When will we pay the bills? April 5, 2024

25:28They're letting them roll off, as they say. Yeah, so we're actually having that, which again, to extend your analogy, strikes me as very, very, very smart to kind of get back in some way, again, as usual, the RBA, the adults in the room, notwithstanding whether the RBA should exist, as you said before, but relative to government, they are the adults in the room saying, well, if you guys don't do anything, we're going to have to do the important, serious, responsible stuff. And to whatever extent they did pump liquidity, is a horrible, horrible cliche and jargon, but to whatever extent they put extra money into the system, they are taking that back out.

25:58And again, not actively, but just letting those things, as you say, roll off, In other words, the bonds are redeemed and not reissued. Apparently, that is starting to reduce that boost that was put in place during the COVID period, which, again, seems to me entirely appropriate if you are going to have a structure like that. If you are going to add temporary liquidity, you want to take that away when it's not needed to get things back towards normal, not to normal, towards normal. So I guess I'm a little more hopeful about the sensible positioning of the Australian economy and regulatory bodies and fiscal realities, even though I'm deeply unhappy with the ongoing government debt.

26:34But it seems like at least we're kind of doing the right things and getting back to some sort of normality. Well, we are, but it's a question of degrees. It's sort of like, you know, you've been on a six-week bender of drinking three bottles of tequila every day. And you've shifted to beer. You know, like, well, okay. It's a step in the right direction. And they are. They are winding that down. Better up into seven bottles of tequila, which is happening in the States, though, right? Well, that is true. It is a relative game. But it is, again, you see it on the charts. It's sort of like there are these massive increases in liquidity and then it slowly drips away until the next crisis.

27:14Until the next crisis. And this is, I guess, the problem I always have with it. It's not that the intention isn't good. It's just that you're just forced into making the decisions. It's like the, it's an emergency. It's a wartime spending. We have to do it. Yes, everyone agrees. But when things are good, we'll fix, we'll tidy this all up. Yeah, okay, let's promise to do that. Yep, absolutely. pinky promise yep let's do that and we never do like we just never do i was always going to say to their credit but but it's not to their credit other than at least they didn't they never promised that that they were never actually they were never actually responsible enough or or thoughtful enough to say we should probably fix this after we finish like no it's gonna we're just gonna throw stuff on all over the walls yeah it might drop that that was all it was like where's the next bit no there's no that's just it so there's this great it's probably a couple years old now there's this great interview with christine lagarde the from the imf right oh sorry from the european central bank um and the interviewer is pointing to the the euros on issue it's just like again it's this vertical line it's like so what's going on with that and she's going oh yeah it'll be all right there's a really unsatisfying nervous way like right can you can you expand on those like no it'll be fine uh will it i mean like that i was kind of just asking a question now i'm like now i'm worried exactly it's it's very i mean it's said by a very um a person in a position of power very well dressed and educated than that but it's basically she's saying trust me bro trust me yeah i'll all right well i know it doesn't look good but we'll fix it up okay when hmm how okay and uh uh this is this this is this is my issue with these kinds of things it's just like i i i find as though the it is never squared right it's you talk about government debt before as well it's like okay well we needed that for this okay maybe you're right when are we going to fix that later well we haven't yet we're not even on the course like it's not not that the debt is going down we're not even we're not even changing anything that will allow that to sort of go down so it's sort of this is like a full circle probably put a bow on this conversation but it's it's it's it is whenever we're having this acceleration in in this money it will it will people who have the money and you always want to hold hard assets, right?

29:45And these kinds of scenarios, because you can't, you can't easily create more property in downtown Manhattan. You know, you can't easily create another BHP billet or whatever it is. Now you can, and they can issue more shares and you can build more property. There are other things. There's one thing I won't mention that you can't create more, but there are other things, you know, but, but on a relative basis, money will seek that out. And I feel as though you're going to a point where in a well-functioning market, the calculus is I'm going to make the best risk-adjusted bet to get the best return.

30:19And now it's kind of like, well, that is still true. But my focus is shifting more towards whereas I may have demanded a 10 % expected annual return over the next five years for me to part with my money and invest in asset X. I'm kind of happy if it just paces with inflation because my goal here is preserving capital. I don't really care if coffees are$20 each in the year 2032 because on a relative basis, my assets will mostly go up. So again, it's a, and I think this is exactly the case for a lot of people in Australia holding assets. It's a look at my property. It's done really well. It's a, yeah, but you do really need to look at that on an inflation adjusted basis.

31:00And it's still good. It's still good, but it's very different. And again, the value of money is what you can exchange it for. And you might have more of it, but if you have to exchange a lot more of it to get the things that you actually want, then you need to square that kind of circle. Which is why this is all very interesting and intellectual, but it's why it's actually I have great concerns from a society standpoint because it's all good and well if you've got assets. if you don't have assets. So it's always the poor that are screwed. And it's easy for me to say, or someone in finance to sort of say, well, I've got my three investment properties.

