. It’s basically a very detailed exposition of giving people what they want and making sure the value is highest to the buyer..Essentially, Browne says want to conduct an honest conversation with the buyer. The best way to start is to ask them what their most pressing problem is. Presumably, if they’ve been through any kind of nurturing process, they’ll know the sort of thing that you’re offering and the sort of issues that it addresses. So they will answer in that context. Then you explore it. You explore whether the price you want for it is fair to them and whether your product actually meets the need or desire they currently lack. Then you explain how your product meets that desire or need. The sale will only happen under those circumstances.There are a few other things. A great list called the five power disqualifiers by John Paul Mendocha. Do you remember him?Yeah, John is one of Perry Marshall’s colleagues. I was literally just trying to pull up what the five power disqualifiers were. Yeah, from memory, it was something like, do they have the bleeding neck problem? Do they have the decision-making capability? Do they have the money to pay for it? Do they buy into your unique selling proposition?If you run through the list of disqualifiers, you’ll save yourself a lot of wasted time by talking to people who are not going to buy for one reason or another. One disqualifier it to find out whether they really have the authority to make the purchase decision. Many salespeople spend a lot of time talking to people who are perfectly happy to talk to them, but haven’t got the authority within the business to make the decisionSo the full five power disqualifies are:* Do they have the money?* Do they have a bleeding neck? A bleeding neck is a dire sense of urgency, an immediate problem that demands to be solved right now.* Do they buy into your unique selling proposition? Perry says, if you’re just going into a market, the question is what big benefit will they buy into? What deal would they snatch up in a hot second? What benefit do they want that other guys are not promising?* Do they have the ability to say, yes, we’ve just been over this. Major decisions in our house are made not by me, but by Linzi.* Does what you sell fit their overall plans? If your service requires major brain surgery on the part of the customer. He ain’t gonna take your offer unless brain surgery is literally a lot less painful than the alternatives.Right. Okay, so that deals with sales.MarketingNow, marketing really covers everything involved in acquiring, developing, and retaining a customer for repeat business.That was Peter Drucker’s definition, wasn’t it? That marketing is everything to do with making and keeping a customer.Yeah. So let’s talk about the arrangements we’ve got to, to harness potential customers and get them engaged with you. Obviously, a starting point for that is advertising. We’re all aware of the myriad forms of advertising that you have. An important thing to understand is the necessity of split testing.You can come up with the most brilliant creative you can imagine. Unless you actually test it against some alternatives, you’ll never know whether what you’re putting out actually resonates with the target audience. This has been made much easier with the internet, because it’s very quick and easy to put out alternative wordings, see which gets the best response, try alternative versions of the sales page, see which gets the best response, and gradually dial it in.This is something which really smart advertisers have recognised for over a hundred years. There are a couple of classic books on this. One is Scientific Advertising by Claude Hopkins and the other is Tested Advertising Methods by John Caples. A little bit of a caveat on that: the fifth edition of Tested Advertising Methods was totally revised by people who had no idea really what John was getting at.Yeah, I’ve got a copy of the fourth edition.So you want to look for a secondhand copy of the fourth edition or earlier, which is what John actually wrote.Claude Hopkins in particular was a pioneer of the discount coupon for groceries and the like. The obvious reason for the discount coupon is to encourage people to try it at a lower price and feel they’re getting a bargain. But the real purpose of the discount coupon was to include a small code somewhere on it. When the coupons came back, and the retailer was reimbursed for the discount they’d given to the customer, it’s worth noting that this is a win-win-win situation. Assuming that the product is one that the customer likes when they try it out for whatever reason, they’re a winner. They’re a winner because they’ve got it cheaper than the first purchase, which has reduced the risk involved.The retailer is pleased because he’s made a sale he might not otherwise have made, perhaps bringing in the customer. He’ll also buy some other things while he’s there. The retailer also wins because they get a share of the cash when the vouchers are redeemed. The supplier is winning because he’s expanding his customer base. But more importantly, he’s getting feedback and intelligence on which of the adverts he used to offer the coupon worked, because each coupon carried a code indicating which advert it was.You could run a lot of different adverts across different media. You could see which ones were most effective in terms of the return he got on his advertising spend. Once again, this is a classic technique that has been around for over 100 years and has been supercharged by how we can deliver messages on the internet.You can even do it for phone calls. You could have multiple phone numbers that can be tracked to different sources. Or you say, ‘ring up and ask to speak to Derek or John’, or someone who doesn’t exist. Then you know that if they ask for John, they came from that ad.Yeah, you know where they came from. So that’s a core skill to master in this area.Another important concept is the ladder of awareness. Depending on what your product is, it might be something the prospect is already aware of or already exists, and that’s the question. You have to move them on to: why should he choose your version of this product rather than any other?Going back down the scale, there are some products that the customer doesn’t even know exist yet. So informing him about the product’s existence is something you do. According to what your product is and how aware they are of it, the kind of communication you need to start having with them is determined. Do you want to say a bit more about that?Yes, I do. So if you go to Google and run a search and look at the ads, most of them speak to solution-aware people. But in any market, there might be a much wider pool of people who are less solution-aware or aware that their ankle hurts, but are not aware of ways to fix the problem. Although not even problem-aware. They’re just like hobbling around in the street. You might be able to reach them with an ad, but it’s going to be an interruption.Eugene Schwartz did a great job outlining the different levels of awareness in Breakthrough Advertising, another book we can recommend.Yeah. That book was out of print for a long while and secondhand copies were very expensive, which is an indication of the value they held.I think Brian Kurtz revived it, but it’s still quite expensive. But there may be PDF copies somewhere.Right, but it’s a worthwhile investment if you’re serious about business.Having attracted a potential customer, there are various mechanisms that you can use to get them to start communicating with them. Popular ones are surveys or quizzes. Very often, this is the start of a process of drawing somebody into a conversation where, further down the line they’re going to reach a point where they’re ready for that sales conversation.Yeah, there’s an app called Scoreapp that a lot of people use. Daniel Priestley developed it. Once people know you are in your world and are in the consideration phase, then it’s a great tool.Yeah. Then of course there are mailing sequences. For all that we’re deluged with emails now, email is still a very worthwhile way of nurturing clients. Depending on what your product is and what your price point is, and how well qualified the prospects are, it’s definitely worth also considering physical mailings. They’re probably far more likely to be read than an email.It’s also not that expensive at bulk mailing rates, especially if you compare the cost of sending someone an A4 letter compared to the cost of an average click on Google. It’s actually much cheaper to send them a letter once you have their mailing address and their permission. So the permission is still essential. This is for nurturing your inner circle, not necessarily for attracting new people.Yeah. Once again, it wants to actually be an informative, interesting letter rather than a glossy brochure.I send quite a lot of what is called ‘folded A3’ letters that fold down to four pages that are sent as a newsletter with a mix of articles and promotional content.Yeah good. Of course, one of the very best things you can send people is a book.You have one too that we co-created a few years ago, called The Letter from 2100: A Possible World for your Grandchildren.You’ve got several books out, haven’t you?Just one now called Simple Story Selling, which is constantly under revision.Of course, the great advantage is that a book lends you fast credibility. We could do a fill episode on the mechanism of getting a book out and for sale on Amazon. This is something which was impossible to do without investing several thousand pounds and having half a garage full of cases of books which you might or might not sell. Whereas now it can be done effectively at zero cost on a print-on-demand basis.There are a number of print-on-demand services, but of course Amazon is the big one. You can also buy authors’ copies at an extremely steep discount and send these out as gifts. Although a lot of unsolicited mailings go into the bin, very few people are going to throw away a book.Of course, the whole point of the book is not necessarily to make a killing on your sales as an author, although that could be an unexpected bonus. But the main point is the book extol the virtues of your product and explains what it is and how it works, woven into an interesting narrative. You can have several calls to action, ideally one at the end of each chapter and one to round off the book, where you advise people to get more information by going to your website or taking some other benefit-driven action.It comes back to testing as well. It’s harder to do, but you can test your calls to action. You can also switch out the call to action in your book every now and again. As long as you’ve got a steady drip of sales coming in or books that you’re sending out to people, you can start split testing different calls to action within the book.Right. Those are all the marketing topics that came to mind for sovereign entrepreneurs. Obviously, we could run an entire conversation on marketing and sales every week for a year.The marketing approach we’ve outlined in this conversation is geared towards expert service providers. It’s not the only marketing mix, but it speaks to the sovereign person we’re trying to reach here.Anything else you want to say before we wrap this up?I have a golf analogy for sales and marketing, where if you’re not doing much marketing and just relying on sales calls, it’s like trying to hit a hole in one. From a sales perspective, it’s very hard to sell to a cold prospect. Whereas if you’ve got enough marketing elements working to knock the ball forward toward the hole, your sales conversations will become much easier.So by the time you get in a sales conversation, you’re standing on the green, ideally right next to the hole, just tapping balls in. That’s where you want to be in a sales conversation.Very good analogy.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We were originally going to cover entrepreneurship, sales and marketing in this conversation. That is coming next time, but we felt compelled to comment on some goings-on. So what are those goings-on that we need to talk about?Right, well, there are five that are worthy of comment. Obviously, one is the ongoing situation in Venezuela. The second one was a speech from the Iranian representative to the UN Security Council. The third one is Trump’s latest soundings on Greenland. The fourth is Trump having done another U-turn over who he says is responsible for failing to reach a peace treaty in Ukraine. It’s now gone back to being Zelensky’s fault.The fifth is a speech Putin gave to ambassadors from 32 other countries in Moscow. As far as I can see, it hasn’t received any media coverage. So let’s dive straight in.1. VenezuelaIt’s still a mystery how they pulled off the arrest of Maduro….It could all be theatre. It smacks of theatre, doesn’t it?It does. Having got him to New York, he’s now going to wait two and a half months until he gets the next bit of his trial. I don’t know what conditions he’s been kept under. It seems like a very high-risk move without it being at all clear what outcome they want.It’s clear that the United States would like to simply steal all of Venezuela’s oil and any other mineral resources it has. But it doesn’t appear to have been thought through. It wasn’t clear what they were going to have as a result of the immediate abduction. The vice-president, who is now acting president, has made it absolutely clear that they’re not turning themselves into a vassal state. They haven’t got an alternative government plausibly lined up. The ridiculous opposition leader who was given the Nobel Peace Prize for no noticeable reason and has now donated her medal to Trump is in no position to form a government.It’s not at all clear that if American oil companies sent in their executives and technicians to improve the infrastructure and extract the oil, they’d be safe, or that their safety could be ensured. So it’s difficult to know where it goes from here.This is actually the fifth attempt to destabilise Venezuela and bring it under US control. They started off by imposing sanctions a few years back. They then attempted to have a regime change, putting forward Juan Guaidó. Having said that, the 2024 election was invalid; elections seem to be getting less and less credible everywhere in the world.More and more people are realising that we’ve been given a plastic steering wheel to try and steer the car with.It looks a bit like it. Then they tried diplomatic isolation. Finally, they had a system of conditional export licences for Venezuelan goods, none of which was enough to pressure Venezuela into falling in line. It does seem that the major impetus for feeling they had to do something comes back, yet again, to dollar hegemony in international trade, specifically in oil. Once again, Venezuela had made it clear that it was about to start accepting alternative currencies and to use the Chinese financial settlement system to conduct the deals.Then, of course, we’ve had the blatant piracy of attacking and capturing oil tankers on the high seas. It seems that if the United States wanted to destroy any credibility it has as an honest operator on the international stage, it couldn’t be going about it more rapidly.I saw a Pirates of the Caribbean AI-generated meme with Trump’s face on it. There’s a lot of banter going around the internet at the moment.Yeah, replacing Johnny Depp’s face with Trump’s. It’s almost too easy, isn’t it? Okay, so that’s a question of ‘watch this space’. Any attempt to invade a place which is three times the size of Vietnam and similarly mountainous and jungle-covered would obviously be catastrophic for any forces that the United States could bring to bear. Bluntly, it seems like yet another failed attempt to rerun the playbook, which has worked so well for the last 50, 60, 70 years: drum up some protest, work behind the scenes to get a disgruntled opposition group with enough power, weapons and training to rush in and take over, then provoke some triggering event. This also appears to be what is happening in Iran.I was going to say that. That sounds very similar to what we’re seeing in Iran. We’ve had open admission from certain people in power that there are Mossad agents on the ground.2. IranYeah. This is extraordinary. Once again, there are broadly two... There’s no doubt that there have been a lot of demonstrations in Iran. In the Western media, they seem to have been portrayed as protests against the government in general. The alternative narrative is that the first wave of demonstrations was a protest demanding that the government address the rapid inflation caused by the rial’s devaluation.They just circulate photos of protests that may or may not even be in the correct location or the correct time. You can’t believe anything you see.The reports I find credible from Iran say they were entirely peaceful. Then there was a flare-up of violence, which included the burning of mosques, which doesn’t seem likely to have been instigated by Iranian anti-government protesters, bearing in mind that it’s a very solidly Islamic country. As you say, there have been actual honest admissions by people in the West that Mossad agents were involved. That seems highly plausible.In other words, it’s the same thing we’ve seen in all kinds of things, from the World Trade Organisation meeting in Seattle years ago to the student fee rises protests when the Conservative government came in about 10 years ago in this country. You get a few people in there who are not actually part of the protest group, but they’re there to stir up trouble and create violence.Yeah, I suspect that stage name ‘Tommy Robinson’ falls into that category.Yep.So then there have been very large demonstrations. The agent provocateur factions seem to have quietened down. Incidentally, there are again two narratives about the jamming of the Starlink signals in Iran. This is being portrayed as an attempt at censorship to prevent the protesters from getting accounts of the demonstrations out to the wider world. The alternative explanation is that they were shut down to prevent coordination of the agent provocateur factions. Anyway, be that as it may, the violence subsided.There have then been very large demonstrations, which again are portrayed as anti-government. But there seems to be a strong case that they were actually pro-government demonstrations, demonstrations of support and solidarity. At the UN Security Council, the Iranian delegate made a very forthright and clear statement about the entire thing. Once again, this doesn’t seem to have been widely reported, though it’s easy enough to track down on YouTube. It’s well worth investing 10 or 20 minutes in listening to.It’s important to actually listen to people and form our own assessments of their integrity and their plausibility.Otherwise, your worldview gets hijacked by powerful interests.Yep. So there’s no doubt that the United States is genuinely rattled by the amount of Chinese infrastructure being installed in South America, including ports, railways, and energy facilities. There seems to be very little they can do about it. Again, over time, we’ll find out whether this can be taken at face value as Chinese support for improving the lot of those countries and for building a mutually beneficial relationship, or whether claims of some underhanded motivation can be justified. But it’s worth watching.3. GreenlandTrump’s been nattering about Greenland on and off ever since he was inaugurated. It seemed to me totally implausible that they could actually act on this. It seemed like empty rhetoric, but all the indications are that he’s fairly serious about this. The thing that I am continually puzzled by is wondering how many of these things that Trump comes up with are, first and foremost, his own brainstorms, and how much of it is him putting the public rhetoric on the surface of decisions that have been made behind the scenes by other actors.As this is an audio-only podcast, I can tell the listeners I have a large grin on my face at this question!Of course, we now know that the Europeans have protested about this because they say Greenland really belongs to Denmark. Although Denmark, of course, has no more claim on it than the United States does, and they haven’t behaved particularly supportively or generously towards the island’s native population. Nonetheless, this has led to greater fragmentation between Europe and the United States. We had a suitably unimpressive speech about it this morning from Keir Starmer.4. Trump’s n’th U-Turn on UkraineThen, fourthly, the latest on the Ukraine situation is that Trump has now been saying that the obstacle to peace is Zelensky. I would say that’s fair comment, but yet again, it’s a bit like a weathervane in a whirlwind. The fact that he says this today doesn’t mean it’s what he’s going to say tomorrow, and it certainly wasn’t what he was saying yesterday. I’m sure the Russians have just decided that they did their best to engage in some dialogue.I thought back at the time of the Alaska meeting that this was really the dawn of a more sane opening of dialogue, normal diplomatic exchange, and communication and cultural exchanges between the West and Russia. But clearly there’s no sign of it. Once again, the best way to put it is that it was pure theatre.5. Unreported Putin SpeechFinally, there was a speech by Putin, which if you rely on mainstream media, you wouldn’t know about. But once again, it was delivered to a meeting of the ambassadors and some supporting staff from 32 countries in the Kremlin. He gave a very forthright summary of the background to the Ukrainian situation, noting that they have made an offer to extend the Strategic Arms Reduction Treaty, which is set to expire. They’re waiting for a response from the US regarding that.It reviewed again the point that they were very firmly promised in 1991, when they dismantled the Warsaw Pact and the Soviet Union, that NATO would not advance towards them. That has been honoured in the breach continually since then. They’ve made it clear that... So once again, it’s really worth tracking that down and listening to it, deciding how it corresponds with any estimate you make of the realities on the ground and where that leaves us for moving forward.So everything is still in flux. It’s difficult to see where we’re going to end up.P.S. Our comments on the WEF meeting in Davos will come next week.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.I’ve come across some numbers regarding the United States’ current financial position. Now, of course, the debt numbers we’re talking about run into the trillions. Bear in mind that a trillion dollars represents in round figures the lifetime earnings of a million people.I will put a link into the episode we did on big numbers, where we explored the true scale of millions, billions, and trillions.Yeah thanks. So now we’re talking entirely in trillions. The US stock market valuation (equity stocks in United States corporations) is $42 trillion, and $22 trillion of that is held by overseas investors. So if they start to have reservations about the dollar’s ongoing purchasing power, this could itself trigger a stampede.Then you’ve got the US government debt, which is now up to $38.6 trillion. It seems to add a trillion every time I come back and have another look at it! Once again, a substantial portion of that is held by foreign investors.I had to go back and see how much China holds. China, of course, has to tread a fine line. It doesn’t want to get left holding the baby if the value of the dollar goes into free fall. At the same time, it obviously doesn’t want to be blamed for crashing the global financial system by holding a fire sale. But it’s been steadily reducing its dollar holdings by amounts that are pretty big movements when we’re talking about national currency reserves.When the music stops you don’t want to be the one left without a chair.That’s right. For those figures there, of course, you’ve got a vast amount of US consumer debt as well. That also runs into the trillions. But the context is that the United States’ GDP is about $31 trillion a year. But bear in mind that much of that is imported goods, paid for with dollars created out of thin air. A lot of it, as we’ve discussed, is either financial transactions or replacing things that become obsolete or worn out, rather than the creation of any novel wealth.But either way, those liabilities, if you add them all up, vastly outweigh the actual economic activity going on in the United States.I was motivated by this because there are various discussions about, well, yeah, this will take years to play out. But I thought it was worth revisiting the hyperinflation in Germany in the 1920s. At the time of the Versailles conference, it was apparent to people who were really on the ball that Germany would never be able to pay the reparations imposed on it for the cost of the First World War.That much was obvious to me as a 13-year-old sitting in history class 80 years later, too.Yeah. It appears that spinning up the printing presses was a colossally naive move. The alternative view is, of course, that the German finance minister was not at all stupid, and he was not economically naive, and he knew perfectly well what he was doing. This was to essentially inflate the debt to the point of non-existence.In fact, even after that conference, the German economy appeared to be holding up quite well. The stock exchange was still rising. That continued until December 1st, 1921, when the German stock market peaked and began to decline. It took less than two years from that point to the point when they threw in the towel, discontinued the Reichsmarks, and issued the new currency in Deutschmarks. This was in November 1923.So from the beginning of December, when the economy turned round, it took 23 months for the fall to happen. By the time they abandoned the Reichsmark, the exchange rate, which I hadn’t picked up on, was actually $4 trillion to one Reichsmark.I’m not sure what the exchange rate was. I’ll check up on that and we can add a note to the page when we publish this. But in round figures, it would have been somewhere around parity. All of the currencies were broadly similar at the beginning of the 20th century.The exchange rates were in single digits, whether one, two, three, or four, depending on the direction. So these astronomical amounts persisted in some European currencies before the euro was introduced. I remember thinking, you know, why are these Spanish pesetas such tiny amounts? What about the lira, which was running at 2000 to the pound when I was travelling in Italy. If you needed change from a 100 lira note, they gave it to you in sweets. Of course, this was all because of the collapse of the currency values during the war. The French franc had been broadly in the same ballpark and was replaced by francs at the rate of 100 to 1 after the Second World War.So basically, the German currency went down and down in value until it was literally one-trillionth of its value at the beginning of the First World War. That is essentially what happens when confidence is lost, and it is lost through the process of currency debasement.For instance, the $38 trillion US federal debt had gone up from $14 trillion in 2007. So it increased by a factor of about two and a half in less than 20 years.I’m deeply suspicious about the accusations of incompetence as well. I think it has been allowed to happen.Well, when you’ve got debts on this scale, it’s obviously physically impossible for them to actually be repaid in reality.Yeah, because there’s not enough wealth in the world. The GDP of the world wouldn’t scratch the surface.If they attempt to, they’re now caught between a rock and a hard place. They can’t repair it, and any attempt to have another round of so-called quantitative easing will accelerate the evaporation of confidence worldwide. So we could certainly be looking at something far less than the two years it took for the German currency to collapse in the 20s. Bearing in mind that we live in a much more rapid world in every respect now.The feedback loops are everywhere.Yeah. Which reinforces my prediction that we’d see something dramatic sometime this year. The other thing, of course, is that all the time, American government securities are being retired at the end of their time, and they can no longer sell long-dated bonds. So it’s all being refinanced by short-dated ones, and the prevailing interest rates are going higher and higher.Which ties into what I was talking about recently: the market interest rate is determined by both the basic rental of money, which has historically been about two and a half per cent. Plus factors to allow for your evaluation of the likelihood of default and your estimation of the likely buying power of the currency when you repossess it at the end of the loan period.It comes back to confidence, doesn’t it?How that process had been short-circuited by the ongoing creation of new currency. It looks like that levitation effect has now run out of steam, and so all the feedback loops are going to be going in the opposite direction.This is the situation we’re in, and it also explains the hysterical and reckless attempts to do things like attempt to seize Venezuelan oil. Which one way or another is not going to happen. There’s no doubt that the American oil companies would like to go in there. They’re not going to go in there if any people they send in to manage the oil wells and the refineries are in danger of getting sorted, and there’s no way that the Americans can provide security.So that is the main thing on my mind when I look at the global financial situation. Of course, you know, we’ve now got the Singapore Gold Exchange opening vaults in Hong Kong and Saudi Arabia. At some point in the future, we’re going to see convertibility of the Chinese Yuan into gold. At some point, that’s going to become a fixed rate.This will be a full circle back to the situation of America at the end of the Bretton Woods Conference in 1946, where because the dollar had a fixed exchange rate to gold and America had the gold, and nobody doubted it at that time. The dollar was as good as gold, which is why it became the reserve currency and people were prepared to hold it.Plus, there was the deal Kissinger made with Saudi Arabia: they would always sell oil for dollars, would not present them for conversion to gold, and would invest them in US government bonds and other US securities. Which was a confidence trick that held up for 50 years and is now running out of steam. So the only question is how rapidly and what form the ensuing chaos takes.We were talking last week about the various promises that Trump made, pre-election, and we omitted one…Which was perhaps the most important one: the promise to audit the gold in Fort Knox. At the end of Bretton Woods, it was asserted that the American Treasury’s gold holdings at Fort Knox would be audited annually. In fact, they were only audited once over the next 10 or 12 years, during the Eisenhower presidency. They haven’t been since. There was a publicity stunt within the last decade. I can’t remember exactly when they took a bunch of American politicians on a sightseeing tour of Fort Knox, opened one or two vaults, and showed them cages full of gold bars.Nobody actually checked whether it’s real gold. Nobody actually checked whether there was anything behind the front row. Nobody looked in more than a very tiny proportion of the total vaults in the building. Nobody even counted the number of bars in the ones they looked at. So it was purely a PR exercise.So nobody knows whether there’s anything significant there at all or what relationship it has to the nominal holdings of the US government or the US Federal Reserve balance sheets.We let the fox guard the hen house and have neglected to audit how many hens remain in the hen house after all this time!Yeah, exactly so. So interesting times.The other thought I had as you were talking about the dollar was I remember when I spent six months in South America about 17 years ago. The South American currencies are notorious for hyperinflation, and it was advised at the time to carry some dollars with you at all times. If you couldn’t get money, you’d usually be able to spend dollars as a backup medium of exchange. It feels like all of that doesn’t really hold that much water anymore.Exactly. Yeah. It’d be interesting to know what people do regarding that now.There are some countries like Honduras and El Salvador that are moving towards Bitcoin, perhaps in Argentina as well. Which is because people are so fed up with having multiple currencies quickly become worthless that there’s more incentive to look for a different approach. Which I am watching with interest.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.Editor’s note: this episode contains two discussions covering current affairs, one from 12th December 2025, and one from 5th January 2026. (The Editor got distracted by Christmas!) We’ve published them together as one backs up the other regarding our stance on the dollar. There is an audio interlude between the two segments on the audio version.Comments from 12th DecemberWe’re wrapping up some recent current affairs today. What’s been going on that people need to know about?Well, one of our themes has been that we’re plainly at an end-of-the-empire situation with the United States. The US has been the predominant world power since the end of the Second World War. It’s been a remarkably short run as empires go, because it’s clearly in decline.Empires do some pretty crazy things as they die as well.Yeah, they usually do. What makes this situation unique is that we’re now literally in a position to end life on this planet. Certainly all higher life forms, or even if it didn’t go that far, the complete destruction of the human global civilisation, possibly the extinction of the human race. We’ve never been in that situation before. How we navigate this is obviously critical, and it’s obviously out of our hands. The more people who have a realistic assessment of the situation, the more likely it is that pressure will mount to navigate it safely.I just wanted to indicate a few of the areas where it’s showing up. It’s like Groundhog Day. We keep saying it’s the situation as it has been, but it’s getting more extreme. You’ve got the Israeli government continuing its devastating destruction on the Palestinian areas of its own state, also lashing out into surrounding states like Lebanon and Syria. It’s a matter of time before there’s another attack on Iran, although you’d have thought that the decisiveness of the response last time might hold that off. Who knows?The other ongoing conflict is, of course, Ukraine. The way that it’s developed on the ground over there in the last month or two has come as no surprise to me because I’ve been following this. It was quite obvious that despite the accounts we’ve had in the Western mainstream media trying to put the best gloss possible on it, Russia was making the running. However, this has now become so obvious and so unavoidable that it’s no longer possible to pretend otherwise.Yet the so-called leaders of Britain, France and Germany continue to deny this. They think that somehow or other they can roll it back. They continually try to find a way to confiscate the frozen Russian assets, which are mostly held in a Belgian bank. The Belgian government is resisting that. The logic of doing that really defies common sense because the idea was that when Russia had been defeated, these could be legitimately confiscated. I don’t know whether legitimate is quite the right word.There’s no logic whatsoever if you assume that there’s any chance that Russia might not be defeated. The chances of it being defeated look increasingly remote. Also, the unmistakable support that the Europeans are giving to the Ukrainians really amounts to the reality of their being in conflict with Russia. Of course, we’re all hoping that it remains contained. Russia doesn’t actually strike out at our own countries, which it could make a very strong case for doing.Recent developments have been the attacks on Russian oil tankers. Most of the ones that have been attacked have been empty, as far as I can figure out, and on their way to pick up a shipment. There have now been five that have been badly damaged, probably rendered unusable. The logic behind this was supposedly that if they could strangle Russia economically by cutting off its oil exports, it wouldn’t be able to continue to maintain the war in Ukraine. There hasn’t been any sign.So the sanctions didn’t work, so we’re going to try and sink all the ships instead.As I say, they’ve attacked five so far. I don’t know how many tankers they have in total, but I believe it’s somewhere in the region of 1,000 or 1,500. They’d have to sink a lot more before it would have any real impact on Russia’s economy. But it’s obviously a flagrantly illegal act under any interpretation of international law, as is the sinking of half a dozen to a dozen small Venezuelan boats because they were transporting drugs destined for the USA.Yeah, that’s a cover story for implementing the geopolitical change they want to enact.This has been taken a step further. I don’t know whether you noticed, but one of these boats was heavily damaged and its hull was still floating in the water. It’s on video, which has gone around the world, that two passengers were seen clinging to the hull of the boat. Another attack went in there and killed them in cold blood. That is an absolutely black and white war crime under the Geneva Convention.Even if the original attack was justified, which it clearly isn’t—assuming that there was a strong case that they were smuggling drugs, which is highly unlikely because the United States coastline is 2,000 miles away and those boats don’t have that range—but even assuming that, the right thing to do obviously would be to intercept them, search them, collect the evidence and put them on trial. Give them an appropriate punishment, which isn’t the death penalty for smuggling drugs anyway. Certainly not in international waters.This has taken another notch up with the American commandos dropping from a helicopter onto a Venezuelan oil tanker and capturing the tanker on whatever pretext, which is simply an act of piracy. This is visible for the whole world to see. So America seems to me to be eroding its own credibility faster than it’s achieving anything useful.Yeah, I sometimes wonder what goes through the minds of those commandos. They must just blindly follow orders.You have very little option but to follow orders if you are in the military.It’s not a—I don’t mean this to be patronising—it’s not a thinking man’s occupation.That’s the way I would look at it.If you turn the tables on any of these situations, if these things were happening to the United States boats or oil tankers, it would be the end of the world. It would trigger a chain of events that could be catastrophic.Yeah, we’re still in the phoney war stage. We don’t know what’s going to happen. The usual way these situations work out is that the CIA have paramilitary forces in the country and they execute a coup against the leader, which could well happen. However, what would happen after that is anybody’s guess. Maduro obviously does have enemies. No leading politicians fail to do so, but he obviously enjoys enormous support from the majority of the population.Any attempt to set up a puppet government there would be extremely troublesome, to say the least. So there we’ve got it. The other thing from the economic realm is that the stranglehold the United States has had over world finances, because there was really no alternative, has now decisively come to an end. The entire BRICS group now has sufficient trade among themselves that it no longer needs the United States or the Western world in general as a marketplace.It no longer depends on them for supplies of anything because China’s manufacturing and technical sophistication is rapidly outstripping everybody else’s. They don’t need them for the financial arrangements because they’ve set up a parallel system that will almost certainly work better anyway. The necessity of holding dollars as the reserve currency has more or less eroded over the past year or two.China steadily reduces its holding of US Treasury bonds of one sort or another. It’s replacing that either by gold or by holding the currencies of its trading partners. So, in a way, we’ve come full circle to the way the system of international exchange worked before America essentially monopolised it in the aftermath of World War II.I was thinking that maybe this was the primary change that happened after World War II.Yeah, it was. The Bretton Woods system really locked the rest of the world into subservience to the United States. At the time, that made sense. It was by far the most economically powerful nation in the world. It was by far the richest. It was owed money by most of the European countries. It had gold backing to the dollar, which rendered the dollar literally as good as gold. That lasted less than 30 years, 25 years until Nixon closed the gold window.Now that it can no longer rely on that and no longer enforce the dollar as the purchasing mechanism for oil, it could unravel very much more rapidly than anybody expects. I don’t know at what point it would become the case that it can no longer pay all these military personnel stationed all over the world in any currency with meaningful buying power. But that would handicap its ability to exert military force.The unknown quantity is whether it would do something utterly destructive in response. For all that, I’m still of the opinion that we’re going through some kind of birth process of a more positive era for the human race. Time will tell whether that was fruitless optimism or whether there is some hope of that.I think it has to be, otherwise we won’t be here. There isn’t a middle way. I don’t think we can continue in this manner.It’s not doing us any harm to be aware of what’s going on as long as we don’t let it drive us into depression, which I’m doing my best to avoid.Yes, keep standing in the light.Comments From 5th January 2026I’ve noticed every January that the ‘False Matrix’ or ‘The Empire’ doesn’t waste any time kicking off the next psyop. There are always bushfires or a war. In this case, the president of Venezuela has been abducted. We don’t have a shortage of source material for 2026 so far, but we thought we’d do a bit of a roundup of goings-on last year and how they relate to events happening today.One of the things I wrote in my journal around a year ago, either when Trump was elected or when he was inaugurated, was that I didn’t think it would take long for many of the people who were enthusiastic about his win to become disillusioned. That assessment has been vindicated in spades to a far greater degree than I could have imagined. The team he’s assembled around him seems like a mixture of raving lunatics and complete incompetents.Trump’s team seems remarkably short of talent and somewhat demented in some of the ideas. Some of them looked pretty credible during the Senate hearings to confirm them, but have turned out to be very disappointing in reality. Bondi is an obvious example. Cash Patel, the FBI chief; his assistant, Dan Bongino, has resigned already, quite wisely.I was also reviewing many of the promises he’d made. In general, we don’t expect politicians to honour their promises, but the pledges of openness about all sorts of things would have been really positive. The assassinations of John Kennedy, Robert Kennedy Senior and Martin Luther King… We’ve had a certain amount come out about Kennedy, which confirmed what many people had strongly suspected anyway.I didn’t exactly fall off my chair in shock.It seemed to create remarkably little outrage, presumably because most people who actually cared about that already knew most of it. But the fact that it’s been openly admitted is quite significant.It feels like the year they stopped pretending to care about these things. They stopped pretending to hide. They stopped pretending they’re doing all these things in the name of ‘freedom’ and ‘democracy’. They’re coming out and saying openly now that it’s about the oil.It’d be very interesting to see whether they’re impervious to the consequences of being open about these things. The big one is obviously the Epstein scandal. It’s difficult to see how Trump could have expected that to go okay, given what he obviously knew. I don’t know whether he expected the revelations to be highly selective or what. But the fact that everybody’s anticipation was raised by it, and then we’ve had a series of extremely implausible evasions and delays.Then what comes out—did you pick up on the fact that many of the redactions in there, which were absurd anyway, didn’t actually work? Apparently, they were done by overprinting with black highlights in Microsoft Word. It didn’t take long for a number of people to figure out that by saving it as a text file, you could see what was in the text beneath the blocking. Had you picked up on that?No, I hadn’t.The incompetence is staggering. Of course, it’s been more embarrassing than if they’d just revealed it in the first place. It’s difficult to see how we can avoid bringing prosecutions against many of the people who, from what has come out in the limited releases so far, are now clearly revealed to be involved in flagrantly criminal activity.Although the anti-Trump people have made a big deal about how much of him there is and embarrassing pictures and so forth, I haven’t myself come across anything which is actually incriminating to him. Although we’ve got a few extra pictures, many of the ones are the ones we’ve been seeing with remarkable regularity over the past year anyway. But these are merely embarrassing rather than anything else. Clearly, we’re dealing with somebody who’s basically immune to any feelings of embarrassment.It’s quite interesting also that one of the more minor promises of revelations has dropped out of sight. What happened to all the stuff about the unidentified aerial phenomena? We were supposed to receive revelations about what they knew or had uncovered regarding those. It’s just been quietly dropped from the agenda, without anyone much noticing or commenting on it.It could be wrong, but it felt like a distraction to me.I’m surprised they didn’t make more use of it in that case!We’ve got the Ukraine war rumbling along. The peace negotiations don’t appear to have been done in good faith.It’s the same in Gaza.It’s difficult to believe they were anything other than theatricals. Give the appearance of doing something without actually expecting anything different.It’s pretty clear they lie about everything.The other thing is the assassination of Charlie Kirk. Such official explanations as we’ve had have been widely regarded as implausible, which has just fuelled further wild speculation. It has certainly done nothing to damp it down. More and more is coming out of him, plainly speaking out against the official line in all manner of ways.It feels like he broke ranks somehow. It was definitely a professional shot that took him out. It wasn’t from the direction we’re told.It looks very much as though it wasn’t even a bullet. It was a flechette of some sort.The big picture has got to surely be that what we’re seeing is a classic end-of-empire situation. Every empire on the way down doubles down on things it’s done things that have worked in the past and are beginning to backfire. We’re seeing this in a massive way.As far as the Venezuelan abduction is concerned, ‘abduction’ is the only word that will do...I was trying to think of the right word for it. It’s a kidnapping.Well, kidnapping is as good a word as any. A flagrant disregard of international rules by any standards and international law. A public relations disaster as far as I can see. The entire world is almost united in condemnation. Even countries like Britain are making lame attempts to distance themselves without actually criticising. It didn’t work out well with that.It’s a mystery why the air defences didn’t take out the helicopters, whether that’s incompetence or some form of collusion. Who knows? They can hardly give him a secret trial. I’m sure he’s articulate enough to come out with lots of embarrassing proclamations in the course of whatever hearing they put him through, particularly as the alleged offences are actually totally implausible.He might just hang himself in his cell in the five minutes that the CCTV is not working…Well, let’s hope not. That probably won’t help America either. I don’t know what they really anticipated. The deputy who has stepped into the role as acting president was expected to roll over and cooperate, but clearly she’s started out by making a robust statement that she wasn’t going to.The senior officers of the military have already made a clear statement that any interference will be resisted. Reports I’m hearing indicate that the population has become more united against any foreign meddling. Of course, one side effect of all this is that, overnight, many more people who were previously just going along with the standard account of events are now questioning it. They’re now taking another look at a whole succession of regime changes that the United States has orchestrated all over the world over the last 70 years—or maybe over 100 years.They didn’t even bother with the standard CIA-backed coup this time. Or maybe they did and maybe it failed, but who knows.Well, they certainly didn’t manage to drum up any significant apparent protests against the regime ahead of time. Then, of course, in the last week, we’ve had the drone attack from Ukraine targeting Putin’s country house, where he may or may not have been at the time. Right while Zelensky was in Miami, presumably holding peace talks with Trump. So there’s more insanity than anything rational in every direction.Meanwhile, we’ve got the governments of Britain, France, and Germany, in particular, and several others in Europe who are plainly out of step with their populations on a number of counts. Not doing anything whatsoever to tackle the very real problems that we have in these countries. Hitching themselves to a foreign policy, particularly in relation to Ukraine and in relation to Israel, which has absolutely no support whatsoever amongst their own subjects.On the positive note, one thing is the collapse of the hold that the elites have had over the narrative and have taken for granted. The result of their activities of the past year, and the rise of genuinely independent journalism online, has been that more and more people are questioning. There is more and more open debate about what is going on.It looks that way to me.Interesting times.Good. Any predictions for this year, or just watch this space, as we usually say?Well, my prediction for this year—my key prediction—is that there will be a dollar crisis of greater magnitude than most people could have conceived sometime in this year.We’ve been hinting at that for quite a few episodes. My crystal ball happens to be broken, but if I were a betting man, that’s where my chips are!How that’s going to spill over to the various, for want of a better word, Western Alliance countries, we just don’t know. It doesn’t look good.Well, they’re certainly in a hurry to push through the digital ID infrastructure. And presumably central bank digital currencies tied to that. So the race is on.I think they probably underestimate people’s ability to create black-market-type workarounds for anything they do in that way.Well, you just create a parallel economy, or people find other ways of trading or exchanging value. If you find other ways to exchange value, those ways are not taxed.That is a big one.Good. Well, let’s leave this one here. We’ll keep an eye on how things progress over the next few weeks. Just to say, for anyone listening, if you have any questions for Derek about anything we discussed in 2025, hit us up in the comments. We’ll address it in an episode soon.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts and support my work. