Mailbag: You’re wrong on inflation and money printing. July 27, 2025

27:12it tends to favour those other things that you can't measure socially but that may give us better outcomes at a holistic level. Yeah. And look, if you want to do – so the example that comes to mind is GPs in regional areas. It's a struggle. Actually, even in our respective partners' fields in teaching. Yes, huge. No problem with primary school teachers. No shortage there. High school teachers, they're a very different story, and particularly in regional places. And it's funny because, God bless the Department of Education and its geniuses that work there and all the things they try and figure out to do.

27:47I'll ask your wife stop now. Sorry, yes. Yes, I should. Doing a great job, guys. Doing a great job. Keep it up. And it's funny because, I mean, as someone in sort of economics and finance, Ben, she's telling me about some of these issues and I go, oh, well, don't you get paid more? It's like, no. So I was like, oh, but there's this program that will do this. And I was like, it's so easy, right? It's so easy. If you wanted to fix this, just give people a financial incentive to do it. As I said before, everyone's got a price, right? If it's deemed, there are non-economic considerations, and it's just deemed that it's very desirable that we need GPs in these places, just keep raising the price until you get someone.

28:29Now, people might turn around and go, oh, that's outrageous. Like, well, become a, you know, well, that's, if that's the goal that you want, that's the best way to do it. Give people an incentive. Show me the incentive. I will show you the outcome. So simple. I think it's roughly right. I still think at some level, if you only allocate resources at a policy level, again, rather than, if you only allocate, you only allocate resources where you get maximum economies of scale. So every doctor would be in the CBD, just let everyone move to them and eventually they get there and you have the cheapest medical treatment in the world, right?

28:58Because it's just, there's more people, there's more, more. the economies of scale of the service will be so much easier, right? So you have all GPs within a block. And it's just that block and the hospitals will be there too and everyone will come all there. And I'm being a little bit facetious, but I'm just illustrating that you're right. I completely agree about it's just a pricing level. It's perfect. But there is something about those scale economies that do, if you're purely financial as a government. And by the way, once most people in the city have to care about the voters of the Bush either because there's not enough of those.

29:25And so all you do is kind of focus on the 51 % every time. And I'm not sure, I know you don't disagree, I'm not sure that's the best way only to run a democracy. There's just always that element of what's universal. Same with schools, right? Don't have schools in the bush. Make people drive my own cities to have their kids educated because a school with one teacher and eight kids is far less efficient than a school with 400 ,000 kids. So let's, you know, have mega schools with 3 ,000 kids at one spot, one principal, and that'd be cheaper and easier. And there's just, there's something there. I'm being deliberately, you know, silly in my extreme view or extreme examples, but there's just something there that we need to allow for, I think, at some level.

29:59Yeah, but it's also just an understanding that prices are a signal. There's information in prices. In fact, the whole point of a price is to signal information. That's what it does. Yeah, that's right. It's one of the points. It just isn't. Yeah, so if you want. It's just really linked. Yeah, it's just like, well, we're paying this and no one's doing it. It's like, well, that's the information. The information is you're not paying enough. Yeah. Like, there's none of this. I mean, yeah, there are edge things. If you pay more, you would solve the problem. But you just would. but I don't want to pay more.

30:30Okay, well then just be comfortable with the situation. The world is full of trade-offs, right? This is what economics really is. The study of economics is the fundamental problem of scarcity. Unlimited demand and limited supply. That's what the whole box and dice is all about, right? And so, look, I live in a regional area. You do too, right? And so people like us will tell anyone who lives in the city, it's like, oh, it's so much better out here, right? And then in the same time, with the same breath, we'll go, we don't get the same services. Isn't it unfair? It's like, yeah, but that's the trade-off, right?

31:04I've got clean air. I don't have any traffic. I can park wherever. There's all these wonderful things that come with living in a regional. I love it. I love it. I love it. I love it. But I can't turn around and go, wow, there's not a cinema, Cineplex around the corner. And, you know, that's really unfair. Like, it just, well, of course. There's no 12 cafes, not 42 to choose from. Yeah. Like, it's just, that is the trade-off. So you have to ask yourself, what do I value most? And again, yeah. Yep. I 100 % agree. 100 % agree. Another anonymous question. I'll tell you what, Yela. This one doesn't just get read for the opening, but I'll ask you to allocate yourself to one of these two descriptions, Ram.

31:44It starts, to the Hugh Jackman and Ryan Reynolds of the finance pod machine world. Ryan Reynolds in a heartbeat. Yeah? I love Hugh. we could do a whole podcast on Reynolds and his business acumen the aviation gin the soccer team that he's bought you know the both of them were all soccer team together actually yes which is fun so he's a successful actor and if you're a top Hollywood actor the pay's pretty good but that's like a fraction of his money and not that it's all about money of course but he's just he's a very very savvy business person you know more about Ryan Reynolds than I suspected you would yeah I'm a big fan I know.

32:24To Paul Wilfred. It's like, look, I mean, artists are praiseworthy in their own right for, you know, being masters of their craft. But I just think there is – that is an arena where fame and fortune is usually pretty hard to come by, very hard to come by, and also very fleeting even once you've got it. So it's sort of like I just – I think to – he's just done very – he's done very well for himself and how he sort of played his cards. But it's not just like, I was famous and I was able to put a label on something and did it. Anyway, it's a whole story. It's a whole story. Kim Kardashian similarly, by the way.

33:04Yeah, right. Yeah. Not that I'll match bad with her on most of the headlines, but yeah. At this point, it's occurred to me, Ram, that unfortunately I'm both not very clever, don't have much foresight, and I'm a bit lazy. If you think about all the ways we've been described as part of these openings of these podcasts, maybe you can solve it for me with a chatbot but I would just like to be able to do some marketing of the podcast using the you know when the movies where they have the quotes from the movie critics you know the best movie of all time five stars I just want to have all these under our podcast the Ryan Reynolds and Hugh Jackman of the podcast world or you know the Sadler and Waldorf I think a combination of those we're missing a trick we're missing a massive trick massive marketing opportunity gone by anyway we'll work it out later I won't I'm lazy I have a rant says our anonymous questioner, correspondent.

33:51Love a good name. Naturally, it's got to be a good one. Naturally being a finance podcast, I'm solely talking about finance and will not in any way mention politics, which of course means there's going to be politics coming. I work in agriculture in Victoria. We are currently experiencing the worst drought in living memory. I'm going to stop there, Ram. I want to make a bigger deal of this because in South Australia, Victoria, they're really massively suffering and there is no, speaking of megacities, how many times have you read about the drought in one of our newspapers? And the answer's almost none because the journos and people who read the papers don't live out there.

34:21So it's kind of, it's almost going completely unremarked, which is phenomenal. And yet I know every single detail of a lady who made a beef Wellington, right? Is it that cookbook plagiariser? Is that what we're talking about? No, the mushroom death cap. Oh, that one. Yeah. Right? It's been live blogged. I know. And it's not the same as it's not an intro, but it's just sort of like there are other things happening in the world and that's a great example. And I'd love to blame the journos. You know what? clicking on the drought story and we're clicking on the death cut mushroom story, allegedly.

34:52Anyway, our correspondent says, I thought this might be an opportune time to run through the business case of a farm and I'd be keen to hear your thoughts on the matter. Love it. Farms are a capital intensive exercise, says Anon. Requiring land, owned or leased, heavy machinery, livestock and all the all-important labour. Farmland has tracked Australian residential pricing the last few years in my region and is now abstract from the cash generating capacity of the land. That is true, I did some numbers relatively recently i do some uh i do regional radio i do triple m uh griffith and mia the murraybidgee irrigation area murraybidgee murray anyway um and they the farmland has gone up extraordinarily quickly and again not maybe even more than housing but you think about that it's even weirder um anyway let me run through the finances for my district broadacre cropping for the most part good cropping land is worth about 19 000 per hectare it on average returns about$1 ,000 per hectare profit per annum, giving an annual return of about 5 % in theory.