31:42I've got my super fund. I've got my portfolio of different shares. Yeah, inflation is bad, but look, my assets are going well. And as you said, gold's up, equity's up, property's up. It's kind of like, yeah, I know on a nominal basis versus a real basis, there's a deal, but I'm okay. Now you contrast it with the person who's paycheck to paycheck, who don't know i'm renting i don't have any assets it's like it's all downsides there's there's no upside here and that problem folds on itself and it exacerbates and it gets harder and harder and harder and harder you get you get increasing wealth divides you get a tendency towards populism which i think we're seeing and and so yeah it's it kind of matters for a whole range of things why we need to make sure that we at least try and have adult conversations to steer us back onto a more, which I know you're very big on for this exact reason, right?

32:32Like, you know, okay, you guys needed to borrow a bit of money. You needed to spend more than you had. I get it. But can we at least have a conversation about turning this around at some point? Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

32:51I tweeted only this morning, actually, just recording this on Thursday. The tweet doesn't matter in itself, other than, we've talked about this before. If you care about inequality and fairness, you're going to say, hey, we should do something about it. If you don't and you're only about self-interest, you still should be saying we need to do something about this because for all of the – I mean, who are the customers for those businesses if they haven't got the money? You talk about social unrest and rise of populism. You want to be very careful about the sort of country you want to live in. You can live in 17th century feudal France if you choose to, and that's kind of okay.

33:23And, yes, you can say, well, at least I'm richer than that guy and take some degree of relative comfort from that. Or you can say, actually, you know what? I'd rather live in 21st century Australia or wherever you live around the world. You know, we are far, far better off. And I think we want to be a little bit careful about, again, we should do it for the right reasons, but at least do it for the wrong reasons because those reasons are still real in the sense that, you know, at a self-interest level, having people able to put food on the table, you know, buy your products, not commit crimes, not trying to overthrow your government.

33:53And, you know, it's why there's a growing number of people, young people in particular, who are saying, actually, maybe socialism's not so bad. Actually, maybe democracy's not that important. Maybe capitalism's not working. And I think that's, you know, I think... Scary. Right? And that's because we know how that can end. Not a prediction, not a doom and gloom at all. But if you think about that and say, well, yeah, we should do nothing about it because I might want a tax cut this year or I might want my property to go up another 2 % or my shares go up another 2 % next year. it's like yeah okay but just just be careful what you wish for because um you know at the end of the day those things i'm sure people in you know choose choose pre-revolution society you know in one of any number of countries particularly in europe um when when eventually things break they break and you know i don't know it's uh don't don't assume uh that relative wealth protects you because it's certainly not been the case historically and again let's do it because It's the right thing to do.

34:49But if you can't come at that, at least do it for your own sake. If someone else gets a benefit and you are better off at the same time, hey, that's a pretty good result. Yeah. I mean, let me just state for the record, it's an absolute pipe dream that any society will be perfectly flat. Yeah, totally. It just won't be. You don't really want to try because you end up with red lines in Russia. I mean, you'd like to be able to do it, but it's not going to happen. And if you try too hard to do it, you create Russia or Cuba or whatever else. You want equality of opportunity is my standpoint. But what I would say is, that being said, I think there's a lot of evidence that suggests the flatter the society, the more prosperous the society.

35:32You look at some of the Nordic countries, Australia back in the day, very, very egalitarian society. There was always rich people. There was always poor people, but they weren't that far apart. But, you know, the richest kid at school versus the poor, there wasn't a massive gap there, right? And it's only getting wider and wider and wider and wider. And it has really bad outcomes for everyone. So, it's sort of – I mean, look, here's an interesting thing from News in the Week. Did you see this? Of all the jobs created over the last year, one in three were associated with the NDIS. I did see that.

36:05I did see that. So, I know you've got comments on that. I'll let you run with that for a little bit. No, I don't. No? Okay. I know I'm happy to, but I, it, it, it, yeah, go on. You said what you were going to say. What's the implication? Well, again, again, it's sort of, it's sort of, do we as a society want some kind of framework that will help carers and people with disabilities? I mean, that the kind of society want? I mean, everyone will have their opinion. I say, yes, I do. I do want that. However, do I want my tax dollars supporting someone who is in a difficult situation who happens to have an$8 million investment portfolio.

36:44That's a little, you know, why is this person who has 10 times as much money as me getting government support? You know, it's sort of, again, these are all well-intentioned things, but sometimes executed very badly. And it has all these, I pick on the NDIS, but it has these perverse consequences of, again, we're taking money from all of us and distributing it to a lot of people who really need it, but also a lot of people who don't really need, like, you know, whether or not this program existed, you're fine. You're not on the street or you're not having to not have a wheelchair or rails in the house or something like that.

37:18You know what? It's just, I mean, it is a burden that you have to bear, but you can completely wear that burden and be more comfortable and be in the top 20 % of society. You know, there's things like that. And when you, when you go towards these social, I've got to be careful. These terms are so loaded because any, so you've got to be careful but i often think that when when people talk about a lot of these things it really does come from a good place and they see the problem and they misdiagnose the problem and they miss and they they they come at it with a solution that's not appropriate and i think in the year 2024 we can reasonably confidently say that because this experiment has played out dozens and dozens of times in history and it's just never worked out really well right it it always ends up breaking at some point and we're all poorer as a result of it so So I don't know, mate.

38:07I don't know what the answer is, but I do know that at this point where we stand today, we are continuing to see huge amounts of money flow in. There's a big gap between those that have it and those that don't have it. And as I said, I think the conditions are such that we are not fixing inflation anytime. I've said it for as long as I can remember on this pod. You know, it's not two to 3 % I think is a long way off at this stage. And wherever that exists, I think people will seek shelter in things like gold, in things like the S &P 500 index, in things like property. And that what you see is these assets go from their utility value of the cash flow they can generate for me as an investor to a store of wealth premium.