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We’re going to get back to a core topic today: the nature of money. At some point in the sovereign finance journey, everyone realises that the money that you thought was real in your pocket isn’t as real as you were led to believe growing up. So what else do we have to say on this?First, at the end of the day, money is a tool. It’s a tool that can be used like any other tool for good or for ill. If you’ve got a knife, you could use it to prepare your dinner, or you could use it to stab somebody.If you’ve got a hammer, you could use it to construct things, or you could use it to break things up. The same goes for money. It’s a tool that can be used to generate prosperity. We’ll say in more detail in a minute about how to do that, or it could be used to exploit and to expropriate, which is a lot of what’s happening at the moment. But it is value-neutral as a thing in itself.So what is money’s purpose? Its purpose is to smooth the path of the accumulation of wealth. How is wealth accumulated? It’s accumulated either by creating it, that is by, let’s say, manufacturing something, or by growing food or other products from the ground. The accumulation of wealth is furthered by trade. Once somebody’s manufactured something, it’s of limited utility to them, assuming they could have made all of whatever product it is they wanted for themselves. Beyond that, the value lies in trading it with someone else to get something they want. Money is obviously the means by which they can do that.Other ways wealth is increased are by moving things and people around. Things that are abundant in one region of the world have a much higher value where they’re more scarce. So moving them from where they’re abundant to where they’re less abundant is a form of trade. Money facilitates that. Operationally, the obvious nature of money is as a medium of exchange. There are two or three other classic definitions, but I wanted to examine its essential nature.It seems to me that the essential nature is that it’s a store of energy. If you think about it, any work that we do requires energy. If we’re moving things around, we’ve got to use our muscles to move them. If we’re growing vegetables, the vegetables are essentially harnessing energy from the sunlight. The physical effort that’s gone into planting them and tending them and harvesting them is also an expenditure of energy.Of course, some commodities are actual literal direct stores of energy, a sack of coal or a tank of petrol, a charged up battery. These are literally stores of energy. They are worth something. The money that could be used to purchase them is, if you like, a store of the energy of whatever work was done to earn that money. Is that a useful way of looking at it to you?Yeah, so it sounds a bit like the fuel in your tank being a store of energy that originated from sunlight. We’re pretty distanced from this in terms of money actually being that store of energy. Thinking about all of the money that is going off to Ukraine in places that’s just been magicked into existence out of nowhere. I don’t think much energy went into creating that!Exactly. That provides an insight into the system’s dysfunctionality, because what you have there is money that did not have the energy put into earning it in the first place.So coming back to the classic economic definitions, I’ve already mentioned that it’s a unit of exchange. If I’ve got a violin, I need to eat. If I’ve made the violin, that’s a certain amount of energy gone into the construction of that violin. I can’t necessarily directly exchange that for a year’s supply of potatoes, for example, nor would I want to. I’d like to convert that into something fungible that I can use to buy my potatoes, pay my energy bills, maintain my car, and do whatever else I want. That’s the most immediate and direct way.It’s also a store of value, in that I might do some work now, be paid for it, and not necessarily want to spend it immediately on other things. I’d want to put it to one side and be able to expend it at some later time that suits me.For instance, you might want to wait until someone drives into the back of your car so that you need to buy a new car in a hurry. Not that that might have happened to me this week!Yeah, exactly. It’s a unit of account, which means that, say, in a village situation, a farmer requires a set of new shoes for his horse but doesn’t have the wherewithal to purchase them immediately. So he makes an arrangement with the blacksmith that he can have the shoes now. He’ll pay them in a couple of months after he’s brought in the harvest. So the money represents the amount of the transaction to be settled at some future time.Finally, money is a unit of measure. It’s to answer questions such as: How much profit did we make this year compared with last year?Having tremendous rates of inflation can’t help with that measurement.Well, this is exactly the point I was going to make. The unit of exchange, as long as you’re expending it as quickly as it comes in, inflation really cancels out. But any time there’s a delay between the two, as there is in this situation where you’re using it as a store of value or a unit of account, it’s clearly not fit for purpose. This is true in a situation where we have inflation, particularly inflation running at the rates that it has been over the past year or so. It’s likely to continue into the immediate future.The same thing applies to its use as a unit of measure. If I’m trying to answer the question, how do my earnings this year compare with last year? If I’ve increased it by 10% but the actual purchasing power of the money has decreased by 20%, that’s not an accurate measure of change because the goal posts have shifted. So the periods of time when we’ve had stable currency, which was, for instance, the case in the United States between 1945 and 1971, or in the case of Britain between the late 1600s and 1914, was a time when the money system worked.Within that environment, it served all its purposes. As we’ve seen and as we’re learning experientially right now in a situation where we no longer have that stability, it no longer serves that purpose. It undermines the actual smooth operation of commerce in all its aspects.Money in my brain is associated with this idea of flow. If you think about the infinity sign, the number eight on its side, like it comes in and it goes out. Anything that impedes that flow will damage the long-term viability of whatever we’re using as money.Yeah. Okay, so that was my reflection for today. It’s something that it does well to bear in mind because in general, we don’t actually go any further than the abstract notion of taking money for granted.Everyone has an emotional connection to money as well.Yeah, there is that too, which is not constructive.No, that’s right. Do you think Bitcoin could eventually become money?Well, I’ve been thinking about this. I recently saw an article about electricity generation in China. There was a sideways comment in that article about Bitcoin. It’s the first time I’ve noticed anyone saying out loud and explicitly what I’ve been beginning to feel about Bitcoin.For one thing, the analogy of Bitcoin mining is actually flawed. It’s supposed to be an analogy of the mining of gold. Obviously, if you dig gold out of the ground, you can then trade that gold for anything you want. But it’s taken a lot of effort to pull that gold out of the ground. But once you’ve actually got the gold, it is persistent. It continues. It doesn’t require anything else other than making sure it doesn’t get stolen and moving it, if necessary, from one place to another to make transactions with it. It doesn’t require an ongoing effort.Bitcoin mining was arguably an analogy of that when new coins were being created. But the supposed inherent advantage was that there was a finite quantity. We’re now getting to the point where virtually all of the coins that can be brought into existence have been. It requires the same amount of computation, which requires an enormous amount of energy going into the special purpose computers that do those calculations to verify each transaction.As there are no new Bitcoins coming in, that has to be paid for by charges in the transactions, which undermines its long-term potential as a serious element in global trade. It doesn’t have the scalability to replace all other transaction mechanisms.So its only real attraction is that anyone investing in Bitcoin is hoping that someone else will value it more highly and sell it. That is the classic characteristic of a Ponzi scheme.That’ll go bust at some point.I would suspect so. There’s obviously a great deal of effort going into maintaining the illusion. Another aspect of it which is concerning is the fact that originally this was propagated as being an anarchic freedom loving attempt to generate something that would be outside the control of the existing powers that be. Of course, now we’ve got major financial institutions and major banking institutions moving into it. China has apparently banned the trading of Bitcoin internally. So that is a factor.Anyway, the point is that this article as a sideways comment actually suggested that the only merit of Bitcoin was that people were expecting somebody else to come along and be prepared to pay a higher price for it. Certainly, it is essentially a monetary exchange system, which even more than all of the fiat currencies in the exchange systems of the world, is highly volatile. The amount of speculative transactions completely dwarfs any transactions in relation to purchase or sales or commerce.So I’m not making any predictions. I know I’d be speaking well out of turn. Everybody’s got to make their own decisions. It’s always been the case that sound advice for Bitcoin or any cryptocurrency is to treat it as a speculative investment. Don’t put any portion of your assets that you seriously depend upon into them.So that remains the advice really, whatever happens. But the main point of this article was to highlight the progress of electrical generation capacity in China. This has really been quite extraordinary.Probably the opposite of what’s happening here as well.What’s happening in the Western world apart from various bits of disruption, has been fairly constant over the last 25 years. Electricity generation in the United States has been relatively constant at 4,000 terawatt-hours per year over the past 25 years. At the beginning of that time in the year 2000, China’s generation capacity was around about 1000 terawatt hours per year. It’s been climbing steadily. It crossed over that 4000 mark with the United States in about 2008.It’s continued on the same trajectory. It has now surpassed 10,000 terawatt hours per year. What is also interesting is that very nearly 50% of that is from renewable sources. So, although it’s still burning substantial amounts of coal in coal-fired stations and has a number of nuclear stations, the main expansion is in wind power, water power, and solar generation.So that is a serious indication of the wave of the future. To what extent we’re going to have an all-electric world is something, again, I’m pretty sceptical about. But some mix of all of these things. Of course, long before the end of this current century, we’re going to have exhausted the economically viable supplies of virtually all of the fossil fuels except for coal. Of course, coal is both the dirtiest of the fuels and the least flexible in its use.Well, just quickly, what do you make of the assertions that oil and gas are actually renewables. Do you think that’s not true?I don’t think it’s at all true.There are pathways to liquid and gaseous fuels from sunlight, most of which involve an electrical phase. As we stated before, every transfer of energy involves some loss. So the more stages you go through, the fewer you get to. We talked a couple of weeks ago about hydrogen and how it wasn’t really a terribly practical storage mechanism. It isn’t an energy source; it’s an energy storage system, but it’s not an efficient one in any manner.For a highly portable energy store, liquid fuel is probably unbeatable. So when we no longer have sources of that from what was stored over millions of years underground, we’re going to have to generate it from current sunlight. I would think some pathway from solar generation of electricity through to chemical processes to produce ethanol or methanol is probably the most promising. That would involve drawing carbon dioxide out of the atmosphere, which would then be released in the same quantities when the ethanol or methanol is converted back, whether by burning or by developing fuel cells.The future of vehicles, I would bet, over the next half a dozen decades would be essentially electric vehicles with regenerative braking. So you get a good deal of the energy that’s gone into the motion back into a battery to do it. Rather than the battery being the motion energy storage, it’s the secondary one, just for regenerative braking. The primary energy carrier is done by ethanol or methanol. We develop a fuel cell to generate electricity, which drives the motors that power the wheels. That’s quite an exciting prospect.Yeah, the batteries in electric cars are obviously a big problem.Yeah. Okay. Well, that will do for today unless you’ve got any other things you wanted to bring up.No, I will link to the article about China and electricity and Bitcoin so people can check that out as well.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.The UK budget was announced on 26th November 2025, which we broadly regard as a PR exercise for the powers that ought not to be. The budget isn’t really a budget because they don’t break down where the money comes from and where it’s going. Could you elaborate on that Derek?A good starting point would be this post that you forwarded to me from someone you’re acquainted with on Facebook. He’s apparently been an engineer and gone into property development, and is quite wealthy. He’s got his own perspective and his own views. The core of his perception is really along the lines of something that John Kenneth Galbraith put in his 1958 book, The Affluent Society. What Galbraith said is that the proportion of people in society doing anything really tangibly useful and productive is very small. The rest of the population, one way or another, is being carried by them.Your friend had some numbers in his post that are worth chewing over. He started by saying that the non-working-age population in Britain was 27 million. What he means by non-working age is under-16s and pensioners. Out of a population of 70 million, the working-age population is 43 million. Then he goes on to say that every working-age person must support just over half of a non-working-age person. But actually, that’s sadly wrong.He goes on to break down the working-age group into several categories. He says there are 9 million who simply choose not to work, and that fewer than 2 million people are seeking work.Then he goes on to say there are six million people in the public sector. Although he isn’t claiming they don’t do anything useful, I’d agree with his implied point that we don’t get much value for money from the public sector as a whole. I’d hate to offend anybody who’s a civil servant or a local government official or something. Obviously, there is quite a bit that the government does which is worthwhile. We could certainly do with more people filling the potholes in the roads. Also, a lot of the people doing the most valuable work, such as nursing, emergency services, or teaching.But his point is that they’re all paid from taxation. So the people who are actually generating wealth are those in the private sector. Of course, if we wanted to be brutal about it, there are a great many people in the private sector whose work isn’t necessarily generating value.So where is the value being generated? Well, the people who are actually working on the farms, the people who are actually working in factories and workshops. This is a small proportion. I’d say that even people who are cooking or serving tables in a restaurant are providing something of value to their customers. It’s obviously transient value, but we’d all agree that at least some of the time, going and having a meal that we haven’t had to cook or clear up is something we’d like to do. The people doing it are at least producing value.Gainfully employed, I’d argue.Yes. So, anyway, summarising all that, what he said is that of the 43 million of working age, there are 28 million private sector workers that generate profits to pay for the rest of the population via taxation. In other words, every private-sector worker must generate income to pay taxes that cover 2.5 other people.This is one of the reasons why the money you’re managing to bring in for your own efforts doesn’t produce nearly as much effort from other people when you pay it out. That’s the way it looks to me. Would you agree with that, Rob?I’d agree with that, yeah.However, a few things are missing from this picture. One of them is that a very tiny proportion of the population are clearly coining it on a grand scale. That seems to be an increasingly large amount going to an increasingly small number of people.Millionaires are becoming billionaires, billionaires are becoming trillionaires. To paraphrase Caitlin Johnstone, we’re feeding the world’s ecosystem to the wood chipper in the process.Yeah. Of course, another thing that is particularly relevant at the moment is the purchase of weaponry by governments. We really need to have some analysis of this, particularly when we’ve got situations like the war in Ukraine. I’d really like to know how much equipment, ammunition and material that we, the British people, have sent there. How long does it actually last before it’s destroyed?There are tanks, artillery pieces, and armoured personnel carriers that are destroyed sometimes within days of arriving. There are explosives and ammunition, which if they actually reach the battlefield, are instantly auto-destroyed and cause a great deal of damage in the process. But there’s a great deal of ammunition that is destroyed before it even reaches the battlefield. Clearly, these are objects which have been built, manufactured, and created; however the energy put into them produces no useful benefit to anybody.It seems to me that they talked about the First World War being the war to end all wars, which logically ought to have been.The war to start all wars is actually what happened!But I wonder whether, if we survive this era we’re going through at the moment, we’ll see that the Ukraine war really was the war that indicated the sheer futility of it. Whatever you put into the battlefield, something is so asymmetric.Now that drones have become so ubiquitous on the battlefield, some of them are little more than £50 or £100 hobby drones that people play around with. Those can be arranged to drop a hand grenade. You know, even the more exotic and sophisticated ones that we’ve got out there now are still in the range of a few hundred pounds up to a few thousand pounds. Each of those can do multi-million-pound worth of destruction to enemy equipment.At this rate, it must soon reach the point that even within the internal logic of people who are not morally horrified by the whole nature of warfare, it must increasingly begin to look like a futile exercise.So there again, he made some predictions. This letter was penned just before the budget. He suggested that we would see numerous small tax rises across many areas. In many cases, they would not actually produce much more income to the government, but would upset a lot of people.He didn’t expect there to be any significant government spending reductions. As we know, there never is. There’d be more tax rates on the private sector. I don’t know how those have worked out. We’ll see how this is spun in the media. We’ll see how things work out in the future.Against this, what I’d be inclined to say myself is that the structures within which patterns of work and patterns of taxation have been set up are really from years gone by. With the technological developments we’ve seen over the last 50 years, there is no longer any need to expect that everybody works a 40-hour or longer workweek.The total amount of work that actually requires a human interaction to deliver the things that we really want delivered in society, once we’ve cut out the unnecessary burden of having to replace your washing machine and your refrigerator every five or ten years, when there’s no reason why it couldn’t have been built to last a lifetime.But even within that, once we get rid of all of the unnecessary make-work which is merely done to justify people collecting a paycheque and just concentrated on what was necessary to provide us with the material basis for living our lives, the amount of work that was required to be done would, as I say, be maybe ten hours a week, maybe five hours a week on average.Most people would be quite capable of doing that. There’d be a lot less resistance to it. There’d be no actual unemployed people. If they were paid a commensurate proportion of what they’re generating in doing that work, it would be enough to provide them with the exchange wherewithal to purchase what they wanted in return.Of course, people who wanted to acquire more, or live a more extravagant lifestyle, could actually work more than that. They could actually create more. It’s entirely possible, but it requires a complete change of mindset to achieve it.What we’re looking at here is not something that could be fixed by making minor tweaks to the way the present situation works. It’s something that will necessitate our stepping back from the entire thing, taking a look at it and totally redesigning the way that human society works. That will only be possible if there is a radical reorientation of our philosophical and, indeed, spiritual outlook and approach.This is as we shift from the totally individualistic mindset we’ve been steeped in, particularly over the last few hundred years, to one that’s truly universal. But certainly a far more widespread understanding that we are all part of one and the same global cosmic system and part of the web of life, which actually supports our existence. Not something aloof from it. So this is a much bigger issue.Our education system turns out workers. It sets in stone this mindset that you should be working half eight to half five, five days a week, with 20 days of holiday a year. That’s normal.Yeah. Doing things that you’re not particularly interested in and not particularly keen on.For me growing up in the North, there was this unspoken narrative that jobs are scarce. You’re lucky to have a job. You have to do things you don’t want to do. Keep your head down. Don’t complain. Work hard. Whereas we need people who are more creative, who understand themselves better, who ask more questions, who maybe do things differently. Who collaborate with like-minded people. We will see that eventually, but there are major problems with the education system. We need to encourage more people to actually understand themselves. We need to teach things like finance, which we don’t do at the moment. There are glaring holes in the project of producing sovereign humans, but the goal of the system is not to produce sovereign humans, it’s to produce dependent humans.It’s quite the reverse, yeahI also think it’s natural for people to have fallow periods as well as productive ones. I don’t think we’re meant to just work constantly until a set age. Retirement’s dying anyway, as a thing. People will just work on what they want to work on. I don’t currently envision ever retiring and putting my feet up and waiting to die. It’s not really on my agenda. But if you’re doing work that aligns with your core essence, interests you, and so on, why would you stop?So yeah, we’re due an overhaul.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We’re going to talk about interest rates on bonds today. What’s going on that people need to know about here?Well, a few years ago, we did a piece on this. What I said was that the interest rates being commanded were a result of several different factors. One of them is the basic rate for basically hiring some money for a period. Another factor is how reliable you regard the borrower as being.The other one was what you expected the exchange rate to move over the loan period. I probably also said that the classic way of looking at it appeared to have broken down. If you go back 10 or 15 years, the interest rates on government bonds were insanely low.There was recently a UK Treasury bond due to mature around 2035, but trading way above par. The question is, why? We’ll come back to this, but let’s first cover the theoretical principles.How It Should WorkThe essential idea is that if somebody has a bunch of cash, they could just stick it under the bed, but the prevailing wisdom is that you want to make it earn its living. You make it earn its living by investing it in something which is going to pay you for the period that it’s tied up in that investment.If you go to the main investment areas like the stock exchange, there are broadly two types of investment. You might get equity shares, which give you part ownership of an enterprise. Or you could make a loan, or you could put it in a deposit account in a bank, which is another way of loaning the money to the bank….You’re actually giving the money to the bank…Yeah, it’s no longer your money once you’ve put it in the bank. That’s another major misunderstanding that they’re very keen for most people not to realise. But we won’t get into that today. Essentially, if you look at banking in the conventional traditional way, what they’re doing is acting as an intermediary between you and their customers who want to borrow some money.It’s a lot more complicated because, as we’ve discussed elsewhere, most of the money that the banks are lending, they’ve simply made up. They haven’t borrowed from their customers, but that’s another story for another time.So suppose you’ve got a stack of cash and you’d like to draw an income from it. The classic position most people are in when they want to do that is thinking about being able to retire at the end of a working life. Being able to have a steady income from what they’ve accumulated over the course of a working lifetime. It’s more abstract than that for most people, but that’s what it amounts to.As I say, the two principal ways you could invest it, apart from simply putting it in the bank and having the bank pay you interest, are either making a loan (either to the government or to a corporation, or a local government entity like the county council), or you could take part ownership of an enterprise. That’s what is called shares or equity shares.There’s a range of risks that are associated with that. If you’re investing in a corporation that runs an operation, you might consider something very reliable, like Unilever or Procter & Gamble. There’s a very predictable amount of soap powder they’ll sell every week. There’s a very predictable profit margin on it, so it’s a very solid business. It doesn’t fluctuate much. That would be a low-risk equity.Alternatively, you could invest in a high-tech start-up company, which might yield you an enormous return. Or it might just fizzle out and go bankrupt, and you lose the lot.Or you might invest in a new company that has the rights to prospect where they think there’s a gold deposit. Obviously, they’ve got to spend a lot of money digging holes in the ground and seeing what they get out. If it turns out that there are nuggets of gold down there, they’ll get an enormous return for the people who invested in that. If all they dig out of the hole is a lot of dirt, you won’t get anything.So there are high and low-risk investments. Suppose even buying shares in the soap powder company is a bit too risky. You could invest in something which is really safe.If you go back to the 19th century, what we call gilt-edged investments or gilts for short, are government bonds. In those days the most reliable government bonds were British ones. Everybody expected the British Empire to be in business for the foreseeable future.Right up to the early 20th century, most people made this assumption that it was going to be around forever. But it didn’t take more than a decade or two for the cracks to start appearing.All of these things implode under their own weight in the end.This is, of course, the lesson of history.At that point, the British government could issue an undated bond. It had no redemption date at all. You’re basically lending your money to the British government forever on the basis that if at some point in time you want your money back, there’s always going to be somebody else who’d be prepared to take it off you.This held up until it gradually began to fall apart after the First World War through the interwar years. Then it went rapidly downhill after that. Most of those British government bonds were around 2.5 - 3% interest. Some of them were 3.5%, depending on the prevailing circumstances when they were issued.Suppose at a later period of time, the prevailing rate of interest is higher. Then that would mean that for each £100 nominal worth of government bonds that you’ve got, the price of the bonds would have to go down. Supposing that the prevailing rate of interest is 5%, then you’d only get £50 when you come to try and sell your £100 bond of British government debt.The £2.50 interest on the £50 you’ve invested to get a nominal £100 would yield you 5%. It’s a straightforward ratio. If, for any reason, the interest rate went down below 2.5% or 2%, you could probably trade those 100-pound blocks for more than 100 pounds, so it would go the other way.In recent years, since the First World War, people have been unwilling to buy undated government bonds. They would want a bond which had an expiration date when they knew they’d get the money back. This still assumes that whichever government you’ve invested in will be solvent enough to continue paying interest over the period. It’s going to be solvent enough to give you your money back when the bond expires or matures, as it’s called. Any thoughts up until this point?So how solvent are they currently??Well that is the big question, which is why we’re revisiting this discussion today! I’ll come back to that, but first let’s go into more detail about those other factors that set the prevailing interest rate.We’ve covered the fact that your borrower might not be completely reliable. If you’ve got a borrower who’s not all that reliable, you’d probably want to charge a higher interest rate. You’d want to put a premium on that basic 2.5% for the rental of the money to allow for...If I was lending money to my mates, there are certain mates that this would probably apply to!Yeah, do you lend money to your mates?No!Well, that’s the point of course. If it’s all-or-nothing, then this is hypothetical. As with all statistics, you need a large base to spread your risk. If you’re talking about a single person making a single investment, it’s all or nothing. You’ve either got a reliable borrower and you get your interest paid and you get your money back at the end of the period, or you don’t, and then you lose it. But of course, if you’re thinking about something like an insurance company where you’ve got a lot of funds under your management, you’re spreading them across a lot of different people.The idea of a risk premium makes sense. You might be lending money to the British government, the French government, the German government, and the American government. You figure that they’re not all going to go bust simultaneously, but some are looking dodgier than others. You charge them a higher rate of interest, and the others not quite as high.Over the entire portfolio, if one or two of them go bust, then the extra income that you’ve had from the higher rate of interest would cover your losses. That’s the theory of it. If you’re moving into lending money to corporations, because corporations raise money not only from their shareholders but also from their bondholders...They’re people who are basically lending them money. Rather than taking the risk of fluctuating interest rates, they’re assuming the corporation is solvent enough to pay a regular, reliable rate of interest, which would be lower than the interest they would expect on shares with more risk.But this is likely to be regarded as riskier than government bonds. The other factor you need to take into account is your view on the likely inflation in the currency this bond is denominated in. If you bought Zimbabwean bonds, you might figure their currency is unlikely to hold its value. You want to really stack up the interest to take account of that.In theory, those are the factors that set the prevailing interest in the market. A few years ago, I would have backed these factors to play out quite confidently.For example, when I was working in the early 70’s as an investment analyst for a stockbroking firm, we had very high inflation.It had also been only a few years since the humiliating devaluation of the pound. British government undated bonds were selling at about £16 for each 100-pound block of bonds. That was the price at which you would get the prevailing market rate, which was about 16% interest. It had to be 16% because you were taking account of the fact that your money wasn’t going to go very far when you got it back, maybe 10 years later.The people who were buying those British undated bonds at £16 per 100, they maybe were smarter than the people who were selling them as a dead loss. Because 40 years later, the government finally decided to cash in all those undated bonds. (Foolishly, as it has turned out.) The prevailing market interest rate was then even lower than 2.5%.Anybody who bought those bonds at £16 for the £100 worth would have been getting 16% on their interest on the money they actually spent to buy them - for the last 40 years. Then they’d have got six times as much when the government cashed them in, which obviously they did at par at £100 per bond.Now, obviously, the bonds which have already been issued and out there in the marketplace, as we’ve just illustrated in that fairly extreme example, are going to trade at a rate which is the inverse of the prevailing interest rate. When interest rates rise, existing bonds in the market decline in price.At the price they change hands, they’ll yield the prevailing rate of interest. If the market interest rate goes down, the price of bonds will go up. This led to a situation where the British government issued bonds that, as I say, had a maturity of 2035 or 2040.They were originally issued at 4.25%. Then, in 2005, the prevailing interest rate was around 2%. Those 4.5% treasury bonds, maturing 30 years later, were changing hands at £220 per £100 nominal.I thought: “This is insane. Who would spend £220 today in order to get back £100 in 30 years’ time? Who knows what the £100 is going to buy you in 30 years’ time?”There are so many unknowns.It was a dead cert that this was a poor investment, but that was the state of the market.What’s Happening Today?The reason this has come to the fore now is that the entire Western world, in particular the United States, is in a situation where all the American treasury bonds held by other countries are being allowed to expire. They’re not reinvesting in dollars. There may well be a political axe to grind in the course of that decision, but I would think that it is probably an entirely rational assessment.First of all, they no longer need to, because over the past few years most of the rest of the world has decoupled from the need to use dollars for international trade.Until recently, that was the only game in town, except that the chickens have come home to roost because of the way that the Americans have taken advantage of the situation to a ridiculous degree. Plus, the dollar has actually fallen quite significantly over the last year or so relative to other currencies.It’s entirely rational that people no longer want to hold dollars, given the confident expectation that those dollars won’t buy them as much next year, the year after, or in five years’ time. That’s why these considerations of the ways that interest rates are computed are relevant today.How’s that sound?Yeah, to me it reiterates that we’re seeing the emergence of a multipolar world. There are definite trends moving in that direction.Just going back to earlier in the conversation, if you’ve got money that you want to lend out and earn interest on, I was thinking of Richard Koch and his Star Principle where he talks about investing. He’s earned a lot of money by investing in small but very fast-growing companies, which is obviously quite different from a government bond, but it’s the other end of the spectrum.Yeah, it’s the other end of the spectrum.So, coming back to the bonds due to mature in 2035 or 2040, we reckon they were trading well over the odds. Why is that?They were trading at that level because they had been issued at 4.5% in 2005. But after the markets had been flooded with currency by the so-called ‘quantitive easing’ in response to the crash of 2008, the prevailing market interest rate had been driven down to less than 2%. So the prices of existing bonds with higher rates moved up to keep their yield in line with that.There’s a psychological dimension to this, as there was a lot of talk about a bond ‘bull market’. A bull market is a rising market, or one in which people have a lot of confidence, whereas a bear market is a falling market. It means people who were holding those bonds could feel good because they’d be able to sell them at a higher price.But if they’re holding these as a safe, reliable way of getting interest, that wouldn’t actually help them. They’d make a capital gain on the bond sale, but it wouldn’t do them any good, because if they wanted to reinvest that money, it would be at the current interest rate. They’d still only be getting 2% on it.The underlying reason interest rates were so low is that all the central banks were busy increasing the money supply. You’ve got a certain supply and demand logic in that if there’s a demand for borrowing money and there’s lots and lots of money to borrow, then you can’t charge a lot of interest for lending it.However, like any other self-fulfilling prophecy, it has reached a point where the contradictions have become too apparent. This is what’s happening now. The central banks are stuck between cutting off the endless supply of new money, which will obviously create all kinds of solvency problems for various governments, or continuing to do so and thereby eroding confidence in the marketplace about the currency’s viability. The period of cheap borrowing for governments in the Western world is coming to an end.You can only kick the can down the road so far…That’s exactly it. They’ve kicked the can down the road, and this is as far as it goes. Of course, what they failed to take into account was that their hold over the rest of the world was not going to persist indefinitely.It’s not as though the actions of China in particular, but the rest of the world in general, in diversifying out of the dollar are an attack on the dollar as such. It’s simply a preservation of their own self-interest in having put together arrangements that enable them to become more and more independent of the dollar.The prevailing conversations around this are quite interesting. There’s an acknowledgement that the era is coming to an end. Usually, there’s a proviso added that it will take time to play out and that the dollar is still a major important currency, which it is.But as I’ve said before, this could spiral down far more rapidly than most commentators expect. The reason is that positive reinforcing feedback mechanisms are involved. Now that the conversation has started about your dollars not buying as much in the near future, more and more people will sell, which will drive the price of dollar-denominated assets down.Of course, the faster it goes down, the more people are going to panic and pile in. So it’s definitely going to be a very interesting few months in the very near future. We’ll see how this goes.Watch this space is the usual way we end these episodes, and this seems to apply here. If anyone is listening to this and you have a question about something that Derek said, leave a comment below and we’ll cover it in a future episode.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We thought we’d do a bit of a roundup of current affairs and goings-on today. What’s going on that people should be aware of?Well, the short answer is, of course, more of the same! I was leafing through my journal over the past three or four months. I’ve been saying more or less the same things every time.We’re like a broken record…Yes. We have yet another peace plan in Gaza. It’s quite interesting, there’s considerable criticism and disappointment in some quarters about the fact that the United Nations Security Council, Russia and China abstained from voting on this plan. The United Nations officially adopted the plan, whereas either or both could have used their no votes to veto it. The Security Council has to make unanimous decisions.This is of course, one of the design flaws of the United Nations. Because of the five permanent members of the Security Council, who effectively have a veto, this now allows one or more of them to paralyse any decision that’s made. Both China and Russia gave very concise, clear speeches about why they thought the plan was not going to work.Had they vetoed it, and then it not been implemented, they would have been held responsible in the public opinion of the world for having prevented it from being enacted. Abstaining was the only thing that they could reasonably do.You can see the headlines already, can’t you, in the Guardian, etc.They had already put forward proposals to modify this plan, which might have made it more realistic. But these were not agreed to by the rest of the council. Abstaining and giving a concise summary of what they’re thinking was probably the best they could do.As we know, it’s going to be yet another thing that makes no difference. The Israelis certainly aren’t taking any notice of their obligations under this. They’re continuing the slaughter, they’re continuing the starvation. There’s no end in sight.What the Israelis say appears to all be white noise to me.Yeah.We now also have a 28-point plan for peace in Ukraine that Trump has put forward. Whether this is acceptable to either side or not, we just don’t know. So far, the signals from Zelensky are that he’s not prepared to make any concessions.In the world of reality rather than fantasy, he’s not really in a position to make any concessions or to withhold any.He’s a bit short on bargaining chips!Exactly. The lack of realism among Western leaders is, to my mind, staggering. They’ve nailed their colours firmly to the mast of supporting Ukraine and trying to turn the situation around. Whereas every single day for the last year and a half, Russia has made larger and larger gains.Not only that, it’s outproducing the entire Western world combined in manufacturing new weapons, more ammunition, and more missiles. It’s got a large, growing army, which is rotated to keep its troops fresh. Okay, it’s taking casualties, but it’s inflicting casualties at about 10 times the rate it’s taking them.Ukraine doesn’t have the population that Russia has, for starters. Seven million people have left the country in the course of this conflict, at least. They have very few fighting-age men left to recruit. The ones that they are recruiting are deserting in large numbers.Some of them are being murdered by their own side when they attempt to desert. Some of them are being taken prisoner. A great many of them are being slaughtered.It’s a tragedy, isn’t it? It’s all completely pointless.I’m not a military expert, but it was obvious to me that it could not go any other way. Yet somehow the Western leaders have convinced themselves that they have.Unless the Western leadership are just puppets. They’re not really the leaders; they’re not really making the decisions.Well, it’s quite obvious that somebody or some entity has a hold over them, that goes without saying. But they haven’t been able to find any way to negotiate their position away from the one they’ve rigidly adopted.In the meantime, in this country, our own public services are being cut more and more deeply. I don’t know what we’ve sent to Ukraine in terms of equipment or money. The equipment sent there is usually promptly destroyed.As we covered last time out, the money we sent there has been magicked up out of nowhere.Yeah. For the reasons we discussed with them about the issues, it’s getting harder and harder to perpetuate that. Of course, the latest news over the past few days is the accusations of staggering levels of corruption by Zelensky’s closest accomplices. Theft of funds in the hundreds of millions of euros or dollars.I would like to gasp in shock.Well, the thing that amazes me is that if you were into that, you could embezzle £10 million. It wouldn’t bend your entire country’s economy out of shape.Yeah, why go for £100 million? How many houses do you need to buy?Exactly. £10 million would enable you to do whatever you wanted for the rest of your life. It’s demented, isn’t it?We’ve always known, throughout the entire time, that Ukraine isn’t the democratic nation portrayed by the press. It is quite a corrupt place. They have a neo-Nazi battalion as part of the army.Yeah. The prevailing living standard in Ukraine was very low, which led to widespread discontent among the population. It was possible for the various manipulators of the situation to direct against the government of the time. To overturn it in 2014, bringing in a government that was even more corrupt.Revolution doesn’t always end very well, does it? It just brings in someone else to fill the power void.Exactly so. It remains to be seen what’s happening. Apparently, two American generals are going to meet with Zelensky and presumably give him an ultimatum. What will come of that, or how they can spin this not to be an abject defeat by all of Europe, we’ll have to wait and see. Again, watch this space.Again, watch this space.Thanks for reading Sovereign Finance! Subscribe for free to receive new post. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We were talking in the conversation last time about energy and how energy is generally misunderstood or misused. We left last week’s conversation by saying that, at some point in the future, we’re going to hit limits in how we generate energy at the moment. If it’s going to be a transformation, we might need to use less energy or be more strategic about it. So we thought we’d unpack that a bit today.Yes. It seems that the mainstream commentary about this is, “Well, we can’t do without fossil fuels. They’re essential for maintaining the standard of living that we want and improving the lot of poor people.” I wanted to address some of the perhaps low-hanging fruit we could use to consume less energy without reverting to a medieval or Stone Age standard of living.Without living a small, cold, dark existence, which seems to be the plan for us by those up top!Yeah, it does seem so. Anyway, I was looking at the analysis in a very good book, written by the late Professor David McKay in the mid-90s, called Sustainable Energy Without the Hot Air, which is an interesting pun. It spawned quite a lot of ‘without the hot air’ books. Of course, he was making a sideways reference to climate change, as well as using the phrase ‘hot air’ in the usual rhetorical sense, because there’s a lot of talk on both sides of the debate that is disconnected from reality.Now, according to his analysis, the average energy consumption in Europe, including the UK, is about 125 kilowatt-hours per person per day. It’s about twice that in the United States. He did a breakdown of what this is, the various ways that it’s used. I thought if we just look at each of those one by one and see what scope there is for making economies that are not particularly onerous for us.The biggest contributors to that total, according to his analysis, were car and jet flights, heating and cooling, and what he called stuff —manufacturing and transporting stuff. So let’s look at those for a start.The manufacturing of goods accounts for 48 kilowatt-hours per day per person. Now, we’ve discussed before that the planned obsolescence and the throwaway culture are really completely unnecessary. Over the course of an adult lifetime, most households buy perhaps somewhere between five and ten of every single one of their domestic appliances. So it’s technically not at all challenging to make these so that they’re A, durable and B, easy to maintain and repair when they’re needed.It’s the absence of a more modular design, where you can’t repair a single element.Yeah, exactly. Without getting into a detailed engineering conversation, it’s obvious to anybody. The mere fact that you very often can’t even get them open to examine anything. All of the bearings are not removable and replaceable when they wear out. There’s no supply chain for components, there’s no standardisation across one and another.There’s a multiplicity of marginally different designs from different manufacturers, resulting in a huge duplication of labour in designing and developing them. We could, purely and simply by shifting from the planned obsolescence and non-repairability model to a far more sensible one, probably cut that 48 kilowatt hours per day per person by a factor of at least five. So that would bring it down to about 8 kilowatt-hours per day.Transporting stuff is another 12 kilowatt hours per day; you could take that down by a similar factor. So the two of those together come to 60 kilowatt hours a day. It could easily come down to say 12 or 10 without any reduction in our standard of living, and possibly one could say an enhancement. At the same time, it would free us from the financial churn we’re all experiencing of having to earn money to replace all these things, which is entirely unnecessary.The next thing is the car: 40 kilowatt-hours per day. Of course, these are averages. Averages are fairly misleading unless you’ve got a very symmetrical normal distribution, which you haven’t with any of these things. Probably the majority of people aren’t using anything like that amount of vehicle transport, and it’s a relatively small proportion of the population who use a lot more than that to bring the average up to that level.It’s a power curve, isn’t it? 10% of people account for 90% of car journeys.Yeah, probably. So not only is there scope for actually reducing the number of journeys that are done by car, we could probably take a serious look at the amount of time we’re all spending on travelling from one place to another and ask whether this is really necessary and whether it’s really enhancing our lives.A great many people have horrendous commuter journeys to work and back, a colossal amount of time, stress, and money spent on that, and also disproportionate energy consumption. As we’ve said, if you’ve ever been anywhere near a main transport artery during rush hour, you’ll know that it’s an incredibly inefficient way of getting from one place to another. The majority of those cars have one occupant, sometimes two; very rarely are they full.Definitely 90 per cent of that could be reduced either by doing far fewer journeys or by doing a lot more of them by efficient public transport. Even with public transport, there’s a lot of scope to improve how it’s done at the moment.The public transport system is a mess. If you compare the infrastructure we had 70 years ago, compared to the one we have today, and consider the average price of a rail ticket, it’s not comparable.Yeah. So once again, that could go down either with more efficient transport or with less of it. Very easily from 40 kilowatt hours per day per person to, around four or five.To be clear, we’re not talking about mandating anything or about telling people they can’t do these things or travel. It’s just structuring things differently so that people don’t have to do these crazy commutes if they don’t want to.Yeah. Then we’ve got jet flights at 30 kilowatt hours per day. I’ll do a more detailed analysis of what that works out to. Once again, we’re going to have a power-law distribution, where the average is skewed by a relatively small number of people taking many long-haul flights. We could look at what would be possible for the typical person not to be necessarily deprived of holidays and a reasonably different change of climate and culture.Then there’s heating and cooling: 37 kilowatt-hours per day, on average. That could obviously be greatly reduced by the kinds of measures we all know about —better home insulation, more efficient heating, and, again, more solar harvesting. As I’ve mentioned before, in a climate like ours, the solar contribution is not so easy to do because the time when we need the heating is the time when there’s less sunlight available to provide the energy.But as far as air conditioning, which is a massive expense in hotter climates, that could very easily be all solar powered, and it would be self-regulating by means of the fact that the time you have got the most demand for air conditioning is the time when you have the most available sunlight.What do you make of the government initiative to introduce heat pumps and similar measures?Well, we’ve got a heat pump and I’m very happy with it. It’s worth pointing out, though, that as they’re driven by electricity and the process of generating electricity has its own inefficiencies, so does the distribution. One thing that’s worth saying: all the defenders of the fossil fuel approach keep harping on how it’s not feasible to switch to renewable sources for all our energy because of the intermittency of wind and solar, and that you need baseload power stations.This needs a serious debate, but a mix of arrangements so we get away from the simplistic idea that we need enormous battery storage to tie solar, wind, and water generation together when it’s not productive. Another point, a proposal Buckminster Fuller came up with as far back as the ‘50s, certainly the ‘60s, was that a worldwide energy grid would go a long way toward solving these problems.There are parts of the world somewhere or other that are in sunlight at any given time, and there are parts that are in darkness. If it were all connected together, providing continuity of service would be quite easy worldwide.I’ll just mention another factor that’s in there: 15 kilowatt hours per day for food, farming and fertiliser. I’m not sure how much of that total is for agricultural machinery, which I’m quite in favour of. It was an enormous release of humanity from the backbreaking labour that had been its historical lot when we used human and animal muscle power. But the energy input to fertilisers and pesticides is enormous, and that’s a whole thing that would be cut through.I think we’re papering over the cracks of soil degradation by just caking on more fertiliser.Exactly. Yeah.There’s a whole regenerative farming practice where if you structure things differently, you don’t need anywhere near as much fertiliser.Yeah, exactly. So in short, it would be quite easy to have a perfectly acceptable standard of living for perhaps no more than 20 per cent of the current energy consumption. One figure I found surprising is that he calculated the defence’s energy consumption at just three or four per cent of the total for European energy consumption.A more detailed analysis of what goes into that is well worth looking at. We’ve mentioned before the colossal energy expenditure in manufacturing explosives and propellants. Then, of course, you’ve got all of the steel manufacturing that’s going into armoured vehicles and tanks and so forth. So if we had a world where the human race regains its sanity and abandons warfare, which I actually think is quite likely, we could abandon it because we destroy ourselves entirely or destroy our social and political structures.We’ve commented recently that it’s futile. It doesn’t help. It just blows s**t up.Yes, it doesn’t solve anything. So anyway, those were my thoughts on the low-hanging fruit for improving the quality of life and improving the viability of our energy consumption.There are two angles we can take on this: the residential angle we’ve outlined on this call. But yeah, there’s surely the industrial angle, where the biggest industry for these things seems to be the military. That may be the biggest low-hanging fruit of all. But yeah, it’s like trying to turn around a battleship, isn’t it? Because there’s so much money and so many big interests invested in its continuation and expansion. It’s perhaps clear that if they don’t spend on the military, the entire financial system might collapse in itself even faster than it’s going to anyway?Yep.So is there anything individuals can do on a more hands-on level?I would say that anybody thinking of starting up an enterprise of any sort is well worth being aware of these factors and creating something for the future rather than perpetuating the inefficient methods of the past.I noticed that in the resort where we had a holiday in South Wales last month, all of the toiletries and cleaning products and things that were provided in the housing on the resort had all come from a local Welsh company which was committed to refilling bottles rather than simply following the standard practice of giving you not only a new bottle but a new spray head every time.Once again, if we look at the economics of that, we’ll see that for many of the products lining supermarket shelves, the packaging might well account for more than half, perhaps more than three-quarters, of the cost of producing the item. In other words, it completely outweighs the cost of the product. So once again, there are opportunities there.I think the future is going to involve far more return to local businesses, which is going to again reduce the costs and the energy consumption of transporting things from one end of the country to another when they could—I think people generally want that as well. We want to buy local, we want to support local people. The answer to the energy question seems unlikely to come from the top down. It feels more likely to emerge as a bottom-up thing.Yeah. I think so.