Book Review: Jeremy Lent's 'Ecocivilization'

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]

Some Things The BBC et al Aren't Telling You

Rob’s comments below are in italics.Derek’s comments below are in normal font. Today is the first of May — the Celtic festival of Beltane. We’re at the halfway point between the spring equinox and the summer solstice. I mention it because, amid all the dark stuff going on, we need to remember to pay attention to what’s in front of us and around us. Right. I’ve made a similar adjustment myself. George Orwell wrote in one of his essays that whatever the bureaucrats, politicians and militarists do, spring is still spring and the earth is still going round the sun. The sun will still come up. Having said that, there’s been a lot going on over the last five days, and we feel like there’s plenty to talk about. There are many different threads, and they’re all interrelated. The first thing to note is that, despite the demonisation of Putin in the Western media, he is far more accommodating than any leader likely to replace him, as far as I can see. Something people must wake up to soon is that he is talking to everybody prepared to have a dialogue with him. The most notable example is the Iranian foreign minister, Arachi, who visited him. Putin gave him a substantial meeting and has since come out publicly saying they are standing with Iran. That’s pretty notable in itself. Apparently, Trump is now saying he had a 90-minute conversation with Putin. Given everything, it would be understandable if Putin had decided it was a waste of time talking to Trump. The criticism he’s getting from within Russia runs along the lines that he’s not proceeding fast enough in Ukraine and should be far more aggressive. There are also plenty of people inside Russian politics and the military saying that Germany, France and Britain — who are openly bragging about supplying Ukraine with drones attacking Russia — are effectively waging war and Russia should strike back. It’s an act of aggression, surely. We’ve been very lucky over recent years that the Russian leader appears to have a couple of brain cells to rub together, which cannot be said of our so-called leaders. Certainly not of anyone in the West, as far as I can see. The leaders of Britain, France, Germany, the Baltic States and probably Poland are all actively trying to talk their populations into contemplating war with Russia in the not-too-distant future. They seem to be actively promoting this. They’ve not read the room. It’s not going to happen. Well, Merz has just said he aims to rebuild the German military to a strength of 480,000. Who he thinks will sign up, I can’t imagine. If they try to conscript people on that scale, my reading is that there would be open refusal. Certainly, anyone of military age just doesn’t buy into it at all. These look like acts of desperation, but I also don’t think these leaders make their own decisions. They seem to take their orders from above. Keir Starmer has not made a single independent decision. You can see when something happens — he waits to be briefed and then sticks to that line. Somebody must have an enormous hold over them. One wonders what they’ll do with all those elderly pensioners the police were picking up for holding a placard. This is another thing, though. If you think they’ll stop at arresting pro-Palestine protesters, just wait until it’s something you do care about, because it’s coming. Yeah. Another thing: Kazakh oil has now stopped flowing to Russia. Not only are they not getting oil from the Gulf states, but they’re also not getting any from Kazakhstan, either, which has been a significant portion of their supply. The reason for the stoppage isn’t entirely clear. Germany has been in continuous economic and industrial decline for four years, arguably since the Nord Stream pipeline was blown up. What they’ve had to pay for energy since then — largely from the United States — is far more than before. We’re getting an object lesson in how much we depend on the energy sources and prices we’ve taken for granted. Did you see the Chris Hedges interview with Richard Wolff [https://chrishedges.substack.com/p/how-the-iran-war-is-accelerating]? Wolff was essentially saying this is the price of globalisation. He was talking about car manufacturing. In the early seventies, it was all based in Detroit; the supplier companies were small- to medium-sized firms located within about 50 miles. Everything was done within America. Whereas today production is spread across different parts of the world, so you rely on these shipping networks. As soon as those networks are disrupted, the whole thing becomes very fragile. Yeah. The population of Detroit has fallen from 2 million to 700,000, which is pretty dramatic. There’s an enormous degree of social unrest there as well. There’s a famous photo of the old railway station in Detroit — a huge building you can see from miles around. It’s a monument to what once was. Image: Derek Gauci [https://commons.wikimedia.org/wiki/File:Detroit_Train_Station.jpg], CC BY-SA 4.0 [https://creativecommons.org/licenses/by-sa/4.0], via Wikimedia Commons That’s interesting. The other thing about Kazakhstan is that many of the Ukrainian drone attacks on the Russian heartland have been routed through Kazakhstan. There must be intense diplomatic activity, with Russia pointing out that this constitutes a de facto act of war. If further drones come over and the Kazakh government doesn’t take responsibility for shooting them down, Russia will respond, which means a certain amount of debris will land in Kazakh territory. Getting back to failure to read the room: in Germany you wouldn’t have to try very hard. The AfD, Alternative für Deutschland, is now running at 28% to 30% in opinion polls — higher than the governing party. In the