The value of money. December 12, 2025

24:27I do believe very firmly though that to a degree you do make your own luck. Like if you never leave the front door, right, like you just, you're not, so I've mentioned before you talk about the lottery. I buy a lotto ticket every week, dude. I have four. I do sometimes too. I've just got an automatic thing. Oh, right, nice, okay. Yeah, it's like$1.65 I think it is a week. So like every six months I put 50 bucks there. I'm not at, well, I was going to say I'm not an idiot. people will say that. I beg to differ, Andrew. Careful making those sort of statements, mate. My dad calls it a tax on hope or less nice idiot tax.

25:03Idiot tax is what I've heard. Yeah, I like that one. Tax on hope I like, though. It's just like that's because it's what it is. Yeah, that's right. It's almost a cynical tax on hope, too. It's people like me, the Pollyannas, right? It's like the whole, oh, God bless you, I'm going to take your money. Yes, yes. You skip down the road dropping dollar pieces and I'll just pick them up and pop them. I'm not going to tell you you've got them. I'm just going to take them. But I guess the point to the story is that my odds of winning the lottery are one in a gazillion, whatever they are. But the odds of winning the lottery without buying a lottery ticket are precisely zero.

25:36Which is not that much different, actually. Well, it's qualitatively very different. That's how many decimal places you go to, mate, because it still rounds to zero for most of us. You're not helping me make my point. No, no, go on, go on. But it is, I mean, there is something. And so that needs fleshing out a little bit here as well. And I'm going to use my favourite word here, asymmetry, which is there is the roulette example of taking your net wealth and putting it all on black, right? Well, to a degree you're making your own luck. But in that situation, if you get it wrong, you lose everything.

26:12If I get it wrong with my lotto ticket, let's call it a strategy, if I go wrong with that, I'm going to be on my deathbed and I can tell you of all the things going through my head, it's not going to be, oh, my God, I spent$1.65 a week for 50 years. What an idiot. So make your own luck but try and put yourself in situations where the upside is materially better than the downside. So if the downside happens and it's statistically more likely, it's like, meh, you know, it's just like I had a friend, I've probably told this story before, but it was a long time ago, young and single and, you know, doing what young single guys, you know, try and do, is that he had a lot more luck romantically and I would be terrified to talk to a girl, right?

27:01And so you can imagine that I just didn't have many girlfriends. It's hard to believe for everyone listening. But Andrew, you're so erudite and good-looking and, you know, it's a complete package. You two are investing nerds? Really? You had trouble? I know it's, I find it hard to believe as well. But, you know, I didn't have a lot of girls. This guy, every other week, your new girlfriend, right? And the difference was he was, not in disrespect for him, but be very careful to make sure. He was just, he would just go and talk to a lot of girls. And low and, he might have had, like, let's be very generous to my ego here.

27:40Let's say that statistically, you know, I had a one in ten chance of going, you know, lining up a date with a girl and he had a one in 100 chance. Well, the reality is I would only very rarely have the guts to kind of do it. He would go out and he would speak to 100 girls. And so, like, when you play the numbers like that, it's like is it any wonder? And I remember it's one of those memories that just stick with you. I remember him saying, like, go talk to, you know, a girl over there. And I was like, oh, I can't. What if? And he's like, so? He just didn't care. So he would get knocked back again and again and again.

28:16But it emphasises my point. I'm sorry. It's a little crass as an example, but it's just sort of like that's the asymmetry. Worst case scenario, someone who I am never going to see again says, on your bike, I'm not interested, don't talk to me. Now, he's a very respectful, nice guy. He wasn't one of those guys. I really want to make that kind of point here and those guys that you do. Here's a message for you young guys out there. Not every girl wants to speak to you, right? And if that's made clear, walk away, you creep, because that's really, really not appropriate. But his view was just sort of like, hey, can I buy a drink?

28:55No, I'm not interested. Okay, boom. Move on. Yep. Where's the downside? Yep. Okay, you feel a little awkward, a little bit embarrassed, right? Anyway, I'm flogging a dead horse now. Oh, I like it, mate. How far are we into our intro? 29 minutes exactly. It's got a new record. It's pretty good, isn't it? A lesson for that is life is more important than money. Money's a tool. It's so true. Money's a tool. A lot of miserable rich people out there. Right? Yep. It's miserable. Look, I'd rather be rich than miserable and poor. Sure. But there's better options. Yep. Go and do it. It makes you happy. Yep.

29:29Money's the tool. Money gets you there. Money gives you options. It's not the objective or the aim. Mm-hmm. Speaking of money, see, my next words were going to be, let's talk about the price of money, and then I'm thinking Andrew's going to go for a rant, and that's the end of the podcast. So let's do that. So big week for rates. Again, I always want to fall. Was it though? Was it a big week? Like nothing happened. Well, it did in the US. That's true. So I meant rates globally. So the ECB, the Bank of Canada, the US Fed and the RBA, I think all released decisions this week. So kind of, you know.

30:03Yeah, sorry. You're right. Not big in. Well, big-ish. So a couple of interesting things. Rates on hold here in Australia. I don't want to get into the RBA itself. Other than I reckon we dodged a pretty big bullet today, or this week. And, by the way, we're not just recording on Melbourne, no, Melbourne, RBI Day. I just got today wrong. Here's the statement, mate, and I'm... I'll just read the first paragraph of the statement because I just thought it was fascinating. Quote, while inflation has fallen substantially since its peak in 2022, it has picked up more recently. The board's judgment is that some of the recent increase in underlying inflation were due to temporary factors and there is uncertainty about how much signal to take from the monthly CPI data given it's a new series.

30:48Nevertheless, the data do suggest some signs of a more broadly based pickup in inflation, part of which may be persistent and will bear close monitoring. End quote. Now, regardless of what you think about central banks, and we know what we think about central banks, that paragraph could have been written at the top of an announcement of rates being put up. Yeah, because it says nothing. Oh, we don't know. The future's uncertain. We'll be driven by the data, except when we don't like the data. You know, it's like cut and paste, and you can put that statement virtually in front of any decision, I would dare say.

31:21I would go further, though. I honestly think when I read that, my first thought was they're worried about inflation, but they just squibbed the decision. It sounded to me like they've gone, well, this is bad. What should we do? We probably should put rates up. Let's see how this plays out. No, let's not. Let's see where this one goes. And it kind of, that's what grabbed me. It wasn't so much the decision itself. I mean, I've said in separate places, if I was on the Reserve Bank board, I would have voted on Tuesday to put rates up, which makes me very unpopular. I've done this on radio. Oh, you're a brave man.

31:56Right? I must have a death wish, seriously. And I am stupid enough and idealistic enough and poly-ran enough, all those things that everyone knows about me already, to just kind of go, and God love me, like no one gives a stuff what I think. But I figure I have, my father's son, Judy was important to him. He was a 20-year Army Reservist, a Vietnam veteran, worked for the fire brigade. You know, so yeah, Apple doesn't fall far from the tree. And just because I'm stupid, I kind of feel like my responsibility, if I'm going to be asked something, I should at least provide some degree of, not expertise, not even necessarily accuracy, because I'm as wrong as anybody else and probably more so.

