What is Money, and What's In It For You?

What is Money, and What's In It For You?

Rob’s comments below are in italics.Derek’s comments below are in normal font. As we said last time, over the next series of episodes, we’ll discuss chapters from our forthcoming book, Unravelling the Money Puzzle. The first chapter is “What’s in it for you?” So why would you bother? What’s In It For You? Why would you bother with this? Essentially, we’re all pitched into life in the society we live in. Money is pretty much essential. Robert Anton Wilson once described it as bio survival tickets. Clearly, if you want a roof over your head and food on the table, you need to have money to do that in the society we live in. I like that. I’ve learned since I’ve got older that there isn’t actually that much difference between monopoly money and real money. Well, this is one of the things we’ll cover in the next section, where we look at the issue of what money is. Essentially, we’re not given any formal education on it at all. Whatever we learned, we learned from our parents, and for most of us, we didn’t have any formal lessons from them about it. We picked it up in between, out of the implications of what was going on around us. Or, in my case, I ignored everything my dad tried to pass on to me and had to learn it all the hard way instead. That’s a pretty common experience. Certainly, I don’t remember any lessons on it in school. The only time I can remember it being discussed at all was when one of our teachers remarked in passing that the pound note, as we had it in those days before they went over to pound coins, actually still said, “I promise to pay the bearer on demand the sum of one pound in gold,” over the signature of the Governor of the Bank of England. The teacher said, well, actually, that’s not true these days. The reason it wasn’t true is that they suspended the convertibility of pound notes into gold in 1933, when they finally threw in the sponge on pretending that the First World War hadn’t destroyed a lot of value in the country. A pound was no longer worth what it had been. But that’s another story. Anyway, one of the boys asked, well, in that case, why is it worth a pound? Which was a very sensible question. The teacher replied, “Well, if you’re not sure about that, you can always give me any that you’ve got.” Which was typical of that particular teacher, totally missed the chance for what could have been a very constructive and informative discussion around that. At the time, I just thought it was a preposterous brush-off. I suppose you could take the view that he was subtly getting the point across that it’s because we all believe it’s worth a pound, and that somebody’s going to give us a pound’s worth of goods, whatever that might be. It’s a shared story that if we stop believing it, it collapses tomorrow. So we come out into life, and most people’s experience is that it’s a constant juggling act. We feel we’ve done all right if we get through the month without having got worse off. Of course, a lot of people in the present day, in pretty much all of the developed economies, are actually finding that they’re not getting wealthier; they’re getting less wealthy. Just to go back a few steps, why was gold used in the first place? Gold has been used across the ages. Is it just because it’s a scarce, finite resource? Well, it’s a scarce, finite resource. It’s incorruptible in the sense that it doesn’t corrode, rust or tarnish. That’s what makes it attractive. It’s been known since antiquity how to ascertain its purity, and it’s what they call fungible, meaning that one lump of gold is exactly like any other. We tokenise it because it’s quite inconvenient to carry lumps of gold around. Well, this is getting on to the topic of the next chapter. At the moment, we’re just saying why this is important to you. It’s basically important to you because, plainly, some people have a flair or expertise for accumulating it, and most of us don’t. This makes me feel that it probably suits the people who have that flair, that expertise and possibly that obsession, that the rest of us are not so well informed. It makes it easier for them to take advantage of us. I don’t think I’m being paranoid when I say that, or even if I am, it doesn’t necessarily mean I’m mistaken. Just because you’re paranoid doesn’t mean they’re not out to get you. Exactly. I’m just running through the notes I made about the points. We’re covering them pretty rapidly. Another impression most of us have is that it’s very difficult and complicated. In the course of the investigations we’re going to be sharing, it will come across that it’s almost embarrassingly simple in a lot of ways. The things you really need to know don’t require much sophistication or exceptional mental powers to grasp. When they’re brought out into the open and examined, they’re very easy to grasp, and once you’ve grasped and internalised them, that will empower you going forward. So that’s what we’re up to with this educational project. What you’ll get from following this through to the end is that you’ll become confident, relaxed and effective in dealing with your finances, which very few people would say, in all honesty, that they are at the moment. You’ll get the clarity to avoid being taken advantage of, and you’ll probably be quite angry when you see some of the ways you have been being taken advantage of. You’ll get clarity on how to build prosperity over the course of a lifetime. So that’s what’s in it for you from following it. What Money Actually Is Now I’ll go on to the next section, taking a look at what money actually is. Before I do that, are there any other points you want to raise, or any other questions you want to ask, Rob? No, just to say that I think there was a hole in my education. I think we have to unlearn certain mental habits around it as well. It’s not just about learning; it’s about unlearning some unhelpful thought patterns around this too. So the next section will address the question: what is money? It used to be a bit more obvious what the answer to this question might be than it is now. At the time I was growing up, which seems increasingly like ancient history, money for the most part was something completely tangible. It was coins and notes. There were one-pound notes, ten-shilling notes and five-pound notes. The ten-shilling note is worth fifty pence in today’s currency. Slowly, we picked up on the fact that money could be balances in a bank. We thought of the bank as a big storeroom where the money was kept in a safe place. There were lots of banks up and down every main street in every town, and people were going in all day long, either depositing money or withdrawing it. So it was quite easy to look at it just as though it was a kind of storeroom. Like a big piggy bank. Yeah, whereas now increasingly it’s something entirely abstract, it’s figures on a screen. There’s been this huge push over the last five or six years, particularly to steer us all away from tangible forms of money and toward intangible ones, on the grounds that they’re more convenient. Of course, it’s convenient until it isn’t - when the system breaks down or when you become a victim. This has been happening quite a lot, in terms of people who felt