Are We Repeating the 1930s? A Global Warning from Victor Schwetz

27:51The tax rates were high. But nevertheless, productivity growth rates were high. The middle class creation was high. And you look at it and you say, OK, theoretically, in neoliberal framework, that's not supposed to happen because that's totally opposite to most neoliberal ideas. But it worked in 50s and 60s. And it seemed to me that the younger generation, having gone through some difficult time, is looking back to 50s and 60s. And therefore, the futures probably will be state-oriented. But because societies have not yet agreed on what the right model is, we'll be switching from one to the other.

28:31Because remember, if societies cannot agree on what is the right economic, business, political model, politics cannot agree. Politics is just reflection of society. There is no dysfunctional Washington. There are dysfunctional people. And so when people finally agree, Washington will become a consensual institution solving the problem. But until people agree, the politics cannot agree. And so what we are at a period right now, and probably for the next 10 years at least, that we're swinging from one extreme to another. And all of those swings are basically a knife edge. It's about 2 % of the voters swinging one way or the other.

29:14But eventually, as I said, maybe 10 years from now, a new consensus will emerge, as it did in 1947, as it did in 1979, 1980. The new consensus, probably in late 2020s, early 2030s, will emerge. And I think it will be much more state-oriented rather than neoliberal. No matter how much I like neoliberal because I am a baby boomer, but one has to face reality, what we're likely to see. Victor, is your view then that the Washington consensus, the neoliberal consensus that existed, that was very much at the beginning of the Reagan-Thatcher revolution, that it was simply improperly applied? Or, as your second suggestion was, is it that there's some aspect that is just inherent to the way that this digital economy is moving, that technology and financialization have pushed us to a point where state intervention was always de facto inevitable?

30:13I think it was de facto inevitable for a couple of reasons. One is, as I said, technology and financialization. But the other reason is that I don't believe in equilibrating systems. The history tells us that the economists and societies as they evolve tend to gravitate towards a higher accumulation of power, higher accumulation of wealth, as Piketty, for example, was describing back in his books. And eventually something else have to counterbalance it. Now, what can counterbalance us? Only state has a power to counterbalance us. So in other words, either you destroy it in wars and destruction, or you deploy the state to counterbalance it.

30:57It's either one or the other. Think of Teddy Roosevelt breaking up trusts in the 1910s and Woodrow Wilson continuing that in the 1920s. That's a state stepping in and saying, private sector can only be efficient when it's competitive. If it is not competitive, it's not efficient. It's not necessarily better than what the state can provide. And he was absolutely, and both of them were absolutely correct. And so do we have a great deal of monopolistic power developing? The answer is yes. Do we have sectors, whether it's healthcare or many other services sectors, that really are monopolistic sectors, and therefore private sector is not really improving efficiency of the outcomes, but actually making things worse?

31:44The answer is yes. So to me, because neoliberal framework assumes that there is perfect information, there is relatively low friction, and there is competitive environment. If you had that, it's actually going to work. But the problem is, most of the time, we don't have that. Most of the time, we don't have perfect information. We have friction, and we have monopolistic powers that develop. Now, that precludes neoliberal thinking of working through. And so to me, there is an underlying flow in the system of neoliberal thought. In other words, it's not as socially, nor politically, nor economically viable.

32:27As Karl Polanyi back in the 1940s was arguing, that if people were prepared to take the pain, pain of unemployment, pain of reduction in wages, pain of dislocation, that maybe the clearances of that system could have worked. But since 1930s, we really never had any dislocation of any magnitude. We really never had any clearances. So if you allow the system to work, it could work. But people politically will never accept it. And people then mobilize themselves to fight against it. And so the clearances that neoliberal system assumes just never occurs because it's against the nature how human societies actually work.

33:14And so to me, I always looked at the government as a balancing actor. So in other words, someone that can make that system work better. Now, no question, government always exceeds its mandate. That's what happened in the late 60s and into 1970s when we had a stagflationary period. But not to have government balancing, it's even worse. So it's not that, as I said earlier, it's not that you're choosing between the good and the bad. You're choosing between the bad and the very bad. Well, you know, I'm reminded of the Andrew Mellon quote from the 1930s where you talk about this, the pain that people are willing to bear.

