1 00:00:05,200 --> 00:00:09,240 Speaker 1: Pod cast. It it's a podcast that you're listening to. 2 00:00:09,320 --> 00:00:13,120 Speaker 1: It's it could happen here. It's the the show where 3 00:00:13,119 --> 00:00:14,720 Speaker 1: things fall apart and so as you put them back 4 00:00:14,760 --> 00:00:20,040 Speaker 1: together again. And actually, okay, you know, I really should 5 00:00:20,040 --> 00:00:21,480 Speaker 1: have checked the calendar before I did it, before I 6 00:00:21,520 --> 00:00:23,360 Speaker 1: tried to do this introduction where I've referenced the thing 7 00:00:23,400 --> 00:00:26,239 Speaker 1: that I'm saying came out last week but might actually 8 00:00:26,239 --> 00:00:30,760 Speaker 1: have come out like no, no, no, okay, okay, I got 9 00:00:30,800 --> 00:00:32,159 Speaker 1: it right. I got it right. It should never have 10 00:00:32,159 --> 00:00:35,919 Speaker 1: doubted myself. Last week we did an episode about inflation, 11 00:00:36,520 --> 00:00:42,680 Speaker 1: and we told maybe half that story and the part 12 00:00:42,720 --> 00:00:45,080 Speaker 1: of it that we didn't tell. You know, we got 13 00:00:45,120 --> 00:00:47,360 Speaker 1: through the most of the part about like, you know 14 00:00:47,400 --> 00:00:50,760 Speaker 1: what this sort of theory of inflation that the people 15 00:00:50,760 --> 00:00:52,640 Speaker 1: are trangged better to fellows. We got through what it was. 16 00:00:53,320 --> 00:00:57,200 Speaker 1: What we didn't really talk about was what happened next, 17 00:00:57,200 --> 00:01:00,400 Speaker 1: which is a very very interesting set of sort of 18 00:01:00,960 --> 00:01:04,160 Speaker 1: maneuvers that happened where this theory started spreading through a 19 00:01:04,200 --> 00:01:08,680 Speaker 1: bunch of very disparate academic circles and you know, sort 20 00:01:08,680 --> 00:01:13,200 Speaker 1: of like economic circles and different political circles that usually 21 00:01:13,240 --> 00:01:15,240 Speaker 1: don't have anything to do with each other. But we're all, 22 00:01:16,000 --> 00:01:18,720 Speaker 1: I don't know, taking taking things in very interesting directions 23 00:01:18,800 --> 00:01:22,280 Speaker 1: and to talk about how how how this sort of 24 00:01:22,280 --> 00:01:25,720 Speaker 1: supply Chaine theory of inflation like spread through the world 25 00:01:26,040 --> 00:01:30,039 Speaker 1: and all of this very very interesting, somewhat bizarre stuff 26 00:01:30,080 --> 00:01:32,400 Speaker 1: that happened. Next, we once again have Steve Mann and 27 00:01:32,480 --> 00:01:36,080 Speaker 1: John Michael Cologne, who are co editors of Strange Matters. Yeah, 28 00:01:36,920 --> 00:01:38,640 Speaker 1: Steve jmc welcome back to the show. 29 00:01:39,560 --> 00:01:40,559 Speaker 2: Thanks for having us. 30 00:01:42,280 --> 00:01:44,399 Speaker 1: Yeah, I'm glad, glad glad we could have YouTube back, 31 00:01:44,400 --> 00:01:49,040 Speaker 1: and glad we get to talk about the really really interesting, 32 00:01:49,280 --> 00:01:54,680 Speaker 1: somewhat strange things that happened next, which was, Yeah, a 33 00:01:54,720 --> 00:02:00,360 Speaker 1: lot of people started picking up your theories and starting 34 00:02:00,360 --> 00:02:01,280 Speaker 1: to work with them. 35 00:02:01,600 --> 00:02:01,800 Speaker 3: Yeah. 36 00:02:01,800 --> 00:02:03,960 Speaker 1: I worrying if you talk a bit about I guess 37 00:02:03,960 --> 00:02:05,760 Speaker 1: like how that kind of first started and how people 38 00:02:05,800 --> 00:02:07,600 Speaker 1: first started sort of coming to you for stuff. 39 00:02:08,800 --> 00:02:15,280 Speaker 3: Yeah, like last year. So last year when the first 40 00:02:15,360 --> 00:02:18,600 Speaker 3: of these pieces came out notes toward the theory of inflation, 41 00:02:19,919 --> 00:02:22,960 Speaker 3: we got like a really good response in general from it, 42 00:02:23,000 --> 00:02:27,079 Speaker 3: and it was kind of provoking discussions between groups of 43 00:02:28,639 --> 00:02:33,040 Speaker 3: economists and like readers of econ stuff on Twitter and 44 00:02:33,080 --> 00:02:36,680 Speaker 3: stuff like that. Who otherwise wouldn't have really been talking 45 00:02:36,720 --> 00:02:41,560 Speaker 3: to each other, but suddenly having a different theory of inflation, 46 00:02:42,320 --> 00:02:44,639 Speaker 3: one that was like a lot different than what sort 47 00:02:44,639 --> 00:02:46,160 Speaker 3: of like the people who thought it would be super 48 00:02:46,200 --> 00:02:49,480 Speaker 3: transitory or the people who thought it was like purely 49 00:02:49,520 --> 00:02:53,320 Speaker 3: a monetary phenomenon or something like that. Like having that 50 00:02:53,440 --> 00:03:00,120 Speaker 3: option sparked good conversations, and it eventually led to some 51 00:03:00,160 --> 00:03:04,040 Speaker 3: writers approaching us who are sort of inspired by those conversations, 52 00:03:04,560 --> 00:03:08,919 Speaker 3: and particularly a few of them really wanted to follow 53 00:03:09,000 --> 00:03:12,920 Speaker 3: up on like specific key like either points from the 54 00:03:12,919 --> 00:03:19,280 Speaker 3: paper or follow some of the implications as far as 55 00:03:19,320 --> 00:03:23,440 Speaker 3: they think they could take them. So one such paper. 56 00:03:24,560 --> 00:03:27,320 Speaker 3: Oh and by the way, just as a refresher, the 57 00:03:27,360 --> 00:03:29,880 Speaker 3: original theory that is laid out in part one of 58 00:03:29,919 --> 00:03:35,119 Speaker 3: this series that we're doing is essentially saying that inflation 59 00:03:35,400 --> 00:03:40,240 Speaker 3: has a tendency to propagate along supply chains first and 60 00:03:40,280 --> 00:03:46,680 Speaker 3: then through supply chain networks secondarily. And so it's it's 61 00:03:46,680 --> 00:03:49,280 Speaker 3: saying it's essentially that that's that's how it propagates. It 62 00:03:49,320 --> 00:03:54,240 Speaker 3: starts in supply chains. Things like bottlenecks along production processes 63 00:03:54,840 --> 00:03:59,000 Speaker 3: have give the price setters, who are people at companies 64 00:03:59,640 --> 00:04:04,280 Speaker 3: social acceptable reasons to eventually if they need to raise prices, 65 00:04:04,880 --> 00:04:09,160 Speaker 3: and but they but that generally pricing managers refrained from 66 00:04:09,280 --> 00:04:13,160 Speaker 3: raising prices unless that us like every other lever they've pulled, 67 00:04:13,680 --> 00:04:17,160 Speaker 3: essentially has not worked. So like people took that theory 68 00:04:17,279 --> 00:04:19,839 Speaker 3: and wanted to follow up on it, and so one 69 00:04:19,839 --> 00:04:23,680 Speaker 3: author who did that was Alex Vacolo who approached us, 70 00:04:23,720 --> 00:04:26,960 Speaker 3: and we essentially wanted to do an updated version of 71 00:04:27,000 --> 00:04:32,720 Speaker 3: the pricing manager survey that we found really helpful in 72 00:04:32,760 --> 00:04:37,400 Speaker 3: writing those initial pieces. So we like in my piece 73 00:04:37,400 --> 00:04:40,359 Speaker 3: and that sort of theory of inflation, I relied upon 74 00:04:42,000 --> 00:04:46,680 Speaker 3: like a wealth of pricing manager surveys that showed that 75 00:04:46,920 --> 00:04:49,560 Speaker 3: where they asked these pricing managers under what circumstances would 76 00:04:49,560 --> 00:04:53,600 Speaker 3: you raise prices? And they sort of went through each 77 00:04:53,880 --> 00:04:57,839 Speaker 3: scenario of that over the decades, starting in the thirties 78 00:04:57,880 --> 00:05:01,800 Speaker 3: and going into the nineties, and do that in order 79 00:05:01,839 --> 00:05:05,360 Speaker 3: to not have a replication crisis, Like we need more 80 00:05:05,400 --> 00:05:08,760 Speaker 3: and more studies, right, Like this is a that's phenomenon 81 00:05:08,760 --> 00:05:11,919 Speaker 3: across social sciences and elsewhere, So you want to have 82 00:05:11,960 --> 00:05:14,839 Speaker 3: good replication studies. One way to do that is to 83 00:05:14,880 --> 00:05:17,719 Speaker 3: have an updated pricing manager survey that talks to like 84 00:05:17,800 --> 00:05:21,800 Speaker 3: sort of modern corporations in the twenty twenties, So are 85 00:05:21,880 --> 00:05:24,240 Speaker 3: they still concerned about some of the same things, are 86 00:05:24,240 --> 00:05:27,480 Speaker 3: they not? Are there innovations and pricing that we should 87 00:05:27,520 --> 00:05:31,520 Speaker 3: know about? And so Alex Paccolo, who's a financial journalist 88 00:05:32,640 --> 00:05:37,920 Speaker 3: by trade, he went and interviewed some managers at Walmart 89 00:05:37,960 --> 00:05:45,440 Speaker 3: and other big companies and some smaller ones and found that, like, 90 00:05:45,760 --> 00:05:48,520 Speaker 3: broadly speaking, a lot of the same issues are at play. 91 00:05:48,920 --> 00:05:53,039 Speaker 3: So companies have cost plus market pricing as kind of 92 00:05:53,040 --> 00:05:58,000 Speaker 3: their bedrock, and from there they developed some innovations such 93 00:05:58,040 --> 00:06:01,720 Speaker 3: as like so called dynamic pricing, where they have the 94 00:06:03,960 --> 00:06:06,720 Speaker 3: like if you're a larger company who knows that they 95 00:06:06,760 --> 00:06:14,240 Speaker 3: are viewed as a price leader, you have some leeway 96 00:06:14,440 --> 00:06:17,920 Speaker 3: in responding to sales forecasts and changing your pricing, like 97 00:06:18,080 --> 00:06:20,800 Speaker 3: Walmart does what they have like everyday low prices, that 98 00:06:20,839 --> 00:06:25,599 Speaker 3: type of thing. And if you're a grocery store and 99 00:06:26,000 --> 00:06:28,919 Speaker 3: one of your competitors is Walmart, Serve on the flip side, 100 00:06:29,800 --> 00:06:34,680 Speaker 3: you might start developing indexes of prices set by Walmart 101 00:06:34,800 --> 00:06:37,720 Speaker 3: or like one of the other big like behemoth chains, 102 00:06:38,240 --> 00:06:41,320 Speaker 3: knowing how important they are to the overall supply chain network. 103 00:06:42,240 --> 00:06:47,280 Speaker 3: And knowing how important they are for the demand for groceries. 104 00:06:47,760 --> 00:06:51,600 Speaker 3: Like if wherever Walmart goes, many people have no choice 105 00:06:51,640 --> 00:06:54,000 Speaker 3: but to follow them in terms of their pricing schedules. 