to be troublesome to the ruling elites in some way or another being debanked. There’s absolutely nothing they can do about it, because it’s an extra-legal procedure. A number of people are grappling with court cases over this, and in the meantime, it’s almost impossible to function normally in the society we have. I think Nigel Farage had one of his accounts closed, didn’t he? Although he’s clearly back in line with the establishment narrative because he’s back in the fold now. He did. I don’t have a great deal of sympathy for him, but I don’t think it should happen to anybody. The Canadian truckers’ protest was the other thing that came to mind. Exactly. Anyway, what is money, in essence? I’ll start with the classic definitions, and then we’ll see how this works out. 1. A Medium of Exchange First and foremost, money is regarded as a medium of exchange. Now, what does that mean? The typical way it’s explained is that, in primitive societies, people operated by barter. Somebody would take goods they had produced or otherwise acquired and swap them for other goods, which is obviously very cumbersome. There’s considerable doubt over that narrative as a literal historical sequence. Part of the confusion comes from the degree of obsession we have these days with money, and the degree of obsession we have with looking after our own individual interests over and above others. In very primitive societies, much of what went on was much more like a gift economy. It was the local community as well. It’s not like you were buying from someone in a different country. Yeah, or someone you’d never met before and never expected to meet again. But people were much less rigorous about making sure they covered their own interests. They were much more prepared to just be generous, providing something to their neighbours and fellow villagers, and expecting that when the boot was on the other foot, they’d be taken care of. It was very common throughout the world, in all sorts of cultures. All the Scottish clans used to do that, didn’t they? This principle of hospitality. Yes indeed. So, what does it mean, a “medium of exchange?” Suppose a farmer wants a table, and the carpenter thinks the table is worth three bags of wheat. If they were operating on a strict barter system, they’d do a straight swap, and chances are the carpenter doesn’t want three bags of wheat. So a convention arises in the village, in which some system of tokens is brought into play. It could be anything - let’s say they agree to use seashells to keep track of things. They all agree that ten seashells are worth a bag of wheat. The farmer could find three people who each want a bag of wheat, give them a bag of wheat, get ten seashells from them, and then take his thirty seashells to the carpenter. The carpenter gives him the table, and then he’s got the thirty seashells and can swap them for whatever he wants. He could take five of them to the butcher and get a joint of meat for his Sunday lunch. He could take one seashell to the candlemaker and get a box of candles, and so on. The interesting thing about looking at the story that way is that you see, where there’s a transaction, contrary to the assumption widely made these days that the seller is the winner because they’ve got the money, when you look at it from the perspective of this story, clearly it’s the farmer who’s the winner, because he wanted a table and now he’s got the table. The carpenter’s only got his thirty seashells, which, until he actually exchanges them for something he wants, leaves him down in terms of tangible assets. 2. A Store of Value This brings us to the second traditional use of money, which is as a store of value. This means the farmer doesn’t have to cash in his seashells immediately. He can keep some of them as a buffer for a rainy day, so he can purchase something later. Humans have been doing this ever since we switched from hunter-gatherer societies to agricultural societies. 3. A Unit of Account And the third use of money, according to the traditional definition, is that it’s a unit of account. Now what does that mean? Let’s say it’s May, and the farmer wants some horseshoes, and four horseshoes are worth a bag of wheat. But he hasn’t got a bag of wheat, because the harvest isn’t until August, and he’ll have the bag of wheat after he’s carried out the harvest. So he can say to the blacksmith, okay, we can make a note of the fact that I owe you one bag of wheat, and I will pay you that in August. That’s obviously related to the store of value, but it’s, if you like, a time shift from the future to the present. It’s a consistent measure, isn’t it? Yeah, and incidentally, having got to this point, I’d say the most common form of currency over the past 5,000 years has in fact been grain of one sort or another - wheat, corn or rice. That’s why all the Lords of the Manor had tithe barns, and the peasant farmers brought in their yearly taxes or rent - however you want to describe it, it comes to the same thing - and they paid those taxes or rents in the form of grain. That was not because the Lord of the Manor wanted to eat all the grain himself - plainly he couldn’t do that - but he would obviously consume some of it, and he used some of it for paying his retainers and his suppliers. That was the primary form of money for most of the time. The interesting thing about that is that it loses its value over time. The intention is that it will last you round till the next harvest, but you don’t expect it to - So as a store of value, it fails. In Summary Yeah. So in summary, money is a system of tokens which represent a claim on wealth, which raises the question: what is wealth? Perhaps we can all think about that until we get to the next section next week, and then we can examine it in more detail and go on from there. So, just to recap on some of the things we talked about. Seashells, for instance, are a good medium of exchange, a poor store of value, and not a great unit of measure - because, do you find a bigger seashell than another one? There’s no standardisation there. So that’s probably a good thing to remember. One shell might not be the same as another. Yeah, and so - although for day-to-day transactions in a lot of village societies over the past few millennia, grain would have been used - obviously for larger purchases people would have used precious metals. Of course, the metals known to antiquity were gold, silver and copper, which is why our entire token money today is split up into those denominations. Gold was rarer and less subject to corrosion - in fact, to all intents and purposes not subject to it at all - than silver and copper, which were more common and more ready to tarnish. Yeah, and it sounds like some of these earlier forms were more decentralised, in terms of not having a single central provider. It sounds to me like rulers throughout the ages have sought to control the money supply because, if you control the money supply, you control the people. Yeah. These are all topics which will become clearer as we look at different aspects of this investigation as time goes on. Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com [https://sovereignfinance.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Sleep With One Eye Open!