35:50Yet the average numbers most achieve are closer to 4%. Granted, some years when all the stars align, we can achieve double-digit returns. Yet just the same, we can have other years where the returns are negative. Well, why the pinch? We have rising input costs, says our correspondent. Agricultural imports, fertilisers, chemicals, machinery, have all ballooned. Apparently it's called inflation. Interest rates have risen, so those with debt are squeezed higher. Land is the price of entry. and a huge amount of capital is tied up in that land. You cannot farm without it, yet it is seen by some as a portfolio.

36:21For a cropping enterprise, you stump up most of the costs up front before you know what the season will bring. So you take on a lot of risk before any sense of an outcome. Then throw nature into the mix. Floods, frost, droughts, diseases. It's a real challenge to manage these factors alone, yet most you cannot insure against. Now look at pricing power. The trouble with all this is farmers are broadly price takers, not makers we are producing a commodity product with only a few avenues for selling to a differentiated or premium market unlike nearly every other country in the world our farmers do not receive government subsidies or price flaws we are entirely at the mercy of the market it makes us the most efficient farmers in the world if you do a bad job you do not survive yes the global commodity price is more or less what we receive and that fluctuates greatly from sowing around april to harvest in december i'm not having a whinge on the farmer's behalf but I feel it's worth the general public understanding the business fundamentals behind it all.

37:16The margins are getting skinnier in the sector and concern for me is the lack of incentive for people to keep reinvesting in their enterprises. This is by no means whatsoever in relation to the increased fire services levy, the state government in Victoria is introducing. Rant over. Thanks. Anon. Yeah. Yep. Yep. Gosh. Oh, so much to say. Yes. Super tough business. I mean, one of the hardest. Yep. And at the same time, one of the most important. So, you know, there you go. I would say it was really interesting there to sort of say that we as Australians don't enjoy a lot of the protections that governments provide.

37:55And therefore, we are one of the most efficient. That is not a coincidence. True. And it's yet of the 4 ,587 ,291 examples throughout history of when these government-driven incentives have backfired and just created less efficient outputs and distortions. It's just, it's another case in point. And it always gets, you've got to be careful there because I'm not just sort of saying it through our hardworking farmers to the wolves here. But it comes back to the point we made on that other question here. Prices are very, very, very important for signals. here so what you will find is is like it all stems like so what was it 19 000 a hectare yep yep a thousand bucks a year profit if you're only getting four percent on that and that now prices keep going up because some idiot in martin place you know managing some portfolio decides that they want to allocate a bunch of money there and now it's 25 000 a hectare now nothing else changes yeah what happens to your earnings yield like it drops right so it's sort of like and like just play it forward it gets to the point where it's just like you might go all these investors are screwing everything up they're really screwing themselves up frankly right because the land is the land is the land the land doesn't know what it's worth the cow that's sitting on it or the the plant that's growing on it doesn't know what it what it's worth but it does it does make it completely unvalued so at a point when you go to sell you know it's like it's people people the language is telling right it's worth this much like no it's currently priced that much at the much.

39:25It's really, but perhaps it's not worth that much. And when you come to sell it, you'll find out exactly how much it's worth. Now, if you're going to tell me that you can make, what was it? $1 ,000 a hectare and you want to sell me your land for$100 ,000. No, thanks. $10 ,000 a hectare. Let's go, baby. 10 % yield. That's fantastic. I will do that. And again, this is why it can be uncomfortable, but it's why you've got to let these things play out because these things will correct themselves. They really will, right? And then you think, well, wait a second, but we have all this variability here.

39:59This is really hard. Yep. And you know what happens when free and open markets are left to do their thing? The person who runs their business right on the edge with no fat, no buffer, no rainy day fund, they go out of business. And the person who was prudent, thought ahead when they made super profits during the good time with lots of rain. Because that happens in fun. As the listener just said, sometimes you get these incredible periods. Like, yeah, bank it. Bank it. Because you're going to... Not you might need it. You are 100 % going to need that in the next five years because you're going to have a terrible period there.

40:34And again, you play this forward. And what happens? It's like prices tend to reflect the economic reality of things. And at a point, it's very hard to pass your prices on. But when everyone is suffering and when everyone is unviable, you absolutely pass your prices on because there's no farming without, there's no food. So it comes to a point, it's like, if you want a banana, mate, you've got to pay 10 bucks for it. Do you see what I'm saying here? I do. Now, there are certain what you might generously call one-off big factors and we can have a discussion about whether or not government intervention is involved there.

41:19A lot of industries have – insurance industry has a reinsurance arm to it as well. So it's just like you can do things to sort of prepare for that. And I'm going all over the place. Did you read Howard Marks' recent letter? I have not yet, no. Yeah, he's talking about have we repealed the laws of economics and he's having fun with it. But sort of saying that, because, you know, for all good intentions, people try to do these things and it leads to even worse outcomes. He gave many examples. One of the examples he gave was with the insurance industry in California. And because insurance was going for bushfires, was going up, the premiums were going up.

42:02And the political pressure, people weren't happy about that, obviously. No one likes their prices going up. But the insurers are going, yeah, but the fires are more risky. that they're more likely and they're more dangerous now hello climate change like it's a thing right if you want to know it's a thing ask the insurers right because that's when it comes to money and dollars and profit they'll tell you exactly what matters right it doesn't become a night it's not just an ideological thing when when their very livelihood and profits are on the line so the so the californian government said we're gonna we're gonna cap what you can charge as a premium Now, Milton Friedman would have seen it coming a mile away, right?

42:42And anyone who's done any economic history would see it coming a mile away. They're like, what did the insurers do? They stopped providing coverage. Why would you provide coverage? It's uneconomic. So think about this. If there was the example, I'm going to mess this up, but the example was there's a one-in-ten-year event that's likely to cost you$10 ,000. But all you can do is charge$500 a year to anyone who takes out a policy. Let's think about that. So over 10 years, I'll probably make$5 ,000 because I get$500 every year. But I also know, this is where the actuaries are very good, you know, statistically.

43:17They'll go, yeah, but over that 10-year period, I'm probably going to have to pay out$10 ,000. So$5 ,000 coming in from my premiums and$10 ,000 going out. How many policies do you want to write, Scott? Like zero. No way I'm going to do it. So when the fires hit, tragic. It's so tragic, right? It's so tragic because it's not just this, again, a finance thing. People weren't covered. They weren't covered because a lot of people didn't provide the necessary coverage. In other words, what I'm trying to get at here is that sometimes, too often times, there is corporate greed and uncompetitive dynamics and all these things that just go to flat out rent seeking and exploitation.

44:03And that is wrong. but in in a properly structured markets these prices are actually just real world signals that just come back to individual decisions that that people have to make here and so what i'm really trying to say i'm coming at it from an ideological perspective because you kind of have to here because it's a very very slippery slope as soon as you start going in there and meddling with good intentions the road to hell is paved with good intentions the poor old farmers are super important yes they are they work really hard yes they are it's a super tough industry yes yes it is we should put all our taxpayer not all i mean we should send a big big big chunk of our of our money to help them out it's like oh that's where i draw the i mean not the hard and fast way but it's just like the reason i do it is not because i'm a i'm a i'm you know caring a-hole that just really wants the farmers to suffer it's just that if you play that forward and give that enough time all you do is you is you prop up the inefficient players you don't allow the rewards to those who are taking more prudent long-term decision-making.

