Is America The Richest Third World Country?

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1:00David McWilliams: To understand the economy, you have to understand human nature. This podcast is powered by Acast. Don't cry for me, Argentina. The truth is I never left you. All through my wild days, my mad existence, I kept my promise. Don't keep your despair. How are you doing there? It is time for the podcast. As you can hear, we're going to be talking about Argentina, but not necessarily Argentina. Musicals we're going to be talking about. We might actually talk about musicals, John. We may well talk about musicals, because the musical Don't Cry For Me, Argentina was based on Evita, and Andrew Lloyd Webber is going to do a new musical, which is going to be called Melania.

1:58David McWilliams: Right? because we're going to talk about how America under Donald Trump is heading down the road of Peronism. So Argentina, 80 years ago, had an experiment in a thing called Peronism. Right now, every day, Donald Trump is creating the background noise for an American experiment. So we're going to talk about American Peronism. Now, I know just before we talk about musicals, I think Melania would be a great musical. Absolutely, yeah. Yeah, yeah. We should write that. Melania, the musical. I'm going to edit all of this out before anyone else grabs the idea. And Trump in the background like Perron.

2:37Yeah, yeah.

2:38David McWilliams: Don't cry for me, Oklahoma. Okay. It'll be amazing. Don't cry for me, Oklahoma. And away we go. Yeah, absolutely. Away we go. We could write this. If we fail as podcasters, we could become musical stars. We'd be huge. Tin Han Ali, Ali Economics, okay? You could write the music. I'd write the words, away we go. Done. Done. How are you doing there? As you can see, it's podcast time. We're down in the HQ. We're in the basement for the first time in a while. And there is a ripple of excitement. There's a sort of a fleece on of creativity zapping across the four walls of the basement. Why? Because we're going to talk about your favourite subject, my favourite subject, John's favourite subject.

3:20David McWilliams: Well, not favourite, but the one that's dominating. Which is what, after having gone for the head of Jay Powell, then firing the head of American Statistics Bureau of Labour, now firing a governor of the Federal Reserve, what Donald Trump is doing to the credibility of American institutions. Now, the reason we talk about terrorism there is because we have seen this thing before, John. We have seen this play before. 80 years ago, Argentina was the seventh richest country in the world. And I'll tell you a little story, right? Yeah. Christmas Day of about 10 or 15 years ago, I was in a small town outside a city in Argentina called Córdoba.

4:13David McWilliams: We were visiting friends of ours. Córdoba, like in Spain. Like in Spain, yeah, exactly. So there's a big city in Argentina called Córdoba. And we were guests of friends of ours who are an Italian family in Argentina. and the most bizarre thing is we arrive in and some of the people can speak English. I don't speak any Spanish. These are our cousins. So the cousins were actually, the entire family had emigrated to Argentina from Italy, from the north of Italy, from Lombardy. So it's not from the south of Italy, in 1950. After the Second World War, they thought... Along with thousands and thousands of...

4:46David McWilliams: Thousands and thousands. Well, if you look at all the great Argentinian footballers, Maradona, Messi, Passarella, they're all Italians. Yeah, yeah, that's true. They've all Italian names, right? So we were having a chat and the American cousins were the rich cousins. So the family had emigrated. Two brothers. One had gone to Argentina to make his fortune. One had gone to America, USA, to make his fortune. The brother who goes to Argentina, his kids, grandkids, end up living in a country that went from the world's seventh richest country to the world's 77th richest country. That is a collapse of monumental proportions.

5:23David McWilliams: In how long? In 80 years. 80 years. The brother who went to America, North America, ended up living in Chicago, and all those kids were, you know, middle class, corporate people, whatever, loads of money. And it was interesting. So it's the same family, and the funny thing is the cousins look really the same. Their common language is Italian, but the North American version of the family had prospered. the Argentinian version of the family had become increasingly impoverished. And many of us say, why the hell did we leave Italy in the first place? And therein lies the familial... But why didn't we go to America?

