Ep.41 Know Nothing About The Economy? This Episode's For You.

0:00More than half of the population say they don't understand economics basic principles which is one of the reasons that I really wanted to do this episode today. I think one of the most terrifying things for young people is constantly being told, we're in a recession, there's this crash. You know, the economy's been hit quite a bit and we might fall into a recession, we might not. Crypto is very different to kind of money. It might be worth£5 a day, but also£50 next week. You never be sure. If you can't pay it back, the bank can take away your house. Is there a time that is statistically best to get a mortgage?

0:34Why can't we just print more money? Why do I need to use a bank? It helps explain loads of questions that some people might be asking themselves now. That is astounding. I love a fun fact.

0:53Right, sit down, get your notepad out. Today's episode is a little bit different. I've been listening to the news lately. my alarm is radio 4 I know sophisticated I know intimidating I know sorry I'm so sophisticated it actually hurts but I've just been thinking about like how complicated it is all the time especially now with so many crises left right and centre and it feels a little bit intimidating especially if you don't understand economics or general things about the economy and I feel like it moves at such a fast pace that none of us really do and that's coming from someone who literally studied economics.

1:29So I wanted to do an episode with someone who is actually an expert and actually understands things, aka not me, in order to create a kind of dummy's guide to the economy and I feel like this is not boring by the way. First, before you switch off, I feel like this type of thing is incredibly important. You should be able to open a newspaper or listen to the news and actually understand somewhat of what they're saying and I feel like school doesn't always go a long way to be able to make that happen so I wanted to put together an episode that wasn't too long that was just about like there is no stupid question we are talking about like what is a mortgage what is a housing bubble when should you be saving when should you be spending what does the Bank of England do what is an interest rate what is inflation and just kind of myth busting but also just being like I know it gets to a stage where you feel like it's a really stupid question and we don't like that and I feel like if you're about self-improvement and you're about optimizing you're probably going to be the type of person who does want to understand the news and I kind of think we should all be able to at least to some extent I do feel like a lot of it is inaccessible but I feel like at least to some extent in order to be able to make decisions about our future when it comes to voting etc etc so I hope you enjoy this episode as I mentioned it's a little bit different from the usual but that is because sometimes we need to learn things that's not just about people's stories or celebrities or big, big gossip and is instead about the economy because some days we just need to go back to school.

2:58Today's one of those days. Please make sure to rate and subscribe to the podcast if you enjoy it and if you do not, please don't. And as always, have a lovely day, have a lovely week, share the podcast with your friends if they know nothing about the economy and I have nothing really more to say. Enjoy the episode.

3:17Rupal Patel is a senior economist at the Bank of England and co-author of the best-selling pop economics book Can't We Just Print More Money? The Bank of England's first book in its over 325 year history. Today Rupal advises governors at the Bank of England on their policy decisions and is passionate about improving economic literacy especially amongst young women. Rupal makes sure there is no stupid question left unanswered from what actually is money why aren't Freddo's 10p anymore to why shouldn't I hoard all my money under the mattress RuPaul is on a mission to make economics more accessible no matter your age or background thank you so much for joining me thank you for having me I'm very excited to have you today I feel like this is going to be like a private tuition session for me like how can Grace understand the news better I want to go back a bit to give people some context on your career how did you get into economics and how did you get your job at the Bank of England?

4:13So I started studying economics at A-level just as the financial crisis was coming about. I actually think one of my first lessons was during the time where Lehman Brothers went bust. Really? Yeah and all over the, obviously I didn't know what Lehman Brothers was or had really heard of it but all over the news there were kind of images of bankers with their heads in their hands clearing out their desks and then slowly I realised that people around me like my you know friends of my family or my friend's parents were starting to lose their jobs yeah and some of my favourite shops even started closing down to like Woolworths and H &B which were high street kind of icons at the time and I didn't really know why and by studying economics at school really gave me like a framework to really understand what was happening and I was interested in kind learning a bit more about it and so I started studying at a university and while I was at university I kind of knew I wanted to go into economic policy largely to kind of help the efforts of recovery in the UK after the financial crisis and so I applied for a job at the Bank of England through its graduate scheme, went through the interview process, surprisingly got through and I've been there for nearly 10 years now.

5:30Oh amazing, so it was the first place you went after university and you're still there now do you like working there I mean I guess there's one answer to that no I love working there um you know it's a great organization it's always interesting I've been able to work on kind of biggest challenges of the day I worked on Brexit I worked on COVID I've looked at the impacts of like the Ukrainian war um and right now I advise kind of one of the governors on his policy decisions which is really interesting yeah I can imagine that's really interesting and in terms of governors coming in because things like the cabinet and things like you know like who's in government changes so fast a lot of the time you're like looking at someone you were like you were on transport yesterday how are you on housing today like how do you know both of those things it's obviously I guess the advisors around that that make sure they can make the right decisions is there like a lot of change in terms of like who you're advising at each time no so So unlike the government, the Bank of England actually have a steady set of governors where they have set terms.