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We’re going to talk about energy today. Where do we need to start with energy?Well, on YouTube lately, I don’t know whether you’ve noticed the same thing, but I get an enormous number of ads for heaters that supposedly heat your room in seconds for next to nothing in energy costs.They work by magic.Yeah, exactly.I thought, actually, this is physically impossible. There’s a very marginal difference in the efficiency of one heater versus another, because, by default, turning any power into heat is what happens when you’re trying to do anything else. I thought I’d just start with a review of what it is, why we need it, how it relates to our general prosperity, and what the prospects are given the wider picture of the exhaustion of oil, coal, and gas resources, and concerns about global warming or climate change, and so on.Let’s start with the absolute basics. Two universal laws apply whenever one form of energy is changed into another. In its most basic definition, energy is the capacity to do work. The simplest form of work is applying a force to move something from one place to another. Or if we’re going to be more strict about it, — to either overcome resistance or accelerate something.You need energy to get your car moving. That obviously comes from the fuel in your tank. The two laws that apply are: the first is that energy is neither created nor destroyed. In other words, the total amount of energy you’ve got inside any closed system is the same at the end of any conversion as you had at the beginning.The total amount of energy you have at the end of your car journey, or the total amount that exists at the end of your car journey within the totality of you and the environment, is exactly the same as when you started. But of course, when you began, it existed as fuel in the tank, which enabled you to do something, i.e., go on that journey.At the end of it, there’s less fuel in the tank. All the other energy has turned into the car’s momentum while it’s moving. By the time it’s come to a standstill at the end of the journey, all of that energy is out in the form of heat in the air, possibly some in the brake drums, perhaps some in the engine block and the radiator.It’s either gone out of the exhaust pipe or been dissipated through the air passing through the radiator, or it’s heated the brake drums and brake discs, then cooled down by heating the air around them. That’s not available for doing any work, which is what brings us on to the second law.The second law says that any time you convert energy from one form to another, some of it is no longer available to do anything useful with.Because it dissipates into various forms and is no longer in a single convenient fuel tank.Yeah, so there are two aspects to this. One is that it relates to imperfections —the shortfall from the ideal of any physical implementation you make. That’s on top of a fundamental limitation.The fundamental limitation is that if you built the most efficient motor that you could build, it would not be 100% efficient in turning the energy, whether that’s electricity or petrol or whatever it might be, into actual movement. There’s a theoretical maximum to that.These are called the laws of thermodynamics. Thermodynamics is an unfamiliar word, which immediately makes people think it’s obscure and complicated. Funnily enough, this is not something which is taught in any of the school science courses until you get to a pretty advanced level. Is that your experience from what you remember?Yeah, I was trying to think if I was taught it at school. It’s more things I’ve learned for myself as I’ve got older.Yeah, that’s probably about right. I think that’s most people’s experience. The funny thing is, it’s really intuitive. If you see a movie, you can immediately tell whether it’s running forward or backwards. It looks completely ridiculous if it’s run backwards.If you’ve got a glass that falls to the floor, breaks into pieces, and shatters, that is clearly absurd when you play the movie backwards: all the pieces gather, form into the shape of a glass, and jump back onto the table.That is because the energy that you had by virtue of the height above the floor is transformed into the glass moving faster and faster as it falls. It hits the floor, it stops. Some of that energy is used in breaking the bonds that held the glass together. Some of it is converted into the movement of the glass pieces skittering around until they come to a stop due to friction.Some of it is caused just by the directed motion of all the atoms moving together in the glass getting jumbled up and moving around randomly. Atoms moving around randomly is what heat is. I don’t even think that changing the name of thermodynamics to ‘heat and movement,’ which makes it sound a little less obscure, is really the whole story. Because this applies to any conversion of energy from one form to another, whatever that is.For instance, if you charge up a battery, it takes a certain amount of electricity to power the battery charger. The battery charger gets warm, so some of that heat is lost. The current flows into the battery. Some of it warms the wires up slightly, so that gets lost.When it gets to the battery, some of it is used to convert the chemical energy into stored energy. But the battery also gets warm, so that dissipates a bit. When you use that battery to run a little electric motor, once again, you’ve got the same thing. There will be a little bit of warmth in the battery as the actual conversion takes place.There’s going to be some heat in the wires from the current flowing through their resistance. The motor itself will get a bit warm. Through those stages, the same thing applies when sunlight shines on the leaves of a plant. It converts chemicals in the plant into sugars, which store energy. When you eat those plant products, you get energy into your body.When you think, type, ride a bicycle, or do anything, as we all know, you get hot during exercise — you sweat and lose heat.So how does anything happen? It happens because the Earth isn’t a closed system. The Earth is constantly taking in and losing energy. It’s taking in high-quality energy—short-wavelength radiation from the sun. That is being converted in one way or another: either by plants, by warming the atmosphere, which creates air currents and winds, or by evaporating water from the ocean, which rises and forms clouds. Then that falls to the ground and runs downhill in rivers.All of these circulations of energy are coming from the sun. Then approximately the same amount of energy that arrives every day is lost to radiation into space. Of course, the debates about global warming stem from the fact that, with a higher concentration of carbon dioxide and methane and other gases in the atmosphere, the rate of radiation into space is slower, leading to a gradual temperature rise. There are probably all sorts of different processes at work to complicate the overall picture.Yeah, like the oceans are a big sink of carbon dioxide, aren’t they? They release carbon dioxide into the atmosphere as temperatures change.Yeah, which creates other problems because then they become more acidic, disrupting coral reefs and the functions of the algae. So you’ve got a very much more complex dynamic system.It’s presented as a straightforward thing, but it’s not, like any complex system. It’s hard to pinpoint one strand and say, ‘ This is it. ‘Yeah. The energy that we’re using from coal or oil, or natural gas is energy which has come through that same process, has come from sunlight, which was converted into sugars and other high-energy chemicals in the leaves of plants 300 million years ago, which are then buried under the ground and stored there for 300 million years. Then we’ve blasted through it in just over two centuries.Once again, this is a key point because, whichever way you look at it, we have used the majority of the readily available supplies of these things. People argue, but it’s really only a matter of detail whether we start to feel the pinch in 10, 20, 50, or 100 years. But it’s obvious to all of us.At some point, it’s inevitable as the costs of extraction increase.Yeah, in case we were wondering, it’s clearly the case with the rises in fuel bills of all kinds over the last year, the previous year, and the previous decades. This is a process which is obviously accelerating.It doesn’t help when we blow up certain pipelines carrying fuel from one place to another…Yeah, absolutely. That’s dissipation of what has already been harvested before it’s even been used, which is the most extreme form of wastefulness. But the entire business of warfare and modern industrial conflict is squandering energy at a huge rate.I was just doing some back-of-the-envelope type calculations. I looked at a figure I found for the conflict in Gaza, which was that a little over a year ago, it was estimated that about 70,000 tonnes of bombs had been dropped on Gaza by the Israelis in the course of that war. Of course, we’re now over a year further on, so that’s probably more like 100,000 tonnes.Probably underestimated anyway.It’s probably an underestimate anyway, but even that would be three times the number of bombs that the Germans dropped on London in the Blitz. Then you’ve got something that is obviously a similar order of magnitude in Ukraine, or probably much larger, given the area of the conflict.But just taking that 100, that 100,000 kilotonnes of bombs: a kilotonne of explosive is equivalent to a million kilowatt-hours of electricity or of any other form of energy that you might be considering. That’s just the energy that’s actually in the explosives of those bombs.You could at least double it for the energy used to manufacture those explosives and the capability. You could double it again to account for all of the transportation from the weapons factories to the battlefield, from the point where they’re fired to where they’re delivered by missiles or aircraft or artillery shells. So we’re now up to about 400 million kilowatt-hours in that conflict.A typical household uses about 4,000 kilowatt-hours of electricity a year. In other words, that conflict has burned up the energy that would power 100,000 households’ electricity for a year. Clearly, this has been wasted. Not only has it been wasted, of course, because it has destroyed the embodied energy that went into building all the houses, apartment blocks, bridges, and roads, which are destroyed by the conflict.So we’ve got this energy squandering. At the same time, there are a lot of conversations around where people are trying to say, ‘But we really need energy for the level of prosperity that we have. We don’t want to live in poverty.’ You may not want to, but somehow or other, we’re going to have to accommodate ourselves to the realities of physics and geology.One way or another, this means we’re going to have to live consuming an order of magnitude less energy. We’re going to need to be harvesting that from the sun —current energy flowing into the Earth —and the difference between that and the energy dissipated into space.I contend that doesn’t mean we have to return to a lifetime of medieval or Stone Age poverty. This is something we’ll explore in the next episode —the various ways we could do that. But the short answer is that, for a start, we could stop the utterly wasteful and destructive, not to mention devastatingly inhumane, activities of warfare and destruction.Another is that we could generally stop squandering energy by manufacturing things designed to be thrown away. We could stop wasting energy on all this febrile rushing about in individual vehicles. We’ll do some sums to work out what that could involve.Insofar as there’s no discussion in the wider public discussion sphere about this, it is along the lines of, ‘Well, we’ll replace all of the petrol cars with electric cars.’ Well, quite apart from the fact that if we were serious about that, we’d have been going flat out to do it 20 or 30 years ago. All we’re doing is a bit of messing about in the margin.But apart from that, I expect you, like me, manage to avoid too much exposure to driving around on motorways in the rush hour or anything like that. Is that the case, Rob?Only when I have to, yeah.Exactly. You mean you avoid it?Yeah, where possible. The electric car thing is interesting because it’s advertised as zero emissions, but that can’t possibly be true. Unless all of your electricity that’s going into that has been generated by immediate sunlight, which obviously it hasn’t.Yeah, you’ve just moved the pollution to the power station. You could argue they have a certain amount of value. When you’re stuck in a traffic jam, an electric car isn’t using anything. When it’s crawling along, it uses less energy, whereas your petrol car still uses it when you’re stalled in a traffic jam. It’s using more energy per mile when you’re crawling along at walking pace.It also made the car very expensive in the process!But leaving that aside, part of the total solution, which would make all of our lives better rather than worse, is to re-evaluate how much moving around we really need to make. There’s obviously great scope for getting whatever amount of work is necessary done without everybody having to rush in the same time slot to get from there.I feel like this has happened a bit over the last few years, since all the lockdown shenanigans...Yeah, probably 1% to 5% of the way that it needs to go.It’s just when you go to the supermarket and you buy some apples and they’ve come from, I don’t know, South America or somewhere. We have apple trees here. So it’s not just people moving about. I’m very wary of these top-down diktats and 15-minute cities. We’re not for any of that, but especially the movements of things. If we can minimise the movement of things you’re buying locally, support things made locally, and support local industry in the process, surely that’s a big thing.Yeah. When you buy milk and it came from another country, for instance. There’s plenty of scope here. This is something that we’re all going to have to look at.Apart from that, I thought we’d just have a quick review of contemporary global events.Just before we do, I was thinking about the amount of energy required to operate an AI data centre, because it appears to be quite a lot. Something like eight times as much energy is required to query an AI tool as it takes to do a Google search. There’s a big investment going on in these data centres. So again, it is a case where we’re told one thing, but then there’s unlimited energy and resources for other things, like AI and warfare. Or like travelling around in private jets. I don’t see any leadership coming from the top, which is the issue. Nobody visible is living it. They’re just telling us what to do. Until someone lives it, I can’t get on board with it.Yeah. Or like cryptocurrencies. Yeah. Yep, fair comment.What’s been going on this week then?Current EventsIn a way, it’s the same, the mixture of the same, except the main actors keep doubling down. We have had a much-trumpeted peace plan from Donald Trump for Israel, which is, of course, immediately violated, with each side blaming the other for the breakdown of the ceasefire and the failure to follow through. So once again, it’s the picture as before.In Ukraine, there’s been a major development. In the two major towns, Pakrovsk and Kupiansk, there have in each case been 5,000 or so Ukrainian soldiers entrapped by being surrounded by Russian troops, or at least having all their possible escape routes and supply lines cut by Russian control.I don’t know whether you’d heard that Putin announced he was prepared to observe a six-hour ceasefire in both cases and to provide safe passage for any Western journalists who wanted to go there and see what the immediate situation on the ground was. Had you heard that?I’ve not, no.A lot of people haven’t. It was not very much reported. Of course, the proposal was rejected by the Ukrainians. So we’ve been deprived of the opportunity to find out those realities. But what is interesting to me is that as I watch this, it’s pretty obvious which way the conflict is going.The Russians have far more troops. They’re losing them at a much slower rate. They’re still recruiting volunteers without having to conscript. Whereas the reverse is the case on the other side. Ukrainian losses, by estimates, range from 7:1 to 20:1 in terms of casualties per Russian casualty.I know that many Western outlets report the opposite, but that doesn’t add up. Plus, they’ve got very exhausted troops, whereas the Russians keep circulating them. They’ve burnt through most of the supplies of arms and ammunition and vehicles that the West have provided them with.Although the Russians have taken losses of equipment, they’re plainly completely outproducing, in terms of ammunition and all kinds of weaponry, the entire Western group of nations put together. So there’s only one way that the conflict can go.Once again, the Western media tries to portray the Russians as being the ones who are reluctant to talk, whereas as far as I can see, they’ve said over and over again that they would sooner settle it by diplomacy than on the battlefield. But if they can’t have what they laid out at the outset as their clear objectives —namely, that they were not being threatened by a hostile power right on their border —then there was no other eventuality up for debate.So this is just moving on and on. The European leaders and the British leaders still seem stuck in this, a fantasy world of thinking that somehow the tide can be turned. Sooner or later, they’re going to face the reality that this is not the case. How they cope with that, or how the population in general is going to cope with that reversal in position —that acceptance of the reality on the ground. Have you got any thoughts about that?No, it’ll be interesting to see how the narrative and propaganda around it changes. Because these people also control all of the major news outlets. You get this psychological nudge operation. You can tell when the tide’s beginning to turn. It was the same during the COVID period, when all of a sudden, medical products went from being fully safe and effective to only partially safe and effective. There was just this nudge. It transitioned over time. I see the same thing happening.Yeah. Well, the other big thing, of course, is that Virginia Giuffre’s book, Nobody’s Girl, has been published and has become an instant worldwide bestseller. Have you followed any of the commentary about this at all?No.Okay, well, I bought a copy and I’ve read it. It’s a very harrowing read. There are many things that are unpleasant to face. One of them is that it’s not a matter of merely rich and powerful people having sexual escapades with young, poor, vulnerable women and girls. But it’s the brutality and the nastiness of it. It is a genuine infliction of pain and suffering, which is extraordinary.In the circles that I’ve lived in my entire life, and I would have hoped that everybody did, sex was something which was, as one young woman put it to me years ago, a really groovy way of being nice to each other. The idea that people get a kick out of using it to be horrible to others is hard to face up to.But regardless, the book names a number of people. It certainly highlights their involvement, whether there are particular accusations of sexual misconduct. There are very direct accusations against unnamed individuals. For legal reasons, but there’s enough information there to tie up with other public-domain details to identify those people.This is going to reinforce the demands that all the material gathered by the FBI in its investigation be uncovered and that the people concerned be held to account. Because quite apart from people’s outrage against the nature of the crimes, the main outrage is about the one law for the rich and another for the poor syndrome. Whereby rich and powerful people can just flagrantly ignore the legal system and ignore any norms of civilised behaviour, and walk away with complete impunity.That obviously is a kind of injustice which applies not just to sexual indiscretions, but it applies to fraud and theft on a grand scale and all manner of things. When I look at all these different threads, the conclusion I come to is that there are all manner of fault lines that have been hidden and are becoming increasingly clear.Some people are more exercised by, for instance, the sexual scandal. Some people are more exercised by the abuses of the financial system. Some people are more exercised by the horrors of warfare. Some people are more exercised by the growing, completely unnecessary and highly destructive gap between the ultra-rich and the mass of the population.All of these things are coming to the boil. This is quite apart from the pressures imposed by rising energy costs, declining output, vanishingly adequate supplies of raw materials from mining, and population pressures. All of these factors are coming together. One or the other will trigger an avalanche. Then it’s going to spread over into the others.So it’s going to be pretty dramatic in the coming years, possibly even months. But my conviction is that there is at least a possibility of something much more positive arising out of this. So we do live in interesting times.There’s a lot of negative energy about it, isn’t there? It’s very easy to get wrapped up in that. But there is an alternative route of focusing on what we do want to create or co-create and move towards. There’s a lot of positive energy around that as well. So yeah, keep standing in the light.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts and support my work. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.Today, we’re going to talk about how wealth is seemingly represented by weaponry and other destructive elements of society, and relate that to some current events. So what do people need to know?“Ilth” and the Futility of WarWell, it’s worth reminding ourselves of the definition we settled on: wealth is what people want. Obviously, people do want weapons, and therefore you could indicate that that’s a form of wealth. Certainly, in accounting, we add up all the financial transactions to get a number —the gross domestic product (GDP). The prevailing attitude is still that this should be regarded as some proxy for human wellbeing. Obviously, if you’re making huge quantities of weapons, it adds to the GDP. Particularly if you use the weapons and destroy a lot of things, and you then have to spend more money rebuilding them, that adds to GDP too, which highlights the absurdity of this as a metric.I think ”illth” is a better word for things like weapons, ammunition and military equipment; wealth being a measure of wellness, and ills being a measure of illness. So with illth, it should be a negative and subtracted from the metric. But even if we get away from money, what does that represent? Well, apart from enormous margins of profit, which are simply being funnelled into the pockets of the people who are the ultimate beneficiaries of the arms manufacturers. The rest of the money is going to pay people to design the weapons, to pay people to manufacture the weapons, and to buy the materials that go into their manufacture and to pay for the energy that goes into the manufacturing process.But more importantly, it goes into the energy in the explosives and the propellants. All that is energy which could have been used for something else. It could have been used to delay the transition away from fossil fuels once there are no longer any economic sources of them, quite apart from the pollution aspect. So this is truly tragic, and that’s before we’ve even gone on to the humanitarian issues of the pain and the suffering and the bereavement that this causes.Another thing that I’ve been increasingly reflecting on over the last year or so is that warfare itself is becoming futile. Even within the mindset of regarding tanks and personnel carriers and bombers and missiles and fighter aircraft and all the rest of it, even if you regard that as an investment, it’s only an investment if once you’ve got it, you can use it over a period of time to do the job that you wanted to do, to get something that seems to the weapon owner as being worthy of the investment in terms of a result.What we’re plainly seeing is that enormously expensive pieces of equipment get put into the battlefield, and a large number of them get destroyed very often by very cheap drones within a matter of days or weeks. Sooner or later, even within the calculations of people who think that warfare is a worthwhile operation in the first place, even within their calculations, it must get to the point where, hang on a minute, this looks self-contradictory. What do you think?I was wondering whether warfare has been largely futile for pretty much a hundred years, other than as a way to cull the population, if that was your goal. Perhaps the Vietnam War was a good example of a war that was futile, not winnable, even with the unlimited arms budget. So I don’t think this is necessarily new. It’s just an extenuation of a process that’s been happening for a while.Yep. Obviously, the whole thing, from my point of view, and I would say from the point of view of anybody who wasn’t actually insane, the whole enterprise is disgusting. We just shouldn’t be doing it. There should be more in the way of a convincing attempt to avoid it than there seems to have been over the last few years.But what I’m saying is that the drone warfare that we’ve seen in Ukraine has really shifted the balance entirely. In Vietnam, the slaughter on both sides was horrific, but the equipment and the weapons that went in there were reasonably durable, whereas we’re seeing no durability at all on the battlefield in Ukraine. This is going to be increasingly the case going forward.Current AffairsI don’t know whether you saw or not, but there was an article in The Guardian revealing that Boris Johnson had received a kickback of £1 million (or a present or a consultancy fee) around the time that he went over to Kyiv and strong-armed Zelensky into backing out of the peace deal that was on the point of being signed. This donation came from a British man who lives in Thailand, who is apparently the largest shareholder in three UK arms manufacturers.So I don’t know how widely this has been disseminated, apart from amongst Guardian readers and some followers of George Galloway and other alternative news channels on the internet. Had you come across this at all? What is interesting is how much effort will be made to hold him to account for that in some way, or to provide an explanation.I’d not known. It doesn’t surprise me at all. I don’t think there is any holding of accounts of people allegedly at the ‘top’. It seems that they just do what they want with no consequences. That would be my prediction if I were a betting man.Yeah, mine too, I’m afraid, but we’ll watch this space.The second thing that’s happened is that there is supposedly a peace deal for Gaza on the table. Whether this comes to anything or not, we’ll just have to watch this space. Given the record of Israelis holding to any agreements they’ve made, personally, I find it very difficult to raise any optimism about the likelihood of anything good coming from this, apart from hand-waving.Another interesting thing that has happened this week is that China has really taken the gloves off by imposing export restrictions on rare earth minerals and the high-performance magnets made from them, as well as on the technology for processing and refining them and making these magnets. Bearing in mind the depletion of the US and Western arms because of the Ukraine conflicts and the Israeli conflicts and the far lower output of the weapons manufacturers in the States and the importance of these magnets for just about the entire range of high-performance modern weaponry, it looks like that’s a serious torpedoing of the ability to replenish the stocks, which I can only say is a good thing.Of course, there have been howls of outrage and accusations of unfair trade wars and so on, but the Chinese clearly know what they’re doing.So bearing in mind what I’ve said, it is potentially a real game-shifter. Of course, more or less every day this week, there’ve been conflicting stories about whether America is going to provide Tomahawk missiles to Ukraine and what impact this would have on the war. There have been the usual contradictory statements from one day to the next, along with ambiguities from Trump.It now looks as though the latest thing is that he’s said he’s not going to send them, which is just as well. It couldn’t possibly be anything but catastrophic, I would say, if they went there and started firing missiles which have a nuclear capability. Of course, until they land, you don’t know whether it’s got a nuclear warhead or a conventional one. But the only point of Ukraine having them would be to make more attacks deep inside Russia.Zelensky’s gone to Washington. It looked like he had a bit of a low-key arrival. There was very little pomp and ceremony, which wasn’t a good omen, according to people who read these signs. He’s due to meet with Donald Trump today. So at the end of that, we will know whether the Tomahawk missiles are on or off, and we’ll know what statements, if any, have been given about how much extra support he can expect from the United States. So this will be interesting, and we’ll see what the implications of that are and what people make of it over the next few days.Of course, the much more significant thing is that yesterday, Trump said he had a long phone call with Putin and that they’re going to arrange a face-to-face meeting, possibly next week, possibly in Hungary. That is a bit of a smack in the teeth for Zelensky. Let’s hope that it’s a helpful sign. Because of the erratic nature of Trump’s pronouncements, it’s very difficult to know for sure where he’s going, what he thinks, or how much is a bluff and how much he knows himself.Of course, the big question is what is going on behind the scenes? Who has leverage over him? How strongly that leverage is being applied, how much of what we’re seeing is a result of him trying to accommodate that, and how much of it he still is a loose cannon from the point of view of the intelligent deep-state bureaucracy.Yeah, I don’t know about Ukraine, but I think regarding Israel, he definitely seems to be a controlled actor in the process. People like Miriam Adelson seem to have given him many billions during the election.Right. Well, things are being revealed more candidly to more people, and this is an accelerating race. The other thing that’s happened is that in Germany, there’s been the most enormous anti-war demonstrations and demonstrations against Chancellor Mertz.Sooner or later, the ruling elites of Britain, France, Germany, and Europe in general are going to have to make some accommodation with how far out of step they are with their populations at large. Rather worryingly, so far, it seems to be more and more draconian crackdowns. It’s difficult to know how far that will go and to what extent it will be effective in the long run. So we’re definitely living in interesting times.Perhaps a little bit too interesting!Yeah, perhaps. Okay, so assuming we’re here next week, the focus of next week’s talk, I want to look at the role of energy and what could be possible as we move out of the age of being totally dependent on fossil fuels, which is something that’s going to unfold in your lifetime if not in mine.No doubt at great cost to us peasants.Yes, okay, we’ll see.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts and support my work. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We’re talking about inflation today. I was talking with my wife Linzi the other night about how we basically can’t go to Aldi, which is our local supermarket, and spend less than a hundred pounds, no matter how hard you try these days. She was like, well, where does this end? Because people can’t carry on doing this. I said, “It ends with the complete controlled demolition of the financial system and digital serfdom!” But that’s just my take.Yeah, well, it’s very interesting to know to what extent it’s a conspiracy and to what extent it’s a cock-up.Anyway, I was thinking about it because I did some calculations, and they surprised me. For one thing, I’ve looked at the prices of various things in pounds and in gold. I’ve also looked at the prices of things measured in terms of hours or minutes or weeks, or years at minimum wage, according to what the scale is. Some of those results surprised me, but they’re quite illuminating.The calculation that I did, which brought me up to thinking about all this in more detail, was a reflection that when I went into the shops, if I pay cash, which I try and do as much as possible, as a rule, anything less than 50p, I tell them to put it in the charity box.I don’t feel I’m being overly generous there. So I thought, ‘What is a pound worth these days?’ I tried to compare it over the period across my lifetime. For many people listening, the time when I was a schoolboy might as well have been the era of cavemen or dinosaurs. But it’s real for me!I lived through the 1950s, and there were occasional comments about how prices had changed since the war. However, prices were generally stable throughout my childhood and university years. There was perhaps a slow, gradual erosion. The two-ounce bar of chocolate stopped saying two ounces on the front, and it very imperceptibly got smaller. But inflation wasn’t romping away; prices were on the whole fairly stable.The smallest coin in circulation was half a penny, half an old penny that was. There were 240 of them in the pound.So, how does a pound these days compare with that? The short answer is that throughout my childhood, a pound was worth 2.9 grams of gold. Now that had gone down from 7.3 grams of gold in 1914. By 1930, it was 4.2 grams of gold. By 1945, it was 2.9 grams of gold, which was stable through my childhood.There was the frightful humiliation and shock of the devaluation of the pound in 1967 when the exchange rate was reduced from the post-war $2.8 to $2.4, valuing the pound at 2.5 grams of gold. So that’s actually not very much difference. There were shrill cries of horror about what a humiliation this was, how incompetent the Labour government under Harold Wilson was to have allowed this to happen; but it was actually the accumulated effect of the disparity of economic performance in Britain compared with the United States over 23 years from the end of the Second World War.Anyway, now in 2025, any guesses how many milligrams you get for one pound?Not many. 0.2 grams?It’s actually now 11 milligrams. That’s 0.011 grams. So that’s 11 milligrams of gold for a pound now, which ironically is almost exactly the value of one penny in my childhood - and a penny was then valued at 12 milligrams of gold. So in other words, a pound now will get about the same amount of gold as one penny’s worth in 1960.Again, the reminder that that was not a hundredth of a pound, it was a 240th of a pound. Anything smaller than a halfpenny obviously didn’t exist. Well, there were farthings (a quarter of a penny), but they had practically stopped being circulated.So I then started looking at some other things. I thought, “What’s the minimum wage?” I was actually quite surprised that minimum wage is now, do you know what it is?About £15 an hour?You’re closer than I was. It’s £12.21. For some reason they call it the ‘national living wage’. I don’t know what that’s supposed to mean. For a 40-hour week, that comes to £488, which certainly makes the old-age pension look a bit stingy.In 1960, there was no formal minimum wage in place. Except for catering workers and agricultural workers, because those were the groups that held the least bargaining power. So presumably, I would have imagined that that was brought in by the Labour government in the post-war years. Those workers had a legal minimum wage. I’m not quite sure what it was.But it was probably fairly close to the de facto minimum wage everywhere else, which was worked out by bargaining of one sort or another between employers and employees. For unskilled manual work that was five shillings an hour, 25 pence in today’s money. So for a 40-hour week, you got £10 a week. What’s your immediate reaction when you hear the idea of people living on £10 a week and how do you think the £488 minimum wage for a 40-hour week now compares with it?It’s not a comparison. It feels like I’m trying to compare apples to oranges in my brain.Well, you are in a way, and I’ll explain why in a minute. But in the first place, most people, even when I tell them what I was earning as a young graduate salaried worker, they go, “How did you live on that?” I reply, “That was about four times as much as a bus conductor was making! You could live quite well on it.”But the thought is that that must have been incredibly difficult. Well, in fact, very few adults running a family earned as little as £10 a week, but they probably worked an extra 10 or 15 hours a week in overtime. Overtime was in those days almost universally paid at time and a half.You’d be getting seven and sixpence an hour instead of five shillings for what you worked over 40. So most people in unskilled labouring jobs would probably take home about £15 a week. That of course was under the income tax threshold. So they’d be getting that net, which is another point. At £488 today, I think you’d be paying 25 pence in the pound tax on half of it, wouldn’t you? You’d definitely be getting some deductions.I then calculated what that is worth in gold. So, your £10 a week in gold would be equivalent to 29 milligrams. The £488 a week minimum wage now works out to be equivalent to five milligrams of gold. So in other words, you’re earning less than a fifth of the amount measured in gold. So you’d have to be making something like 3,000 pounds a week these days to get the equivalent of a £10 a week minimum wage job in 1960.Everyone feels they’re trying to run faster just to stand still.The Red Queen in Alice in Wonderland is quoted more and more frequently these days, and it’s plainly the case. How does that compare with some real purchases? So I did a few things. I looked at a house, a pint of beer, a pint of milk, and a litre of petrol.I try not to think too much about the inflation on a pint of beer...Well, funnily enough, it’s not too bad in absolute terms. In 1960, a pint of beer in a pub was two shillings, that’s ten pence in modern money, which sounds brilliant. I put down for the price now £5, so it obviously depends on the pub and the city and everything. Is that still about right in Sheffield?I’d say it’s a reasonable average.Right. OK. So the two shillings pint of beer in 1960 would be 20 minutes’ work at minimum wage. The £5 pint of beer in a pub today is 25 minutes’ minimum wage. In fact, it’s quite similar.I did a similar exercise with some of the other ones. The interesting one was housing. So, in terms of gold, I was surprised to find out it’s not nearly as different than I expected. I took a typical three-bedroom family house in 1960 as being £3,000. Obviously, it depends on how well-appointed the house is, its condition, and its location, and it will vary quite widely. But that would be quite reasonable for a modest family house in Winchester when I was growing up. Similar houses now change hands for about £600,000, which sounds like a walloping increase.However, if you measure it in gold, in 1960 that would have cost you 8.7 kilograms of gold. That £600,000 would have only cost you 6.3 kilograms. So in terms of gold, it has gone down a bit. However, if you look at it in terms of minimum wage, it’s equivalent to six years of continuous work for the value of that house in 1960. Obviously that’s hypothetical because if you’re on minimum wage, you wouldn’t be buying a house. You wouldn’t have anything left over after your basic expenses. But it’s helpful to get the ratio.Today, of course, it’s more like 33 years of minimum wage, which explains why housing has become unaffordable for people. Bearing in mind, even people earning six times the minimum wage would still find it unaffordable. They would have found it as unaffordable as the people who were on £10 a week in 1960.As I said, in 1968 it was 2.5 grams of gold to the pound. By 2006, that had gone down to 91 miligrams. In 2009, it had gone down from there to 28 miligrams. That was just after the financial crash, quantitative easing and so forth.We’ve seen a lot of that in the last five years as well.Yes, well exactly. At the end of 2019, just before the so-called pandemic, the price of gold was still at 28 miligrams of gold per ounce. By 2023, that had gone down to 20. Over the course of the pandemic, it lost nearly a third of its value, which is not surprising, given that a lot of money was printed and nobody was actually doing anything to earn it because they weren’t allowed to. What is interesting is that it’s almost halved in the last two years. So, if losing 50% of the value isn’t hyperinflation in two years, it’s certainly not far from it!It explains why I can’t spend less than £100 at Aldi for just a few baskets of food!Yeah, absolutely. Anyway, there we go. Those are all things that are worth reflecting on.Obviously we don’t venture into the realm of financial advice, but if you do have large amounts of liquid assets in the form of cash, keep an eye on that because it’s dwindling away. You can probably buy less gold with it than you could a month or two ago, even.The Multi-Polar WorldYeah. I think we mentioned last week that the parallel financial system being set up principally by Russia and China, the other members of the BRICS group and basically the whole of the rest of the world, is clearly moving towards a gold-based exchange arrangement.My prediction is that these trading arrangements are in effect a return to the gold standard by stealth. It’s not being announced as such. That’s what it will relate to in reality. They’ll still be talking about their own currencies. Over time, the settlement arrangements have returned to a full circle, reverting to the pre-1914 arrangements, where London was the primary centre at that time. Later, it became divided between London and New York, and possibly Frankfurt as well.But where the gold holdings were stored, they were simply transferred between one ownership and another. That is what’s happening with the gold exchanges in Shanghai and in various other places. The development is that these are also going to include various other strategic metals as well as gold. So that’s a very interesting development.Technics and CivilisationAnyway, I wanted to say a bit more about this book. As I said, it’s called “Technics and Civilisation”. What Lewis Mumford meant by the term “technics” was not just technology, but also the entire political, economic, and financial structure of society, both nationally and globally. There’s a historical view. Then the last section was a reflection on essentially what’s working, what’s not working, and how things might work.Now, he wrote this in 1932, just after the Wall Street crash in the early years of the Great Depression. It’s very interesting because the book had a second edition in 1963, and he wrote a foreword to that, saying “I was wrong about a lot of things. I was optimistic that things would get better, but the last 30 years have actually seen things go from bad to worse in a lot of ways.”It’s interesting that 1932 was when Aldous Huxley wrote “Brave New World”. In the early 60s, he wrote “Brave New World Revisited”.Huxley said, “In the novel, I projected this as 600 years in the future, but in fact, we have practically got there in 30 years”. It wasn’t until a decade or so later that it became obvious to many of us that the prosperity was suddenly going into reverse.This particular edition was released in 2010. So that was just after the global financial crash. There is a foreword written by someone else stating that the ideas in this book are worth reconsidering. I just wanted to read one passage, give you a flavour that sums up how visionary some people were, even in those dark times of the 1930s depression, where he was talking about the structural unwisdom of the entire system.He says, “At the same time, the conception of a normalised consumption acknowledges the end of those princely capitalistic dreams of limitless incomes and privileges and sensuous vulgarities whose possessions by the masters of society furnished endless vicarious gratification to their lackeys and imitators. Our goal is not increased consumption but a vital standard, less in the preparatory means, more in the ends, less in the mechanical apparatus, more in the organic fulfilment.”“When we have such a norm, our success in life will not be judged by the size of the rubbish heaps we have produced. It will be judged by the immaterial and non-consumable goods we have learned to enjoy and by our biological fulfilment as lovers, mates, parents and by our personal fulfilment as thinking, feeling men and women.”You could transplant that to today, couldn’t you?You could indeed. Anyway, that’s worth doing. The only thing I’d like to say about the world is that it’s going on much as before. On all fronts, despite maybe a bit of arm-waving, the powers that ought not to be are doubling down on their lunatic behaviour.One thing that I found particularly interesting is that there’s an annual think tank called the Valdai Discussion Group, held in Russia. There are a lot of business leaders, politicians and journalists there from all over the world, although not so many from the Western world, surprisingly enough.Putin gives a keynote speech every year, or certainly most years. He spoke for over three hours this time, very light-hearted and quite humorous in places. Then he took questions and answers. He took any questions that came up and responded.Whatever you think of him and whether you agree with him or not, it’s healthy to examine what he says thoughtfully and evaluate it as best we can. So I thought, “I wonder what the BBC had to say about this.” So I went to the BBC website, I searched for Valdai, and a page of results came up. There were a couple there with things about Putin giving a speech at Valdai, and the headline in the synopsis seemed quite positive.I thought, oh, that’s good. But then I started to read them and I thought, hang on, this doesn’t sound right! I looked and the two top results for that search were 2013 and 2015. There was nothing whatsoever about this event that happened last week! That’s at a time when, to my mind, we should be doing our very best to understand what his view of the world appears to be, rather than either hiding it from ourselves or somebody taking the opinion that it’s not worth drawing anybody’s attention to.As usual, it is propaganda by omission in this case.Yeah. Okay. Well, assuming we’re still here, we’ll meet again sometime next week.