32:33But just kind of to tell it straight, you know, just don't. Right? Yes, exactly. And so a couple of times this week I've just sort of said, look, here's the thing. And we talked about this before. I'm not going to do it in detail because our listeners know this well. But I've kind of done the whole, look, rates go up and down. They move backwards and forwards depending on what needs to happen. All right? And, again, I don't get into the RBA. What needs to happen? Right. I get into whether the RBA needs to be there or not. Even outside of that. What the RBA thinks needs to happen. Anyway. But prices go up and they go up and they go up.

33:04so you know the the inflation is a ratchet right at least interest rates fluctuate and and so the point i try to make to people is look here's the thing no one wants to have their mortgage repayment go up and so when someone makes it go up it's him to look at that person in this case michelle will it can go that bad lady hurt me please make her stop and that's kind of what it comes down to when inflation happens it's kind of like well it's probably probably gonna I'm probably going to blame Coles and I'm probably going to blame the insurance companies and I'm probably going to blame the oil companies, but I don't really know who specifically to blame and I'm just kind of have to cop it because inflation has always been here.

33:42And because it isn't in the hands of somebody, it's not a decision that's handed down. It somehow feels less for a lot of people. And this is why I do have this conversation. It feels less direct and absolute and deliberate. And so it's kind of that idea of we kind of accept inflation because we feel like we can't avoid it, but rates we can avoid if the RBIH does something different. And I made the point, I said, look, you know, if I was on the board, I would put rates up on Tuesday. And I would put rates up on Tuesday because we can always put them back down subsequently if the opportunity presents itself.

34:14But if prices go up instead, then they're coming back down. And you make the point really regularly, mate, that lower inflation doesn't mean lower price. It just means a lower rate of growth. And so it's that conversation. I've said that this week. And if you read that statement, the first paragraph of the rest of it, it's similar issues in tone anyway. I know you're saying it says nothing. That's probably true, but to me it actually says, I read it, I was like, this is what they would have written if they were going to increase rates specifically, not just as a motherhood statement that means nothing, but actually saying, hey, some of it might be temporary, but we're worried about the stuff that's not, is what that said to me, which is, you know, we think this is a problem.

34:49And all I can take from it is they feel like they're obliged to soften us up because I reckon this is the warning shot, right? This is the shot across the bow, which is next time, you know, I'm firing straight. And I don't know if they're going to increase rates in February. We've got two more inflation rates to come. I'm not going to do predictions. I never do. I'm never going to. But I've got to say it feels to me like a reserve bank board saying, well, this is crap. It's too high. Maybe some of it comes down, but the rest probably doesn't. We're probably going to have to do something. And it just struck me as a bit of a softening up blow, I have to say.

35:24Yeah, I'd take a slightly different interpretation, which is that they're using the under-recognized tool of the jawbone. The jawbone, yes, exactly. In other words, they know that just as important as what they do is what they say because expectation becomes reality here. So everyone assumes they're going to put up interest rates. They don't need to put up interest rates because the impact. The jawbone, yep, yep. So that's the jawbone. So I reckon that they are talking tough because they don't want to put up interest rates. Yes. And if they can affect a similar outcome without putting up interest rates, that is a far better approach.

36:11I'm sure that's part of it. I'm absolutely sure. So there is that. Yeah. I mentioned to you off air, I think all of, so I read a lot of the commentary on it and I think if you want to operate within the frame of reference as the modern monetary theorists do, which I thoroughly reject. But, you know, by the way, we pre-recorded our hard money episode. We did. Earlier this week. It's going to come out early Jan. So if you're going, what are you smoking, Andrew? It's like, well, it's a three-hour deep dive coming your way. A little behind the scenes for those who just want a bit of a taster. We said, oh, we'll do an episode.

36:49It'll probably be two. And then the second episode is longer than the average episode. We could have done three, man. We could have done four or five. Let's think about podcasts, right? At some point it's like we just did three hours of talking. It could have been one episode or two or five or seven. It just happened that we'd cut half at some point. We scratched the surface, right? We did. But I guess where I'm going with this is, and I know I've made the point before repeatedly, but it's a dual mandate, right? Yes, it's prices, but it's also unemployment. and there is one, they both suck. Yes.

37:22Excessive, I would say all inflation sucks, but excessive inflation sucks and losing your job sucks, but just that one is far more slow and, you know, it's a bit more of a Chinese water torture. The other is more like I'm just going to beat you in the head with a mallet. Right. And knowing the political reality of that, whenever there is a devil's choice to be made, they will choose to protect unemployment. So, yeah, they'll talk a tough game. If we get some really rough inflation reads out there, but the job market is still strong, they'll probably do it. I just don't think they've got much capacity, just because of the sheer level of debt in the system, to do it too aggressively for too long in too sustained a fashion, which, yeah, you might control inflation, but you will definitely, you know, eviscerate.

38:09That's too strong a word. You will definitely have an impact on the wider economy and therefore jobs. And that's going to be far more obvious and in your face. You know, noticing your groceries are 4 % more expensive over a year period, going, that sucks. But it's harder to see, right? So I suspect. And anyway, my point was being in all of the analysis I read, you've got all these pundits who are making the point that, well, according to the theory, this is what they should do. And it's like, yes, you are right. However, in the real world where there is a political reality and calculus that is there, right, and that humans will always seek to make sure that they protect their own interests.

38:49And your interest is that we looked at what happened at former governors when they don't play ball or they do things that the people don't like. You lose your job, right? And I know it sounds cynical, but I've seen too much. As an older man, I have been around and it's hard not to be cynical. I mean, look at let's go to the US, right? So in the US overnight, our time, they did cut interest rates for the third time in a row. inflation is not exactly under control of it, right? And now there's talk very serious. Trump out there essentially signaling that, well, here's my guy for when Powell gets the flick, his term's going to end, we're going to get rid of him, we're going to put this guy in, and he's just like, oh, we're going to cut, we're going to cut, cut, cut, cut, cut, like you wouldn't believe.

39:33They're going to run this thing damn hot. And, again, all the theorists will go, well, that's not right, that's not what the theorists are like, yeah, I hear your point, but back in the real world, you've got an orange buffoon at the head and it is a very political environment and they're going to do that thing. And it's like, yes, it doesn't make sense, but that's why I think what you miss is there's a disconnect between what should happen, quote, unquote, and what will happen. So there's that. I just want to also pick you up on another point that you made here, which is you made the point that, you know, price is always sort of ratcheted up, but interest rates go up and they go down.

40:08It's like, yeah, it's actually interesting. When you look at the, I've just gone to the RBA's website, the cash rate that go back to 1990 through to today, and it basically goes down. There's a couple of periods in the mid-'90s. There was a little blip. There was a little blip after 2000 going up. There was a little blip in the lead up to the GFC going up, and there was a little blip post-COVID. But I'm trying to paint a visual picture here, but you've got a chart that goes top left to bottom right. It's down with a couple of little blips along the way. And so you're right. They go up or down, but they go down a lot more than they go up.