38:56And like gold, like again, gold, what the heck, Bitcoin, whatever. What is it? Nothing. It doesn't do anything, but there's only so much of it. And I will impart value to it because of its scarcity, because of its relative scarcity to the other thing that I'm measuring it in. You can imagine if I was the, uh, the, uh, um, Lord of meters and I could just create more meters at will. Now the distance between your house and my house is not going to change, but I'm going to change the measuring stick constantly. It's going to play havoc with our view of the world and how we sort of find our feet on and figure out where things are.

39:33And that's essentially is what is happening when we bug our eyes around with the money too much, which I think particularly in the US and particularly in Latin America and places like that. Like it just, it never ends well. And there's a spectrum and it's not just a black and white thing, but we're moving in the wrong direction along that spectrum. Yeah, I think that's right. But my quick thoughts on the NDS stuff and the job stuff,

40:02I'm not very popular sometimes. And I'm also stupid enough not to care. And that's just dumb because, you know, who wants to be unpopular and just ask people to throw rocks at you? But there you go. Unemployment at 3.5 % was too low relative to a capitalist system at some sort of balance, right? When an economy is running hotter than usual, you're going to have lower unemployment than usual and than average. No value judgment, just literally again. This podcast is brought to you by maths today. The massive thing is that when economic activity runs hot, you create more demand, which creates inflation and creates more jobs.

40:43And frankly, the more jobs bit is just, you know, it's a construct of, you know, it's almost human capital inflation in the sense that those people would have jobs. Otherwise, if there were productive things for them to do, when there's so much money temporarily chasing something, those people get dragged into the labor market, which is great for them. But when the cycle turns, because cycles turn, because that's why they're cycles, you're going to have more people go back out of work. It is no surprise that 8 % unemployment and 40-year, sorry, 8 % inflation and 40-year unemployment coincide. 40-year low unemployment.

41:15Again, it's the maths, right? This is what happens. So when you then say, okay, what drove that? We have the economy itself, and we have, we'll just finish talking about it. NDIS is a nice kind of illustration of this, meaningful increase in government spending that aren't going away because governments are too gutless to do it. And what's been the biggest boost in government spending, I don't know specifically, but on the pedestal, on the podium, sorry, is the NDIS. The tens and tens and tens of millions. It's already massively exceeded the original forecast, and it's likely to go to something like three or four times the current size, which ends up being, I don't know, eight, nine, ten times the original forecast in terms of cost.

41:51And those services are delivered by some are products, some are services. You increase the number of services being provided, you increase the unemployment in those areas. That's kind of how it happens. Now, some people will say, great, any reduction in unemployment is a good reduction. And I would say on a human level, that's absolutely true in the short term. The consequences of that, i.e. the inflation we just finished talking about, what is the cost of that excess demand? Well, what does it cost to those jobs? It is the fact that everybody else, and some people can tweak. He's okay. If inflation goes up, he's going to be all right.

42:28But to your point, mate, the effective, the group we'll call the working poor, which is, again, a horribly overused cliche, they're worse off. Yeah. Now, you know, is one less person in the unemployment queue worth 100 people paying 10 % more for their groceries? That's a conversation we can have as a society. But that is the trade-off. There is no third box where it's like, no, no, we're going to do both with no consequence. It doesn't exist. I'm glad we're doing the NDIS as a service. I think the structure is abominably terrible. It's terrible. Designed by investment bankers and neocons. Poor incentives.

43:02Yeah, to be gamed. It's set up exactly. When you separate the payer and the receiver of a good or service, you blow the system up. Mate, there's nothing easier in the world than spending someone else's money. Correct. It is. It is, I mean, anyone who's had a job somewhere where you've had like a per diem allowance or, do you know what I mean? It's just like - You spent up to$200 on this. Well, I'll spend$200 on it then. Yeah. That's what I did. It's like, oh no, it's coming out of your own pocket. Two minute noodles it is. You know, it's just like you spend it entirely differently when it's someone else's money.

43:31And I'm not even necessarily blaming the recipient of the service here. If the government says, it's like tax, right? I don't mind corporates taking tax deductions that I think suck. If it's a legal tax deduction, of course you're entitled to. If the government says to you, you can have this service or this good because you meet these criteria, then the government is literally saying, these are the rules. If you fit within that range, you can have it. It's like, okay, cool. Oh, dude, we used all the vouchers in COVID. Right. No one pays more tax because they think, well, actually, I'll donate some extra to you.

43:59You're right. You probably won't tax me enough. So I don't blame anyone for this. The problem is the structure. Why wouldn't you? Why wouldn't you do it? It's a game theoretical construct here. It's just like, well, you can die on a hill, right, with your morals and the rest, but everyone else is going to do it. It's like, well, I'm only losing here. So, yeah. So, I want to be really, really, really, really clear. The NDIS as an idea, actually, let me go back a half a step. The idea of helping people with disability who need it is fantastic. The structure they have designed, both in terms of the eligibility, as you said, and the incentives of the structure, calling it an insurance scheme, we privatize something that should have been a public good or service.