Western press they’re portrayed as far right, sometimes even accused of Nazi affiliations. I have reservations about whether party politics can solve any of this. These movements tend to get infiltrated. But it’s still an interesting read of public perception. Yeah, so do I. If you look at their manifestos and publications, one clear position is that they strongly favour renormalising relations with Russia, which seems only elementary common sense. You have to judge them by what they do, not what they say. That’s the proof of the pudding. Yeah. They’re also calling for cooperation rather than confrontation. Meanwhile, Zelensky keeps touring Europe, saying Ukraine should be the bulwark between Russia and aggression towards the rest of Europe. That’s not going to happen. Now that Orbán has lost the premiership in Hungary, the obstacle to the EU providing the 90-billion-euro loan to Ukraine is out of the way. However, apparently Zelensky will only receive 20 billion of it, and Ukraine’s economy is already 20 billion in deficit. The remaining 70 billion is supposedly being directed to European arms manufacturers, which clearly indicates what’s driving this. Yeah, just what we need. Meanwhile, Bulgaria has just had an election with a landslide victory for a party that wants to re-normalise relations with Russia. Once again, I share your scepticism about party politics and about what actually happens when people get into power versus what they promised. All political parties of any size get hollowed out by corporate interests. Those corporate interests are largely invisible in the background. Yeah. The United States has been shipping increasing numbers of troops and equipment into the Middle East. They’re now talking about deploying hypersonic missiles — the first time we’ve seen those from the United States. We’ll see how well they perform in reality and what difference they actually make regarding Iran. They’ll probably still get shot down by a hundred-dollar drone or something. That seems to be the pattern. Who knows? Anyway, I had a quick check on the BBC website yesterday, and I listened to Radio 4 news. None of those items I’ve mentioned so far were on the main one o’clock bulletin. Do you still pay a licence fee, by the way? I do, because we watch quite a bit on iPlayer. I really feel I should cancel it. It’s only the family that keeps me paying, but we really ought to stop funding them. There’s something in that. I’ll talk it over with Gina. Now, whatever you think of Trump, Putin is still prepared to talk to him. They recently had a 90-minute conversation. I have no idea what was said or agreed, or how much agency Trump actually has. Apparently, they discussed both Iran and Ukraine. One way or another, this will affect how things unfold, though exactly how is unclear. Apparently, all this movement in oil prices involves heavily manipulated futures contracts on paper. Anyone trying to buy real oil for delivery now is paying between $150 and $230 a barrel. The prices going up and down to placate American public opinion have nothing to do with what anyone in the real world is doing. With shale oil and fracked gas, it’s true that current US consumption is covered by domestic production, with a little left over. But even without that factor, the price of diesel there has doubled. The US companies will sell it abroad first, ahead of selling domestically at a lower price. Exactly. That was another point Richard Wolff made in the Hedges interview. The price has gone up anyway, and it’s going to go up a lot more. I wonder how much pain the average American will bear before it erupts into real trouble, bearing in mind the population is heavily armed. The problem both the Russians and the Iranians face is that any restraint on their part is interpreted by the Americans and their allies as weakness, rather than as an opening for more constructive dialogue. One thing that’s contributed to European complacency is that for the past 300 years, Russia has been trying to integrate itself into Europe and has largely been rebuffed or left in a weaker negotiating position. What Europeans don’t seem to have grasped is that Russia has progressively taken the view: if you don’t want to engage, fine — there’s a whole world to deal with that’s more convenient and more congenial. Russia’s got plenty of options given where it sits in the world. Yes. The post-Second World War independence movement across colonial territories gave those countries a nominal political break from their imperial oppressors, but in practice, it made far less difference than they had hoped. Many of the leaders installed were Western puppets, so even political independence wasn’t what it seemed. More to the point, those countries remained under Western economic control. What appears to be happening now is that the countries known as the Global South are slowly regrouping. The global financial system is definitely changing. The key question is whether the transition can be reasonably smooth or will result in a catastrophic breakdown. With the latest disruption to traffic through the Arabian Gulf, the likelihood of something cataclysmic, abrupt and violent is increasing. Yeah, it’s very concerning. Those are the key headlines from the last two or three days. I’ll leave it there unless you have further observations. I think maybe you should apply to BBC News as the kind of journalist they clearly don’t have at the moment! The only reference they had to the Middle East was a brief word from their economics correspondent, stating the blindingly obvious. Just to reiterate — we’re not all deep in gloom. There is a world that can work for everyone, and it’s worth fighting for. Hang tight. Keep standing in the light. Thanks, Derek. Right. Exactly right. 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]

Time to Stock Up?