6:31And they're unelected as well, but they're appointed by the prime minister and I guess now the king. And they're usually experts. So all the governors are kind of economists who've worked in the field for many years. And it's quite nice to have the kind of steady set of leaders. Yes, a bit of a change from government then. More than half of the population say they don't understand economics basic principles, which is one of the reasons that I really wanted to do this episode today in terms of just making a little bit of a dummy's guide, a little bit of a broken down, accessible approach to something that people might not know about, especially if they didn't get any background on it at school, which I know a lot of people didn't.

7:09Why does it matter that some people or over half the population don't know about these principles? Like, why should we know about them? you sort of answered the question economics is so cross-cutting it matters pretty much in everything we do and helps explain loads of questions that some people might be asking themselves now like why is it so expensive to fill up my car or you know why is it so expensive to heat my house why is it across a living crisis and it's important that we understand because the people kind of making the decisions about your life so you know how much tax you might pay next year or how much your mortgage might cost or how much it would cost you to borrow money is made by economists at the end of the day and so by getting more engaged in the topic and the subjects and understanding how those decisions are being made you can kind of help navigate your life a bit better and I guess that is that element of like when it comes to election time I know especially with general elections so you know what which I know more people get involved in and what might be you know more local elections etc there is definitely an underlying feeling that everyone feels a bit stupid I think everyone kind of looks at all of these different things and they're able to latch on this is why I guess campaign marketing works so well because a lot of the time it's based on the things that of course you're going to latch on to and of course you're going to be like no I'm against that or no I'm for that or whatever it might be whereas actually like the basis of the party's economic policy is probably going to be one of the things that's going to affect you most on the day-to-day obviously there will always be big issues around that but actually like every time I get to election time the further I get away from having been at school and having studied economics I'm like I really don't understand that anymore and I really don't understand what that is and it's really hard to I guess have a vote in your future or like what the policy you know whether you care more about having higher taxation or or lower taxation, or whatever it might be, actually being able to vote for that because you understand which party is lining that up, I think, to me, feels most visceral when it gets to election time, and I'm like, ha, I appear to have gone down in intelligence since last time.

9:23No, I completely agree. You know, when people don't understand economics or the economic policies that are being presented by different parties, they can make some really bad voting decisions, which will then affect them and make their lives or society even worse off. So it's really important that when politicians go out campaigning or journalists report on these things, or even economists talk about it, they talk about it in a way which is understandable and relevant for people voting. Yeah, no, I think that's a very, very important point. So we're going to go back to the very basics. What actually is money?

9:56oh so over the years money has been loads of different things uh it's been shells chocolate teeth cigarettes pretty much you know named objects and it might have been considered money in some points in history teeth um and at the moment you know it might be cash but also it's credit cards and now it's even things like phones and your watches um and really what it is is a system of trust if everyone believes that something is worth a certain amount and you can exchange it for something that is worth a similar amount and everyone and you can use that money at any point in time with anyone in an economy then it's money.

10:38Why is it a trusted system then if it just relies on people's trust because surely then if people just turn around they were like don't really see the value of that number in my account anymore I mean you can't think money to not existing you can in some way but you need a lot of people to think sure um so at the moment all our money is backed by trust in the central bank that's the bank of england and at the bank of england we make sure that you know that fiver in your pocket is worth five pounds year in year out and you can go to the shops and buy five pounds of worth of things but if you don't believe in it and a lot of people don't then that paper is worthless and we've seen it in other countries before where you see currencies collapsing and people having to use other things to pay for it usually they go for say dollars because it's more kind of you can use it more widely in different countries but luckily in the UK sterling has held up as kind of the money of choice and so if I've got some money saved up I see on the news that you know there's as you say Lehman Brothers collapsed back in 2007 2008 you're worried about that happening again you've saved up a bit you want to buy a house in the future but not quite yet why do I need to use a bank and put it at risk by being in this kind of big centralized economic system and why couldn't I just like hoard it all under the mattress so you could afford it under the mattress and I'm sure some people do but by keeping money in the bank it actually provides a very important social benefit because you might put 100 pounds in the bank you don't need it at the moment but someone like me might need it more and bank is able to give me some of that where I can spend it on something that might be useful and make my life better off and maybe others and then I can repay it back in the bank and you'll get your money back and if loads of people do at the same time you can actually have economies grow through it so banks are actually very pivotal in our economy and society so basically what you're saying is that if I have money in the bank and my friend is using her credit card to be able to you know buy something for now when she won't have the money until next month essentially what's happening is that money isn't in like it's not in a vault somewhere it's not like Gringotts Harry Potter style bank it's not like sitting there in piles and piles it doesn't actually really exist or it's all exists in the big banks little pot of money that they give to me when I want it back is that right yes so money is no longer backed by anything it used to be backed by gold so you used to actually be able to go up to the Bank of England and say I want you you know,£10, whatever, and it'll be backed by gold, when you can exchange it for gold.