45:04You end up, and we end up suffering because we don't have the efficiency that we would otherwise have. And that means we pay more for our bananas or whatever. Insert agricultural item there. It's a very, very hard thing to get your head around because it almost suggests, particularly without thinking about it too much, is you're just saying, hands off, let them fall where they may land. So yes, it's exactly what I'm saying because that just reflects the real world dynamics that we all experience. And we can pretend it's not true and we can do things, but I don't even have to rely on thought, like on reasoning and inductive thinking.

45:42I can just point to hundreds and hundreds and hundreds of years of history where it has never worked. So that's why I'm pretty passionate about it. It's like, yeah, it's tough, but please stop helping in some of these counterproductive ways. What do you say to someone who says, that's all true as long as there is a level playing field but when overseas governments are supporting their farmers you don't get the you've just you've described a market where the the invisible hand is allowed to move when you've got the invisible thumb on the invisible scale in in those other countries and our guys are saying well hang on i can't make a decent return not because of too much competition or because of imprudent management or because of any of those things because the international price is effectively lower than it would be in circumstances where the french and the american farmers have to compete on their own terms their costs are higher than ours, the global price of the commodity would increase if it allowed to because of the relative efficiencies.

46:33The Australian farmer would be more able to compete and able to compete at a different level of profitability because, you know, rather than make the$1 ,000 acre or hectare, you get to make$1 ,500 a hectare because your price is X percent higher. There's an argument there to say, you know, for all of what you just said, how do you deal with a market where there are those thumbs on the proverbial scales? What does it mean more broadly also for the sort of social, social farming sounds ridiculously cliche, but you know what I'm saying. Do we, if we were to lose all or most of our farming to international players because we simply can't compete with those subsidies, does it, you know, what happens when we no longer have meaningful amounts of competitive farming operations in the country, for example?

47:15Yeah, excellent point. Excellent point. The trouble is, there's a couple of things. The first one is it's a race to the bottom. Yes, it is. Right? So it's sort of like, so someone over there is doing something really dumb and it's clearly not working, but let's do it too. But now we're just even, it's just like, well, that ruins their reason for doing it in the first place. So they'll go even harder at the subsidy. It's like, oh, okay, well now we need to catch up. Race to the bottom. Everyone's worse off, right? Everyone's worse off. And let's just say that we took the hard decision to not intervene in that situation.

47:49Think about what that means. Now, again, when you're talking about big policy decisions here, unfortunately, you have to just reconcile with the reality that there will be winners and losers. And the best thing you can do is just go for the greater good. You have to. There is no scenario where every single person is better off and no one is worse off. right so looking at it through that lens i would say well if there are all these uh distortions from foreign markets does that mean that i'm getting my food cheaper than i otherwise would yeah because they're being subsidized so my food's cheaper yeah but our guys can't produce it that cheap no they can't so that's going to be hard for them now what do you do in a business that's unproductive you stop doing it so all these hard-working capable intelligent farmers go into another industry, mining or whatever it happens to be.

48:38Now, again, we can have a discussion as to whether that's a good or a bad thing. I think it'd be a terrible thing, frankly, but the market would adapt and it would react. This is what's so critical about this system. We operate in a chaotic, dynamic system full of feedback loops. It's just the reality of the world that we live in, right? And so it's sort of like, if that is true, and it is true, we need to allow the adaptation to occur. We need to allow the reflexivity of the system. We need people to move on. So the cheapest I can put a banana on the table locally is for a dollar. But these buggers overseas in France, let's pick on the French because that's always fun.

49:25They can do it for 80 cents, even with transport costs. well so 99 % of people in Australia who aren't farmers now get cheaper bananas and the one that and so again coming at it from the angle of the aggregate view here it's like okay like guess that's that's good right and and then and then he's like but what about the farmers well this is why this is why broad based impartial safety nets are a good idea you know so they're I'm not just saying again throw it to the wolves but it's just like let's not let's if someone is doing something stupid the answer isn't let's also do something stupid like it's just not the answer so so do you see what i'm saying so when when when when everything is said and done we have a much smaller farming sector but we have cheaper food than we could produce ourselves and we've now redeployed all that productive capacity elsewhere and we're better off overall yep and we're better off overall now let's say let's you go ah but what happens when they stop doing it's like well the land hasn't gone away right people go wait a second land is really cheap in australia because no one has been farming it and actually now someone will do the calculation someone will do the calculation and go oh my god i can make a fortune here and they will do it and the market will react and that is that is the thing it's not this unthinking uncaring system that everyone sort of seems to think that it is it is an adaptive reflexive system which is exactly what you want in a dynamic chaotic world i think you've summarized that beautifully um i'm happy about that by the way like if i was designing the simulation i would say everyone gets everything but and that's my only my only i'll repeat myself for a second my only addition is just that not everything is always just about the money so there's just there's just there's just that reality and i don't even i wouldn't do anything differently either um and on i'm sorry i hope i hope you weren't expecting us to say all of a sudden we think farming should be protected in australia um i you mentioned the fire services levy um i don't know anything about the fire service levy I know it's been a particularly controversial topic in Victoria.

51:24I think government should – if they do anything to help productivity, it's to kind of get out of the way where you can afford to. No, I don't know. Maybe the fire service levy is required. I'm not making a comment on that or anything else. But to this end, we can remove artificial barriers, artificial constraints, artificial obstacles, stop making things worse. I think we all agree that would be a good thing as well. Can I just add one more thing too? Just to cover my backside a little bit. is that because you've got to be careful online. Things get clipped, right? And you miss a bit of content.

51:55I think the record speaks pretty clearly for itself. Just on Friday, I was ranting and raving about protections for the airline industry. So it's not a farming thing. I'm not making this argument in the context of farming and too bad, so sad farmers. I'm against you. In fact, the most egregious sort of example of all of this stuff is in the sector that I work in. I was just, I was ranting on Friday about rest super and some, allegedly some of the things that may be going on. It was Friday five weeks ago, by the way. Five weeks ago. Sorry, I'm getting all confused. But that's, my point is it's just like any sector, any industry.

52:32I'm not picking on anyone. It's just sort of like, and to your point, there are definitely non-monetary kind of factors there. And that's cool. There's nothing wrong with that. In fact, as a finance bro, I will even say that the non-monetary things are the most important things in life. Just understand that there is always trade-offs and compromises. So if we as a nation say, yes, we know that if we do this, we will be less efficient, less productive than we otherwise would have. But we feel good about helping the 0.1 % of people that work in that sector. I'm not even trying to put any judgment on that whatsoever.

53:14So just facts. If that's what we all decide, then okay, that's what we all decide. But we've got to, as a country, stop thinking that there is just a magic pudding of the government can fix that and there is no trade-off. There is no compromise. There is no opportunity cost. There always is. And we just have to be alert to that. Yeah, I think that's right. Yeah, I don't. Yes. Because if I can wave a wand and fix it with no one being worse off, then yeah. And that's always the challenge. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener. Hey, mate, let's go to a question slash comment from Jay, who says, hi, Scott and Ram.

54:00Sounds like a food brand, says Jay. Scott and Ram? I don't know. What would we make if we were a food brand? Hot sauce. It's an easy one. Extra spicy. Extra spicy with a dose of brand. Love the show. A little bit chunky. Probably not really good for you in large amounts. Not good for you if you have too much. Love the show, says Jay, and the thoughtful conversations each week. In the spirit of discussion, I wanted to share a couple of counterpoints to arguments I've heard on the pod. Specifically, one, that it's better if governments can't mess with their currency, gee, they're fighting words, and two, that zero inflation is a good thing.