44:36If people with disability need a certain good or service to make their lives better, then there's no reason it shouldn't have been provided as part of the healthcare system. We don't have a national hospital insurance scheme where you say, well, I broke my leg. Okay, you get to have your leg fixed. Here's a blank check. See if you can find someone to fix your leg for you. Okay, well, I've fixed my leg. I got plastered. They bought me a new car because I needed a new car. I've got gold-plated crutches because, hey, why not? I'm allowed to have them under the scheme. And again, I'm not saying the scheme is entirely bad.

45:04What I'm saying is it is being bastardized and rorted because it can be. And to your point, mate, this is the lack of fiscal discipline, which has been through multiple governments. Started with Gillard, went through Morrison, now with... Morrison bought a brand new ute for every tradie in the country, right? Right. So, you know, there's plenty of reasons, you know, political and otherwise. And again, you know, both sides of parliament supported the NDS. The problem was neither of them, I didn't realize they didn't care that if you'd asked an economist, economists are, I've said it lots of times, economists are terrible at predictions.

45:39They're great at explaining. You know, there are some great economists. I interviewed Cameron Murray, who's a bit of out-of-the-box economist on the good oil recently. Talk about housing of all things. You'll like it, Ram. Have a listen. But also, you know, the - I like his books. Yeah, he's good. But economists are great at saying, hey, this is what happens in these circumstances. Here's how markets work. Here's how systems work. They're very good at deconstructing them and explaining them. And so Blind Freddy could have said, as I said, if you separate the payer and the recipient, you're going to have a blowout.

46:11And sometimes it's just, as you say, just like, well, I can have it so it would make my life easier. If I had to buy it myself, would I buy those four things? I'd probably buy two of them. The other two would be nice, but not really necessary. If someone says, hey, you've got this condition, you can have these four things. Oh, good. Thank you. I'll take them. Yeah, of course you will. Entirely, entirely reasonably, But that's why the system is broken, which gets us back, mate, very quickly, sorry, to the challenges we have, I was going to say macroeconomically, systemically as a society where we are spending money we can't afford to spend at an individual level, at a government level.

46:43The fact that unemployment fell and we all cheered is great. Effectively, to whatever extent the NDS is being rorted, those jobs would not have been created. And so, again, careful what we, not wishful, but careful what we celebrate. We've celebrated the bastardized results of a terribly designed insurance scheme. That's not sustainable. That's not success. And it's distorting, to your point. It is distorting the rest of the market. Now, distortions matter because they take relatively efficient capital or resource allocation and make it inefficient. and we talk about productivity when we talk about returns we talk about standard of living when we talk about you know what we can get for our tax dollars or our own personal dollars uh we could have had more things or paid less tax or both if you remove the rorting and that money would have been spent as i said on the more things or the more money which gets spent somewhere else or increases prosperity somewhere else um creating jobs that again are largely being useful most many who aren't.

47:49And again, on those inflated, gold-plated, you know, you hear the stories of the$2 ,000 wheelchairs when the other ones are$600 and that kind of stuff. That's what's going to happen if you let this sort of stuff happen. And the fact governments don't seem to know or care is frankly kind of very dispiriting. Yeah. I mean, let's really dumb it down here. If printing new money or throwing money at something fixed problems, well, we could solve every problem right now. Here you go. Everyone in the country, million dollars, boom, done. Obviously, it doesn't work because this is just a little tokenized system that we sort of keep track of everything for.

48:27And it's not real, right? What it needs to do is it needs to be something that we can have faith in and understand that it is a mechanism for information flow. And you use the perfect word for it, distortions, because it's not even a question of incompetence. I'd say it's almost impossible for any human mind or collection of human minds to design something in the face of such incredible diabolical complexity as the modern world and economy. It can't be done. And so we have this mechanism that transmits money. It's like, oh, it turns out that when it's raining, umbrellas are more expensive. That is the system working beautifully.

49:07And so it should, right? It should be that way because that's going to make other manufacturers of umbrellas go, oh, prices are up. there's increasing demand here and they'll put more demand in. They'll add more supply. That'll correct the problem. That is the capitalist system working beautifully without coordination, the Adam Smith invisible hand. And so when a well-meaning bureaucrat comes in and goes, no, no, no, we're going to do it by throwing all this money. Where's the money come from? And we're just going to print it. Okay. Now there is opportunity cost in that. There's dislocation in that.

49:36Money that otherwise may be invested over here is not being invested. Look at all the, you mentioned NFTs before. All that dumb stuff happened at the height of the money printing frenzy. And we saw it in the tech space on the ASX, you know, all kinds of crazy valuations, all kinds of stupid investments and mergers. And it doesn't change the fundamental base of reality that we're dealing with, but there's a lot more sort of artificial signal in the system, which allows for these kinds of things. You do have people spending, like Jay-Z spending$10 million on a monkey JPEG. Like it's just, it's pure madness.

50:17And again, as I say, look at history and find me an example of wherever throwing money at the problem. No, there is something to be said. I'm not saying we don't allocate resources to where they're doing, but it must, it must have an opportunity cost because we're basically changing the ruler here. on the we're we're we're changing the system of of of measurement so it's i mean i'm once that penny drops for you and for me it's taken a while but it's just sort of like you just see it everywhere it's like if think about the good example i think is with war it used to be very hard for a government to sell a war of conquest to its people because we need you to buy our bonds we need to tax you more because war is super expensive and it doesn't create any value except you know, defense perhaps, or maybe we get a bit more land if we win.