33:52It's a great quote. And look it up. This was Herbert Hoover's Secretary of Treasury, I believe. liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. The capacity to tolerate that pain in a democratic system didn't exist in the 1930s. And it would seem with the rise of financialization that it is less likely to exist right now. I know Julian Brigden on Real Vision has shown the correlation between the S &P 500 and the labor markets, the inverse correlation, obviously, as stocks. is the risk that you just can't simply tolerate a sell-off in equities because the economy has become so totally financialized that when stocks drop, unemployment spikes dramatically.

34:34So if we didn't have the capacity to tolerate this in the 1930s, is there any capacity to tolerate this now when people get to go to the polls every two years and throw out the rascals who are in office and set in another set of rascals? Zero. Zero chance and zero tolerance. But one of the things you correctly highlighted is that I've come to a conclusion over the last decade that we no longer have proper economic cycles. In other words, we're managing cycles so tightly that neither corporates, nor investors, nor individuals know whether the beginning of the cycle or the end of the cycle. It could be beginning on Monday morning at the end of Tuesday morning.

35:14It could be as fast as that. So we've been managing economic cycles very aggressively since FDR New Deal. In fact, Peter Drucker, one of the founders of management science, he was questioning it in the early 1990s, which was 30 years ago. He was saying, basically, what will be the cost of us managing weather rather than climate? So in other words, his view was that prior to FDR, the way the government worked is that if it's really, really, really bad, the government will step in. But otherwise, they will allow the cycles more or less to go through. What started to happen after FDR, we seem to be setting temperature on like 75, 80 degrees Fahrenheit, no less, no more.

36:01Occasional cloud is perfectly OK, but certainly no thunder, no lightning. Occasional rain is fine, but no floods. And so one of the things he was questioning is, what price would we ultimately pay for subjecting economic cycles to so much pressure? Well, the answer, we know now what it is. We don't have clearances. We're accumulating inefficiencies. We get shallow gross rates. We know what the answer is. But what we also started to do, Ash, as you have mentioned, starting from Alan Greenspan's food option in October 1987, we started to manage capital market cycles. Remember, prior to disruption of Bretton Woods, there was no need to manage really capital market cycle.

36:48But from 1970s onwards, we started to manage it. And so we now reach a position, as you correctly said, that we can't tolerate asset price volatility. That was the essence of a Greenspan put in 1987. And the reason we can't tolerate it, because today, financial economy is a dog, and the real economy is just a tail attached to it. That's all it is. And so the whole objective of central banks is to make sure that the dog never sits on a tail, because, God forbid, you have six to 10 times more capital than the underlying economies are. that excess capital or what I call cloud of finance has different rules to the underlying economies.

37:34If you allow volatility of those assets in a cloud of finance to increase, they're going to destroy this little underlying economy on the bottom incredibly fast. Because as you continue to financialize, both households and corporates become asset addicted. So in other words, they take asset prices as a cue for making decisions whether to save, to spend, to splurge, and corporates doing exactly the same thing. They're taking it as a cue, whether to invest, to do share buybacks, or to do something else. So you've reached the stage that we no longer even have capital market cycles. Now, you, Ash, losing money, that's perfectly OK for Federal Reserve.

38:17But nothing systemic can be allowed. This is what we saw with Silicon Valley Bank. Usually something bad happens on Thursday, but Monday is fixed. That's what happened with the reverse repo crisis in 2019. That's what happened with European central banks and spreads between, say, German boons and Italian paper. We will never have shortage of US dollars now because there are swap facilities that were established in 2008, 2009 with unlimited supply of US dollar if it ever becomes disruptive. So you no longer have economic cycles. You no longer have capital market cycles. And you also live in a world of excess capital, so now that we have too much capital.

39:03Now, that explains how you can tighten monetary policy and spreads on how yield bonds fall at the same time. Or you can ease monetary policy and spreads might increase, not fall. So in other words, the rules of constrained capital, the rules that drive DCF, discounted cash flows, the rule that guides how you allocate capital in the world of constrained capital no longer apply. Now, what that basically means, there is no DCF. There is no neutral rates. That's why Jerome Powell keeps talking about sailing under cloudy skies. He doesn't see the stars. that also applies that risk-free rates become incredibly unpredictable and volatile.

