Will America’s Debt Crash the Global Economy?

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1:51David McWilliams: To understand the economy, you have to understand human nature. This podcast is powered by Acast. John and I are looking at the window here from the basement. And we're looking at bucketing down rain. I'm just reminding you. We're glad to be in the basement. We're glad to be inside. Had that rain. I'm just reminding you that this is the sort of rain that my mother used to see. that's terrible wet rain. Yeah, but there is wet rain. There is wet rain, there is. So just in case you're not from Ireland, you don't know, they know the way they say the Eskimos have 800 words for snow. We have 800 descriptions for rain and we're now looking at terrible wet rain coming in sideways.

2:32David McWilliams: Coming in sideways off the Irish Sea, which if Nigel Farage had his way would be called the British Sea, but there you go. Yes. The Gulf of Britain. Exactly, it's all to pay for. It's all to play for. Today, we are going to be talking about, I know it's ridiculous when it's torrential rain, overheating. It sounds very strange. But we want to talk about other things first, Scott. There's other things on your mind. Yes, yes, yes, indeed. Flicking through the Financial Times, as I do. Exactly. No, but I was reading the article on Jamie Dimon, and his quote was, the US bond market will crack under pressure of rising debt.

3:12So I read the article and I got the gist of it.

3:16David McWilliams: But what does he mean by crack? Like, what does that look like? Well, I think that's a euphemistic word for there will be a serious, serious problem for the United States to sell its debts to foreigners at a price that the Americans can afford. So this is a really massive issue. I explained that one. Okay, so this is a massive, massive issue. So if you want to look at the evolution of economics in the last six months, at around Christmas time, the vast majority of financial market commentators, of financial players, of economists, of strategists, all took the view that one, the United States stock market was the best place to invest, had been for the last 10 or 15 years and will continue to be so.

4:05David McWilliams: And number two, that the American financial architecture was fundamentally sound and robust, underpinned by the most important price in financial markets, which is this long bond, right? Which is the American either 10-year or 30-year treasury, mainly the 10-year treasury. So, and this is the asset of choice, which is the American bond, that the vast majority of finance houses, banks, quasi-banks, shadow banks, private equity, whatever you want to call it. Because it's the safest place to put your money. It's the so-called risk-free return. Yeah. And the reason it's called the risk-free return is that it is assumed the United States will never default.

4:52David McWilliams: And if you assume the United States will never default, and let's say the long bond rate is 5 % today, well, why not just put your money in the long bond, buy American bonds, get 5 % interest rate every year and go and hold it. Don't worry about the world. Yeah. Right? Sounds good to me. Sounds very, very good to you. Get out of Ireland, right? Get out of Ireland, get out of the rain, right? So that's the sort of working assumption that was characterized financial markets for many, many years. Now, again, underpinning that working assumption is the idea that the United States will never default.

5:29David McWilliams: Now, I happen to think that American default is still miles away, right? But as I have been on this little, you know, wandering paddy tour, as I call it, right? The wandering paddy is... The exodus journey. The exodus journey, right? All the discussions in financial markets I'm having on global economics and global strategy, all those roads are leading to the question, is the American fiscal position sustainable? So what does that mean? This comes to Jamie Dimon, right? And it means that if you have a country whose GDP is, let's say, more or less$30 trillion, that's the income of America, but its debts are over$30 trillion, maybe$34 trillion, suddenly you have a situation where if the rate of interest is higher than the growth rate.

6:24David McWilliams: So if the rate of interest, if the amount of money the Americans have to pay out every year is higher than the growth rate, which is the revenue they get in every year, and from basic mathematics, if your debt GDP ratio is over 100%, what that means is your debt dynamics begin to deteriorate very quickly. So either you have to raise taxes to get in more revenue are cut spending. Yeah. Right? So what has Donald Trump announced last week? The big, beautiful budget, which is a tax-cutting, free-spending budget. Yeah. Which already means that Elon Musk is gone. Yes. Right? Yeah. Couldn't hack it. All his efforts on Doge don't matter now because they're spending so much in the Pentagon.

7:11Yeah.