106 00:06:54,640 --> 00:06:56,839 Speaker 3: And so that's another thing that is going on, Like 107 00:06:56,880 --> 00:07:00,200 Speaker 3: people are developing just entire price indices of like Walmart 108 00:07:01,080 --> 00:07:03,800 Speaker 3: or Costco or Sam's Club or whoe have you. 109 00:07:04,760 --> 00:07:08,120 Speaker 1: Yeah, that was something that's I think interesting in terms 110 00:07:08,120 --> 00:07:14,760 Speaker 1: of like the the difference between the way that like 111 00:07:14,840 --> 00:07:17,320 Speaker 1: economists think about sort of price, the difference between and 112 00:07:17,760 --> 00:07:20,040 Speaker 1: how it's actually getting set, which is like a lot 113 00:07:20,080 --> 00:07:22,280 Speaker 1: of it, a lot of it. Very much seems to 114 00:07:22,320 --> 00:07:25,080 Speaker 1: be like if you are if you are like the 115 00:07:25,200 --> 00:07:28,360 Speaker 1: largest company in a market, like if you are like Walmart, right, 116 00:07:28,440 --> 00:07:31,800 Speaker 1: you have this incredible ability to sort of like like 117 00:07:31,840 --> 00:07:36,920 Speaker 1: you have this ability to like like force people force 118 00:07:37,000 --> 00:07:40,520 Speaker 1: your like downstream or like I guess upstream suppliers to 119 00:07:40,880 --> 00:07:43,120 Speaker 1: like sell it to you at low at lower prices, 120 00:07:43,160 --> 00:07:45,400 Speaker 1: because you have this enormous sort of like you know, 121 00:07:45,400 --> 00:07:48,320 Speaker 1: amount of buying power that like, you know, if you're 122 00:07:48,440 --> 00:07:50,960 Speaker 1: like if you're like a smaller thing, you don't necessarily 123 00:07:51,080 --> 00:07:54,640 Speaker 1: like you know, like like the same company will charge 124 00:07:54,640 --> 00:07:58,040 Speaker 1: like another grocery store more for like the same thing, 125 00:07:58,120 --> 00:08:00,040 Speaker 1: because Walmart, Walmart has the ability to sell it a 126 00:08:00,080 --> 00:08:04,160 Speaker 1: lower price than if I'm remembering this right, I'm gonting, 127 00:08:04,160 --> 00:08:05,480 Speaker 1: I'm gonna I'm getting strange looks. 128 00:08:05,960 --> 00:08:09,200 Speaker 2: Yeah, well it's it's it's important not to mix up 129 00:08:09,200 --> 00:08:12,280 Speaker 2: two separate things. One is Walmart's relationships to suppliers and 130 00:08:12,320 --> 00:08:14,800 Speaker 2: the other one is relationship to its competitors. Right, So 131 00:08:15,200 --> 00:08:18,560 Speaker 2: the supplier bit, you're totally right on the right track. 132 00:08:18,560 --> 00:08:22,320 Speaker 2: It's like, you know, like people who supply Walmart with 133 00:08:22,520 --> 00:08:25,080 Speaker 2: products because Walmart is such a big customer, you get 134 00:08:25,080 --> 00:08:27,480 Speaker 2: the Walmart contract and you're a small producer or a 135 00:08:27,520 --> 00:08:30,440 Speaker 2: medium sized producer, like you're set right because like you know, 136 00:08:30,520 --> 00:08:33,000 Speaker 2: then you can basically just like you know, they can 137 00:08:33,040 --> 00:08:35,520 Speaker 2: even be your only customer in many cases. But that 138 00:08:35,600 --> 00:08:37,959 Speaker 2: comes at a cost, which is that you sell at 139 00:08:37,960 --> 00:08:40,320 Speaker 2: the price that Walmart dictates. Otherwise they'll just tell you 140 00:08:40,360 --> 00:08:44,000 Speaker 2: to fuck off basically. And you know, it's not only price, 141 00:08:44,080 --> 00:08:46,720 Speaker 2: it's also the quality. You have to hit the standards. 142 00:08:46,880 --> 00:08:49,480 Speaker 2: And oftentimes what these firms that are like the big 143 00:08:49,520 --> 00:08:53,040 Speaker 2: important firms, so called nuclear firms in a supply chain 144 00:08:53,080 --> 00:08:55,880 Speaker 2: do is that they set those standards like very rigidly, 145 00:08:55,920 --> 00:08:58,319 Speaker 2: and you have to be certified with them. So McDonald's 146 00:08:58,320 --> 00:09:00,640 Speaker 2: does this for example, you know, like all those poultry 147 00:09:00,640 --> 00:09:03,680 Speaker 2: farmers or whatever who supply the chickens for the chicken 148 00:09:03,720 --> 00:09:06,040 Speaker 2: mc nuggets, they have to go through this extremely rigid 149 00:09:06,120 --> 00:09:08,440 Speaker 2: process in order to be able to qualify to be 150 00:09:08,480 --> 00:09:11,679 Speaker 2: a McDonald's certified supplier or whatever, because that's how they 151 00:09:11,720 --> 00:09:14,160 Speaker 2: keep the product standardized even though they're not in house. 152 00:09:15,480 --> 00:09:17,400 Speaker 2: And then the other thing that you were alluding to, 153 00:09:17,440 --> 00:09:20,200 Speaker 2: which is a vocalos piece, is the relationship to competitors. 154 00:09:20,240 --> 00:09:23,120 Speaker 2: So obviously Walmart's able to keep things cheap all the 155 00:09:23,160 --> 00:09:26,160 Speaker 2: time in their famous every day low prices beca because 156 00:09:26,320 --> 00:09:29,960 Speaker 2: basically those they have economies of scale. You know, there's 157 00:09:29,960 --> 00:09:32,720 Speaker 2: this notion, I think common sense for a lot of people, 158 00:09:32,840 --> 00:09:35,160 Speaker 2: especially those who don't have a lot of business experience, 159 00:09:35,520 --> 00:09:37,720 Speaker 2: is that the more that you make of something, the 160 00:09:37,760 --> 00:09:41,360 Speaker 2: more expensive it's going to be. But actually it's almost 161 00:09:41,360 --> 00:09:46,280 Speaker 2: the exact opposite. Any firm that has survived, like over 162 00:09:46,320 --> 00:09:48,880 Speaker 2: a period of time being able to make more and 163 00:09:48,920 --> 00:09:51,880 Speaker 2: more of something has generally found ways of making more 164 00:09:51,880 --> 00:09:54,400 Speaker 2: and more of the same thing using fewer inputs and 165 00:09:54,480 --> 00:09:57,680 Speaker 2: less labor like you know, and that's something that happens 166 00:09:57,720 --> 00:10:00,000 Speaker 2: through automation, but it's also something that happens through administers 167 00:10:00,040 --> 00:10:03,440 Speaker 2: rate of innovation and through and sometimes through less than 168 00:10:03,720 --> 00:10:07,240 Speaker 2: the nice things, right through through through you know, Amazon 169 00:10:07,360 --> 00:10:10,280 Speaker 2: warehouses where people aren't allowed to take bathroom breaks, or 170 00:10:10,320 --> 00:10:13,080 Speaker 2: through sort of like you know, coercive measures that they 171 00:10:13,120 --> 00:10:15,920 Speaker 2: can do because they've found a nice little spot in 172 00:10:15,960 --> 00:10:17,680 Speaker 2: the economy that lots of people are depending on them 173 00:10:17,720 --> 00:10:20,280 Speaker 2: and they can dictate terms. But whatever it is, you know, 174 00:10:20,280 --> 00:10:22,520 Speaker 2: as firms get bigger, it actually gets cheaper to make 175 00:10:22,600 --> 00:10:25,480 Speaker 2: more of their kind of thing. So people in a 176 00:10:25,480 --> 00:10:29,679 Speaker 2: bodega can't match Walmart's prices for everything from like hamburgers 177 00:10:29,720 --> 00:10:32,640 Speaker 2: to detergent right because for them, it's more expensive to 178 00:10:32,720 --> 00:10:36,040 Speaker 2: produce or to acquire. So what they do instead, knowing 179 00:10:36,080 --> 00:10:38,400 Speaker 2: this and they're able to survive, is that they do 180 00:10:38,480 --> 00:10:42,360 Speaker 2: Walmart's price, and then they do a markup over Walmart's price. 181 00:10:42,400 --> 00:10:44,480 Speaker 2: So in the same way that like by themselves they 182 00:10:44,480 --> 00:10:47,319 Speaker 2: would do a markup over their costs, Walmart's costs are 183 00:10:47,360 --> 00:10:50,480 Speaker 2: lower and they do a markup, so they do a 184 00:10:50,520 --> 00:10:54,840 Speaker 2: percentage over Walmart's markup. And as long as it basically 185 00:10:55,000 --> 00:10:57,680 Speaker 2: is something that's doable in terms of cost, they do that, 186 00:10:57,880 --> 00:11:00,920 Speaker 2: which means that they're basically advertising them selves to customers 187 00:11:00,920 --> 00:11:04,280 Speaker 2: as the slightly more expensive but more local you know, 188 00:11:04,400 --> 00:11:08,520 Speaker 2: more you know, more reliable or easier to get to 189 00:11:08,559 --> 00:11:10,640 Speaker 2: you can just walk to the corner store or whatever, 190 00:11:10,760 --> 00:11:13,679 Speaker 2: you know, whatever conveniences. They're kind of like justifying themselves 191 00:11:13,679 --> 00:11:15,880 Speaker 2: with to the customer base. And in cities, this can 192 00:11:15,920 --> 00:11:18,200 Speaker 2: be enough to keep you know, small to medium sized 193 00:11:18,840 --> 00:11:21,240 Speaker 2: you know sort of retailers in business, although in the 194 00:11:21,280 --> 00:11:25,240 Speaker 2: suburbs the competition is basically just all other all gobbalistic 195 00:11:25,320 --> 00:11:29,280 Speaker 2: firms on Walmart's scale, like you know, Wegman's, or in 196 00:11:29,640 --> 00:11:31,559 Speaker 2: Florida it will be something like Public's, you know, and 197 00:11:31,840 --> 00:11:38,719 Speaker 2: that kind of thing. So generally, uh Vacola was discovering, 198 00:11:39,080 --> 00:11:42,600 Speaker 2: was I want to just emphasize Steve's point about replication, Like, 199 00:11:43,040 --> 00:11:45,440 Speaker 2: you know, if if a lot of the supply chain 200 00:11:45,440 --> 00:11:48,480 Speaker 2: theory depends upon a story about prices that most economists 201 00:11:48,520 --> 00:11:51,760 Speaker 2: just don't believe in. Economists believe that supply and demand 202 00:11:51,800 --> 00:11:54,520 Speaker 2: are automatically adjusting based on changing prices, and that those 203 00:11:54,559 --> 00:11:59,880 Speaker 2: adjustments determine in turn how we spend and how we produce. 204 00:12:00,320 --> 00:12:03,559 Speaker 2: You know, that's that's supposedly how everything works. They believe 205 00:12:03,559 --> 00:12:06,319 Speaker 2: in this thing called the price mechanism. The supply chain 206 00:12:06,360 --> 00:12:08,520 Speaker 2: theory depends upon a story where the vast majority of 207 00:12:08,520 --> 00:12:10,920 Speaker 2: prices in the economy are a markup over costs or 208 00:12:11,280 --> 00:12:15,320 Speaker 2: you know, beyond that some kind of strategic decision being 209 00:12:15,320 --> 00:12:19,160 Speaker 2: made in pursuit of a certain strategy. But like, you know, 210 00:12:19,679 --> 00:12:23,440 Speaker 2: if some studies had verified that, but then other studies 211 00:12:23,440 --> 00:12:26,599 Speaker 2: refuted it, then you would have a situation like psychology 212 00:12:26,640 --> 00:12:29,640 Speaker 2: where you know, the psychologists are always saying all human 213 00:12:29,720 --> 00:12:33,520 Speaker 2: beings really have a neck fetish. But then you know, 214 00:12:33,559 --> 00:12:36,160 Speaker 2: because some study of like some college students you know, 215 00:12:36,679 --> 00:12:40,080 Speaker 2: said this, and then six months later it'll be like, actually, 216 00:12:40,160 --> 00:12:42,880 Speaker 2: that failed to replicate this. It turns out that human 217 00:12:42,920 --> 00:12:44,959 Speaker 2: beings don't have a neck fetish. You know. And I'm 218 00:12:44,960 --> 00:12:47,400 Speaker 2: being rude to psychology, but this is a real crisis 219 00:12:47,440 --> 00:12:51,240 Speaker 2: that happened there, called the replication crisis. Now. Fred Lee 220 00:12:51,400 --> 00:12:54,160 Speaker 2: that the economists who kind of like started us along 221 00:12:54,200 --> 00:12:57,160 Speaker 2: this track in his famous book POSTKINSI and Price Theory, 222 00:12:57,320 --> 00:13:00,760 Speaker 2: found seventy one pricing studies and they form Appendix called 223 00:13:00,800 --> 00:13:03,079 Speaker 2: Appendix B in his book, which ought to be legendary, 224 00:13:03,080 --> 00:13:04,800 Speaker 2: but it's not, because all this stuff is very obscure. 