Rob’s comments below are in italics.Derek’s comments below are in normal font. We thought we’d do a bit of a roundup of recent goings-on today. What do people need to know? Well, in the week since our last recording, there have been more or less daily reversals in the apparent American stance regarding the discussions with Iran. It was more or less a surprise that we actually got the memorandum of understanding signed by Trump. No sooner was it signed than Israel continued the fighting in Lebanon, despite the fact that the number one item on the memorandum is a complete cessation of hostilities, including in Lebanon. The strait was reopened, but it’s already been shut again in response to that. As of today, this is what I mean by the rapidity of reversals. The moment you think one thing has actually developed, the next minute, we’re back to where we were before. Each time there’s a failure to live up to what has already been explicitly agreed, it erodes the credibility of the United States even further. It just makes it appear like a circus, doesn’t it? All done to probably manipulate the stock value of certain companies, I would suspect. Yeah. Originally, there was going to be a signing ceremony, initially in Islamabad, then it was moved to Geneva. It has since become apparent that there was a Mossad plot to assassinate the Iranian negotiators. That’s why the agreement was actually signed in separate locations. The Iranian side signed separately, and Donald Trump signed in Versailles. That is ironic, because that’s where Germany agreed to the humiliating terms that ended the First World War, which of course was responsible 20 years later for the outbreak of the Second World War. So a slightly ironic gesture. Even though it’s been signed, and even though the Iranian Supreme Leader expressed his reservations about whether America would continue with it, he agreed to go along because a majority of the governing council had decided this was the best way forward. Because of the immediate reopening of hostilities by Israel in Lebanon and the subsequent closure of the strait almost as soon as it was opened, apparently about a dozen tankers got out, nearly all Iranian ones. Now we’re back to square one as far as the Strait is concerned. The negotiations are now about how to reaffirm America’s seriousness about this agreement so that the strait can be reopened. We’re still in this phoney war state, which has gone on far longer than you or I would ever have imagined. Certainly in this country, we’re not yet seeing actual shortages at the pumps. We are seeing price rises in the shops, which is more or less inevitable given the rise in diesel fuel prices, which is much sharper than the petrol price rises. In America it varies by state, but price increases have been quite painful and will continue. One reason we’ve been insulated from actual shortages, rather than just price changes, is that there was obviously a lot of petroleum in transit on tankers when the straits were closed. These have taken time to reach their destinations and be discharged, providing something of a buffer. All countries have also been drawing down their reserve stocks - to the point that these are now close to exhaustion. Some people reckon there’s less than a couple of weeks before there’s nothing left from that source, and then the pain on the world economy will really begin to bite. Even if the strait opened tomorrow and production from the mothballed oil fields was ramped up to full capacity with shipping going flat out, those who understand these matters better than I do estimate it would take three times as long to recover as the three months the strait was shut. So it’d be nine months before we got back to where we were before. Which is essentially what we’d said back in February and March, wasn’t it? It may just have taken a bit longer than we thought to become apparent. Yeah. Once again, there’s been a complete asymmetry between the seriousness with which the Iranians are approaching these negotiations in Geneva and the frivolousness the Americans are displaying. Foreign Secretary Agarci and parliament speaker Cardibuff simply walked past Vance, Witkoff, Kushner and all the photographers sitting there waiting for a photo opportunity, all set up to show them grinning and shaking hands. They just weren’t going to go along with that pantomime. Some people are depicting this as a deliberate snub, but it was simply that they wouldn’t stoop to that masquerade. They then walked into another room, where they were greeted by the Prime Minister of Pakistan, who warmly embraced them. They continued to ignore the Americans, and Vance looked completely disconcerted, clearly out of his depth. The Iranians then refused to enter the discussion room until all reporters had been cleared out. All of this was entirely predictable. It’s astounding that the Americans didn’t realise they could have avoided all of that public embarrassment by treating them with the respect they deserved. They could have kept the press circus out entirely. Yeah. I was thinking about Caitlin Johnston’s comment the other day. The US Empire seems to think the entire world is its property. Anyone living in those places who responds to US naval bases or whatever is deemed to be committing an act of aggression, even though it’s in their part of the world. Until that mindset changes, the US Empire’s attitude towards these negotiations won’t change. Yeah. So it’s going to be a rocky few months. We just have to watch this unfolding day by day. The approval ratings of the Israeli regime amongst the American public have been plummeting, and this is likely to continue. Particularly when the full effects of this conflict feed through to affect people’s own day-to-day lives and financial stability. Trump is in a difficult position. He doesn’t seem capable of controlling himself. Part of the reason the talks got off to such an appalling start is that he published yet more rants on social media before proceedings had even begun, almost like dealing with someone who can’t control what they blurt out. Yeah, it all feels like a big show. I was reflecting last night on the fact that the Iranian football team played two World Cup matches in America. Surely that reflects the fact that some elements of this are theatrical. If you were genuinely at war with someone, would you have that country’s football team playing on your home turf? Even that was done incredibly incompetently. They made life as difficult as possible for those players, with delays, harassment, and so on. If you’re going to allow it, you could at least do it properly. So sometime soon we’ll get back to the original idea of this podcast: to provide an outline of how the money system works, how to get to grips with it, and how to apply that understanding to working within it to your own best advantage. We didn’t intend this to be a current affairs channel, but we didn’t expect world events to unfold quite like this. These events will affect the financial position of all of us and the options available to us in life. That’s right. Would you say, for someone thinking of starting a business, it is worth hanging fire for a month or two and seeing how things play out? What kind of volatility do we think is going to come up? It depends on what your business is. I’d been working on developing various electronic devices and audio effects for musicians. I’d projected quite considerably forward with plans to have things manufactured in China. I’d got prototypes done that way and opened negotiations with suppliers about scaling things up if it worked out well. I’ve just put all of that on ice because of the uncertainty. Not knowing how much you’ll be affected by events entirely beyond your control is unsettling. The best business would be something local, providing services to people immediately around you, face-to-face, offering things they’d find harder to get or much more expensive to get through the larger corporate structures we’ve taken for granted. Things they can’t just buy on Amazon. Yeah exactly. OK, until next week. Good thoughts. Thanks. Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com [https://sovereignfinance.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Book Review: Jeremy Lent's 'Ecocivilization'