7:12David McWilliams: And because, of course, they're cutting taxes for the rich again. Yeah. And ultimately, this leaves a hole in the American budget deficit. Now, that would be okay if the budget deficit was already, let's say, very modest. But the budget deficit at the moment in the United States is about$2 trillion a year. Right. So just to give you a sense of how big$2 trillion is, that's about half UK GDP every year. The Americans are every year are overspending. Okay, just to give you a relative. And the UK is the fifth or sixth largest economy in the world. So they're going to try and save money by cutting Medicare and Medicaid and all the stuff for normal people.

7:53For poor people.

7:54David McWilliams: Yeah. Right. And they're going to give rich people lots of tax breaks. Right. So we know all that. So it's estimated that last week at the announcement of the budget, seven million extra Americans will now be without medical or health insurance. Seven million. Right. And they're all poor people. Yeah. And they're actually all old people as well, because old people require medical care much more than younger people. So be that as it may, so you've got a massive debt GDP ratio. You've got a debt GDP ratio that's rising rapidly because of tax cuts. For the last 40 years, Republicans have tried to convince themselves that tax cuts are self-financing, which is something that is kind of economics of naughty land.

8:41David McWilliams: Tax cuts are not self-financing. So starting with Reagan, every time Republicans cut taxes, they said, don't worry, there's a thing called the Laffer curve and we'll make loads of money and there'll be self-financing. And all the while, the American budget deficit has expanded, expanded, expanded, expanded. So this brings us to the global imbalances that are at the core of the tariff policy, right? So as the Americans continued to borrow money, why? Because they wouldn't tax themselves enough. They borrowed money from abroad. So that means that the Chinese and the Europeans and the Japanese gave the Americans dollars.

9:19David McWilliams: The Americans in return gave us pieces of paper called a U.S. bond. We then took the interest rate off those U.S. bonds. We never redeemed them. They never called them in. And over time, the Americans became increasingly indebted to the rest of the world. But of course, as the Americans issued us with IOUs, they printed money. And that money got into the American system. And what did they spend that money on? More Chinese goods. So you've got a gradual 40-year erosion of the American manufacturing base, which is probably largely to do with the inability of America to pay for itself. This has been choices the Americans have made.

10:01David McWilliams: And as a result of that, American consumers have got cheaper laptops, cheaper cars, cheaper everything, right? But this is, of course, what Trump wants to bring to a head, right? This is the American carnage he talks about. Yes, yeah, yeah, yeah. Now, fascinatingly, tariffs are part of a tax-raising policy that if the Americans want, And this is the really weird thing. If the Americans want to get their house in order and bring their fiscal position down, the way they have decided to do this is by raising tariffs, which will raise revenue for America, which will reduce the budget deficit. But now we know that even the tariffs are being regarded as unconstitutional by courts who are saying that, you know what, Mr.

10:50David McWilliams: Trump, you cannot invoke emergency legislation when the economy is growing by 2 % and unemployment is 4%. That's an emergency. That's a normal, fast-growing, reasonably robust economy. So what Jamie Dimon is saying... But they've rolled back on that now temporarily. Yeah, and it's two steps forward, one step back. But what someone like Jamie Dimon is saying is, look, there's only so much debt the Americans can issue without the bond market taking fright. And if the bond market takes fright, it means that bond yields go up. If bond yields go up, it means that the amount of interest the Americans pay every single year goes up.

11:32David McWilliams: If Niall Ferguson, the Scottish historian said, great nations always have a problem if the amount of money they spend on debt servicing is bigger than or becomes bigger than their military expenditure, you therefore are not an empire. And that's exactly what's happened in the States now. Right, okay. So their interest payments alone are bigger than the gross military expenditure. Which is considerable anyway. Well, it's over 1.3 trillion a year. and if the Americans are not spending on the military or spending more on debt servicing, they can't project their power abroad in the way in which certain parts of the American establishment would like it.