54:36I know I'm simplifying a bit here, says Jay. These sound reasonable, but my recent travels to Greece and Japan have made me question. On currency control, Greece seems an interesting case study. During the European debt crisis, the situation was made worse because it was locked into the euro. Since it couldn't devalue its currency, it had no way to boost exports or tourism through that weaker currency, which could have helped stimulate the economy and reduced debt pressures. Instead, the country had to rely on painful internal adjustments like wage cuts and austerity, which dragged out the recession.

55:06Other countries that manipulated their currency seem to have been able to devalue their country and help restore competitiveness faster. faster currency that's it's country where currency is and help restore competitiveness faster um i'll stop there because i think anything goes on to inflation um what do you think strong disagree i mean think about it these are very great they're excellent questions they're so good questions and they're really hard to wrap your head around but step back for a second and again i always like you're an alien you've landed on earth there's all these hairless apes running around like you don't know about the stories that we tell ourselves our social and societal conventions they're all made up right they're good they're powerful human rights is a made up concept but i'm all for it right so i'm not i'm not trying to devalue it but but it is what it is they're not laws of nature they're not laws of nature they're not the laws of the universe so by making more bits of paper what does that change?

56:05let that hang there for a second just think about it now I know it's digital paper these days and the rest of it but it's just like number of tokens same thing whatever shells shekels bales of tobacco whatever right it's just like can I throw a real example of this in just for people to help a fake but a real example imagine you're playing Monopoly and everyone starts with$1 ,500 and then halfway through the game everyone gets another$5 ,000 each yep we're all better off We're all better off. Clearly, we're all better off, and there's no consequence to that. Oh, wait. No. Everything goes up in price.

56:41There were no extra squares created on the Monopoly board. Right. So you've got more money, but exactly the same. And by the way, I say it's not real. It is entirely real. I mean, Monopoly is not real. But the idea of within a system, there is a certain number of resource units. And there's not just properties in the real world. There's other things you can do with your money. But the reality is whatever number of things there are, there is now more money chasing those same things. The game rules don't change. The game board doesn't get bigger. It just says everyone's got more money now. And then what?

57:10We've got an abstract ledger that we call the Australian dollar. That ledger interacts with another ledger that's called the US dollar, which interacts with the yen, you know, all made up, complete. And completely made up, but an incredibly powerful fiction, like an incredibly powerful, like money has been probably, I would put it easily in the top three of civilizational enabling technologies. Like without money, we've never gotten beyond Dunbar's number in terms of coordination. Yeah, right. I can only keep track of 150 interpersonal relationships because that's what my brain evolved over many millions of years to be able to do it.

57:47But I can absolutely do business with someone in India who I've never met before and don't trust because I trust the money. Money's super powerful, right? So it's a massively important fiction. but to think that just by changing the abstract, like an abstract quantity in quantity, like an abstract, changing the quantity of the abstract quantity, that that will do anything in the real world is completely false. Now, you've talked about, oh, if we did this, it would have gotten rid of the debt. Well, there's a few things you said there's like, well, there's a counterparty to that. There's the person who borrowed the money and there's the person who lent the money.

58:27So what you're saying is it would be better for one party, but much, much worse for the other. Now you've got to decide who – no free lunches, again. So you might – You might say nationally though that if the foreigner has the debt, you care less about them than about you. Okay, let's play that forward. Okay, screw the foreigner. Trump's finding this out the hard way right now in real time, right? He's finding this out. It's just such basic stuff, right? And it's just sort of like you've basically defaulted on your debt. You can call it a restructure. you can call it a very value what you can use any fancy financing term you want you've defaulted and if you don't think that's true lend me a thousand dollars and i'll pay you back in something that's nominally that but not really that like i'm going to give you something that's equivalent to that at least on paper but has completely different purchasing power like it doesn't make any sense so it's it's now now you're still running a deficit you still need people to buy your bonds you still need to borrow money what interest rate do you think you're going to charge after you just screwed over all your creditors.

59:26Do you think they're going to turn around and go, well, everyone else who gave you money got completely bent over, but I'm happy to lend you money at the same age? No. There is a reason why Argentinian bonds are at 30 % yield and US bonds are at 4%. Well, maybe the US isn't a great example. But yeah. Right? Speak of sentiment and reputation, but yes, you're right. You talk about Japan. Japan's a classic example. No one buys their debt. So the central bank in Japan turns around and buys it. What do they buy it with, I hear you ask? Click, click, click on a keyboard, poof, money. It just came into existence.

1:00:02And there are consequences. My point is there are consequences to it. It's always emergencies. Never waste a good emergency, right? Because this is how you justify things. With what's going on in the world with all the calamities in the Middle East, I'm sure that'll be used as a scapegoat or a cover for certain other things that would be harder to politically push through. You talk about the export industry. If they had the chance to devalue their currency, the exporters would have been really happy. Okay, cool. What about the importers? Do we not care about the importers? Correct. Yeah, screw the importers.

1:00:40But the importers are importing stuff that people want and use. And they've got jobs and businesses. They've got jobs and businesses. So now you've put it, I'm being a little bit harsh here, and I know you're coming from a good place, but if you were saying that you could do this and we could help people and not hurt other people, then I'm all on board. But what you were inadvertently saying is, I think that the livelihoods of the exporters are more important than the livelihood of importers. And I think importers should be screwed over so the exporters can live to fight another day. I can keep going on, right?

1:01:16I'm going to one more point. And again, it's like with the farming example here. Will there be dislocations? Will there be uncomfortable periods? Will some people see businesses go out of business? Yeah. Yeah, they will. But they'll adapt, as they always will. And again, oh, so you're happy with that? No, I'm not happy with that. I'm not happy with it. But you can't wish away the reality of the world. This is the problem I think people fail to understand. If you were laying out to me a solution that just had no downsides, then sign me up. But you're not. You're not. And there are always other consequences.

1:01:54And so we can have that discussion. We can have that discussion. But just to think that some central bureaucracy of rich, connected, politically elite white men can make a decision on behalf of tens and tens of millions of people and get it right and not fall victim to all the human frailties. and shortcomings that we have as a species and that that's just going to make everything perfect again. That's the, I was going to swear, that's the poo that got us here in the first place. How did Greece get into the sovereign debt crisis? Because it was spending without abandon on things that were completely unviable.

1:02:34And they turn around and go, oh, it turns out that this isn't viable. And then there are real world consequences, not for the rich and powerful, but for the poor schmuck who doesn't have a pension, who worked 40 years slaving their guts out under the promise that we'll pay you this and now you don't get it sorry now you know how can you not be angry at that anyway a little bit well actually one thing i'll say is i'll throw it back to you i'll throw it back to you very quickly and i want to say i i feel very strongly about this stuff but there is always an open invitation because if I'm embarrassing myself here and there's a very good chance that I am, I'm not just saying this, like, set me straight.

1:03:16Set me straight on what I'm missing. So I agree with everything you said. Where there is a different, so I'm not, yeah, I 100 % agree. Jay, though, suggests that devaluation only happens via government, currency devaluation, not debasement, but devaluation, i.e. the exchange rate, only happens with government that dictator government involvement. Yes. And it doesn't, right? And so what I think is worth just holding out, Jay, is I think you're right about all those things. The question is how it would be done. Should it be done deliberately or should it be done by virtue of the market? So take the Australian economy without money printing.

1:03:51Let's say the government tomorrow says, no more money printing, we're done. And the year after that - What a utopia of a human flourishing and advancement we would see. Yeah, and Ram might even sell his Bitcoin at that point. And so the year after, unrelated, I'm not saying this is causal. It's just, yeah, I don't want to get distracted here. The year after there's a recession in Australia, right? For reasons that are just completely unrelated to currency, it just is a recession. The Australian dollar will fall because the buyers and sellers of the currency will need less of it, want less of it.