5:59Why didn't we go to America? Exactly.

6:00David McWilliams: But therein lies the familial snapshot of what happened in the different fortunes of Argentina and America. And the question is, why? Why did that happen? One of the obvious reasons is the system of government. Because the system of government sets the tone for the economy. The system of government and the Americans embraced in 1950 was kind of consensual politics, you know, left, right, Democrat, Republican, rule of law, independent institutions, free market economics, properly credible central bank, etc. Right? All those things, all those institutions. That's what the Americans set up and abided by that law.

6:40Right? The Argentinians came up with this new thing called Peronism.

6:46David McWilliams: In fact, as an Argentinian would say, Peronism is the only successful Argentinian export, right, in the last 80 years, because they don't export very much apart from soybeans and wine, right? Now, what was Peronism and why is it important? So Peronism was this bizarre system of government that ruled Argentina for 80 years and destroyed it. Peronism is about tariffs, putting them up. The Argentinians put up huge tariffs. is about something called import substitution, which is basically you say, oh, that thing's made better in Germany. Well, we're not going to take the German one. We're going to make it ourselves.

7:23Right.

7:23David McWilliams: Which is exactly what Trump talks about. Yeah. Of course, it's demagoguery, which is like the one man, El Duce, the big, big president, nationalizing industries. That was what the Argentinians did. What did Trump do last week? Yeah. Took 10 % of intel and said, we're going to do more of this. We're nationalizing industries. It's so anti-capitalist though. Yeah, exactly. Completely. Censorship. This is exactly what Trump is doing by taking the lead statistician of the Labour Bureau out, attacking the central bank, which is what Peronism is all about. They forced the central bank to print money all the time.

8:00Central planning. And, of course, what they did was they created a country which closed itself off from the world.

8:10David McWilliams: And the world shrugged its shoulders and said, yeah, whatever. De Valera style. De Valera style, right? But this is what's happened. Why? Just tell me briefly why Peronism came out. Juan Peron. How come he came to power? And what was the need for him to come to power at that stage? So up until the late 1920s, Argentina was regarded along Uruguay as the Switzerland of Latin America. They had universal suffrage before most Europeans. They had universal health care. They had universal education, free education. These were a little part of Latin America that looked, felt, and smelled like Europe. They had very vibrant democracies, incredibly vibrant free press, and they had lots and lots of migration.

8:54David McWilliams: People were coming in all the time to this part of it, particularly that part of Santa Catarina, which is south of Brazil, Uruguay, and Argentina. So flying along. Then in the 1930s, they get hammered by the Great Depression. because they're largely based on exporting agricultural products. So they got screwed when tariffs came in. They also had a very large speculative nature to the economy. They were dependent on foreign capital, exactly like the United States. They ran large current account deficits. They issued debt, and that debt they were able to pay back. But the whole thing was based on importing foreign capital, foreign labor, and fusing these things together to create products for export.

9:41And what was their, who was their main export market? Was it Europe? Europe and America. Europe in the main.

9:46David McWilliams: Europe in the main. Britain hugely in the Argentinian case. Argentina was called at one stage the most English Latin American country. Right. Because there was a lot of English speakers there. And a huge amount. Christian Brothers. Huge amount of people from, Christian Brothers, yeah. And a huge amount of people from your neck of the woods, from Longford. That's where most Paddy's came from. Longford, Westmead, and me, County Mead. In fact, an interesting point on Christian Brothers, John. There are many. Okay, this is an interesting point. This is one. You might remember, you might have seen that movie about a Uruguayan rugby team that...

10:20Oh, yeah. ...who's plane crashed in the Andes. Yeah, yeah, yeah, yeah. And some of them ended up eating each other. Yes, which was remade actually recently. That team came from a school called Estella Maris.