12:12David McWilliams: So there's a coherence in the overall Trump policy, which is we don't want to spend on military. We want to have tariffs. We want to get our budget deficit in order. But the problem is they're not making any of the choices. So in the military, they're spending more on the Pentagon. On tariffs, they're zigzagging. Yeah, yeah, yeah. And the fiscal deficit's going out of control. And all of this is undermining the dollar. And the bigger issue here is that a crisis in the bond market will also be a crisis in the dollar. And the problem for the world is that there's nothing to take over from the dollar right now.

12:52David McWilliams: Like, for example, when Britain went from being the premier country in the world to a secondary country in a tertiary country, and sterling relinquished its role as the currency of last resort, the dollar was there to take up the slack. The euro will not take up the slack from the dollar. It's not big enough. It's not designed to be a global reserve currency. And the Europeans don't want the responsibility of it. The Chinese may well in time be the global reserve currency, but right now the Chinese do not want anyone to have any obligations in China other than the Central Bank of China. Yeah. So there's no obvious replacement for the dollar.

13:33So this is the crack that Jamie Dimon is talking about. So at the end of the day, what's the, I don't want to say the worst case scenario, but what could this look like, the outcome of this?

13:44David McWilliams: Well, I mean, you know, as I was writing in Money, you know, all empires tend to end because the fiscal situation implodes, right? Right, okay. The reason the British Empire ended as the major world power was because it got into enormous deaths to fight the First World War. So its fiscal situation imploded. We know that the Roman Empire, of the 348 reasons given historians as to why the Roman Empire collapsed, never once have historians talked about the total debasement of the Roman currency, which I believe is coincident with the end of the Roman Empire. Right. So, you know, we have absolute evidence of large powers declining because they believe their own propaganda.

14:35David McWilliams: They believe that they are invincible. They believe that the world needs them more than it needs itself. Yeah, yeah, yeah. And what Jamie Dimon is warning about is that the American bond market cannot count on the rest of the world indefinitely to finance American deficits. So that's exactly what he's talking about. And he's also probably looking at all the debts that were incurred in America. So if you think since 2008, QE was basically a cash for trash scheme. Interest rates were lowered. Then during COVID, interest rates went to zero. Then, of course, this led to an enormous increase in borrowing across the American economy.

15:16David McWilliams: Yeah, yeah. In every area of the American economy. And what I think Diamond is saying is that the bond market is literally the last place that you think is safe in America. And if that were to be undermined, the financial architecture would crash. And the financial architecture is really, really enormous. So we need to keep our eye on the American bond market. But are there other kind of indicators or red flags that could spark this off? And the reason I ask that, by the way, is that I saw something on LinkedIn recently about the student debt in America. And I'll just read this to you, actually.

15:58According to the U.S. Department of Education, over 5 million borrowers haven't made a payment in more than 360 days, more than a year, and remain in default. Another 4 million are in late-stage delinquency. That's kind of 90 to 180 days. So if trends hold, nearly 10 million borrowers could soon be in default, pushing almost 25 % of the federal student loan portfolio into default status. is that, that's a major leading indicator. That's a major leading indicator. I think that there is a reasonable chance,

16:37David McWilliams: not a central case, but a reasonable chance of a serious American debt default financial crisis event on the horizon. Yeah. Simply because the figures don't add up. And of course, up until now, the rest of the world tolerated American, financial delinquency because America was our protector. Because America was actually our friend. Now that America has decided it's not our friend, many people are saying, well, why should I invest in America? Why should I risk my money, my capital in the United States, when I know they don't like us? I know that there might eventually be a smash and grab of European assets or Chinese assets in America.

17:26David McWilliams: Why don't we gradually divest ourselves of America? And that's what Jamie Dimon's worried about. Now, the reading indicator you talk about. Where do you divest to? Well, I mean, Europe has enormous amounts of industrial capacity. You know, we've got, Europe could easily expand its internal investment requirement. China could easily expand its domestic economy internally. In fact, it needs to. So the money could find its way somewhere. This is what I think the Americans don't really understand, is that the world is actually full of opportunities that are not necessarily based in the United States.