39:46And it also means that risk premium, which usually is based on economic and capital market cycles, no longer work because there are no cycles anymore. So you can't determine whether the risk premium should be 1 % or risk premium should be 5 % or more. So it becomes a very, very different world. And are we to blame? In some ways, we are. I don't think anybody made a decision deliberately that we're going to eliminate economic cycles. I don't think anybody deliberately made a decision that we're going to eliminate capital market cycles. I don't think anybody made a decision we're going to create such a surplus of capital that we no longer have signals like yield curves.

40:29We no longer have signals like spreads. It's just we stumble along over the last 40, 50 years. But that's the final outcome. So many interesting points there, Victor. Hard to know where to begin. I should say just some reference points where we can talk about this. Jim Carson, who's frequently on Real Vision, talks to me about the mathematics of this tail wagging the dog effect in terms of exactly what you said, actually, that the idea is that the tail has actually become the financial markets that's wagging the dog. Anyway, the point is that the financial markets are ultimately what's driving the economy, not the other way around.

41:09The reference point has essentially been inverted. I really enjoy those conversations with Jim when we talk about that. But let me ask you this. It's almost this idea. You try and come up with a metaphor that people can understand about how this management of financial cycles rather than economic cycles work. For me, it's sort of a simplistic way that I think about it. It's the effect of kind of a culling the underbrush so that you don't have forest fires. And then when you do get one, it's absolutely massive. But with that said, and just trying to understand this and when that pivot point moment was, was it the Greenspan put in 87?

41:43Because you mentioned the New Deal as one of the markers as you begin to start managing at least the climate, if not the weather. But US industrial production grew dramatically after the New Deal, through Bretton Woods, indeed, through the Nixon shock and after. Talk a little bit about how you understand that framework and see where those pivot points are, where the shift is, where that potential inflection point is, and where you could potentially get a nonlinear effect in financial markets as well as the real economy. Yeah, you're absolutely right. It is a very good metaphor that you've just used, Ash, that essentially is eliminating Russia and then having massive, massive fires.

42:26That is why the government is becoming more and more proactive. If you think of, for example, Trump administration, incoming administration, there is a lot of conflicting objectives in this and that administration. They are pro-industrial policies and anti-industrial policies. They're pro-free market and they're pro-tariffs. They're pro-unions and anti-unions. They're pro-technology platforms, anti-technology platforms. There is a variety of contradictory views coming through. But one thing is clear, that Donald Trump fully understands that money matters. And that's why if you think of appointments that Donald Trump is making, and was making in Trump 1.0, for example, Trump 1.0 never replaced Treasury Secretary.

43:21But he replaced multiple Secretaries of State and National Security Advisors and the rest of it. He only replaced one Commerce Secretary. You know, Federal Reserve was not touched. And even now, think of it, Jerome Powell disagreed with Donald Trump twice, and Donald Trump did not respond. How many times does that happen? Not many times at all. And so when I look at it, basically, despite all the chaos of elections, whether it's in the UK, whether it's in France, whether it's in Canada, whether it's in the US, where disoriented masses keep moving from one direction to another, despite all this noise, it is apparent to me that at least Donald Trump understands that money is important.

44:08Because money is important, you can't put incompetent ideologues in charge of money. And so most of the appointments that he's making are actually fairly conventional in many ways and quite solid. Now, that basically tells you that Donald Trump and any other minister, Cinco Brothers of Italy, for example, as an example, they all emerge as a relatively conventional economists. They are quite unconventional, conservative or otherwise in cultural and other areas, but quite conventional in every other aspect. Now, the reason for that is very simple, that they also understand that at some point in time, there will be that flip from being very placid and nothing happens, spreads don't rise, bankruptcies don't rise, provisioning doesn't rise, to something horrible occurring very, very quickly.

45:08Because remember, the risks have not disappeared. They've just been expelled out of conventional economics and capital market cycles. So when you look at the screen, you're not looking at real life. I usually tell to the clients, you're just playing computer games. None of it is real. But now and again, real life interferes with your screen because the risks are not gone. You just don't see it on a screen. So where are those risks? Well, they've gone out of the system. They are in polarization, in political outcomes, electoral outcomes. They are in geopolitics. They are in health care. They are in climate.