225 00:13:05,120 --> 00:13:09,079 Speaker 2: The seventy one studies from very different book length studies 226 00:13:09,080 --> 00:13:12,400 Speaker 2: from very different people with very different like political and 227 00:13:12,440 --> 00:13:15,679 Speaker 2: economic commitments. Some of them are business school literature. Some 228 00:13:15,720 --> 00:13:18,520 Speaker 2: of them are empirical studies commissioned by states or by 229 00:13:18,600 --> 00:13:21,520 Speaker 2: corporations on how corporate management works. Some of them are 230 00:13:21,559 --> 00:13:24,600 Speaker 2: by like Marxist economists, some of them are by neoclassical economists 231 00:13:24,640 --> 00:13:27,320 Speaker 2: like and they all converge, no matter what the biases 232 00:13:27,320 --> 00:13:30,000 Speaker 2: of of the people involved, upon this same kind of 233 00:13:30,000 --> 00:13:35,560 Speaker 2: similar cost plus administered prices model. Vocolo writing now in 234 00:13:35,600 --> 00:13:38,160 Speaker 2: the present day, not in the period that Lee was 235 00:13:38,200 --> 00:13:41,280 Speaker 2: talking about, which is roughly from the thirties to roughly 236 00:13:41,360 --> 00:13:44,559 Speaker 2: the nineties, Like you know, he is talking about the 237 00:13:44,600 --> 00:13:46,880 Speaker 2: twenty twenties. He just went out and started talking to 238 00:13:46,920 --> 00:13:49,640 Speaker 2: pricing managers and capitalists and all this other stuff, and 239 00:13:49,840 --> 00:13:53,720 Speaker 2: lo and behold he found the exact same thing. So 240 00:13:54,760 --> 00:13:58,920 Speaker 2: the evidence base, the empirical evidence base, for the underlying 241 00:13:58,960 --> 00:14:02,440 Speaker 2: basis of the supply chain theory is very very sound. 242 00:14:02,640 --> 00:14:06,760 Speaker 2: The ball is in other people's court in mainstream economists 243 00:14:06,760 --> 00:14:09,200 Speaker 2: court who want to defend the supply and demand bullshit 244 00:14:09,360 --> 00:14:12,600 Speaker 2: and the price mechanism bullshit to to prove us wrong, 245 00:14:12,840 --> 00:14:16,280 Speaker 2: because frankly, the weight of the evidence is so strong 246 00:14:16,360 --> 00:14:20,360 Speaker 2: that they're the ones who have the who have to 247 00:14:20,400 --> 00:14:22,520 Speaker 2: prove their case, not the other way around. You know 248 00:14:22,560 --> 00:14:25,760 Speaker 2: that the what's it called when you when you've got 249 00:14:25,760 --> 00:14:29,200 Speaker 2: the you know, the the I think the burdensump the 250 00:14:29,240 --> 00:14:31,680 Speaker 2: burden of proof, thank you. The burden of proof is 251 00:14:31,720 --> 00:14:32,400 Speaker 2: on their side. 252 00:14:33,400 --> 00:14:33,600 Speaker 3: Yeah. 253 00:14:33,600 --> 00:14:35,600 Speaker 1: And so something also I think is really interesting from 254 00:14:35,600 --> 00:14:39,880 Speaker 1: the color pieces that like, you know, there is a 255 00:14:39,920 --> 00:14:42,520 Speaker 1: bit in there about firms that try to do this 256 00:14:42,600 --> 00:14:46,000 Speaker 1: sort of like like in real time reacting to supply 257 00:14:46,040 --> 00:14:48,800 Speaker 1: and demand stuff. And it's like Uber and if you 258 00:14:48,800 --> 00:14:51,080 Speaker 1: look at Uber's like, okay, so Uber has a couple 259 00:14:51,120 --> 00:14:55,800 Speaker 1: of things. One they don't have, like the thing that 260 00:14:55,800 --> 00:14:59,400 Speaker 1: they're like they don't really have the supply chain really, 261 00:14:59,440 --> 00:15:01,600 Speaker 1: a B. They don't make any money. They never make money, 262 00:15:01,600 --> 00:15:03,720 Speaker 1: They will never make money. And the third thing that's 263 00:15:03,720 --> 00:15:05,960 Speaker 1: really interesting about is that like that kind of pricing, 264 00:15:06,240 --> 00:15:08,880 Speaker 1: like you know, if if if you have some people 265 00:15:08,920 --> 00:15:11,200 Speaker 1: who go in ideologically and like we're gonna build an 266 00:15:11,200 --> 00:15:14,720 Speaker 1: algorithm to like try to have pricing respond to demand 267 00:15:14,760 --> 00:15:17,680 Speaker 1: or whatever it like. It fucking sucks and everyone hates 268 00:15:17,720 --> 00:15:21,640 Speaker 1: it because it means that, like, you know, suddenly, like 269 00:15:21,800 --> 00:15:25,280 Speaker 1: when you actually need a thing, it's unbelievably expensive, and 270 00:15:25,480 --> 00:15:29,000 Speaker 1: it pisses people off. Like most most people who have 271 00:15:29,080 --> 00:15:31,960 Speaker 1: to deal with actual like the normal things that a 272 00:15:32,040 --> 00:15:34,480 Speaker 1: business do don't do. And the only people who do 273 00:15:34,560 --> 00:15:39,320 Speaker 1: it are like the insane tech people who are like like, 274 00:15:39,920 --> 00:15:42,920 Speaker 1: I don't know it. I almost want to call it 275 00:15:42,920 --> 00:15:46,160 Speaker 1: like intensely ideological, and also assholes and also don't make 276 00:15:46,200 --> 00:15:49,320 Speaker 1: any money, which is just I don't know, it's it's 277 00:15:49,360 --> 00:15:51,200 Speaker 1: I think it's kind of a coincidence. But it is 278 00:15:51,240 --> 00:15:53,760 Speaker 1: just very funny to me that the people who actually 279 00:15:53,760 --> 00:15:57,640 Speaker 1: try to use the neoclassical like pricing theory, it sucks 280 00:15:57,880 --> 00:15:59,160 Speaker 1: and everyone hates them. 281 00:16:00,560 --> 00:16:06,040 Speaker 3: Yeah, and uh, the Colo kind of summarizes like the 282 00:16:07,360 --> 00:16:12,920 Speaker 3: several different pricing procedures that he witnessed and to just say, 283 00:16:13,000 --> 00:16:19,320 Speaker 3: like on both on both determining your company's costs and 284 00:16:19,520 --> 00:16:22,800 Speaker 3: determining what market markup you should have, so the cost 285 00:16:22,840 --> 00:16:24,760 Speaker 3: plus markup you need to you need to figure out 286 00:16:24,800 --> 00:16:29,520 Speaker 3: both of those pieces. It's anything but automatic. Yeah, it's 287 00:16:29,560 --> 00:16:33,000 Speaker 3: a very manual process. And even I would I would 288 00:16:33,040 --> 00:16:35,960 Speaker 3: go so far as to say, like Walmart has teams 289 00:16:35,960 --> 00:16:40,520 Speaker 3: of tech people, Yes, but they're liaising heavily with the 290 00:16:40,560 --> 00:16:45,200 Speaker 3: finance department and sales and marketing to determine what is 291 00:16:45,200 --> 00:16:49,720 Speaker 3: an appropriate margin based on historical like in industry and 292 00:16:49,760 --> 00:16:53,840 Speaker 3: sub industry trends and like what is our historical cost 293 00:16:53,880 --> 00:16:57,920 Speaker 3: structure for each product down to the product level. And 294 00:16:57,960 --> 00:17:01,240 Speaker 3: they have so many different products that they might actually say, well, 295 00:17:01,280 --> 00:17:04,439 Speaker 3: because we're selling everything to everyone, maybe some things can 296 00:17:04,560 --> 00:17:06,600 Speaker 3: just be what are called lost leaders and have a 297 00:17:06,640 --> 00:17:09,399 Speaker 3: negative margin because they get people in the store and 298 00:17:09,400 --> 00:17:11,200 Speaker 3: then those people are there and they see other things 299 00:17:11,200 --> 00:17:13,800 Speaker 3: which have higher markups and then they buy those and 300 00:17:13,800 --> 00:17:16,320 Speaker 3: then overall they've made more of a profit because they 301 00:17:16,920 --> 00:17:21,520 Speaker 3: use something's a negative margin on them. And it's like 302 00:17:21,600 --> 00:17:24,240 Speaker 3: it's a really complex process. And even if an algorithm 303 00:17:24,320 --> 00:17:28,600 Speaker 3: is being developed by say by say Uber to like 304 00:17:29,400 --> 00:17:32,879 Speaker 3: dynamically priced things up and down based upon events like 305 00:17:32,920 --> 00:17:34,879 Speaker 3: a baseball game or something they're going on in a 306 00:17:34,880 --> 00:17:37,680 Speaker 3: city so you can get more revenue, that was still 307 00:17:37,680 --> 00:17:39,200 Speaker 3: a people. It was a group of people in a 308 00:17:39,280 --> 00:17:43,040 Speaker 3: room in a very extremely manual process. Coding is extremely 309 00:17:43,040 --> 00:17:48,280 Speaker 3: manual still, and like liasing with like sales, marketing, finance 310 00:17:48,320 --> 00:17:49,520 Speaker 3: people all at once. 311 00:17:51,800 --> 00:17:54,200 Speaker 1: Yeah. 312 00:17:54,200 --> 00:17:58,119 Speaker 2: And the other thing is that it's like supply and 313 00:17:58,160 --> 00:18:02,960 Speaker 2: demand is afraid that gets thrown around anytime that there's 314 00:18:03,080 --> 00:18:10,119 Speaker 2: any kind of interaction between like the amount of people 315 00:18:10,800 --> 00:18:13,800 Speaker 2: who want something and the amount of people and the 316 00:18:13,800 --> 00:18:16,600 Speaker 2: amount of stuff that there is, right, which is a 317 00:18:16,640 --> 00:18:21,720 Speaker 2: lot of different situations. But the specific supply demand price 318 00:18:21,840 --> 00:18:25,200 Speaker 2: theory that's at the core of neoclassical economics is this 319 00:18:25,359 --> 00:18:30,360 Speaker 2: price mechanism story whereby you know, companies basically all make 320 00:18:30,400 --> 00:18:33,639 Speaker 2: one thing. The price of that thing is not something 321 00:18:33,680 --> 00:18:36,680 Speaker 2: that is really under their control. It automatically fluctuates based 322 00:18:36,680 --> 00:18:38,960 Speaker 2: on demand, which I guess you can roughly measure as 323 00:18:39,000 --> 00:18:43,680 Speaker 2: sales and like the UH and in turn, like what 324 00:18:43,720 --> 00:18:45,840 Speaker 2: the price of that thing is determines how much they 325 00:18:45,880 --> 00:18:49,560 Speaker 2: produce and how much of it people buy, because people's 326 00:18:49,640 --> 00:18:53,600 Speaker 2: buying decisions are in some fixed functional way, and people's 327 00:18:53,600 --> 00:18:57,000 Speaker 2: production decisions in some fixed functional way are tied to 328 00:18:57,040 --> 00:19:01,080 Speaker 2: that price. Like if you want to create an algorithm 329 00:19:01,440 --> 00:19:05,040 Speaker 2: that includes as a consideration doing a discount when you 330 00:19:05,080 --> 00:19:08,000 Speaker 2: haven't yet sold all the seats in an airplane in 331 00:19:08,040 --> 00:19:10,280 Speaker 2: the hopes that you'll get some last minute sales, which, 332 00:19:10,320 --> 00:19:13,680 Speaker 2: by the way, statistically is shown to not actually help 333 00:19:13,720 --> 00:19:16,119 Speaker 2: that much. Those kinds of last minute sales and discounts. 