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.So we thought we would pass comment on current events today. What’s going on that people should pay attention to?Well, probably at the top of the list would be alleged incursions by Russia into the airspace of various NATO countries. We briefly discussed this a couple of weeks ago when the drones appeared in Poland.All of the people that I regard as sensible commentators are now firmly saying what I strongly suspected at the outset, that this is a straightforward false flag operation. It had nothing to do with the Russians at all. They were Russian pattern drones. None of them were armed.They were all drones that are used as decoys to confuse the air defence systems. The house that was damaged was damaged by a missile fired from a Polish warplane which shot a missile at the drone, which landed on the house instead. Since then, we’ve had screaming headlines, I certainly saw on the newsstands, front page headlines in the Daily Mail about alleged Russian planes violating Estonian airspace.Russians have firmly said that they definitely did not deviate from internationally agreed flight paths and encroach on anybody’s airspace. Then just yesterday we had three drones appearing over Danish airports, causing a lot of disruption. Actually, nobody knows where these came from, although the Western media are firmly saying this is a Russian provocation.What strikes me about these stories is that they’re monumentally implausible. Russia would have no conceivable benefit by aggravating any NATO countries. They’re focusing entirely on the objectives that they stated at the outset of the Ukrainian conflict. They’ve not budged from that. If you actually listen to what they’re saying, it’s an entirely understandable concern. You may or may not agree with them, but most of the comments about it are complete fabrication and speculation rather than spin put on the interpretation. Unfortunately, people are so ready to be stirred up on nationalistic or ethnic divisions. To me, the fundamental thing is that we’re all human beings. A lot of the conflicts are not even between ethnically or genetically diverse populations. Even the most genetically diverse populations on earth are still human beings. The fundamental thing is the brotherhood of the entire human family.Yes, they get us punching sideways to prevent us from punching upwards.People fall for it so readily. It’s really perilous in an increasingly nuclear-armed context.There must be some people who are absolutely itching to fire a nuclear weapon. They talk about tactical nukes as though this were something very minor. A tactical nuke is about the size of the ones that destroyed Hiroshima and Nagasaki. So it’s not trivial. I don’t suppose you’ve ever seen the movie called “The War Game,” which was made in the 1960s? It was intended to be broadcast on television, although they decided to pull it. But it did have a very limited showing in the cinema, I saw it when I was at Cambridge. The scenario they had for how the war started is precisely that: firing a tactical nuclear missile, which then triggered a much larger exchange. What was depicted in the movie was a very limited strategic exchange that was enough to bring the fabric of society to a standstill.A cascade of events. It’s not just movies, I was thinking of Daniel Ellsberg, who wrote The Doomsday Machine; he makes a very good case for the cascade of events that would happen if that were to be triggered.Yeah, there are plenty of accounts, but obviously, there are people who are making increasingly reckless choices in the face of this. Israel apparently has 90 warheads, and it seems to be the one that is most likely to act recklessly.Douglas MacGregor has just been speculating that they’re gearing up for another attack on Iran. I would have thought Iran had demonstrated conclusively that this would unleash a decisive response.But that doesn’t stop people from seriously considering it. Then many in America believe that China must be contained in some way. They should have thought that before they built the fastest-growing economy in the world.Just shows what you can do, doesn’t it?One of the things that occurs is that there seems to be absolutely zero strategic thinking in any of the Western nations, including the United States. They seem to be rushing around trying to apply fixes to something or other without any long-term vision of how this might work out, how it is likely to work out, how it could possibly work out and what they would like it to work out to. That is really the picture across the entire board. I seriously wonder what private communication has occurred between Putin and Trump.I don’t know how high Putin’s expectations were of getting anywhere with normalising the relations, but that seems to have ground into the sand. It looked very promising to me that, whatever one thinks of Russia, most of us have a very unrealistic picture of it. We imagine it’s very much like the Soviet era. We don’t realise the progress that has been made economically and socially within Russia over the last 25 years. For one thing, but regardless of what differences of strategy and philosophy or anything else, we’re all living on the same planet. We need to find a way to get along with each other. The first one is to actually listen. The dogged refusal to listen or even to accurately report what they do say is extraordinary.It’s like any relationship, though, isn’t it?Yeah. So the public position is that Trump is more or less washing his hands of Ukraine. He’s saying if the European countries want to buy American weapons and give them to Ukraine, they’re welcome to do that. None of the European countries have got any money to buy the weapons with, we can’t even afford them.Not a problem, for weapons we just magic up more money!Yeah. Which just impoverishes everybody by devaluing the currency. So the only hope is that the American economy and the economies of the British, French, and German countries tank so conclusively that we can’t pursue this. The trouble is that the personnel and weapons are already in place. The question is whether economic collapse will overtake the military situation.There’s no doubt the big picture is that the dollar-based global economy is coming to an end. I probably sound like a broken record because I say this every broadcast, but it’s becoming increasingly obvious.So if you’ve missed any of the last 17 broadcasts, we will repeat the message until it’s clear!Yeah. The developments with the Chinese setting up gold exchanges in various places, including Saudi Arabia, are essentially facilitating what is, in all but name, a gold-based international trade. It’s just returned to exactly what it had been from the time of the Venetian bankers up until really up until Nixon took the dollar off the gold standard because effectively when the dollar was backed by gold and when there was a kept commitment to retain its conversion value at $35 to the ounce, then effectively World Trade was in gold, even if it was denominated in dollars.Of course, that was the origin of the wealth of the city of London; they held gold, which backed the sterling pound, which enabled transactions to be made in that. So we’ll definitely be returning to that. You can draw your own conclusions about what form you want to store your own wealth in. We won’t elaborate on that, but our reasoning is fairly straightforward. Then not only are they, there are certainly elements in the United States establishment that would want some conflict with China.I would have thought the Chinese had just decisively demonstrated that they’re ready for anything. Now they’re making very ostensible warlike noises about Venezuela.Yeah, I’m like guys, come on. We’ve had this psy-op a few years ago. Do we have to go through it again?Yeah. Well, the excuse that they are pivotal to the supply of drugs to America doesn’t even bear thinking about. The majority of the drugs, as everybody knows, come from Colombia, Ecuador, and Mexico, all of which are firmly in the pockets of the United States.It’s never about what they say it’s about. That’s obvious.No, the most obvious thing to notice is that Venezuela has the largest oil supply reserves in the world, or among the largest. The question is whether the internal contradictions, whether financial or social tensions, which are endemic to the entire Western world, will overtake it before someone does something truly reckless. This is a pretty gloomy topic. Any other thoughts on this?It feels to me like we’re watching the controlled demolition of all these economies in real time. It’s a question of what’s going to happen first.One thing that is also significant is that there’s another current, which is the numerous ways in which our governments have been lying to us for years and years.In pretty much every way!Different people will have different wake-up moments. The moment that you’ve woken up about one really big thing that gets under your skin, you start looking at the others.That was 9/11 for me, realising that there was probably not the way it was presented.Can you remember which conversation it was that woke you up to that?Yeah, I was a student in Sheffield, and there was a documentary that went around. It was a series of documentaries that explored the fact that it appeared to be a controlled demolition, whether it was or wasn’t exactly, but it examined some of the aspects that didn’t quite add up about it. But that was 2006-ish.Yeah, well. This is getting a lot of coverage now.There are a lot of people realising, since the Charlie Kirk assassination, that Israel probably is controlling more of American foreign policy, or seems to be influencing more foreign policy decisions than they’d been led to believe..Well, exactly.Tucker Carlson has produced a series of seven in-depth programs on 9/11. He was one of the speakers at the three-day event, which was held last week over the 10th, 11th and 12th of September. They had very knowledgeable speakers discussing various aspects of it. Building seven, the two towers, the Pentagon. There’s been huge coverage about this. Whatever you think, what is really weird is that for something as important as that, it was totally taboo to even discuss it.That’s the point, isn’t it? If something is taboo, it’s worth looking at.I wanted to ask you, the UK government has announced that digital ID is going to be mandated at some point soon. That was announced in the last couple of days.There was certainly a petition saying we don’t want it, which I signed. I don’t know whether you saw it?I’ve seen it. Yeah, I should sign it. But yeah it looks like they’re gonna try and ram it through.Yeah.So we’ll see how that goes. It feels like there should be enough people who say no to it to make it not enforceable. We’ll see. But tying that back to the finance lens, it’s like if we are arguing that this dollar-based currency is gonna not going to be a thing anymore, then what are they trying to build instead? This move to central bank digital currencies is very much on their agenda. Obviously, the digital ID is the prerequisite for that. So yeah, it’s just something to be aware of.Yeah. It depends on whether the wider, more fundamental vulnerabilities are addressed before all this is in place. Yeah, there’s no doubt that there are very strong forces moving in diametrically opposite directions. Either one of them could prevent the other from happening.I would say the heartening thing is the rapidly accelerating and self-reinforcing state of the awakening process.Yeah. Thanks to COVID, there are more people switched onto the digital ID threat than would have been the case if they’d done it the way around and done digital ID first.Incidentally, Tucker Carlson stirred up a huge storm with the eulogy he gave at Charlie Kirk’s memorial service. I don’t know whether you heard about that? He pointed out the fact that Jesus said things that people in power didn’t like, and therefore they decided to kill him. Now, some people think that it’s a bit of a stretch to draw the parallel with Charlie Kirk, but the point he was making is that Charlie Kirk was saying things that powerful people didn’t like, and then he got killed. Whether you think that the analogy with Jesus was appropriate or not is another matter.He’s got a point, you know, as far as I know, Jesus was a maverick and a thorn in the side of the establishment; that much appears to be clear.I heard the other day that in conservative Christian circles in America, if anybody suggests praying for the children of Gaza, they’re told to shut up. The extraordinary thing is that people who seem to most determinedly identify as Christians don’t seem to actually adopt the core teachings of loving thy neighbour.It’s just the levels of indoctrination that we live under. I think you have to identify where these worldviews are somehow incompatible. When you’ve done mental gymnastics to support a worldview for long enough, eventually it’s going to crack. That’s an ongoing process for all of us.Yes, the point I was going to make is that the number of views these various dissenting critics are receiving on YouTube alone is phenomenal. There was a Tucker Carlson interview on another independent news channel. He talked a lot about 9/11, also about Israel, Gaza and Charlie Kirk. In just in a few days, it had 347,000 views. You know, many of these channels are gaining millions of followers. So I’d like to finish on a more positive note that the awakening is the only way to say it.Well, we’ve said this in the past, that the Matrix was both a documentary and a movie, wasn’t it?Yes. So let’s finish on that positive note.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We thought we'd comment on the state of the world and some goings on today that relate to Sovereign Finance. So what's been going on that people should be paying attention to?Well, there are lots of things that don't seem to be working. Rather than addressing them, our wonderful leaders seem to be simply doubling down. Some commentators think that Britain, France and Germany are all on the brink of civil war.Pouring more petrol on the fire in the process of talking about it...It would surprise me if it came to that. Once again, the trouble with civil wars is that they're probably more divide and conquer than actually overthrowing the causes of the problem.It doesn't benefit the proles. Also, we're not well-equipped enough for it.No, America, of course, is a different story. The assassination of Charlie Kirk this week has thrown that into sharp relief. I'll have a word about that in a minute.I have to admit I didn't know who he was until that happened. It was pretty clear that whoever fired that shot was a professional and made a professional-level getaway.Well, whether they were professional or not, they were certainly extremely competent. Whether or not there was any collusion in allowing them to get away is yet another question.Yeah, there were two guys right behind him making funny hand signals right before the bullet hits him in the neck. Lots of things that look a bit suspect.The thing that has come up for me is the extreme polarisation of the reactions to it. There are a few sane voices who are saying, well, you might or might not like what he was saying. But if we haven't got the right of people to express themselves and to deal with disagreements in a civilised manner by entering into a debate, then we're on the way down.Ultimately, a family has still been left without its dad.Yeah. I was generally aware of him, not of him personally, or the particular focus of his movement. But a few months back, I bumped into some videos of one of the meetings of his organisation. But we're still bumping up against these ‘left-wing’, ‘right-wing’ labels. Those terms are practically meaningless these days.Thinking back a few decades, the distinction was pretty clear. Right wing meant being conservative, basically wanting to keep things the way they were, which primarily means keeping the privileges of the elites in place and keeping everybody else down. Left wing was anything from mild socialism to extreme communism, but essentially at least arguing in theory for equality of something or other between human beings. At least equality of opportunity and equality of access to education, and at least a bare minimum material standard of life. I'd find it difficult to argue with that as a broad agenda, but of course, it doesn't always work out as well as that in practice.I quite like James Corbett's distinction where rather than left and right, it's actually uppest and downist, where uppest is your for more centralisation, more big power structures and downist is more towards anarchism.Yeah. Anyway, so to get back to the, as I said, the same commentators to my way of thinking were the ones who said, you know, shooting people is no way to resolve disputes, basically. Freedom of speech is a genuine good; in fact, it is essential for the proper functioning of society.We've been saying this on the show for ages as well, haven't we? You should go and listen to people that you disagree with, at least to try and understand what it is that they're trying to say.I do a lot of listening to people I disagree with. But anyway, what it threw up was the extremity of the polarisation, particularly in American society, but across the Western world generally, possibly even the entire world, for all I know. But apart from the few sane voices, the majority of the comments are either "Ha ha ha, he got what's coming to him. That's what comes of saying that you support the Second Amendment and people should own as many guns as they like." Then, on the other hand, you've got people going, "we've lost a wonderful person who was a great leader, he would have made a wonderful president of the United States at some stage." Taking such extreme positions doesn't bode well.No, the point to me is that anyone like this in the public eye shouldn't be endangered by visiting a university to give a talk.Yeah. Another notable thing is that yesterday was the 11th of September, which marks the 24th anniversary of 9/11. Over yesterday, the day before and today is a major conference on the events of 9-11. Were you aware of that? No? Exactly. It hasn't got much coverage in the mainstream media.Is this truth-based event of what really came to pass on that day? For people who have questions about how three massive buildings collapsed into their own footprint? And a missile-shaped hole appeared in the Pentagon?Rather than an aeroplane-shaped hole. Of course, it happened to take out the office where they were investigating the hole in the Pentagon's budget…You can't write this stuff can you? Or about how the steel girders apparently disintegrated, but two passports floated to the floor of Manhattan. Yeah, yeah, sure.If you wrote it in a novel, nobody would believe it.So apart from that, we've got Israel. Just when you think it can't get any worse in Gaza, it does. Just when you think Israel and their at least passive supporters in the West can't lose any more credibility with the rest of the world, it seems they do. Then they have an attempt at the so-called Houthi leadership in Yemen and certainly killed a lot of civilians there.It's desperate actions by people who are likely to fail at what they're trying to do.Well, I don't see how there can be any success. War orphans make great terrorists.Why did Hamas exist in the first place? Other than the fact that the Israelis funded it, but why did people in Gaza want to get their own back in the first place? You don't have to be a huge historian to work out that.Then of course, there was the attack on the Hamas negotiators in Qatar. There are two things. Well, three things about that. First of all, America arranged for them to go there to have peace negotiations, and then they got assassinated. Once again, it looks as it did with the Iranian situation, that America set up a meeting and that meeting was targeted for a lethal attack. Who knows whether that was deliberate or not? Yet again, the mere fact that there've been no cries of outrage from official sources in America shows how much under the thumb of Israel the American leadership is.My rule of thumb is that they lie about everything, so the truth is probably the opposite of whatever they're saying.Well, that's about the size of it anyway. Somebody pointed out that even the Mongols didn’t kill envoys or diplomats. That's just common sense, as well as established international standards of behaviour.Even people who raped and pillaged their way across half a continent did not resort to that kind of tactic.They didn't. It's also been a little while since the meeting in Alaska between Trump and Putin. As far as the Ukraine conflict goes, nothing much has changed.Trump's public announcements are pretty mystifying, apart from explanations along the lines of:* A, he's not very bright* B, he has no attention span* C, he's got no sophisticated knowledge of history or geopolitics or anything else. He's a real estate speculator and a TV reality show star.But you've also got to take account of the fact that there are manipulations by what you might call the deep state intelligence services and their associates who have been really controlling the actions of every president since Kennedy.So on the one hand, nobody knows what pressure or what leverage he's under. For another thing, he has to do the balancing act of keeping all his political enemies at bay, who seem to have significant legitimate grounds for criticism of him. Also, to keep his own supporters in line, who must be deeply dissatisfied by whatever progress they thought he was going to make towards their well-being.I don't think he cares about his own supporters, for what it's worth.Well, he's got midterm elections coming up at some point. I'm not an expert in American politics, but I would have thought there was a good chance that he'd lose control of both the House of Representatives and the Senate in those. If he does, it will be extremely constrained. So that's why he's got to pander to such supporters as he still has, as much as possible.Anyway, so there's that, but the main thing is that Zelensky is not prepared to budge an inch. I don't know how convinced people are about him claiming that Putin's not interested in talking, when it's quite obvious that he's just taking an implacable position which makes it impossible.Then you have the European leaders. In Britain, we can't keep our schools in order, our health service or the holes in the roads, and yet they're proposing to spend enormous sums on weaponry. Which if they get sent to Ukraine, will be annihilated in very short order.Yeah. Super.Whatever you think about the morality of the situation, any proposals you make, I should have thought, have to be grounded in some sense of realism. I would have thought any assessment of realism would indicate that the whole of Europe couldn't drum up an army that is capable of engaging with Russia in any way that wouldn't be annihilated in literally a matter of weeks, as far as I can see.The alarming thing is that they are just talking up the prospect of war more and more as time goes by.I don’t think there's any appetite for it, other than among the people who claim to be in power. I don't think anyone else wants it.War is the last-ditch response to losing popularity. Look at what happened to Margaret Thatcher up to the point of going to war in the Falklands. Her popularity was plummeting for plenty of adequate reasons. All of a sudden, the whole country was behind her.Over a rainy rock in the South Atlantic covered in penguin poo.It has usually worked up until now that the country rallies behind its leaders during times of war. That's possibly what they're relying on...Except we now have the internet to talk to each other.We now have the internet, which is, of course, a big game changer. So, the reality is that there still seems to be the delusion that Ukraine might manage to get some victory, whatever they imagine that would look like. Anything short of driving Russia out of all of the areas that they have actually taken by force of arms strikes me as improbable in the extreme.In fact, on the ground, there's only one little bit of the front where Ukraine is pushing back at small areas of territory that Russia has captured. That's to the northeast of the Kursk. That seems to be the only area of the front where they actually have got motivated, well-equipped, crack troops. Nobody really knows what cost these battles are being fought at.But they've had to divert such resources from other parts of the front. The Russians are just moving ahead by leaps and bounds there. There was the opportunity again for a diplomatic solution that was rejected. Russia is clearly going to press ahead and resolve it on the battlefield, which is tragic. Both sides are losing lives all the time in every single life that's lost as a tragedy, whichever side they're on. We won't know until the war's over and the accounting is done, but this is tragic.Of course, the latest thing this week is a lot of jumping up and down over the fact that 19 drones of Russian design encroached on Polish airspace. I note that almost all of the mainstream accounts of this repeat over and over again that this was a deliberate incursion by Russia. Actually, it's impossible for anybody outside to know. The only person who knows is whoever launched those drones. But to me, it doesn't even strike the plausibility test. Russia has so much going on that it doesn't need to go out of its way to do something that will cause a lot of aggravation and adverse publicity.It could be a false flag event.It wouldn't be the first time, would it? Finally, the ongoing grind away is on the international economic front. Several commentators I've heard lately say that the dollar is on the way out as a global reserve currency, which we've discussed several times. But most of them say this will take decades. My own guess - this is just my personal estimation - is that it could happen much more suddenly than that.I heard some interesting statistics this morning. About 40 years ago, Europe had 10 times the level of economic activity as China. Now, China's economic activity is about equal to the whole of Europe put together. Europe is seriously economically declining as we speak. China is still going from strength to strength.That in itself is significant. Of course, we have recently discussed the BRICS organisation, the Shanghai Cooperation Organisation, and ASEAN, the Association of Southeast Asian Nations. All of these are collaborating more and more tightly together. They're doing more and more transactions independent of the dollar system and independently of the American banking structures and institutions.So we could turn around and see something reach a tipping point very quickly. So just watch this space. So that's about all I wanted to say for this roundup. You got any other comments?If you told me 10 years ago that this would be the state of the world today, that we'd be banging the drums of war about going to war with Russia, I'd have been like, “nah, all of that's in the past!” So, I suppose that illustrates how poorly we tend to predict the future and how much we underestimate the people ostensibly in charge.Yeah, absolutely. Of course, it's not helped, as we keep saying, by refusing to acknowledge or listen to or analyse what, if you like, our opponents are saying. For instance, while he was in China, Putin gave a very clear, very measured, striking speech to a big news conference over there. So I searched on the BBC website for “Putin press conference”. Guess what the most recent result I got was for that.About 2015?It was Putin and David Cameron giving a press conference in 2013.Yeah, there we go. Propaganda is as much about omission as what they say.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We’ve got some thoughts to share on the SCO Summit, which before this call, I was not aware of. So what is it, and what do people need to know?Well, it's the Shanghai Cooperation Organization, an organisation which is oriented towards both defence and trade. It's another thing which has expanded enormously over the last few years.One of the most notable things about it, which has largely been ignored in the Western media, is the enormous camaraderie between Putin, Xi and Modi from India. One of the things I found very interesting was comparing their body language, which came across to me as entirely natural and spontaneous. They were walking around grasping each other's hands, smiling, chatting, clearly totally relaxed with each other.If you contrast that with all of the European gatherings, there's a lot of smiling and hugging and shaking hands. Even more ridiculous when you see it in movement, clearly posing for the camera, where they are shaking hands and turning to look at the camera, grinning inanely. The whole thing comes across to me as very clearly staged and formulated. They're not even terribly good actors.Yes it's a PR exercise. Can we have some better actors please!After all, Ronald Reagan was an actor.Trump's got a few acting credits in his bio too...Yeah, well, of course, he was in the reality show. He imagines he still is. But that's another story.Anyway, the point is that there was clear enthusiasm. A major report was issued, detailing their findings on the future of global governance. It's the same theme. It keeps on recurring. It's obviously a wave of the future. It's building momentum. The theme is a multipolar world.There was a catchphrase they had. The paper they produced was titled the Concept Paper on the Global Governance Initiative. I searched the BBC website for global governance initiative, and nothing came up.One of the section headings was sovereign equality. This actually sums up the theme being pushed by both organisations, which is purely a trade, economic, and global finance outfit.These two groups both have considerable overlap in their membership. Obviously, both of them have got Russia, India and China in them. Indonesia, Iran. Then there's another group of countries which are in one or the other, but not both.The underlying themes discussed are very much along these lines. What's summed up by that phrase ‘sovereign equality’, is the idea that one nation-state has just the same rights to respect and justice as any other.This discussion about multipolar polarity is obviously an attempt to move away from the unipolar world that the United States imagined it was living in since the collapse of the Soviet Union. Before that, we could have said we had a bipolar world.Yet again, it was clear that any prospect of dividing Russia and China from one another is clearly fanciful. This was part of the game. Of course, in Orwell's 1984, you had the three global power blocks, which obviously were the American, the Russian and the Chinese, although they weren't actually labelled as such in the novel, and how the alliances shifted from one to another. That was what was happening all the way through the Cold War.The more I look at it, the more it seems clear to me that when the Soviet Union dissolved and they terminated the Warsaw Pact, they imagined that it was going to really be the end of the Cold War. There was going to be open free trade and mutually beneficial relationships between all the countries in the world.Of course, as we know, the American power centres didn't want that at all. They just wanted to decide now that they'd won the Cold War and that they were the hegemons that ruled the entire world.Everyone else was now fully under the thumb.People could be taken by surprise by how quickly this unfolds. Very interesting statistic I came across.The trading transactions are increasingly being done in the native currencies of the trading partners. For example, over 54% of Chinese trade is in the Chinese currency. Over 90% of the China-Russia trade is in either renminbi or roubles. More than 75% of the Russia-Asian trade is in the national currencies of the relevant countries.Where are these numbers from?It might have been Jeffrey Sachs. It was certainly one of the prominent economic commentators. It could have been Richard Wolff in correspondence with somebody like Danny Haifong or Judge Nimboni Alataro.So the dollar has already toppled from its position. The other thing to note is that the members of the BRICS consortium now account for somewhere around 50% of the world's population and somewhere around 50% of global GDP.When you bear in mind that America is what, three or four per cent of the world's population, and the entire Western Bloc is a little under 10% of the world's population. It is plain that in these days, where we clearly have a much more universal grasp of technology and of military power, education and a rapidly rising expertise in finance and banking, the leverage that the West had over the rest of the world has already evaporated for all practical purposes.Yeah, it's already gone.Anyway, a couple of days after the SCO meeting in Beijing, there was an enormous military parade. This was a celebration of 80 years since the defeat of the Japanese, in which the Chinese had a large part. Obviously, the Americans think it was entirely them that defeated the Japanese, just as they believe it was entirely them that defeated the Nazis.It's one of the forgotten theatres of war.Yes. An interesting thing I found out is that the Second World War, or whatever label you put on it, didn't start in 1939 for China. It actually began with Japan's invasion of Manchuria in 1931. So by 1945, the Chinese had been at war for 14 years.It suffered brutally. Many, many millions slaughtered by the Japanese. I don't think we take complete account of that. Once again, the Chinese and the Americans were allies in the war against the Japanese. Of course, as soon as the war ended, they became sworn enemies. Very similar situation with Russia.People don't take that for granted. Another interesting aspect is that the enmity towards Russia from Britain, which the Americans inherited, is often attributed to the economic differences of opinion with the Bolsheviks in power. But it goes back way beyond that. It goes back another 100 years or so.The British and Russians were geopolitical rivals with considerable bitterness since the 1840s onwards. Of course, they had a war in Crimea between them, which didn't work out all that well for the British.Anyway, they have this enormous military parade showing the latest Chinese weaponry, which is obviously far more advanced than anybody in the West had ever realised. So there's a certain statement being made there.Rather miserably and pettily, with the exception of Slovakia and Hungary, nobody from Europe or America went to join in with that parade. So once again, we're moving into a world where the powers that have been dominant for the last two or three hundred years and have imagined that this was going to continue indefinitely are finding themselves increasingly irrelevant.Against that, it's worth commenting also that Trump seems to have an inherent contradiction in his approach to the dollar. He wants to eliminate the trade deficit by making America strong again. To do that requires a weaker dollar so that imports become more expensive and people are less inclined to buy from abroad. American exports become more attractive.However, that is clearly incompatible with Trump's other declared intention, which is to maintain the dollar as the world reserve currency. Clearly, it's highly unattractive for the rest of the world to hold their investments in dollars and do their transactions in dollars if the value of it is evaporating before our eyes.Needless to say, the same goes for Britain. As we noted the other day, the cost of borrowing each time that a bond issue expires and has to be replaced by a new issue has to be issued at ever-higher interest rates. This also has the effect of depressing the price of the old government bonds in the marketplace, which are paying a lower interest rate.So it'd be very interesting to see how rapidly this unravels, but it could easily take a lot less time than people had been imagining.There has to be a tipping point.Of course, the other way in which the West is losing credibility is on the moral front, as more and more people. The rest of the world has been able to see what was going on in Israel for quite some time. But it looks to me as though even our own general populations are beginning to become horrified by it.So it's difficult to see how the government are going to maintain the slavish support that they've been showing. There could well be some revelations as to what leverage Israel has over our own politicians.Well, that's the big thing about how powerful the lobbies are.Yeah. So interesting events this past week.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We're talking about debt today. Last time out, we were talking about how debt can be a good thing or a bad thing at individual, business and national level. It appears in the last week or so that Britain is in a much worse state than the authorities have led us to believe. It seems we might actually be bailed out by the International Monetary Fund, which doesn't bode very well for ordinary folk like you and I. So what do we have to say about that?Well, we were both watching a brief Neil Oliver monologue this morning, where he was saying that suggestions are circulating that Britain's finances are in such a bad state that we may need a bailout from the IMF. This happened once before in 1968 during the Harold Wilson Labour government.The press had a field day saying this is all a response. The outcome of Labour's fiscal incompetence and irresponsibility. In fact, the reason for that was that there was a run on the Bank of England caused by the fact that the pound was overvalued relative to the dollar. At the time, they were still on the fixed exchange rate, which came in at the end of the Second World War during the Bretton Woods negotiations of $2.80 to the pound. It was put down to $2.40, which was regarded as a tremendous humiliation at the time, although we'd be delighted if we could get $2.40 for a pound these days.The reason for that mismatch had nothing to do with the immediate year or two that the Labour government had been in power. It was the cumulative effect of the 23 years since the end of the Second World War. During the majority of which time the conservatives had been in power. So really everybody was equally to blame insofar as blame is relevant. The American economy was obviously in a far stronger position at the end of the war than at any other time. This calls into question the entire degree of realism associated with fixed exchange rates, even though in principle it sounds like a great idea.Anyway, whenever the IMF are called in anywhere, their prescriptions are pretty standard. It essentially lets the elites off the hook and absorbs any government expenditure that benefits the wider majority of the population.I don't know how much further we can go down in that regard. But what is weird is that at the same time as we're in this position, as we mentioned last week, we're talking about spending money that we haven't got subsidising the war in Ukraine. So is the rest of Europe, which is in a similar position across the board. Apparently, Germany has just pledged to give nine billion pounds worth of support to the Ukrainian side in the war, whether by buying weapons from America and sending them out there or sending the money straight there.This seems pretty odd at a time when the German economy is in a desperate state and they've been cutting their welfare programmes. They've been put in a much disadvantaged position since the cutoff of the supply of cheap Russian gas and oil. Yeah, the destruction of the Nord Stream pipeline. Apparently, Norway has pledged $8 billion to support Ukraine. I don't know what state Norway's been in generally over the last few decades. Norway's finances have been in a pretty healthy state due to the North Sea oil and gas. I'm not sure whether that's still the case or not.The point, apart from anything else, it seems to me pretty certain that any weaponry which is sent to Ukraine is likely to be destroyed before it even gets used very effectively if you take a realistic look at the battlefield.We've said in the past that warfare in the last resort is armed robbery on a grand scale and we're seeing that very clearly in this case. We are over a barrel in both directions. Some of the support given to Ukraine is in the form of loans, which can be shown on our balance sheet as sound assets if Ukraine wins the war, but will have to be written off if it loses. Conversely, there was the $300 billion worth of Russian assets which Western banks have seized: a small proportion, no more than about $5 billion, is held by American banks.About $47 billion from British institutions and considerably more from France and Germany, and Belgium. We've all been effectively stealing the interest due on those loans since they were frozen.Nobody really knows to what extent the actual principle may have been dipped into and diverted elsewhere. Should Russia be victorious, those assets would have Russia's claim restored to them.The war will end when Russia wants and how Russia wants. Anyone with half a brain should probably know that. So then the question is, why are they just using it to keep the magic money tree flowing in the meantime?Well, this comes back to a conversation we had some time back, asking, ‘Is it really true that the love of money is the root of all evil?’ It's certainly the root of a lot of evil. It's undoubtedly the root of the motivation of people who make these weapons of war. For them, it's just more business and more profit, and they're prepared to ignore the tragic human loss on a grand scale, which is the result of warfare.This has been going on for a long time. I recently read that the same American companies basically financed both sides of the Second World War, including both the Allies and I.G. Farben.Yeah, absolutely. This is now well known. I have a book about it. I can't remember the title at the moment, but there's enormous detail about the extent of that.Anyway, so that's where we stand. The additional funds being sent to Ukraine or spent on weapons, which will be sent there, is a case of good money being thrown after bad.Especially since the Ukrainians have stated that they can't account for so many billions of it that has already been sent, anyway, so who knows?It's truly tragic. It will be very interesting to see how long it takes for an objective summary of the validity of the different narratives about the war to emerge. I'm not sure how plausible the mainstream narrative seems to people. But there are plenty of clearly very knowledgeable commentators in the alternative media space who are all unanimous in what the real situation is.It would appear that most Ukrainians want it to end. The only ones who don't are the ones who are far away from the fighting. Or the West wants it to continue. So then you have to query, well, why exactly is that the case? You have to say borderline evil reasons that we've been aligning.It’s a rather gloomy outlook!But things can unravel quite quickly.Well, the real joker in the pack is at what point the American economy collapses totally, because America has very little to export except arms. It looks as though the Russians have pulled a long way ahead in terms of their missile technology and rate of production. This is another significant factor: the Russian industrial capacity for producing war machines and ammunition outstrips that of all the Western nations combined. Nobody really knows where the Chinese are.No, no, and hopefully we never find out.Well, I certainly hope we're not going to find out the hard way. Anyway, it's a very fluid situation. I hope we managed to live through it and that we will see a brighter outcome within our lifetimes.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We're going to revisit a topic today that we've been talking about quite a bit recently - debt. So yeah, what's going on that people need to know about?What prompted me to think about this again was a broadcast I listened to the other day. It gave a rundown of the state of the United Kingdom's finances, which are in a dreadful state. We recently borrowed an additional £20 billion, and three-quarters of that is simply going to pay interest on the debt we already have.We have also discussed interest rates in the past and how they've been artificially held down. There's only so long that you can do this before the markets will no longer trade debt at the prices and interest rates that governments have been used to for the last 20 years or so.In this context, I would like to revisit the distinction between good debt and bad debt that I've previously discussed. From the point of view of business, personal finances and national level, there are parallels between the three. The easiest one to grasp is with business.Business LevelSuppose you're running a business and you negotiate a loan with the bank, for example. That's not necessarily a bad thing. If you are investing that in something which is going to—If there's a bigger rate of return than the interest that you're paying on the loan, then it makes sense to do.Yeah, absolutely. That's the one-line summary. If you buy, for instance, a piece of machinery that you can use to manufacture things that you wouldn't have been able to do previously, and there's a ready market for those, you can sell them and make more profit than you're paying on the loan. Then it's a sound proposition.If, on the other hand, you take that loan and use it for frivolous purposes - you redecorate your office or use it to pay yourself to go on holiday - then all that's happened is you've spent it on things that don't actually bring any new customers in.Or splashed it on Google Ads!Exactly, there are any number of ways that it can be frittered away. That means you then have to repay the loan, paying the interest on it, and your balance sheet is worse off than if you hadn't done it.Personal LevelIt's very easy to see that parallel if we bring it down to a personal level. There are all manner of things that we might not be able to afford, but if we had them, it would increase our ability to bring in an income. There are also any number of ways that we could just fritter it away. We could go out for a lot of expensive meals, or go on holiday. Once again, that means we still have to pay the money back. We will still pay the interest on it.National LevelThe same principle applies at the national level. There are things that a nation-state could invest in which make the nation a more viable proposition. This was John Maynard Keynes' advice to governments during the Great Depression of the 1930s.The whole thing had seized up. There was nobody to harvest the crops. They were rotting in the fields because there was no money to pay the labourers to do the harvesting. Because there was no money to pay the labourers, they were unable to go out and buy things in the local shops, which kept the local businesses going. It was all stagnant.So Keynes's solution was that the governments should effectively create money out of thin air. Whether they do it themselves or have the banks do it and then the banks give it to them, it comes to the same thing. It's money that hadn't been earned previously. But then by paying people to do something constructive, that creates a certain amount of wealth and puts money into their hands. There is also a cumulative effect from it.It creates circulation, doesn't it?Now Keynes receives a lot of criticism from economists who accuse him of encouraging fiscal irresponsibility in governments, which is somewhat unfair to him. He planned that when the business cycle picked up again as a result of that stimulation, we would go into the boom phase. At that point, the governments could pay back the loans.I don't know whether he was being naive here or simply being realistic and dealing with the most pressing problem that was immediately at hand. However, the trouble is that when the boom times come, governments are only too ready to take advantage of them and enjoy the benefits. They don't want to start spoiling the party by running things down and being tight on expenditure, so they have the money to pay back the debt.There's no incentive for them to do that. If you just follow the incentives, it's pretty clear what any government is going to do.Exactly so. The worst possible thing we could do, particularly in the current circumstances of this country, is to run down the situation regarding the scale of debt in the United States. The UK's relative to its economic activity is probably even worse.At times when all manner of penny-pinching measures are being taken by the government, such as cutting off winter fuel payments for old age pensioners and attempting to reduce disability allowances, we can't run our health service adequately. We can't maintain the buildings of our schools. We can't fill the holes in our roads.Against this background, Starmer appears to be seriously considering purchasing a substantial amount of weaponry and sending it to Ukraine, where, as we've seen, it rapidly becomes scrap. So this makes no sense whatsoever.We said that there is a terrible situation if you borrow money and then do nothing constructive with it. Of course, it's even worse if you're spending it on weapons and ammunition, which actually have a negative impact on the total amount of wealth and circulation, as we're seeing.It's essential to go beyond merely financial accounting of this and examine what it means in terms of the cost of energy, in particular, and raw materials generally. One of these days, I'm going to conduct an analysis of the amount of energy invested in the two notable conflicts currently underway - the one in Israel and the one in Ukraine.Bearing in mind that it seems pretty clear to me that over the course of the next 20 years, we're going to pretty much exhaust our readily available sources of fossil fuels. As we've discussed at other times, there doesn't seem to be any contingency plan in place for maintaining the standard of living we've come to expect.As that goes out, it's not at all impossible that we could rejig things to live within the budget of our available solar energy. This is surely what must happen. Whether it's through a significantly reduced human population living a much more primitive lifestyle, or whether we make a smooth transition to a high-tech one based on completely different energy sources.Yes, my understanding is that the small proportion of people in the world who essentially own and control everything will have plenty of energy, while the rest of us will either not exist or be left in the cold. That seems to be the grand plot.Yeah. Against this, we must consider the enormous amounts of energy that are being wasted. Even if you are using all of your munitions effectively in battle, it's still a tremendous amount of energy that's gone into that shell or that bomb or that missile, which all gets consumed in a matter of a few seconds or a few minutes.Every time one of these military aircraft goes on a sortie, that's a huge amount of fuel consumed. This is even before you get into the situation where there's an ammunition depot and the whole thing gets exploded without even being used, which is happening all the time in Ukraine.There are wanton, vandalistic attacks on oil refineries, gas pumping stations, and oil pipelines, which have also been carried out extensively by both sides. This is a consumption of energy that could have provided years or decades of continued constructive civilian use.More importantly, it will take energy to construct the solar infrastructure, which we need to make a transition to a technologically sophisticated, sustainable life. To me, that should be a clear priority.Yeah, looking at the climate narrative and how we're being told to worry about carbon dioxide and all of these things - if that actually were true, then that would apply first and foremost to the war-making activities that have by far and away the biggest environmental impact. This just shows that what they are saying and what they value are completely different things.Absolutely, yeah. You could go on a lot of car trips, foreign holidays, or even hot baths for the cost of one missile strike.Yeah. If I were attending a climate conference and actually cared about these things, I probably wouldn't take a private jet there. But there we go.Yeah, we've gone into that before, too. So, against this background, there has been, of course, an apparent attempt to bring a conclusion to the Ukrainian war with the summit meeting between Putin and Trump.Of course, there's been a chorus of shrill complaints that this even took place. Why should anybody imagine that we're going to improve our chances of survival by cutting off communication between nuclear-armed superpowers? I cannot imagine. It can only increase the likelihood of some catastrophe occurring due to misjudgment or confusion.I would have thought it was critical to restore the diplomatic relationship to a situation that was regarded as normal and essential until the last decade or so. Whatever else one thinks of Trump, that it was a monumental achievement to have even made this start.Of course, the fact that the primary objective many people assumed was to settle the war in Ukraine, obviously hasn't happened. That doesn't make a difference because we have no idea what other agreements they've made.The most important one is that they're talking to each other, which gives some chance that the Strategic Arms Limitation Treaty, which is due to expire next February, will be renewed. The world will clearly be in a more perilous situation if that's allowed to expire. That's in none of our interests.Once again, the best way to avoid warfare is to have mutually beneficial trade going on between nations. So that would be a bonus too. There seems to be every intention to wreck the likelihood of that on the parts of some of the players. So who knows how that will come out?The notion that a ceasefire should be declared now, while the combatants simply regroup and rearm, was obviously a ridiculous suggestion. The fact that this has now been taken off the table, and we've said that what we need is an actual peacemaking agreement, which is clear and addresses the underlying problems, once again, this appears to me to be elementary common sense. In contrast, it has been depicted as a sellout, particularly by our own government and that of all Western European leaders.How much the population at large supports this position isn't at all clear to me. Probably a majority are still swallowing the official propaganda line. What's your view?I probably live in my own echo chamber. I've been reading Caitlin Johnstone's emails recently, and she actually has more hope in the next generation than in the current or previous ones. So in the longer term, maybe there was some hope there as well.Yeah, well, one of the things that I'm interested in - as I said in a recent podcast of ours - I look at the alternative viewpoints on YouTube. I'm greatly heartened by, first of all, the fact that views that go against the mainstream narrative get through and aren't censored. But also by the size of the followings of some of these commentators. There are excellent channels by Scott Ritter, Douglas MacGregor, John Mearsheimer, and many others. I see that the material initially produced on those channels is being repurposed on many other podcasts. Many of these have followings in the hundreds of thousands, and some reach millions. So amongst the younger generation, there are probably more followers of that. Let's see how we go from here.The only other thing I'd say is that there has been a lot of confusion since the meetings that Trump had with Zelensky and the European leaders that followed. They've been talking about security guarantees and a lot of this, which is a vague term. It's not spelt out what that actually means.But a lot of the things that have been speculated by Western leaders and commentary in the media are clearly not going to be acceptable to Russians and could not possibly have been agreed to at Trump's talk with Putin. They're unlikely to be approved anytime soon.Whether Trump deliberately misdirected, provided some misdirection, or allowed people to read more into his remarks than he intended - or whether people have taken the ball and run with wishful thinking - I don't know.Of course, the next question is whether there will be a meeting between Trump, Putin, and Zelensky, or a bilateral meeting between Zelensky and Putin. We don't know.I personally think it's unlikely to be a three-way meeting purely because it will likely fail. Zelensky's position is totally incompatible with Putin's, and there's no point in having a meeting at that level unless all the details are finalised, which was clearly not the case with the Trump-Putin meeting.That would not have happened unless both of them had an obvious idea about what they were going to discuss beforehand, which had clearly been arranged through the discussions that Steve Witkoff had with Putin and through direct conversations between Trump and Putin before they began.Yeah, so the meeting itself is like a PR exercise for something that's already been agreed...Yeah, yeah. Although that was announced at a week's notice, it was absolutely clear that there was much more than a week's worth of planning to get all of that in place. They must have been aiming for that for at least a couple of months, if not longer.So interesting times. Many things are not what they seem. Short answer: watch this space.