13:32But now it's backed by trust. And the trust is that when you go to the bank and you want£100 out, the bank will be able to give it to you. And they have enough in there to give you the£100. But what they don't have is if everyone at the same time went back and asked for their money back. And when that happens, things can go really badly wrong. And we saw that actually during the financial crisis. It happened to Northern Rock. you might recall some of the long queues that are forming outside of the bank which is what economists would call bank runs so what stops a bank just losing all of its money then because obviously when you have money in a bank account you're protected up to i think it's 85 000 in the uk you know something happens to it you're protected you get to have that money back what stops the bank literally just being like sorry i know you said you trusted me but i just don't have the money today so the banking system is very well regulated and they're actually regulated by the Bank of England and the Bank of England make sure that each bank is actually has enough resources that it can pay back people if they need to and that they're making decisions that so they're not acting in a really risky way so they're not being frivolous with the money that you're keeping with them and so I want to go in briefly now just to talk about crypto because I know that crypto is deregulated which is obviously what a lot of people kind of draws a lot of people to it there's no centralization so it's you know it's completely yeah I mean it's away from this kind of central bank it's deregulated which sounds and is kind of sold as something that's like very freeing but surely that also means that deregulation is also like quite risky because there's not regulation to be able to make sure that they can't just say like actually I'm afraid you don't get this money back, even though, you know, it says you own it.

15:18Yeah. So crypto is very different to kind of money in the same way that economists would think about it. Not just that it's not regulated, but it acts actually very differently. So, for example, money, as I said, you know, if you've got£5, it's worth£5 today. It should be worth£5 next week. But with crypto, it might be worth£5 today, but it could be worth 50p, but also£50 next week. You can never be sure how much you can actually buy with it. And similarly, you know, loads of things aren't priced in kind of crypto money. You can't go to the shops and kind of buy things just using your crypto money.

15:58And because it's deregulators and it kind of goes up and down in price so much, you can lose a lot of money quite quickly and no one will kind of pay you back. You're not protected, as you said, up to£85 ,000 or anything like that. yeah so we'll come back to that later because I actually want to talk a little bit about like whether people should be getting into crypto whether people should be getting out of it like what the Bank of England's doing about it all of those types of things but I want to talk quickly about the idea of a recession because I feel like we hear it as this buzzword some of us might know what it means in terms of the actual definition but I think a lot of people especially young people might hear the word recession and be like cool like it sounds terrifying and I know people lose their jobs but like why should I care if I'm about to go into a recession people should care about a recession because it impacts people's lives in many different ways it can be things like they're more likely to lose their jobs which she talks about businesses are more likely to close down people have less money that can also affect people in kind of very different ways so we know that you're more likely to get divorced after recessions really yeah people tell me more people have uh Lots of financial difficulties.

17:05And then because that sort of those conflicts, people break up. But we also know kind of weird things like you're more likely to be asked out on a first date during a recession as well because people feel more lonely. There's also kind of this great stat where men are less likely to buy underwear during a recession. That's a really great stat. What, are they just going commando? Don't know. It's just because it's reusing, I think, with Holzen. Who knows? Maybe having fewer accidents. Yeah. I don't know. I think it's just because it's something that people don't see and it's non-essential for them and so you see actually sales of men's underwear falling.

17:40I find it astounding that underwear isn't essential for men. It was a measure of the health of the economy used by Alan Greenspan. He used to run the US Central Bank a few years ago and he would always look at what men's underwear sales were doing to figure out what was going to happen in the economy. Actually, another one which is interesting is that it can even affect fashion trends. So women are more likely to wear longer skirts during recessions and shorter skirts in kind of boom times. Playtime and not playtime. Yeah, you can think, you know, you can think about like the roaring 20s or 60s where hem lengths got shorter.