1:04:23We'll see it's less valuable. Interest rates will fall. So international investors who otherwise might have bought Australian dollars for the yield are not. They're going to sell them and buy US dollars again or whatever they're going to buy. And so the currency moves by itself. So, Jay, you are a million percent right about I think the euro is a terrible thing for individual member countries. You're going to have monetary and fiscal responsibility on the same plane. Again, that was so obvious. So, monetary union without fiscal union is madness. But for Australia, everything you said about all big currencies is absolutely right.

1:04:56And not with saying Rem's point about it would hurt importers, but one of the great things about a floating currency is when our dollar falls, Australian export has become advantaged relative to the rest of the world. So it actually cushions the Australian economic fall because all of a sudden - Right, it's great. It's so brilliant. So Jay, I think you're a million percent right on your point. The question is, should we do it via money printing? Ram would say, hell no. I would say no. But it doesn't mean that there's not positives from it and it will happen anyway, which is the beauty of it, which is the great thing about it being an automatic stabilizer is it will reflect the appropriate realities of supply and demand for our money, in this case, and our bonds and for our products.

1:05:32And so you actually get the benefits you highlight without needing to print money to do it. Which so is, you get Rams happy and you're happy, Jay. It's just, it's not done via government action. It's done by the forces of the market, which Rams talked about eloquently in this podcast and others for a while. So that's really useful. Ask yourself, I mean, these are such great. I love that people are thinking about it because they're actually so, so important to all of us for our quality of life. And anyone who's got any sense of fairness, I just think it's so important. So ask yourself this. Why is it that the Congolese pound, I think they have over there, do they?

1:06:06buys less US dollars than the Australian dollar? Why? Congolese franc. Frank, there you go. There you go. Now, I'll cut to the chase. It's because all a currency is, a domestic currency is just a gift certificate you can use in that jurisdiction. The Australian dollar is a gift certificate for Australia. It's really, really important in Australia because you can go into our mall that's called Australia and you can exchange your gift certificate anywhere. You know, go to France and they'll laugh you out of any shop. We don't accept your gift certificate here, right? And again, it's an abstraction.

1:06:48So it's really just sort of saying, why would I want a Westfield gift certificate? Because I want to spend money in Westfield. Like, obviously. Why would I want the Congolese franc? because I want to buy stuff in the Congo. Like, period. Maybe that's an investment that I hope to get a return on. Maybe it's goods and services that I want to partake. But outside of that, why? Like, there is no other reason. So the reason that the currencies are of different values is because they represent economies that have different values. Not in a racial, superior, exceptionalism kind of thing. It's just like, no, one economy runs much better, is much more productive, has much more wealth.

1:07:36Yeah, the currency's worth more relative to the quantity that's out there. But look at it in the way you might look at a share. Rather than looking at a share price, look at the market cap. That's far more informative than an arbitrary share price, right? Correct, yeah. And the same thing, you've got to look at that in terms of currency. It's a deep rabbit hole, and it's a mind blow, and it's just so hard to get your head around because we're just fish contemplating the nature of water. It just surrounds us. And from a very early age, granddad pushes a$1 coin into your palm. It's a bit of metal.

1:08:04Oh, it's also a lolly if I want it to be. Like you, and we just have this stuff and we don't really ever sort of question it. But it's like there are so many things that are downstream of the money, which is why I'm such a passionate, become such a passionate Bitcoin. It's like, it's not this shiny little token to gamble on. And it's sort of like, oh, no, it's a hard money standard that enforces, it reflects the true reality of the world and leads to far, far better incentives and far, far better outcomes. But we don't have that. We have a system where we can have rich white men in buildings that can, at the whim, change the amount of money, change the rate that currencies are exchanged for.

1:08:49And it's just, again, they're not evil. They're not lizard people. But they're human. and they're frail and they're biased and they're flawed. And I refer you to any history book you care to look at. It's not a good record. So, yeah, this is important stuff. I will share this Congolese franc footnote with you because you'll like this. I'll try and restrain yourself. I know what you're going to say. Quote, the Congolese franc is the currency of the Democratic Republic of the Congo. In the past, it was subdivided into 100 centimes. Centimes? I said. However, centimes no longer have a practical value and are no longer used.

1:09:21Speaking of the impact of inflation, right? The denomination they used to have, the smaller denomination is no longer useful because no one transacts in those values anymore. Because of inflation. Why? I don't actually know the answer. Is there a specific why you have the answer? Because it's a – and this is nothing against anyone from the Congo. I mean, full love, right? Government of the people, yeah. But I do not have any love for the authoritarian regimes that are in very – I'll be more general. when you ask why are all these countries poor? Like Argentina is, I use that as an example, it's an incredible bounty of natural resources.

1:10:01It was the richest country on earth at the turn of last century, right? And it's just sort of like the answer, yes, you're right, inflation. But why the inflation? Because they couldn't help themselves. They had access to a big red button that's a money printer and they pressed the button. And here's the thing with it. It's like your first taste of heroin, right? It's like pretty good. It doesn't do much damage, right? It's like, well, I think that - Don't do drugs, kids. I'm not speaking from personal experience. Either that or I could like really handle my heroin well. I'm not speaking from personal experience.

1:10:36Explain something. But do you see what my, like, it's kind of like, and it's always an emergency. Oh, oh, well, we need to. We need to print them. Oh, okay then. And then once you do that and you do it again and you do it again. Now, the US government and the Australian government can barely contain themselves. And we're considered the best sort of looking horse in the glue factory. There's 160 something international currencies that are out there. And again, outside of our little Western privilege bubble, it is something like 86 % of them tend to last an average of 12 years. Because these despots print it at personal enrichment.

1:11:13And when you're next to the money printer, you get to spend the money before the impact of the inflation is felt. So, again, back to your monopoly example. Everyone's getting$200 they pass go, I'm just going to give myself$400. Now, the first time I spend that, the money hasn't yet entered into the game. So, there are no inflationary impacts. I just get the full benefit of it. Afterwards, now the dilutionary effects happen. It's called the Cantillion effect. It's got a name, right? Because it's a thing. And that is why those countries are poor. It's not their natural endowment. They don't have the institutional rigor and standards and legal base and, frankly, discipline to not stuff around with the money.

1:11:54And that's why I'm so passionate about it, because we've got examples of it. Stop screwing with the money. You talk about it in terms of budget deficits. It's the same thing, because when we fund deficit spending with borrowed money, and And when we can't find buyers to give us the money, the central bank starts buying. It's just a fancy roundabout, long-winded way of just pressing a button and making money out of nowhere. And if you can explain to me why that's a good thing, I'm all ears. I am all ears. Interestingly enough, this is Jay's second point. We will try and keep this a little bit shorter.

1:12:25Sorry, Jay. This is my whole thing at the moment. I know. Oh, man. Jay says, on inflation, Japan's been stuck in a low growth, low inflation, or even a deflationary environment since the 1990s. While prices staying flat sounds good for consumers, it's created a cycle of weak demand, stagnant wages and rising debt. More recently, Japan has been trying to engineer a bit of inflation, encouraging wage growth and higher prices to generate more economic activity and increase government tax revenues to help manage their enormous public debt. There's even talk of deliberately creating a mild wage price spiral.

1:13:00Thoughts, says Jay? Maybe these examples give a counterfactual to our own economic troubles. Though it could be argued that these countries got themselves into this mess by economic engineering. Really appreciate the open conversation. Very strongly argued. Really appreciate the open conversation. You're encouraged. Looking forward to hearing more. Cheers, Jay. Thanks, Jay. Yeah, doesn't inflation help kickstart the Japanese economy, get things moving again? I think it's, without hyperbole, I think it's one of the biggest lies ever predicated on society. And I really lean into this. I will suggest this because we're going to run out of time.