40:46And where is particularly interesting, this is far more true for the US than it is for Australia, although we are exactly on the same trajectory, is that you get to a point where it's kind of like, well, the maths just won't math any other way. You can't. We are never going, despite what your parents might like to tell you, we are never going back to a 15 % cash rate. Because could you imagine? I mean, you would do that and you would eviscerate the economy. It would just explode. everyone would lose their job, asset prices would crack. It's just, it's impossible for it to happen. And that's just because we just keep loading more and more and more debt.

41:21And you kind of get this, you would have a debt spiral on the way. And that is the dynamic that we find ourselves in and the reality that we find ourselves in. And so my viewpoint is, and I think that I'm not going to make predictions, specific predictions either, but I will very happily make a longer term sort of general change prediction, which is we will continually, lower rates is the new normal now. And I don't know if we'll ever get back to emergency zero rates like we did in COVID, but I just cannot see a world where we ever go sustainably above 5 % cash rate. And just because the leverage is too great, the consequences are too great.

42:02Would it fix inflation? Yes. but at what cost? And I think if you were to speak to any Michelle Bullock or any of the other high priests of money off air, they would go, yeah, that's the calculus here. Everything sucks. That sucks a lot less. We're just here to keep things okay until we're out of this position. There's a funny... There's a funny...

42:30I guess there's two tracks to that. I agree with you in a lot of ways, actually, mate. But I would point to, there's the, I don't want to call you cynical, but there's that kind of view, call it what you want. No, it is cynical. It is. No, no, no, I don't mean it that way. I call it evidence-back cynicism, Scott. The other long-term, though, kind of observation I would make, and you mentioned it with debt, I think this is where there's a question about so-called real interest rates, which is effective interest rate minus inflation. So how much additional are we paying or how much less are we paying?

43:10And that's a very valid question. And trying to work out the long-term future of inflation as well as rates is really hard, right, for all those reasons. It's also true, in my opinion, I think it's reasonably objectively true, but maybe it's not, that the other reason rates don't, won't go higher is because they actually don't need to, and I'll use the word need, but in this context, from the RBA's perspective, they don't need to because you've got so much bloody debt. You don't need to move rates as much to have the same impact on spending. So if you think about, and we've talked a lot about housing affordability, when your parents talk about the 1990s, you know, 17 % interest rates, the house prices were a fraction of today's house prices.

43:55Three to four times average incomes. And now what, a dozen times? At least there are pockets of some of our capital cities where it's approaching 14 times. Okay. So let's just do fun maths because I thought it was around 11 point something, to be honest, but 3 and 4 and 12 were nice. They kind of divided into each other nicely, so let's go with that. Okay, yep. Effectively, if you were paying three to four times, let's say four times income again, I'll say three. Can I just qualify that? Oh, please. Household income. Yes, correct. Not individual income? Correct. Because back then there's a predominance of one single incomes, three to four times a single income household.

44:28Now we're 12 dozen times a largely, almost in all cases, a double income. I suspect in the early 90s it would have been largely double income, wouldn't it? In 90s? 70s and 80s, yeah. Not to nowhere near the same extent as it is now. Your job is to Google that while I talk. Okay, yep. So my point I'm making, I suppose, and hopefully this is reasonably clear, you probably already jumped to the same conclusion, is if you've borrowed three to four times your income and the RBI wants to slow the economy, I mean, let's say they want to slow the economy by 5%. I'm not going to try and make the maths work, but just, and they don't pick these numbers, but just stick with me for a second.

45:04What do you have to do to reduce economic growth by five percentage points? We have to take a lot of money out of the economy. Well, how do you do that? Well, if people are spending everything else and not as much on housing, and your tool is, I'm going to make housing more expensive to slow the economy, you've got to work really, really hard to get out enough demand to slow the economy. So what do you do? You jack rates up to 17%. Now, fast forward to 2025. and you want to take the same amount of economic growth out, instead of our incomes, I don't know what the numbers were back then, but let's say they were 20 % of the income went on in housing on average and now it's 40%, you'd have to work anywhere near as hard to have the same economic impact because more of our income is leveraged to or is garnished by paying for housing.

45:49And so the RBA doesn't, I don't know, I've seen numbers thrown around, but effectively a quarter point now in terms of the dollar impact of that is probably closer to, I'm going to pick a number and say 1%, because we're going to go with the three times to 12 times, so four times, just make my ass easy. Don't take any of these numbers to the bank. Think directionally. Listen to the police. But, yeah, effectively, the RBA is only going to work as quarter as hard as it used to to have exactly the same impact. So you don't need to push rates up to that. In fact, if they put rates up to 17 % now, we'd be in a 10-year depression, right?

46:18Why? Because that would destroy the entire housing market. Some people lost their homes in their 90s. Don't get me wrong. But most could absorb it. They didn't like it. They could absorb it because they could cut back on all that discretionary stuff and still pay the bills. These days there's not enough discretionary stuff to cut back on because so much of the income goes into house prices. Which is why it paints the complete ineptitude of some of these economic measures to say we've got a good economy. We talked about this extensively on our pre-record day, but, you know, stock versus flow and the rest of it.

46:48It's like what you're effectively saying here, and I don't think I'm muddying your words in any way show, is just sort of like we're just leveraged to the eyeballs. I was going to use another body part. We're leveraged to the eyeballs. And it's sort of like, is that a healthy economy? I don't think so. It's like, oh, but GDP is here and unemployment is here. It's like, yeah, but we are all drowning under a mountain of debt and we're such, to your exact point, we're at a point where you only even have to not even move but threaten to move by one quarter of 1 % and people are, you know, like losing their minds.

47:27And it's like, you're right. I just want to make the point is like if that doesn't highlight the madness or precariousness of our situation, I don't know what is. Because if you're going to, which everyone does, if you want to extrapolate things like housing prices, which is what you're talking at, you've got to say, well, that thing has to happen again. But it gets incrementally harder every single, you know, We really are going to have to get to a point of negative interest rates if you can wrap your brain around that to have the same quantitative impact from monetary policy through to asset prices.

48:01It's very precarious. And God help us if there is any external shock that comes our way because we will not have the resilience and the fortitude to withstand it because we don't have discretionary income to apply to us. There's no money there, right? It's all being committed. Exactly right. Yeah. Just back to the interest rate point, though. Sorry. No, no, no, no, at all. I want to round that off and then we can move on. We're just to say that while they might have other reasons to want to or other pressures to not increase rates, it's also, I think, objectively true. They simply don't need to have the sort of rates we've had in the past because of that level of debt, which is not a good thing, by the way.

48:36Not a good thing. It's just the RBA's gone, well, so you may only have to do a little bit and it'll hurt a lot. I guess I'll only do a little bit then. Not because they don't want to hurt us, just because in the past they would have gone, okay, this needs to hurt and I'm sorry, but okay. Upgrade rates, 5 percentage points. Oh, my God. Now it's like, we can do that with half a percent. Let's just do that then. And I just think there is some recognition of not that they don't want to, that they don't, and there's not political pressure because there is, and there's not other national debt issues because there are, but even without any of that, you could put all the cynicism in the world aside and just simply say, why won't rates go up again?