334 00:19:16,920 --> 00:19:19,280 Speaker 2: I mean, I suppose in a flight where there's a 335 00:19:19,280 --> 00:19:21,119 Speaker 2: time limited thing, it might work better. But for a 336 00:19:21,160 --> 00:19:23,760 Speaker 2: typical product, it doesn't move the dial very much in 337 00:19:23,840 --> 00:19:26,640 Speaker 2: terms of sales, which is why Walmart pursues an every 338 00:19:26,720 --> 00:19:29,919 Speaker 2: day low prices strategy, just keeping prices down in general, 339 00:19:29,960 --> 00:19:31,800 Speaker 2: so you don't do sales and discounts which don't move 340 00:19:31,840 --> 00:19:35,080 Speaker 2: the dial much. But like you know, that's a strategic 341 00:19:35,160 --> 00:19:37,600 Speaker 2: pricing decision that you've chosen to make because you think 342 00:19:37,600 --> 00:19:39,520 Speaker 2: that it might move the dial in some way, and 343 00:19:39,560 --> 00:19:41,840 Speaker 2: you experiment it with it and see if it works 344 00:19:41,880 --> 00:19:47,119 Speaker 2: or whatever. That's not the automatic lawlike functional relationship that 345 00:19:47,240 --> 00:19:50,200 Speaker 2: is supposed to exist according to neoclassical theory between supply 346 00:19:50,440 --> 00:19:54,520 Speaker 2: demand and prices. People will say that the algorithm is 347 00:19:54,560 --> 00:19:59,520 Speaker 2: about supplying demand, but that's not really how it works. 348 00:19:59,680 --> 00:20:03,000 Speaker 2: That's it's it's not the same thing as the theory, right, 349 00:20:03,200 --> 00:20:06,600 Speaker 2: It's just a pricing system that takes into account among 350 00:20:06,840 --> 00:20:09,240 Speaker 2: many other variables and usually not as the primary thing 351 00:20:09,600 --> 00:20:15,760 Speaker 2: whether or not for example, there is available available slack 352 00:20:16,040 --> 00:20:19,560 Speaker 2: in the in the you know, in what you're producing 353 00:20:19,600 --> 00:20:21,560 Speaker 2: to be able to get some last minute sales if 354 00:20:21,600 --> 00:20:23,840 Speaker 2: you do a discount or something like that, like or 355 00:20:24,040 --> 00:20:25,800 Speaker 2: like Steve was saying, like, you know, there's a there's 356 00:20:25,840 --> 00:20:28,440 Speaker 2: a game today, so you can do surge pricing because 357 00:20:28,440 --> 00:20:30,320 Speaker 2: people are gonna you know that a bunch of people 358 00:20:30,359 --> 00:20:32,240 Speaker 2: are going to want to get in the game, So 359 00:20:32,240 --> 00:20:36,320 Speaker 2: you're basically just price gouging based on this opportunistically based 360 00:20:36,359 --> 00:20:39,960 Speaker 2: on this event that's happening or whatever, like like, yeah, 361 00:20:40,000 --> 00:20:42,760 Speaker 2: you can do that, and you can say that it's 362 00:20:43,080 --> 00:20:46,000 Speaker 2: pricing that tries to take into account supply and demand, 363 00:20:46,280 --> 00:20:50,040 Speaker 2: but it's not the supply demand price mechanism of neoclassical theory. 364 00:20:50,240 --> 00:20:55,600 Speaker 2: And also, as McColo like you know, finds out it 365 00:20:55,680 --> 00:20:59,160 Speaker 2: attempts to do this are very very mixed in their 366 00:20:59,200 --> 00:21:03,280 Speaker 2: success at best. You know. Basically, people who are trying 367 00:21:03,320 --> 00:21:06,160 Speaker 2: to do it are like, yeah, maybe it could work, 368 00:21:06,359 --> 00:21:08,800 Speaker 2: and then they try it, and nine times out of 369 00:21:08,880 --> 00:21:11,119 Speaker 2: ten it doesn't work very well. So they go back 370 00:21:11,359 --> 00:21:13,800 Speaker 2: to some variation on a cost plus model, you know, 371 00:21:14,240 --> 00:21:17,000 Speaker 2: or a price leadership model or something like that. You know, 372 00:21:17,040 --> 00:21:18,960 Speaker 2: the kinds of methods that Lee discusses. 373 00:21:21,600 --> 00:21:24,400 Speaker 3: Yeah, I mean the customer good will that you kind 374 00:21:24,400 --> 00:21:27,280 Speaker 3: of put at risk with these more dynamic pricing models 375 00:21:28,000 --> 00:21:31,320 Speaker 3: is like often a little too risky, like even for 376 00:21:31,400 --> 00:21:34,160 Speaker 3: big companies like Uber, Like there's been a backlash against 377 00:21:34,200 --> 00:21:35,000 Speaker 3: Uber for doing that. 378 00:21:35,960 --> 00:21:39,000 Speaker 2: Absolutely the only reason they can maybe get away with 379 00:21:39,040 --> 00:21:42,360 Speaker 2: it has been because they have access to infinite finance. 380 00:21:42,600 --> 00:21:44,320 Speaker 1: But yeah, how long is that gonna last? 381 00:21:44,440 --> 00:21:44,640 Speaker 3: Yeah? 382 00:21:44,680 --> 00:21:47,840 Speaker 1: Like, and that's an everything's interesting, Like you know this 383 00:21:47,560 --> 00:21:50,119 Speaker 1: is this is to some extent like a different economic question, 384 00:21:50,280 --> 00:21:52,800 Speaker 1: but like you do at some point have to ask 385 00:21:52,840 --> 00:21:55,800 Speaker 1: the question, like to to what extent can you learn 386 00:21:55,840 --> 00:22:00,520 Speaker 1: things about the economy based on companies that don't have 387 00:22:00,600 --> 00:22:03,080 Speaker 1: a revenue model or the revenue model is they will 388 00:22:03,119 --> 00:22:06,080 Speaker 1: continue to be headed piles of money by like the 389 00:22:06,119 --> 00:22:10,440 Speaker 1: same seven billionaires they've conned. And that's like a I 390 00:22:10,480 --> 00:22:14,040 Speaker 1: think there's an interesting interplay of how dependent you are 391 00:22:14,200 --> 00:22:19,359 Speaker 1: on actually making like actually having revenue be the source 392 00:22:19,440 --> 00:22:22,360 Speaker 1: of like the continuing existence of your company, and how 393 00:22:22,400 --> 00:22:25,920 Speaker 1: ideological you can be about running do you have a gameshom. 394 00:22:26,600 --> 00:22:29,240 Speaker 2: Yeah, Well, it's actually very funny that You say this 395 00:22:29,400 --> 00:22:32,480 Speaker 2: because one of the people that Vocolo talks to is 396 00:22:32,520 --> 00:22:35,959 Speaker 2: this guy Cohen. I can't find his first name right now, 397 00:22:36,000 --> 00:22:38,320 Speaker 2: and I don't want to scroll up. But somebody whose 398 00:22:38,400 --> 00:22:42,280 Speaker 2: last name is Cohen is quote unquote more skeptical of 399 00:22:42,320 --> 00:22:45,240 Speaker 2: the of the dynamical pricing, and he says, I think 400 00:22:45,280 --> 00:22:48,160 Speaker 2: it's a sexy idea, and probably it has a lot 401 00:22:48,160 --> 00:22:51,879 Speaker 2: of intellectually valuable pathways, except when it crashes into the 402 00:22:51,920 --> 00:22:55,359 Speaker 2: sensibility of the customer. He said, it could create a 403 00:22:55,480 --> 00:22:59,080 Speaker 2: universe of very inconsistent prices across categories in time, which 404 00:22:59,080 --> 00:23:01,840 Speaker 2: I don't think. Human beings to align to these dynamic 405 00:23:01,920 --> 00:23:04,159 Speaker 2: models need common sense judgment attached to them, which is 406 00:23:04,200 --> 00:23:07,480 Speaker 2: not always necessarily available. Now, this is a very diplomatic 407 00:23:07,520 --> 00:23:11,840 Speaker 2: statement by somebody who's formerly of Sears Canada. Now I 408 00:23:11,920 --> 00:23:15,719 Speaker 2: find this very funny because there's a kind of subtext here. 409 00:23:15,800 --> 00:23:20,800 Speaker 2: Vocola doesn't get into it, but Sears Canada obviously kind 410 00:23:20,800 --> 00:23:24,040 Speaker 2: of related to Sears. In the nineties, Sears had a 411 00:23:24,119 --> 00:23:28,560 Speaker 2: CEO who was like this ultra libertarian, you know. He 412 00:23:28,640 --> 00:23:30,800 Speaker 2: basically believed that the problem with the free market is 413 00:23:30,800 --> 00:23:33,480 Speaker 2: that it's not free enough. Right at the height of neoliberalism. 414 00:23:33,680 --> 00:23:36,840 Speaker 2: So he's really pissed off about the fact that inside 415 00:23:36,920 --> 00:23:40,920 Speaker 2: the corporation there's no free market. It's all a planned economy, 416 00:23:41,000 --> 00:23:43,359 Speaker 2: you know, which is true. There's no there's no market 417 00:23:43,400 --> 00:23:46,919 Speaker 2: exchanges in there, like, it's all allocations, Like, Okay, we 418 00:23:47,000 --> 00:23:49,280 Speaker 2: have this goal, so we're going to allocate these workers 419 00:23:49,280 --> 00:23:51,240 Speaker 2: to this place and blah blah blah blah. You know, 420 00:23:52,119 --> 00:23:54,440 Speaker 2: and and we're and and and you know, anything that 421 00:23:54,480 --> 00:23:56,919 Speaker 2: the company owns, they just use it to pursue their goals. 422 00:23:57,400 --> 00:24:01,679 Speaker 2: He wanted everything inside the company to have a bress 423 00:24:02,040 --> 00:24:04,679 Speaker 2: so that everything could just be you know. But and 424 00:24:04,720 --> 00:24:07,479 Speaker 2: this is kind of a mad scientist experiment done on 425 00:24:07,520 --> 00:24:11,680 Speaker 2: this like very old American corporation. But somehow, I guess 426 00:24:11,720 --> 00:24:13,719 Speaker 2: it was the nineties, you know, people were coked up 427 00:24:13,720 --> 00:24:16,040 Speaker 2: on this kind of thing. They tried it, and it 428 00:24:16,080 --> 00:24:19,119 Speaker 2: was a catastrophic failure that actually generally seen as contributing 429 00:24:19,119 --> 00:24:21,679 Speaker 2: to the end of Sears as a as a major 430 00:24:21,720 --> 00:24:25,359 Speaker 2: player in retail. And it's like like, so it shows 431 00:24:25,440 --> 00:24:27,760 Speaker 2: so I think that the fact that this person very 432 00:24:27,760 --> 00:24:31,240 Speaker 2: diplomatically from Sears is like this doesn't work, you know, 433 00:24:31,800 --> 00:24:34,760 Speaker 2: And that might be born of more experienced than than 434 00:24:35,000 --> 00:24:35,400 Speaker 2: than not. 435 00:24:35,560 --> 00:24:38,000 Speaker 1: You know, yeah, okay, we have to go to an 436 00:24:38,000 --> 00:24:39,880 Speaker 1: advak Before we do that, I want to tell one 437 00:24:39,920 --> 00:24:43,320 Speaker 1: more insane nineties Like people in the nineties really really 438 00:24:43,359 --> 00:24:46,480 Speaker 1: had market brain in a way that's like difficult to 439 00:24:46,560 --> 00:24:49,200 Speaker 1: understand now. And you can even see this kind of 440 00:24:49,200 --> 00:24:51,600 Speaker 1: through Obama, Like they really have market brain. And like, 441 00:24:51,600 --> 00:24:53,840 Speaker 1: I think the most market brain thing anyone ever did 442 00:24:54,480 --> 00:24:56,880 Speaker 1: was the the I think it was the Army Joint 443 00:24:56,920 --> 00:25:00,560 Speaker 1: chiefs of Staff brought in like a group of aonomists 444 00:25:00,840 --> 00:25:02,880 Speaker 1: who were you know, like you were doing the whole 445 00:25:02,880 --> 00:25:05,000 Speaker 1: like okay, we like, how how can we make how 446 00:25:05,000 --> 00:25:06,920 Speaker 1: can we use the market to make the army run 447 00:25:06,960 --> 00:25:09,240 Speaker 1: more efficient? And the first polls that they put on 448 00:25:09,359 --> 00:25:12,360 Speaker 1: on the table is we're going to have each each 449 00:25:12,520 --> 00:25:16,080 Speaker 1: like like each like section like what's the tap time declartum. 