1:13:33But if you're interested in this, And I really think you should be. I think it's important. But there's a Google, what's the problem? Joe Bryan, B-R-Y-A-N. British entrepreneur guy. He put together a video on what the problem is. Yes, at the end, it's got a Bitcoin thing. But ignore that. I'm really not trying to pitch it. I'm really not. But it's why you can get, and I think so many people are increasingly passionate about it, because once you sort of see it, you see it, right? So it's not about that B word. It's about, so forget about all of that. So I don't want to, I don't get that. The furthest thing from your mind, because as soon as I say that, it's going to put people off.

1:14:14Just watch the first 90 % of it and he will absolutely answer your question for you. There's another really good book by a gentleman called Jeff Booth called The Price of Tomorrow. And it really just like tears this argument to shreds. So the accepted wisdom is we need inflation. The government actually, the rba mandates a target of two to three percent because if we didn't people wouldn't spend their money which is just patently absurd right like i will spend money because i need to eat and i want to live somewhere every now and again i enjoy a bit of entertainment and the rest of it like why wouldn't i spend my money but it but it gets said it's and the thing is with it as well it's not that sometimes things in economics are hard to get your head around they're not obvious But in our game and in economics, people say this like it's like a law of gravity.

1:15:04Oh, people wouldn't spend. You go, oh, right. Has anyone done any empirical research on that? No, there's nothing I can point to. So is it true? Yep. Why is it true? It just is true. And the best example ever is with electronic goods, right? Consumer electronics have precipitously fallen in price. Flat screen TV 20 years ago was five grand. You can get one that's 10 times as good now for$100, depending on how big it is. But let me ask you this. Has anyone not bought flat screen TVs or computers? No. As soon as they come out, people line up around the block and camp out overnight to get the latest whiz-bang phone, right?

1:15:43It's like, you know, you know that if you wait six months, that same exact iPhone is going to be significantly cheaper. People still buy it. That fundamentally flies in the face of this nonsense that we need inflation. So I reject that. The second point I would make too, and this is what the video does so well in explaining, is like falling prices is the natural outcome of us being more productive. like there's a hundred people on the island Scott catches the fish I cut the wood it's all tickety-boo turns out after doing that for a few years I get really good at cutting the wood so in my eight-hour day I now produce twice as much wood as I did before forget about the money for a second right you're now twice as good at catching fish or you were terrible at it so someone else started doing it they were much better at it right so the same amount of people except all of the stuff that we're making has now increased.

1:16:40Now, if we had some kind of monetary token unit that we were exchanging for this, and there was only so many seashells that we were using, what happens to the price? The price goes down. And that's a good thing. It's a good thing. Now, deflation - It's effectively productivity measured in monetary units. Of course it is. It has to go down. Now, sorry, I'm getting worked up. But we're really stealing that productivity game by printing all of this kind of money. It's like we've gotten better and better. We can do like farming came up earlier in the pot. You can now farm with a fraction of the people that used to be able to like even 50 years ago.

1:17:26It's so insanely efficient. And yet price of food has gone up over that same period of time. In real terms, it's gone up. The only way mathematically you can square that circle is there's just been more money created into existence. And it's all done in the name of quote unquote growth. So where people get mixed up too is they'll say, oh, so you're telling me these deflationary busts aren't massively damaging? Yes, they are. They really are, particularly in a hyper leveraged economy where we've let like that's where everything cumbles down. So what we've done is we've built a system that is so fragile that if prices stop going up, then all of these second and third order consequences happen and there's a big calamitous crash.

1:18:09Yes, there is. In the same way that if I drink a bottle of vodka every day for the next 10 years and then I stop, I'm having a really bad week as I detox out of that. Of course it is. But that's not a reason not to do it, right? And the other thing, final thing I will say is under a perfect, perfect hard money system, you're not getting 10%. If I knew that prices were going to fall 20 % next year, yeah, I probably would stop spending. And that would probably have input. But what world is that? In the same way that no one who advocates for inflation says 20 % inflation is good. Why not? Well, that's really bad.

1:18:44That's really going to hurt people. No, but 2 % or 3 % is okay. Well, let's flip that around. And so, usually when people argue about this, they go, oh, so you don't think prices falling 5%, 10 % a year would be damaging? Well, A, it would be under the current system and only that one-off adjustment. But B, we only get, on average, over the long term, 2 % to 3 % productivity enhancement. So, would I prefer to live in a world where every year prices came down 2 % or 3 %? And before someone goes, ah, but that's revenue for someone else's business. Yeah, but their costs are also going down at 2 % to 3%.

1:19:24It's called Wittgenstein's ruler, right? You can change the length of the ruler to make things seem a little bit better. But the thing is the thing is the thing. It's the same size, shape, and quantity that it is. And if we want to start calling an inch three centimeters instead of two and a half centimeters because it makes the statistics look better, well, we can do that. But we're kidding ourselves. I'm stopping. I'm walking away from the mic at this point. Well done, mate. Sorry, mate. I'm sorry. You wanted a short answer, but there is - I was never going to share. I just think it's so fundamentally important.

1:19:53I gave on the short answer once I started asking the question. Yeah, it wasn't happening. I could go on, by the way. Again? Yes, you could. You could. Anyway. I really could. Jay, I - So I - Man. There is always Ram's point about the hangover, or your point probably that you'd probably die after drinking that much vodka for that long. But you have a big night. Next morning, you stop drinking. You have a hangover. that sucks um could you could you have a hair of the dog and try and make something a bit better yes um you better to kind of just wait it out and see yes so the japanese story um you gotta ask yourself why they want the growth and whether i mean i'm trying i'm trying to tell myself a nazi it's hard when you when you you should want economic growth for its own sake which sounds like a heresy um you want economic growth because people are benefiting from from exchanging their labour for a thing they want.

1:20:45I'll just interrupt very quickly. You don't want economic growth. You want improved living standards. Thank you. Even better way to put it. Which in a good system, one would equal the other. Right. And so why aren't Japanese people paying more? I don't have a good answer to that question. Why do they buy more? I don't have a good answer to that question. What I don't think you should do is artificially go on. You see, again, one thing after another, right? There's historical context to everything. They had a pretty big property bubble back in the 80s. I see, yes. Right? Back when everyone was worried that Japan – you know how everyone talks about China now?

1:21:20Yeah. It wasn't that long ago everyone talked about that with Japan. They were industrial powers. They just really bounced back after that devastating war, right, and the industrial capacity. Very similar story. Very similar story with what's happening in China in a lot of ways. They just really ramped up their productive capacity. It wasn't about GDP. It was about productive capacity, which is, again, the thing all the talking head economists tend to kind of miss here as well. They became an absolute powerhouse. And then they started getting above their seat, and they started getting into a speculative friends of the air, put it all into a thing, and the whole thing collapsed.

1:21:54And we are today still dealing with that on top of a demographic decline. So, again, if you go to Japan, you go, wait a second. It's a first world country, great medical services, good food. It's a safe place. And yet everyone's telling me it's an economic disaster. It's an economic disaster when viewed through a certain neo-Keynesian lens because they look at these, oh, GDP is not growing. Oh, it's terrible. It's like, yeah, but so? Yeah, right. So? Yeah. What's wrong with, but people are having a good life. Would you rather live in Japan or would you rather live in some backwater? And I don't want to, again, throw various countries under the bus here.