49:09Because they would crash the economy because we don't have the disposable income to absorb any significant increase in interest rates. Well said. And let me go the other side of this, right? Now, at some point, believe it or not, things work in cycles. We're going to have a recession at some point. I'm not saying tomorrow, don't want to at me, you know, as cynical as I am and as negative as I can be. I'm not saying there's a recession around the guy. Far from it. I actually think that they will do everything in their power to juice this thing beyond what is mad. But at some point, it will happen.

49:42And why you would, as a central banker, like a higher rate to start with is it gives you firepower for when you need it. Right, yeah. So you've made the point that actually we don't need to increase it too much to affect a slowdown. Well, what happens when you try, and again, I reject the premise of how they think, but I'll put that aside. But within their framework, if you think that, you know, the entire economy rests on what decisions you're making and rah, rah, rah. and let's say that interest rates are already dead low, right, you know, 3%, whatever they are, 0.7%. You can't, I mean, in 1990 when we had the recession that we had to have, we saw it go from 15 % to even just to 95 % down to 5%.

50:30Now we can't do that anymore. There's no dry powder, which is why you get into an era of fiscal dominance, which is sort of like, well, there's actually just, we just don't have any, we don't have anything we can do on the monetary side because interest rates are already ridiculously low. You made an excellent observation that actually what really matters is real rates. Yeah. When inflation is at 4 % and the official rate is at 3%, what does that mean? Just put that one aside, right? But what it means is that the government's going to have to step in on a fiscal footing to quote-unquote stimulate.

51:03Again, I reject the whole premise of, you know, this kind of thinking, but that's what they will do. And then you might go, whoa, whoa, whoa, back up, guys. You just said that we're in the problem because of our overleveragedness and we're far more indebted. So if that's not going to work as a tool when we need extra stimulus, the government will step in. It's like, but aren't they in debt? It's like, yeah, oh, yeah. Debt's only been very modest compared to the US, I agree, but certainly trending upwards and sort of like, huh, and how did that change after COVID? Oh, it got dramatically worse.

51:33Okay. And so when we do have a crisis again, we're going to do that again. Yeah, okay. And at a point, again, the maths is just going to matter, at a point, don't forget when the government borrows money, it does so by issuing bonds to the private market. The private market, yeah, I'll take that deal. But then you get into this really weird scenario, sort of like the reserve bank going, no, no, no, everyone, rates have to be lower. And the private market is going, I don't really care, Michelle. Say what you like. I am not lending money to these irresponsible, what's the nice word? So-and-so's.

52:05Thank you. for 3 %? Yeah. For 10 years? Are you kidding me? At which point they go, well, we'll have to buy them. At which point Money Printer goes, brr. At which point inflation gets far, far, far worse. At which point we find ourselves in the situation we find ourselves in, which is the man trying to dig themselves out of a hole. And there are no good outcomes here. But at least, and again, even if you're going to operate under their framework, which I don't, but if I did, And there is no path out of this that doesn't involve pay. That's the reality. No politician's going to say that because they're not going to get reelected.

52:44No bureaucrat's going to say that because they want to keep their job. But I hate to be the bearer of bad news, but it's just the reality of it. I'm not saying I like it or I'm celebrating it. It's the reality of it. And otherwise, it's sort of like, do you want your pay now or do you want it slowly delivered to you over the next decade in a way where it might feel less immediate but the damage will be far greater in the total reckoning of things? And that's where we're going to go. We're going to go. We have to. We don't have to. Politically we have to. We will choose to, yeah. Can I just come back on the guy you told me to Google?

53:24In 1990 approximately 55 % of couples with dependents had both parents working. Okay. Now it's 73%. I'm claiming half a victory and you can have the other half. That's a pretty big increase, dude. I know, but I said most would have been at that point. I'm saying that's 55%. 55, 73. Technically right is the best kind of right, as I'm very fond of saying. It's a decent increase. It wasn't 20 to 90, I guess is all of them. I'm just saying 78. I thought it would have been higher than that. That's interesting too. 73. 73, sorry. I thought it would have been higher than that. I would have guessed it would have been higher than that.

53:57I'm taking a surface level Google result here. So the devil's always in the detail. But I think it's - This podcast doesn't need detail, mate. We can just make arbitrary claims and move on, I think. I'm a vibe investor, my friend. And the vibes, I think most people - Yeah, vibe podcasters. Vibe podcasters. I think the anecdotal experience would be, particularly if you look at your parents and older generations, it's just sort of like we can pick various starting and end points, but the trend is very strongly in the favour of it. Like, I can't think of anyone at my age, or I'm not spring chicken, a ball-o, who has very few people who have the luxury of just, like, well, only one of us needs to work.

54:35Yeah, I think that's... And particularly that will probably continue to rise as, frankly, the boomers die out for all the reasons. Or even leave the workforce. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

54:52Hey, mate, let's... Speaking of boomers and dying out, no, I'm kidding. I have a lot of opinions on a lot of things. I don't really have a strong view on this one. So I want your thoughts. So a couple of things. Firstly, God love the politicians actually named something accurately for a change rather than, you know, the build, what's that bloody, what's that build, Future Australia, what's that thing called? Future Made in Australia, that's right. Future Made in Australia. Yeah, in the US they're even worse. They name the builds with marketing taglines, right? There's the genius act in there. Yeah, right.

55:27Seriously. Anyway, but there's this thing called the compensation scheme of last resort. It's like that's pretty clear, couldn't it? What does it do? Well, it's compensation for when things get really bad. Right, there's nothing else there. We'll backstop it. Okay, cool. It's designed for victims of financial fraud. So if you lose money, not just because you made a bad investment, But if your advisor or your fund manager scarpers off with the cash, the fund is there to help provide some sort of financial recompense, up to$150 ,000 per person, if you find yourself in that situation. Now, that has been, and it's been underfunded.

56:13I laugh because I don't know what optimists thought the financial system would actually be good and financial, you know, professionals wouldn't try and screw people over because history might suggest I guess that was an optimistic thought. Now who's being cynical? Right. Well, again, as you say, what was it? Evidence-based cynicism? Evidence-based cynicism. Evidence-based cynicism. Turns out the financial sector was worse than the people thought when they put some money aside. No. I know, right? No, I don't believe you. So we're$47 million short for the 26th financial year is the forecast and$100 million short in 27.

56:44Okay. And so the government said, and basically they're going to expand the, I don't know a lot about the details of the origin of this, to be fair. They're going to expand the groups of financial organisations who have to contribute. Now, in the US they have this thing called, is it FINRA? Anyway, whatever it's called. SIPC, SIPC, SIPC. It's basically brokers over there contribute to a fund and then if something goes wrong and one of the brokers fails, that fund bails out the broker's customers. That's kind of what it's about. Actually, we have it in terms of stop broking with the National Guarantee Fund.

57:17That's true, we do. We do, that's right. So this is kind of that, right? It's like, okay, all you financial lots, if you're doing this and your brethren screw up, we want you all to contribute. It's a pooled insurance scheme, effectively is what it is, right? Protecting not the contributors of the money, in other words, the super funds or the financial advisors or whatever else, but actually the people who might get defrauded. Now, we're going to be short of money. So for the first time they've gone to the super funds, you guys have to tip in as well. and i'm torn on this for a couple of reasons mate if question one is should there be a scheme for this and we can have different views.