10:33David McWilliams: Estella Maris, set up in the 1950s by Irish Christian brothers. and it was an English-speaking school in Montevideo. So the Christian brothers have been everywhere. There you go. They sure have. And places where they shouldn't have been as well. Don't, don't. So the Argentinians begin to flirt in the 1930s with military dictatorships, with the strong man. Think about what was happening. Mussolini was initially with corporatism. Franco was in Spain with his own version of corporatism. Of course, Hitler had Nazism. And the Argentinians began to flirt with this idea that, remember we talked about the garrison state last week?

11:18David McWilliams: Yeah, yeah. That Argentina would have a garrison state, but they were a garrison state without any enemies. That was a much more different thing. Well, yeah, they were miles from anywhere. Exactly, exactly. And Perón was a junior officer in the Argentinian army in one of the various coups during the Second World War, where Argentina was actually on the side of the Allies. But lots of people believe they were on the side of the Germans, but they were actually on the side of the Allies. But ultimately, there was instability after the Second World War, there were military coups, and this pretty handsome young man called Juan Perón emerges as the leader of a junta.

11:59David McWilliams: But the fascinating thing is he gets elected. So he goes to the country as a military guy, but he's not a demagogue. Like Donald Trump, he gets elected twice in legitimate open elections. And then he begins to create this movement called Peronism. And the Peronista were largely based on Mussolini's corporatism. So the state, the trade unions, and the corporate sector would come together in tripartite agreements. and this was the beginning of a process that led to the sort of nationalization of large parts of Argentinian industry. So the telecoms, the airlines, the railways, all that sort of stuff.

12:44And again, like what's happening in the United States, the idea was, well, you know, the government needs to own these strategic industries, et cetera, et cetera. And then, of course, the attack on the central bank was absolute.

12:55David McWilliams: And the reason Evita Perón is regarded with such extraordinary fascination was that she, the wife of Juan Perón, basically adopted the mantle of the Peronists and she became this sort of transformative figure in Latin America. Came from nowhere, came from poverty, was brilliant with the average Argentinian and she became a force in and of herself. So the umbrella movement was called Peronism. But the point is that Peronism destroyed Argentina. You might remember years ago, about four years ago on the pod, when Boris Johnson became the leader of the Tory party. Yeah. I called him an Eton Peronist.

13:41Yes, yes, you did. I remember that.

13:43David McWilliams: I said, this guy's going to destroy the country. And he did. Yeah. Right? Well, he made a good fist of it. Yeah, yeah. He made a good... If he stayed any longer, he would have. He made a good go. Yeah, if he'd been sober for a while, he'd have done it, right? Oh, you should get off the sauce for a while. So if you look at what's happening in the United States now, we're going to talk about Central Bank and how pivotal it is. I know you have lots of questions. But the way to frame this is through the prism of, we have seen this movie before. An incredibly successful country. Goes down the road.

14:15Stage show. We've seen the stage show before.

14:16David McWilliams: Sorry, you're absolutely right. We've seen the stage show, right? So we've seen the stage. We've been at the theater right before. We've been at the musical, right? Don't drive for me, Oklahoma. And what I think is happening is, so for example, do you know John Bolton? Do you know who John Bolton is? Yes. John Bolton, right? Big Tash John Bolton. Fantastic Tash. If you're going to have a Tash, you're going to have a John Bolton Tash. The warmonger, as Trump calls him. Yeah. Well, do you know what happened last week? His house was raided. I mean, this is crazy stuff. They're putting cops on the street of Washington simply to see...

14:51No, the interesting thing, the cops aren't going into violent areas.

14:53David McWilliams: The cops are going into really peaceful areas. Yeah, it was the National Guard. And actually, I don't know if you've heard that the governor of Illinois, Pritzker, I think his name is. Big guy. Big guy. And he's made some brilliant speeches before, but his most recent one about the National Guard. Have a listen to this. This is about the president of the United States and his complicit lackey, Stephen Miller, searching for ways to lay the groundwork to circumvent our democracy, militarize our cities, and end elections. There is no emergency in Chicago that calls for armed military intervention.