1:22:40And that's the answer. That is the answer here as well. It's like it's bad because our chosen ideology says it's bad in complete defiance. I'm not saying everything's perfect in Japan, of course, but it's in complete defiance of what blind Freddy could see if he was on the ground. It's a pretty good place to live. It's got its massive challenges. It's got massive challenges. I'm not saying that it doesn't. But the fact that the GDP number isn't going up at a certain pace and has more to do with demographics as well, and then there's the whole thing that they're doing with their currency. So anyway, there's a good answer to it is what I'm saying.

1:23:15So in the short term, it's understandable to try and shock yourself out of that sort of system. And is inflation the answer? It's one potential answer they're trying to come up with. And it may well work, at least to solve that particular issue. It won't work. Well, it could, right? It'd be the first time in history it works. Well, no, but in the short term it'll work is what I'm saying. So does it promote economic activity? Drinking the hair of the dog works in the short term. That's what I'm saying. So that's exactly my point, right? So they're trying to stimulate activity. Could they do that by doing this?

1:23:47Yes, it's very possible. Is it worthwhile? Is it advisable? Even around his point, it is absolutely about quality of life. you know there's abstractions in my head there's GDP from there there's standard of living which is effectively you know what do I get from my money there's quality of life which is what do I get from my money plus how enjoyable is my life and do I get enough downtime and am I healthy and all those kind of things so that's my kind of mental model for this stuff and that's the right mental model it's the only one that can make sense it makes us lepers in our industry though that's because our industry is full of rent seeking correct shut up but also you're right but also people who don't, haven't thought more deeply about it, which is not to say we're deep philosophical thinkers, but when you're raised on, if you study economics, you learn about GDP, you might learn about standard of living.

1:24:34And so you go, well, economics says this. Yes, it does. And that's okay. I've said a million times, economy's got to serve the society, not vice versa. And that's where you end up with the bigger piece. So could stoking inflation help Japan grow? Yes, possibly, Jay, possibly. Should they want that? In the short term, yes. And if there's no consequences, absolutely yes. But to Ram's point, there are consequences. So that's, you know, I think you are spot on in terms of saying, I can see how this would improve things and achieve the goals they're looking for. You're absolutely right. A bit like the currency thing, it's just like, and then what?

1:25:09The second, third order impact of, you know, this would work. Okay, then what would happen? Well, and then you're back in devaluation land, you're back in debasement land, you're back in all that kind of stuff. And you're back in, go on. Well, you get to the argument of, well, it didn't work because they didn't do it right, which to me is the same way of saying communism's great if they just did it properly. And it's like, well, I can't argue with that, but it's just never been done properly. That's right. So it's sort of like, yeah, but if they did this and not having a go at you, Jay, there's always someone there on the scene to go, no, no, I can.

1:25:41It's never worked in history before, but I can do it. And it's like, I don't think you can. I think Jay's dead right on both those. if they did this this would happen is absolutely true what we're just saying jay is there is probably and no one knows for sure right because the future is unknowable but there's probably some negative consequences that flow after the bit you've got to which is once they've done that then what happens to the currency what happens to inflation what happens to price what happens to living standards those are the things that at some point you kind of some people will even say well that's okay we'll deal with that problem then and again i don't blame them for starting with that thought.

1:26:14The problem is we are at the then for what we did 5, 10, 15, and 20 years ago. We should have fixed the problem. We're still dealing with it. So it's kind of fine to say, you know, and look, the whole investing is all about a dollar is worth more now than later. So there is absolutely some real value in prioritizing the now over the later. The question is when you prioritize it, what do you make the later look like? And if later looks meaningfully painful, then you don't do it because the benefit of the now is still not worth it because future Scott and future Andrew or future Jay have to deal with that future point.

1:26:41We're still around then. and we go, well, drinking a bit more felt good at the time. And yeah, maybe I did have more fun at the party. And yeah, you know, I'll stop there. And, you know, it all feels good at the time. And then future Scott goes, oh, you were right. I mean, yes, it made me feel better. And yes, it had a better time. But man, I would have taken, I would happily swap the slightly less great time for not having this hangover to deal with. So it's kind of that story. So, okay, Jay, I get it. And honestly, mate, by the way, that thinking is what's behind a lot of the i'm a big fan of some of the keynesian approaches not all of them keynesian sorry approaches i've talked about that before i always mispronounce that thanks wait you economics teacher um uh like the keynesian i think a lot of keynesian economics is useful i think this part of it where effectively i tried to solve a social problem by bending the laws breaking the laws of of kind of reality that the idea of you know only so many resources no matter how many tokens you've got that's the bit that felt good for a while and I even understand the motivation of it because the motivation is if we just did this, it would make things better for now and that would be better, wouldn't it?

1:27:45And yeah, my problem is the road to hell is paved with good intention. And that's what it was, right? So I think for my mind, you disagree around because of the execution piece, which is fine. But to my mind, the budget surpluses, deficits of a Keynesian budget setting, I think are 100 % justifiable and appropriate and good and great. They should be done better. The money printing stuff has almost no defence because yes, it creates those short-term bumps, which is what you're seeing in Japan, Jay, the longer-term implication is, and then what? And that's the bit that simply because at the end of the day, Ram's point is right, you can't change the laws of physics.

1:28:16A certain number of places on Monopoly board and a certain amount of cash, you double the amount of cash to so many places, no one's better off. Well, I tell you a lot. Some special interest groups are very much better off. Politically connected people are extraordinarily better off. Those who already have the places on the board are better off. So yes, but overall, the game the players as a group aren't better off. And so, honestly, I don't know if you disagree, Ram. I don't think there's any conspiracy here. I don't think there's a... The RBA or the pollies aren't trying to say, let's create some inflation so that we can help our rich mates.

1:28:49They've just all swallowed the same idea of, would it be better? Yes, I suppose. Is it the orthodoxy? Yes, I suppose. Are there any options? Lastly, we've got a long time already, mate, but I just wanted to touch on one thing you mentioned. There is a very strong argument, and I'm not an economic historian, that a lot of the Great Depression was extended by the expectation people thought prices would fall. And so I waited for them to fall before they spent. And that extended the longevity of the Great Depression once it had hit. I think there's probably some validity to that. I think to your point, mate, I think Jay is right to the sense that if we stopped inflation now, we would cause a structural, a worse word than a hiccup, but I can't think of one.

1:29:29Oh, it'd be calamitous. The change would be really, really painful. It requires it. Yeah, because we've built a level of demand. It's a debt-based system. Exactly. There is more debt in the world than there is money in the world. Yeah. That's all you need to understand, right? So in other words, the only way it's going to get paid back, the only way that you can meet the interest is to create more money. It has to happen. And if someone was to enforce some of these things, it would be messy, messy, messy, messy, messy, which is why we're between a rock and a hard play, because it's a stupid, stupid system, but there's no easy way out of it.

1:30:04I tend to think that, well, we should still try because it's clearly wrong and broken, right? It feels like it's happening organically anyway, so that'd be cool. But it's sort of like, that's not a reason. It's exactly the alcoholic who keeps drinking because it's going to suck. It's like, yes, it is. Now, by the way, to your point, getting off the grog means you drink a little bit less for a little while and just slowly bring yourself up so you kid yourself doing it. So to your point, this is where I end up with the, you know, the Pollyanna versus the cynic kind of conversations because there are a million ways of getting ourselves off the drug.

1:30:36Well, there's not actually, there's not that many because you don't need that many. But what I'm saying is there are a range of options you can choose. There are options. There are ways to go about it. You can do it in different ways, different places, different sizes, different speeds, different asset classes, different people. So the combination of permutations are large and it's doable and it's entirely doable and it's entirely worthwhile and we should do it. Why? Because we end up with a more sustainable economy. And by the way, a more sustainable economy means, in theory, less pain at some future point.