450 00:25:16,200 --> 00:25:18,399 Speaker 1: We're gonna have each branch of the military bid for 451 00:25:18,480 --> 00:25:20,840 Speaker 1: control of who of who gets controlled the nuclear weapons. 452 00:25:22,240 --> 00:25:24,879 Speaker 1: And there's a bunch of just like five star generals 453 00:25:24,880 --> 00:25:26,520 Speaker 1: sitting at this table going like what the fuck are 454 00:25:26,560 --> 00:25:29,359 Speaker 1: you guys talking about? This kid about and that that 455 00:25:29,480 --> 00:25:31,879 Speaker 1: was the end of like but that was like like 456 00:25:32,000 --> 00:25:35,040 Speaker 1: peak absolute peak nineties brain of like these these people 457 00:25:35,119 --> 00:25:38,760 Speaker 1: thought you could solve terrorism by like having futures markets 458 00:25:38,760 --> 00:25:41,800 Speaker 1: on like where when terrorist attacks would happen, Like it 459 00:25:41,880 --> 00:25:45,119 Speaker 1: was these people were wild. None of this stuff worked, 460 00:25:45,720 --> 00:25:48,200 Speaker 1: Unlike the products and services that you're gonna you're gonna 461 00:25:48,240 --> 00:26:02,360 Speaker 1: now hear ads for and we're back from these fine 462 00:26:02,400 --> 00:26:07,200 Speaker 1: products and services. If you're if the thing you were 463 00:26:07,200 --> 00:26:09,160 Speaker 1: doing right now is you have your finger on the button. 464 00:26:09,160 --> 00:26:10,800 Speaker 1: We are about to message Sophie about the fact that 465 00:26:10,800 --> 00:26:14,480 Speaker 1: we have gold ads again, like please don't like please 466 00:26:14,560 --> 00:26:18,600 Speaker 1: leave Sophie alone. Oh my god. I think we we've 467 00:26:18,640 --> 00:26:20,800 Speaker 1: gotten We've gotten a little we've we've gotten sort of 468 00:26:20,800 --> 00:26:22,399 Speaker 1: into the weeds of I guess, like the kind of 469 00:26:22,440 --> 00:26:25,480 Speaker 1: research stuff it's been produced, but I wanted to move on, 470 00:26:26,000 --> 00:26:28,560 Speaker 1: I think to some of the some of the other 471 00:26:28,920 --> 00:26:32,760 Speaker 1: like kinds of like I don't know, kinds of discourse 472 00:26:32,800 --> 00:26:34,440 Speaker 1: and kinds of sort of work that's been produced out 473 00:26:34,440 --> 00:26:34,679 Speaker 1: of this. 474 00:26:35,440 --> 00:26:40,160 Speaker 2: Yeah. Sova Cola's piece I think was was very, very accomplished, 475 00:26:40,160 --> 00:26:42,920 Speaker 2: and it adds to this proud tradition of pricing surveys 476 00:26:42,920 --> 00:26:46,399 Speaker 2: like you've been saying. But the piece that I would 477 00:26:46,400 --> 00:26:49,320 Speaker 2: say ended up having the biggest impact in the sense 478 00:26:49,359 --> 00:26:53,000 Speaker 2: that it really kind of started getting followed up on 479 00:26:53,119 --> 00:26:54,959 Speaker 2: by a lot of people and it got a lot 480 00:26:54,960 --> 00:27:00,280 Speaker 2: of attention, was Tim Dimetzio's piece, So a little bit him. 481 00:27:00,400 --> 00:27:05,119 Speaker 2: He's an economist based in Australia and I should remember 482 00:27:05,160 --> 00:27:07,560 Speaker 2: the name of his university, but it was the University 483 00:27:07,720 --> 00:27:11,680 Speaker 2: of Something and it starts with W and it's a 484 00:27:11,840 --> 00:27:16,680 Speaker 2: very long name there you go, University of Yeah, And 485 00:27:18,720 --> 00:27:23,080 Speaker 2: he's a political economist. He does a lot of stuff 486 00:27:23,400 --> 00:27:27,639 Speaker 2: pertaining to kind of like international relations type stuff, but 487 00:27:27,680 --> 00:27:31,439 Speaker 2: he also comes at economics from a particular perspective. So 488 00:27:31,480 --> 00:27:34,840 Speaker 2: we mentioned last time that there's these the orthodoxy and 489 00:27:34,920 --> 00:27:37,720 Speaker 2: economics is this one school called the Neoclassicals, who believe 490 00:27:37,720 --> 00:27:39,320 Speaker 2: in the supply and demand stuff and along with a 491 00:27:39,359 --> 00:27:41,879 Speaker 2: whole bunch of other dogmas. Then there's a bunch of 492 00:27:41,880 --> 00:27:44,920 Speaker 2: dissident heterodox schools. And there's a whole bunch of these, 493 00:27:45,560 --> 00:27:48,280 Speaker 2: and one of them is called the capital as Power school, 494 00:27:48,520 --> 00:27:53,280 Speaker 2: which is named after a book called Capitalist Power by 495 00:27:53,119 --> 00:27:58,200 Speaker 2: these two professors called Bickler and Nitsen, and it has 496 00:27:58,400 --> 00:28:01,080 Speaker 2: a lot of things to say about a lot of subjects. 497 00:28:01,160 --> 00:28:05,080 Speaker 2: But so Capital's power is a book that says a 498 00:28:05,080 --> 00:28:06,919 Speaker 2: lot of things and a lot of different subjects, but 499 00:28:07,080 --> 00:28:12,399 Speaker 2: at its core is the idea that what makes the 500 00:28:12,440 --> 00:28:17,200 Speaker 2: capitalist system tick is the process of capitalization, and that 501 00:28:17,200 --> 00:28:21,359 Speaker 2: that process of capitalization is controlled by certain people, and 502 00:28:21,400 --> 00:28:26,600 Speaker 2: their control over that process is the basis of the 503 00:28:26,760 --> 00:28:32,199 Speaker 2: entire economic system. That's very heavy stuff. It tends not 504 00:28:32,240 --> 00:28:33,320 Speaker 2: to have to do with what we're going to be 505 00:28:33,320 --> 00:28:37,600 Speaker 2: talking about, but it informs the perspective that Demutzio comes from. Now, 506 00:28:37,640 --> 00:28:42,080 Speaker 2: Demuzio saw Steve's brilliant essay on the splashing theory of inflation, 507 00:28:42,160 --> 00:28:44,640 Speaker 2: was very inspired by it because there are certain affinities 508 00:28:44,680 --> 00:28:47,360 Speaker 2: between the framework that we're coming from in this kind 509 00:28:47,400 --> 00:28:50,240 Speaker 2: of research and the capital's power framework. They don't agree 510 00:28:50,360 --> 00:28:52,200 Speaker 2: one hundred percent on everything, but there's a lot of 511 00:28:52,240 --> 00:28:55,960 Speaker 2: common ground there. So he basically hopped aboard to say, well, 512 00:28:56,000 --> 00:28:58,600 Speaker 2: why don't we talk about interest rates? Because remember the 513 00:28:58,600 --> 00:29:02,760 Speaker 2: main upshot of Steve's of Fred Lee's administrative crisis theory, 514 00:29:02,840 --> 00:29:06,240 Speaker 2: and then and then by extension, Steve's theory about inflation 515 00:29:06,480 --> 00:29:09,160 Speaker 2: is that inflation is not about money, it's about prices. 516 00:29:09,920 --> 00:29:12,440 Speaker 2: And in order to understand inflation, you have to understand 517 00:29:12,720 --> 00:29:15,480 Speaker 2: why people set the prices that they do, and why 518 00:29:15,560 --> 00:29:17,840 Speaker 2: prices across the economy will go up at any given 519 00:29:17,840 --> 00:29:20,240 Speaker 2: moment because it's people who set prices, not the market, 520 00:29:20,280 --> 00:29:22,240 Speaker 2: not the money supply, and not any of these other 521 00:29:22,320 --> 00:29:26,360 Speaker 2: sort of automatic general macroeconomic things. It's a microeconomic decision 522 00:29:26,560 --> 00:29:29,760 Speaker 2: made by particular people within particular institutions with the ability 523 00:29:29,800 --> 00:29:33,880 Speaker 2: to pull the lever on particular prices. Right, So the 524 00:29:33,920 --> 00:29:37,680 Speaker 2: interest rate is a price, you know, it's a very 525 00:29:37,680 --> 00:29:38,920 Speaker 2: important price too. 526 00:29:38,800 --> 00:29:41,000 Speaker 1: Because we should look, we should we should back off 527 00:29:41,040 --> 00:29:43,240 Speaker 1: for a second and explain what when when you say 528 00:29:43,280 --> 00:29:46,080 Speaker 1: the interest rate, you should explain what that is, because well, yeah, 529 00:29:46,400 --> 00:29:47,520 Speaker 1: that's under explained. 530 00:29:48,560 --> 00:29:52,200 Speaker 2: Yeah, that's that's totally exactly where I was going. Because 531 00:29:52,600 --> 00:29:55,520 Speaker 2: there's actually many interest rates out there in the economy. 532 00:29:55,640 --> 00:29:58,440 Speaker 2: When we talk about the interest rate, what we tend 533 00:29:58,520 --> 00:30:01,400 Speaker 2: to be talking about is the interest rate that is 534 00:30:01,480 --> 00:30:05,160 Speaker 2: set at the central bank of the country that control 535 00:30:05,360 --> 00:30:10,320 Speaker 2: like of the currency under discussion. Right. That is basically 536 00:30:11,240 --> 00:30:15,560 Speaker 2: an interest rate that sets the price for credit for 537 00:30:15,760 --> 00:30:18,560 Speaker 2: loans in the rest of the economy. And it's basically 538 00:30:18,600 --> 00:30:20,280 Speaker 2: you can see it as a supply chain, even though 539 00:30:20,280 --> 00:30:22,920 Speaker 2: it's not a physical one and it's basically the main 540 00:30:23,160 --> 00:30:27,440 Speaker 2: cost for banks that want to borrow, you know, and 541 00:30:27,920 --> 00:30:31,160 Speaker 2: they then have to set a markup over that cost 542 00:30:32,200 --> 00:30:35,440 Speaker 2: as the price for anyone who wants to borrow from them, 543 00:30:35,640 --> 00:30:38,840 Speaker 2: which includes other banks but also includes end consumers and firms. 544 00:30:39,160 --> 00:30:42,760 Speaker 2: So that's basically I mean, I'm oversimplifying and Sea probably 545 00:30:43,880 --> 00:30:49,120 Speaker 2: a more nuanced version of this, but that's the basics. 546 00:30:50,320 --> 00:30:53,640 Speaker 3: Yeah, Banks, just like any company, need to determine both 547 00:30:53,640 --> 00:30:56,800 Speaker 3: their cost structure to except that they are able to 548 00:30:56,880 --> 00:31:01,920 Speaker 3: themselves and their markup and markup is they like banks 549 00:31:01,920 --> 00:31:05,640 Speaker 3: have costs just like anyone. One of their principal costs 550 00:31:05,720 --> 00:31:10,200 Speaker 3: is the rate of interest that they pay on deposits 551 00:31:10,240 --> 00:31:13,840 Speaker 3: of their customers in order to get them to get 552 00:31:13,880 --> 00:31:16,840 Speaker 3: new customers in Like, that's one of their main services 553 00:31:17,160 --> 00:31:20,480 Speaker 3: that they provide is checking checking accounts and savings accounts 554 00:31:20,480 --> 00:31:23,320 Speaker 3: and like, so how much interest are you is a 555 00:31:23,320 --> 00:31:28,360 Speaker 3: bank willing to set on its savings account is like 556 00:31:28,880 --> 00:31:31,800 Speaker 3: an important decision that's like part of its cost structure. 