18:01David McWilliams: You know, 96 % of the world's population are not American. I mean, we've got to reinforce this all the time. I mean, the economy is about 21 % of the global GDP, so it's huge. But, you know, Europe's about 17%. So what I'm saying is, and Macron, interestingly, in Asia this week said, when his wife wasn't knocking the shite out of him, said, you know, Europe and Asia are natural allies. And we don't want our cooperation to be made conditional by a president in a foreign country. And what he was basically saying is, we all have options. How did that go down, though, with Xi and the like? Well, the Chinese love this because this gives, the Chinese want to create a non-American third column in the world.

18:52David McWilliams: And the Europeans don't want to create a non-American third column, but what we do want is create options for ourselves. So there's a lot of stuff in play. And I think what Jamie Dimon is saying is, look, because there's a lot of stuff in play, don't depend on this one market to be forever robust. And then you think about the leading indicators that could be student loans. What happens in student loans is because they tend typically to be higher risk, the rate of interest goes up much quicker. So maybe you're talking about 5%, 6%, 7%, 8 % annual repayments. The fact that people are defaulting on this means they just simply don't have the income.

19:31David McWilliams: And of course, what always happens in situations where there's a great expression, which is sometimes the best investment decisions are taken in the worst of times, but also sometimes the worst investment decisions, i.e. to take out a loan, are taken in what appear to be the best of times. So you go back two or three years ago, economies are post-COVID, accelerating rapidly, unemployment is falling, rates of interest are very low, house prices are rising. All these background leading indicators are suggesting, you know what, life's going to be okay. So therefore American kids take out large loans.

20:08David McWilliams: Then they get into the existing labor market and they realize, well, their wages aren't that good. Rents have gone up in the United States. their take-home pay isn't as they thought it was going to be. The rate of interest on those loans has gone up, not down, and they simply cannot afford to pay them. So is that a leading indicator? Yes, everything is in the mix. You've got car loans in the States. You've got student loans in the States. You've got, you know, home loans for refurbishment. You've a whole host of... Is this what you call stagflation then? But this is what you call the incipient beginnings of a credit crisis.

20:47David McWilliams: Right? That you see these, what you would call straws in the wind, you tend to ignore them. But then what happens is because I've always said that liquidity is the most important thing in financial markets, which is the accessibility of capital and credit. Yeah. But liquidity is only the financial word for confidence. Right? So confidence is what I've always, economics is what happens between our heads. You know, when economists talk about the real economy, they talk about roads and infrastructure and this. I don't believe that's the word. I think economics is something that happens between our ears.

21:23David McWilliams: And it's a constant battle between hope and depression, between confidence and optimism and pessimism. That's all it is. Yeah. You can get pills for that. You can get lots of pills for that. Absolutely. You know, you can. And the financial equivalent of antidepressants is credit. Yes. Okay? Yeah, okay. If we take this analogy, right? Yeah. Okay? Because credit allows you to tie shit over, right? And credit is, when you take out a loan, what you're doing is you're creating a picture of yourself in five years' time, which is by definition more optimistic than you are now. Because you're betting on your future self, right?

22:03David McWilliams: Yeah, yeah, yeah. So you're traveling in time in a way. It's a sort of an odd way to look at finance, but I've always found that that's an interesting way of looking at finance. So if you think that credit is extended because you are confident and therefore liquidity is ample, if you stop becoming confident, liquidity dries up. Now, why does it dry up? It's because economic hope and confidence is infectious. It's like a virus. We infect each other. so if you're you know optimistic and you start doing this well and prices are going up and you think wow you know the world is getting better etc you actually infect me because humans are not rational because we're completely irrational and we there's always that kind of what you should be doing is this and you go yeah sure jump in how much yeah yeah yeah it's that word you know fomo yeah fear of missing out is what drives an enormous amount of economic activity And this is sometimes never communicated properly by economists because they don't like to go into, as we've talked before, the soft, squidgy area of personal psychology, where in actual fact personal psychology and then group psychology is actually what economics is all about, or at least the credit cycle, which we're discussing.

23:17David McWilliams: And therefore, someone like Jamie Dimon, to come back to him, he understands as probably the most successful investment banker of his generation, that banking is also dependent on confidence. And the entire thing is a confidence trick. Yeah. So it's about keeping the entire system going. Now, the entire system can be kept going if the foundational price, the US long bond, back to our friend, is stable. And that is only made stable by the fiscal position being stable. But I'll just give you the vista, is if liquidity disappears from credit markets, it means the rate of default will rise. It means the rate of interest on risky assets will rise.