Rob’s comments below are in italics.Derek’s comments below are in normal font. We’re going to chat today about a book you’ve been reading - Ecocivilization: Making a World that Works for All [https://www.amazon.co.uk/Ecocivilization-Making-World-that-Works/dp/1685892337/] by Jeremy Lent. Now I’ve been rather crafty here, nudging you to read this because I know you’ll read it much faster than I will! That way we can have this conversation and you can tell me what it’s all about! Yes, it’s almost the book I wish I’d written myself. I’m staggered by the depth and breadth of his scholarship and his attention to detail. It’s very much along the themes of quite a lot of things we’ve probably spoken about, and of my own book, The Letter from 2100: A Possible World for your Grandchildren [https://www.amazon.co.uk/Letter-2100-Possible-World-Grandchildren/dp/B09XBWKZTC/]. The idea is that we’re at a crisis point in human global society. We’re either going to pull through it into an unimaginably great situation, or we’re going to have a catastrophic collapse. There’s no real third alternative, as far as I can see. Ecocivilization is not a rose-tinted spectacles job, saying everything’s going to be all right. It actually goes into a lot of detail and points out some possible pathways. The overall structure of the book is in four sections. The first one is “How Did We Get Here?”, pointing out that we as a society are careening towards a precipice. This is obvious to anybody who hasn’t been living in a hole in the ground for the last five years or so. There are crises of all sorts, and it looks as though if one doesn’t get us, another one will. He flags up “The History They Didn’t Teach You in School” - that’s the title of one of the chapters in this section, and it’s brilliant. There’s a whole bunch of insightful stuff there. The second section is what he means by an ecocivilisation - a world that works for everybody. Obviously, that has to have respect for human beings as an absolute cornerstone of what’s involved, along with respect for the planet and the entire living systems, without which we won’t survive anyway. That section provides a theoretical outline of what to aim for. The third section is the biggest part of the book. It’s called “Envisaging an Ecocivilisation”. It has eleven or twelve chapters. One covers the world economy, and the other structures industry and enterprise to serve the common good. One is on agriculture, and the way that needs to be revised so it provides nourishing food for every human being, a fundamental necessity that the present system doesn’t achieve at all. He’s also got a chapter on wealth and what he calls the commonwealth, or the commons. There was an important insight in that chapter about the royal seal being put on the Magna Carta by Henry the Third, a couple of years after the barons forced King John to acquiesce to it. At the same time as the Magna Carta was sealed, there was also a Charter of the Forest, which is of personal interest to me. That charter reassigned to the common people the areas which had been fenced off as rural hunting grounds - the New Forest was one of them. They’ve now introduced car parking charges all over the forest, even little two-line strips on the side of a lane outside the pub in the village. I don’t know how much impact that’s had on the pub’s trade, but it’s about time somebody reminded them that this was actually granted under royal seal. We almost need a Magna Carta 2.0, don’t we? Just remind me, when was Magna Carta sealed? That was around the 1200s, wasn’t it? 1217. It was acknowledged in 1215, and actually put under royal seal in 1217. It’s quite interesting - I’m surprised nobody’s flagged up that the right to jury service has just been abolished by the government. Anyway, that’s another story. If you go to legislation.gov.uk, you can look up Magna Carta [https://www.legislation.gov.uk/aep/Edw1cc1929/25/9/contents], and it’s still there. So it’s a piece of active legislation. That’s not much help if they’re ignoring it! They can’t get rid of it, so they’re just ignoring it and gaslighting everyone. Pretty much. Another point - there are all sorts of interesting sideways snippets of information in this book. One is that when the UN was established after the Second World War, Albert Einstein said it wouldn’t work. He said the trouble was that the Charter grants sovereignty to individual countries without providing a mechanism to make them adhere to it, which is exactly what’s been happening since. The next chapter is on finance - transforming money to work for us all. We’ll probably have a detailed run-through of what he’s suggesting in another episode. It’s very much in line with a lot of the discussions we’ve had on this channel. There’s a chapter on technology, and one on infrastructure - the networks of communication, physical and informational. On governance, there’s the obvious fact we’ve discussed at times: that democracy in its present form isn’t really delivering the goods, however great an idea it is in principle. The law is a very interesting one, because it’s not something I’d given much thought to. We naturally assume the law is what it is, without analysing how it came about and who it’s designed to benefit. There’s a chapter on global governance, looking at a system that would integrate the entire global system. What’s written in the UN Charter would be a good starting point, if there weren’t the opportunity for any sufficiently strong actor to decide to ignore it. There’s also a chapter on the living earth - mutually beneficial symbiosis with the rest of the biosphere - and a chapter on culture and community, talking about education. There was a very interesting thing I didn’t know, flagged up in that chapter, about the way the education system we all take for granted was set up. The modern education system resulted from Prussia’s humiliation after being overrun by Napoleon. Did you know that? I’d heard about this - they needed soldiers, didn’t they? People who follow orders and don’t think too much. That was about it. In 1806, Napoleon conquered Prussia, and a philosopher called Johann Fichte said it was necessary to revise the entire education system. He said that “The new education, on the soil whose cultivation it takes over, completely annihilates freedom of will, producing strict necessity in decisions and the impossibility of anything else.“ That set the pattern for the way schools everywhere are run, and that we take for granted: you sit down, you do what you’re told, you don’t talk, you don’t decide what you want to learn, and you’re drilled into compliance. That produced enormous technical advances in Germany on the one hand and, just over a hundred years later, led directly to the First World War. I would argue that being in business is a good antidote to the inability to think for yourself. It’s quite a long road, but an important one. One of the insights in that first section, “The History They Don’t Teach You at School”, is how deliberate it was to impoverish the population at large as a way of disciplining them. There was a Scottish merchant and magistrate who actually wrote, without any sense of irony: “Poverty is therefore a most necessary and indispensable ingredient in society, without which nations and communities could not exist in a state of civilisation. It is the source of wealth, since without poverty there would be no labour; there could be no riches, no refinement, no comfort, and no benefit to those who may be possessed of wealth.” You could apply that to today. Absolutely. Over the course of my lifetime, I’ve seen how steadily leisure and space to think have been eroded. There was another insight from George Kennan, the American diplomat - he was the ambassador to Russia for a while. One of the things he wrote