15:32Mr. President, do not come to Chicago. You are neither wanted here nor needed here. Your remarks about this effort over the last several weeks have betrayed a continuing slip in your mental faculties and are not fit for the auspicious office that you occupy. So there you have it. So if you were worried about the United States, the problem with the United States is half of the Americans now believe that Trump is a dictator, but the other half want them to be a dictator. Yeah, they do. So the country's completely divided. But again, let's go back to the idea we've seen this before. I think what we want to focus on is the economics, right?

16:12I'll just start with one idea. And I want listeners to take this in, which is the definition of an emerging market is a country where interest rates in a recession rise. They don't fall. And just keep this in the back of your head. Because right now in the United States, as Trump interferes with the Fed, as the Fed has suggested it's going to cut interest rates because the economy is slowing, what is happening in the long end of the curve, okay, which is the 30-year rate, 10-year rate, those interest rates are rising. But that is the sort of behavior of a country that is dependent on others for its prosperity.

16:53As I've said before, its prosperity is rented, not earned. That is what happened in Ireland when we had the great crash in 2008. Our interest rates went not downwards, upwards. So our bond rates were about 13%. Why? Because people thought we were going to default. What happens in a proper country that is well managed, and our British listeners will be aware of this because British interest rates are rising now, even as the economy begins to contract. What happens in that sort of scenario is interest rates rise now. Why? It's because the integrity of the economic and financial architecture is being undermined by the person at the top.

17:33And this is exactly what is going on in the United States. If this keeps going, because I know we want to talk about central banking, if it keeps going, what we will see is there's a very thin line between credibility and a lack of credibility. And if people think, okay, we thought it couldn't happen, but, you know, John Bolton just got arrested the other day. Jay Powell's been hunted out of office. They've just fired a governor of the Federal Reserve.

18:06David McWilliams: the budget deficit's going through the roof the tax cuts are for the rich there's no sense of anybody being in control there's chaos monkeys everywhere they just say screw this and that I think is not where we're headed but that's the risk scenario for America but isn't it a case though that Trump is all about the markets or certainly has been and if he's spooking the markets why is he following this at all well the interesting thing about the markets is that what the last few months has proven is that the markets will only go where they think other people are going, right? So the markets have no morality.

18:44There's not a guy standing.

18:45David McWilliams: Remember you said, I am Spartacus, right? There isn't a dude saying, I am Spartan, right? And I'm going to go through. What they do is if they think financial markets, because financial markets are basically a, what I've always said before, they're a reflection of human nature. And if they feel, well, you know what, we can keep getting along with this and tech stocks are rising. I happen to believe that everything in America is crazily overvalued at the moment. But not just me. Most people who've been looking at history, economic history. The stock market says share price over... Or cheese. Cheese is overvalued.

19:18David McWilliams: Yeah, cheese. If I was you, I'd be buying Oklahoma cheese. I didn't know what you were talking about there. Yeah, bread. Very expensive. Milk is very expensive. Eggs are very expensive. Eggs, remember it was the yellow egg thing. But let's focus on the central bank because I know this is what everyone's talking about over the last couple of days, and I know you've lots of questions, which is what is happening to the Fed? Why does it matter? Independence of central banks. Why are people getting their knickers in a twist? It's one person getting fired. Surely that can't be a big deal. Yeah. But I think maybe after the break, we should tease that a little bit more.

19:54Absolutely.

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21:37Actually, just before we start, when you played Evita that time, brought me back to a time when I was working in a studio. You know, I actually did a session with Sarah Brightman and Andrew Lloyd Webber. No way. They were a married couple at the time. Yes. And both of them were in the control room and they were kind of bickering and I kind of pottered out and fixed up some mics and stuff and when I came back it was a full blown row. I love it. Do you know what it was about? Go on. Who was going to drive the Bentley home? I kid you not. I love people. I was looking at them and going what really?

22:15Did somebody want to drive or be driven? What was the thing? I'm not sure. I was just scratching my head I can't believe this is happening in front of me.