24:08David McWilliams: It also means the collateral that is required by banks to continue to lend, even if it's only lending for what they call rollover in the loan, increases. If the rate of collateral increases, it means people have to put up more real assets. That's one thing. So only people with real assets that are unencumbered by debt can do that. That means debtors gradually succumb to the virus of a lack of confidence, a lack of liquidity. And there's your default situation. And defaulting, just sort of it jumps from one asset to another. This is the Minsky moment. The Minsky moment is when people have to sell good assets to pay for losses on bad assets.

24:53David McWilliams: And that's when you hear this great, what I would call sucking sound, which disappears from the global financial market as liquidity and confidence evaporate. It's like if you could imagine water going down, actually going down a bath, a plug-o. That's how it operates. And we could well be very close to that. You talk there about confidence and stuff. So is there such a thing of being overconfident, overexcited? I mean, you wrote recently about overheating economy of Ireland. Yeah, well, maybe. Is that what we're suffering from at the moment? Well, maybe let's come back after the break and discuss that because I'll tell you, the overheating, John, came, this idea came to me when I was stuck last week in traffic in Dublin.

25:37Yeah.

25:38David McWilliams: Started to rain. Yes, again. Traffic actually just clogged up. I was told that traffic started to clog up because some little small adjustment was made at Westland Row onto Pier Street. don't ask me why i was going to the salesforce tower which is a sight to behold is amazing yeah 3 000 people work there in salesforce than but i was doing an event for a venture capital company called act act act yeah and they are an irish very successful irish venture capital company who invest in startups yeah and what was really interesting about the night was i was listening to people who had actually created startups and then sold them for 10 times 20 times whatever it happens to be.

26:19David McWilliams: And just understanding that intersection between capital and startups and everything. As I was actually saying to them when I was giving this speech that equity is only a fancy word for hope, that you have to hope. But my point was it took hours to try and get around Dublin in a car. Now what that tells you is there's too many cars and not enough infrastructure. There's too many cars. There's not enough alternative public transport. There isn't a metro system. I'd actually come from Barcelona where the metro system is amazing. Oh, fantastic. Amazing, right? And you're in a clean underground system which is integrated.

26:57Even a small city like Bilbao as well has great metro systems.

27:01David McWilliams: Yeah, they've got metro systems, right? So what I was looking at in Ireland is there's no greater indicator of an economy overheating than traffic. Because what it means is that the consumption side of the economy is being driven too hot for the investment side of the economy to catch up. So the investment side being public transport, metros, all that sort of alternatives to individual transport like the car. And I think we should spend the second half of this podcast, John, talking about the fact that Ireland is overheating. And in fact, a global downturn could do us a power of good. Ooh, after a bit of this.

27:43Exactly.

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29:13Go to mod.com to get started. That's M-O-D dot com. Therapy's biggest impact doesn't show up in some dramatic breakthrough. It shows up in the smallest moments. You bite your tongue instead of escalating. You put your phone down instead of firing off that text. You say what you actually mean instead of what would hurt someone else the most. Nobody applauds those moments, but they quietly change your life. That's what growing feels like. And that's exactly what Grow Therapy is here for. Grow is therapy that works, covered by insurance. Sessions average$21 with insurance and some pay as little as$0 depending on their plan.

29:54There are no subscriptions, no long-term commitments. You just pay per session. Grow connects you with thousands of high-quality licensed therapists across the U.S. offering both virtual and in-person sessions nights and weekends. You can search by what matters, like insurance, specialty, identity, or availability. And you can book a therapy session in minutes and begin in as little as two days, not the national 48-day average. See if you could pay as little as$0 for therapy in seconds at growtherapy.com slash ACAST. That's growtherapy.com slash ACAST. growtherapy.com slash ACAST. Availability and coverage vary by state and insurance plan.

30:42Okay, Mark, sitting in the pissing, is it rain?