51:10But usually it's a whole bunch of capacities put into things that only has one real use and it doesn't actually enrich us directly. And usually it's worse than a zero-sum game war. Now you can go to war whenever you want because I can go to war, I can build an aircraft carrier, I can double the size of the military without taxing you more, without having to sell or rely on the private markets to buy my bonds because the Fed will just buy it. And that's exactly - So when you look at the US deficit spending, like, well, military's way up there. So next time there's some kind of snafu in the world, well, we don't have to talk about it.

51:53There's ones going on right now. There is no shortage of capacity to throw all kinds of dollars at this kind of stuff. and okay, fine, fine. I'm not going to get into that. It's a very prickly kind of issue. But that has been done with newly minted money and that is creating all kinds of distortions and that's feeding into it. Wouldn't it be a different situation with George W saying, okay, we're going to Afghanistan. Yeah, let's go get them. Let's get the terrorists. Okay, cool. Your taxes are all going up 10%. Ooh. All of a sudden I'm not paying for blood as much. You know what? But it just, there is a, the reality is there is a cost to these things.

52:32Whether we want to measure it or not, there is a real world cost. And when we hide the measurement or when we disguise that cost, it never works out well. It never, ever, ever works out well. Does that make sense in terms of the context? And I think you're very monetarist in your view. I'll just add the fiscal element, which is the same thing when governments borrow money and pretend they can keep spending on stuff and the national debt is some abstract number that's not mine and not yours. And so we don't feel it. So when the government debt is approaching a trillion dollars, which is not created money, it's borrowed money.

53:02Now, they've borrowed it from the RBA, so it gets a bit messy at some point. Well, that's correct. If it's borrowed from the RBA, it's created money. Yeah, but it's also borrowed elsewhere. That's why I just want to make the point. Yes, that's true. That's true. I don't want to say it's not. It's largely not created money. There's some of it might be. But the idea of it's, in theory, going to be paid back or it's going to be carried on the national credit card by you and me and everyone else listening and everyone else not listening. But you can say, well, hang on. This is the thing with the tax cuts, right?

53:24I'm against being unpopular, was against stage three, continue to be against stage three. It's better, but it's not good because it increases the government debt. And people say, well, hang on, I want my money. And again, it's kind of the game theory thing you talked about before, but it's, you know, I want a tax cut. Okay, fine, but I'm affected with the debit. The credit is to my account. The debit is to my share of the national debt. And we don't have to ever pay it personally, so we kind of feel like it's not there. But it has, to your point, it has those implications. It has consequences because the circumstances of higher national debt mean that has to be at some point either repaid or it impacts our ability to borrow in future or it impacts our ability to respond to the next crisis, for example, like COVID.

54:03Yes, we are better than most countries in the world. And people sort of say, but at least we're better than the US. That's true. My usual retort is I'd rather be, being the least sick bloke in the hospital, still means you're in hospital, right? I'd rather be outside. Thanks very much. And we live on the same planet as the US. Exactly, yeah. It's a quarter of the global economy. Like you can say, well, we're better over here. It's like, yeah, but whatever they do, is going to impact us here. But that's why I think we should be dealing with the fiscal challenges as well as the monetary ones. Can I just, one thing I want to stress on this too is it's not, I don't think this, either of us are coming from the ideological position of debt is bad.

54:36Debt is wonderful, right? Like debt is a really useful enabler. But the idea is, is that when I borrow money, I am going to use that to create value. And so, you know, one plus one equals three kind of thing. It's like, I take some money, but I'm going to start a business. I'm going to create some jobs. I'm going to deliver some value to my customers. I'm going to generate a profit. And that's going to allow me to repay the debt. And in fact, that was a wonderful thing to do, right? That was brilliant. I never would have been able to start this business without that debt. I've got the debt and I've paid it back.

55:07The problem is, is when you borrow money and it doesn't have that positive economics to it. So in other words, I borrowed money. I went and bought an emu farm and I blew it up. And now I can't pay back the debt. Now for you or I, I don't have anything for it. So, someone has suffered there and someone should suffer. I don't know what to sound mean, but again, otherwise it just burns into a very, very bad place. Government's a little bit different. People say you can't compare government to a household because government can always create its own money. And that's true, but it means that this malinvestment does get hidden.

55:40So, when you say, oh, well, we're going to borrow all this money, but it's for a really good cause, be it the NDIS or anything else. It's like, okay, cool, but if you're not deploying that capital well and it doesn't generate the required return, well, you can't pay back the money, which means you have to borrow more money to pay back the other money that you borrowed. And then it spirals out of control. So just to be clear, debt is not necessarily a four-letter word. It is a bad thing when it's not appropriately used. And I think we need to bear all of that in mind. I think that's true. I don't know if you're a Keynesian anymore or maybe you never were.