18:16It can even affect hairstyles. During a recession, it's more fashionable to have longer hair because people have less money to get regular haircuts. and in boom times when the economy is doing well it's more fashionable to have shorter hair because you might be able to afford to go to the hairdresser more that is astounding I love a fun fact I honestly I live for a fun fact and I feel like that's really really delivered so I hear a recession's coming on the radio I actually don't today I know this morning they announced that we're actually not in a recession um but I hear it coming what should I be doing to prepare for that's effect on me I think understanding how it could affect you and understanding again what a recession actually is and the type of recession so we're going to perhaps enter a really weird recession where unemployment is really low but the economy isn't doing that well and that's quite different to past recessions where unemployment was actually very high and so it's important to think about what it means for you like is your job safe is it not should I be saving more money should I not and it's obviously very up to the individual um about how they kind of navigate a recession but understanding it is probably the first step yeah and what what types of jobs are usually safer versus ones that are riskier and we need to be probably you need to be probably thinking a little bit more about what your next step is I think it's really dependent on the type recession so um the financial crisis of 2007 2008 loads of bankers or people in the finance sector lost their jobs because there was a banking crisis but this time it might be different it could be kind of all across the economy it can be certain sectors um it very much depends yeah and so obviously the definition of a recession is consecutive how many consecutive quarters two two two consecutive quarters six months of negative growth why does the economy even need to grow why can't we just have the same size economy we know how much you know like when I get my salary it's going to be the same every month and I know how much I spend on rent I know how much I spend on food I know how much I spend on shopping whatever it might be why can't the government literally just go okay guys we're going to be this big for this quarter and we're going to spend this on this and we're not going to concentrate on growing next quarter we're fine we're not insecure we're fine how we are why can't we just do that because the growth of the economy is actually very much linked to our standard of living okay and so when economies grow overall everyone's standard of living or most people should increase and like it might be less obvious in a place like the uk but in kind of developing countries even small bits of growth can mean have big impacts and over time if you kind of kept an economy at the same size things wear away so you've got to think about um you might have the same salary but as you kind of grow older your needs might change you might actually want to earn a bit more to facilitate the lifestyle that you want okay so we want to grow we know we want to grow why can't we just print more money?

21:23Well we can but we really shouldn't. So by giving everyone a bit more money you might think you might be able to buy more stuff. So if I just gave you you know double the amount of money in your account but I did it for everyone it would actually cause inflation which is really bad because you've got too much money chasing too fewer goods and that increases actually the price of them so much so that actually you're not better off you might even be worse off. We've seen where this has gone really wrong for some countries. So I don't know, you might have seen images of countries like Zimbabwe, where people are buying loaves of bread using wheelbarrowes and money, and perhaps it still might not be enough.

22:04So if we print too much money, we get too much inflation. So obviously we can't just print more money all the time or just blanket give everyone an injection of money. I mean, interestingly, I know they did that in terms of the stimulus checks in the US in COVID times. Do those types of things cause inflation? Yes, but sometimes inflation might be needed. Actually, we did something similar here in the UK. We've actually done it quite a few times. The Bank of England have actually printed money, and they did it actually during the COVID crisis as well in 2020, when the Bank of England thought that the economy actually needs simulating, and people did need to spend more, because even though high inflation is really bad, actually having something called deflation, where prices are falling, can be just as bad.

22:50Okay. Which is quite surprising. But, you know, if you think about if you're wanting to buy, I don't know, a new pair of jeans or something and you know the next day they're going to go on sale and so they're going to be cheaper, you're going to put off buying that pair of jeans. But then if you know, you know, next week it's going to be even cheaper and the week after that, you're just never going to buy that pair of jeans. If that happens across the whole economy, no one spends any money and actually the economy gets smaller and smaller. And that can be even worse than sometimes having too much inflation.

23:19Yeah, no, that completely makes sense. I'd never thought about it in the other way. And I want to talk about the cost of living crisis, because I think that obviously, it's something that's hugely affecting a lot of people at the moment. And I think potentially as well, one of the first times that people who, you know, potentially have come out of university in the past few years, and students historically, I guess, aren't as affected by things like recessions, because their kind of state of being doesn't change that much in that time. but I think with the cost of living crisis there's been such a shift to how much things cost whether people are paying for their bills whether people were you know buying their food from week to week how does something like the cost of living crisis even happen because I know that you know we talk about the financial crisis we talk about you know in the 1980s what happened there we talk about all of these different ones how come these things I guess like keep happening and we don't just like learn from them like how do they come about so every crisis is very different and they have very different ways of coming about and their impacts are also very different.