45:50And so if you were to ask, what is a flip? Those will be the flips. Most of the time, when the real life interferes with your very placid screen, which doesn't show that Yilko, Yilko tells you nothing, doesn't show spreads, doesn't show any tensions, doesn't show anything, now and again, the real life comes through and suddenly everything looks horrible. Now, can you restart your screen? Now, a lot of real life interference is actually not that serious. and the policymakers through macroprudential controls, microprudential controls, through communication policy can restore your screen very, very quickly.

46:34You know, you come on Monday morning, say, oh, my God, it's going to be a terrible day. By Monday, lunchtime, oh, you know, it's OK. By Monday evening, let's go for dinner. And the whole thing is just gone. So a lot of that life interference can be fixed quickly. But sometimes it cannot be. And that's what one needs to prepare for. So when investors ask, OK, what should I be looking for? You should be looking outside the system, not into the system itself. Don't focus so much on the provisioning of bad debts. Don't worry so much about bankruptcy levels. Don't worry so much about the yield curves or spreads.

47:11Look outside the system. Because whether it's electoral outcomes, whether as a result of those outcomes, massive policy shifts, whether it's geopolitical outcomes, whether it's a health care, whether it's a climate, something outside the system can massively intervene. And when it does, it might take central banks and treasury departments, you know, sometimes months, sometimes years to restore your screen to the placid form that you expect. That's what you should be looking at, something that disrupts you from outside the system, not from inside the system. Yeah. There are decades when nothing happens, and there are weeks when decades happen.

47:54I think I've quoted Lennon with an O, John, not Vladimir, more often on this show. But that quote is one that sort of haunts my consciousness. And it's this idea that when these exogenous shocks happen outside the system, your ability to restore things on your screen with another screen diminishes. And we saw that, obviously, with COVID pandemic and the impact of the real economy. Let me ask you this. And to some extent, Russia, Ukraine will too. So let me ask you this. When we talk about this, some people have called them black swans, Nicholas Nassim Taleb's line for it. What are some of the ways where investors can position themselves if they're reading these gauges or not reading these gauges to get a sense of where they can find shelter in the event that one of these exogenous shocks happens from outside the system?

48:47Yeah. In extreme cases, of course, if we go into world on fire of 1940s, your portfolio will be the least of your problems. So in extreme cases, it is not really that relevant. But assuming we don't go into the world on fire of 1940s and focus on a more manageable risk, my argument for some time was that if risks are everywhere, risk is not. nowhere. We have now risk everywhere. So if you think of 2000.com, that was really one asset class going bad, which spread a little bit wider. If you think of 2008, it was really only one asset class going bad. And then again, it spread wider. Today, problems of mines are everywhere.

49:40So people ask me, are you worried about commercial real estate? No, I'm not. Are you worried about about private capital, both equities and debt. I mean, at the end of the day, private capital is just public capital, highly leveraged with delayed prices. That's all it is. So are you worried about it? Are you worried about it? No. Are you worried about various digital assets, which God knows what the hell these are? Are you worried about the parity trades? Are you worried about basis trades? Anyway, there are so many things to worry about. Are you worried about concentration of returns? And the answer, no, I'm not worried about any of that.

50:17Why is that? So long as we don't have massive exogenous shock, all of that will be taken care of. There will be special policies for commercial real estate. There will be special policies for private capital. All of that will be taken care of. And so I'm not worried about any of that stuff going wrong. Now, the question that becomes, if that is the case, then risk is nowhere. If risk is nowhere, that's an encouragement to speculate, whether it's a$6 million bananas, whether it's Bitcoin, whatever that is. That's an encouragement because risk is everywhere, but risk is nowhere to be seen. That's true.

50:57Can you moderate that? Well, the answer is yes. That's where your macro and microprudential controls theoretically should come in, trying to manage that degree of speculation. But then, as you said, exogenous shocks coming outside the system could displace it very, very quickly. Now, my view on those shocks is to say, if you say, take Trump administration coming in, do you have potential shocks coming from tariffs, deportation, immigration, fiscal pulse, etc.? The answer is yes. are there a guardrails on a system that should preclude the most extreme outcomes? The answer to me is yes. So what you should be looking for is the guardrails.

