Andrew Bailey marks out of ten so far. I don't want to personalize it.
You know, I've said often repeatedly that I struggle to think of more than
five people in the world. You said this before.
You know that understand money. And Andrew, unfortunately, is not one of
them. Jay Powell is not one of them.
You know, there, there, there, there. A rare being.
And so we we enter into the world in an era of policy errors.
And to that point, you know, to that point, I would say to you that the world
of economic macro, if you will, history changed twenty five years ago.
And I'd say that markets and policymakers have yet to embrace it.
And the change I refer to is the rise and prominence of China, the
industrialisation of China. But with a closed capital account.
Okay. And so as deficit countries, we buy
their goods and services. They have amassed an immense surplus of
capacity in China at all. But in return, they buy our financial
assets. They don't buy our goods and services.
And so we're left with this predicament of profound asset price inflation.
But this inflation, deflation in the real compensation for the real folk and
the central bankers don't get that. I'm afraid they're compounding it.
And it feels like class warfare. Are we trying to fix that, though, Hugh?
I feel like there is a lot of good to see you, by the way.
And there's a lot of money certainly put into industrialization, infrastructure
here in the US, green energy, etc. Like are we trying to fix this exact
problem? I mean, the act you refer to it, the
preposterously titled American Fighting Inflation Act, whatever, is a great step
in the right direction. But there is a solution.
You know, I would suggest that the US government, as a form of flattery, turns
around to their Chinese counterparts and says, hey, you know what?
It's hats off to you. It's been a success.
You have risen in the last 30 years. China's gone from the GDP of Turkey
today to the size of continental Europe. And I would propose the US close its
capital account. No, that would not be without
consequences. Severe and bad consequences.
Asset prices would shrink. And guess what?
The power brokers who control Washington are Wall Street and they don't want it.
And so we have this profound, grotesque Gini coefficient, which just gets worse.
The rich get richer and richer and asset prices elevate to levels beyond the
media. Implication will be the implication of
effectively building a wall financial wall between China and the United
States. The implication guy would be that they
would be forced to buy our goods and services.
The implication would be that their currency would appreciate that one point
four billion Chinese citizens would be wealthier.
Visa v ISE view their currency Michael Barr since and after the Chinese
currency has devalued from roughly six point five to presently about seven
point three. Despite the magnificence of everything
they've done, that defeats the logic of economics since NAFTA.
So 1990 for a long time ago, it's devalued.
So you assuming that's not going to happen, like we're not gonna put up a
firewall for the financial connection that the West has a China.
So does that mean it's a structurally higher inflation world and actually
higher asset prices like you? Meaning that then central banks cannot
fix that and therefore, that sets up how you can make money.
Central bankers are certainly powerless to fix that.
That is something that has to be coordinated and arranged for that kind
of head of government level. And to correct you, forgive me, but I'm
talking about the kind of buy fewer occasion in our world where we get asset
price inflation and we get this profound collapse in the real compensation of
Western households owing to this profound surplus of capacity, if you
will, in the Eastern Mercantilist nations.
Now, my problem is that the Fed in and of course, dear Mr.
Bailey, don't seem to comprehend that. And so in raising rates, you're you're
targeting wages. The world today needs the genius of a
Henry Ford. We need higher wages.
And let me tell you why. There are three components to GDP
growth, population growth. And I'm afraid we're not having enough
babies. Okay.
Yeah. Productivity growth, which is really
dependent upon investment. And we're not invest.
Thing, because why would you if this this lack of capacity in the east and so
you're reliant upon debt growth? No, it is.
It's a fragile equilibrium as long as you operate a kind of zero interest rate
policy that you make. The cost of carrying that debt up very
low. But when we are less approximate to four
times debt to GDP and when you raise rates to 5 percent, the UK, effectively
we are at 20 percent and we're gonna break things.
That's what the motto. What breaks?
What we through. OK.
So monkeys are telling you that things are going to break.
What? What do you think the market is
signalling he's going to break next? Well, let me give you a personal
anecdote. I arrived back in the UK from heaven
from paradise on Sunday. And the family home, which is leased.
Yeah, we're being evicted. Why are we being evicted?
We've been paying the bills. But the landlord was getting like two,
two and half percent yield. Okay.
Where's his rent? Where's his rent resetting to?
He's losing money. Right.
So that that property is going on the market, believe me, a hell of a lot of
property is going on the market. And so capital prices, asset prices are
going to fall. Secondly, my favorite place where I go
for my coffee. My loft.
And it's this is an expensive place. This is a ten dollar latte.
It's closing. Why is it closing?
Because the landlord is raising the rent.
Yeah. Also here.
No one's gonna want to pay ten bucks for a latte.
They can't get the wage increase at the same time.
Favorite question if things are going to break.
What do you do? I sit in and.
Well, listen. The problem with as gold is it is a
defense. Yeah.
The upside is kind of modest. So gold is capitalized at 13 trillion
dollars. Okay.
And you were in it to win it? Yeah, we're on Bloomberg.
We're looking for a fight. Pitchers so say gold tripled.
Gold would be the equivalent size of all U.S.
stocks. No, I've lived long and I've lived a
crazy life and I've seen some crazy stuff.
But I even I can't conceive of that. So, yeah, maybe maybe it preserves its
value. I come back and, you know, I've been
saying to you, the dreaded bitcoin bitcoins, half a trillion dollars.
Okay. And Bitcoin finds itself in the world of
asset allocation within a bucket that we call alternatives.
You know, private equity, commercial property, gold at all.
It's 100 trillion dollar bucket and bitcoins, half a trillion dollars.
So that could triple and it would be, what, one and a half trillion dollars?
It would be half the size of Apple. So I kind of I think.
Yeah, I mean, kind of greedy. I'd have some of that.
We're seeing extraordinary things. We're seeing, you know, crypto being
cleaned, crypto being eliminated. Bitcoin is not crypto.
It's a commodity. Yeah.
And we're we've seen this remarkable development the last few weeks where you
see BlackRock and Fidelity apply for an ETF.
Okay. And it's likely to succeed.
These are the ultimate insiders. You can buy bitcoin today at a 40
percent discount to the prevailing price by buying great the Grayson Trust in
U.S. so and fund applying to be an ETF.
It will it will become an ETF. So there is an opportunity.
So it's the risk of not owning Bitcoin too great right now?
Absolutely. Absolutely.
And would you would you just buy. Is that a barbell?
Do you just buy a little bit of it? I buy.
Buy. I mean, you.
You can buy it. I mean, buy less.
And we can do it. We can go barbarian.
Go into it. We can go to the gym, if you wish.
JB but you want to. But you definitely want to have it.
It's been great. See?
Thank you very much indeed for joining us.