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts and support my work. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We're discussing big numbers today, a topic we've explored before in how billions and trillions are used in public discourse. We're going to talk about that today in the context of US debt. So what do people need to know about this?Right, so I'll just give a bit of a recap. When we talked about an idea of how to get a handle on millions and billions in the past, I said that there are various ways we can envisage these things, but a very useful one is to say that if you take somebody who's earning £25,000 a year, pounds or dollars or euros or whatever it might be. They've got a working life of 40 years. Their total income over that lifetime is a million.We could say, as a rule of thumb, that a million pounds or a million dollars is the lifetime earnings of a typical individual. You might want to play around with that if you reckon the earnings rate is a bit lower, a bit higher or the lifetime. But that's a good order of magnitude.It seems to be in line with the stated averages for what people typically earn…Yeah, anyway, so then if you move up to a billion, then obviously this is the lifetime earnings of a thousand people. It would be, let's say, the entire population of a fairly large village, a thousand people. A billion pounds or a billion dollars would be the equivalent of what that whole population earned.Given that trillions have been cropping up lately, extending this to a trillion would represent the lifetime earnings of a million people. In other words, in a substantial city, the entire earnings of that city for a lifetime adds up to a trillion.So in light of that, let's look at the various debts that are running about in the United States. The US federal debt outstanding is just under $37 trillion. The way things are going it won't take long to get it past that number. Then on top of that, you've got the total municipal debt. That's bonds issued by cities and urban and rural authorities across the country. So that's another four trillion.Then you've got debt bonds issued by individual states. California alone is 1.6 trillion. That's significantly larger than the next largest single state, which is Illinois. But two trillion for the total of all of the 52 states would be a very conservative estimate. So I put that in at 2 trillion.Then you've got US corporate bonds, debt issued by large corporations like General Motors and IBM and so forth, whereby they borrow money for a fixed period of time from investors. They agree to pay a rate of interest that is higher than the government rate. Some people might opt for this to earn a larger income, but they should be aware that, as a private financial organisation, it may not be as reliable as the government. Although the government is probably not very reliable at the moment!Anyway, the total of the US corporate bond issues is 10.5 trillion. Then on top of that, you've got the US household debt, debt owned by the general population, credit cards, bank overdrafts, car loans, and mortgages. That's another 18.2 trillion.So when you add that all up, it comes to 72 trillion. So if you then compare that with the US population of 340 million, what this amounts to is that the total outstanding debt in the United States is approximately 20% of the entire lifetime earnings of the entire population.Looked at in those terms, it clearly is beyond the bounds of possibility that that is something which is ever going to be repaid in the normal sense. You know, if I borrowed a hundred pounds off you because I was a bit short one month and said I'd pay you back the next month, that would be the normal way we think about debt. But when you've got debt which is completely out of proportion to any chance of repayment, such as that across the whole of the United States. It's just not going to happen.No, I think that was never the intention.Well, of course, that's another whole point. I'll do a similar exercise next week for Britain. Of course, Britain had a substantial amount of debt on undated bonds, issued in the 19th or early 20th century, when British government obligations were considered as good as gold.They could have kept that rolling, but some financial genius in the treasury decided to redeem them at a time when two and a half per cent seemed an excessive rate of interest because temporarily it was below that. Not included in those figures are social security obligations, Medicaid, Medicare, and state and federal pension obligations, none of which are included in that figure. That is a form of debt which is not even included in that figure.So there's either going to be a default at some stage or there is going to be inflation on a much more massive scale than the inflation that we've seen over the last few decades, which will in the end bring the obligations down to nothing.Of course, a lot of this debt is held by Americans themselves, but a lot of it has been held by other trading parties around the world, in particular the oil producing states and in particular China, because for the last 30 years that China's been accelerating its economic and industrial expansion and selling goods to United States and other parts of the world. If I want to buy anything from China, I have to pay in United States dollars. So I've got to change my pounds to dollars and then send the dollars to China.They have been, of course, recycling these by, for the most part, buying United States Treasury bonds. So they've been lending that money back to the United States government, or they've been buying significant but minority shares in US industries. Of course, this presented them with something of a dilemma when, over the last few years, they decided this is possibly no longer looking like a sound investment.Had they dumped their treasury bonds it would have crashed the prices of the securities. So they didn't do that. But of course, all of these treasury bonds have an expiry date when they have to be repaid. The US Treasury has been rolling over its debt by issuing new bond issues, hoping that the people who sell the expired bonds will buy the new ones. This approach has generally held up over the past couple of decades.Of course, the unfortunate thing is that over the last year or so, the interest rates have risen. So although they might be able to issue an amount of debt, they're having to issue it at a higher rate of interest. So, this is draining the US federal economy at an increasingly rapid rate. However, overseas bondholders, particularly China, have been cashing in their expiring bonds and saying, “thank you very much, but we’re not buying the new issues.”The brokers responsible for selling these bonds are increasingly struggling to find buyers. What the Chinese have been doing instead is they've been investing internally. They've been investing in numerous countries around the world.This, I would say, is genuine investment. It's building roads, railways, viaducts, oil refineries, and water purification plants across large areas of the underdeveloped world. Of course, this has also rattled the United States Washington establishment because they are jumping up and down complaining about the fact that China and Russia are exerting undue influence in Africa, for example. Many African countries are beginning to realise which side their bread's buttered on.That was pretty much what I wanted to say today for my summary of where we're at. Any thoughts?Yeah, it ties quite closely to last week's discussion about the BRICS nations. But the clear emergence of a multipolar world and people coming to separate arrangements outside of the US dollar. So we are seeing a continuation of that.What do you make of the assertion that if all of this debt were just wiped off, that essentially all money would disappear? In other words, why can't we just wipe off the debts? That's happened in the past in the form of debt jubilees.Deby jubilees were pursued as a deliberate social stabilisation in the ancient world. That was part of certainly the Judaic code that there would be a Jubilee every 50 years or every seven times seven years, which was 49 years when debts would be written off and slaves would be freed because there was a recognition that as a matter of practicality having the majority of the population in hock to a small minority was socially destabilising.Whereas our current rulers do not care about such trivialities!Exactly. But sooner or later, equilibrium will be restored one way or another.How much of what's going on, for instance inflation, do you think is being put in place deliberately? Or is it more like a runaway train that can't be stopped?I think it's a runaway train that can't be stopped.Anybody who thinks deeply about this knows that it's not a sustainable situation. At the same time, everybody concerned hopes that it will be somebody else's problem later rather than theirs in some impending present moment. Does that make sense?I guess to take away from this episode, when millions, billions and trillions get thrown about, you make this mental heuristic that a trillion is a few billion, but it's not. It's many, many, many times more. A thousand times more. So having that mental visualisation of the village versus the city is essentially quite helpful.Yeah it's a thousand billion.Good, OK, well, we'll hopefully be back next week with some more comments on the more insane goings on.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We're going to talk a little bit about a book called the Mighty Micro?This is a book written in 1979. As far as I was concerned, he was preaching to the converted. I'd already been using microcomputers and indeed designing with microprocessors for two or three years at the time the book came out. But I've kept it on the shelf, and I pull it down from time to time to remind myself of the extraordinary changes that we've experienced over the last 46 years since it was written.1979 was really the outset of macro computing as well, wasn't it?I'd been working with them for two or three years, but they were completely off most people's radar. In fact, in 1979, I was a co-director and part-owner of an Apple dealership, which could have...Which I think we discussed previously on an episode about “all the money I could have made but didn't!”Quite so. Anyway, two things are interesting looking at this, but one is the way he tentatively speculates about all sorts of things that may be possible. Pretty well all of those on a technical and development front have now happened. They've exceeded what he predicted, and most of these we've just got accustomed to. It's very interesting to hear him cautiously suggest the possibility that these things were going to happen and continually reassure the readers that although this sounds like science fiction, it isn't really. Even the laborious way that he speculates about the fact that we might not have to write letters to each other anymore because we can sit down at a computer and type something in which can be printed off at the other end.I’ve got friends who don't even speak on the telephone. They just send each other voice notes on WhatsApp, and that's how they communicate.Right, well, best of luck! Do they ever meet in person?Yeah, it doesn't bode well. Well, sometimes, yeah. But I don't know. It's not how I choose to operate. But there we go.However, there are also some ironic aspects on the social, economic, and political fronts that he turned out to have been wildly overoptimistic about. He discusses the idea that everything will become significantly more efficient, rendering the current level of work unnecessary. He says, the first practical evidence of this shift will be reflected in a cut in the working week to an average of 30 hours, a retirement option with strong inducements at 55 or even 50, and annual vacations of at least six working weeks. In tandem with these questions must come the first significant questioning of the work ethic, leaving aside a discussion of the use to which people will put their increased non-working life. The notion is that it is morally reprehensible not to work hard all the time. The idea that the devil finds work for idle hands to do is deeply ingrained in our culture. It would have been very nice if we had had a 30-hour working week.Sounds great. Yeah. He underestimated the determination of the world's billionaires to work everyone into the earth!On a practical level, if we could sort out the psychological and political dimensions of it, the possibility of a much more satisfactory existence than the one that most of us are experiencing now is very real.I'm further reflecting on some of the things we discussed in the last few episodes about the various threads of narrative that are going on on the planet at the moment. One of those in last week's recording, I alluded to the fact that Trump's attempt to backpedal on the revelations about the Epstein case was beginning to backfire on him. I was saying that it's very difficult. You said it was pretty much par for the course that some politicians make promises to get elected and then discard them. But he didn't even do a very good job of discarding it, starting off by announcing that there were revelations on the way and then trying to backpedal suddenly.It just astounds me that this has happened twice as well. This all happened in 2016. How many times do we have to go around the merry-go-round to learn that the people making promises during elections do not have our best interests at heart?Well, there is that, but the most astonishing bit of the misjudgement is to imagine that having gone into office and made various announcements to the fact this was going ahead and then suddenly decide that it isn't, he completely failed to realise how much that was going to enrage everybody, particularly a large proportion of his own supporters. Last week, I felt that he couldn't have possibly been involved in the sexual manipulation of underage people himself, even if his friendship with Epstein was pretty suspect. However, what has emerged over the last few days is a torrent of accusations, repeated on various channels, particularly on YouTube, which is the most important one because it is widely viewed.The proportion of people who are seriously questioning mainstream media narratives has increased. I don't know what proportion of the population that is, but the ones who are serious about it disregard YouTube at least. But it's worth looking at YouTube from the point of view that this has got a far bigger audience reach than Substack and Odyssey and Rumble, and things like that.It's clearly an approved narrative.Well, it certainly hasn't been clamped down yet.Obviously, the powers that be want that message to get out, otherwise those videos would, like many of us, contravene community guidelines…Yep. Anyway, I cannot believe he can survive this, even with the thick skin we know Trump has. On the other fronts, it's difficult to know where to start. Still, one of the things I've been reflecting on is that a lot of aspects of the goings on in the world which appear to be entirely distinct, like the Israeli behaviour towards the Palestinians, like the Ukraine and Russia conflict, like the unravelling of the American dollar-centric hold on world trade and world economics. They are all in a way different aspects of the same process. Does that make sense?Yes, these are symptoms, not necessarily independent things that are just happening. Maybe symptoms of the same root metaphors that we are living under and operating by. Perhaps these root metaphors have been at work for hundreds of years and are still manifesting in this way here.Yeah. Meanwhile, the government seems to be hell-bent on self-destruction. The mere idea of arming ourselves and taking up a combative stance towards Russia, which is the only way you put the latest treaty between the UK and Germany. To the best of my knowledge, it hasn't even been discussed in Parliament. It seems that Keir Starmer just decided to go off and sign it on his own initiative, as far as I can tell.Apart from the fact that it strikes me, it should be obvious to any sane human being that any war is something that should be avoided at all costs. Certainly, rushing into potential conflict with someone whose military resources completely dwarf one's own seems to be the height of recklessness on practical terms, much less morality.It'd be like the financial crisis though, wouldn't it? Think of all the profits BlackRock would make rebuilding everything afterwards!Well, if there is anything left to rebuild.Yeah, that's it.So once again, we just have to watch this space, watch it unfold and see how it goes. The only ray of hope I can see is that America becomes impotent by running out of cash and running out of credit before they unleash the end of the world. Or whether they might, that might prompt them to rush ahead and do just that.Well, it certainly feels like things are speeding up, doesn't it?The other thing that is interesting I was having a look in the Observer came out on Sunday and there's a whole lot of stuff about Starmer and there's one pretty well whole page article saying essentially that his own supporters in this country may not be fully behind him, but he's widely respected in international circles for his diplomatic moves. Well, I don't know. I would have thought he was widely derided internationally, but who knows?Whoever wrote that needs to lay off the spice!Haha, exactly.As we've discussed before, most people are underwater as far as their own personal balance sheet goes. This again is something that wasn't the case 50 years ago.Yes, if you consider the amount of work required or the value you'd have to provide to achieve the same outcomes, it's not even remotely comparable.Unless you've found a high-growth, highly leveraged way of operating, such as leveraging technology or AI, or building a network that connects people together. I don't know if you've read Perry Marshall's emails today, but he outlined three businesses that would be immune to developments in AI.One was building a platform, in other words, making use of AI. One was building a network that connects people together. And one was providing a service that has some human touch that AI cannot automate. So, if you have to decide strategically how to invest your efforts, whether in employment or business, then those three areas sound good to me.No, I haven't read that yet. I'll take a look at it.Very good, we'll catch up next week.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts and support my work. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

A quick announcement: We’re holding a free live Sovereign Finance discussion on Sunday 20th July, at 7.30PM on Zoom. We’ll discuss global trends, things you might do, and answer questions from the podcast so far. Register for free here.Rob’s comments below are in italics.Derek’s comments below are in normal font.The news this week has been dominated by Trump backtracking on his commitment to be fully transparent about what was going on with Jeffrey Epstein.Do you think he's on the list, presumably?It's undeniable that he was friends with Jeffrey Epstein for 10 or 15 years. According to his biographer, they fell out not over any misgivings about what might have been going on with Epstein's sexual escapades, but over a difference of opinion over a rivalry over some real estate deal that they were both involved with. Whether that's true or not, I'm unsure. I thought it was extraordinary that Trump made the offer to come clean about Epstein, bearing in mind that it was open knowledge that he and Epstein had been on very friendly terms for a number of years.He was on the flight logs...I can't believe that he would have even made that offer had he been seriously implicated in anything likely to be revealed personally. The two main theories that have come up as to why he suddenly, having made that offer, decided to backtrack on it is either that it had been drawn to his attention that a whole lot of people that he didn't want to embarrass might be implicated in unsavoury goings on there, or that he decided it would be more advantageous to him to continue with being able to blackmail or coerce various people who were involved if the details remain secret rather than coming out into the public domain. Either of those seems plausible to me. What mystifies me is that he didn't foresee the difficulties in fulfilling that promise or the fact that the general public, including many of his supporters, would react so violently to the sudden reversal of the activity on that front.Yeah, I agree. I think it's quite an obvious bait and switch pre and post-election. I think paying quite obvious lip service to whatever was said to get voted in. Whether someone is pulling the strings above him or whatever goes back to the usual questions of who's really in charge?Ghislaine Maxwell remains the only person in prison in the world for human trafficking to nobody!He clearly underestimated the determination of the general public to demand justice on these particular issues.It's obvious also that the secret services, the intelligence services, are heavily involved with this. It's well known that MI6 and the CIA on Mossad have sexual blackmailers as one of their main weapons in their armoury to pursue their own goals.The revelations that have come out over the Kennedy assassination have had less impact on public sentiment than I would have expected.The apathy is quite astounding, isn't it?I expected that that would cause much more of a public outcry.You know, it's now... It's now been made abundantly clear that the CIA was involved with the assassination of their own head of state and was seriously involved in the cover-up afterwards.Which is old news to anyone of a conspiratorial bent. However, it appears to me that for many people, if it's not literally on BBC News or written in The Guardian, it's as if it never happened. I don't know how much clearer it has to be.Anna Paulina Luna, who has done such good work uncovering all the details, is also totally committed to revelations about Epstein, which is in itself quite interesting. It'd be interesting to see if that brings her out of favour with Donald Trump.But once again, we could say that the parallel with the United States at this point in history is very much reminiscent of the state of the British Empire and, for that matter, the French one in 1914. Although Germany was blamed for starting the First World War, it was clear that the British had a strong interest in restraining Germany, which was rapidly overtaking Britain as a dominant industrial power.Many of these issues appear to stem from geopolitical control rather than the reasons they are actually given.Yeah. Now we've a situation where the United States has clearly fallen behind Russia in terms of industrial output, sophistication, technology, and infrastructure development. The railways in this country are a joke, but they're even more of a joke in the United States. Yeah, the trains still chug along at 50 miles an hour. I'm surprised they're not burning logs. So there we are. But of course, the worrying thing is that Britain and France didn't have nuclear weapons in 1914, and the United States does now. When all of the other attempts to bring the situation under control to their liking fail, you know, there seems to be a real possibility that they might go, oh, well, let's go for broke, which of course would be catastrophic for all of us. Alarming times we're moving through.Amtrak is the biggest joke in the United States.Another thing is that in the early 19th century, as bankers and industrialists rose to prominence and prosperity, British industry could produce a wide range of goods much more cheaply than other countries could. They could then export those goods, import food, and import any raw materials that we couldn't source ourselves. The traditional ruling classes, which had been the landowners, were alarmed by this prospect. In particular, they didn't want cheap imported grain entering the country and undercutting what they could earn from their landholdings and the rents they could charge their tenant farmers. So there was an attempt to impose tariffs on imported corn. David Ricardo, an economist from the banking class, was strongly in favour of free trade.It took 30 years of squabbling and going back and forth before we eventually abolished the Corn Laws and introduced a free trade regime worldwide. We now have a very similar situation in the United States, where the entire economy has been undercut and effectively deindustrialised, apart from the manufacture of weapons. Essentially, this is a form of rent seeking. It's a form of charging interest for money. It's making money by moving things around, conducting financial transactions, rather than by actually producing goods and trading them.All of this talk about tariffs is likely to increase the costs to American consumers and, by extension, to American industry. They've only just woken up to the fact that a lot of the raw materials that they need, even to make their weapons systems, come from China, which is ironic.So, the world's in flux. More and more countries are aligning themselves with China. China has experienced an enormous increase in the prosperity of its citizens. It took me a while to realise that the China we have today is not at all the China of our imagination from the Chairman Mao years and the great leap forward in the Cultural Revolution and poverty-stricken masses. A considerable proportion has been moved from landless peasants into some kind of middle-class existence. There's very little sign that the Chinese population are unhappy with their leadership. It looks coercive to us. However, it appears that what the Chinese population strives for more than anything is stability, and their current leadership has delivered that to them, along withBecause they invested heavily in educating their workforce, sending them abroad to Western universities, amongst other things, they managed to provide a whole level of competence which has faded out in this country and perhaps even more drastically in America. Those are the things to look out for. Additionally, the shift away from reliance on the dollar as an international reserve currency and a key component of the global trading system could occur much more rapidly than many people anticipate.There could be a tipping point in the chain of events.Okay, that's my review for this week. Once again, let's hope we're still here in time for next week's broadcast.Depending on how quickly I get this episode out, we are talking on Sunday evening as well with a free live discussion on Zoom (register here).Yeah, by all means, bring any questions you have or raise any topics for discussion when we meet on Sunday.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

A quick announcement: We’re holding a free live Sovereign Finance discussion on Sunday 20th July, at 7.30PM on Zoom. We’ll discuss global trends, things you might do, and answer questions from the podcast so far. Register for free here.Rob’s comments below are in italics.Derek’s comments below are in normal font.Okay, so it’s the 10th of July. It's a full moon rising today or tomorrow. We'll review some of the contemporary events insofar as they're likely to have an impact on your finances.How much importance do you put on the changing of the moon by the way? I know some people who organise their lives around it, and many others who just think it's woo woo. I wondered where you stood on these things. It's quite hard to know, is my stance.Yeah, absolutely. As I've said before, I'm agnostic about most things in principle. Even things I'm 99% certain of, I'm open to seeing evidence which causes me to revise my view. However, if it's under 99%, I'd be very surprised if such evidence appeared. The impact of the moon, I don't know.My subjective impression is that quite often, around a full moon, the psychic tension peaks. There could be all types of really mundane, prosaic explanations for that. The mere fact that it's a lot brighter at night and very few people have completely blacked out bedrooms that makes it that bit more difficult to sleep. That could be a factor.It could just be a placebo effect as well, where if you think it makes a difference, then it probably does.Yeah, it could be that, too. Although the placebo effect is often overrated when it's used as a dismissal that there's anything real going on.This touches on a point which is often not nearly as widely realised as it ought to be, which is that looking for causes and effects is almost invariably an oversimplification because anything which is non-trivial. This certainly applies to all of finance, all of markets, all of governments, all of politics, all of public opinion, as well as, you know, more concrete things like population growth or reduction, food supplies, energy supplies, prices of things.All of these are part of the dynamic system, which consists of multiple nested feedback loops. So consequently, to choose one factor in a situation, assume that it is the cause of something else and that there's a cause and effect. It may well be, but it's itself the cause of something else, which is the cause of something else. Before you've gone too many times around the chain, it's going to be the cause of the thing that you think is causing the effect. Does that make sense? Was that clear?I once read someone describe homo sapiens should be called homo explanicusbecause we just go through trying to assign explanations for things that may be quite complicated. We then create a story, narrative, and worldview based on that, which may have some directional accuracy, but it's never completely accurate.Yep, that is absolutely the case. That ties into George Soros's key insight on reflexivity, that markets go up because some people think that they're going to go up, which makes them go up, which makes more people think they're going to go up and so on. So you get that feedback loop.Until it becomes clear that it's overshot any realistic possible outcome, at which point the same thing goes into reverse and usually much more rapidly. That is a general factor of any dynamic system. As we've discussed before, that's built into the model of the limits to growth. We clearly are in overshoot on a number of fronts.This is one major perspective on trying to make sense of what's going on in the world at the moment. Another major perspective on it is that the American Empire is clearly in its latter phase. One of the things that always happens in the latter phase of empires is that the people responsible for operating the empire are in acute denial of this.Somebody was pointing out the other day that America hasn't fought a war against any opponent which is remotely comparable in strength and organisation since 1945. It's been at war continuously somewhere or other in between, invariably in a very unequal context.That leaves amongst the warmongers in the American establishment, which is still in the ascendant...I saw that Trump had been nominated by Netanyahu for the Nobel Peace Prize!You couldn't make it up, could you? That was one of the more ridiculous events of recent days.Caitlin Johnson's newsletter today raised a very interesting perspective on it. It says the Empire is a non-stop insult to our intelligence. Marco Rubio just denounced Francesca Albanese, the UN rapporteur on the Israeli Holocaust in Gaza. Of course, the UK government has listed Palestine Action as a terrorist group.Meanwhile, HDS, which is the Al-Qaeda proxy running the Syrian government, has now just been delisted as a terrorist group. So, you put all those things together, it's certainly reaching the point that we keep thinking we've reached where satire is no longer possible, because nothing is more absurd than what's going on in the real world.Yeah, I definitely, given that I have some ambitions to write novels, I don't think I can make this s**t up.No. Incidentally, talking of novels, I just read an Ian Banks one. It must have been one of his last, I should think. It's called Transition. Have you been a follower of Ian Banks at all?No, I'm not familiar.It was very interesting. I couldn't help feeling it was an allegory for the Deep State. I won't go into that; we'll get too far off track. That's the first novel I've read in a long long time. I've mostly been reading non-fiction of one sort or another, as anything is non-fiction.BRICS SummitSo, in the past week, they completed the BRICS summit. By all of the accounts that I find credible, it was a considerable success. In the Western press, there have been the usual attempts to marginalise it and discredit it. This is obviously going to be a very significant development in terms of world trade. It's primarily world trade.Certainly, what's called the global south, the ex-colonial countries seem to be putting a great deal of faith in this as an avenue to the real prosperity that they thought when they attained their nominal independence from the colonial empires...If not financial independence, saddled by loans and all sorts of things.Exactly. The really brilliant speech by Lavrov, about a 30-minute speech followed by 15 minutes of questions and answers. That's available in full on the YouTube channel from the Hindustan Times. It's a very sound investment of 45 minutes or less, depending on the speed you tend to listen to these things.What he says appears to me, A, to make sense and B, to be absolutely sincerely meant. I listen to what everybody says, whether they're people that I'm sympathetic to or not. I think it's more important that we listen to people we disagree with. First of all, hear what's going on outside our own particular chosen chamber. Secondly, because it's conceivable that even if somebody that I'm completely unsympathetic to might have something to say, which shifts my opinion or my perspective to some degree. But also it's deeply fascinating.There are two things that I'm on the lookout for when I listen to what anybody has to say, particularly anybody in a position of political power or influence or financial power or influence. The first thing I'm looking for is, do I get the impression that this person sincerely believes what he's saying, or is he deliberately fabricating it to serve some other agenda? Definitely with Lavrov, I haven't seen a single thing which suggests to me that he's making stuff up.The second thing that I'm on the lookout for is, assuming they are sincere, do I believe that they are significantly mistaken in the position that they've embraced? If I believe that they're sincere and basing their assertions and opinions on, as best I can judge, an accurate reading of events, I think they're well worth listening to and well worth taking on board.One of the things that he said and that Putin has said as well over and over again is that the world could work a lot better by adhering to the charter of the United Nations, which we've all nominally signed up for. Clearly, the Americans cynically disregard at every turn. People have to look at the record and make up their own minds whether they think the Russians and the Chinese disregard that or whether they more broadly adhere to it.You can understand why the BRICS Nations have backed the other horse.Yeah, absolutely you can. They certainly haven't got anywhere by backing the other one. The events of the past month, even more than the past year or two, have ever seriously undermined the credibility of the West.Seriously undermined people's ability to accept any public pronouncements from any of the Western nations without taking it with a pinch of salt. Which moves on to probably a very major factor, which we should all be investigating under our own best attempts at due diligence, which is the shift away from the dollar as a global reserve currency.I wanted to say one other thing about the treatment in the Western press of the British nations. There was quite a lot made of the fact that neither Putin nor Xi Jinping attended it in person, which they are trying to put some spin on as reducing the credibility of the organisation or reducing the commitment of those individuals to it. You know, calling it, calling into question whether they are in some way having their power diminished or something.It's perfectly understandable that heads of state no longer feel that it's necessary and that they can send other ministers. One of the notable developments at this BRICS summit was the increase in breakout groups. Meetings were held among experts from various countries to discuss matters. To make practical arrangements about various aspects of how they should work together more closely.One of these is that an increasing amount of trade is being done by the various members and the associates of BRICS directly between one another in their own currencies. There was speculation a couple of years back that they were going to come up with their own currency. That was obviously entirely premature.I believe that in the future, before the end of the century, there will be a single global currency used for all transactions, because of the ratio between international trade and internal trade that almost every country has. It makes no sense to have separate currencies per nation.It doesn't serve working people to have all these crazy fluctuations and to have the gambling on it essentially, which is all it is.Well apart from the fact that some people are doing very nicely by gambling on it, of course, cancelled out by the losses that other people make because it's a zero-sum game. The only real reason for the continuing attachment is that the governments of every country want to be able to manipulate their currency for their own purposes.So it doesn't solve anything. I think we will make a full circle to having that currency defined by reference to gold, because that is ultimately the only reason, the only mechanism that has ever been implemented which really works to prevent abuse through devaluation of the currency.Yeah, every fiat currency has crashed and burned, hasn't it?Yeah, or even the supposedly non-Fiat currencies. The Roman Empire supposedly had a silver-based currency, but as time went on, they debased the metal in the coinage more and more. As they say, history doesn't repeat itself, but it rhymes.Each time around, we've got a slightly different arrangement. So once again, we all need to take a look at that, see what our assets are denominated in, what is substantial, what is based on something and what is built on sand.Do you think we're gonna get this big financial crash that has been promised for a while, possibly to then usher in digital ID and control matrix on top of that?Whether or not it's clear that they would like to usher in a digital ID, it's also clear to me from my own experience…It's being introduced anyway. There will be slow incentives coming in. Then they'll try to enforce it or make it mandatory. A proportion of the population will say no, which will likely undermine the whole thing. Hopefully, we'll end up with a system that actually works for everyone. But it's gonna be rocky.Yeah, it's going to be rocky. That is one of my current themes. The outcomes are not set in stone. If they were, we'd be living in a much less interesting world. We all knew what was definitely going to be the future. So, it's just a question of watching it day by day.The Ukraine war is clearly now set in for the long haul, barring some unexpected event. It seems as though both sides are absolutely locked into incompatible positions. Russia has said yet again that it would prefer a diplomatic solution. It's ready to talk anytime. If there isn't a diplomatic solution, it will be determined on the battlefield.It doesn't serve the interests of the US empire to have a diplomatic solution, which means that a lot of people are going to be pointlessly fed into the meat grinder.I'm amazed that they still have enough morale to continue the fight, but there you go. Of course, every day that the war goes on, not only are lives lost tragically on all sides, far more on the Ukrainian side than on the Russian one, but whoever they are, they're human beings. They've got wives, sons, daughters, mothers, partners.But not only that, every day of warfare is a destruction of wealth. It's far easier to destroy things than to build them.I've seen that with my kids. It's far easier to pull the house apart than it is to tidy everything up!Yep, absolutely entropy. Anyway, a collection of observations today, but hopefully there’s something of interest to people in today’s discussion.P.S. Don’t forget you can register here for Sunday’s live discussion.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

A quick announcement: We’re holding a free live Sovereign Finance discussion on Sunday 20th July, at 7.30PM on Zoom. We’ll discuss global trends, things you might do, and answer questions from the podcast so far. Register for free here.Rob’s comments below are in italics.Derek’s comments below are in normal font.Our topic today is the BRICS annual conference, which started a few days ago. We've seen several trends accelerating that we've been discussing for a while. So we thought we'd talk about those today. Where do we need to start?As you are aware, it was originally a group of five nations: Brazil, India, Russia, China, and South Africa. Now, the main hitters there are Russia and China. Brazil has the presidency of BRICS this year, and that's where the summit has been held.They've now got up to 15 members. Iran has just become a full member, which is highly significant given the conflict with Israel and the United States. In addition to the 15 members, they've another dozen or so associate members.This now represents approximately half the world's population and a substantial portion of the global industrial and economic activity. There has been an accelerating process of arranging international payments between them and establishing a system that's entirely independent of the American banking system, the SWIFT international money transfer system, and the dollar-based trading mechanisms.It's been given an extra impetus by the attack on Iran. It's no secret that America is desperate and growing increasingly desperate to preserve its privileges of the dollar being the world reserve currency and one which has no anchor in linkage to gold, which was the way that it was originally set up in 1945. So this could all accelerate very rapidly. The dual processes of them trading with each other in a way which is independent of that system.De-dollarization of the world currency system. It's very likely that, for a while now, it has been obvious that the currency system they introduce will almost certainly be ultimately anchored to gold in some way or another, whether they eventually move towards a single currency or not. If they're trading with one another, they've got to have some mechanism for confidence that the value of one country's currency is going to have some stability over at least the time that it takes to complete delivery and payment, which of course with floating currencies around the world, it is one thing that nobody could depend upon.It sounds like we're witnessing the emergence of a multipolar world before our eyes.Yeah, exactly. Once again, both Russia and China have been very forthright in laying out their vision of what a more equitable future world would look like. It would certainly be one where no single state has the imperial dominion over everybody else that for the last half a century or three quarters of a century the United States has had.Do you think this heralds the potential end of the dollar?Well, it's the beginning of the end of the dollar as the global reserve currency, I would say, as a matter of clear fact.It sounds a bit like when the pound was the global reserve currency and now it’s an irrelevant footnote really to anyone outside of Britain.When the pound was the de facto reserve currency, it was a gold-based currency. Each pound was, at that time, worth about a quarter of an ounce of gold.It's debatable now whether we have much gold at all!Well, yes, as we've mentioned in the past, it was a spectacular own goal for Gordon Brown to think it was a smart move to flog off about half of Britain's gold reserves to raise some quick cash shortly before the accelerating climb in the gold price.So, the attack on Iran once again shifted the urgency, I would imagine, for that country to make its own independent arrangements.They're going to need some powerful friends if they're going to get through the coming times.Clearly they've been astonishingly lax in their own intelligence gathering and security to allow such a preemptive strike. It really, even if one takes at face value the ostensible reason for it, which was to prevent Iran from developing a nuclear weapon, which is hardly plausible anyway.It's far more likely that it was an attempt to weaken that regime and replace it with one that would be more amenable to American and allied interests. From that point of view, it clearly had a spectacularly opposite effect. Rather than triggering a revolt against the current regime, it's had the effect of uniting the population entirely behind the present government.That's what happened in the Second World War as well? Was it Germany that first started bombing civilian centres or did Britain bomb German civilian centres?No, it was the German tactic, the blitzkrieg, the attack on particularly London and Coventry and the various industrial centres of Britain, which was fought off in the Battle of Britain. But it then set the standard, and the bombing of civilian centres has been a constant feature of warfare ever since.In the ancient world, there was a convention of not attacking civilians. It wasn't really for humanitarian reasons. It was because the civilian population of the defeated nation would become enslaved. So you didn't want to kill your potential future slaves!Nonetheless, it was a convention right up until the point where Franco, with support from Mussolini and Hitler, bombed Guernica, which horrified the world. Yet, less than 10 years later, this had become standard practice on all sides of the conflict.But the point is it never demoralises the civilian population. It tends to cause people to rally around the cause instead.Yeah. Of course, there could not possibly have been any expectation of the effectiveness of Iran's response from a military point of view. I'm not clear whether the ceasefire that Trump declared after the 12 days of conflict has been universally observed. Israel's record of honouring ceasefire arrangements speaks for itself. Anyway, one result of that has been a much strengthening of whatever arrangements Russia and Iran had for universal support on the military front. Another factor is that within the country, there was a significant body of opinion that advocated for greater rapprochement with the West.An ending of the sanctions regimes and everything. This is now almost completely collapsed. They've presented one united front. Even the people who were, if you like, pro-Western have now concluded, well, we plainly can't trust them. So once again, that has been completely counterproductive. So this means that there is a considerable focus on building up the alternative arrangements with the rest of the world, which is not part of the American-led factions. So all of these are working together.Trump's attempt to bully the rest of the nations by imposing tariffs on them has again been counterproductive. The attitude of China has been, well, if the Americans don't want to buy our goods, we'll sell them to other people.They just come to other arrangements with more amenable trading partners.Yeah. The other thing is that we don't generally in the Western world recognise the enormous success that China and India have had in getting large segments of their population out of poverty and into something resembling at least a lower middle-class standard of living.Across China, India, and Southeast Asia, we've a population that is close to 50% of the entire world's population, of which approximately 90% were in poverty 20 years ago. This has now been reduced from 90 percent to getting pretty close to half and the process is continuing to accelerate because, once again, economics is not a zero-sum game. It's something which is self-reinforcing. The more prosperous people you have, the more they have to spend and the more they have to spend, the more they create prosperity for other people, which is the opposite of what's been happening in Britain, America, Europe, and the English-speaking world generally.Especially when they're not required to spend it in dollars.Yeah, exactly!The majority of the population has seen their standard of living decline steadily since around 1975.It's been an astonishing period to live through and to witness first-hand. The stories of the standard of living that was taken for granted across the British population when I was a child, a teenager, or a young adult seem completely fanciful compared with today. Almost nobody seems to be able to live within their income.Not only that, but we also have a disintegrating infrastructure, including potholes in the roads. We have all the visible signs of decay and a tiny elite drawing more and more wealth towards themselves, which is then effectively being taken out of circulation. Not only that, you look at the civil engineering projects in China, the bridges, the tunnels, the dams. It's quite extraordinary.There’s nothing like that happening here.No, exactly. So, this is the thing to keep an eye on, to see the self-reinforcing changes take place.There are 193 member states in the United Nations, but the decisions made by the United Nations are paralysed by the fact that the five permanent members of the Security Council, Britain, France, Russia, China and the United States, have a veto power. So they can prevent any significant alteration of the structure of the United States, and they can prevent any resolution being adopted that any one of them objects to. The United States has a solid record of vetoing proposals which have near-universal acceptance by the rest of the members. This is obviously a source of great frustration, and it renders the entire thing, whatever the ideals were, impotent.Because eventually people will just leave and form alternative arrangements.This is becoming increasingly clear day by day, and it is unavoidable to notice.—We are holding a Sovereign Finance live discussion on Sunday, 20th of July at 7.30PM UK time. To join us, register here.