557 00:31:32,320 --> 00:31:35,760 Speaker 3: But where people if the Federal Reserve were to raise 558 00:31:35,800 --> 00:31:41,280 Speaker 3: its federal it's the federal funds rate, it's a principal 559 00:31:41,320 --> 00:31:44,800 Speaker 3: policy rate up to what they have now five and 560 00:31:44,840 --> 00:31:48,880 Speaker 3: a half percent or so, when it was less than 561 00:31:48,920 --> 00:31:54,200 Speaker 3: one percent only a year ago. In order to compete 562 00:31:54,640 --> 00:31:58,720 Speaker 3: with all of the other products which are based upon 563 00:31:58,840 --> 00:32:02,760 Speaker 3: this so called risk free rate of return that the 564 00:32:02,800 --> 00:32:07,840 Speaker 3: central bank offers that governments used to like set the 565 00:32:07,960 --> 00:32:12,880 Speaker 3: rate of things like treasury treasury bills and stuff like. Eventually, 566 00:32:12,920 --> 00:32:15,240 Speaker 3: if you're a bank, you have to start charging higher 567 00:32:15,280 --> 00:32:18,320 Speaker 3: and higher interest rates. Sorry, you have to start offering 568 00:32:18,480 --> 00:32:23,160 Speaker 3: higher and higher interest rates on your savings accounts. And likewise, 569 00:32:23,160 --> 00:32:26,960 Speaker 3: you need to, like, you need to start charging higher 570 00:32:27,000 --> 00:32:30,680 Speaker 3: interest rates on the products that are your actual money makers, 571 00:32:30,720 --> 00:32:34,760 Speaker 3: like mortgages and home equity, lines of credit and that 572 00:32:34,800 --> 00:32:41,680 Speaker 3: sort of thing, and so like the cost so the 573 00:32:41,720 --> 00:32:44,200 Speaker 3: cost structure of a bank will shift as the Federal 574 00:32:44,280 --> 00:32:50,120 Speaker 3: Reserve is changing its policy rate, and so too will 575 00:32:50,160 --> 00:32:53,760 Speaker 3: its margin over time as it competes with other banks 576 00:32:53,800 --> 00:32:58,600 Speaker 3: for like a narrowing pool of qualified mortgage applicants, and 577 00:32:58,920 --> 00:33:01,760 Speaker 3: also for people who are willing to shop around for 578 00:33:02,840 --> 00:33:05,120 Speaker 3: where to keep their deposits in a way that they 579 00:33:05,200 --> 00:33:08,280 Speaker 3: previously they weren't because there was no sort of differential 580 00:33:08,320 --> 00:33:11,080 Speaker 3: in interest rates at all. It was just being held steady. 581 00:33:13,400 --> 00:33:18,160 Speaker 2: Yeah, absolutely, So the key thing to understand, and by 582 00:33:18,160 --> 00:33:19,680 Speaker 2: the way, up to now, Steve and I have been 583 00:33:19,680 --> 00:33:22,640 Speaker 2: describing what we regard as the real world. Like everything 584 00:33:22,720 --> 00:33:26,400 Speaker 2: that we've just described, we can see it in action 585 00:33:26,720 --> 00:33:29,680 Speaker 2: like in the world right Like if the FED raises 586 00:33:29,720 --> 00:33:32,880 Speaker 2: this interest rate effectively, what that means is that this 587 00:33:33,120 --> 00:33:36,040 Speaker 2: whole supply chain of people lending to other people, who 588 00:33:36,080 --> 00:33:38,280 Speaker 2: lend to other people, who lend to other people, the 589 00:33:38,320 --> 00:33:42,200 Speaker 2: cost of lending has essentially increased, which will eventually lead 590 00:33:42,200 --> 00:33:44,400 Speaker 2: to a rise in the cost and the cost of 591 00:33:44,480 --> 00:33:49,160 Speaker 2: lending to people downstream until for end consumers, which is 592 00:33:49,200 --> 00:33:51,400 Speaker 2: basically like firms and households trying to get a loan 593 00:33:51,440 --> 00:33:53,960 Speaker 2: from the bank, those loans are going to be more expensive. 594 00:33:54,080 --> 00:33:57,440 Speaker 2: And conversely, if the Fed's interest rate goes down, those 595 00:33:57,480 --> 00:33:59,280 Speaker 2: prices will tend to go down as well. 596 00:34:00,400 --> 00:34:03,240 Speaker 3: If you like. Crucially, none of it is just automatic. 597 00:34:03,880 --> 00:34:05,360 Speaker 2: That's Y's absolutely true. 598 00:34:05,440 --> 00:34:08,680 Speaker 3: There's even just just because it's a bank doesn't mean 599 00:34:08,719 --> 00:34:11,759 Speaker 3: it's any different than the story that Facola was laying 600 00:34:11,800 --> 00:34:12,839 Speaker 3: out for retailers. 601 00:34:14,080 --> 00:34:18,719 Speaker 2: Mm hmm, that's exactly right. The Fed's rate is a 602 00:34:18,880 --> 00:34:23,800 Speaker 2: very important rate because it's basically the first, the first 603 00:34:23,840 --> 00:34:26,080 Speaker 2: one in this chain, and it's a cost for pretty 604 00:34:26,120 --> 00:34:29,080 Speaker 2: much everybody who's doing business and dollars. But that doesn't 605 00:34:29,120 --> 00:34:32,000 Speaker 2: mean that it in some simple way just controls everything else. 606 00:34:32,680 --> 00:34:36,400 Speaker 2: You can hope that it controls if you're the central banker. 607 00:34:36,960 --> 00:34:38,839 Speaker 2: But of course all these firms are making their own 608 00:34:38,880 --> 00:34:42,839 Speaker 2: decisions based on their own reasons, so you know, they 609 00:34:42,880 --> 00:34:45,440 Speaker 2: can make all sorts of decisions based on their priorities 610 00:34:45,480 --> 00:34:49,560 Speaker 2: and based on like like, all sorts of things. Now, 611 00:34:51,120 --> 00:34:52,840 Speaker 2: by the way, if you want the more detailed version 612 00:34:52,960 --> 00:34:55,400 Speaker 2: of this story that actually talks about the different agents 613 00:34:55,400 --> 00:34:57,640 Speaker 2: at each step of this process in much more detail, 614 00:34:57,760 --> 00:35:00,200 Speaker 2: you should check out Perry Merling's work on this. And 615 00:35:00,239 --> 00:35:04,640 Speaker 2: there's even online online lectures that kind of get into 616 00:35:04,719 --> 00:35:08,200 Speaker 2: the nitty gritty which I have absorbed and then since 617 00:35:08,239 --> 00:35:10,200 Speaker 2: completely forgotten the details of, so I would need to 618 00:35:10,200 --> 00:35:12,080 Speaker 2: watch them again to actually be able to name the names. 619 00:35:12,440 --> 00:35:16,960 Speaker 2: But the point is that so far, so real. Right. Now, 620 00:35:16,960 --> 00:35:18,799 Speaker 2: here's where things get a little bs. 621 00:35:19,560 --> 00:35:26,280 Speaker 4: Remember that the mainstream theories of inflation are all basically 622 00:35:26,320 --> 00:35:29,560 Speaker 4: descended in their DNA, even though they've been moving further 623 00:35:29,600 --> 00:35:30,840 Speaker 4: and further away from. 624 00:35:30,600 --> 00:35:34,239 Speaker 2: It from the old school quantity theory of money. The 625 00:35:34,280 --> 00:35:38,520 Speaker 2: idea that the amount of money in the economy basically 626 00:35:38,560 --> 00:35:41,879 Speaker 2: determines the price level. More money that there is circulating, 627 00:35:42,200 --> 00:35:45,160 Speaker 2: the less that money is worth because there's too much 628 00:35:45,200 --> 00:35:46,799 Speaker 2: of it, so the price of it goes down, and 629 00:35:46,840 --> 00:35:50,279 Speaker 2: the price of money basically determines like how much your 630 00:35:50,280 --> 00:35:52,799 Speaker 2: money is able to buy. Now. People have been moving 631 00:35:52,840 --> 00:35:56,279 Speaker 2: away from that towards theories that get more realistic, but 632 00:35:56,320 --> 00:35:59,120 Speaker 2: still retain the basic structure where the money supplies the 633 00:35:59,160 --> 00:36:01,719 Speaker 2: main thing that matters, and they'll say, for example, that 634 00:36:02,160 --> 00:36:06,400 Speaker 2: it's the amount of money circulating in people's pockets relative 635 00:36:06,440 --> 00:36:09,160 Speaker 2: to the amount of goods being produced, such that if 636 00:36:09,200 --> 00:36:13,080 Speaker 2: too much money is chasing too few goods, like there 637 00:36:13,120 --> 00:36:17,520 Speaker 2: isn't enough supply to meet the demand, and that causes something, 638 00:36:18,000 --> 00:36:20,840 Speaker 2: although people disagree on what, that causes prices to be 639 00:36:20,920 --> 00:36:24,680 Speaker 2: bid upwards, and that's called the demand poll theory. It's 640 00:36:24,719 --> 00:36:28,640 Speaker 2: the dominant theory that most economists, classical mainstream economists that 641 00:36:28,640 --> 00:36:33,000 Speaker 2: you talk to today will will will pedal to you. The 642 00:36:33,040 --> 00:36:36,319 Speaker 2: ones who are not orthodox monitorists, they still believe in this, 643 00:36:37,080 --> 00:36:39,680 Speaker 2: which means that they still think that you have to 644 00:36:39,760 --> 00:36:41,960 Speaker 2: when there's an inflationary event, you have to attack the 645 00:36:42,000 --> 00:36:45,799 Speaker 2: money supply now from them. From their point of view, 646 00:36:45,840 --> 00:36:47,560 Speaker 2: it doesn't have to do with the absolute amount of 647 00:36:47,560 --> 00:36:49,520 Speaker 2: money circulating. It has to do with the amount of 648 00:36:49,520 --> 00:36:52,200 Speaker 2: money in people's pockets relative to the amount of stuff 649 00:36:52,200 --> 00:36:54,799 Speaker 2: that can be bought. So, if there's too much money 650 00:36:54,800 --> 00:36:57,040 Speaker 2: in people's pockets, how do people use their money? They 651 00:36:57,040 --> 00:36:59,840 Speaker 2: spend it on goods and services that are produced by firms. 652 00:37:01,080 --> 00:37:06,800 Speaker 2: So if you reduce that amount of money, that basically 653 00:37:07,239 --> 00:37:08,440 Speaker 2: the only way that you can do it is by 654 00:37:08,440 --> 00:37:11,839 Speaker 2: putting people out of work, right, you know you by 655 00:37:12,200 --> 00:37:14,600 Speaker 2: because then they don't get the wages which they would 656 00:37:14,600 --> 00:37:17,200 Speaker 2: have spent on stuff that you know, the factory is 657 00:37:17,239 --> 00:37:20,359 Speaker 2: in Walmart and everything else, the agriculture and whatever, all 658 00:37:20,360 --> 00:37:24,319 Speaker 2: the stuff that gets made, the goods and services. Now 659 00:37:25,080 --> 00:37:28,040 Speaker 2: they think that if you raise the interest rate, it 660 00:37:28,080 --> 00:37:32,239 Speaker 2: makes the cost of finance more expensive. Some firms are 661 00:37:32,280 --> 00:37:35,759 Speaker 2: depending on finance, so if that cost increases for them, 662 00:37:36,160 --> 00:37:38,200 Speaker 2: they're going to go under. And when they go under, 663 00:37:38,200 --> 00:37:41,839 Speaker 2: people get unemployed. When people get unemployed, they have less 664 00:37:41,840 --> 00:37:43,960 Speaker 2: money in their pockets, which means that they're spending less, 665 00:37:43,960 --> 00:37:45,920 Speaker 2: which means that some other firms go out of business, 666 00:37:46,160 --> 00:37:49,240 Speaker 2: and then those people go unemployed. Now, the full version 667 00:37:49,280 --> 00:37:50,800 Speaker 2: of this is like the crash of two thousand and 668 00:37:50,800 --> 00:37:53,879 Speaker 2: eight or nineteen twenty nine, where suddenly a whole bunch 669 00:37:53,880 --> 00:37:55,600 Speaker 2: of people are unemployed and a whole bunch of companies 670 00:37:55,600 --> 00:37:57,840 Speaker 2: are empty. They don't want to go all the way 671 00:37:57,880 --> 00:38:00,319 Speaker 2: with that, but they want to kind