was: “We have about fifty per cent of the world’s wealth, but only six point three per cent of its population. In this situation, we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relations which will permit us to maintain this position of disparity. To do so, we will have to dispense with all sentimentality and daydreaming, and our attention will have to be concentrated everywhere on our immediate national objectives.” Which is pretty much still how the empire operates today. Exactly. That was eighty years ago, and we’ve now seen the results of pursuing that incredibly narrow objective all around us. Before we get too gloomy, section four of the book is “How Changes Happen” - models of societal transformation, with examples of specific things where quite dramatic changes have come about. The other chapter in that section is “Making Changes Happen: Moving Towards an Ecocivilisation”. Once again, his main point is that it’s not a done deal. We’re in a very perilous situation. The actual crisis thrown up by the logical working-out of the way we’ve been structuring things may well be the context within which there’s a possibility of transforming into something entirely different. He points out numerous little ways this is happening right now, and has been happening over recent decades. Any one of them might be regarded as small beer, impossibly out of scale with the magnitude of the problem, but taken all together, they’re building up a cumulative effect. So, for an initial summary, how does that sound? That sounds great. I was also thinking that the amount of hope you have for the future probably depends on how much faith you have in young people. I have equal amounts of faith and despair - who knows? I’m certainly surprised by the lack of vigour amongst young people in agitating against the system. Maybe it all just seems hopeless to most people. But who knows - it’s a possibility. We’ll see. There’s definitely a sense of apathy, but there are also lots of surprises. Young people don’t seem to be taking on the traditional narratives we’ve been fed, which are no longer holding up anyway. So, who knows? Good - I’ll link to Jeremy Lent’s Ecocivilization book [https://www.amazon.co.uk/Ecocivilization-Making-World-that-Works/dp/1685892337/], and I’ll endeavour to read it myself. I’ll be able to fill you in on more details once I’ve finished it and done a more thorough summary. The other thought I had is that we were talking about AI last time, and this sounds like quite a different tack. A lot of people are looking for tech solutions - the idea that tech and AI will save us. We were saying last time that we don’t think that’s the case. We think it’s a tool that could be useful to you as an entrepreneur, but we don’t think it’s going to save the world. If you look at where the money is going, it’s all going to AI and data centres. That’s where the big players in the world are putting their bets. So we as individuals and entrepreneurs need to put our bets elsewhere. P.S. Jeremy Lent’s Substack can be found here [https://jeremylent.substack.com/]. Thanks for reading Sovereign Finance! Subscribe for free to receive new posts and support my work. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com [https://sovereignfinance.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Updated Thoughts on AI

Rob’s comments below are in italics.Derek’s comments below are in normal font. Derek and I know each other through an American consultant called Perry Marshall [https://www.perrymarshall.com/]. Perry was originally a marketing guy but has transitioned into an all-around business expert. You attended one of his seminars this week, specifically on AI. We thought we would unpack what you had learned and how we, and anyone listening, might apply that. Yeah, absolutely. It was a really inspiring, really interesting day, with a strong focus on AI. Frankly, I’ve been very cautious about the whole AI thing and somewhat sceptical of its value. We use it a little bit, don’t we? We use Claude to clean up the recordings and generate transcripts. I’ve been very impressed by how that goes and how much better it is than anything on offer until a few years ago. I’ll add some comments on that. When we started the podcast a few years ago, getting the transcript into a readable version took a lot of work. These days, it’s literally 20 minutes before I go to parkrun on a Saturday, courtesy of the tools available. Yeah. I then give it a second check. Other than where I’ve expressed things poorly, all it’s required from me are minor spelling and punctuation changes and a bit of reformatting. I’ve had less and less to do, more or less week by week. One of the reasons I was sceptical about AI is that it’s yet another technological innovation which has produced a disproportionate amount of hype. A lot of people who’ve been swept up in that hype are going to be disillusioned, because it’s unclear to many what it is and what it isn’t. There are two levels of hype. One is “this is going to transform humanity,” but nobody seems to be suggesting how. “This is the future of great prosperity,” but nobody seems to be saying in practical terms what that prosperity will actually look like. And who for? Who’s going to get the benefit? Exactly. There’s also a philosophical dimension to the hype. There’s a lot of speculation about whether AI will become fully conscious, whether it’s going to overtake the human race. I’m absolutely clear that whatever it is, it’s an algorithmic system running on computers, and that is never going to be conscious. That’s a very big philosophical debate, but I’m crystal clear in the basis I have for being certain of that. Did you see that Richard Dawkins got ripped to shreds for saying he thought Claude was conscious? That was so funny. I cannot imagine how he thought he would enhance his credibility by putting that out. Don’t get me started on Dawkins. It’s very much on the side of people who are still trying to say the universe is a great machine, that we’re all bits of machinery, and there’s nothing transcendental. I had a brief word with Perry about the Turing test. Do you know about it? I’ve heard of it, but I couldn’t tell you what it was. Alan Turing, the guy who, to all intents and purposes, created the underlying intellectual framework for computing, was also a major player in breaking the Enigma code in the Second World War, a major contribution to defeating the Germans. The Turing test was Turing’s contribution to the debate about whether a computer could be conscious. The test is basically this: if you could have a dialogue between a person and a computer and the person couldn’t determine whether the entity they were conversing with was human or a machine, then the computer would have passed the threshold of consciousness. According to that criterion, we’ve actually passed that point, and Perry and I agreed on that. I got the output of Perry’s group, what he calls the Superconductor, a sort of AI business consultant. You do a quite challenging questionnaire and get a report back. The report blew my socks off. I could not tell that it hadn’t been written by a more-than-averagely competent, insightful business consultant. Yeah, and this is going to completely derail a lot of middle-class jobs for people doing this kind of work. We’ve seen this progressively, haven’t we? The point is, it still isn’t conscious. Broadly, the main reason is summed up in Roger Penrose’s book, The Emperor’s New Mind. Did you ever read it? It’s absolutely spot on. In summary, what Penrose says is that because of Gödel’s theorem, that’s Kurt Gödel, it’s impossible to create a formal system for mathematics that is both complete and consistent. What it comes down to is that there will always be mathematical statements which are true but not provable. Gödel showed this by constructing one. At the same time, he showed that the human mind was capable of convincing itself of the truth of that, which a computer could never do. There’s an argument sufficiently obscure that many people who are