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments below are in italics.Derek’s comments below are in normal font.We're talking about warfare today, which is definitely a relevant topic, given worldly goings on and the connection to the financial system. So what do we need to know?We had the so-called 12 days of what you could call it, Israel and Iran, terminated by a ceasefire that Donald Trump is taking credit for. It's worth examining the broader implications of this. Before we get back to that, I wanted to review the nature of warfare, as this has been a phenomenon that has been ongoing for approximately 6,000 years.In the ancient world, it was a straightforward case of basically robbery with violence on a grand scale. That's what it remains. In the ancient world, there were essentially two forms of wealth. One was land, productive agricultural land, and the other was a means of labouring on the land.Rulers would initiate warfare to grab more land from their neighbours and to grab more men and women that they could turn into slaves. Obviously, there's always a cost of warfare that has to be borne before you reap the dividend from it.Throughout history, they've either financed it by building up a war chest beforehand or hoping to obtain enough plunder as they go about it to finance it, or in some cases, by borrowing it. There have been moneylenders prepared to lend to kings to finance warfare. Sometimes, that has been a very unsatisfactory bargain from their point of view. Probably one of the most prominent cases in history is the Knights Templar who loaned money to King Philip of France to finance his crusades.He decided that he either couldn't pay it back or didn't want to. Therefore, he accused the Knights Templars of heresy and had them burned at the stake.Yeah, I was thinking of Edward the First, who raised money from the Italians for some of his crusades.This is topical because we had the NATO summit meeting yesterday. All of our European governments duly fell into line and promised to spend 5% of GDP on so-called defence. Considering that we're spending two and a half percent and struggling to get that up to 2.6. How we're going to reach 5% without even deeper cuts in the things that taxpayers of this country want the government to be doing for them is something we just have to see.Meanwhile, the warlike rhetoric is going up. We're told every day that we're under threat from the Russians. One of the conclusions that NATO came to is that they want to create a minefield all down the edge of the Russian border. Why they imagine that Russia is likely to trample across Europe, I can't imagine. There's not much sign of it.We won't delve into the pros and cons of the war in Ukraine or its origins here, but it doesn't seem to be going very well at all for Ukraine. Zelensky attended the NATO meeting but wasn't allowed to participate in it. He had a very short meeting with Donald Trump, apparently offering to pay for more weapons from America. Whether that goes anywhere or not, we'll have to wait and see. As far as I understand, his government is bankrupt. It's unable to pay the war pensions for its deceased soldiers and is unable to service its debts. So where the money is going to come from to buy more weapons, we don't know.Of course, we've had the dramatic attacks on Iran by Israel. This is a breach of international law by any standards. They sustained far more damage in return than they had ever expected. We don't know the full extent of that because it's been heavily censored.The justification for this attack was alleged to be to prevent Iran from developing nuclear weapons, although there was no evidence that it was doing so. It has now reduced its level of cooperation with the International Atomic Energy Authority, which had been monitoring it. Not surprisingly, seeing as that authority clearly provided Israel with the intelligence it needed to know exactly where to target the nuclear facilities. Furthermore, the somewhat ambiguous report that they just put in was what provided the nominal excuse for the attack.Bear in mind that whether Israel carried out the initial attack or not, this is a client state of the United States. However, there seems to be a lot of debate at the moment about whether the United States is in thrall to Israel or Israel's thrall to the United States. The US has had an attack on Iran as part of its agenda for at least the past 20 years. Currently, you need to view this within the context of the BRICS Alliance, which is gaining strength and credibility as an alternative to the American-dominated World Financial System. It's valid to examine all the other wars America has been involved in as part of its efforts to maintain its hegemony over the global financial system.Yeah, it's never really about weapons of mass destruction or preventing some state from having nuclear weapons or whatever excuse they give. It's about geopolitical hegemony and control.Iraq had been seriously considering accepting payments for its oil in euros rather than dollars. Some people regarded that as the real reason for the invasion of Iraq, the two invasions of Iraq. Gaddafi had been discussing the establishment of a Pan-African gold-based currency and offering to accept it as payment for Libya's oil.I was listening to an interesting discussion this morning about the Yugoslav war in the early 90s. The story in the Western press was that Milosevic was a ruthless dictator. We had to attack Serbia to prevent its humanitarian purges against the other parts of Yugoslavia. In fact, when Yugoslavia broke up after the dissolution of the Soviet Union in 1991, the various fragments of it except Serbia, all adopted Western-oriented governments. Serbia was the only one that elected a communist government, which was a significant part of the motivation for the NATO intervention.From a humanitarian point of view, it didn't improve the fortunes of any people who were subject to Serbian oppression because there were an extra 10,000 non-Serbian ethnics who were massacred after the bombing started. It's also interesting that this was the point at which Europeans wanted to resolve the difficulties in the former Yugoslavia through negotiation. Rather than doing so peacefully through the European Union, which was originally established to prevent war in Europe. It was taken over by NATO which resolved it with a bombing campaign. This shift significantly altered the approach from one of peacemaking to one of resolution by violence.It’s one of the great inversions, isn't there, where all of these things get cached as a defence fund or a defence force. It's not defence when you're going and picking a fight, is it?Exactly. One of the things that I would have thought was the lesson from what we've seen in Ukraine is that the whole project of warfare has become self-defeating insofar as you pour all this money into advanced war-making machinery of one sort or another, whether it's fighters, bombers, tanks, personnel carriers and the rest of it. These are destroyed at a far faster rate than they can be produced.Another significant aspect of the picture is that we must consider the costs in terms of materials and energy, which involve colossal amounts of energy in the manufacture of high explosives, as well as in the delivery mechanisms for those explosives, whether it's shells, missiles, or bombs. This is an ultimately finite resource that is being taken away from activities that produce genuine benefits.I wonder how much silver is required to produce a fighter jet.Yeah exactly so. What's your reaction to what we've said so far?There's a significant difference between the narrative of what they're saying and the actions that actually occur. I come back to what Caitlin Johnson says about keeping a close eye on the movements of both military hardware and troops around the world. That gives you a much better idea of what's going on.This relates to what I was saying about the systems established at the end of the Second World War during the Bretton Woods Conference. America had been essentially undamaged by the war itself. Lost 150,000 troops compared with the 27 million that had been lost by Russia, civilians and troops in that war, and the absolute devastation right across Europe and the destruction. America then demanded repayment of the loans it had made to the Allies during the war, which further crippled the European economies. They then generously had the Marshall Plan, which was provided to the Europeans to spend with American manufacturers re-equipping and rebuilding themselves.Seems to be a great financial incentive for war, not against war. Some of the perhaps worst people in the world stand to benefit greatly by more war happening, not less.This system that America established after the Second World War was one in which the dollar was tightly linked to gold. Of course, that was terminated by Richard Nixon in 1972, when largely as a result of the Vietnam War, money was being spent overseas. Particularly Charles de Gaulle wanted to send the dollars back to the United States and cash them in for gold. So they suspended that convertibility.Since then, America has been able to spend as freely as it wished all over the world. The recipients were expected to hold the dollars and reinvest them in the United States, either in the form of treasury bonds or perhaps commercial bonds or stocks and shares, but without achieving a controlling stake in any American enterprises. Now, over the last decade, it has become increasingly clear to the rest of the world that this is not a good idea, that the dollar is not going to maintain its value. They're not going to play.That brings us back full circle to the attempts to coerce the rest of the world to fall into line by military means. This could become self-defeating very much more rapidly than anyone would realise.It feels to me like they're trying to kick the can down the road even further, and there isn't any more road.That is increasingly looking like it. I'm not sure how willingly the Russians, Chinese and Iranians have been investing in the weaponry and military equipment that they've built up, which has obviously been enormous and has completely shifted the balance. It's astonishing the sophistication of these weapons have been produced internally by countries that we hadn't thought of as being technologically sophisticated or advanced.But they've realised that as a matter of realism, they have to be in a position to defend themselves forcefully. It's certainly going to be a very interesting year and a very frustrating time for all of us as we watch our standards of living decline in the pursuit of trying to catch up and match this. Across Europe, I can't imagine that the population can be at all looking forward to larger amounts of their taxation going on something which is certainly not contributing to our well-being. Arguably, it makes the world more dangerous rather than safer.Most people just don't understand what level taxation really sits at, and then also how it's used. It's clear that if they want to invest money on roads or something, they just get the magic money machine spinning and creating more money for it. They don't need to tax for this, it's just to make everyone poor.But yeah, if everyone understood that taxation was really at 90% when you look at it, spend it, you tax them on what you earn, and you tax them on what you spend. It's not going to be the things that they tell us it's going on, like emptying the bins, fixing the roads and all of the things that we want to pay taxes for. Income tax was only introduced in the Napoleonic Wars as a temporary measure. So, but yeah, it strikes me that taxation could be more like 10% to cover the things that we all agree are beneficial to be done centrally.Yeah, that's right. Quite so. Exactly so. Right, that's about it for today.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Reminder: We’re holding a free live Sovereign Finance discussion on Sunday 22nd June, at 7.30PM on Zoom. We’ll discuss global trends, things you might do, and answer questions from the podcast so far. Register for free here.Rob’s comments below are in italics.Derek’s comments below are in normal font.We're talking about wealth creation and wealth acquisition today. Where do we need to begin?Well, I was reflecting on the fact that, as we discussed in earlier issues, wealth is brought into existence by purposeful work. You could take a bunch of bricks and turn them into a house. You could take a bunch of wood and turn it into furniture. You could connect up some pipes and create a plumbing system for a home.All of these would be examples of creating something that didn't exist before through the action of purposeful work. It would take a certain amount of materials, one or another, a certain amount of energy and some intentionality.Once we've created something with our activity, we can then trade that with someone who has created different work. This is the core of all economic activity, as long as there has been any organised human society. As an analogy to the energy laws, there is a similar pair of laws in the realm of economics and wealth creation.There's a constancy law which is essentially that at any given period of time, the amount of wealth which is created is going to be equal to the amount of wealth which is acquired by somebody else. Either the creator of the wealth keeps it, in which case they acquire it, or they trade it or engage in some other transaction with someone else, and then it is theirs. In a reasonably equitable, balanced, fair, just society, it would be traded with somebody who has created a more or less equivalent amount of wealth. Obviously, the equivalence is in the eyes of the beholder.I was going to mention that, so different people, you know, one man's junk is another man's gold.Yeah. Having said that, there's an analogy with the other energy law. We've got a conservation law, and then we've got the entropy law, which is essentially that every time there's an energy transaction, a proportion of it becomes unavailable for doing useful work. It dissipates as low-grade heat.If an electric current is flowing down a wire, the wire has a certain amount of resistance, regardless of how small it is. That will dissipate a certain amount of energy in the form of heat. If you're pushing, doing any mechanical movement, there's going to be a certain amount of friction and rolling resistance and so forth again, which turns it into heat. So you never get 100% conversion.The same thing applies to any trade or exchange of the products of one person's labour with another. There's always a certain amount of transactional cost of one or another, which doesn't quite even it out.We need to look at is how it's working out in contemporary society. The transactional costs represent a significant portion of the wealth that has been created. This is because a great deal of it is going to either people who are managing to extract more value than they're bringing.I was just thinking about all of the taxes that I pay!Yeah. We've mentioned before that, if you look at it in a certain way, you might find that you've been taxed at a total rate of 95%. We're not just talking about the actual taxes paid to the government, but also the various layers of profit that exist between the manufacturing of, let's say, a bar of soap and the cost of that bar of soap to the eventual consumer.Now, some of those are legitimate transactions. The retailer who sells it to you is going to make a living out of making it available to you in a convenient way. There's a certain amount of transportation involved, but also a vast amount of, to put it bluntly, sheer profiteering in the entire system. There is a significant amount of internal bureaucracy.If there is a highly inefficient transfer like that or if it becomes deeply inequitable at some point, the system must either topple over or implode. It can't carry on forever.Yeah, exactly. It's reached that point, you know. It's a worthwhile exercise to look around at the items in your supermarket cart and ask what it took to produce this bar of shaving soap, for example, or this carton of washing-up liquid, or whatever. You'll find that many of these products are primarily made of water, or they're composed mainly of very inexpensive oil or a combination of the two. They've traces of various active chemicals, which are often not expensive in themselves.Very often, the actual genuine costs of an item that costs maybe three or four or five pounds or more might be literally pennies. Then you've the packaging, which is typically discarded at the end of the day. In many cases, I'm convinced that the packaging costs more than the contents. So we're all doing that. That does hold out a quite optimistic opportunity for the future, because these things could come full circle.Small entrepreneurs have been priced out by large corporations that have economies of scale, which, on the face of it, we can't compete with. However, they also face diseconomies in terms of their superstructure, particularly in the centralisation of their manufacturing and distribution hubs, which necessitates the transportation of goods throughout the country.There is a real opportunity for small, local, ethical, and honest businesses to move in and reestablish that territory. That is a worthwhile opportunity that we should start exploring and considering.More of a localisation rather than a globalisation.Yeah.My mum buys some chocolate from a lady who lives near where my parents live, and she just serves the local area; it’s all handmade. It's easier to put together something that's more crafted and human, rather than having a mass-produced feel. There's probably a snap back on that as well, where people feel like they've lost that local connection.Yeah. For instance, if you want really good-quality marmalade, it costs about £8 a kilogram in the shops. If you get the absolute most basic marmalade, it's still about £3 a kilogram. To make it yourself, the cost is approximately £1 per kilogram.Okay, you've to use a bit of energy to cook it on the stove, and you've to spend some time doing it. But it's a big gap. That marmalade you make yourself for a pound a kilogram is going to be better than all but the very most luxurious top-end of the range. In the future, I see us doing far more of that.I've got a habit of buying quite expensive local honeys. But I'll maybe skip the ‘manufacturing’ part myself!Well, it'd be even cheaper if you had your own beehive!Yeah, it would. It would be good to have some more bees. Full stop.So that was what I was reflecting on. Perhaps if we all start looking around ourselves and conducting a quick, informal audit of what's gone into this and what that really ought to cost, it could be quite hopeful.That could lead you down some wild rabbit holes when you start investigating what's in your toothpaste, where the ingredients come from, and how they make it.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Reminder: We’re holding a free live Sovereign Finance discussion on Sunday 22nd June, at 7.30PM on Zoom. We’ll discuss global trends, things you might do, and answer questions from the podcast so far. Register for free here.Rob’s comments below are in italics.Derek’s comments below are in normal font.I’d like to discuss how interest rates would work in a sane world, and how they have in fact been working for at least the last couple of decades. Plus, how this relates to the unfolding of geopolitical shifts that we're in the middle of.Interest Rates…In theory, the way it used to work, when I was working in the financial industry around 1970, prevailing interest rates were determined mainly by market perception. When I talk about interest rates, it applies to all these things: bank loans, mortgages, the rest of it.I'm primarily discussing the bond market, particularly the government bond market. There are several elements in theory that lenders and borrowers can agree on regarding a rate of interest.The core rate, if you like, is what the market is prepared to rent the use of money for a duration.That obviously, like anything else in the market, is determined by supply and demand, the rate between people wanting to borrow money and people having surplus money to lend. Historically, the core rate has been approximately 2.5%. So if you had a million pounds that you'd lent out, you'd be getting £25,000 a year interest on it.Additionally, you must consider a few other factors. One of them is the borrower's reliability. How confident the lender is that the borrower will continue to make the interest payments. Whether they're going to be in a position to repay the loan at the end of the period or over the period, depending on the way it's structured. That is, you have an insurance element.Suppose a lender had 100 borrowers to whom they were lending money, and they expected that one in 20 of them would default. Then, they'd need to have an additional payment for the interest they were collecting. To reconcile them for the situation where one of those borrowers had defaulted. You can see that the more likely it would be to default the higher the interest rate that you'd want to allow for that.Then, a third factor is whether the money you're going to get back will be worth as much as the money you lent out at the beginning of the period. Which of course, in times of inflation, you can guarantee that it isn't. So you'd have to take a view.That would determine an additional premium that you'd have to allow, which obviously, if nobody knows the future, you'd have to take a view on what the likely rate of devaluation of the currency or rising prices is. Which is the way around you tend to look at it. Historically, government debt has been generally regarded as more stable and reliable for repayment and servicing than commercial debt.For the two or three hundred years, the British government was able to issue bonds that typically paid out around the two and a half percent basic core money rental rate. They were even able to issue bonds which had no period during which they would be guaranteed to be redeemed. There were two main classes. One was called consols, short for a consolidated loan portfolio. They had a nominal interest rate of two and a half percent. The other one was a war loan, which was issued to fund the First World War, although the actual funding was a bit of a scam as it turned out. They had a nominal interest rate of three and a half percent.Can we just cover why that was a scam?It was a scam because, prior to the First World War, when it was issued, it was not taken up by members of the public who wanted to take advantage of the extra 1%. There wasn't a great deal of conviction among the property-owning classes of England that they knew how well the war would turn out. Of course, it turned out disastrously for Britain, even though we supposedly won it, or our group of allies won it.So we're told anyway…Yeah, Britain had greatly impoverished itself. It had also lost a great deal of its manpower disproportionately amongst the bright, well-educated young men who became junior officers and bravely led their platoons into assaults on machine gun nests. Of course, the enemy soldiers took great pains to shoot the officers if they could identify them.Anyway, although the loan wasn't taken up very widely, the Bank of England loaned three and a half million pounds, which was the amount they were trying to raise, to two of its senior employees. These employees then used the loans to purchase £3 million worth of government stocks. So, from a balance sheet perspective, the Bank of England was square. From a balance sheet point of view, their senior executives were square.Let's assume that the bank started out with whatever capital it had. At the end of this exercise, it had assets of three million pounds, consisting of the loans that it had lent to these two individuals. The individuals lodged the bond certificates with the bank as security for the loan. The bank had an asset in the form of the loan to these purchasers and a liability in the amount of the money it had lent. They had on the face of it an asset of three million pounds worth of government bonds and a liability of a three million pound loan to the bank, which cancel each other out, leaving them with a balance of zero on that account.However, the government then had three million pounds to spend on weapons, ammunition, uniforms, boots, and paying the soldiers, which, of course, explains why by the time the war ended, the country was in a disastrous economic position. The attempts by Winston Churchill, who was the Chancellor of the Exchequer in the 1920s, to put Britain back on the gold standard at the pre-war rate caused an immediate run on the pound which led to the general strike. Anyway, so getting back...These government bonds that were yielding two and a half or three and a half percent by 1970, we'd got something like inflation running at 10% or so. Of course, it went on and up from there. Consequently, nobody was going to pay a hundred pounds for a hundred pounds nominal version of British bonds that were only paying two and a half percent interest.As a result, the interest rates prevailing on government bonds increased to around 16%, which meant that people's bank loans, consumer credit, and mortgages rose to even higher levels than that.Consequently, if you've got a bond that pays a nominal 3.5%, and the prevailing rate of interest you're looking for is about 16%, you'd have to buy or sell that £100 nominal bond for about £16. That would yield approximately 16% on your investment.Now, of course, people who bought bonds at that price in 1970 and hung onto them would have been able to see their price go up to over the £100 nominal in the early 2000s.The British government thought it would be a smart move at this time of very low interest rates to redeem those bonds, as new government debt was being issued at around 2% in 2009 and 2010. So, bonds in the market that had a nominal interest rate of 4% were selling for £50 on the nominal £100 bond. Is that clear? How does that mechanism work? If the prevailing interest rate increases, the bond price decreases. If the prevailing interest rate decreases, the bond price increases.Yeah, because the nominal bond price was fixed in the past.Which will be the price when it's redeemed. Until very recently, that has been sustained. Of course, the way it's been sustained is by the Federal Reserve effectively printing more and more money and the other central banks doing likewise.Yes, the “Magic Money Tree”...Yeah. Of course, all good things must come to an end. Just recently, United States bonds have been downgraded from their AAA rating. The US Treasury is finding it increasingly difficult to attract buyers for new issues of bonds. At the same time, foreign US bondholders have been trying to strike a balance.Probably looking at Russian bonds instead!Well exactly. The holders, probably the biggest foreign holders of US bonds, are the Chinese. I don't know how they compare with the Saudis, but the Saudis have huge holdings, as do the other oil-exporting states, due to the arrangement that Kissinger made with them in the 1970s. They agreed to sell their oil for dollars and then use those dollars to buy various assets, primarily US treasury securities, because gold would not yield them any interest, and they would get interest payments on the government bonds.Of course, this assumes that the purchasing power of the dollar at the end of the loan period will hold up and that the assets are sound. When the United States immediately confiscated Russian assets on the invasion of Ukraine, it must have given other US bondholders cause for thought. Well, maybe that could happen to me, too, which makes it a bit less attractive to hold them.Meanwhile, to stimulate the economy, as they say, the Federal Reserve is attempting to keep interest rates low. Obviously, when interest rates go up, people have more outgoings, particularly if they're highly leveraged with a lot of borrowing. They don't have so much money to spend on goods and services.To help keep the economy moving, the Federal Reserve has been attempting to keep interest rates low. It can only do this by flooding the market with more and more dollars. Of course, as it floods the market with more and more dollars, more and more people will be concerned about inflation.So it could be that the confidence trick, really the only way I can describe it, whereby America has been buying goods from the rest of the world and paying them in this newly printed funny money without having to redress the balance, maybe coming to an end. Against this background, we've got 36 trillion of American government debt. If prevailing interest rates rise, the amount the American government will have to pay in interest will increase accordingly.There are only two sources of government spending. It can either come from selling more government bonds or from taxation. The American population is probably not in a position to be paying more taxes, especially if they're subjected to rising prices in every direction.The ability to refinance loans as they mature by issuing new bonds may simply not be available. Foreign holders of US bonds are in a difficult position. If they rush to sell their existing holdings, it will crash the price and reduce the return they can get from liquidating those bonds. However, if they don't, they may end up being saddled with them anyway, as the price plummets.The real significance of this is that, because America has spent the last 20 years hollowing out its industrial base and manufacturing capabilities, it has been cheaper to do so in China...Or wherever, yeah.Or Mexico or Vietnam or wherever. America has very little to export apart from, well, I don't think it has a great agricultural produce surplus over what it needs to feed its population these days. The only other thing it has to export is arms.Ironically, of course, it's not even getting cash for a lot of the arms that it's exporting because these are being subsidised by American taxpayers for ostensibly geopolitical reasons. Essentially, this is a transfer of wealth from the general population into the pockets of arms manufacturers. So we could well find that America simply no longer has the wherewithal to pay its government employees, to maintain its infrastructure, in particular to pay its military personnel, maintain all its overseas bases and continue to run that protection racket, to put it bluntly, which has been operating since the Second World War.It's a globe-spanning setup as well, isn't it? If you think about all of the military bases across the world.Yes, there are about 800 of them altogether. So, meanwhile, we've got Starmer and Macron and Scholz and Merz all suggesting that we should be ramping up our investment in our armaments, which, as we pointed out before, is not creating any wealth.It is putting money in the pockets of the people who happen to be employees or contractors of the arms manufacturers, so that they can go out and spend. Unless we're actually producing the goods that they're going to buy, they'll be spending that abroad. That will be an additional drain on the economy. So my point is that these things could reinforce one another. It could unravel very much more rapidly than anybody seems to imagine.Sounds like a perfect storm, doesn't it? The end of the road appears to be a lot closer than it seems.I would say so. We'll watch this space.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. 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A quick announcement: We’re holding a free live Sovereign Finance discussion on Sunday 22nd June, at 7.30PM on Zoom. We’ll discuss global trends, things you might do, and answer questions from the podcast so far. Register for free here.Rob’s comments below are in italics.Derek’s comments below are in normal font.We're going to do another weekly recap this week, which is useful for me because I tend to live my weeks with my head in the sand, buried in my own affairs. It's good for me to catch up and stay aware of what's going on. So, what is happening that we need to know about?I wanted to discuss the general phenomenon of warfare, as it has a significant impact on the standard of living that we can all aspire to.The point is that any war incurs massive financial costs, as well as substantial energy and resource costs. These are all diversions from other things that those financial instruments could accomplish.From constructive things as opposed to destructive things.Yeah, constructive things. The core of our topic on this podcast is wealth. As I've mentioned in the past, wealth also comes from the same root. So wealth is a measure of well-being.Yeah, it's holistic. It's not just a monetary measure.The fact that you can put a numerical monetary figure on it is not the point. The fact that you can put a numerical monetary figure on anything doesn't mean that it deserves to be called wealth. There have been suggestions that we should have a word, ilf, meaning things that detract from your wellbeing. It makes you ill in one way or another.Obviously, weaponry, military equipment, explosives and ammunition are all examples of ill in that sense. Another example of ilf is the things that unintentionally get produced as a side effect from any process of wealth creation or anything that any of us do in the world. It creates a certain amount of waste, a certain amount of pollution, a certain amount of consumption of finite resources that could have been applied somewhere else.Yeah, to use an economics term, there is an opportunity cost with all of these things you choose to do.I must take bit of time at some stage to gather some statistics because the wars that are going on in the world now are comparable in terms of ammunition and explosives that are consumed as the entire Second World War.We also need to consider this in the context that, at some point over the next few decades, we will reach a crisis in fossil fuel consumption. As we've discussed before, we've done very little in terms of strategic planning regarding how to transition from our current reliance on fossil fuels to something sustainable for the indefinite future. I, for one, believe that it's still entirely possible that we could be living on current sunlight energy and do this without reducing ourselves to a medieval or palaeolithic lifestyle if it were done intelligently.However, to overhaul our entire infrastructure to reach that point is something that, in itself, is inevitably going to consume a lot of energy. If we were being intelligent about it, we would be applying the energy to rebuilding that infrastructure to gather some light, to use it and to organise ourselves in far more efficient ways than we're doing at the moment, which there's plenty of scope for.A more decentralised way of doing things might be the only way because you can't necessarily store all the power. We saw that with Spain, in terms of big surges of energy.Yeah, so instead of that, apart from things like all the billionaires flying around the world in private jets, we're squandering huge amounts of energy in destroying things.On things that go boom…Yeah, and killing people. Anyway, so that's all going on. In case people were wondering how this relates to the core topic, which is bringing our individual finances under control, this is an aspect that we need to be taking care of. The sheer insanity of the world has two crucial aspects of context to help us view what's going on.One of those pieces of context is that we're reaching all kinds of overshoot situations, as modelled by the limits to growth, which we've discussed previously on several occasions. So far, the way that the world's population, food production, industrial capital, industrial production, levels of pollution, all of the things that were modelled in that model in the Limits to Growth are almost exactly on track for the reference run for the 50-odd years since that was published.That's impressive.What that run shows is that one or the other of those is going to go into collapse mode in the next quarter century.Yeah, because the biosphere is not something that can be plundered forever, presumably.That's it. Let's say the model is unduly pessimistic in that regard, and it takes another few decades. That's not impossible, but given its accuracy so far, we should consider it. Many of the ways politics is reacting involve people being unrealistic about coming to terms with it.Another significant aspect of context is that I would argue the American Empire is now in the final stages of decline, as was the British Empire previously, as well as those of the Dutch, Italian, Roman, Portuguese, and Spanish empires. The Persian Empire, like many throughout history, has followed a cycle of arising, prospering, peaking, and then declining. That is the stage of the American Empire. However, what is truly alarming is that it still possesses far more military power, despite being in a stage of decline. We can’t know how it will act or what the repercussions may be.Going back to these wars, that's one of the issues. Because it's not really Russia versus Ukraine, it's Russia against a proxy of the US empire. That's been going on for a long time. But you go further back into the conflict.The bizarre thing, as I mentioned last week, is that in the mainstream news media, there is very little discussion. There are enormous actual developments every single day of the week in the Ukrainian conflict.The heartening thing I find is that there are many well-informed and intelligent people in the alternative media who are receiving a very large hearing and following. Most of them have their main output on things like Substack. However, most of them have a significant following on YouTube for at least a portion of their content.There are different people with varying perspectives, but there's a steady, persistent drip, drip, drip against the consistency of the propaganda we've all been subjected to since time immemorial. Sooner or later, cracks must appear as we discussed last week.I find notable informed commentators include Douglas McGregor, Scott Ritter, and Daniel Davies, who are all former military personnel. All these people I mentioned, I listen to and analyse critically, not necessarily 100% slavishly believing everything they say, but informing myself to try and get a rounded, critical, realistic estimation. Those are all pretty good for the military analysis. They're all accomplished ex-military officers. Very knowledgeable, and it appeared to me to be very intelligent and also extremely honest and forthright.Then you've Jeffrey Sachs, an economist who has worked with governments worldwide and with the UN. You've got Pepe Escobar, whom I find really amusing, really penetrating, and really well-informed. Danny Haifong, who has a video blog with interviews with a whole variety of people, including all the ones I've mentioned so far and the ones I get on.Pepe Escobar is another commentator on geopolitics who's really well informed, really quite amusing. He's just travelled to China and Iran. He's going to go to Russia. Danny Haifong runs a daily video podcast featuring interviews with all these people, who are really well-informed. Brian Beletic is another really good, well-informed geopolitical commentator. Ben Norton and John Mearsheimer are very accomplished economists and geopolitical commentators.Mearsheimer foresaw the Ukraine situation by about eight years.Another good one is Larry Johnson, who's a former CIA analyst. Seems very clear, very honest. All of this is set against the background, which many people seem unconcerned about. In a world where there are enormous stockpiles of nuclear weapons, it's not impossible that we could get triggered into an exchange, which at the very least would be the end of global civilisation and possibly the extinction of the human race, possibly the extinction of all higher life forms on earth. From the point of view of someone deciding to deliberately go ahead with launching a strike, but also with an accident or a miscalculation. This has happened dozens of times. It's a real possibility as long as these things exist and are primed and ready to launch.Which makes the behaviour of the British, French and German leaders look particularly reckless. We've now had the announcement from Chancellor Mertz, the new German leader, that he's prepared to supply Taurus missiles to Ukraine and not to impose any limitations on the range at which they're used. Now, these are capable of striking deep into Russia.Whether Russia's got the capacity to intercept them or not, I don't know. But if one were launched at Russia, that would almost certainly result in Russia interpreting this as a direct declaration of war by Germany and respond to it. Obviously, that could escalate the entire situation out of control. Nobody seems to be taking this seriously as far as I'm concerned.Daniel Ellsberg outlined all of this in his book, The Doomsday Machine, didn't he?Yeah, absolutely. One of the positive developments that has occurred since Trump's ascension to the presidency has been at least an opening of normal diplomatic contact between Russia and the United States. It leaves a lot to be desired, but it's better than nothing. It's bizarre, this idea that when tensions arise, you stop speaking to people. This is the very moment when we should be ramping up our speaking and, more importantly, our listening, trying to understand how the world appears to other people.There's historical precedent; just look at Kennedy and Khrushchev, who averted a major catastrophe in the past.Yeah. And a lot of luck to be honest. Which is another point. You know, they have this whole thing about the so-called nuclear football, which is a rather strange name. It's a briefcase containing the codes that accompanies the president. To the president of the United States, wherever he goes, a guy is trailing around with him carrying this briefcase. It's just pure theatre, yeah. There are any number of people who are in a position to fire at least one nuclear missile with or without.This has been the case since the late fifties, or early sixties…So we'll see what it is. Now, the other ridiculously reckless thing that happened is Ukraine launching several waves of over 2000 drones towards Russian cities. Very few of them got through. There was certainly at least one residential apartment building in Moscow that was hit. Some commentators theorised that these were to stretch and exhaust Russia's air defence systems in preparation for maybe a more serious strike.Which, you know, once again, the consequences of this could be catastrophic. Then there was a response by Russia of a large number of drone attacks on Ukraine. This prompted a public outburst by Trump, saying that Putin's gone crazy. In fact, these responses were all measured. There have been a few civilian casualties in Ukraine. It's not clear whether these were from actual strikes or whether they were falling debris from drones that were shot down by the air defences. All of the targets were of military significance. They were either ammunition centres, troop centres, or military aircraft bases. There was an enormous explosion in Odessa, which was a strike on a ship which was bringing in arms and ammunition to Ukraine. So, you know, those were legitimate military targets.Now we've had the exchange of a thousand prisoners from each side. That's obviously a positive thing; it was brought on, and they paved the way for the next stage, which is to exchange memoranda on how they will see the path to progress towards peace. The Russians have announced that they're ready to send a delegation to Istanbul on Monday. It's not certain at the moment whether the Ukrainians will respond to that or not. However, it does seem highly unlikely that those talks will get anywhere, as the Russians have made their demands clear in the past.Yeah, we all know where the red lines are.It's highly unlikely that the Ukrainians will go, “yes, all right.” Of course, the demands are now larger. The Russians want effectively a demilitarised zone 300 kilometres along the northern border of Ukraine, precisely to preclude anything in that area being able to launch attacks towards Moscow. The extraordinary thing is, according to the Western media, the Russians are very devious and we can't take anything they say at face value. As far as I can see, their track record is pretty good.Of course, this all goes back to 1991. You could argue that the Russians have been astonishingly trusting. When Gorbachev decided to disband the Warsaw Pact and dissolve the Soviet Union, the American James Baker stated that NATO would not expand one inch eastward. Well, of course, precisely the opposite has happened. In fact, nearly every single undertaking that the Americans have undertaken has been consistently broken. But now it's clearly reached the point that they're saying, “We're just not going to take anything on trust anymore.” It's hardly surprising.This is the thing: look at the movement of troops and equipment around the globe, not what they're saying.When Clinton went to Russia to meet Putin, in 97 or 98, Putin, tongue in cheek, said, “maybe I could join NATO?”. Clinton said, “Well, I'll have to talk to the team about that!” But when the Warsaw Pact was dissolved and the Soviet Union was dissolved. There was no longer any logical need for NATO.So we have to see how this unfolds. Trump has been all over the show with the things he's saying. It's difficult to know whether he's really in the dark about what's going on, whether he's not got the concentration to regard it, whether his appearance of being a complete buffoon is to some degree an act or not. He's certainly an accomplished actor. He's been a television personality for 15 years, running the Apprentice programme. I saw that a couple of times, the British version with Alan Sugar. I just thought it was ridiculous. It was nothing like anything I've experienced in running a real business. It sometimes seems as though Trump regards being president of the United States as a continuation of a reality show, which perhaps in a sense, it is. He is obviously being pulled in many different directions.He hasn't got, as we've mentioned before, a cohesive team. He's got people who seem to be quite sensible, like Wyckoff, and people who are severe warmongers, like Rubio and Kellogg. So it's been pulled in different directions. We don't know how much of whatever intelligence they have gathered is being presented to him. He's obviously got to juggle between keeping his supporters happy, which is going to be impossible, and dealing with the various components, opponents he's got in the political opponents in Congress, in the media.He could well just be a useful idiot frontman.So, meanwhile, we've got the continuing destruction in Gaza. Apart from America and its immediate satellites, the rest of the world's countries are watching in dismay and disbelief as all this unfolds. Of course, another notable development is that the last few years have seen Russia and China building alliances economically and politically with an increasing number of countries worldwide. We must consider the application of these sanctions and tariffs in that context as being completely futile. They're futile on two levels. Indeed, as far as Russia is concerned, it's already been sanctioned to death. There isn't really anything more to apply. But more and more, they're going, “Okay, the United States doesn't want to deal with us. We won't deal with them.”All it has done is catalyse different people around the world forming separate partnerships outside of the system. It's just accelerated that process.Additionally, consider the infrastructure in China, including civil engineering projects, bridges, tunnels, roads, and railways. They've just conducted a trial of their Maglev rail system, which can reach speeds of 622 miles per hour, surpassing the speed of an airliner. There's nothing in the Western world that compares with that. Anyway.Ours are falling to bits!In Britain, a lot of it's barely out of the 19th century. Anyway, there we go. Interesting. If we're all alive next week, we'll see where we go from there. We'll likely return to the core topic of this podcast. OK.Sounds good to me. All right, thanks, Derek.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