57:55I think on balance, probably. If the alternative is people get screwed over and they get nothing and they've got no recompense, that seems kind of rubbish. We have victims of crime, compensation schemes, other things around the place. I tend to think we get a little bit too caught up in the compensation, legal responsibility, trip over a footpath, get a million bucks type stuff. I think that's probably too much of that, but that's just my view. Do you think the scheme is reasonable and appropriate? Probably on balance, yes, just. maybe 60%, something like that. And then if you say, well, okay, the scheme needs to be there, cool.

58:26Who should fund it? And some people say, well, hang on, is it super for the members? Why should super members be paying for this fund? And you kind of go, okay, fair. But if they don't, who's going to fund it? Well, the government's going to fund it. And so if I'm not paying out of my left pocket for my super balance, I'm paying in my right pocket anyway because I'm paying out of what's effectively my taxes, right? And so I kind of, I've had a couple of conversations this week with a couple different people about it and i'm pretty torn i don't mind on balance super funds contributing to this because again if you're in the financial services industry and this is a financial services compensation scheme who else should contribute and if you say well government you say well okay well the taxpayers and everyone's got every taxpayer's got a super account every super annuant's paying tax so like it's kind of the same thing anyway maybe different proportions but kind of the same thing if you say only the people who do the wrong thing should contribute well that's the problem, right?

59:19If they had the money, they would already be funding it. This is a last resort scheme. By the way, just to be clear, this is if you've exhausted every other opportunity and you can't get any money back from people who just frauded you, there's no money left, chopper no money, then there is at least somewhere to go to get something just to kind of, you know, get yourself back on your feet. It's too hackneyed. But, you know, that idea of you might lose a million bucks, you give it 150 grand back. There's something there for you. I don't know, mate. As I normally have big opinions on lots of things, but I try and make sure if I don't, I don't make them up for the sake of shock-jocking it and kind of making up something and yelling at the clouds.

59:53It feels kind of roughly right to me, but I don't have a strong opinion. I don't either, but that's not going to stop me from shooting from the hip. Shoot away, sir, shoot away. No, I mean, we have a similar thing with bank deposit guarantees, right? So if your bank goes belly up because they don't have all the money, Again, another shout-out towards the hard money episode coming up in your timeline. The government will say that, you know, you'll be guaranteed$250 ,000 for any deposits that you have with any Australian financial institution, any major financial Australian institution. And I think a lot of people, I think in a way it's, given the way we've constructed the system, it's probably a good thing there just to help underpin trust because the whole damn thing runs on trust, right?

1:00:38Exactly. If you take away the trust and everything. Without trust, you know, nothing works. Yeah, bank runs. We had bank runs. Literally. Bank runs, the whole economy clubs. Upcoming episode. Upcoming episode. You say, Andrew, there must be a better way. Well, to be continued. I will just say at this point, he doesn't rant too much about Bitcoin, people. So if you don't - Hardly at all. Don't go into the episode thinking this is a Trojan Hall. I mean, the whole area is a Trojan Hall to Bitcoin at some level because it's kind of like if you talk about the topic and then say, is there a solution?

1:01:08Funny enough, there might be. But they're not Bitcoin episodes, I promise you. No, no, no. I really don't. I enjoyed doing it. Andrew's import was fantastic. It's just a history of money, the importance of money, lots of good stuff. So don't be put off. You're like Bitcoin, you're like, I want to listen to it. But don't kind of think I'll skip the Bitcoin episodes. You already know, right, because that's generally what leads you to it. Anyway, he's really not about that. Yeah. To me, yeah, so look, I am okay with it. I think it makes sense to have it at a certain degree. Where it gets a little more complicated, I'm wondering if there is a moral hazard dimension to it, you know, it's like when you know that there is a certain backstop that maybe it gives me a little bit more license to push the boundaries a little bit, maybe.

1:01:58I'd actually say at a more wholesale level, I just, it's, something is wrong when the financial services sector is so dominant within the economy and that the sums of money needed to insure people against this kind of stuff is so big. I just Googled it then. So I would say in a healthy society, you know, financial and financial services, very important by the way, actually do provide an incredibly valuable service between savers and borrowers. But all the other stuff built on top of it is a nonsense. Traditionally, you would say 2 % to 3 % max is part of an economy. In Australia, it's closer to 8 % of our economy.

1:02:35It's our third largest sector after mining and healthcare. Healthcare, yeah. Yeah. Yeah, I think that's fair. Which is like in the UK, it's the number one sector. Yeah, it is. In the US, it's, where did I go? I lost my thing. a very major one as well. And it's kind of like, again, for those economics nerds out there, which is everyone listening, I almost by definition, it's just like, but what do you do? What do you make? Now, again, there is, I say, a legitimate role between facilitating relationships between those with excess savings and those that need a bit of extra and hopefully done in a way where incentives are in line and extra value is created.

1:03:16But when it's sort of like, it becomes the whole box and dice. Everything is about financial engineering. Everything is about excessive leverage. And everything is done in a context of not an explicit but an implicit bailout kind of arrangement. That's why you have dot-com bubbles. That's why you have GFCs. It's why you have all of these kinds of things. So it's not that I'm very much not against having a fund that bails or protects consumers. Yeah. But let's not pretend that it's the industry that's paying. Yeah. The industry is paying in theory, but where do they get their money from, right?

1:03:53They get it from you. And you know what? When Willie's input cost goes up, they pass it on to you. And there's probably something to be said in like, of course, every business owner has to make a margin on their costs. Otherwise, they're not in business and they don't exist. So there is, you know, I'm not trying to put too much of a value judgment on, only other than just making the very hopefully obvious point that it's not a free, because free lunches don't exist. That's right. Unless you're a central banker. And yeah, but you're paying for it. You're paying for it. And this is an industry that already, in aggregate, underperforms the benchmark.

1:04:23Once you account for their fees and they're terrible, woeful, there's exceptions, but in the main, terrible, they're bad at what they do, not an opinion, observable, objective, measurable fact, after fees, you know. It's not even they're bad at what they do. It's actually both less harsh but more absolute than that. Because there are fees they must underperform. Yes. It is structurally impossible for active management to not underperform the market if they're going to charge fees. In aggregate. In aggregate. That's the point. Yeah. Yeah. Correct. Yes. Yeah. Which you guys say is there a better way?

1:04:59Yeah. You can just do a passive low-cost fund. Don't pay some numpty in a very expensive suit to do it for you. Yeah. So I don't have a strong opinion, but it's just, yeah. I think it's a social safety net of sorts. It's going to happen. There's a question. The only question for me that remains is how much damage is done. I joked a little bit about how they possibly have underestimated it, but also it highlights, you mentioned moral hazard. I think I'm big on the agent principle problem, as we've talked about a lot of times before. The poor person who says, I don't know who to go to, I guess I'll go to John Smith over here and I don't know what I'm doing and John Smith seems like he knows what he's doing, he suggested this and then he goes broke and you think, well, is the moral ladder really with a customer who chose John Smith instead of Jane Smith for a while?