56:17I am. So I'll add this in that the other use for debt is the, and to use the household example, the fridge blows up. You either don't have a fridge or you borrow it for the fridge. You just make a deal with yourself. Same as a mortgage, frankly. You make a deal with yourself to say, I will take that debt on now. Is it creating more value? No, it's replacing value. I don't have to rent or I can actually keep my food cold. But the deal is I can't afford it in cash now. I'm going to have to reduce my consumption in future to pay back that debt so that overall I'm still better off. And my view as a Keynesian at a federal government level is that's okay to do.

56:52So if you need to spend some money in the short term for those, a social good or for another reason that doesn't necessarily create value, but helps to paper over a hole to get you to the next thing, you then have to also say, okay, but in that context, did it create value? No. Well, it worthwhile you can and let's assume that i'm right it's worthwhile because it does something it replaces the fridge it replaces the car it lets me have a house to live in the deal with myself is i'm going to pay that off because that's how you get back to square so i'm going to say right well i'm going to cancel the holiday because i'm going to pay off the fridge or i'm going to not go out you know every every second night a restaurant i'm going to go once a week and i'm going to pay back the whatever it is right that that's that's how it's a shifting in consumption which is which is allowed for by debt and again that's equally it's a beautiful theory dude i I love it.

57:40But no one ever says, I'm not taking the holiday. In the government context, they say, I will get the fridge and I'll forego the holiday. They go, no, I want the fridge. And actually, I did promise my constituencies the holidays. I'm going to do that as well. Which is stage three. That's exactly what stage three is. Yep. And it's a communism argument, right? It's like communism would work really well if this, this, this, and this. Yeah, but that's never going to be true. And this is my argument against the Keynesians. I get the theory. Theory makes perfect sense. show me evidence of when anyone ever pays the piper.

58:10So it's all of like, we need to spend the money now because of whatever. Okay, cool. Are we going to ever fix that? Oh, yeah, yeah, we promise. But they never do. So it's kind of like the theory is sound. I get you. In the same way that the communist theory is sound. I think you're a little bit... We had a zero net government debt 27 years ago. Maybe a little longer than that. And it's not that long ago that Keynesian economics was observed by our politicians. We can say, I think there's two - Yeah, but it only relies on the people running the show. I mean, that's a difficult bet. Like, who's going to be in power in 10 years' time and how smart and responsible are they going to be?

58:53Correct. And also, just very quickly on that too, there was a little bit of a lucky break in terms of various export booms and stuff. 100%. That saved us. It wasn't like we took our medicine. and it's just like, oh, we won the lottery that week. We got a scratchy and we got it. It was like, oh, look, we solved everything. It's like, yeah, you got lucky is what happened. It's true. But governments believed in that as a policy and a theory towards the abandonment of that since. And I think that's where you and I just differ slightly. Maybe I'm more idealistic. You're more pessimistic, which is unusual for you and I.

59:24Cynical. Well, there is that. But yeah, if done... Okay, here's my question to you. And we need to move on because we weren't going to talk about monetary policy. We spent 20 minutes talking about it. 20 minutes. Yeah, thank you. 45 maybe. All right, fine. If you knew that governments were going to be responsible, would you be okay with them pursuing a Keynesian fiscal policy? Oh, yeah, 100%. Okay, cool. So it's not an ideological objection. It's just a reality of I don't trust the people who are doing it, so let's not do it. It's the same reason why I don't give my 14-year-old$10 ,000 in cash to walk around.

59:57In theory, I could, and he could be very smart with that. He's not going to be, so I'm not going to do that, right? That money is gone the second I hand it over. I think comparing our governments to 14-year-olds is actually one of the more accurate analogies I've heard recently. Mate, let's move on because I'm just going to push this through. Can I just say on this, I wish there is so unsatisfying, the dialogue that happens in the media and elsewhere. because I said to you when we were looking through the fin this morning, what's happened, what we talk about. It's just like I could take any of these articles and what Powell said or did from any point in time and copy and paste.

1:00:38It's all this peripheral stuff. Insert quote from smart Wall Street guy here, which doesn't really say anything. It sort of says on one hand, but on the other hand and this and that. There is no fundamental – no one gets to the base layer and sort of say, yeah, but why? But why? Why is that? these axiomatic truths that just are taken as gospel. And I find it very unsatisfying that we, as a nation and as a country, just can't, we are so blind to the, well, not even blind, it's not even prepared to discuss or even question the base layer reality of the entire system. It just, it kind of like, it's a bit surprising, right?

1:01:23Anyway, I find it very odd. I find it very odd. I hear you. I got stuck up with the government a couple of weeks ago about this supermarkets inquiry, right? The ridiculous dog and pony show of, look over here, we care about your grocery prices, so we're going to do something about this. We're going to hold an inquiry so we can get our 15 seconds of fame yelling at some poor, well, I should say poor, they're fine. Some supermarket CEO who's got to sit in front of a Senate committee and get yelled at by people so that the politicians can pretend they're doing something about something and they actually care.

1:01:55I had a pretty big go about that. I don't know if I mentioned the pharmacy stuff on the pod. I probably did. Yeah, I think we touched on it. At the same time, the government, with the opposition's complete silence, has ushered through another massively anti-competitive five-year deal where pharmacists get protected from competition both in their local area and from anyone else buying a pharmacy and operating a pharmacy unless they're a licensed pharmacist. Were we just talking about distortions? It is. Anyway, so the policy won't say a thing. They are so scared of the Pharmacy Guild, they won't say a thing.