24:23So this current crisis, the cost of living crisis, is all because of inflation. So inflation is the rate at which prices go up in the economy. And usually we'd want them to go up about 2%. But at the moment, inflation's over 10%, which is very high. It actually means that your£10 note is actually only worth about£9, which isn't very good. Yeah, they're not nice. It's not nice. And inflation can be caused by quite a few things, but two kind of main things. One is there's too many people wanting too few goods, because if there's just, you know, one thing and 10 people want it, then you can put the price of that thing up.

25:02And that means that it's more expensive. Or it's when the cost of making things go up. And that's what's happening now. And it's largely because of the war in Ukraine. so we know that the price of energy has increased quite a lot because Russia actually produces quite a lot of the world's gas and it's made it incredibly expensive to make things because a lot of things just need a lot of energy to make and so that's why the cost of a lot of things have gone up the other thing is Ukraine actually produces a lot of food particularly wheat so things like bread and pasta which are staples for a lot of people have gone up in price and that means that you know people are struggling with their food bills and with their energy bills which are essentials and we also know that people on kind of lower income backgrounds spend a larger proportion of their income on the essentials like energy and food so it really hits actually people on the lower end of the income spectrum a lot more than others in in society when you're listening to people i guess going back and forth on what policy they might implement to fix it so what they might do to bring the cost of living down to bring the cost of gas down food down whatever it might be or bring people's frenzy to purchase up whatever it might be why are there debated like multiple solutions to something rather than just we know kind of we pull this lever we're like this is too high we pull this lever to make it low I think from the outside looking in at policy it seems like how are all of these experts literally saying completely different things to what might fix it I think because a lot of policies have unintended consequences okay so So, you know, not every policy just has benefits.

26:40It will also have costs on people. The way that the Bank of England and most economies will deal with inflation is by changing interest rates. So the Bank of England have increased interest rates to tackle inflation. But by increasing interest rates, it actually makes it more expensive, for example, to pay off your loan or your mortgage. And it makes it more expensive to borrow money in general. And that can have a kind of an impact on people. But what's important is to realise that by increasing interest rates, you'd bring back inflation down again, which will hopefully end the cost of living crisis.

27:14For sure. It almost feels like everyone's been around long enough and there are so many enough experts to know what would fix something and what wouldn't fix something. I guess it's like, obviously there's so many, as you say, unintended side effects to doing one thing and not the other. from an outside perspective to something like politics or looking at policy it's very I guess it's constantly feels like the crises over and over and over and so it's kind of like how do we not have that happen rather than constantly get into them and then try and get out of them which I guess is kind of the way the economy works yeah and so I think we've been very unfortunate over the last few years where we've been hit by a series of sharks.

28:02So, you know, starting with COVID, then the war, and now we've got the cost of living crisis because of it. And so it's kind of really hard. And, you know, recessions come and go. Actually, the average person will live through around eight crises of their lifetime, which is twice as many times as, you know, the average person will move home. And so it's something we do need to get used to, unfortunately. Is there an element of that then where it's kind of like, if we all just reacted a little bit less to each... Because I know, obviously, what often drives us into recession is people thinking there's a recession and therefore no one spends and all of these types of things.

28:36Is there an element of kind of just being like, everyone just stays still, like just keep going? I guess, you know, it's classic psychology. You don't want to be the one who loses out if you're not the one who, I guess, saves your money or pulls it out or something. I guess I shouldn't be an economist. I want to talk about crypto for a second because I know that, you know, it's been a huge thing on social media. It's had a big blow up and it's had a huge fall. And some people are still saying kind of to go towards it. I'd love for you to give me, I guess, an economist's perspective on crypto. First of all, from like the what really is it to the whether we should be engaging with it, no matter what someone might say online.

29:24okay in terms of you know what is crypto a lot of people think of it as money and a lot of people think they can use it in the same way that you use your credit cards at the moment but that's not true um at all because we know that the price of crypto goes up and down quite a lot uh kind of day to day hour by hour minute i don't know how often um while you know the money in your pocket keeps the same value day in day out right but so what it really is is an investment like an asset of any type you know in the same way that you might invest in some shares um or i know piece of arse or something it's kind of the similar thing it's really an investment um in something and the way that it drives value seems to be from people either buying a lot of it or buying less of it so more that people buy it the more the price goes up less that people buy of it the more the price goes down.