1:05:52I mean, at an absolute level, yes. Do we really expect that person to have to have done enough due diligence and waded so deep into the weeds they could work it out? I don't think so and that's why I kind of come down on, particularly the average person from the malfeasance of others, I think is reasonable. I do think you're right about we're all paying for it, so there's that. and I guess that's where I go back to the regulations. This is one of those things where we kind of say, oh, everyone should be free to do what they want, let's take some risks and let's not over-govern it, too much red tape.

1:06:19It's like, well, okay, that's fine if you don't have a compensation scheme. As soon as you say, actually, we're all on the hook to help if these guys screw up, it's then very reasonable in my mind to say, okay, well, I'm going to make sure you don't screw up. And so I do wonder about, well, we're funding the scheme and that's appropriate. I think, as I said, I don't have a strong view. What I do have a strong view on is the scheme is necessary because people screw it up and to whatever extent we can expect or ask for better regulation to stop that happening, the money might be spent on the fence at the top rather than the ambulance at the bottom.

1:06:51Yeah, look, I don't disagree. Where it gets more difficult is when you have very, very systemically structurally critical institutions at the heart of any eventual troubles. Because if a relatively small outfit from the Gold Coast goes bankrupt, which funnily enough has happened more times than you can count on two hands. And much love to the Gold Coast. I don't know why it is about that area of the world and financial services outfits. A special mention to Perth as well. And let's not forget good old Sydney, which is... I was going to say, we probably noticed the Gold Coast ones a little more than the others.

1:07:31It's like, oh, yeah. By the way, if I'm shifting uncomfortably, the Motley Fool's Australian office is on the Gold Coast. Yes, that's right. Exception to the rule. You'd hope so, wouldn't you? You'd hope so. Yeah, but I mean it's I'm always worried. I don't want to make it a geographically located, but if a relatively small outfit gets in trouble, there is more than enough capacity to let them fail as they deserve to fail for being very imprudent and reckless and, frankly, should more than fail. There should be more consequences than that. Often laws broken, not just poor investment decisions.

1:08:10Yeah, or poor administration of the regulations as well with a toothless tiger that is, well, it's not even named the four-letter acronym that might be completely mobbled in terms of its capacity or willingness to do anything about it. But what happens if the organisation that fails manages 20 % of Australia's superannuation scheme? This is where you get, again, it feels like ancient history, but it really shouldn't be. And really the lessons that will be forgotten have been forgotten, but I'm going to do my best to remind everyone, is that Bernie Sanders said, as soon as you mention a name, like it's sort of like politicised this thing.

1:08:52Door open. I don't know whether I'm a for or against him or anything, but he does, he has a great line, which is too big to fail is too big to exist. Yeah, I agree. And I think, again, when we give these private institutions incredible power and privilege, as we do, by giving them banking licenses or various licenses that allow them to operate, then okay. I mean, again, I would probably structure things differently. But, you know, the way of the world is such that it's like that. That's where the moral hazard is more pointed in my mind because at that point when you know you're too big to fail, you can actually really push the boundaries.

1:09:30because worst, worst case scenario, you'll get bailed out. And you'll get bailed out and everyone will hate it. But, well, what are we going to do? Well, I guess we have to bail out. And I don't have to be hypothetical about this. This happened in my adult lifetime and most of our listeners are adult lifetime, right? And that is where it potentially gets a little bit prickly. And I'm trying to think of an example without naming names, but a very, very, very big in one of the major top four banks is found to have completely acted in a very illegal way and blown up a bunch of money such that the compensation required is more than is even in the fund and then you, dear taxpayer, are on the hook or you, dear child that's not yet born, are on the hook for the bailout that is there.

1:10:20That's where I'm against the bailout because it's sort of like we're bailing ourselves out to some extent, which doesn't quite. We're actually providing cover to some extent for this kind of thing to happen because, again, it's just a question of incentives. Yeah. On that happy note, let's finish off with you want to talk about Arnott's, so I'll talk about Arnott's. Just briefly, just because it's a pattern of behaviour. That was, right. So, well, it's kind of a bit different and it's different in really uncomfortable and kind of silly ways, frankly. We've had, but these days all you have to do is have the word smelter in your corporate name and the government throws money at you.

1:11:07We've had the Glencore Manizer copper smelter. Government throws our money at you. Yeah, right. The Glencore Manizer copper smelter. Here's some cash. Tomago, the government's trying to throw cash at Tomago and they're currently saying no, which is weird. The government's asking for money and the government's trying to throw money at them. It's because even with free money, effectively, it's still not viable. and even and you would think that the government would go okay no we're bending over backwards to give you money even though you're telling us that it still doesn't fix the problem which is another way of saying you're never getting that money back I suspect Tommy are playing a longer game I suspect they'll take the money when the money's higher but we'll see what happens we've now got we've also got 135 million dollars having gone to is it Trafigura I don't know is it Trafigura anyway a lead smelter in Port Piri and a zinc smelter in Hobart are getting some money So this is bailout money.

1:11:59The best part of the Arnott story is at least it's not free cash or at least, you know, the Smoltz is getting no strings cash. Take the money and just do whatever with it and hopefully you won't need more. By the way, the Hobart and Port Perry, owned by the same mob, have said, thanks for the money. Unless you give us some more, we're still going to close. You've literally, this is. I don't even think, I don't even angry at them. I just, if you find yourself in a situation where the counterparty is that stupid, why wouldn't you do it? Like, I mean, well, you could have an appeal to morality and ethical view of it.

1:12:35I mean, are these the kind of people you expect that from? And, like, in their frame of reference, it's kind of like, oh, my God, there's a patsy at the table here. Let's take them for all they're worth. Yes, yes, yes. Who's the idiot? We are the idiot via our representatives. Well, the thing is once they haven't yet, government hasn't yet agreed to it, once they do, this becomes effectively a patent bargain. right because once you say to someone i'm so scared you might close i'm going to throw money at you then what are you incentivizing to do you're going to ask a second time for more money and as soon as you pay them the second time guess what you're on the hook you have you have taken the free hit you are now addicted to this thing because at any point you stop the money this was a car industry for 40 years was well okay i'll give you more money but but maybe this time to be enough and maybe you'll understand your own two feet and maybe you won't need any more in future oh you need some more okay here's some more but maybe this time finally this time maybe this is enough and it took you know 40 years for governments to kind of go huh this is just at some point self-inflicted injury like this is this is madness we're gonna stop doing this if traffic gear get the money and you're right you can't blame him for asking but if you if you're then going to say whenever you say we might go broke unless you throw us money you effectively become part national not nationalized we don't own any of it we're just bloody giving them money But you become a permanent, the government becomes a permanent funder of this rubbish.

1:13:54Now, I say all that actually because I want to go back to Arnott's. The best thing that we can say about Arnott's. This is jump straight to pure communism at that point, right? Like it's effectively what it is. Yeah, if you're under... Has that worked out for the world? You're underwriting massive amounts of manufacturing for what benefit? And we've talked before about people who say, and people really believe this and I don't blame them for believing it, but the idea of we have to make things, we should make things, We have to do whatever we can to keep these things in Australia. And you kind of go, for what?