1:02:27For better or worse, they're not scared of the supermarkets. And so the opposition leader has joined the fray today. It might have been yesterday. I'm recording this Thursday. Who basically came out and said, we are going to legislate to break up the supermarkets and stop land banking. And that's, you know. This is the party of small government and free enterprise. Right. There is that. But so, you know, we're going to kind of jump in there. No irony there. Well, here was the thing. For all of that, and that's, you know, again, take what you want from the policy. Here's the quote from Peter Dutton.

1:03:01Quote, I think there's a question mark about the appropriateness of that behavior. Ultimately, we've got consumers that are paying through the roof at the moment for items when they turn up to a checkout, end quote. And sometimes they just tell you exactly what they're thinking. This was like, for all of the things that we said we're going to do, maybe possibly at some point in the future, if we're in government, will we be in government at some point? Yes. Will we do this? I don't know. I'm actually pretty sceptical that Alex ended up doing it. But for all of that, what do they want us to hear?

1:03:31They want us to hear, I'm sorry you're paying too much for groceries. Look, I'm doing something too. See, I'm the friend of the punter, not just that other guy that I don't like, that you shouldn't like, you should like me more, because I care more, and I'm going to do more to fix the problem that he's going to do. Again, this problem that, again, as you said before, exists absolutely in absolute terms. Prices are up 20 % in the last four years. There is a genuine issue and implication for household budgets. It just is. But to pretend that the solution is bashing the point of purchase because that's where it's most obvious.

1:04:04And so, therefore, if I tell you I'm doing something about it, you'll think I'm great. And again, I've said many, many times I'm an equal opportunity critic, they are both just it's just this horrible dog and pony show that is supposed to be you know I'm the punter's friend please vote for me rather than I actually care about what's going on well it works this is exactly the point I just made so everyone listening knows you go to the supermarket and it's a lot more expensive I put an online order in this morning actually and I can tell you we spent$200 for our Woolies and change and we didn't get a lot of stuff, right?

1:04:41So, yes, everyone gets it. But then it's just like first order thinking. Ah, well, I buy it from here, so it's their fault. Now, it might be their fault. It must be their fault. I don't want to like, you know, there might be a role that is being played there. But again, no one is going beyond the surface to sort of say, well, isn't that interesting that here and around the world, groceries are more expensive, energy is more expensive, housing is more expensive. and rather than have a mature, intelligent discussion about the causes of this and what might be done about it, we jump on the populist chain.

1:05:15We point at immigrants or evil CEOs or the populist. I'd like to... I imagine that because they're politicians, they're not that dumb, right? That's the worst part of it. They just know that it works. So again, we've often sort of been exasperated in our industry where we've often said that, let's you and I start an investment service. But our marketing is going to be, hey, it's really scary and volatile. And one in every three years on average, you're going to lose a lot of value. But it's going to be okay over the long term. Maybe you'll get about 10%. Come and sign up to our services. No. These people over here are promising like insane returns with hardly any risk.

1:06:04And it's the same here. It's like, so you can, the politician that gets up and goes, well, actually, there's really some deep seated fundamental factors that are at play here. And it's very complicated. And it's going to require you to think a lot. And it's going to require you to get your head around some very advanced topics. Or I'm just going to say that Woolies is evil. I'm going to go with that. And it's the immigrants. Yep. Okay. Let's go with that. And it's just, it's just, it's so depressing that it's so effective. That's what it is. I sometimes admire, sometimes despair for people who on Twitter say, I can't believe Albo is so stupid.

1:06:38I can't believe Peter Dutton is so stupid. It's kind of like that's giving them more credit than they deserve because it's not they don't know. It's they know and they don't care. And that's both incredibly dispiriting and depressing, but there's no lack of, maybe it's not the supermarkets. Let's actually try and find out. That's why the fourth estate is so valuable. And this is the other great despair of our times, I think, is just the erosion of quality journalism. And that is the institution that is meant to actually, rather than get up at the press club and try and get a politician to quote the latest figure as a gotcha.

1:07:18It's like, why don't you ask a normal question? Like what people want to know and get to the root cause of it. Like you guys get to frame the discussion here, right? Except we're kind of back to a lot of people to know, though. Well, everyone wants to know. We're happy with the supermarket acquired because we think the supermarkets are bad guys. It's both, right? We don't want to know. We actually don't want to know. We want to blame the supermarkets because it's easy so we can go back to do what we're doing. I don't disagree with you. I think the problem is we have a three-legged stool. The things that we expect, that we genuinely want, we as an entire populace, not you and me, not our listeners, everybody as a group, what do we actually want?

1:07:58What do we actually want to engage with? Do we actually want the hard questions answered on the news or in the newspapers? We've got the media who aren't asking the right questions, partly because there's not enough of them, partly because the business model have changed, partly because it's just easy to do the clickbait headline. And the politicians, I've said before, mate, I strongly believe the worst part of Trump's ascendancy, regardless of your politics or whatever, is when he just would do and say things and refuse to back down. In the old days, Nixon resigned over something that Trump has done worse than - It was just a Tuesday.