51:44How do the guardrails work? Now, what are those guardrails? Well, first of all, as I said earlier, my view of Trump is that he understands money is important. So one of the most important guardrails clearly is the capital market and how capital market functions. Number two, Republican Party didn't really win in any meaningful way. That's why they have virtually no majority in the Congress. They're far away from 60 senators they require. So do you have some legislative guardrail? I think the answer is yes. Do you have judicial guardrail? Yes. Remember, very few cases go to U.S. Supreme Court, usually no more than one or five percent.

52:23Almost everything is decided at the federal and the appellate level. And there you have more than three times more judges appointed by Obama and Biden than appointed by Trump. Do you have that sort of a guardrail? The answer is yes. In a conservative U.S. Supreme Court, they always lean towards state rights, not federal government. Liberal Supreme Court goes the other way around. They tend to lean towards federal government rather than the state rights. Now, we have a highly conservative Supreme Court. So does it mean it's potentially a problem for Trump? It certainly was a problem for Biden. Well, the answer, if they're consistently conservative, is yes.

53:03Is that a guardrail? There are international guardrails. There are international commitments guardrails. So there is a variety of guardrails in the system to say that whatever announcements are going to come through, which potentially could be incredibly disruptive for the currency market, it could be disruptive for equity markets, that you probably could look through this and assume that those guardrails that I've just mentioned are going to work. But you need to monitor those guardrails. So if you were to ask me one question with the incoming Trump administration, it's your guardrails and how well those guardrails are going to work in order to minimize the disruptive impact on your screen as you trade or you invest.

53:48Now, if you go more broadly, you can also argue from a geopolitical point of view. The way I look at it, that people in most countries are disappointed, they are angry, but they're not yet mad. Now, what it basically means, in order to be allowed to govern, they ask you to defang, to get rid of your most extreme views and most extreme policies. If you say you're brothers of Italy today, they're not brothers of Italy five, six years ago. If you think of Iran in France today, they're not Iran as it used to exist in the prior decades. If you think of Republican Party, they are mass movement of grievances.

54:32But some of the worst excesses are already not there. And I think that will be expelled as we go forward. So in other words, globally, people are displeased. They're not happy, whether it's inflation, whether it's immigration, whether it's inequality, social and economic, they're not happy. But they're not yet met enough to amplify those extremes. Now, what it means from a geopolitical point of view, that they're pulling back the leadership of the country to reduce geopolitical pressures. That's part of the reason China is not invading Taiwan, a part of the reason why Russia still has to make sure that they somehow find an answer.

55:12And you can look at it at Middle East the same way in other places. So long as people are not mad enough to magnify the extremes, then geopolitical pressures will be boiling, but they're not going to be disruptive. So in other words, we're going back to the Cold War of 1950s, 60s, and 70s. We always had Hamas. We always had Houthis. We always had Hezbollahs. Beirut has always been burning. Damascus has always been burning in some form. But it did not displace demand and supply curves for goods, commodities, services, by and large for labor, for decades. So it's a very bad outcome and unfortunate outcome for people who happen to live in some of those places.

55:57But from a global economy, it's actually manageable. In other words, if we have a Cold War scenario, then military spending will go up probably to 4 % or 5 % of GDP. GDP, but in a hot war, it's usually 20 % to 40 % of GDP. Now, in a peace dividend, it was between 1 % and 2%. If you're saying a death and conflict, in a hot war, it's usually 200 per 100 ,000 people. In a cold war, it's 5 % or 6%. In a peace dividend, it was less than 1%. Do you have a little bit more destruction, a little bit more deaths? Do you have more fiscal spending associated with defense? Yes. But this is not at the level that actually will disrupt either global economy or your screens.