30:17And so what is people's attraction to crypto that makes it so, I guess, so something that's talked about and something that people have literally thrown thousands of pounds into before they've even put it in a safe bank account? Some people would say it's a bit like a kind of economic bubble and which like the price will keep going up if, you know, people think the price will keep going up. It's kind of all down to confidence where price will keep going down. And we see kind of bubbles throughout history and all the time in kind of different areas. and so you you know you might have heard of the housing bubble or like the stock market bubble or even the beanie baby bubble which is kind of a less well-known one please go on so beanie babies as you know are like teddy bears they usually cost about five pounds or so I'm guessing but back in the 2000s lots of people started thinking they were rare and so you started buying them as investments and so much so that the price went up a lot to a point where they were selling for thousands of pounds on ebay and people went kind of insane um there was like there was a beanie baby smuggling ring there was a beanie baby bandit who was a man in his 80s there were stampedes and shopping centers where you know actual kids you know kids got hurt because people were so crazy to get like you know the rarest beanie baby um and people you know people really believed it um But what happened was, you know, we know when the price of things go up, they must come down.

31:44And people realised that they'd, you know, spent all their life savings on these teddy bears and actually they weren't worth much. And so people stopped buying them or started selling them. The price came tumbling down and lots of people lost a lot of money. And a family even went homeless and lost£100 ,000. So we see these sorts of bubbles all the time. Some of them kind of more sustained, some of them aren't. it all very much depends on what people feel about the product or the thing that they're investing in. So how do you know if something is a bubble or not a bubble? Like how do you know if you're an early adopter or whether something's a bubble?

32:17So I think the reason why you get these kind of extremes of prices going up and prices falling and people losing money is it's really hard to tell. You've got to think about the fundamentals like what are you actually investing in and will it kind of be worth that much kind of in the future and why it's really hard to tell I think um so there's no straightforward answer yeah I guess because if you always rely on like the safest option it's also like when you are looking at investing in general there are going to be things that are riskier that might pay off but obviously I guess the answer maybe is diversifying more than just being like beanie babies yeah and being able to have I guess you know the kind of investment um term that essentially says that you should never be investing more than you can be very happy to lose I guess or not very happy to lose no one's happy to lose anything but you know happy or able to continue your standard of living without losing I want to talk for a second about the housing in that way so we obviously know that um house prices go up and down all the time but I feel like personally over my since I've I guess read the news there's been a lot about housing bubbles about housing market crashes about how property is the best thing to be in the crash that all of these things I'd like to understand a little bit more about the property market in general in that way why there are bubbles why there are crashes when I guess when you look at property it does seem like a relatively safe bet that people will always be buying homes yeah so I guess a lot of people would say that the housing market has been quite a bit of a bubble especially you know as you said since you've been reading news a few quite a few years now the thing about it is that house prices are driven by loads of different things right they can be driven by loads of people wanting to live in a similar area so you see you know the prices in london yeah are way more expensive than it's kind of around the country because lots of people want to live here or you can um or down to supply so if there's lots of housing um development in a certain area then the price of housing in that area should go down but we also down to you know really small things like well small things they're actually very important things like if you're buying a house near a train station or a chief station it's going to cost you a lot more so there's loads of different factors that affect house prices and we also know that house prices kind of go down during a recession so we've seen house prices starting to fall and during boom times will increase as well I think what was weird was that house prices actually went up during COVID, which was strange given that, you know, the economy wasn't doing very well, it was all shut down.