22:22David McWilliams: That's going to happen to you and I when we write this movie. We write the score. I'm driving. You can go shotgun. There's lots of people say, yeah, you know, that McWilliams and Davis. We were with them one night. You know, they're really successful, you know. An amazing, a total bitch fight. Slapping each other around. Why? Because the banker wanted to drive. Badly. Good stuff. Where are we? Where are we? Where are we? So, last week at Jackson Hole, all the central bankers turned up. for the big powwow. Now, first of all, I don't want to spend too long on this, but I was just curious about when you see that scene in beautiful Wyoming, fly fishing and all the rest, you have all these elite central bankers from around the world, all talking, all planning, strategizing over the direction of the global economic and financial system.

23:16And you kind of wonder, like where's the democracy in that? Democracy, John? Democracy?

23:23David McWilliams: What sort of a thing of a teenian do you think? No, it's a good question. So I suppose the link for this week is the week before last we had this Jackson Hole meeting of all the central bankers and then last week we had Donald Trump having a go at them. Yeah. The one thing about Donald Trump is he's very attuned to popular opinion and he understands that most people on the main street of America will not cry for Argentina, for a central banker. Yeah. Because they think a bit like you. Like, who are these people? They're unelected. They're walking around. They're talking about the world. They're, we don't know who the hell they are.

23:58David McWilliams: They're quite dull. They are in control of the money. This is the most important thing. Exactly. These people control the money. And yet we've no idea why, how, who they are and what they're actually saying behind closed doors. Well, that was it. Yeah. And that, of course, leads to all sorts of theories, conspiracies, or just normal theories about the concentration of economic power in the hands of very few, who by definition don't tell the plebs very much. In fact, Alan Greenspan, who was sort of the central banker, central banker, he just said, if I seem unduly clear to you, you must have misunderstood what I said.

24:37David McWilliams: But the whole point is that their idea was, now they all laughed at this, and we laughed at it, but you think, hold on a second, you're in control of the cash. Yeah. Right? So what people are getting their knickers in a twist about now is, oh my God, Donald Trump is attacking the sanctity of central bankers. And what you're saying is, well, tell me why it's so sanctimonious. Does he have a point? Yeah. Now I've said in the book that basically central bankers, and I speak as a former one, so I can kind of, I know the language and I've been involved in the meetings. Yeah. Do you still have that dull suit?

25:10David McWilliams: I know, it's brutal. I think the color was fawn. Fawn would have been a fleck in it. Lovely. Yeah, yeah, yeah. And Farrah Slacks. Anyway, I think your question is really legitimate. So at the moment, the whole, to use this expression, mainstream media is attacking Trump by saying he's undermining the credibility. I actually think he is, but I don't know if that makes the question illegitimate, which is who are these people and what are they doing? Now, I've basically, in the book Money, I've painted them as like high priests, like the Brahmin caste. And the reason I did that is I realised when I went in bed that the language changed.

25:46Right? Like that sort of greenspan there. You started to mangle the language, you sort of obfuscate, you started to make things very opaque.

25:53David McWilliams: All of us had studied in the same basically seminary. We were like priests. We'd studied in the seminary, right? And we'd read the catechism and we'd read all the Bible and we could quote all the various, you know, economic equivalents of Leviticus and Deuteronomy and Genesis. So we were a caste. We were like a priestly caste. And when I went to those, I used to always kind of think, this is quite odd. Basically, this must be what a conclave is like in Rome. Yes. Right? Yeah, yeah, yeah. Kind of pointy hats and all, right? So they walk around and they're almost like the white smoke idea. Yeah, yeah, conclave with fly fishing.

26:26David McWilliams: Fly fishing, exactly. I don't know what the Americans are obsessed with fishing with. Anyway, it's another thing. But I think my gradual road to financial atheism started from inside the cathedral, from actually being at the altar, preaching the catechism, understanding that, hold on a second, these guys are basically in the business of hocus-pocus. And the great hocus-pocus was the following. You give us pieces of paper. We say something like, you know, three Hail Mayors and our father, and out the far side of the central bank, it was money. You guys, okay, how did that happen? Right? So then what you have is, at the core of central banking, is the notion of trust in the currency, right?