of get part 672 00:38:00,320 --> 00:38:02,759 Speaker 2: of the way to that. They want to put the 673 00:38:02,840 --> 00:38:06,680 Speaker 2: squeeze on the economy and get some companies put out 674 00:38:06,719 --> 00:38:10,279 Speaker 2: of business and some people unemployed on the dole so 675 00:38:10,360 --> 00:38:13,120 Speaker 2: that people don't have money in their pockets, so that 676 00:38:13,280 --> 00:38:17,480 Speaker 2: the supposed pressure of too many people spending money on 677 00:38:17,640 --> 00:38:21,440 Speaker 2: goods that are not being produced enough to meet that demand, 678 00:38:21,800 --> 00:38:26,200 Speaker 2: the demand pressure goes down, so therefore it equilibrates and 679 00:38:26,520 --> 00:38:31,040 Speaker 2: inflation prices. Inflation ceases because prices go down too, because 680 00:38:31,040 --> 00:38:34,480 Speaker 2: the idea is that there's a law like relationship between 681 00:38:35,200 --> 00:38:38,480 Speaker 2: demand and prices such that if demand goes down, the 682 00:38:38,560 --> 00:38:41,600 Speaker 2: price will go down. The actual explanation for this is 683 00:38:42,080 --> 00:38:44,920 Speaker 2: will vary depending on the thing. They basically accept it 684 00:38:44,920 --> 00:38:47,759 Speaker 2: as a religious orthodoxy, and then different economists justified in 685 00:38:47,800 --> 00:38:51,240 Speaker 2: different ways. But that's why they're trying to raise interest 686 00:38:51,320 --> 00:38:55,840 Speaker 2: rates so that basically people get thrown out of work 687 00:38:56,040 --> 00:38:59,160 Speaker 2: and that'll cause prices magically to go down. Now, as 688 00:38:59,200 --> 00:39:02,440 Speaker 2: we discussed, the actual cause of the inflation was an 689 00:39:02,480 --> 00:39:07,440 Speaker 2: exogenous shock based on like the chip shortage, the labor shortage, 690 00:39:07,480 --> 00:39:10,480 Speaker 2: and key things like agriculture, the container shortage and the 691 00:39:10,520 --> 00:39:14,200 Speaker 2: war in Ukraine causing increases and grain prices that have 692 00:39:14,320 --> 00:39:18,480 Speaker 2: cost cost increases. That firms tried to hold off price 693 00:39:18,520 --> 00:39:20,839 Speaker 2: increases as long as they could, but then they couldn't, 694 00:39:20,960 --> 00:39:23,480 Speaker 2: and then they traveled down the supply chain and a 695 00:39:23,520 --> 00:39:26,239 Speaker 2: whole bunch of prices across the economy went up. So 696 00:39:26,440 --> 00:39:28,959 Speaker 2: we know that because we have looked at the news 697 00:39:28,960 --> 00:39:32,480 Speaker 2: stories that you know, and talk to people at these 698 00:39:32,480 --> 00:39:35,000 Speaker 2: different companies. By we, I don't mean strange matters. I 699 00:39:35,040 --> 00:39:37,880 Speaker 2: mean like you know, journalists or whatever, and like you know, 700 00:39:38,040 --> 00:39:42,279 Speaker 2: that's what they say. And yet nevertheless they're trying to 701 00:39:42,280 --> 00:39:45,000 Speaker 2: make the interest rates go up to throw people out 702 00:39:45,000 --> 00:39:47,680 Speaker 2: of work and partially induce a recession in the hopes 703 00:39:47,719 --> 00:39:49,600 Speaker 2: that that will drive prices down. 704 00:39:50,040 --> 00:39:51,640 Speaker 3: But they can't even get that, right. 705 00:39:52,160 --> 00:39:53,000 Speaker 2: That's right, they haven't. 706 00:39:53,000 --> 00:39:56,120 Speaker 3: Actually they haven't been able to get unemployment up either. 707 00:39:56,200 --> 00:39:56,960 Speaker 3: So it's. 708 00:39:58,640 --> 00:40:04,360 Speaker 2: Exactly well, and what's really funny is that Demucio basically says, Okay, 709 00:40:04,360 --> 00:40:06,320 Speaker 2: why do people believe this? They believe it for a 710 00:40:06,360 --> 00:40:09,120 Speaker 2: lot of reasons, but they think that it worked in 711 00:40:09,160 --> 00:40:11,920 Speaker 2: the seventies. That's the myth. Right. You asked Larry Summers, 712 00:40:11,920 --> 00:40:13,840 Speaker 2: why do you think this shit will work? And Larry 713 00:40:13,840 --> 00:40:16,200 Speaker 2: Summers will say, well, you might not like it. And 714 00:40:16,200 --> 00:40:17,759 Speaker 2: I think he actually said things like this, like a 715 00:40:17,800 --> 00:40:19,600 Speaker 2: couple of weeks ago, you might not like it, but 716 00:40:19,640 --> 00:40:21,080 Speaker 2: this is how we got out of the crisis of 717 00:40:21,120 --> 00:40:23,879 Speaker 2: the seventies. If we hadn't done the vulgar shock, which 718 00:40:23,920 --> 00:40:26,080 Speaker 2: is basically the same thing, they raised interest rates through 719 00:40:26,320 --> 00:40:29,960 Speaker 2: up the yazoo, you know, like like we and hadn't 720 00:40:30,000 --> 00:40:33,960 Speaker 2: induced that unemployment or whatever, prices would never have come down. 721 00:40:34,520 --> 00:40:36,600 Speaker 2: But you see, Demucio did something that you're not supposed 722 00:40:36,600 --> 00:40:38,279 Speaker 2: to do, which is that he actually checked up on 723 00:40:38,360 --> 00:40:43,759 Speaker 2: the relationship between between interest rates and prices. And what 724 00:40:43,840 --> 00:40:49,919 Speaker 2: he found was that basically, there's either that I believe 725 00:40:49,960 --> 00:40:52,400 Speaker 2: that I explained his essay is that there's a strong 726 00:40:52,520 --> 00:40:54,400 Speaker 2: version of his argument and there's a weak version. The 727 00:40:54,440 --> 00:40:57,560 Speaker 2: week version is definitely true. The strong version is speculative. 728 00:40:58,000 --> 00:41:01,400 Speaker 2: So he charted it and you found that there is 729 00:41:01,520 --> 00:41:06,480 Speaker 2: absolutely no inverse relationship between interest rates and prices. They 730 00:41:06,560 --> 00:41:09,000 Speaker 2: raise interest rates, they raise interest rates, the prices keep 731 00:41:09,040 --> 00:41:13,040 Speaker 2: going up. Then they're not coming down, right, And the 732 00:41:13,120 --> 00:41:16,440 Speaker 2: prices don't start to go down until oil because remember 733 00:41:16,480 --> 00:41:19,439 Speaker 2: the oil shock caused by the war in the Middle 734 00:41:19,480 --> 00:41:23,320 Speaker 2: East between Israel and Weal and UH and Egypt and 735 00:41:23,320 --> 00:41:25,359 Speaker 2: a whole bunch of other places caused OPEK to raise 736 00:41:25,400 --> 00:41:26,399 Speaker 2: their prices in order. 737 00:41:26,560 --> 00:41:28,480 Speaker 1: Yeah, it's I'm gonna, I'm gonna, I'm gonna, I'm gonna 738 00:41:28,480 --> 00:41:30,640 Speaker 1: point in a thing, which is that the actual story 739 00:41:30,680 --> 00:41:34,200 Speaker 1: behind that is slightly more complicated, which is that, like, okay, so, 740 00:41:34,520 --> 00:41:37,640 Speaker 1: to be completely one hundred percent accurate about this, OPIK 741 00:41:38,120 --> 00:41:41,759 Speaker 1: had a meeting where they decided to raise prices, and 742 00:41:41,840 --> 00:41:46,919 Speaker 1: then the war started, and then like like two weeks afterwards, 743 00:41:47,600 --> 00:41:51,400 Speaker 1: and then they kind of tacked their explanation on to 744 00:41:51,560 --> 00:41:54,560 Speaker 1: the back of the price increase they'd already decided on. 745 00:41:55,560 --> 00:41:56,440 Speaker 2: Oh okay, but. 746 00:41:56,760 --> 00:41:58,640 Speaker 1: Yeah, so this this this is the thing that like, 747 00:42:00,000 --> 00:42:02,440 Speaker 1: I don't know, there was a there was an oil 748 00:42:02,480 --> 00:42:05,440 Speaker 1: historian who went back and like spent a bunch of 749 00:42:05,480 --> 00:42:08,239 Speaker 1: time looking through the records of OPEC and shit and 750 00:42:08,239 --> 00:42:11,160 Speaker 1: trying to figure out what the actual sequence of events was. 751 00:42:11,440 --> 00:42:13,759 Speaker 1: But it it is true that like one of the 752 00:42:13,800 --> 00:42:16,279 Speaker 1: things behind keeping Opek together so that it could increase 753 00:42:16,280 --> 00:42:20,120 Speaker 1: the price of oil was like the like what was 754 00:42:20,120 --> 00:42:21,800 Speaker 1: their sort of solid aarity and they faced the opposition 755 00:42:21,840 --> 00:42:24,160 Speaker 1: of the war. But also it's slightly more complicated than that, 756 00:42:24,200 --> 00:42:25,279 Speaker 1: and I want to I want to I want to 757 00:42:25,320 --> 00:42:28,920 Speaker 1: put that on the record, just because the oil knowers 758 00:42:28,960 --> 00:42:32,960 Speaker 1: will get mad at us. We Yeah, yeah, so that's 759 00:42:32,960 --> 00:42:36,160 Speaker 1: the version of it that like like ninety nine percent 760 00:42:36,320 --> 00:42:40,279 Speaker 1: of accounts will give you. It's just slightly not quite 761 00:42:40,360 --> 00:42:41,560 Speaker 1: exactly what was happening. 762 00:42:42,239 --> 00:42:43,320 Speaker 2: Yeah, I gotta wrote that book. 763 00:42:43,520 --> 00:42:45,239 Speaker 1: Yeah, I think it was, God, I don't remember what 764 00:42:45,280 --> 00:42:49,200 Speaker 1: book I think it was in. I think it was 765 00:42:49,239 --> 00:42:52,919 Speaker 1: in Carbon Democracy, maybe like eighty percent. 766 00:42:52,960 --> 00:42:53,120 Speaker 2: Sure. 767 00:42:53,120 --> 00:42:57,040 Speaker 1: Sorry, I read like four books about oil and coal 768 00:42:57,120 --> 00:43:01,439 Speaker 1: in like incredibly rapid succession, like several years ago, and 769 00:43:01,480 --> 00:43:03,879 Speaker 1: sometimes I have trouble remembering exactly which one which thing 770 00:43:03,960 --> 00:43:08,000 Speaker 1: is from. But yeah, although I want to say sorry, 771 00:43:08,200 --> 00:43:09,840 Speaker 1: I guess I want to say one other kind of 772 00:43:09,840 --> 00:43:12,279 Speaker 1: interesting thing about that that makes specifically trying to use 773 00:43:12,320 --> 00:43:17,040 Speaker 1: the interest rates arguments about like I think it is 774 00:43:17,080 --> 00:43:20,880 Speaker 1: it is pretty clear that raising the interest rates directly 775 00:43:20,880 --> 00:43:23,680 Speaker 1: would like did not immediately did wasn't the thing that 776 00:43:23,719 --> 00:43:28,080 Speaker 1: brought down prices. I think there's like an interesting there's 777 00:43:28,120 --> 00:43:30,560 Speaker 1: like a weird thing going on there too, because the 778 00:43:30,880 --> 00:43:33,200 Speaker 1: like almost all like when when economists tend to look 779 00:43:33,200 --> 00:43:34,400 Speaker 1: at this, what they tend to look at what the 780 00:43:34,440 --> 00:43:36,759 Speaker 1: interest rate rises was what was happening to the US 781 00:43:36,840 --> 00:43:41,000 Speaker 1: economy and the other the other thing that the vocal 782 00:43:41,080 --> 00:43:44,120 Speaker 1: shock did was it raised the interest rates on It 783 00:43:44,200 --> 00:43:46,120 Speaker 1: raised raised the interest rates in all of these adjustable 784 00:43:46,360 --> 00:43:49,759 Speaker 1: rate loans that like all of these countries like all 785 00:43:49,800 --> 00:43:53,399 Speaker 1: over the world had and those economies got fucking obliterated. 