disinclined to accept that point of view simply don’t get it. They say, “Who cares whether a computer can prove Gödel’s theorem or not?” Anyway, I digress more than I needed to. But it explains why I’ve been put off by speculations about whether AI could be conscious. It can certainly be intelligent. If you define intelligence as the ability to extract a simple summary from a complex argument, for instance, you can bring up a whole bunch of definitions. But that’s not the same thing as consciousness. So, my big takeaway from Wednesday’s discussions was that this is yet another tool. The thing about any tool is that you can use it for good or ill. That brings up another whole aspect of the overhyped discussion. Is AI a force for good or a force for evil? The answer is neither. In the hands of someone motivated to do evil, it can enhance their ability to do evil, which is unfortunate but a fact of life, just like any other technology. You can use them for good or for evil. Yeah. That was another very interesting thing, because as anyone who knows Perry will know, he is essentially as strongly grounded in ethical principles as you can be. There were two special guests at the seminar. One was Scott Chang, the guy who developed the Superconductor programme. It was great to meet him and converse with him personally. I’ll be taking up the offer he gave to seminar attendees, an hour’s consultation. After that, I’ll apply it to the project we’ve got to get this book out, which has been a long time coming. He was there, and there was also another guy called Finn, who founded a business called Solar Quotes for selecting solar power installations. It’s essentially a lead generation website for contractors. He recently sold the business for multiple millions and is now enjoying his retirement. What he said was that the biggest factor in his success was running the business not to maximise short-term profit, but to build something of lasting benefit that provided the best possible deal for customers. He structured it so that was genuinely the case. They had one of those rock-solid guarantees that could bankrupt you if you weren’t doing things the right way. If any installer that a website client had booked gave an unsatisfactory job, they would, at their own expense, rectify it to the customer’s satisfaction. You can’t get a more ballsy guarantee than that. I asked him what the philosophical basis for that commitment was, and he said, “It’s just the golden rule.” This touches on what we’ve said before: the strongest thing you can do to build a successful business is to operate according to that principle. It’s depressing how few people in business appear to have that as their overriding priority. Scott Chang, had been a mortgage broker and was one of the few not to go completely out of business overnight when the 2008 financial crisis hit. Mortgage broking is famously another business area operated by complete sharks and charlatans, but Scott operated according to the same principle. It would have been very easy in the early 2000s to make a great deal of money getting people into mortgages that turned out to be immensely profitable for the lender and ruinous to the customer. The devil will always place short-term opportunities in front of you to tempt you away from the longer-term goals… Of course, you don’t have to be a Christian to hold that principle. Any ancient wisdom tells you the same thing, whether it’s Taoist, Buddhist, Hindu or whatever. So it was quite interesting from that point of view. It’s a creativity accelerator, if you like. It’s only as good as what you put into it. This has been the thing for a long time, hasn’t it? Garbage in, garbage out, or good input in, good output out. The work we do for this show, in preparing the written versions, generally involves good input. Yeah. I’m looking at that in a whole new way. Scott gave me one or two pointers about how to approach the project we have on constructing this book. It’s more or less what we had been thinking of doing, but I had been struggling because of not being quite clear about how to go about it.. Incidentally, I put one chapter I manually cleaned up into the shared document you created for this purpose, so you can have a look and tell me how close I’m getting. With the insights I’ve now gained, I’m going to take that approach and feed material in, with instructions, to one or the other of the AI tools. I’ve got ChatGPT on the £20 a month subscription. You’ve got Claude. We can see how one or the other works, and if there’s any way to find synergy between the two, that’ll be an interesting project in itself. I’m quite upbeat about exploring this going forward. I’m now seeing it in very much the same way that I see the CAD system I use for designing electronic circuitry. I use KiCad. I downloaded and installed it as a 70th birthday present to myself. Despite having tried it two or three times before, it clicked on that occasion. Within a week, I was getting a schematic in and turning it into a circuit layout. Having done that on the old system and knowing how much work it took to produce a sophisticated, fully featured design in the pre-CAD era, I find the difference astounding. It could literally shrink at least a man-month’s work into a day or two for one person, whereas you’d have required a team of different specialists to do that before. It’s a force amplifier. We’ve all seen it with producing accounts on a computer. Can you imagine going back to writing it out longhand in a bound account book, adding it up with a desktop calculator and checking it half a dozen times to track down why it didn’t reconcile? Yeah. I don’t suppose you saw the interview between Alistair Crooke and Catherine Austin-Fitts [https://solari.com/civilization-at-the-crossroads-with-alastair-crooke/] on the Solari Report? I didn’t see that one particularly. Alistair was talking about China and their use of AI. He was commenting that their adoption has been more factory-floor-type, focused on robotics and automation. The principle of doing more with fewer people, where it makes sense, increases value and produces things at much lower cost. He was saying what China is doing is much more low-key. Yeah. They’re not making as much hype about it just to inflate the stock market value of a handful of AI companies, which is what I think is going on here. He says we’re going to be left behind. For anyone listening, can we just talk about the book a bit more? What’s it going to be about? Announcing: Unravelling the Money Puzzle Okay, good. Provisionally, we’re going to call it Unravelling the Money Puzzle. We’ll probably do a bit more research into the title we eventually settle on, but I think that summarises it. There will be three sections. The first is the basics. What is money? What’s it for? How do we use it? How is it created? It will also cover what wealth is, because the one-line answer to “what is money?” is that it’s a claim on wealth. How do you create wealth? How is it lost? How is it transferred from one holder to another? That’s essentially the subject matter of what is called economics, and we’re also going to demystify a lot of the confusion around economics. The second part is a practical guide for entrepreneurship, the guide I wish I’d had when I started out trying to run a business. I’ve been learning by making decisions which turned out not to be as well-judged as I’d hoped. From that experience, I hope that anyone setting out to run a business would benefit from some of my suffering. Even if you’re not thinking of running a business or setting up a side hustle, if you’re employed by somebody else, that person is ultimately running a business. It would be genuinely helpful to anyone, in any capacity, to have insight into the skeleton of a business and its processes. It might also give them insight into whether they want to be in that company at all. Just on that second section, self-understanding is a key part of that. I’ve tried to create multiple businesses that were right for other people but not for