A quick announcement: We’re holding a free live Sovereign Finance discussion on Sunday 22nd June, at 7.30PM on Zoom. We’ll discuss global trends, things you might do, and answer questions from the podcast so far. Register for free here.Rob’s comments below are in italics.Derek’s comments below are in normal font.We thought we'd examine current events from a sovereign finance perspective today. So, what has been going on?Well, it's important to have these conversations in a podcast like this, which started out with a fairly specific focus, namely, finance. The point is that finance is just one aspect of the entire human experience and human activity, and everything is interconnected.One thing I've been reflecting on is that our tendency to carve views of life into separate, discrete domains and subject areas is actually quite destructive. It's destructive to our understanding because everything really impinges on everything else.We're all polymaths, deep down.I hope so. It's certainly what I aspire to be. We've touched on this many times, but I'm convinced we're living through a pivotal time in human history. It's certainly not the case that there is nothing new under the sun. There are intervals when it could well appear like that.It's the scale and interconnectedness of everything, isn't it? What's happening probably has happened before. If you think back to the Magna Carta Declaration of 1215 and so forth, there have been repeat patterns, but not on the global connected scale that we have today.Well, it's funny you should go back to that. I was about to go back with an example which doesn't go quite that far, but in the 16th century, as nearly everybody knows, Martin Luther nailed up a notice on his church doorway, which was the spark that ignited the Protestant Reformation. It was 95 articles.Each of these articles was something where he felt that the Church of Rome had diverged from the teachings of Christ. I don't know what the other 94 were, but the number one one was the sale of indulgences. The Church had instigated this practice of raising money by selling indulgences, whereby you could buy your way to a shorter time in purgatory before you got to heaven, which is absolutely ridiculous. It's one of the most barefaced scams you can imagine. Obviously, nothing to do with the teachings of Jesus.You can buy your way into heaven.Yes, on multiple levels! Anyway, so the point is that that sparked the religious divisions, which created a lot of bloodshed and a lot of burnings at the stake over the next couple of hundred years. In some ways, it has been reverberating down to today. But I was thinking of this in the present context because this is an obvious example of somebody wanting to upset the prevailing control of the narrative. Of course, it came shortly after the invention of the printing press.The big thing that Gutenberg did with the printing press—I don't know whether it was the very first one, but it was the prominent one—was print the Bible, which made the Bible itself available to many, many more people. Up to that point, it'd all been copied by hand. It was costly, immensely valuable, and only held by the clergy who...And they were only in Latin.They were only in Latin. There's a two-edged sword to the fact that intellectual life in the Middle and early modern ages was conducted in Latin. One was that it made it a closed book, so to speak, to the population at large. However, the positive side of it was that it enabled intellectuals of all disciplines to communicate with one another, regardless of their own native tongue. But, as you say, it was only in Latin.They kept it that way for longer than they might have otherwise done to stop the proles from reading it.Possibly, possibly.Yeah, but anyway, the point is that both the proliferation of Bibles and the availability of printing, which enabled other people's ideas to reach a far wider audience than before, unleashed a lot of discontent amongst the population at large against the elites.It's interesting. I was reflecting the other day that I remember at school in the hymn book we had this hymn, All Things Bright and Beautiful, very twinkly, twee hymn tune. We were sometimes instructed to omit some verses when we sang the hymns.Yeah, all things great and small.So obviously, being the curious type I was, I read the verses we were not to sing. I can still remember to this day that the verse we were instructed not to sing was the one that goes, “The rich man in his castle. The poor man at his gate, God gave them their endowments and ordered their estate,” which is pretty much the narrative of the ruling classes. To a large extent, people bought it until they had some insight that, you know, perhaps there's another way of looking at things.As we go down the ages, you see the same process happening, those at the top of the hierarchy control the dialogue, the narrative, the story, the context in which people accept as the way things are. Each time a new technology appears that disrupts their monopoly on that narrative, there's a scramble to recontain it. So that happened with printing. The governments required that all printing presses be licensed and that any pamphlet should indicate who printed it so that government goons could come round and harass it.Presumably for your “online safety”!Well, exactly. You know how this went down with newspapers, radio, TV, and then the internet, and they were slightly blindsided by the internet. There's a lot of pushback, yes, we need to ensure our online safety.But you know, it seems to be whack-a-mole, and as fast as they cover up one outlet, another one appears. This is what has been going on now.So, do you think that is different this time around compared to previous technologies?Well, I'm watching this space. I’d love to believe in reincarnation because I don't think I will last long enough to see this through to the end unless it's...Lots of people do, so, you know, to keep an open mind, I guess!I'd love to be a historian in the early next century and look back on this time. But we at least have a front row seat to view it in real time. You know, just like in the time of the Reformation or the Industrial Revolution or anything else that people were living through when there was a sudden acceleration of the rate of change, it's pretty difficult to take stock of it. But that's what I wanted to talk about today.The hold on the prevailing narrative is a good metaphor: it's like a dam. If you imagine a dam that has a huge reservoir of water behind it and has been there for a while, it's not been very well maintained or anything, and occasionally, little cracks appear.Sounds like the Berlin Wall.Yes, exactly. Then you have a bit more of a crack somewhere else and a bit more of a crack somewhere else, and sooner or later, the whole structure is so much weakened that it just collapses. It seems to me that several strands in the official narrative are now under such scrutiny that many people are having their faith challenged by things they've taken for granted. As soon as you get one of them challenged, you start looking at some of the others.I'll come back to the question of Trump and where he's at and what he represents, but certainly his arrival as president of the United States for the second time has accelerated this process and some of it by initiatives that he's taken.I've heard him described as the wrecking ball of the elites.Yeah.It's difficult to know where to start, but I wanted to just look at a couple of things that, personally, I regard as very positive from initiatives that appear to stem from him. One of them was the appointment of Robert Kennedy Jr. as the head of the Health and Human Services Department.The other one was the lifting of the curtain on discussion of various topics with the department chaired by Anna Paulina Luna, who is initially looking into the John F. Kennedy assassination in 1963. These are two pivotal things and...The fallout from that event is still going on.Well, in a way, it explains the impotence of every president since Kennedy.Yeah, we've got a hollowed-out state where I don't think the presidents actually make their decisions. That probably extends to Trump. Perhaps Kennedy was the last one, and he got bumped off for challenging the status quo.Yeah, well, he got bumped off for several reasons. One is that he essentially declared open conflict with the CIA. One is that he refused to give United States air support to the Bay of Pigs invasion of Cuba. One is that he and his brother Robert, as attorney general, were prepared to take on the mafia and organised crime. Another one was that he was gearing up to end the Vietnam War. So he'd antagonise organised crime, the CIA, and probably all the other secretive or semi-secretive intelligence operations. He'd antagonise the arms manufacturers and the military.Of course, after the Cuban Missile Crisis, Kennedy and Khrushchev were so traumatised by the realisation that they had brought the entire planet to the brink of destruction that they communicated with each other. They wanted to back off and negotiate a way out of this.So, it's very interesting. I was watching a clip today of the hearings of the Senate Oversight Committee on the Kennedy assassination. The witness was one of the doctors in the emergency room when Kennedy was brought in.His testimony is just breathtaking. Presumably, he was no more than an intern at that time. I don't know how many of the other people in that emergency room are still alive today. But they brought Kennedy in, lying on his back on a gurney and they were trying to resuscitate him and they were trying to ventilate him and it wasn't working so they decided to do a tracheostomy and one of the things that came out of that is that the bullet hole in his neck was plainly an entry wound not an exit wound.In other words, it had been fired from in front of him and not behind him. After they'd been trying to, they'd done the tracheostomy, they were trying to get the blood circulating, they were trying to get him ventilated. One of the other doctors said, basically, then lifted him up and saw the fact that the left half of his skull had been blown off and announced that there was actually no point in attempting a resuscitation. That's something which has never been publicly acknowledged until now, completely demolishing the prevailing narrative. So several things arise from this. One is: How much can you trust your government?How much can you trust the agencies of your government? How much do you believe they are doing what they're saying they're doing and not doing what they're not saying?That will be the beginning of the collapse in acquiescence to the official narrative for many people. I'll just refer to the Make America Healthy report, which was published yesterday. That's 68 pages long. I haven't read it in detail. I have read the summary. There's a very good summary by Robert Malone. It'd be interesting to see what alternative perspectives people have on it. But it's very measured and science-based. It's very much saying that we have an inexplicable chronic health crisis, particularly amongst our children.We need to get some explanations for this. They lay out the various areas that need to be looked into, one of which is obviously food and nourishment, one is lifestyles, one is environmental pollution, and one is vaccinations.You know, the fact that all of those are coming under scrutiny, that in itself is going to be a gateway to questioning authority, questioning received vision for a whole lot of people, especially those who have tragically had children who've been compromised or worse.Yeah, I can tell you that as a parent of fairly small children, the childhood vaccination schedule is a wild rabbit hole to fall into.Yeah, exactly so.But you know, the point is that nothing should be off the table for questioning. If you can't question it, it's not science.That is the big point. Meanwhile, we've got a whole bunch of other things going on in the world, which, one way or another, are going to impinge on our prosperity and finances. So this is not a wild digression from the topic of this podcast.We've got the Russian-Ukraine conflict, the India-Pakistan conflict, the Israel and Middle East conflict, and all of these have the potential to spiral wildly out of control. I don't listen to mainstream news very much, but I catch up on the radio for BBC lunchtime news two, three, or four times a week. I'm astonished by that almost every single time I tune into it, none of those things are amongst the headlines. There are regular developments on all of those which are potentially catastrophic.Well, it just shows it's a thinly veiled propaganda outlet and not a news service.I don't know whether you know, but over the last day or two, the Ukrainians launched 495 drones. The Ukrainians launched an attack on Moscow, which was shot down. 63 of them reached the Moscow area. I don't know whether any of them proceeded to their targets or not. From the reports I've seen so far, it's not clear. But for one thing, this strikes me as completely and utterly reckless.It's very dangerous, isn't it?It also strikes me that Russia is being incredibly restrained in its responses. There seems to be a lot more intelligence being displayed on the Russian side than on the Western one. You know, we've had the on-again, off-again peace initiatives that Trump has intermittently attempted to promote. None of them seems to get anywhere. The Russians have repeated the same statement of their position that they have been stating since at least 2019, if not 2014. They're plainly not going to budge from that.The peace talks feels a bit like filibustering.Yeah. So, meanwhile, on the economic front, which again gets closer to the real focus of this podcast, it seems that the rest of the world is steadily gearing itself up to being able to act independently of the American-led financial and economic system. There's very little work the rest of us can do about it. We've got our own leaders apparently having taken leave of their senses.The idea that Britain or France or Germany can actually come out in conflict with Russia seems unrealistic, it seems reckless and on the wrong side of history. You know, it looks like we're backing the losers, and we're doing it without any resources of our own, which are up to the task. We haven't got a military of this scale that could make any meaningful contribution. I don't think we can produce arms. The other thing, which of course is mystifying in this sense, is that apparently the United States is still sending weapons and ammunition and military hardware to Ukraine. Again, there's a bit of uncertainty about whether that is happening or whether it's been stopped or how much longer it can go on, but if they wanted to stop the conflict, that would be the first thing to do.Yeah, this is what Caitlin Johnson says, isn't it? Don't look at what they say, look at the movements of troops and warfare equipment around the globe. If you keep an eye on that, that tells you what's really going on.Three of the people I look to for an intelligent commentary on geopolitics are Colonel Douglas McGregor, Scott Ritter and Daniel Davies, a retired Lieutenant Colonel. They've got brilliant podcasts. They're on YouTube a lot and seem very clear, intelligent, well-informed, and worth listening to. Not necessarily, you know, to believe them hands down flat out, but to certainly take into an attempt to provide some overall assessment with whatever other sources of information you want to bring into it. But, interestingly, Scott Ritter says that back in January, he had tentative hopes that Trump would make a significant difference to the approach.He's now become deeply disappointed, which is pretty much what I thought. You know, quite a lot. I noticed that many people whose perceptiveness I would respect seemed to have a lot of faith in Trump in the run-up to last November's election. I wondered how this would hold up, and it's already holding up very poorly.Yeah, all of the voices that were sceptical about him, I'm thinking of Whitney Webb, I'm thinking of Caitlin Johnson. They were pretty much on the money.Yeah. I watched carefully in the early days of his presidency, thinking perhaps he's not as stupid as he looks. I've come round to the view that he probably is. Apart from being a ridiculously needy, egotistical narcissist. He's not very well educated. He certainly isn't a sophisticated thinker. He doesn't seem to hold any consistency from one moment to the next.Who's pulling the strings then? Because that's always the big question I get asked. Who are “they”?Well, who knows? Partly, it's his advisors around him. In the run-up to the election, he either chose or was nudged to choose a whole variety of people who would not be, shall we say, very sympathetic to his ostensible agenda. The other thing is that nothing that's happened so far has diminished the power of what you might broadly call the deep state, by which I would mean an alliance between the intelligence services, the banking industry, the arms industry, the military and corporations.They seem to be still pulling the strings. But in the meantime, scepticism amongst the wider public is growing. I would imagine that we must reach a tipping point at some point.Yeah, this seemed pretty obvious to me going into the election cycle last year; it seemed obvious that voting is the plastic steering wheel that Maggie Simpson has in The Simpsons. I was surprised how seriously everyone took it. Like, how many times do we have to go through this?Indeed. Okay, well that's where we are for this week.A Quick Announcement: Join us on Zoom on Sunday 22nd June For a Free DiscussionA quick announcement that Derek and I are going to have a live Sovereign Finance discussion on Sunday, June 22nd, at 7.30 PM on Zoom. Registration is here. Do we have a topic in mind for that, Derek? Basically this is an opportunity for anybody to raise any comments or questions they have regarding any of the things that we've discussed, either on this podcast or any of the previous ones or any thoughts that you might have or any questions you might have about the whole way that the financial system works and what's available to you to optimise your own path through the rest of your life.Yeah, what plan do you need to make? That's the big question, isn't it? So yeah, we'll publish details with this episode and with the Substack emails that go out. But hopefully, we'll see as many people as possible there. All right, thanks.Okay, great. If you haven't already registered to be a member of this podcast, I urge you to do so so that you don't miss any announcements about what we're doing.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments are in italics.Derek’s comments are in normal font.We're going to reminisce about your past today and explore some of the lessons from working in finance. So what happened and where do we need to start?When I came down from university, I got a job in a firm of stockbrokers. It was one of the large firms, had about 40 partners and 400 staff. Its primary business was for institutions, for pensioners funds, unit trusts, fund managers of all sorts.One way or another, I concluded after about 18 months that this wasn't a life I wanted to pursue for various reasons. However, in the course of that, I did actually get quite a lot of insight into that entire world. I have also kept an eye on the way that it's developed over the years.This was 1969, 1970. It was a very different world then. It was much more leisurely. The office hours were 9.30AM to 5.30PM with a healthy one hour lunch break. Really keen, ambitious people came in at nine o'clock instead of 9.30 to catch up on current financial events, but not anything like the tempo that exists in that world these days. Also, I think to a large degree, it was essentially an ethical environment. I mean, there were a few wide boys, but the majority of people working in stock broking and in merchant banking and in fund management were genuinely trying to do a good job. They were genuinely providing a useful service. For instance, the whole thrust of this was to provide people who wanted to have effective savings and investment plans over the course of their lifetime for those to perform well. In particular of course for people who wanted to contribute either themselves or from their employers into a fund which would provide them with an income in retirement. They managed to do that in an effective way.Certainly with all the employers schemes, they were defined, they were what were called defined benefit schemes. They provided for two thirds of, typically two thirds of your final salary, assuming you'd spent a full time, working lifetime in that scheme for the rest of your life.The mechanics of this is pretty simple. There was an accumulation phase and a drawdown phase. The accumulation phase was obviously over the course of the years that you're working. You paid a proportion, maybe typically 10% of your gross earnings into the fund. The fund was invested to grow according to the laws of compound interest over the course of the lifetime. Then when you retired, it was put into an annuity, which is essentially like a life insurance policy in reverse, whereby the value of the fund was put into that annuity. That provided a certain percentage of the fund every year for as long as you lived. Of course some people lived for quite a long time, other people didn't survive very long after retiring. But it averaged out so that worked out. There was no asset at the end of that.There was a big shift where instead of being the so-called defined benefits scheme, such as that, people were persuaded to pay into defined contribution, which obviously is exactly what it says. You define how much you're paying into it, but you were left at the whims of the performance of the financial markets as to what you actually got in the end. A great many of us have found that we didn't get nearly as much as we were expecting. There are various reasons. One is the changes in the taxation treatment of pension schemes that was slipped in by Gordon Brown when he first became Chancellor of the Exchequer. In order to balance his budget, he needed to raise more taxation. The Labour Party promised not to raise taxation. So rather than doing it in an honest way, he raised the taxation by cancelling the benefits of pension schemes banking on the fact that people would not notice this because it didn't affect their immediate financial situation on a current basis. However, if you're taxing the income which is being accumulated in the fund over the years, that makes a significant difference. Because it's relying on compound interest, it means that there's going to be a lot less in the fund. The other thing is that the large corporations which comprise the majority of the shareholdings that in the funds are invested in are not nearly as generous with dividends as they had been historically. More of the profits from the corporation are being transferred to executives and directors of the companies. More of it is going into the so-called financial industry that's managing these things. So it's a lot less beneficial for the typical normal person who's looking forward to a retirement income.I used to have a client who was an independent financial advisor. He described it as being like the ‘goo’, the financial industry that sucks everything up if you just leave it.Partners of a successful stock-broking firm or merchant bank had pretty substantial incomes. They might have been earning five or 10 times the earnings of a doctor, for example. But they weren't earning 100 or 1,000 times the income of a doctor, which top financiers are doing these days.The number of people in that segment of the economy has ballooned out of all proportion. I think there were 2000 members of the stock exchange in those days. They probably have a staff of about 10 times the number of principals. For instance, my firm, as I said, it had 40 partners and it had a staff of about 400. If you were small stockbroking with two or three partners, you'd probably have 20 or 30 staff. So that would have meant that there were a total of 20,000 or so people working in stockbroking, probably a similar number in merchant banking. A similar number in life insurance and various other kinds of fund management. So perhaps 60,000 people working in the financial district. Whereas now if you look not only have you got the city which is full of skyscrapers instead of the four or five story buildings that were there back in the day. You've also got the enormous financial district over in Canary Wharf in Docklands. I don't know how many hundreds and hundreds of thousands of people are altogether involved in this industry. They're all earning far larger than average wages in other segments of the economy. You have to ask yourself what they're actually contributing to. It's worth mentioning also that banking and stockbroking were arguably performing a useful service at that time. Okay, they were taking a small cut, but they were connecting people who had capital with enterprises which needed the capital to invest in their factories and their motor fleets and their machine tools and whatever it was they needed to run the business.There was a beneficial effect all the way around. Whereas we've seen over the subsequent decades, more and more of it is just some form of essentially gambling, computer, essentially a gigantic casino where one person's gain is another person's loss. So that's been my perspective over the years from seeing Inside the Beast.And that's now our biggest export.I was thinking as you were talking about the doge happenings in the US, the Department of Government's efficiency and looking into these things and realizing that it's not very efficient and why do we have all these people. It sounds like at some point the system's going to break and a similar thing maybe has to happen.Well, it certainly seems to be. I mean, there's no doubt that in government, especially national government, there's enormous wastage of another sort. Nevertheless, the bull in China shop approach to trying to get to grips with that which Elon Musk and Donald Trump have been applying is probably not going to get a happy outcome.What else can people do? Is it a case of looking after your own finances where possible and taking responsibility for things more?Once you grasp the essential principles, you need to see what is possible. This is getting into the realm of finance, but the only thing I can suggest is that you actually find a financial advisor who thinks outside the box.A lot of so-called financial observers advise, they're glorified salesmen.Most just sell products. They don't charge fees, they get paid to sell products. They set their fee out at the commission that they're incentivised to sell certain products. So it's not independent.It's essential to get some orientation as to what are the possibilities as far as the taxation arrangements. These of course vary from country to country and from time to time. See what schemes there are which enable you to retain some control over it. Then learn enough about these things to be able to make an intelligent decision. See what the underlying assumptions are of the way that the fund needs to grow to meet your objectives. Be monitoring it all the time to measure up whether or not it's doing that.Yeah, and I think a good financial advisor should help you figure out how much you actually need to do the things that you want to do as well, because you can't take it with you at the end.Yeah, exactly so. OkayJust on that, had a client, I think it's worth finding someone local as well, or who really understands the local environments. I had a client a few months ago who is a financial advisory in Dublin. So they specifically serve the Republic of Ireland. They say that Ireland apparently has like the most complex legal environment that you can ever imagine. So it's like they specialise in that. So find the right person, I guess.Yeah, that makes sense.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments are in italics.Derek’s comments are in normal font.We're going to take a swipe at current events, current goings on, because as usual, things are running apace. We're also going to touch on inflation, which is coming back into the realm of relevance. Where do we need to start?Okay, I think we've had things running at a pace on numerous geopolitical fronts. It's been more of the same. America is now saying they're pulling out of attempting to broker a deal for peace in Ukraine. It was a bit of a thin claim in the first place considering the responsibility America had for provoking the situation. It did seem initially that progress was being made. It's now stalled. Trump seems to be getting more unpredictable. From the word go, everybody said the one predictable thing about him was that he was totally unpredictable.Yeah, crocodile tears.The picture emerging is that what he says appears to be whatever thought has flitted across his brain, determined by whoever he spoke to in the last five or ten minutes. It's also pretty clear that there are people in the team he's assembled who are clearly pulling in very different directions. JD Vance has made comments about the fact that it's now down to Ukraine and Russia to talk to one another and sort something out.General Kellogg still seems to be in the picture despite all his contributions to diplomacy appearing completely out of step with anything else in the American administration. He's talking about having a demilitarised zone between the two parties policed by European forces. Russia isn't going to agree to that for one moment. He's also suggested conceding Crimea to them and possibly the other occupied areas in Ukraine to Russia. Zelensky has said flat out that he's not going to accommodate that.What else have we had? Putin has said he was offering a 72-hour ceasefire over the course of the victory celebrations, 8th to the 11th of this month, which are currently going on. Ukraine appeared not to be engaging with that offer at all on their side. They've done things which seem flagrantly reckless, particularly launching an enormous wave of drone attacks towards Moscow. As far as I can tell, virtually all these have been shot down without causing significant damage in Moscow.There was a pretty explicit threat to attack the victory parade, considering heads of states from over 100 other countries, including powerful ones like China, were attending. That would be an act of complete recklessness. The parade has gone off successfully without incident, which is a huge relief.It's also interesting that the Russians refer to the Second World War as the Great Patriotic War. They point out they lost over 27 million citizens in the Second World War, a far higher death toll than any other country. They also did more to overrun the Nazi war machine than any other combatant. Putin made a forthright speech about that today at the victory celebrations.The speech is worth listening to because he said something along the lines of, it was nice that our allies opened a Western front to divide the task of conquering the German army. Of course, the US, Britain and Western allies regard the D-Day effort and invasion through France into Germany by predominantly American and British troops as the decisive act. We think of Russia's participation being a useful contribution. The verdict of history will be that it's the other way around.The fact that the majority of world leaders have come to Moscow for this parade speaks volumes about the perception of Russia by the rest of the world. Whether they perceive that as an expression of righteousness or simply a realistic assessment of where power is flowing, it's certainly a statement. The reaction of European leaders to refuse to participate in that celebration seems utterly petty minded to me.There have been strong statements that Russia and China are very much singing from the same hymn sheet. They're supporting each other and working towards a more collaborative world. Xi Jinping is spending a full four days on a state visit to Russia to tie up many details again. It speaks volumes.China and Russia are becoming more closely allied in response to the actions the United States is taking and the actions Western allies in general are taking. They're clearly supportive of many other countries who've been the victims of European and North Atlantic imperialism. The tide is definitely flowing faster.Against that background, various sources are questioning whether there really are the gold reserves in the American treasury that it claims to have. People are asking whether there is anything in Fort Knox. Even if there were the 150 million ounces of gold supposed to be there, without a full audit of the bookkeeping, you wouldn't know whether they actually have title to it or whether it's been sold or pledged to other countries.This is quite extraordinary. At the end of the Second World War, when they set up the Bretton Woods financial institutions and tied all currencies at fixed exchange rates to the dollar and tied the dollar to gold at $35 an ounce, the theory was that Fort Knox would be audited every year. It's actually been audited a couple of times in the 1950s but hasn't had a full audit since then. There was a when this conversation,Sounds like a house of cards, doesn't it?surfaced a decade or two ago. They did what was basically a publicity stunt of taking a bunch of congressmen and women to Fort Knox and showing them around. They took them down to the vaults floor, unlocked one of the vaults and showed them a lot of big piles of gold. They all went away saying they were thoroughly satisfied. It was pointed out that room would have held maybe a million ounces of gold. There's supposed to be 150 million altogether so that might have been all there was for all anybody knows.Even if the full content were there, it wouldn't actually guarantee that it still belongs to the United States Treasury. That's one of the things. Another thing I find very interesting is that partly prompted by one of the promises Trump made, which he has partly delivered on, was to have full transparency about various issues that have been the subject of so-called conspiracy theories. It's ridiculous that the term conspiracy theory is used. in aEspecially by people who are conspiring with each other to impoverish the rest of us!The point is that a conspiracy is simply a secret arrangement between a group of people to commit a crime. This happens all the time. Almost every crime involves more than one person except maybe pickpocketing.Every crime that's committed is arguably the result of a conspiracy. So conspiracies happen and if somebody alleges that a certain thing is a responsible conspiracy, that's not saying very much. It certainly doesn't presuppose that it's fantasy. The question is, is this a genuine conspiracy or a made up one.Yeah, there's some good ones and some not good ones, just like anything in life. The time between conspiracy theory and conspiracy fact seems to be shortening.I think many people are interested in different things. Some are interested in the JFK assassination, some in the Robert Kennedy Senior assassination, some in the Epstein assassination, sex rings, some in various other things that have gone on in the past. Because there's now much more discussion, many people are realising there's all this other stuff going on which is pretty suspicious.Getting back to immediate present events, we've had a pretty scary flare-up of conflict between India and Pakistan. Neither appear to be run by cool-headed, rational individuals, both are nuclear armed. There are definitely alarming potentialities there.I think that's probably the end of course. We've got the Houthis striking out at Israel. Most airlines have pulled out of flights there for the time being following the attack on Ben Gurion Airport in Tel Aviv, which apparently made a 25-foot crater but didn't do any terminal damage to the functioning of the airport. The political and psychological fallout is that air travel to Israel has been pretty much suspended.Trump claims the Houthis have capitulated in response to the bombings. They've said they won't attack any more ships, possibly apart from Israeli ones, in the Red Sea. Trump's trying to spin this as a victory, but they're going to continue attacking Israel. We don't know whether there's going to be an attempt to get into a war with Iran. If there were, that would plainly be disastrous.Okay, so that's where we stand with the state of the world at the moment.InflationWhat did we have to say about inflation? I noticed when I opened the tin of beans for the kids last night that the amount of sauce in the beans seems to have increased recently relative to the amount of beans. I wonder if that was your observation.I haven't opened tins of beans lately, but I could well imagine that's the case. I certainly noticed there were far fewer oatcakes in the last packet I opened. I noticed that many packs of tea and coffee that had been 250 grams were now 200 grams. So even when there haven't been explicit price rises, there have been sneaky ones.I'm going to have to do a real analysis. The most useful analysis would be to look at the prices of various things, not in terms of money figures, these are almost inconsiderable. I'm thinking about across the course of my lifetime.In the 1950s, prices were really stable, but it became apparent to me that things were typically three times as expensive as the prices had been apparently before the war. Then chocolate started getting smaller, packets of biscuits started getting smaller, but it was essentially on a fairly modest scale. When you look at it over the course of 60 years, which probably to young people seems like a long time span, after you've lived through it, it doesn't seem so long somehow.We know it's understandable that between the beginning of a war and the end of a war, money should be worth a lot less. After all, there've been many resources wasted in the war. There's been a lot of expenditure of money that was essentially being borrowed from the future to conduct the war. That's the more or less inevitable result of it.Considering we haven't been at least directly at war over that 60-year period, it's quite astounding. You have to look at it in big picture terms to get the whole scope of it. It was the norm in the 1950s and 1960s that one wage earner in a family was enough to provide housing, food, clothing, utility bills for an entire family. Whenever there was a second partner of a marriage also working, it was a matter of choice. It was a matter of them wanting a higher lifestyle. Now, for most people, it isn't a choice at all. To cover the outgoings of a family, it takes two people working flat out.Let alone to keep up with the Joneses, to go on the holidays, to do all the things that everyone else seems to be doing. I'm not too pressured about these things, but many people are. Yeah, it's expensive.Yeah. I was thinking that even before you get to that, you're just paying your bills and getting a roof over your head. The mere fact that for many people, the prospect of owning their own property is becoming less of a realistic objective.Yeah, I think often now people inherit money and that then forms a deposit that gives them the lump sum. You're still in a situation where you rent it from the bank on a variable rate mortgage. You still pay a tremendous amount of interest on that.The implications of the collapse of the dollar system are going to result in a very steep decline in what Americans and people like Britain and Europe, whose economies are really pretty tightly yoked to the American financial system, are going to see the value of that continue to go down.We might all be on the tins of beans for a while!Yeah. So watch this space.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments are in italics.Derek’s comments are in normal font.Things on every front appear to be getting more chaotic. Nearly everything I am going to run over today are things I have mentioned before over the last few weeks and months, but it seems that the temperature is steadily rising.It is like groundhog day. I think the main development, if you can call it that, over the war in Ukraine is that the latest word from Trump is that essentially they are washing their hands of trying to broker a deal. There are various things about this.One of them is that there is a certain amount of hypocrisy in America, regardless of who was in the driving seat at the time it happened. There is a certain amount of hypocrisy in America claiming to play the role of a blameless broker because the American so-called security services obviously played a large part in stirring the situation up in Ukraine in the first place 10 years ago.Is one of those 1984 things, is it not, where the Ministry of Defense is actually the Ministry of War. The Israeli Defense Force is actually an attack force etc.With the Israel-Palestine situation, there is no change really apart from it gets more and more intense. As far as I can tell, the majority of the rest of the world apart from Britain, America, Australia, and a few close allies is pretty well united in sympathy for the Palestinians as well they might be. It is plainly just a wholesale slaughter of a civilian population and refusal to allow any humanitarian intervention.I guess the main significance of this is a continual erosion of sympathy for the West amongst the world as a whole. This is reflected also in financial dealings. The rest of the world is taking serious steps to disengage from the dollar dominated world trading situation.That is closer to some collapse than anybody could possibly imagine. Certainly anybody could have imagined, let us say, a year ago. China almost certainly is well advanced in setting up an international trading settlement system, which will really render the swift interbank transfer system redundant.The imposition of trade sanctions on the rest of the world is something that might have worked 25 years ago, but is no longer significant in today's world when America has very little to export apart from weapons. It is looking to me as though the weapons systems that Russia is producing are rapidly pulling ahead of those. Anyway, getting back to the war in Ukraine, the attempt to have a peace conference in London last week collapsed because Zelensky said it was unacceptable to concede any part of the 1991 borders of Ukraine and to accept that the population of Crimea wished to be part of Russia. The Russian government and Crimean population are absolutely adamant that that stays.With the peace talks collapsing, we are back into an utterly vicious warfare, which it appears to me Russia is making the run in. They have got enormous advances on just about every front. We are going to get to a point where Ukraine cannot continue. That seems to me to be the only possible outcome.Other things I think are pretty significant is the uncovering of information about a whole variety of things. Trump's administration has been on the whole disastrous and erratic. However, one thing which I think is a very positive move is the increased transparency regarding several issues.We have referred to this before. There is the J.F. Kennedy assassination, the Robert Kennedy assassination, the Martin Luther King assassination.Possibly 9-11, potentially.Now, revelations about 9-11. There are far more open conversations. We have had this publication on the White House website regarding an admission that the COVID virus was almost certainly developed in the Wuhan Virology Lab. There were blatant attempts to cover that up, which have now collapsed. There are also serious reservations about the safety of the mRNA vaccine platform. It is extraordinary to me.All of this is old news to people paying attention, I guess, but it feels like the Overton window of acceptable discussion is being shifted.I think it would be very interesting. Different people will have had different issues in which they are heavily invested in the official narrative up till now. I have been essentially agnostic about more or less everything in public life, which means literally that in the last analysis, I do not know things that I am 95% or more certain about. I still got a certain amount of elasticity if new information or new revelations or new events cause me to rethink these things. However, it seems that a lot of people take in trends, position and hang on to it with absolute grim determination. I do not know how readily they are going to deal with the cognitive dissonance of suddenly having to come to an alternative viewpoint. That is probably the biggest cause for uncertainty in the world. Also one way of looking at it would be grounds for cautious optimism.There is an enormous sense of release in embracing the truth on any topic. There is definitely an inattention involved in trying to compartmentalise information so as to hold on to an existing narrative. Getting back to the mRNA vaccine. The information coming out week after week strengthens the reservations that one must have about that entire platform. Jay Bhattacharya, head of the NIH in the States, has just made some extremely forthright comments about the fact that these cannot possibly have been able to be authorised with any degree of confidence. I am still getting reminders from the National Health Service to get another COVID booster or get the RSV vaccination, which is also an mRNA product.It beggars belief that medical professionals can still at this point be recommending these treatments.They just follow protocols. It is just protocol driven and until the protocols change they just stick to saying well the protocol says this so this is what we recommend. There is no real critical thinking in it.Our own government is pledging to support Ukraine. We cannot even maintain our own hospitals or schools or welfare systems or libraries or public services. Somehow or other, we are going to find hundreds of billions to spend on weapons, which are beyond our capacity to produce anyway in any realistic time scale. So watch this space.Very good. If you do not like the analysis from this week, back in a week or two and we will see where we are again! It is interesting that we are in approximately the same place.The intensity of it seems to be ramping up. I think certain truths are going to become completely unavoidable.All right, thanks, Derek.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments are in italics.Derek’s comments are in normal font.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts.Well, it's been a pretty hectic week since Donald Trump announced his swinging tariffs on the rest of the world. Using this word tariff is a bit of obscurity. These things used to be called import duties. They're not paid by the foreign governments, which is the implication that he wants to convey. They're paid by anybody within the United States who's importing goods from any of these other places. So it's yet another tax. It does mean that all of the things which are imported are automatically going to be more expensive.Probably anything that is made domestically will rise anyway as they'll have less price competition from the imports. We can expect healthy increase in inflation. We can expect the outgoings for the majority of the population to be increasing. Meanwhile, this is apparently coupled with yet more tax breaks for the extremely wealthy, which will give very little benefit to the rest of the population. The most common impression I get is that people are baffled by, as well as being alarmed, as well as being critical, they're baffled by Trump's behaviour. It seems that he's firing off policies without any due thought for the consequences. It's also extraordinarily inconsistent. For example, I thought it was a healthy development that he'd forced the Israelis to have a ceasefire a few months ago.Of course, the Israelis were then routinely breaching that ceasefire. They've now abandoned the entire process towards negotiation, which appeared to have got started. To some people, this may not be a surprise. I don't know whether I'd describe it as a surprise or not, but it was certainly a disappointment to me. However, it does seem that Trump's enthralled to the Israeli lobby in the States and to a lot of significant donors to his campaign who are Israel supporters of one sort or another.Yeah, you've only got to follow the money, I think, to discover that to be true.The American taxpayers are continuing to fund the manufacture of arms which are being shipped to Israel. There's more saber rattling with Iran. I don't know whether they're loosening up for an actual attack on Iran, but it would not likely end well if they did.The real disappointment to me is that I took at face value that he was intending to broker a peace deal in Ukraine. Having apparently made a start on that process, he's now been backing off from it. He's launching rhetorical attacks in public towards Russia in general and Putin in particular, which is not a way to conduct any sensible diplomacy. The effect of the imposition of the tariffs has been predictably that some of the other parties have responded by reciprocating the arrangement and putting tariffs on American goods. I think that if you look at the amount of trade, aside from weapons, the United States makes very little for export.The export trade from the United States to China, for instance, is negligible. So how that's going to work out, we just don't know. Another thing is that the idea that this will force jobs to be created in America as all the manufacturing comes back home is definitely in the realms of fantasy. The American workforce hasn't got the skills to compete in the contemporary world. They haven't got the factories, they haven't got the equipment. It would take years, if not decades, rather than months to reverse that, if indeed it was a viable operation.Things like automobiles, for example, having their final assembly at a plant in America, now contain components which come from all over the world. There appears to be no thought at all about the effect that has on the viability of those motor manufacturers. The thing I'd like to flag up is that we should perhaps take a step back and look at this within the context of two things which I said we'd be dealing with in the third section of the forthcoming book. That is the uniqueness of the present moment in history. One of them is, of course, the coming to an end of the American Empire. Just like every other empire, it goes through various stages. I think it's now further advanced on the downward slope and moving more rapidly than most people imagine.Yeah, to quote Chris Hedges, Donald Trump is the symptom, not the cause of the current chaos.Were you referring to Chris Hedges recent conversation with Richard Wolfe?No, I've not watched that one yet. He's probably said the same thing a few times.This is particularly about that aspect of it. One of the points that Richard Wolf makes is that in the latter days of an empire, the empire managers or rulers or elites seem to lose their minds. They do all manner of completely irrational things that are almost certain to be counterproductive. We can certainly see that at play.The other thing as context for a wider view of these events that I think is important to bear in mind is that if you follow the models that were created by the Limits to Growth team, you'll see that we're still absolutely slavishly following what they called the Business as Usual Run or the Reference Run or the standard model. It was assumed that if policies are not changed in the light of this systems dynamic model, then certain things would happen. We would go into overshoot with industrial production, we'd go into overshoot with the global human population, we'd go into overshoot with the release of pollutants into the soil, the water and the air. This would result in a massive and traumatic correction sometime in the second quarter of the 21st century. All of those graphs have been remarkably on track now.I would say that the critics of either the model or the team or the assumptions behind it have been thoroughly contradicted by the course of events. This year, depending, is either last year of the first quarter or the first year of the second quarter, depending on how you do your counting. Either way, we're going to be moving into that second quarter. Sometime within this, we're going to see drastic discontinuities. It's the refusal to face up to these discontinuities, which is the backdrop to all of the geopolitical events we see, the scramble for raw materials and remaining sites of mineral extraction, remaining sources of fossil fuels and the rest of it.Yeah, it strikes me that the political controllers, let's say, have been hollowed out by corporatists' interests. That appears to be the root cause of it. Until we fix that, until that implodes or however that plays out. I don't know how else it runs.So interesting times. Watch this space and stay safe as best you can.Just going back to tariffs, I'd like to explore because presumably there is an argument for tariffs, but maybe in a more selective way that isn't on raw materials coming in and things that might be used for production in a factory in the United States or in a local country.What almost every country has done as they develop economically and industrially is to protect their own internal industries by means of import duties on goods from elsewhere.That still happens in the manufacturer of arms. It's a protected industry.It is still a protected industry. I mean, it's funded by the government, which has got very deep pockets, especially as it's got unlimited powers of borrowing at the moment. It was very interesting comment by Richard Wolff in that conversation with Chris Hedges, where in contrast to what has often been said, it's often been said that America is trying to throw its weight around as though it was still the 1990s. This was no longer the case. China is in a totally different position from what it was in 1990s. So is India. For that matter, the Russia of today is not remotely resembling the Soviet Union.People are still thinking of it with a stereotype of the Soviet era. There's definitely that blind spot in the American establishment as a whole. An interesting thing that Richard Wolfe said is that the world is not the same now as when Trump was last in office five years ago. That's how rapidly things have moved.The most significant move really was that the United States inadvertently catalyzed the acceleration of Russia and China's moves to reduce their dependency on the American financial system, on the dollar as a reserve currency and of the Swift interbank currency movement system. I would have thought that in two or three years, a bunch of very smart people working very hard and basing what they do on what's already known could easily create a system that would do that job. I think the chances are that they've already done that. So that'll be something to watch out.They're not yet talking about having a global gold based standard, but what they are doing is saying that they're creating bilateral agreements to trade in each other's native currency rather than in dollars. When they do that, there's got to be some balancing and clearing system, which is going to depend on gold. That is one of the reasons why central banks all around the world, whilst heavily denying it, have been building up their gold stocks.Anyway, so interesting times. Watch this space and try and keep a focus on the fact that as the line in the Bob Dylan song, the wheel is still in spin, so don't speak too soon. We don't know how this is all going to work out. I still am absolutely convinced that it's within the bounds of possibility that we might be making a transition to a far more satisfactory world. That's the thing to keep an eye out for. See what signs you can see of that happening and see what you can do to slot into the unfolding new era that we're moving into.Try to focus on the positive rather than the negative. It's very easy to fall into a negativity spiral in all independent media channels, often very focused on the downsides. I think we should be aware of the bad things that are going on, but keep an eye on what we can create and do want to create as well.A very interesting book I'm reading this week is Dance to the Tune of Life by Denis Noble. It's primarily about biology and specifically about evolution and genetics and molecular biology. A key point that he makes there is that the attempts over the past hundred years have been to try and understand life by reductionist models. That is that you understand how things work at a finer and finer grain level until you get down to molecular biochemistry and then you say that explains everything else that happens. Whereas from a systems viewpoint, there obviously are phenomena at higher levels that can't be reduced.An obvious analogy in the physical world is that in thermodynamics, you are considering large assemblies of molecules all moving at different speeds. The average energy of them gives you a measure of the temperature of that object. You don't need to track the trajectories of each one to have a model which operates at the level of macroscopic objects that is meaningless at the level of molecules. The same clearly applies to biological phenomena. The whole point is that there is definitely causation in the upwards direction from the molecules to the cells to the tissues to the organs to the organisms but there is also causation in the opposite direction.Causation moves downward from the level of the organization which actually affects the way that the chemistry in your body works according to intentions that are created in your mind. The same thing applies obviously at the next level up when we're talking about entire societies or countries or governments or the global society. There are causation channels in both directions.Thanks for reading Sovereign Finance! Subscribe for free to receive new posts.Thanks for listening to this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. You’ll receive a free email notification whenever we publish a new article or conversation. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments are in italics.Derek’s comments are in normal font.Subscribe free to be notified of new episodes:We're going to continue today with our tour of our forthcoming book, Demystifying the Money Puzzle. This week, we're going to examine the nature of an enterprise, which is something we take for granted and maybe shouldn't?Yeah, according to the Oxford dictionary, an enterprise, the two meanings they give is an undertaking, especially a complex one. The second meaning is a business. I think that's the way that we would normally interpret the word enterprise. But I want to look at it in a slightly wider context than that.Certainly will be mainly focusing on it specifically in the context of being a small business, but it also could be any operation where people collaborate to achieve a specific result. If you go back to the definition I suggested of wealth of being things people want, ultimately any result, if it's a desired result, it's going to be something that somebody wants.So in the broadest terms, that could be wealth. That's certainly what the purpose of any business is, or at least any honest business, whether it's small or it's big. But it's also the purpose of a charity to achieve a particular result to do something which is of some benefit to some people. It could be a club or a society, something where people come together to enable a dramatic event or a sporting event.Of course, that doesn't necessarily need to be a team of people, but even if you're operating as a sole entrepreneur, you're still going to have suppliers. You're still going to have customers, you're still possibly going to have contractors, you're going to have to rely on some sort of delivery service, whether in the real world or virtually.So it's definitely an interaction between people. Even the government of a country could be described as an enterprise in this way. If you're perhaps not an entrepreneur, perhaps you're an employee of somebody, it's necessary, I would suggest it's beneficial for you to have some idea of what the objective, the aim of that enterprise is that you're working within.For one thing to be sure that you're happy with it. For another thing, you can get clear about the contribution that you're making to the success of that enterprise.I think the best enterprises are clear actually on what they're trying to do. As a result, there's fairly clear values and you can either align yourself with those values or not. It's quite a natural filtering mechanism.Yeah, exactly.1. Principles or Values So having said all that, we're going to go into more detail into what I call the six foundations of an enterprise. The first one of those is your principles or values, effectively your ethical and philosophical styles. If you're not clear about that, you can't assess whether your behaviour is in alignment with that or not.Unless you've got a foundation in that, you won't have clarity about what you're doing, you won't have enthusiasm for what you're doing. So what you're trying to value in life has got to be central to the operation.This harks back to Maslow's hierarchy of need as well, doesn't it?2. The Hierarchy of NeedsWell, funnily enough, the second foundation was actually going to be the hierarchy of needs. Anything that you're doing, if it's going to have customers or consumers or whatever you, patients or clients, it's got to be something that meets some level of need that they perceive.If you're clear about the kind of nature of those levels of need, you can then decide which level you want to address. The basic level of need, for instance, is the physical needs for air, food, water, living accommodation, tolerable temperature, clothing.So all of those would be very obvious things where if you were in an enterprise which was supplying any of those, you would be assured that there would be a demand for it. Then as you go on up the scale, you look at the social needs that people have, the needs for self-esteem, the needs for education of one sort or another.These could be all things that you supply. Also, on the other side of it, if you're aware of that hierarchy of needs, if you're aware of what you want to fulfil at the various levels within there, you can ensure that you structure your enterprise or your working life such that it is in harmony with that and it supports and feeds that.In his book Simplify, Richard Koch describes the most successful businesses as being either price simplifiers or proposition simplifiers. So McDonald's being the classic price simplifier, can operate at scale, can deliver the Big Mac cheaper than anyone else. It feels to me like if you're catering to the lower levels in Maslow's hierarchy of basic security, maybe you're more likely to have a price simplifier type business. Whereas if you're helping people to achieve self actualisation, then maybe you'll probably more like to be a proposition simplifier, making it easier, making it faster, making it more autistic, making it a joke to use.Yep. In fact, it's a fair comment to say that if we're talking about small scale individual entrepreneurial situations, you're unlikely to be in the price simplifier type of operation.3. Conscious CapitalismSo a third foundation is what I call conscious capitalism. It's actually, you like, capitalism with a human face. Capitalism means that the ownership of the means of production is in private hands rather than as is usually conceived the alternative being for it to be in government times, which is socialism.So if you're running an enterprise, you expect to own the assets that you need to operate the enterprise. You expect that they're going to be your property. Perhaps if you expand that, you draw other people into it, there's no reason why they can't have an appropriate share of the ownership. We'll talk about various structures to support that and also various pitfalls of doing that.4. Right AccountingAnother foundation, particularly in the era that we're in in the future is what I call right accounting, which means covering both the obvious internal accounting of the business but also the externalities of it.I won't get into too much detail at this point, but I mean an obvious example for instance is that there's been this huge trend to disposable packaging. In years gone by milk bottles went back to the dairy and were reused until they were no longer usable. Beer bottles went back to the brewery, even soft drinks, bottles, the same story.There's been this trend to have no deposit bottles. They go to the bottle bank. If you look at it, this is obviously something which is a much more costly way of doing it. It's much more wasteful of energy and of materials. It's going to be more costly and the people who are paying for that of course are the general public.So the cost of manufacturing the bottles has really been put onto the customer rather than the company itself.I remember in Peru buying some beer and it was for argument's sake the equivalent of two dollars to buy a bottle of beer and then you got about one dollar back when you brought the bottle back. It seemed like a good system and funnily enough because I was traveling and trying to stretch my budget I did take my bottles back.Right, if you hadn't some kids would have come round and picked them up and cached them in...In fact, that's probably what I should have done!Yeah, of course, that's the way it was in my childhood and adolescence. The beer bottles always had a few pennies deposit on them and that was enough motivation for most people to take them back. Similarly when the brewery delivered a crate of beer to the pub, they take away a crate full of empty beer bottles and take them back and wash them.There's a modern example, isn't there? When they started charging for carrier bags in supermarkets, even though it's only five pence, it would have made you think about taking bags with you.Once again, that's relatively new practice that developed when all the supermarkets gave out free bags, people stopped taking shopping baskets with them. In the days gone by, it was a matter of course that people would take a shopping bag or a shopping basket when they went shopping and it slowly drifted away.The other thing I'm thinking of with those externalities is looking at large scale at the accounts of a company, of an entire country, for instance, we take account of the energy that is consumed. It's balanced by the fact that the reserves of say coal or oil are being drawn down.So there's actually a negative side in the balance sheet, which is largely ignored. More and more, we're going to have to come back, do a full circle to looking at that. That brings me to one of the other foundations, which is energy and entropy.5. Energy and EntropyThe creation of wealth involves doing work in some form or another and energy in its most basic definition is the capacity to do work. We'll look at the entire flow of energy through an operation and through an individual. We're alive because we're taking in high quality energy in the form of food.We're processing that, we're passing out waste products and we're dissipating heat. In the course of that, some of that is just to keep us alive, but some of it is to perform the activities that we're performing. If they're constructive activities, they will be producing an end result.Any end result which is produced involves a reduction in the entropy, a reduction in the disorder and reduction in chaos. We'll look at that in a lot more detail. We will also put it within the wider context. Everything we do ultimately is a result of the energy that flows from the sun to the earth, is absorbed by the earth.Some of it is turned into usable forms by largely in the biological world by photosynthesis, and that provides energy in the form of or one or two stages of remove to us which enables us to perform whatever tasks we're performing.Again, there's a hog back to Maslow, isn't there, of having the bases covered.Yeah, absolutely. The sixth foundation is the nature of money as a tool, not as an end in itself.The Roles in an EnterpriseSo we'll be looking at the various roles that exist within an enterprise. The first thing that you think of is what the enterprise is actually doing. If you're a plumber, it's connecting pipes together. So that's the operation of the enterprise.If you're a manufacturer, it's taking components and turning them into some kind of artifact which does something that the bag of individual components wouldn't have done. That's the first thing that we, that immediately comes to mind when we're contemplating a small business or any other kind of operation is what it's actually doing.But there are several other important areas. One of them is administration. Whatever you're doing, there has to be some sort of organization to actually support the primary operation. There's going to be a financial aspect of it and we'll, I think, hope, simplify things to the point that there's clarity around what needs to be done without making more of a meal out of it than is necessary.Then there is the marketing and the sales. Those are two separate areas. What I mean by marketing is arranging for people to have a sales communication with. Sales is the actual communication which results in a purchase or some other transaction. Anything to say about that?I've been recently been describing marketing as a communication solution to the problem of distance. Like if you're operating face to face, if you're in the market stall, you've got full traffic coming past, you don't need any marketing because it's just an ongoing series of sales conversations. The further away people are and the further they are in the awareness of the problem that you solve, the more the need for marketing goes up.I mean, of course, even if you have a market store, you might do take some action to let people know where and when you're going to be there to encourage people who are interested to make sure they're there in those times and places.Yeah, you can have a customer list. There's things you could do.Another thing I'll say about the roles of business is that, particularly if you're, let's say a one man band, you really have several hats on. One of those is as a worker where you're actually doing the operation of the business itself. One is where you're a manager where you're, even if you only got yourself to manage, you've still got to, for instance, decide how you're going to allocate your time.You've got a role as a director, which once again, even if there's only you doing the managing and the working, the role of a director is to be more strategic, is to decide things like where do I want to be this time next year? How do I plan my operation to support that longer term objective?Finally, you have a role as a business owner. In a large complex business, you might have sleeping partners who have financed the business and have got a share of the ownership. If you've done it all yourself, you should be getting some return for what you've brought to the business by way of capital.Capital is a form of wealth. It's a form of wealth that generates more wealth. In the context of a small business, it would be the premises to run the business from possibly a vehicle to move around or to deliver goods. It would be any tools or machinery you need to operate it and so on and so forth.We'll cover all those. That more or less summarizes what we'll be covering in the nature of an enterprise, section two of the book. Next week on our talk we'll summarize what we're going to cover in the third section which is the peculiarities of our age.Everything that we've said in the first and second parts of this book is kind of perennial and would apply at any time.I was gonna make that point actually, that I think to collaborate with other people to achieve a greater outcome over potentially quite a long period of time, I think that's a very human endeavour. I think people have always done that. We've literally got evidence that people have done that in the form of the pyramids and so on. So I don't think there's anything new. It's just applying the same principles to hopefully achieve a bigger outcome or maybe make your life a bit easier by going down a fewer wrong turns.I'll just briefly that I believe we're passing through an inflection point, a discontinuity in history. There are, if you like, long periods of relative in equilibrium when it really seems as though there's nothing new under the sun.But in fact, each generation that goes by, there's sort of slight shifts of various sorts, but this has been very slow, particularly in more distant periods of historical time. If you think about feudal societies for hundreds of years, the same sort of activities were being carried on.By and large the families of people tended to do the same as their parents had, whether it was being the Lord of the Manor or being the cowherd or being the blacksmith. Whereas there have been a few brief periods when something dramatic shifted.One of those being when we settled down on the land and started cultivating plants and domesticating animals rather than hunting and gathering. Another one was the formation of larger scale operations with the city-states. This was entirely different from the purely village level agricultural society that had existed for the previous few thousand years.Then of course the big one about 300 years ago was the Industrial Revolution. Within the last 70 years of course we've had the Information Revolution. Those have been inflection points and it's my belief that we're now in the middle of, in the process of a dramatic shift.Certainly some of the things look very bleak, they look very chaotic out there. I believe that that is a symptom of a transition. It could well be, it hangs in the balance, but it could well be that this is a transition to something more wonderful than human beings have ever seen.Let's hope so.Thanks for reading Sovereign Finance! Subscribe for free to receive new articles and podcasts.Thanks for listening to this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. You’ll receive a free email notification whenever we publish a new article or conversation. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments are in italics.Derek’s comments are in normal font.So last time out we were outlining our forthcoming book, Unravelling the Money Puzzle, and we thought we'd continue tugging on some of those threads today. What's on the agenda?Well, as I said last week, we gave an outline of the structure of the book as a whole. I mentioned that there are going to be three sections. One is about the nature of money itself, the forms it's taken, what's the common feature, what functions it serves and how well the present form serves those functions. Broadly you could say this is the realm of the discipline of economics, so I think this section of the book we're going to call demystifying economics because I think you'll find that it mostly is a mystery to us.We're familiar with economists as talking heads on TV stations. Usually those economists are either people who work for a bank or some other financial institution, or they're government bureaucrats, or they're academics. I don't know about you, but my experience very often is they have their few minutes of talk or being interviewed. At the end of it, I very often find that I'm not much better informed about what they were talking about.Exactly. It's been described as the dismal science.I go further than that and say it really is definitely a pseudo science. It doesn't count as a science at all because the key thing about science is that you form a hypothesis, you collect evidence for it. When the evidence seems to be sound, you make predictions. If the predictions come through, it gets adopted as a theory. Economics seems to come up with predictions all the time, which almost immediately in some cases turn out to be falsified by the way events actually unfold. So I think that rules it out.It's interesting, we talk about the Nobel Prize for economics, but in fact, that is more of a PR stunt by the profession than anything else. In the Nobel Prizes that were set up in the will of Arthur Noble, there was no prize for economics. The strict name is the Nobel Memorial Prize for economics. It was funded by, I think, the Swiss National Bank to give a fig leaf of respectability to the profession. Some of the prize winners have been notorious for having overseen various financial catastrophes.Like all of the social sciences, it arguably suffers somewhat from what might be called physics envy. Because physics is an exemplary science and is strongly mathematical, there's a feeling that a great deal of mathematical sophistication is required for contemporary economics. Whereas in fact, unless you've got a sound underlying theory and you're confident of the data that you're feeding into the equations, the results of those equations however they land will not be worth much.So garbage in, garbage out indeed.So we'll be looking at a few economists, what they've said, what we can take away from that and have some confidence in and what we should be a bit more skeptical about. We'll be taking a look at the fundamental question of what is money. We all take it for granted. We don't think too much about what the substance of it is, mostly what purposes it serves apart from the fact that obviously we need it to buy things we want.We'll see how different forms of money have been in use over various times and places in history. We'll see how well or how badly it serves the purposes that it's intended to. Related to that is the question of what is wealth. Now, that's not the same as money. It's obviously calculated or measured in terms of money as a rule, but clearly it's something distinct because one way of describing what money is, is to say that it's a call on wealth.When we look at that, we can maybe look at what's available in the world in the way of wealth and what's available in the way of money and how they match up. That would be quite an interesting thing to see.We need a more holistic view of wealth. It's one thing having a tremendous bank balance, but if you don't have any good relationships with the people about you, or you have zero time to pursue any hobbies and interests, are you really wealthy? It seems a bit lopsided.Yeah, indeed. In terms of the tangible forms of wealth, houses, cars, computers, and the form that investments may take, we'll be looking at where wealth comes from, how it's created, where it goes, how it's lost or how it's destroyed. In conjunction with that, we'll be looking at the particular form of wealth called capital. We'll be elucidating what that is.It's also relevant, I think, to take a look at the role of energy in the creation of wealth and the maintenance of wealth and why that's necessary and why they're involved with one another. So that'll give a rundown of what will be in this section of the book. Anything for you there, Rob?Yeah, I was thinking about the role of money. I mean, to my mind, money is a means of exchange, but it should also be a fair means of exchange. I think for the people who control the money supply, I think it's also a means of control.Yeah, absolutely it is. Being aware of that in itself will release you to some degree from the grip it has if you're unaware of that. That's really the intention with this entire project. If you are aware of all of the topics that we're going to cover in this book, you'll be less susceptible to being exploited.The Boy Scouts motto comes into play doesn't it? Be prepared.Yep, that's it.Thanks for listening to this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. You’ll receive a free email notification whenever we publish a new article or conversation. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments are in italics.Derek’s comments are in normal font.I wanted to give a summary of my plan for the book and for the listeners to this podcast today. If you've been listening for the last year or so that we've been running this, we'll have already covered some of the material that will go into it. We will probably go through it again in a more systematic, structured way.Provisionally, we've decided to call the book Unravelling the Money Puzzle. The book is meant to fill a very important gap in your education. We're all thrown into a world where money is a big preoccupation for all of us, in some cases voluntarily, in a lot of our cases reluctantly, but it has to be dealt with in some way or another. I often feel a bit like we've been pitched into a game where nobody's explained the rules of the game.We all have a bit of practice as kids. We get given a certain amount of pocket money, and we have to budget for it, but without anybody explaining what that involves or how to go about it, it probably doesn't leave us with much ability to deal with the complexities of life. I will say that those complexities have got a great deal bigger throughout my lifetime. Nowadays, almost everybody, as far as I can see in the Western world, accepts being in debt to a greater or lesser extent and possibly a crippling extent as a more or less inevitable circumstance of life. As recently as, let's say, 60 years ago, that wasn't the case for most people. I'm talking about my own experiences in England. The same applies across Europe, the United States, and the Western world.Are we including taking out a mortgage and things like that in that category of debts?Well, I think I'll come back to that. A significant number of people did have mortgages in the 1950s and 1960s and probably even back to the 1900s. We'll be covering in greater depth how that worked when it was a workable situation and how it's working now that it's turned into a gigantic swindle.Incidentally, not everybody is trapped, even today. I do know one person who bought a house, believe it or not, in London, Greater London anyway, about five or six years ago, I should think, and she and her husband have paid off the mortgage entirely.It is possible not to be totally suckered by the system, but not many people have the leverage to manage to do that. Anyway, apart from mortgages and to a much smaller extent, bank loans for a very large purchase, like probably a motor car, were the only ones for most people. But apart from that, people weren't in debt.That was not because they were particularly vigilant about it or self-disciplined. There simply wasn't the opportunity. There wasn't the mechanism. Most people dealt entirely in the cash economy. They got their wage packet on Friday. That had to last until the next Friday. When there was no more money in their wallet or their pocket, there was no opportunity to spend anything. The exceptions for that were very minor. Many working class communities had a local shop, which would allow well-known, regular, known-to-be-reliable customers to run up a tab if they ran out of money by Wednesday.That was to the advantage of the shopkeeper, who would sooner sell a bag of sugar on Wednesday than lose the sale. It was obviously to the advantage of the customer, but if they didn't pay up on Friday, they wouldn't get anything else out of the shop until they did.The system expires if you don't honor it.Exactly. There was a slightly larger scale version for middle-class people. Most reasonably sized towns had a department store. The department stores were locally based businesses in those days, they've all gradually been absorbed into the massive chains, some of which have subsequently gone bust as we know. There was an account system customers who were deemed to be reliable, which usually meant at least having a bank account, which the majority of the population didn't, and who the bank would give a coded reply to the inquiry as to whether they were reliable, that was a satisfactory reply. They could make purchases over a month and then be sent an account at the end of the month. They'd have to settle the balance on that before the next month. Once again, if they didn't, there would be no more. If it got dragged out, eventually, the bailiffs would come around. There was probably a bit of flexibility for customers who were well regarded to make large purchases. If they wanted to buy a complete suite of furniture or something, the department store manager would be happy to sell that to them and give them perhaps two or three months to settle. But it was an informal arrangement, case by case, and a very small part of people's transactions. So, as I say, the rules of the game have changed dramatically.There has been an enormous facilitation of people, mainly in the form of credit cards, to draw them into debt and then pay exorbitant interest rates if they don't settle. It's not only made very easy, but they're constantly enticed to run this up.As I said, the rules of the game have changed dramatically, and we’ll cover how in the book. The book will consist of three sections. The first one is demystifying economics. This is, you like, to give you an idea of what makes sense in the realm of the theory of money, what money is, what purpose it serves, and how well it serves that purpose or fails to do so. We'll also discuss things like wealth, capital, and how wealth is created and destroyed. That leads to the second topic of the book, which is the creation of wealth. Wealth is created by collaborations of people in what is called an enterprise. When I use the word enterprise, we immediately think of a business, probably a small business. I'm using the word in a very general term. One dictionary definition is a group of people cooperating to achieve a specific outcome. That covers a business, a charity, a social grouping, a sports club, and a government. Certain principles of running an enterprise apply to all of those things. I think most of us have a kind of intuitive grasp of some of them, but we're going to spell them out in explicit detail so that you get a real understanding and then you can think about it. You can think about all the enterprises that you're involved in in your life. Even if you're not running a small business, you're involved in an enterprise your employer runs. You're involved in an enterprise in so far as we supposedly participate in some form of democratic government. We're involved in an enterprise if we're in any club or social grouping or charity. Having an explicit grasp of those will be of immense value to you. It's extraordinary; all the topics covered in this book are not part of our formal education system.Of course, if you're running a self-employed small business, you might well be all of those roles, but it's a pretty good idea to have a clear idea of the role and be clear how much time you're spending on each of those things, how much attention you're giving to each of those things, what your rate of return for the time that you expend in those things because of course if you're running a small business one of the things you might find is that if you get a grasp of the going charging rate for your thing, you'll find it's reassuringly much more significant than what you would be offered as a wage or salary for doing the same work. But it took me a lot of hard knocks to realise that it needs to be because all kinds of things must be carried.If you're an employee, you get to the end of the week and you get your pay. If you're a small business, you may or may not get paid in any given period. You can guarantee that you have to do a lot of work in those other areas that have not got an immediate invoice attached to them yet, which are essential. So all of that has got to be covered.If I can add to that, I think a job is almost like a preconceived container of value as defined by someone else. That definition of value might not actually match your real value, which is why a lot of people feel like they don't get paid according to their worth because it's someone else's definition of the value that you're going to provide from your time.Exactly so, yep. Of course, they wouldn't be providing the position for you to work in unless they perceived it, rightly or wrongly, as being of more value to them than what they're paying you. I might have mentioned then that I worked as a test engineer in an electronics factory. I went for the interview, and they said, “Well, we think you're probably overqualified for this job; we've only got this amount of budget for it.” I said, “OK, that's fine.” It suited me to have something at that point. They said it would be a month trial on either side. Anyway, I reached the end of the month, and they'd been very impressed with my output. So I went to my immediate manager because, coincidentally, this was when I got the tip-off that there was a job going in the recording studio. I went for the interview and got that job. So I went to my manager and said, “You know this month's trial on either side? I want to terminate it when the month expires.” Needless to say, he was quite upset. He went and saw his boss, who was even more upset. He went and saw his boss, who came round to me and said, “I don't suppose it makes any difference if we offer you some more money.”Instead, they could have structured it so that we can pay for the first month and we will review the situation with you depending on your performance. That's the kind of thing that very rarely happens in large corporations. I've been shocked by the lack of attention to their self-interest by people running corporations. It seems to get worse the larger they are. Has that been your experience?Yeah, I think it's short-term rather than long-term thinking to incentivise and keep the right people.Part of the problem is that in most corporations, at any level, until you get to the executive suite, people have very little stake in the company's prosperity.So, the book's third section is, in a way, the most important one for your future well-being over the next decade or two or three or however long you have left on this planet because the third section will deal with the peculiarities of our age. Everything we've covered in the first two sections will be perennial principles, things that could have applied any time from ancient Babylon up until the present. Of course, there will be more of those which are perhaps more specific to the industrial age, more again into the information age, they're perennial principles. But we're living through an extraordinary time in human history. We will be covering what is peculiar about this, what has led up to it, what is unsustainable in the literal dictionary meaning of that word, what the options are, and what the options are for humanity in general and for you. Any comments on that?Yeah, and I think the options for what humanity are, the options for humanity in general, I think when I speak to so my dad about this, he's like, well, you can't do anything about it. I'm like, yeah, but if everyone thinks that, then we end up in that situation, and then that becomes true. Whereas maybe your decisions have more of a butterfly effect than you realize.Absolutely. Not only that, there is the phenomenon that has been speculated about by the wisest of people for literally thousands of years and which Carl Jung had, which he called the collective unconscious and which Rupert Sheldrake called the morphic resonance field and which many thinkers and philosophers and mystics and seers and wise people have contemplated for years. We certainly see some extraordinary examples of it. I'm told, you know, some of these things that could be urgent urban legends. I don't know, but milk was delivered in bottles with foil tops for many decades. Suddenly there was a blue tit who decided that they could pick through the foil lids of the bottles and drink the cream off the top of the milk. Very rapidly blue tits in widely different parts of the country or continent started doing the same thing. On the face of it, there's no mechanism for doing that. A bigger scale example is that we were all taught that the beginnings of the agrarian civilization started in the Fertile Crescent in the Middle East, up the Nile, the Tigris and the Euphrates and down the River Jordan in the fertile river valleys around there. The extraordinary thing is that after human beings theoretically had the capability of doing that for at least 50,000 years, possibly 100,000, possibly 200,000, over that kind of geological time scale, there was very very little physiological evolution of the brain or the nervous system or anything else. Yet, at the same time, give or take a thousand years or so, a similar insight appeared in the Indus Valley in India, in the Yangtze Valley in China, and in the civilizations of Mexico and Peru. There was no conceivable way that any messages could have been exchanged between those in any tangible external sense. This is one of the things that gives me hope. I think so many more people are thinking along the lines that we've just been mentioning that at some point, that will become a critical mass. The other thing that shows that we're boiling up for a bigger change than most people can imagine is if we look at the events happening now. You probably heard me mention the phrase reductio ad absurdum? That’s certainly what we're seeing in this country with Keir Starmer's posturings, in France with Macron's posturings, and in Europe generally with Ursula van der Leiden's pronouncements: people who are completely disconnected from reality. Starmer's been pledging billions of pounds in weapons and ammunition and munitions to Ukraine, been offering to send a peacekeeping force to stabilize the situation once the hostilities stop. All of these things are complete fantasies. They're not going to happen. We haven't had the money to run our hospitals, schools, and universities. See, yeah.And those things are what people want.Yeah. Even if we did have the money, that would be a better place to spend it. Another thing boiling up, if you look at the Ukraine conflict, is how futile it is to send this sophisticated weaponry.It's a racket, isn't it? I think it's a form of taking money from the public domain that may not even exist yet. It's creating money in the public domain and siphoning it off to the private domain.Yeah, absolutely. But it's reaching a point of absurdity. It's reaching a point of self-contradiction, which has to be becoming so in your face that it is more or less inevitable that more people will notice it.Of course, the other major fiasco of the week was Zelensky's meeting with President Trump. There are two different narratives about this. One is that they're ashamed of, especially if they're American and beholden to the Democratic Party. They're ashamed of the disgraceful way that their president treated this brave freedom fighter. The other narrative is that Zelinsky came across, he had no idea of how to play the very small hand of cards he had to be fair, but he had no idea how to deal with the situation, brushing up against the guy who is arguably the most powerful person in the world, and certainly one of the biggest egos.Once again, the mainstream media's view is somewhat skewed because they showed the end of the interview when Trump, according to some people, lost it, and, according to other people, they gave him some home truths and advanced it much the same way.I've seen people who've analysed the whole thing. I haven't got 20 minutes to watch the whole thing all the way through, although it does make great theatre. I've seen some analyses and some clips from earlier on. The point is, Zelensky, for a start, just turned up in his combat fatigues, which is a conceit anyway.He must sleep in his combat fatigue, so it's part of his act.Yeah, it is. It was totally an act, and it was inappropriate for a heads of state diplomatic meeting.Many Americans saw it as a deliberate insult, so it was not very well judged, even though that is his act. Then, in the earlier part of the meeting, he repeatedly interrupted Trump, contradicted him, and made demands in a very insolent manner rather than polite requests.Trump was very gracious. He fended it off, made light of it, and then eventually just blew a gasket. Now, it's actually given him the excuse to do what I think he wanted to do anyway: cut off the munitions and weapons supplies and cut off the intelligence, which should bring the war to a much more rapid conclusion than it otherwise would.Well, that has to be a good thing. I'm less confident about the situation in Gaza. If you want to know what the empire's up to, I would keep an eye on that location.Yeah, I do not know either, but I suspect that there might be unintended consequences anyway, which are far more telling than anything intentional. I also think that a larger picture may be force majeure.Okay, I think that could wrap it up for today, could it?I think so, yeah. No, I think that's a good overview of the book. I'm excited to read it, even though I'm going to be contributing a lot of the input. Yeah, I'm looking forward to it. If anyone is listening, we'll update you in due course when we will launch a date.Yep. Of course, by following this podcast and/or reading the transcripts, you can see the book unfold in real time over the next few months. Okay. Until next week then. Thank you, Rob.Thanks for listening to this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. You’ll receive a free email notification whenever we publish a new article or conversation. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

Rob’s comments are in italics.Derek’s comments are in normal font.I've got a short quote from Caitlin Johnson to share today. We both follow Caitlin, she's at https://caitlinjohnstone.com.au/. She says in one of her articles:Market forces are not guided by wisdom, they are guided by greed and fear, and by the unresolved early childhood trauma of the Musks and Theils and Bezoses of this world. Capitalism is a great way to guarantee more production and consumption, but it is completely useless for curbing ecocide and restoring planetary health.As long as ecocide remains profitable under a system where mass-scale human behavior is driven by profit, ecocide will inevitably continue. What we need, then, is a completely different system. One where we move from competing with each other at the expense of our biosphere to collaborating with each other and with our ecosystem. Collaboration-based systems are inherently incompatible with the competition-based ones we live under today — but they are also the only way we are going to be able to continue living on this planet.That seems to summarise much of what we've been discussing over the last year. I think that is the change that we want to hopefully do our part to push towards.Absolutely. Last week a joke popped into my head that I was told when I was about eight. I don't know how often I've thought of it since then, but not many. It's quite funny at an eight-year-old level, but it's also got a profound point that was probably lost on me at that age. So the story is thatThere was this guy who was employed to paint a line on the ground for the border between Russia and Georgia. He was going along and suddenly found a house right in the middle of where he was going to paint the line. So he knocked on the door and said, I'm painting the border between Russia and Georgia. It goes right through your house. Can you let me carry on? The guy said, no, I don't want half of my house in Russia and half of it in Georgia. Can you go around it?The guy goes, all right, which side would you like me to go? He said, well, go around the house on the Russian side. The guy says, all right, I'll do that. But I just have to ask you why you chose that side and not the other? The guy said, well, I couldn't face the thought of living through all those Russian winters.The point being, of course, the more profound point, I mean, obviously it didn't make any difference to what the temperature was when they drew the line. The more profound point is that all of these borders are arbitrary.All the rhetoric about the territorial sovereignty of Ukraine at the moment is nonsense. It would be great if ethnic Ukrainians and ethnic Russians could recognise that they're all human beings and live together, or if enough of them could do that, that the minority who fought in terms of separation could be prevented from inflicting indignities and attacks on the others. Given that they haven't, it seems that one of the things which is missing from the public dialogue in the Western world is the fact that in Crimea, there was an overwhelming majority in favour of being part of Russia. That was ratified by the Crimean Parliament. Similarly, with the regions of Luhansk, Donetsk, Zafrosia and Khursan, there have been considerable indignities and restrictions placed on Russians and actual attacks by the Ukrainian army. Those people wanted to be in Russia rather than in Ukraine as well. The phrasing of the discussion in terms of the fact that these are areas that Russia is annexing seems to me backwards.It seems to lack any historical understanding of the history of these regions anyway.Positive Events This WeekYeah. Anyway, to positive reflections on the week. The mere fact that there's been a very detailed meeting between a Russian delegation and a US delegation in Saudi Arabia has got to be positive. The idea that you can engage in megaphone diplomacy and not talk to each other, not try to understand what their perception of the situation is, seems to be a recipe for chaos and lunacy to me. So the fact that this talks going on at all, and, of course, Trump has been usually blunt and undiplomatic, but the howls of protest and outrage in the American press were predictable.And the European press, but they've been largely sidelined, I think.Yeah, yeah. Meanwhile, of course, the Europeans had their own meeting in Paris. A bit of chest-thumping. It seems to me that both the UK and the European Union are hanging on to a completely outdated perspective of how the world is. I'm concerned as a British citizen that our Prime Minister seems to have taken it upon himself to suggest that we send troops over there.The idea of us effectively opening hostilities against Russia is frankly chilling. Apart from the obvious lack of wisdom of going into any conflict on what is clearly the losing side.Haven't seen various people try this over the last few hundred years and come off much worse??I think both Napoleon and Hitler were better equipped militarily than Britain is now.Anyway, I don't know how it's going to work out. The other thing which has been two pretty striking speeches this week, one from Robert Kennedy Jr, his opening address to the staff of the Department of Health and Human Services. It's well worth a listen. It's a 20-minute speech. Every point is spot on. He emphasised the need for openness, transparency, and open debate and pointed out that this is the essence of what makes science workable. He said he's going into it without any preconceptions of his own. He's also said that there's no area which is going to be off-limits for discussion. So I think it'd be interesting to see what comes of that.It's very interesting, I think. The other thing I noticed this week was I noticed that Trump, obviously Trump says a lot of things, so it's hard to know what is serious and what is not. That's always the issue, but he did make some comments about denuclearisation. Yeah, well, I think these two wars, especially the war in Ukraine, I mean, Gaza has been more of a massacre than anything resembling a war. The war in Ukraine has flagged up the futility of warfare as a way of resolving matters. The expense must be astronomical.What is also beginning to be said now is that half of the money and weapons sent to Ukraine have been embezzled. So, if that comes out, it will put a different perspective on things. Of course, the other big announcement was that there is this commission being set up to reveal all of the secrets that have been kept from the American public regarding the JFK, RFK and Martin Luther King assassinations, the COVID pandemic, the 9-11 attacks on the Twin Towers, numerous other things. I think whatever one thinks about the flawed nature of the individuals involved in this current administration in the UK, there are positive things happening in a matter of weeks that most of us have been resigned to giving up hope for.I don't know where it's going to go. I don't know what Trump expects to achieve throughout his presidency. I don't know what he imagines he means by making America great again. I feel that some of the things I've said before are beyond his capability to deliver apart from anything else. I don't know how rapidly people who were his enthusiastic supporters are going to get demoralised by that or whether we'll see so many positive effects from some of the things that have been set in motion that it will be liberating. I personally expect that there will be all kinds of unintended consequences particularly of releasing those secrets from the past. Many people will have severe attacks of cognitive dissonance over one of those issues or another.The parallel I keep thinking of is Gorbachev introducing Glasnost and Perestroika, which was sorely needed in the Soviet Union. The whole country was dysfunctional due to government over control and secrecy.Gorbachev had no intention of bringing down the Soviet Union, but the Soviet Union collapsed because once they started coming straight about some of the things that had been going on, it totally destroyed the population's confidence in the credibility of their government. I cannot but expect that we'll have a similar sort of.We might well be living in a house of cards. Yeah, who knows.Yeah, who knows? Anyway, once again, a lot of the events are happening so rapidly that it's impossible to assimilate them as we go along. It'll be very interesting to see what the perspective is with the view from a little way into the future when things have settled down.Comments on GoldFinally, there are a couple of things that have come up in the past week. One is that the Bank of England has now slowed down the rate at which it honours requests for withdrawals of gold from its vaults. We would have to wonder whether this indicates that there might not be as much gold in there as has been claimed. Similarly, Elon Musk has said that there must have been a recent audit in Fort Knox. Of course, I'm sure he knew full well that there hadn't been any kind of audit since, I think, the 1970s. That was only a partial one. I believe the last full audit was done in 1953. That's amazing, isn't it?There may well be a big shortfall in what is claimed to be in there. This has implications for world finance, particularly given that China, Russia, and other nations in the Brexit Consortium have been steadily building up their holdings as fast as they can over the past decade. There could well be a very serious shake-up in the purchasing power of any fiat currencies in the Western world.Which is going to happen anyway, but it might happen sooner in a more traumatic way than people think.Much more abruptly. So, I think that's a roundup of what we have to go on today. Circling around to that quote that you started from Caitlin Johnstone, I mentioned the five whys last week. I talked about it mostly in the context of a business situation or some kind of production bottleneck or equipment failure where you have this technique. When something has not worked out well, you say why was that. Then you get an explanation. Then you say: why was that. You get an explanation. You keep saying why until you get to the root cause of it. If we look at any one of the major challenges facing the human race, whether it's the increase of any particular form of pollution, whether it's the exhaustion of supplies of some critical material or of the energy sources that we're relying on. Or warfare, which is plainly counterproductive and painful. If you keep asking why, I would suggest that at the end of any of those enquiries, the root cause is that human beings are steeped in the illusion that they are separate from other human beings; separate from the web of life on this planet; separate from the functioning of the planet as a whole, separate indeed from the entire universe. It's that illusion of separation which has to go. Some people approach that from a spiritual point of view, some people approach it from a scientific point of view. According to quantum physics, any particles which have had any interaction with one another are entangled in such a way that you can do quantum measurements of one of those particles. It will give you instantaneous information about the other one, so from any of these points of view, you could look at it from an evolutionary point of view. We do have a common ancestor. The biochemistry of all living organisms is based on a common foundation, and their matter is constantly exchanged. That shift of perspective will be necessary as a precondition for resolving any of the specific challenges we're facing now.My estimate is that far more people are aware of that to some degree than there ever have been, and there is far more interest in that topic from one of those directions or another. I don't know how close we are to reaching the critical mass tipping point where this becomes the prevailing understanding. I think we're living through fascinating times, so watch this space.Thanks for listening to this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. You’ll receive a free email notification whenever we publish a new article or conversation. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

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 FoundationsThe 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 NeedsThe 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 CapitalismMy 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 AccountingThe 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 EntropyThe 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 ToolThe 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 PrincipleAs 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’sThe 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.Thanks for listening to this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. 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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!Thanks for listening this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. 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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.Thanks for listening this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. You’ll receive a free email notification whenever we publish a new article or conversation. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com

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.Thanks for listening this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. You’ll receive a free email notification whenever we publish a new article or conversation. 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