34:54And they're very different factors to play. And I think it's just because lots of people wanted bigger houses in different areas that they were living in now, which caused, you know, house prices to increase in certain areas where you wouldn't really think they would before. Yeah, completely understandable. So we've covered a lot of the general topics of kind of, you know, basics of what's this and that. I guess for people who are getting to the stage in their life where they want to understand more about the economy and it's not necessarily something we're kind of constantly immersed in I feel like sometimes when I turn on the radio I'm like what like I've clearly missed something like I clearly don't you know understand this well and it feels really overwhelming to feel the need to I guess go into a deep dive article or whatever it might be what resources or methods would you recommend to people who want to generally stay in the know about the economy and about the decisions that are happening around them so i think we're quite lucky that there's loads of resources out there like when i was at school it was just textbooks mainly and boring news things but now we've got things like podcasts and loads of like pop econ books including the book that me and my co-author jack meaning wrote called can't we just print more money um that provides kind of a basic level of economics it explains things in a more accessible way and how it's relevant to people's lives I think also what's really a good way of learning is just asking questions asking people around you kind of things that you don't know and then you can kind of work it out between you because actually economics is very intuitive it's just been hidden behind loads of jargon and loads of math equations but it's actually not that it's really just how you kind of interact with each other and how you live your life um and so you'd actually find as soon as you kind of start digging into things it's actually really simple I love the concept behind your book and I think that it's I love anything kind of poppy economics that very much makes it a little bit more accessible and makes it a little bit more like this is how it affects your life you might think it generally affects your life in kind of all of these different very boring ways but actually day to day this is what it affects what did people react strongest to with your book whether it was like a fun fact whether it was a topic so I think what surprised people about it was that you can make economics like witty and fun and also kind of find economics in day-to-day things so in the book we explain how you can get a pay rise through the Simpsons or how you know you can understand climate change by queuing up for a plate of chips or even things like how beanie babies can explain how recessions come about and people don't really think about economics and these sorts of concepts but they're really hidden in kind of day-to-day things that you see and hear all the time okay so how do you get a pay rise so uh in the book we actually talk about it through the simpsons and there's an episode i don't know if you remember it's quite an old one where um the whole of the power plant so him simpson his friends all go on strike because mr burns being mr burns takes away dental health care right um but it ends up in mr burns hiring loads of robots and actually also goes really badly wrong because they end up switching off all the electricity uh in springfield and so striking hasn't worked in in springfield um but in the book what we do talk about which is a better way of getting pay rise is actually through investing in yourself so we know that by kind of educating yourself more and making sure that the kind of skills that you bring are valued more you can get a pay rise because ultimately your salary is determined by how much worth you have to your employer um so that can be in really different ways and so in the book actually we talk about e-gamers who are you know like 15 16 years old who are millionaires just by playing video games at home a lot of people might sit there at home thinking god why am i making millions of pounds just playing video games and it's because you know it's really highly valued by their employer because by employing these really kind of teenagers are very good at playing games they can earn a lot of money through sponsorship deals and so even though like these 16 year olds are earning millions of pounds the companies are earning even more money and they're just getting a small chunk of it because through sponsorship and by you know selling tickets to watch them play they're earning loads of money and you can do the same not just by playing video games but if you get the relevant skills that are useful for your employees to make money you get a chunk of that yeah I guess and also with like the smaller the organization probably as well the more they're thinking about for each employee how they are getting that return on investment so actually looking at kind of what costs are they replacing from elsewhere whether that might be agency whether that might be just not having their income or whatever in terms of like directly boosting the revenue of the company so I guess the more you can show that pretty explicitly the tie between what you're doing and the company's revenue increasing then I can imagine that has a huge impact on getting a pay rise yes definitely okay so I'm going to go right back to basics here and I just want to know what on earth is a mortgage for people who hear the word mortgage flying around they hear people saying like oh no that cost me a mortgage or whatever it might be what on earth is a mortgage and why does a mortgage allow you to be able to purchase something that's so far beyond the actual money you have a mortgage is just a loan to buy a house in the same way that you know you can get a loan to buy a car or some clothes now the only difference with a mortgage another loan is is what we would call a secured loan and it's secured because if you can't pay it back the bank or whoever's lending you that money can take away your house right and so it's really a kind of safety net for the bank um that if you can't pay back that loan they've got something else to hold on to and you also have to put a down payment down so if you're buying some clothes off the internet and you've done it through clarinet you don't need to put i don't know 10 % deposit down right you're just giving that money right to cover the cost of it but for a house you still have to provide quite a lump sum amount so i think it's you know 15 20 % not sure what it is before.

41:04And so it's a bit different to other loans, but they're big loans, but also the bank does kind of own your house pretty much until you've paid it all off. And obviously, plan is a specific company, but on that type of loan where you're not secured against it, why do companies ever do an unsecured loan? They can earn a lot of money from it. So you might have noticed they charge you some interest, and that interest is enough for whoever's lending you that money to think that it's, you know, worth it to give you that money. I don't know how high the rates are, but they're high enough for you to be able to hopefully pay it back and for them to make enough money from it.

41:42And is there a time that is statistically best to get a mortgage? It depends on the individual, right? So to get a mortgage, you have to put down a payment, a deposit, so you'd have to save up for it. And also mortgages go up and down depending on the interest rates in the economy. Right. So where interest rates are high, it's more expensive to buy a house. And when they're low, it's cheaper. And so it kind of depends on the individual, depending on what they can afford. OK, so I want to talk briefly about interest rates because we hear the word pop up left, right and centre. Bank of England obviously plays a huge part.

42:17What are interest rates and how do they affect us? I like to think of interest rates as the cost of money. So when interest rates go up, it costs you more to borrow money. And when interest rates go down, it costs you less to borrow money. But also when interest rates are high, you get more return on your savings as well. And these can provide kind of signals on what you should do or kind of influence your decisions. So when interest rates are high, you're less likely to spend money because it's actually more expensive for you to borrow it. So, for example, we talked about mortgages earlier. Your mortgage gets more expensive.