27:12The idea that they might be dull, they might be boring, but they're not going to screw it up, right? Yeah, they're trustworthy, yeah. Now, I think that this is probably one of the great myths of economics, but it's a myth which most of us subscribe to. I also believe that central bankers have their notion of money wrong. They believe in what they call the push factor of money, which is at, for example, Jackson Hole, all these very clever people get together and say, we know what's going on in the world. We know how much money the world needs. And then they ordain that X amount of money will be pushed into the system from the central bank into the commercial banks.

27:48And those commercial banks will push that money out into the economy. And as a result of that, we have a lovely story that most economists learn in university, which is there's somebody in control. Yeah. Be it, you know, Christine Lagarde or Jay Powell. I don't think that's how money works. I think money is much more credible when you look at it through the pull factor. Basically what happens is the commercial banks create money and the commercial banks pull the central banks around because the demand for money comes up in the street. So I believe it's much more pull, much less push. So that's the first little piece.

28:26So that's the kind of credit and contracts and all that kind of stuff. All that stuff.

28:29David McWilliams: You know, when you go to buy a car, you're the one who makes the decision that I want a loan of 20 grand to buy the car. Not some central banker. And the commercial banker in the middle, who you get the loan from, Bank of Ireland, doesn't ring up the central banker and say, if I'm going to call John Davis here, can I give him money? They just do it. And that's why I think central bankers end up looking like eejits once every generation because there's a crash. And then somebody says, but I thought you were supposed to be in control. Yeah, yeah, yeah. And then they go on television and pretend they were in control.

28:58Yeah.

28:58David McWilliams: When in actual fact, they weren't at all. So this is, I suppose, the original sin of central banking. But to get back to the idea, there is something in the notion that these guys, dull, opaque, unelected, bureaucratic as they may be, have some sort of sense that they will try to do the right thing in the trade-off between inflation and unemployment. So as we said before, they will try to cool down the economy if the economy is getting too hot. Why? Because a very hot economy generates inflation and inflation affects everybody. But more importantly, inflation affects poor people most because poor people spend most on milk and bread as a proportion of their income than rich people.

29:43David McWilliams: People who drive Bentleys, John, for example, are not really worried about the price of milk. Okay, well, that brings me to the next question. So if Trump is going to interfere with the Fed's independent. Yes. And he's been banging on about that he wants lower interest rates. So if he kind of gets control of the Fed, he drops interest rates, he meddles with the credibility and the integrity of the whole American and global system. What happens then? There's a good example that recently, different country, different individual, kind of strong man, elected, but with demagogic sort of hard choices.

30:28David McWilliams: Erdogan. Right, Turkey. Erdogan and Turkey basically did exactly the same. So Erdogan said to the central banker, I don't like you, you're out, I'm going to get my mate in, okay, my mate Mustafa. So Mustafa comes in and Erdogan says to him, listen Mustafa, you want to keep your gig, you keep interest rates low. And Mustafa said, sorry, it's a bit racist, I know his name is Mustafa, right? But anyway, the other guy says, oh, but the rate of inflation is very high. And Erdogan says, don't worry about that. Inflation, just keep interest rates low. Right. For the purpose of? For the purpose of fueling the economy, making sure the economy continues to grow and grow and grow at breakneck speed so that Erdogan can claim he's the man.

31:07He came up with a new theory, which was that the lower the rate of interest, the higher the rate of exchange, which is basically the inverse of supply and demand. Bizarre stuff. Anyway, what happened in Turkey is the lira has been in freefall for years. And the reason that it has been in freefall is like the United States, Turkey runs a massive current account deficit, so it depends on other people financing them. So we've seen this before. But Turkey hasn't collapsed yet. It hasn't collapsed, and that's maybe what... And Erdogan is still in power. Yeah, yeah, yeah, yeah. But it has destroyed parts of Turkish society.