1:31:00It means the right allocation of resources, all the things we've talked about before. So that stuff I think is really, really important and useful. There is no political will. There is no reasonable challenge to economic orthodoxy. By the way, I consider myself a pretty orthodox kind of guy, right, when it comes to economics. I'm not a radical on the left or right wing saying, blow the whole thing up, communism or libertarianism or anything else. It shouldn't be radical to say, let's actually stop taking on a bit more debt. Let's live within our means. Right? Yeah, exactly. Why is that controversial?

1:31:27And we can't get there straight away. We cannot get the Australia without causing massive, massive damage. But we can move towards that consistently, thoughtfully, usefully. And by the way, even if we can't make the Yanks do it, doing it here at home means we're in a better position relatively if and when the proverbial hits the proverbial. And so, you know, that's why I'm so strong on the debt thing is, yes, it's much better than the Yanks. It's much better than the most European country, much better than the UK. We are, I would rather be us than anyone else. But as I've said before, being the least sick man in the hospital, you're still in hospital, right?

1:31:56Get out of the hospital. And that, for me, is just set yourself up so that you are – you're never going to be bulletproof because you can't imagine every bullet, but give yourself the best chance of surviving whatever uncertainties or, frankly, likelihoods come our way from elsewhere. Let's make sure we are as healthy and well as we can be. So when the – I'll let you talk to the metaphor. When the virus arrives, we're in the best possible place to fight it off. That's, you know, rather than – That's a strong economy. Exactly. Regardless of what GDP is, that is a strong economy. Yes. Right? right there 100 % yeah that's the very definition of it I hate I hate the the appeal to orthodoxy on things and like it's not just at a sovereign level it's like at a business level or personal relationship level it's like how many businesses are you doing anyone listening right like you say to the boss why do we do it that way and the answer is well that's how we've always done it that is not an answer yes you know there was someone in the Aztec empire who said hey maybe we should stop like sacrificing our kids every time we want it to rain he's like well I'd like to hear a better idea.

1:32:58We've always done that. We've always done that. Sometimes the rain stops, yeah. It's like, you know, or selling witch trials. Like, well, we've always burned the witches, right? That's how you stop the milk from curdling, like clearly. But, well, you know, it's just, it's so, especially when there's a lot of evidence. I'll give you one, and we'll shut up after this. One really salient example was, again, go back to the GFC, which is just such a rich vein of education for those that care to look at it. And again, it's amazing how quickly that's been forgotten. But you will remember that Norway, little old Norway, it's the population, six, five, six million, something like that, was actually a major player in the global financial crisis because they had a lot of their banks mucking around with all of these CDOs.

1:33:47Oh, right. Yeah, yeah, yeah, they did. And so they had a whole bunch of banks, like happened in the US, like happened in Europe, like happened in all lots of places around the world who just woke up one day and were functionally insolvent. Do you know what they did? Go on. Let them fail. You know what they did? Sent some of the CEOs to jail. You know what happened? Economy was in a mess for a year or so. You know what happened after that? They bounced back bigger, better, stronger than ever. So you've still got places in the US that are still trying to deal with some of these issues. So again - You don't think of Iceland though, rather than Norway?

1:34:20Iceland, sorry, Iceland. I'm sorry. Sorry. It doesn't matter. I was trying to play. I was thinking, I haven't heard that story. Why haven't I heard that story? Oh, I'm sorry. Apologies. Apologies. I often hold my way up on a pedestal because it's a sovereign law fund. So it must be them, right? The story remains. No, the story is the rest of the details are spot on. And the thing to remember here is, is that the damage has already happened, right? Now it's just a question of, oh, we've misallocated all these resources. All of these investments we've made have gone bad. There is no going back in time to change that.

1:34:54There's only like, I guess we have to deal with the fallout or let's pretend it didn't happen. Funny because it's true. And it's funny because it's true. And we can print up all these tokens to pretend that it didn't happen. Now, you ask me. You don't need a degree in economics. In fact, it's a real advantage if you don't have a degree in economics to understand that the latter isn't actually fixing anything. Yeah, yeah. But the economy was really bad for a year. Yeah, because of all the stuff that happened before that. It had happened. Now it was just allowing that reckoning to play out and to come back bigger, better, stronger, more resilient than ever.

1:35:34We don't do that because it's too politically unpopular. So next time Australia has a crisis, and we'll have one because everyone always does at some point, the call will come out, the government needs to fix it. And two misunderstandings there. One, that the problem has already happened. And two, that the government, by making more units of paper, can fix the problem. And if you believe either of those two things... You got a bridge to sell us? I've got a bridge to sell you because you'd be convinced of anything. I completely agree with you. Other than I think we probably have a slightly different view on how long we should try and take to get ourselves out of it and cause the least pain.

1:36:16I don't want to put words in your mouth, but I suspect you're right about the, you know, if it went bad, would we recover? Yes. Would it be painful? Yes. Should we try to do it in the least painful way? I think so. So I'm not a big bang kind of guy. But bail out people, not businesses, not institutions. So I'm people first every single time. So if there is that dislike, I keep saying, because I guess my friends misunderstand me. Very big on welfare and social security. I want a big fat safety net there for anyone who falls through them. So do I want to bail out Barbara, the factory line worker, because some executive on Wall Street did something really dumb?

1:36:55Yeah, I do. But let's not bail out the rich dude who caused the problem in the first place, thinking that, don't worry, that will ultimately help Barbara. Let's not help Barbara out. Let's screw those guys. Oh, sorry, their investments fell through. They're still going to be as rich as Midas after the fact anyway, less so than they were, but they're not on a bread line here. Anyway. I'm sure we didn't tax our money to do it either. No! For all the reasons we've just talked about. No. Or borrowed money or made up money or any of those combinations. I think we just set a record for a podcast length.

1:37:25Oh, Jay, that is totally on you. It's on Jay. That is totally on you. Totally your fault. Mate, thank you for the chat. This podcast will be back in about six days' time, but I won't be back for another five weeks. So I'm very much looking forward to this point in five weeks' time when you and I can resume our banter. Hopefully the rants you have stored up, the topics. because I imagine there's a butcher's paper, a border with butcher paper somewhere. It's like, when Scott gets back, dot, dot, dot. It's like, oh, man. You know what? Also, lots of red twine with needles and stuff, like, and photos.

1:37:56I'll have it all pieced out by then. Can I say very quickly, if you're still here, here's a little bit of an Easter egg for you. And God love, if you're listening to this and you are the person who said it, I am going to make fun of you, but I apologise in advance. I wrote about the Vanguard ETF thing. We spoke about it five weeks ago on Twitter this week, the week of recording. and I said, wow, it's amazing, it's quadrupled. And someone sent me a, this is why. And it was a Star of David with Goldman Sachs, Vanguard, BlackRock, State Street, George Soros, Bill Gates. Oh, no. I can't remember what they were, overlaid.

1:38:29It was the global Jewish conspiracy that caused Vanguard's funds under management to quadruple, which I thought was about the longest I've ever seen drawn. So speaking of red string and pins, that guy's got one. I do think a lot of – you see more conspiracy theories these days. People are right in that there is something wrong, but just massively wrong. About what's wrong. About what's wrong. And who caused it. Yeah. Anyway, I just thought I'd share that with you, mate. So you're not alone in your conspiracy theories. Hopefully I don't go that far. You say that now. Five weeks is a long time. Let's find out, shall we?

1:39:04Mate, thanks for – and one more thanks for doing all these pre-records. I really appreciate it. Hopefully it's been good. Hopefully I'm back now-ish from the trip. And if I am, we'll be back on Friday with a brand new, still pre-recorded, but just less in advance, episode of Motley Fool Money. Until then, have a great week and full on. Nice one. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener.

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