42:49If you're thinking about buying a house, you might not do it. If you really have a mortgage, you might go, oh, my mortgage has gone up. I should save some money or spend less on going on a holiday or something. And so you spend less money. But when interest rates are low, it's actually cheaper for you to borrow money. So you might go, oh, buy more clothes because it's cheaper. Or buy a car because it's cheaper to borrow it and spend more money. and could you talk a little bit about how the government then uses or the Bank of England then uses interest rates to actually change people's spending habits so the Bank of England use interest rates to influence inflation and inflation is the rate at which prices go up in an economy so by increasing interest rates as they have done lately they're trying to bring inflation down and by putting up interest rates as I said it gets more expensive to borrow and to spend and so people will spend less and by doing that the price of things shouldn't increase as quickly because there are fewer people wanting those things and that should bring inflation down.

43:54And they do the opposite, they drop interest rates when you want to stimulate the economy and you actually want inflation to be higher or the prices to increase a bit quicker and because it's cheaper to borrow people spend a bit more and the price of those things go up. So we obviously hear about the stock market a lot. We hear about the FTSE 100, FTSE 250, NASDAQ, all of this. What is the stock market? So stock market is a market just like, you know, if you went down to your local farmers market, but it kind of doesn't, it's not a tangible place. It's kind of in the ether of loads of different shares being bought and sold.

44:34And a share is really just a way of companies raising money. so if a company say wanted to expand they wanted to open another kind of shop nearby to the one that they already have they might go um and sell some of their really small portion of their business and give you the chance to invest in it now it's great for you because you're going to be paid by the business to invest in it so you make some money it's great for the business because they've got money uh that they can use to buy another shop um and that can benefit everyone really and so lots of people think the stock market is something that's really abstract but really isn't and usually the companies that are in the stock market really big companies like apple amazon you know all the big ones um but by investing and selling and buying these shares they actually can expand their businesses which means that you might be able to get a bigger range of goods or even sometimes cheaper um which is great and i guess they often see their stock price go up after they've you know done a big announcement or whatever it might be so more people put money in there so they raise more money also probably worth saying from someone with companies it's not every company it's only public listed companies so a company can this is just me adding on my expertise it's not expertise at all um when a company decides to IPO aka like initial public offering they decide to go public that's the point that you can then publicly buy into the company um through a number of different investment platforms but something like Tala for example my clothing company you couldn't buy shares now that's only open to private investment when we do funding rounds well that's separate just because people are sometimes like why can't I buy stocks so to round off I'd really like to just generally from someone who's come out of today's episode and feels like they understand a little bit more about the economy be great to just get that kind of state of affairs what's good what's maybe not so good and where we go from here so the economy's been hit by a series of shocks which is actually not very common to be hit by so many shocks at the same time so there was a pandemic and now there's war and there's a cost of living crisis and so things you know the economy's been hit quite a bit as you said we're not in a recession but the economy isn't growing we've kind of stagnated and we might fall into recession we might not but um these are kind of you know the technical definitions you might still see things like businesses closing down people staying at home more instead of spending but some of the good news is is that unemployment is low and in most recessions we would have seen unemployment go up quite a bit um but actually there are really plenty of jobs around um we actually know that there aren't enough workers for the amount of jobs that we have in the economy and so that's a kind of a good news story if you're someone who's coming out to university wanting a job or wanting to change jobs um that's quite a good thing to kind of be in um unlike you know when I was at university and I was finishing up um you know jobs were a bit harder to find at the time so in general people concentrating on upskilling still feeling confident that they can you know there are jobs out there employments actually relatively low so we might have been you know there might have been a few shocks but also understanding and remembering that statistic that you know we'll all live through eight crises if the life expect our life expectancy is kind of mid-70s which I think it is is that my brain okay so like pretty much 80 so that's actually you know that's going to be a crisis once every 10 years which sounds terrifying and sounds like a bad news story but if that's kind of the cyclical nature of the economy then we can somewhat be able to especially at the point where unemployment's at an all-time low be able to kind of roll with the punches to some extent of course there are going to be crises that are far worse and there are crises that hugely affect people and it's important that we talk about them and understand them but also being able to understand I think one of the most terrifying things for young people is constantly being told we're in a recession there's this crash there's this crisis there's this bubble there's all of this and you're kind of like ah but to some extent being able to understand that that's pretty cyclical and that happens quite a lot happens a lot and when you get recessions after recessions you usually get boom times when the economy is actually growing and so that will also happen at some point as well we won't always be in a recession brilliant such a good note to end on well thank you so much for joining me i feel like this has been a very good like myth busting session and I hope that people will come out of this episode feeling a little more acquainted with the economy whether they you know you walk into a room and the radio's there just be able to understand a thing or two or read your morning metro on the tube and I can't thank you enough for sharing your expertise where I definitely do not have it.

49:37Thank you for having me.

49:45Thank you.