1:08:27Right? Well, that's the thing. And so you kind of go, hang on. At one point, the pollies themselves had a standard of behavior they all expected of each other and themselves. And so you kind of say, well, hang on. There's fewer media voices. There's fewer investigative journalists. God bless Kate McClymont for the City Morning Herald, who is just a rock star in that space. There's others around as well. So, yeah, there's fewer investigative journalists. There's fewer serious stories. There's pollies who don't know and don't want to know and don't care and are happy just to bluster. And, you know, we had a prime minister with five ministries.

1:08:57at one point not too long ago, and a public who say, I just want to believe... If I tweet about Woolies and Coles, I get accused of, why would you stand up for the big guys? And of course they're doing it. And someone told me this morning, well, cabbage has gone from$3 to$10, therefore there's price gouging. And it's just like that single anecdote of, I don't know, mate. You're not wrong in any of those things. The problem is I think it's all of them. And I don't know how you... Maybe I want to believe this is true. I think if I was going to put a finger on something, I reckon it's that political standard.

1:09:26The things they simply would not have accepted of each other, that the standards of what we call civil society, which is kind of a bit of an elitist, kind of ridiculous term, but the idea of like pollies wouldn't... Barry O 'Farrell, the New South Wales Premier, resigned over a bottle of Grange. It's... Ross Kelly and the Whiteboard, the Hawke government. There was ministerial accountability. Early Howard government, same thing. I think if that was... That's what Trump showed the world. Right. is that actually you can say whatever you want and there's no content. That's right. Huh. Okay. And it comes back to our discussion, the fiscal discussion we were having before.

1:10:04I think there was a responsibility there because politicians assumed that no one would, if we start doing, no one's going to stand for that. You know, they will storm the Capitol and hang us from the rafters if we do this. So we didn't do it. We won't do it. Yeah. And then really in the last couple of decades, we've figured out that actually you can. Turns out you can. You can say whatever you want and you can spend whatever you want and no one cares. And I think once that clicks, it's kind of like, oh, it's on. Oh, I can do this? Yep, I can. No one's going to question it? Well, no, seriously.

1:10:39And they're going to point the finger at scapegoats and all these other kinds of things like, well, I'm just going to keep doing it. And then, again, game theory kicks in because you're going, well, I'm not going to do that. Well, every one of your opponents is and you're out of the game. So these things were held in check by a very rational assumption that no one would stand for it. The surprising thing is, oh, yeah, we easily spoon feed us whatever nonsense you want. I'll gladly take that. It's just like, really? Okay. We want to believe, right? And that can be great and it can be terrible. Mate, on that philosophical note, I think we've probably spent enough of our listeners' time talking about things that are interesting, hopefully, and engaging.

1:11:21and hopefully useful. Should we come back on Sunday, though, and actually answer the questions they want answered? Yeah. I was going to say, well, we're having the discussion on the fundamental stuff. I don't know if we're actually making progress or headway anywhere of solving any of these problems, but at least it's being talked about, right? I was going to say, I think, yeah. And that's, you know, sunlight is the best disinfectant. I think if there's these conversations being had, you want to agree on everything? A really, really nice comment from one of our listeners, actually, our live attendees, who came at me just at the end, I apologize if I've forgotten your name, but said, you know, it's really a issue you guys like each other and respect each other even when you disagree.

1:11:57And I figure that's, if we're doing some service, that I hope, and again, I'm being arrogant by assuming that that's right and positive, but I hope that that's actually part of what we're doing to, you know, help eliminate some of these issues. Even when we disagree or partially agree, having that conversation, throwing those things around, hopefully makes us better and hopefully brings better ideas, new ideas, different ideas, different perspectives to our listeners? Oh, it's just, I found it. I really leaned into this as I've gotten older. I just, I feel as though I, the best conversations are not with the people who I'm in strong agreement with.

1:12:34Yes. So I mentioned to you the other day, I went to a Bitcoin conference, not to talk about that, but it was just like, you know, everyone's on board, right? It was fun. It was a great conference. But the conversations with the naysayers are far better, right? And it partly - Reasonable naysayers who aren't equally trying to find the truth. Well, I might be wrong on a whole bunch of things, right? So I want to – like if we had the – if the podcast was he's right, I'm right, and we both agree. Exactly. It's like it's a very – the trouble with it is is that you get so convinced in your correctness that you can't see it when you're not.

1:13:07So the – Yeah, so I would just really employ anyone regardless of whatever domain you're operating in. What was that framework called, the five wires or something? Yeah, so good. ask and that's so good but i just this is the superpower that kids have as well they're just not afraid to go yeah but why uh because of this yeah but why is that uh because and as if anyone is a parent right you know you you catch you if you're honest you catch yourself all the time because little johnny says something guys it's because of this and then they go well explain yourself yeah actually i can't do you know what i mean and it sends you totally just go oh well I'll shrug my shoulders.

1:13:45But I think what most people do is that you shrug your shoulders and no, it's because I said so. I signed up to this philosophy and that's it. You know, you're quiet out of my door. But for those that can go, huh, that is actually, I don't know. But I'll find out or I'll look into it. I'll think about it. I just think that the world is far too complex for you to have any other standpoint. I think that's reasonable or rational. So we might annoy half of our audience every week, but hopefully at least prompts you to think a little bit, even if we're completely wrong, which we very well could be.

1:14:17And we will try and deal with some of those wires on Sunday after Andrews finishes Ultramarathon and we're back for a mailbag episode. Until then, Fool 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. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.