56:45And so the question that becomes, if you sink off geopolitics, is to say, do you sink you on the cusp of going from a Cold War to a hot war? If that is the case, that's a fundamental shift of everything that you do. If, however, you just keep bubbling at that level without exceeding those thresholds, then degree of disruption, despite all the news flows, is going to be very, very limited. The same applies to climate. Now, clearly, climate is changing, but we're really not doing anything about it. And the idea is that somehow, for a period of 30, 40 years, we will find answers. And yes, maybe the weather will be in a climate, the temperature will be one and a half degrees or more warmer.

57:33Maybe that's the case. But we're really not doing anything right now. So the things to watch out is the extent to which it forces us to act much more proactively. Because if we take 30-year view, then both private sector and public sector will adjust. We're not going to have more investment on existing investment. We're not going to have more spending on existing spending. But if we must adjust in a space of only five to 10 years, there is no question that this will involve duplication of investment and spending, will be highly inflationary, will create all sorts of problems. So the fork on the road here on the climate is to say, do you think we can continue going on as we are without encountering such a major climatic disaster that we will be forced to recognize that the changes must occur in a much shorter period of time?

58:24and therefore displays, as I said, everything on your screen. And a final point I'll make. Because the technology and financialization are such a powerful forces, if you want to take a longer-term view, you just play into them. So in other words, any company, any industry, any sector where productivity and circular drivers are strong, So you can grow irrespective of what happens around you. That could be another way of doing it. As I said, basically saying, all of this stuff could happen. There is no way I have a visibility. I'm just going with underlying strong forces, which to me is the information age and to me is finance.

59:11Now, a lot of people say, does it mean technology? No, because technology is everywhere. I don't even know what technology is anymore. Everything is technology. Victor, let me ask you this. I know we're talking about this at the broadest possible level from the framework of global macroeconomics, but when it comes to the three largest economies in the world, the EU, the United States, and China, do you have a view, as we talk about the structural implications, the guardrails, the way these economies are structured, do you have a long-term view about which of the three are on a relative basis, how those three are likely to move in relation to each other.

59:51Okay. Yeah, I do. I've been a bull on the United States for a long time. And the reason was very simple. The U.S. is the only major economy that is aiding labor, capital, and growing multi-factor productivity all at the same time. It has a large domestic economy. It has a relatively low trade dependency, because if there is no global cycles, you don't want to depend on them, because there is no cycles to depend on. So you want to have as much domestic economy as possible, and that's what the United States has. It has a best blend of tangible and intangible assets, which means you can guarantee faster gross rates longer term.

1:00:34The US has no geopolitical problems. In a sense, US spent less than 1 % of GDP on Russia, Ukraine, and they almost defeated Russia. If they spent 2%, Ukrainians probably would have defeated Russia. So there is no geopolitical problems. There is an extremely wide waterfront of assets to invest in. The only negative in the US is social polarization. It's actually one of the highest in developed countries. And it's not even clear how you're going to reconcile it, because clearly the coastal areas and the major cities are predominantly democratic. Everything else is red. So people no longer live next to each other.

1:01:13They no longer befriend each other. They no longer marry each other. They have very different life experiences. They have different education. There are so many differences that it's not even clear how you're going to bridge it. So the only major problem is that, and that's why I always say only Americans can kill America, but nobody else can. And so longer term, those pluses I've highlighted explains why U.S. corporate ROEs are at 20%. Well, in Europe, they're 10. In China, they are 8 or 9. It explains the cash flow generation. It also explains why you would pay 22 times forward in the price-to-earnings multiple for US.

1:01:57Now, China, in my view, is in a liquidity trap. Essentially, they overinvested. They overcapitalized. Efficiency of capital utilization is very low. It's not even clear how they're going to get out of this. And it's reflected in everything from the rising leverage level to declining ROEs. It's reflected rising I-Core, incremental capital output ratios. It's reflected in diminishing cash flows. It's reflected in negative deflators. And that's why nominal GDP is growing slower than a real GDP. So China needs fundamental restructuring of the economy, as well as changes in politics and geopolitics to restart.

1:02:43Because theoretically, China is below technology frontier. and can continue to grow faster over a prolonged period of time. But it requires a very substantial shift. In other words, far more consumption, far less investment, far less savings, far less reliance on export. You have to open up some free space between public and private sector, between state and non-state. You need to reduce geopolitical tension. There's a whole range of things that China needs to do. So it's a very complex environment. And European Monetary Union doesn't really have a lot going for it. In a sense, it doesn't add labor.