me. Yep, that’s a common pitfall. Those first and second sections are perennial, evergreen if you like. The same thing could have been said at any point in history. The third section deals with the current global human society, the predicament we’re in, and the transition we’re going through. It’s becoming more obvious every day that the days are numbered for the way the world has been operating, certainly for the last 70 years, possibly for the last 300, possibly for the last 6,000. The inherent contradictions are boiling up to the surface. It’s very important for us to have the best possible map of what’s going on, what is possible and what is not, as we make our way through the current transition of human society and its structural features. Yeah, very good. One question I meant to ask you about AI: all these data centres keep popping up now. The so-called climate crisis doesn’t seem to apply when it comes to water usage for AI centres. To me, the AI centres seem more about creating forthcoming programmable money and population control than about helping you do things faster. Well, we could have several episodes exploring the implications of that alone. The other thing I’d be interested in is getting some estimates at some stage of the amount of fossil fuels being destroyed in the two major conflicts currently going on in the Middle East and in Ukraine. Bearing in mind that well before the end of this century, we’ll reach the point where that bonanza of cheap energy is no longer available, it seems these conflicts are actually knocking years off the time we have left. Yeah, looks that way. Okay, on that note. Thank you, Rob. Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com [https://sovereignfinance.substack.com?utm_medium=podcast&utm_campaign=CTA_1]

Going to Tehran

Rob’s comments below are in italics.Derek’s comments below are in normal font. You were telling me before we hit record that you’ve been reading a book called ‘Going to Tehran’. You were saying that if the people in the American establishment had read it, it would have saved everyone a lot of heartache! Yes, it’s called ‘Going to Tehran’. It’s by Flynt Leverett and Hillary Mann Leverett, obviously a married couple. They were policy advisors or analysts in both the Bush and Clinton administrations. When was this book written? The book came out in 2013, with a slightly updated edition since. It gives a very detailed, impartial description of what the Islamic Republican government of Iran has been through since it was created 47 years ago. It explains a lot about the experiences it’s had and why it’s taken the position that it does. It totally undermines the prevailing Western narrative that they’re all lunatics, fanatics and extremists. The religious regime may not be one we would choose, but it does seem that a large majority of the population are very happy with it. The events of the last year or so have led many younger people — particularly those who didn’t live through the Shah’s rule — to reassess. The Shah, of course, was installed by American and British intelligence services in 1953, overthrowing the democratically elected Mossadegh government. He then ran a very brutal tyranny with a great deal of torture and assassination of anyone who rose up against it. Didn’t the Shah go to boarding school in Switzerland or something? He was groomed and then put back into position. He was totally a Western puppet. He was installed because Mossadegh wanted to nationalise the oil extraction processes. Mossadegh wasn’t even going to restrict its use; he just didn’t want it sold off at a knockdown price. He wanted a fair return to the country for the resources being extracted. It’s the same old story. The recent events have caused many people who were looking to the West, thinking the grass might be greener, to reassess. Anyway, well worth a read. I’m only about 20% of the way through it myself at the moment. Just while we’re on books — you obviously read a lot. Do you read 20% of a book and then dip back into it later, or what’s your preference? Usually, if I decide it’s worth reading, I stick with it until I’ve got right through. How about you? I’m trying to get better at giving up on books that aren’t excellent. So I’m trying to get a bit smarter about it. I very often read the first page or so and the last page or so of each chapter to get an instant summary. It obviously depends on how they’re written, whether that’s a useful exercise. A lot of writers do open each chapter by giving a rough idea of what they’ll cover. A lot of them also finish with a brief summary of what they’ve covered, which is good presentation practice anyway. If they do that, you can get a pretty good idea of whether you want to go into the full depth and detail. Sometimes I do that exercise and conclude I’ve pretty much got the drift. Anyway, very interestingly, Robert Kagan — it’s very difficult to label him. I was inclined to say “right-wing,” but “right-wing” and “left-wing” no longer make much sense. ‘Right-wing’ just means he says things the establishment doesn’t agree with, doesn’t it? Not in this case — he is the establishment. He’s the husband of Victoria Nuland, who was Assistant Secretary of State at the time of the 2014 overthrow of the Ukrainian government. So he’s a militarist, a warmonger. I remember her. He’s part of the swamp. In this article, he actually says that the Iran conflict is the biggest defeat in US history. So you’ve got somebody from the core of the American establishment effectively taking it for granted that the conflict is lost, whatever happens from now on. He says the only way it could be resolved is by a land invasion and occupation. I don’t know whether he’s saying this to strengthen the military’s resolve to go ahead and do that. It seems blindingly obvious that any attempt to do that would result in an even more humiliating defeat — and a more decisive one. Of course, Trump was probably hoping, with this visit to China, to get some sort of support in getting the Strait of Hormuz reopened. They gave a very polite reply without actually suggesting they do anything. Have you been following the China trip at all? I saw that he was there. To be honest, if something is really meaningful, I rely on you to tell me about it! Well, I’m glad I’m doing something useful. I don’t know what he expected. As somebody suggested, it was partly about stroking his ego — I’m sure it did that to some extent. There was a reception, flag-waving, bands, 21-gun salutes, a huge ceremonial banquet, and sycophantic speeches praising each other. What actually happened in any of the closed-door meetings, we don’t really know. There haven’t been any announcements of grand progress on any front, which is no surprise. China has been as robust as it could while remaining polite in laying out its position. Before it even started, they said they had four red lines: discussions of Taiwan, democracy and human rights, their political system, and any interference with China’s right to development. So if Trump had thought he was going to make any assertions about any of those, they were off the list to start with. In fact, Xi made a very coded reference to Taiwan and to the necessity of avoiding conflict. There are clearly very strong elements in the American political establishment that want some sort of proxy war against China to restrict its future prosperity and its ability to rival the United States, which is almost too late, I would say. Taiwan is to do with semiconductors, right? Well, the history of Taiwan is that the Kuomintang retreated there after losing the civil war against the communists in 1948. For quite a long time, the United States took the position that this rump of non-communist politicians in Taiwan was the actual legitimate government of China. At some point — possibly around Nixon’s visit — they had to abandon that and accept that mainland China was the real China. The position since has been what they call the “one-China” policy — that Taiwan is actually part of China. There are strong elements within