31:44It has created the background noise for Erdogan to push through other sort of changes in Turkish society. But it hasn't collapsed, you're right. But the United States is different. Why? Because the United States is the lender of last resort. Yes. So the global financial system is based on the idea that in a crisis, a global financial crisis, the United States Federal Reserve will actually extend dollars to people who need them. And that is a function of many things, but one of which is people wanting the dollar. What happens if the dollar is so undermined by our friend, Mr. Trump, that people in the crisis don't want dollars even if the Federal Reserve prints them.

32:27Then we're into a brave new world, a totally new world. Because Trump and the Trump family dynasty have ploughed so much into crypto that by crashing the dollar, it's a stronger argument for crypto. That's exactly, John. We did that podcast about four weeks ago that basically this is a heist. It's an inside job, but it's an unbelievably high stakes heist because it may well enrich the Trump family. But there's one thing we know is that Americans really hate inflation. That's, I think, why Joe Biden probably lost. If you look, if you go through the whole thing, the fact that he was senile and couldn't speak probably didn't help him, right?

33:09But I mean, in general, inflation was what undermined and eroded the take-home pay of the average American. and they said, look, we want something else. Trump is flirting with this. He's no Egypt. But I think what Trump is trying to do in the Fed is exactly what he's done in the Supreme Court. Point his own people, control the agenda. So basically, if you look at most democracies, you have the executive and you have the legislator, right? And you have the political class. And there's all these separations and there's a reason for separations. But what Trump has done is he's politicized the Supreme Court.

33:46Yeah. he's going to now politicize the Fed at the same time as he's deploying censorship, at the same time as, you know, he's arresting the likes of John Bolton or at least going through there. So all these civil liberties that the United States held firm, held dear, all these assumptions that, you know what, institutions are going to be strong enough to deal with this, every day one of those assumptions is beginning to be not crumbled, but chipped away at it. and ultimately, when you look at where the United States could be going, I mean, I think the American treasury taking a stake in intel is much bigger than people understand.

34:27Yeah. Because that's kind of the perilous route. Now, the interesting thing is Asian countries have always done that. So Japan and South Korea developed very rapidly under a system where the state owned large chunks of those big strategic industries. But as a result of that, or maybe related to that, the political culture in those countries was very consensus-driven. There was a consensus that this is the way we're going, and there was a middle ground taking. The United States is so unbelievably divided now that if the Republicans do something, Democrats will say it's wrong, and vice versa. And there is no consensus.

35:09So when you have those big moves, you need consensus. I just don't think it's there in the States. Well, here's another question then for you. As the dollar weakens, which it has been weakening consistently over the last six months or so, it's down 8 % or more. So it weakens the dollar. Does that kind of boost American exports then? But they don't export anything. They don't make enough stuff. It should in the long term change the relative prices. It should. But that's their whole strategy. But the problem is that the United States is not a great exporter. Hasn't been for a long time. They don't make good stuff.

35:51If you go around in Ireland, they make iPhones, they make Macs. That's about it. I mean, you go around your kitchen, nothing's made in America. If you think about it, no cars, whatever. And the food is, that was Nutlik banging on about, why don't you Europeans buy American chicken or American beef? It's the best. I know. I mean, look, where we're at, John, though, is a very interesting juncture because we had eight months of a Trump presidency and already there's been an enormous amount of change in the states, in the relations with the rest of the world, in the American economy. Thus far, the American economy has done quite well, although Trump feels that they need much lower interest rates than most people feel, but he feels that.

36:45And that's why he's going for Jay Powell. I think had you said to people 10 months ago that this would happen, people have said the dollar would be much weaker. Yeah. But the problem is there is no alternative to the dollar at the moment. So there's a case of a, what do you buy instead for the financial markets? But I'm more interested in the long-term implications of what's happening. And that's why I think the Argentinian example is not 100 % applicable. But it's persuasive examining what happens to a country when the institutions are corroded, not from the bottom, but from the very top. But then also, okay, so America goes down a Peronism route.