1:14:20And they kind of go back to, well, because we want to make things. And it must be deeply, deeply, deeply emotionally seated, I suspect. Because I have a lot of conversations on Twitter and most of them are wonderful, really good conversations. Every now and again, I trigger some people who just spout vitriol and nonsense at me, and that's fine. That is what it is. The people who say this, mate, generally are really good, decent people who just, in their bones, feel it's right. Somehow morally, ethically, nationally, something. in the DNA, state of the universe type stuff, right, that we should make stuff.

1:14:51So I get it. I think it's wrong-headed, but I get it. The Arnott's thing, though, is fascinating. So they're all the bailouts, right? The Arnott's thing is the National Reconstruction Fund, government fund, right, set up with some money to support manufacturing in Australia, is part of a consortium, and the government's on the hook for$45 million worth of debt to Arnott's that was bought by private equity mob KKR for$1.9 billion. Now, if you're private equity, how do you buy something for$1.9 billion? Well, you throw in four cents, you borrow the rest because that's what they do, right? Other people's money, it's the oldest trick in the book has been done.

1:15:29No, just to qualify you there, it's not other people's money. It's newly created bank credit. No, I've done other money, but I'm sorry. Other people's obligations. Another sneak preview. It's a good gig, man. It's a good gig if you can get it is all I'm saying. Other people's obligations. Right. So, yeah, you know, so that's what private equity have always done. KKR, by the way, previously known as Colberg Kravis Roberts, were the barbarians at the gate of the book of the name, which is well worth it. It's a bit dated now. Oh, such an illustrious noble history going back. RJ and Nabisco was the business they tried to take over, the smoke company slash food business.

1:16:04Anyway, rolling it forward so that they're a private equity model. They got more money than God. They spent$1.9 billion buying this thing. They took out a whole lot of debt to do it. that said, we should really restructure that debt. We should probably just roll it over and get someone else to fund us some money. The government's put their hand up through the fund and gone, would you like$45 million from us, please? Because private investors are just lining out the door to do this. It's such a great deal that the private market has gone, no, I don't like making low-risk money. So the government's getting involved.

1:16:32And the fund's supposed to be there to support manufacturing businesses. So someone somewhere, and I want to be careful because I think I don't get in trouble if I name names, I don't think. I thought Arnott's had gone, Mr Government Fund, we've got some workers and we make some stuff and so could you lend us some money? And the government's going, yeah, yeah, have some of our money. Well, as you said, taxpayer money. Our representative's money and unborn children's money. Right. Because we haven't got enough uses for the money. We couldn't possibly do anything else with it. We'd rather lend it to you.

1:16:58Yeah, we've got so much of a surplus. You know, we're raking it in. Oh, wait a second. No. Oh, well, whatever. Have some anyway. Here's some money for Tim Tams. Because it's Tim Tams, right? You know what? Let's cut to the chase here. If it was anything else, but it's because we are so jingoistic in this bloody country. Oh, Tim Tams? I mean, you know, I don't really care about various wars across the other side of the planet, but if Tim Tams are in trouble, I'm picking up arms and, like, we've got to do something, right? Ridiculous. You know what? I would like to believe that's true. The number and type of things government's thrown money at recently, I'm not even sure it's about that anymore.

1:17:33That's even more depressing than I do. It was the only deal that was done. If nothing else had been done, it was just... I was like, okay, it's a Tim Tam vote. All right, fine. It's like, so what? It's Australian copper and Australian aluminium and Australian zinc and Australian lead. By the way, we need lead for purposes and things. I've been to Port Peary. The lead pollution in that town is extraordinary. The government would... And again... Why do you like jobs? Why do you like economic growth? What's wrong with you? I was going to say that, right? So the government's going to say, well, I lose the jobs.

1:18:04I've got to support the town, look after the town. People live there. That's their livelihood's all that kind of garbage. You say the same about asbestos if you want to. Let's kill some more kids. Let's poison some more kids being the name of growth. I mean, I want to be careful. There are people who live there and probably some of them are listening and I get it and I know. They'd be more angry. They're furiously applauding right now, I would dare say. No, they're not, mate. That's the thing because it's that idea of they have, they see no other hope either. And so there's a whole lot of people in Port Piri who want to move out, some who can't, but also they're thinking, well, hang on, I work at the local shop and at least the bloke who worked at the lead smelter comes and shops for me.

1:18:35And so they are doing what Ayala does, which is if the town dies, what the hell do I do? And this is where you and I come back to every single time, which is support the workers, don't maintain the jobs just for the hell of it. Yeah, no one's saying throw them on the scrap heap here. If we let traffic you're a fail and we don't smelt lead in Port Peary, that is a huge win for the people of Port Peary as long as we support them in other ways, which we should. And that's the nonsense, that whole thing. Anyway, so I said, I'm not sure it's just about Tim Tams, but I'm sure it doesn't help that it's about Tim Tams.

1:19:01It doesn't hurt that it's about Tim Tams either, right? I mean, I'm saying it increasingly often these days, but it's just like the initial knee-jerk is, well, this is why capitalism bad. And it's like, no, this is not capitalism. This is definitionally not capitalism. Capitalism would imply that like, oh, you took on too much debt, you got over your skis and the business is unviable. Well, that sucks. I guess you go bankrupt. Like that is, you know, it's not, well, you know, you get to make a squillion dollars in profit, take on incredible amounts of risk, and if it goes well, well, here's, you know, you'll get power yachts.

1:19:32But if not, don't worry, we'll bail you out. That is not, that's socialism on the way down and capitalism on the way up. It's an absolute bastardisation of what it is. Of course it is. More to the point, it's just sort of like, I always hate that they, I think humans are just, in general, we don't deal with large numbers very well. And so you'll go, well, there's 4 ,000 jobs at this Arnott's factory. Well, that's a lot. And you go, is it though? Is it? Like, I'm not saying 4 ,000 people is not a lot, but it's just like, you know, if you just look at businesses that employ less than 20 people, that is 42 % of our economy, of the private sector workforce.

1:20:08That is huge. It's 5.2 million people. And everyone out there who's got a small business right now is going, I don't get, should I leverage myself up? And you're like, no, no, no, no. You guys are much closer to capitalism than an overseas-owned hedge fund with incredible entrenched power. And, you know, it's so sickening. And as I always say, it's the same with Wayala and with all the others. It's just, it's so transparent once you see it. It's just like you're holding the workers who are going to suffer as a result of this hostage. But let's remember the reason that the workers are in trouble is because of you.

1:20:51You over leveraged. You didn't run your business. Yeah, it sucks for the workers because of you, not because of some external factor that was beyond your, you absolutely deliberately engineered the business to be as fragile as it possibly could be so you could squeeze an extra percent or two out of your return on incremental capital, you know, calculation. And it blew up in your face and then you go, oh, the worker, oh, who's going to look at it? If the workers understand, and I can't blame them for not understanding because it's quite opaque, but if they actually understood what was going on, They'd be marching up to KKR's head office with pickaxes and nooses and torches.