Rob’s comments below are in italics.Derek’s comments below are in normal font. It’s been about 10 days since we last spoke on the show. We thought we’d do a bit of a catch-up on what’s going on. We’ve had a ceasefire of dubious intent, some negotiations that were clearly theatre. What do we need to update people on? Well, let’s start with that. A lot of people breathed a sigh of relief when Trump said Iran had agreed to a ceasefire, that it was going to last a fortnight, and that they were going to reopen negotiations. He said that the Iranian 10-point plan seemed like a good starting point for discussion, though that sounded almost surreal to me. The Iranians’ 10-point plan is nothing new — it’s more or less what they’ve been saying from the outset: essentially a flat rejection of everything the Americans have suggested. It’s the same with Russia, isn’t it? If you look at the Russian demands, they’re just not compatible with the demands of the Empire. Yeah. Every single one of those 10 points is something it’s inconceivable to imagine America agreeing to without looking ridiculous, apart from any other considerations. Anyway, there were even public suggestions — in the Wall Street Journal, I believe — that the Iranian negotiating team should be assassinated. Mohammed Marandi said they fully expected to be sent to paradise on their journey back home. I hope they weren’t too disappointed to arrive in Iran instead! I’ve got the words of Hillary Clinton ringing in my ears, where she once said, “Can’t we just drone this guy?” Who was that in connection with? I’ve lost the specifics, but she was caught out saying something like that. Well, it’s fairly consistently what they’ve been doing anyway. I’m pretty sure everybody outside the US and its vassal states can see quite clearly that - although Iran was almost certainly not expecting anything useful to come out of the discussions - they did go into them seriously. They had quite a large negotiating team with specialists in all kinds of areas. They turned up fully briefed and fully authorised by the Supreme Leader to reach agreements. The first thing that happened, of course, was that Israel continued its absolutely brutal attacks on Lebanon, destroying whole blocks of apartment buildings in a dense city-centre area of Beirut. The BBC had the gall to describe these as Israeli strikes on Hezbollah command centres. That’s highly unlikely. Israel then said Hezbollah wasn’t part of the agreement. Trump said it wasn’t. The Pakistani mediators said it was. That immediately drew a question mark over whether the Iranian negotiators were going to leave the hotel in Islamabad and go to the actual negotiations. But, they got there. It turned out there were no face-to-face discussions at all. They sat in separate rooms while mediators carried messages back and forth. It went on for 21 hours. The US team consisted of JD Vance, who clearly had not been given the authority to decide anything or any clear briefing, because he had to keep ringing Donald Trump — and, according to some accounts, Benjamin Netanyahu too. He was accompanied by Witkoff and Kushner, both Zionists with no training as diplomats and not part of the US government. It’s not exactly the diplomatic dream team, is it? No. They’d already destroyed whatever credibility they might have had — not only in connection with Iran, but also in connection with Ukraine. So it was really doomed from the start. It was no great surprise when Vance came out and said they’d made progress on several points, but Iran had not agreed to their proposals, so it had gone nowhere. Which was entirely predictable. Then, as soon as they got back, Trump announced a blockade. He was not allowing any ships to pass through the Straits that had docked at Iranian ports. Quite apart from the fact that there’s no basis in international law to unilaterally make such a distinction, the Straits of Hormuz are of course territorial waters — either Iran’s or Oman’s. Territorial waters extend 12 miles from the coast. 