30:45David McWilliams: Yeah, exactly. But you're telling me what... In the wet rain. In the wet rain. But you're telling me that I'm overheating. You're overheating. Okay, I know, I know. It's hard to get your head around this, John, but... Okay, overheating is when the economy has been run too hot, right? Yeah. When we are throwing everything at the economy to achieve growth rates now that we don't necessarily need to achieve, the best leading indicator of overheating would be traffic, house prices, rents, too much immigration coming in, too many people coming in with nowhere to live. Also, we mentioned the last podcast, educated Irish kids leaving because they don't want to live in the country.

31:22David McWilliams: And it's a way of looking at overheating. it's when your standard of living as measured by your take-home wage has no real relationship to your quality of life your day-to-day as sociologists say your lived experience I don't know whatever fucking other type of experience you can have you know my lived experience well what the fuck do you mean it's your either experience or it's not you're not from my dead experience so these are sleeping experience yeah these are bugbears of mine when I listen to the radio You know, particularly academics are going to say, well, you've got a lived experience.

31:58David McWilliams: Anyway, right. Jeez. No, but I'm in that mood today, right? As you said, the diplomat. Yes. Anyway, anyway. So what about the argument following, which is that Ireland doesn't need any more economic growth, that it needs slower growth. We need to slow down. We need to take a breath. We need to invest in what we need to invest in in order to increase the quality of life of the people. I mean, the quality of life has to be the objective of economic policy. And then when you look at economic policy, there are four major levers that a government has to slow down the economy, to make it appropriate with the ability of the economy to house a number of people, to allow people to travel around, all that.

32:49Yeah, yeah, yeah.

32:49David McWilliams: So the first thing is, there's four things, which is taxation. if the economy is growing too strong, you tax it. You take demand out of the economy. The major lever that I think works very well, we've given away, which is unfortunate, which is interest rates and exchange rates. So when we had the punt years ago, the currency that I am beloved of, I quite like the punt. It wasn't doing too good though. It was grand. It was grand. It was grand because it reflected us. Exchange rates reflect the idiosyncrasies of a nation, I always believe, right? Right. So if the economy was going too hot, our rates of interest would have gone up.

33:25Yeah.

33:26David McWilliams: As our rates of interest went up, people would save more, they would have invested less, and you would have taken some of the heat out of the economy. Also, as our rate of interest went up, our exchange rate would go up. And as our exchange rate went up, it would mean that making stuff in Ireland would become less profitable, right? So we'd have made less, so demand would have gone down. So that is a really important lever that we gave away when we joined the European Union. That's a real tightrope one to get right, isn't it? It's hard to get right, but you know, it's a massive part of economic policy that we gave away.

34:03David McWilliams: I believe the reason that Ireland goes from booms to busts is precisely because we gave it away. I think that within the euro, we are condemned because our economy is neither European nor is it stable. Our economy is unstable. It's services driven and it's largely, as I say, Connecticut with shitty weather. It's an adjacent, it's an American adjacent economy. As a result of that, we will always over-invest or under-invest. We over-invest, then we have a crash. Then we under-invest. There's no stability. Why? Because we have taken away, I think, monetary policy and exchange rate policy as a lever.

34:41David McWilliams: That means that the governments have to raise taxes when they see the economy overheating. They'll never do that because that will actually get them voted out. Yes. So the government that raises taxes can't go to the electorate and say, look, I'm a nice guy. They'll say, well, hold on a second, you raised taxes. So rather than raise taxes and rather than manage the cycle, what we actually do is we risk booms and busts, which I think this is the Irish disease. Makes living in this country a bit of crack. Yeah. Because it's never 100 % confident. You're never 100 % confident which way we're actually going.

35:15David McWilliams: Then the third way you can control demand is by controlling foreign direct investment. We don't need more American multinational investment here. You just don't. We don't have the people. We don't have the capacity. You look at, for example, the latest thing, you know, Ischke Air and Irish Water thing. We don't have the water infrastructure. We don't have the electricity infrastructure, right? We don't have the trains. We don't have the trams. We don't have anything. So we are gridlocked because every time the IDA goes out and say, we want more American investment, and the American investment says, yeah, they say, great, just bring it in.