1:21:30Like it's just sort of like be angry, be very angry, but be angry at them. And if we as a society want to make sure that those people, as I say, aren't thrown onto the trash, let's look after them. Let's not look after KKR. Here's the other thing. Again, I make the point again because it feels like it just doesn't land for people. It's like these biscuits, these Tim Tams, like I know there's a lot of products. Brilliant. Huge fan. Massive fan of Tim Tams, right? But the machines that make them exist. No matter what is on a financial statement somewhere, no matter what loan obligation or structured finance derivative instrument or nonsense financial jargon that you want to, there is a warehouse somewhere with a big machine and a bunch of people who operate that machine.

1:22:17That still exists. And so let's play it forward. Let's, okay, what happens? KKR gets in so much trouble, no one bails them out, and they have to sell all of their assets at a fire sale price. There is going to be, I guarantee you, someone will go, well, I've got a few hundred million lying around. I'm going to be able to pick up these assets for pennies on the dollar and I'll be able to hire the people and we'll be able to make Tim Tams. It's an incredibly iconic brand. Australians are going to stop buying Tim Tams because of some, 99 % of people don't even know the corporate structure in the owner.

1:22:54All they know is I go into Coles and Woolies and there it is on the shelf and I like it and I buy it. And you know what? After all was said and done, if you let them collapse, it would still be available because people love making money and people have an opportunity, especially if you can buy it at a fire sale price. It's sort of like the economic calculation becomes insanely profitable, right? There is a price at which every private business with a capacity to pony up the capital, of which there are legion examples out there, will absolutely do that because they like making money. And a very large proportion of the workforce would be saved anyway and the people who copped the loss are the idiots who made all the bad decisions.

1:23:35Not only that, maybe the assets aren't picked up and maybe we don't make any biscuits anymore because we can't make biscuits profitably at the price people want to pay for them because they'd rather buy something else. That's also completely okay. It's why we don't have 85 % of the population working in agriculture. It's why we haven't backstopped Coopers and Cobblers and, yes, why not, candlestick makers. You mean the barrel makers, not the beer makers? Correct. Just for clarity. That's right. Coopers, lower C, C, yeah, lower C, the barrel makers. Thank you. I hadn't even thought about that. It's pretty funny.

1:24:06It's also why we still don't have massive, you know, 30 pub outback towns, plus a hill in New South Wales where they found gold 150 years ago. I mean, can you imagine it these days? No more gold. We should have supported all those jobs. We should have something, right? We should have half the workforce out there, you know, digging holes in the ground to find shiny metal because of jobs. We would. Someone's got to support the town of Hilland. I mean, we can't let the town die. We've got to do something. Honestly, in 30 years' time, 50 years, 100 years' time, look back at Whaler and go, really? Like, why did you guys think that was going to continue to be the case?

1:24:37It is. And, by the way, every dollar spent supporting the status quo is a dollar that's opportunity cost. Andrew's second favourite, Fraser. or Simitry maybe comes first. I'm not sure. Yeah, top three. If you're spending, if people are working, I'll make it about Hill End just for the fun of it, right? If you're supporting the 30 pubs in Hill End and government money is going to that, not only is government money being wasted, so it's inefficient, unproductive, a net detractor from economic output, activity, growth, success, living standards, quality of life, all that stuff. Not only is that happening, but the people that aren't going to move to other better things.

1:25:12What are all the barrel makers doing? I mean, some of them retired, some of them went out to work for a while. Most of them were trying to get other jobs. There was a very good reason why we have still 4.5 % unemployment and no barrel makers anymore. We have 4.5 % employment and no people with picks and shovels on the gold fields of Ballarat anymore. Why not? Because they went and found other things to do. But capital, we talk about capital as if it's money, we've said before, capital is also human capital. It moves to where it's most valued. So you don't have a bloke with a pick and shovel working at Ballarat.

1:25:45He learns to drive a header and he works on a farm, replacing the guy who was digging the ditches and threshing the wheat by hand. Or he's got a degree in electrical engineering and he's helped building chip fabrication plants, you know, around the other side of the world. Or a physiotherapist. Or a guy to forbid a barista. Prama, hairdress, anything, right? Like anything. And here's the other thing. The key thing here is it's not as though no one's making the value judgment here other than us collectively. effectively, if you're not viable, it's because no one wants to buy your stuff at the price you're offering it for.

1:26:13And if there's a job somewhere else, it's because there is opportunity there via the demand that we all say what we want individually. And then, and that aggregates up and that just, it's, it's just, it's, it's just the way that we coordinate everything. What it really means. And I said this to you off air. I think it makes sense. I'll try. Let's find

1:26:36I know what you're saying and you're right, but when you use words like it's for the economy and all of that, I think that just gets very abstract very quickly. And what we really mean, and you're not wrong, but let's just bring it back to something that really matters here. And what we're saying is that there are these collections of people that organise themselves. Okay, it happens to be through a legal entity called a proprietary limited company, but it's just a group of people that are expending their time and their energy and the shareholders and the investors who have stored up their savings and they've put it all into this venture and they just can't make it work.

1:27:15And so by the government saying, no, we're going to make it work no matter what, I'm going to give you free money, you're actually saying, here is a collective enterprise which erodes value year in, year out. Forget about money. Money is just the way that we measure it. but we are destroying value. And the government is saying, I want to make sure that you can continue to destroy value. That is literally what is happening here at the expense of other value that could be created. You know, it's an absolute nonsense. And it feels good because we're helping some people out here, but we're not helping them out because they're just in this as precarious a position, which is it going to find yourself in a bailout later on.

1:28:00Wait for the issue to drop, yep. And we're rewarding, quote unquote, capitalists who are making very, very stupid decisions. Whereas it should be, it's like whatever money is going to be employed here, as you say, retraining, welfare, make sure that people are not out on the street. Absolutely. We're not heartless buggers. Of course, we're going to help people out. But I just don't want to help out a private equity partnership that's worth squillions of dollars. That's the egregious part of all of this kind of stuff. And it's just so sickening and so obvious to me. but it just, for whatever reason, it just tends to work, which is why the pollies do it.

1:28:34But it's all coming out of your pocket one way or the other, right? And it's just depressing. And as you said, it would be one thing if there was some isolated incidents here, but it's not just the Labor Party as well. The Libs did it. It's just the uni party, as I've heard it called, because they are. They're all just different flavours of the same nonsense. but that we are increasingly running or trying to run an economy through political calculus as opposed to economic calculus. And again, what does that mean? It means that we're all getting poorer, not in a number on a screen, although, yes, that is true, but in a manner in which really matters, we're all getting poorer by electing to continue to do things that by definition erode value.

1:29:28It's like that is the height of stupidity. Sorry, I'll stop ranting at this point. Not at all. Choking on my own rage here. That's important. Can you keep enough rage for Sunday? There's a very deep well, my friend. I was going to say, keeping it's about regenerating it. That happens naturally, doesn't it? Yes. Sleeping is a wonderful thing. In that case, mate, I will talk to you on Sunday. And until then, thanks for listening. Have a great weekend. And full on. 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.

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