12 plus 12 is 24, and they’re 21 miles wide. Every part of the Straits falls within the territorial waters of one or the other. Any stretch large enough for a ship to navigate is quite likely to be within 12 miles of the Iranian coast. So they’re entirely within their rights. There are many places in the world where a narrow waterway exists, and the adjacent sovereign state exacts some form of payment for passage through it under various pretexts. It’s not a particularly unusual situation. The Americans can’t bring warships close to the actual Straits because they’d almost certainly be attacked by Iran. The closest they could get is somewhere out in the mouth of the Gulf of Oman, which is far too large a stretch of water to supervise, even with the largest navy in the world. It’s completely impractical. We’re just about to start feeling the impact throughout the world of the shipping constraints that have been in place for the last six weeks. Yeah. It feels like the summer of 1940, doesn’t it? Exactly. I was just refreshing my memory of the Phoney War. The Second World War started when Germany invaded Poland on 1st September. Britain and France declared war on Germany on 3rd September 1939, in view of their treaty with Poland. It wasn’t until the following May that there was any actual fighting between the Allies and Germany. We were technically at war, but there wasn’t a war happening. The situation here — I’m amazed there haven’t yet been far more severe price rises than we’ve seen. The last time I looked, diesel was back to the two pounds per litre range. Petrol is considerably more expensive than it was six weeks ago. There’s been virtually nothing in the way of shortages, and people don’t seem to be taking it seriously. The reason there haven’t been any effects so far is that all current supplies were already en route when hostilities broke out. There’s been almost no passage through the Straits since then, and most of what has passed has been bound for China. China has issued some pretty robust warnings — couched in the usual general terms — against interference with its shipping on the high seas. A considerable amount of the ships allowed by Iran to transit have been bound for China, so it’s quite clear what they’re referring to. Incidentally, France actually joined China and Russia in vetoing the Bahrain proposal at the UN Security Council. The proposal was to censure Iran without providing any context whatsoever. I take at face value their position that they didn’t want this war in the first place. They didn’t start it. They’ve responded in a measured fashion, and the escalations have come entirely from the United States and from Israel. It’s how it gets framed in the media, isn’t it? All of these places “just happen to be under attack”. Yeah. So we’re about to start feeling the effects of that. The most immediate one is petrol shortages. Most of the world’s nitrogen fertiliser is either shipped from that region or dependent on natural gas shipped from there. There are going to be enormous price hikes in fertiliser, which are already occurring. We’re in the planting season in the Northern Hemisphere. This will feed through to food shortages and price rises in six to 12 months. That’s already baked in, regardless of what happens in the next few weeks. Regardless of the effectiveness of any naval action the United States takes, the major restriction on traffic in that area will be driven by insurance implications. London, European, and American-based insurers will either refuse to insure ships making those passages or vastly inflate the premiums for doing so. That alone will throttle the traffic, regardless of any naval action. Countries outside Western control won’t face the same restrictions — China, I’m sure, has its own insurance arrangements. The difficulty is that Trump’s ego won’t let him come out of this looking like a loser. He’s now put himself in a position where it’s very difficult to see how he can arrange anything else. He seems past the point of being able to provide any kind of window dressing. After all, the Vietnam War started with a contingent of 3,000 to 4,000 Marines landing. They were stuck with it for 10 years, suffered a catastrophic defeat, and lost over 50,000 American servicemen. This feels like Vietnam 2.0. It does indeed. That’s enough to be going on with, I think. The main message is: there’s a lot of chatter across various groups about prepping and being mindful of what’s likely coming, including potential price hikes and food and fuel shortages. So now’s a good time. Yeah. Stock up. Make sure you’ve got a few tins of beans as well. All right, thanks Derek. 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]