1:03:23It adds wrong type of capital. It doesn't grow multi-factor productivity. Theoretically, they have a very large domestic market, but it's really split into 20 smaller markets. It does have monetary sovereignty, just like the United States. But ECB is not connected to individual economies the way Federal Reserve, for example, or BOJ are connected to the US economy or the Japanese economy. Europe is a cauldron of all geopolitical and social tensions that you can possibly envisage. They've got a wrong balance of tangible and intangible assets. And so you look at it and you say, OK, I understand why cash flows are low.

1:04:03I understand why they're struggling getting are re-ease above 10%. And I'm not totally sure why I should be paying 15 times for this, rather than 22 times for the United States. Now, the only thing to say, if you disagree with me on cyclicality, and if you say, Victor, I think in 26, global economy is going to accelerate significantly, then you should buy European Monetary Union. Because remember, their trade dependencies four times the US level. So in other trade dependency of the US is 25 % of GDP. They're almost 100 % of GDP. So think of European Monetary Union as a mercantilist bloc that will prosper if, in fact, we return back too much faster growth rates.

1:04:51But as I said, I don't believe we will. I think we're stuck in the twilight with the global economy roughly growing 2.5 % in market terms. Not better than that. China will never again support global growth. It will never again support global commodity complex. There is nobody to step in into China's shoes today. So U.S. effectively is sucking in all the growth globally into the United States because of those structural positives that I have just outlined. And as I said, the only thing that concerns me is a social polarization in the U.S., Yeah, I think it concerns everyone. But on balance, as you say, first of all, there's never a perfect scenario for any economic area.

1:05:39And you talk about the balance of probabilities, the guardrails, and the structure. A very, I think, bullish case that you've just highlighted in the longer term. But maybe that's just my bias as being someone who's very pro-American. But a fascinating conversation, Victor. I hope you can come back and join us again and continue to explore this framework that you have of viewing the world. I think our viewers are really going to enjoy it. We'd love to have you back on the show. I would love to. Thank you very much for having me. But your finer thoughts, let me give you an opportunity here because we've covered so much ground to sum up what we've talked about here today.

1:06:13Final thoughts, key takeaways from this conversation. Well, to me, the key takeaway, if you're an investor, don't get preoccupied with economic cycles. They don't exist. Don't get preoccupied with capital market cycles. They no longer exist. Assume that excess capital, abundant capital will continue. Look for risks outside the system. That's what potentially could make a difference. If you're more politically oriented, the key takeaway should be that today we don't have a globally recognized social, economic, and business model. That's the essence of my book that I wrote, The Twilight Before the Storm, where we're basically saying, equivalent to 1930s, we are in a stage of confusion.

1:07:07That confusion would last, in my view, at least 10 years. And therefore, from a geopolitical and political perspective, expect continuing swings from one extreme to another as disoriented and dissatisfied people keep moving from one answer to the next without finding an answer that they are happy with. That probably will be, at least from my point of view, the key conclusions. Victor, fascinating big picture conversation here. And once again, for people who are interested in learning more, the book is called The Twilight Before the Storm from the Fractured 1930s to Today's Crisis Culture, How to Avoid a World on Fire.

1:07:52Thanks for watching. Thanks for listening. Have a great afternoon, everybody.

1:08:20so within this we have parties you can choose the vip track and then you might be on a boat party and you're doing something else and going for a dinner there or meeting people in different venues and bars so there's lots going on it's like a mad treasure hunt I like the idea of just hanging out with you guys, drinking a rum or a glass of champagne and putting the world to rights and just really celebrating you as our members and our community. And it's a thank you for that as well. It'll be an incredible event.

1:08:55Listen, get your tickets quick before they sell out. This is the event you've been waiting for. Come and join us for the crypto gathering. We will have an absolute blast.

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1:10:44And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments. S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, Forex, and beyond. With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus500. With over 20 years of experience, Plus500 is your gateway to the markets. Visit us.plus500.com to learn more. Trading in futures involves the risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus500. It's trading with a plus.