35:52David McWilliams: But there's no joined up thinking. There's no like, oh, where are the people going to live? How are they going to get there? Do we have enough people? And then when we run out of people, as we run out of people, we import people. Yeah. It's called immigration. And then that switches up house prices. The immigrants buy cars, of course, because they live here. They go to school here. They go to hospitals here. So they increase the capacity constraints that are already there. So what I'm saying is it's very clear to me that the economy is overheating. But is that very easy to sit back as an economist and say, yes, we should slow down and all the rest.

36:30But what does that actually mean for day-to-day life? You know, you're talking about, okay, to increase taxes. Well, you know, people are paying, feel that they're paying enough. And, you know, especially as we spoke about the youth before, not able to buy houses and that kind of stuff. So those levers that you're going to pull are going to put more pressure on day-to-day living.

36:54David McWilliams: John, you're absolutely right. All these choices come consequences. And all these consequences come with political in particular and social implications. You're absolutely right. But looking at the economy in the round, we probably have too much foreign investment here. Yeah. We probably have too many immigrants at any one time for the capacity of the economy, even though the immigrants are bringing all sorts of good stuff as well. Most of them are. Yeah. We probably have taxes that are too low in certain areas, like, for example, on property, right? Sure, yeah. All those things, right? And we don't have this exchange rate lever.

37:35David McWilliams: So as a result of this, we're kind of condemned to sit in traffic and fume and say, I can't believe that, right? I would think that it would make more logical sense for Ireland to understand that we are a reasonably rich country that thinks like a poor country. And by that I mean, we think like a lotto winner rather than an investor, right? And we think that somebody's going to take all the money off us in the morning. Yeah. Like some fucker's going to come and take it all, right? So get it all in here. Get it all in here. Whereas rich countries, I'm talking our Scandies and our Dutch and these sort of people, they understand that they have to inconvenience themselves by investing, by slowing things down, by not consuming everything today, by consuming tomorrow, all that sort of stuff to try and ease the burden.

38:27David McWilliams: And my sense is that Ireland is, if we were a company, we would be what they call over-trading. Yeah, yeah, yeah. So your top line is great, but inside the machine is chaos. Yeah. And, you know. It's like, well, it's like the both of us having high blood pressure and, you know. And on the outside you look fine and then all of a sudden, bam, and you're dead. John is revealing that his enduring, actually we're going for a pint now. That'll get the blood pressure up. The pint of stout settles the bag. You settle down. You can watch other people playing sport. There's even better than playing sport yourself.

39:00David McWilliams: Eat a few packets of crisps. Oh, yeah, that's essential. The Tato and Stout combination then, you know, followed by a few Gaviscones to keep the net sorted. Yes, you're absolutely right. So we are pushing the engine, you and me. Yeah. And I would say almost everyone listening to this, if you're of the Irish DNA set, you push the engine too hard. We're always accelerating, always accelerating. We never want to put slam on the brakes. Or when we brake, we slam on the brakes, right? We don't like gently change gears, go, you know, down from first to first. And we don't have an airbag. We don't have any airbag.

39:34David McWilliams: Or seatbelts. Seatbelts, nothing, exactly. And it makes for an exciting life, but I'm not sure the economist in me would recommend this as a lifestyle choice for anyone. But to come back, we conclude the podcast. We talked about the United States. We talked about what might happen over there. We talked about the gradual increase in anxiety about the stability of the American financial architecture. Then we came back to Ireland. We're overheating. Is there a sweet spot where America slows down gradually, where Ireland slows down gradually because we're so dependent on America, where we accelerate our internal investment in metros and all that sort of good stuff, and where the quality of life, particularly urban life in Ireland, because I think rural Ireland has got different challenges, different dilemmas, but they're not really the challenges of rapid overheating.

40:35But urban life in Ireland becomes commensurate

40:40David McWilliams: with urban life in other Northern European cities so that we calm down, stop taking the pills, John. Get a bit of exercise. Get a bit of exercise and just ease into the week as opposed to always having the fear on a Sunday night. Ireland the country of the fear we'll talk to you next week

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