Taiwan that want a clear separation. It’s quite a muddled situation. As long as they don’t cause any trouble, the Chinese are perfectly happy to sit it out and wait. Meanwhile, America has been selling increasing quantities of arms to Taiwan. In one light, that might be regarded as yet more profit for the military-industrial complex. By doing that, however, they’re plainly playing up to the separatist factions — there’s no point otherwise. Taiwan’s not going to have a fight with anybody except mainland China, so selling them weapons can definitely be seen as an invitation to pursue that. The American position is that they would intervene to protect the democracy of Taiwan if China attempted to take it over by force. I can’t see there’d be much appetite on either side for armed conflict, because there’s a great deal of kinship between them — literally. There are many mainland families with relatives in Taiwan, and many Taiwanese families with relatives on the mainland. It would really take something to stir things up to that point. But of course, this is the playbook we’ve seen everywhere. It’s too big a fish, basically. Xi’s message was that we should be careful not to fall into the Thucydides Trap, which surprised me. You don’t expect Chinese leaders to be versed in classical Greek history. What Thucydides was referring to was that when one powerful state was growing to the point of becoming comparable to another, war would be inevitable. Xi was saying as clearly as he could — without spelling it out further — that it would be far better if the US and China could avoid going to war with one another. He then went on to give a very diplomatic warning against any interference or provocation regarding Taiwan. We’ll see whether we get any more concrete announcements. The other thing is that not only have we got the Strait of Hormuz closed, but Ansar Allah — generally referred to in the Western press as the Houthis — have effectively closed the strait at the mouth of the Red Sea to US shipping. Most Western shipping companies have more or less abandoned the Suez Canal route because they simply can’t afford the very real possibility of losing a ship and its cargo. The insurance premiums for passing through that route for a fully laden container ship are now up to three-quarters of a million dollars. How much is the cargo worth if the insurance premium is three-quarters of a million dollars? A figure I heard was around 10 million. But that three-quarters of a million represents pretty much the entire net profit of the voyage, so it makes paying the premium uneconomical. Routing around the Cape of Good Hope adds an extra 14 days to the journey and an extra three and a half thousand dollars in fuel. All of that will feed through to the costs of anything imported into the Western world, which of course is most consumer goods and appliances from China, Vietnam, and various other places in that region. So there’s another front which has been somewhat eclipsed by Ukraine and Iran — the North African states: Mali, Chad, Niger, collectively referred to as the Sahel. These are all former French colonies, and there’s been considerable realisation in those areas of the extent to which they’ve still been economically subjugated even since nominal independence. Those governments are standing up to the French. They’re making their own currency arrangements rather than ones controlled by the French central bank, and they’ve been supported in that by the Russians. Now there’s been considerable agitation — so-called separatists, so-called freedom fighters — breaking out and striking against the government. This is almost certainly agitated by the French and also, of course, by the CIA. It’s a further rupture point in the international order that has held for the past seven or eight decades. All of these things seem more obvious than they used to be. Exactly. The short answer is that control of the narrative — which has been taken for granted, particularly by the US and the Western world in general — is breaking down. They could do these things and get away with them. Now it’s becoming clear. What else has happened this week? There was an Israeli attack on yet another freedom flotilla trying to provide humanitarian supplies to Gaza. Israel attacked the flotilla 1,000 kilometres from the Israeli coast, so completely in international waters. They used planes, drones, and warships, and even included a prison ship in their attack force. Some of the operators of that flotilla had been arrested and brutally treated by the Israelis. This is all in full view of the world. Everything Israel is doing reduces whatever respect the world as a whole has for them. The same applies to US actions — it can no longer sugarcoat the reality of what’s going on. Meanwhile, our own governments are demonstrating that they’re increasingly out of touch. Labour got an absolute hammering in the local government elections and in the Welsh and Scottish elections. Starmer has resolutely refused to resign, but there’s growing pressure on him. It’s ironic — I saw a clip of what Starmer said when the Conservatives were in power and he was in opposition. Did you see that? I’ve seen the meme that’s based on it, yeah. He gave a very pompous speech. I can’t remember which Conservative Prime Minister was in office at the time of that dismal local election performance — was it Cameron? David Cameron, yeah. Starmer pompously said he should recognise the will of the people when it’s been expressed as clearly as that and do the decent thing. Now the boot’s on the other foot. Of the people within the parliamentary Labour Party being touted as conceivable replacements, they all seem totally implausible to me. I did not know anything about this Wes Streeting fellow, but I cannot imagine him as prime minister. I thought it was Tommy Robinson at first — he’s got a very similar physiognomy, a very similar haircut, and a very similar accent and mode of expression. The interesting development today is that Josie Simon has resigned her seat in parliament, which means there’ll have to be a by-election. Andy Burnham could stand in that, become a member of parliament, and then stand as a credible candidate. Not that I hold much hope for conventional politics, regardless of who’s in charge — it’s 99% theatre. It’s a matter of time until Big Nige gets in as PM, and he’s a corporate-captured person as well, isn’t he? Maybe. Maybe all of the Reform candidates who’ve gone on to local councils will make it abundantly clear what a bunch of incompetents they are, and people will think twice about voting for them where it’s really going to count. That’s all I could hope for. It’s clear we’re not going to vote our way out of this. My stance is that if it made any difference, we wouldn’t be allowed to do it. Okay, so that covers the things that have stuck out for me this past week. As we were saying, we’ll try to get back to some of the core topics we started this podcast to talk about — the nature of finance. Obviously, all of this will affect our finances one way or another. At least for the next couple of years, we’re going to have to get by consuming far less energy than we’ve been accustomed to. That might not be a bad thing; it might be a worthwhile focus on the measures we’ll need to take and the adjustments we’ll need to make to live in a world no longer awash in fossil fuels. I’d be more on board with that if our leaders were leading by example and not flying halfway across the world to have a cup of tea in China. Fair enough. Let’s call it a day for this week. All right, thanks Derek. Over the next few episodes, we’ll revisit certain topics we’ve covered in the past — like bonds and interest rates — but look at them through the lens of what’s happening now. We’ll cover that over the next few weeks. Thanks for reading Sovereign Finance! Subscribe for free to receive new posts. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit sovereignfinance.substack.com [https://sovereignfinance.substack.com?utm_medium=podcast&utm_campaign=CTA_1]