37:29Because the UK has done that. Yeah, but what will be the ripple effect across the globe? How will the ECB react? How will, you know, the Japanese central bank react? And, you know, what happens to the rest of the global monetary system? Well, I think that if you look at Bretton Woods, so that was the conference that set up the global monetary system in 1948. At the center of this was the United States, which was regarded as the hegemon, which is the big guy who come and sort everything out, you have various iterations of that system, but the assumption that the United States would protect the value of its own currency was always the foundational assumption of the whole system.

38:18Because the United States printed dollars,

38:22David McWilliams: it had this exorbitant privilege, so it printed dollars, which the rest of the world had to give it real stuff to acquire. But it printed them with the magic of central banking out of nothing. So it's back to that, our friend Brendan Greedy's idea of Dutch disease. So the more the Americans printed, the more debt other people took, the higher the dollar went relative to where it should be, the more American manufacturing contracted, the more the American trade deficit expand, the more the Americans paid for the trade deficit by issuing IOUs, the more IOUs were out there. So at a certain stage, this system had to stop, or not so much stop, but readjust and realign.

39:02So the generous approach, the benign approach, the optimistic approach to take is that this is the realignment moment. But the dilemma is that when global financial systems realign, they don't do so smoothly. And if they realign at a time when stock markets are incredibly overvalued, then what you're likely to see is a massive dislocating fallout, financial crash, problems in the credit markets, etc. And this is where the United States could be going. It seems to me at every stage that they're pushing and pushing and pushing what you would regard as the risk factor. and at every stage, everything's getting riskier.

39:49Policy is getting less credible. The adults in the room are being thrown out. They're not leaving, they're being thrown out. Yeah, yeah. And what we're left with are a bunch of chaos monkeys at the very top. But because America is so divided culturally, nobody's calling them out. Very few people are calling them out. If the Americans left Trump at it and the Europeans just stood back and didn't engage so much with Trump and fret every time he throws a threat across the Atlantic. If we did that, Trump will be the cause of his own demise eventually. And then we all just get on with life.

40:32David McWilliams: No, I think, no, because Melania will be back in. Of course, yes. Stop, John, you're done with the program. The program is Melania takes over. She emerges from behind the shadows like Evita Perón. Yeah. And we write the musical and we make a fortune. Okay. And the signature choose, don't cry for me, Oklahoma. So I think the Trump presidency ends with a financial meltdown of some sort. Possibly coming from the bond market, possibly coming from the stock market, possibly coming from the fact that the rest of the world gives up on American debt, or at least gives up on it, says, you know what, I'm not that plussed to take on more American debt.

41:17You know, don't forget that at every juncture, you know, for example, Donald Trump slapped, we lend here, a 50 % tariff on India this week. Now, what does that do to India? Does it push it into the arms of America? Or does it push it into the arms of China and Russia? Russia that it already buys all its oil from and lots of military in India is bought from the Russians, right? The Chinese and the Indians have always disliked each other, but lots and lots of countries hold their noses and say, hold on a second, who is treating us better? So what I'm saying is that there are so many variables, like really big geopolitical variables, that are being dislocated, that are being ignored, that are being inflamed by this administration.

42:05And at the same time, the credible institutions of America are being undermined from within, it's very difficult for me to see, because I'm a non-ideological person, it's very difficult for me to see how this doesn't end in some sort of catastrophic economic calamity for the very nation that up until 12 months ago was doing quite fine. That's the crazy thing. It was doing fine. I mean, America has incredibly low rates of unemployment, really high rates of income in certain sectors. Very, very innovative in certain sectors. It has services that work in certain sectors. People trying to come into it.

42:52I mean, basically, the most egregious but maybe accurate description of the United States now is the United States is the richest third world country the world has ever seen. And that is the way it's going.

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