786 00:43:53,760 --> 00:43:56,399 Speaker 1: And that actually I think, I think actually that there 787 00:43:56,400 --> 00:43:59,799 Speaker 1: there is an argument that like my my argument would be, 788 00:43:59,800 --> 00:44:03,759 Speaker 1: I think it kind of probably prevented prices maybe from 789 00:44:03,760 --> 00:44:06,080 Speaker 1: going up more, But it did that because it prevented 790 00:44:06,120 --> 00:44:09,480 Speaker 1: any more opex fromforming and just like absolutely annihilated any 791 00:44:09,520 --> 00:44:12,120 Speaker 1: kind of political movement to like have pricing be set 792 00:44:12,160 --> 00:44:17,080 Speaker 1: by like raw material producers rather than by like countries 793 00:44:17,120 --> 00:44:19,239 Speaker 1: that do production. And this is a kind of like 794 00:44:19,320 --> 00:44:22,200 Speaker 1: separate thing, but like this is I think, I think 795 00:44:22,200 --> 00:44:24,120 Speaker 1: the moral of my story with this before we get 796 00:44:24,160 --> 00:44:27,680 Speaker 1: back to sort of like the I don't know, the 797 00:44:28,160 --> 00:44:32,200 Speaker 1: the other arguments about this is that like that moment 798 00:44:32,600 --> 00:44:35,359 Speaker 1: was such a fucking shit show. There were so many 799 00:44:35,360 --> 00:44:39,120 Speaker 1: things going on. It's so complicated. It is absolutely nuts 800 00:44:39,160 --> 00:44:41,400 Speaker 1: to try to base literally your entire theory about how 801 00:44:41,400 --> 00:44:44,440 Speaker 1: you stop inflation by raising interest rates on one event 802 00:44:44,760 --> 00:44:48,080 Speaker 1: in like probably the most complicated economic crisis, and it 803 00:44:48,160 --> 00:44:53,440 Speaker 1: like we've ever had. And yeah, because like it did, 804 00:44:53,600 --> 00:44:55,799 Speaker 1: like the Volker shock did a lot of things that 805 00:44:55,880 --> 00:45:01,080 Speaker 1: weren't what Volker or not even not not what Vocal 806 00:45:01,160 --> 00:45:02,239 Speaker 1: were trying to do, but it did a lot of 807 00:45:02,280 --> 00:45:04,600 Speaker 1: things that aren't what economists talk about when they talk 808 00:45:04,640 --> 00:45:07,480 Speaker 1: about what the Volcan shock did. Like it had all 809 00:45:07,480 --> 00:45:11,799 Speaker 1: of these incredibly like powerful political ramifications that they just 810 00:45:11,960 --> 00:45:16,440 Speaker 1: don't put in the equations because it doesn't feel like 811 00:45:16,480 --> 00:45:22,440 Speaker 1: how do you mathematically model like the collapse of the 812 00:45:22,719 --> 00:45:25,239 Speaker 1: like like the collapse of the non online movement and 813 00:45:25,280 --> 00:45:27,759 Speaker 1: like the Third World movement, Like you can't, right, And 814 00:45:27,800 --> 00:45:30,600 Speaker 1: so they just sort of like wave their hands and 815 00:45:30,640 --> 00:45:34,000 Speaker 1: pretend that it was just like directly it caused more unemployment, 816 00:45:34,000 --> 00:45:35,520 Speaker 1: the unemployment prot inflation rydown. 817 00:45:36,160 --> 00:45:38,960 Speaker 3: Yeah, it's interesting to think of the global effects of 818 00:45:39,000 --> 00:45:45,000 Speaker 3: the Vulcar's shock. It's like you have countries who are 819 00:45:45,000 --> 00:45:50,160 Speaker 3: dependent upon USD finance suddenly are facing a much stronger dollar. 820 00:45:50,480 --> 00:45:53,600 Speaker 3: So if they didn't already have dollars, that's a huge problem. 821 00:45:53,840 --> 00:45:55,880 Speaker 1: Yeah and again, yeah and again. Also just like like 822 00:45:55,960 --> 00:45:58,720 Speaker 1: just literally the interest rates on their loans like increased 823 00:45:58,719 --> 00:46:01,279 Speaker 1: by like twenty percent. And that's like, you know, like 824 00:46:02,400 --> 00:46:05,080 Speaker 1: you're it doesn't really matter what your economy is. You can't, 825 00:46:06,160 --> 00:46:08,319 Speaker 1: I don't know, it's it's unbelievably difficult to survive them 826 00:46:08,440 --> 00:46:08,719 Speaker 1: like that. 827 00:46:09,360 --> 00:46:13,200 Speaker 3: Yeah, on the four x dimension and just on regular 828 00:46:13,280 --> 00:46:16,799 Speaker 3: lending terms, in dollar lending anyway, it's going to get 829 00:46:16,840 --> 00:46:21,520 Speaker 3: way tougher. They even domestically, like to de Mitiu, superimposes 830 00:46:21,560 --> 00:46:25,080 Speaker 3: the oil price onto the inflation and like the the 831 00:46:25,080 --> 00:46:28,440 Speaker 3: inflationary crises of the seventies and early eighties, it was 832 00:46:28,480 --> 00:46:31,680 Speaker 3: a double it was a double victim, if you remember. 833 00:46:32,640 --> 00:46:35,319 Speaker 3: And so like the first time the FED chairman who 834 00:46:35,360 --> 00:46:40,680 Speaker 3: proceeded Paul Voker was blamed for not raising interest rates 835 00:46:41,080 --> 00:46:44,879 Speaker 3: during an inflationary crisis because of the emerging theory, said 836 00:46:44,920 --> 00:46:47,759 Speaker 3: that maybe that would be a good idea, and so 837 00:46:47,880 --> 00:46:50,839 Speaker 3: like the monitorists had like their one moment after that 838 00:46:51,200 --> 00:46:56,280 Speaker 3: to say like they were, they became more than simply 839 00:46:56,320 --> 00:46:59,719 Speaker 3: an academic movement and became like briefly hegemonic. With with 840 00:46:59,800 --> 00:47:04,080 Speaker 3: the the vulgar interest rate arise that happened to like 841 00:47:04,719 --> 00:47:08,040 Speaker 3: in set in nineteen seventy five or so, when the 842 00:47:08,080 --> 00:47:13,080 Speaker 3: oil price was about fifteen dollars per barrel. That's when 843 00:47:13,120 --> 00:47:17,040 Speaker 3: inflation and the oil price start to move closely in 844 00:47:17,120 --> 00:47:22,359 Speaker 3: conjunction with each other, going into nineteen eighty, which is 845 00:47:22,480 --> 00:47:27,360 Speaker 3: also when the interest rates are being raised more like 846 00:47:27,520 --> 00:47:31,359 Speaker 3: give or take nine to eighteen months or so, and 847 00:47:32,280 --> 00:47:38,359 Speaker 3: the economic historians, the neoclassical economic historians, will forget about 848 00:47:38,360 --> 00:47:40,520 Speaker 3: the supply chain pressures like the oil price, which has 849 00:47:40,560 --> 00:47:43,840 Speaker 3: nothing to do with the FED, and like that happened 850 00:47:43,880 --> 00:47:47,400 Speaker 3: in this inflationary when oil prices were up to like 851 00:47:47,440 --> 00:47:51,720 Speaker 3: one ten. During our current inflationary crisis, this exact debase 852 00:47:52,000 --> 00:47:57,120 Speaker 3: debate was taking place again. Yeah, which like where it's like, 853 00:47:57,200 --> 00:47:59,440 Speaker 3: I mean, there's like all of the prices that the 854 00:47:59,480 --> 00:48:02,080 Speaker 3: FED has no control over. It's like, well, if you 855 00:48:02,120 --> 00:48:04,879 Speaker 3: ignore those ones, then actually our theory is like kind 856 00:48:04,880 --> 00:48:06,879 Speaker 3: of getting close to being right. 857 00:48:07,200 --> 00:48:10,839 Speaker 2: And the worst part, the worst part is that the 858 00:48:10,880 --> 00:48:16,440 Speaker 2: interest rate correlates positively with prices. 859 00:48:16,640 --> 00:48:19,880 Speaker 5: This is so like so like so like the interest 860 00:48:19,960 --> 00:48:24,120 Speaker 5: rate when it's high, theory expects that prices will be low, 861 00:48:25,239 --> 00:48:28,880 Speaker 5: but actually and and and and like even. 862 00:48:28,760 --> 00:48:31,120 Speaker 2: If you adjust for like a delay where maybe like 863 00:48:31,160 --> 00:48:35,200 Speaker 2: the prices get low afterwards, like no, that's not what happens. 864 00:48:35,600 --> 00:48:39,440 Speaker 2: It's like the interest rate goes up and prices go 865 00:48:39,640 --> 00:48:43,319 Speaker 2: up to prices go down, and the interest rate goes 866 00:48:44,120 --> 00:48:44,920 Speaker 2: you know, like like like. 867 00:48:45,280 --> 00:48:49,480 Speaker 3: It's like yeah and like and Demucio is like it 868 00:48:49,960 --> 00:48:53,680 Speaker 3: when he eventually he super imposes old price, fed funds, 869 00:48:54,000 --> 00:48:56,399 Speaker 3: thorough funds, rate, and inflation all in one chart. It's 870 00:48:56,440 --> 00:48:58,920 Speaker 3: just like this epic wave of all three going up 871 00:48:58,960 --> 00:49:03,280 Speaker 3: at once, like almost in lock step. And then oil 872 00:49:03,360 --> 00:49:05,479 Speaker 3: goes back down, and then interest rates go back down, 873 00:49:05,560 --> 00:49:06,879 Speaker 3: and then prices go back down. 874 00:49:07,680 --> 00:49:10,279 Speaker 2: Yeah, I can't think prices first before interest rate. Let 875 00:49:10,320 --> 00:49:10,640 Speaker 2: me see. 876 00:49:12,160 --> 00:49:16,879 Speaker 3: Oh yeah yeah like inplation, Chris, like yeah, somewhat concurrently 877 00:49:16,920 --> 00:49:21,760 Speaker 3: with the federal funds and then the uh, the oil 878 00:49:21,880 --> 00:49:25,120 Speaker 3: price eventually falls like like shortly thereafter. 879 00:49:25,760 --> 00:49:28,120 Speaker 1: Yeah, and then and this this just gives you a disaster, 880 00:49:28,320 --> 00:49:31,120 Speaker 1: right because you like, okay, so the you will get 881 00:49:31,239 --> 00:49:33,440 Speaker 1: neoclassical economists who are like, oh my god, oh no, 882 00:49:33,520 --> 00:49:36,880 Speaker 1: all these idiots are saying that increasing the increasing the 883 00:49:36,920 --> 00:49:39,279 Speaker 1: interest rate actually increases prices. It's not what happening. It's 884 00:49:39,320 --> 00:49:41,920 Speaker 1: like you get into this mess. You have to figure 885 00:49:41,960 --> 00:49:45,920 Speaker 1: out the new classical explanation, right, is that like, okay, well, 886 00:49:45,920 --> 00:49:49,280 Speaker 1: the reason it looks like the fund rate increasing increases 887 00:49:49,320 --> 00:49:51,480 Speaker 1: prices is because you do that in response to the 888 00:49:51,520 --> 00:49:54,279 Speaker 1: inflation happening. Right, But like you can also just very 889 00:49:54,280 --> 00:49:56,600 Speaker 1: easily look at this as like a panic index basically 890 00:49:57,120 --> 00:50:00,000 Speaker 1: like where you know, it's like, okay, well, prices go up, 891 00:50:00,080 --> 00:50:02,960 Speaker 1: and then the Fed panics and so they raise their 892 00:50:03,320 --> 00:50:06,600 Speaker 1: it doesn't, and you know, like it's it's this is 893 00:50:06,600 --> 00:50:09,480 Speaker 1: one of those things where like the neoclassical economists have 894 00:50:09,640 --> 00:50:16,000 Speaker 1: invented a mechanism that like allows them to explain their 895 00:50:16,040 --> 00:50:18,920 Speaker 1: own actions in a way that's plausible enough that they 896 00:50:18,920 --> 00:50:21,400 Speaker 1: can call anyone that they've they've gotten a fagiblity that 897 00:50:21,400 --> 00:50:26,640 Speaker 1: could say anyone who says they're wrong is just like nuts, right, right, 898 00:50:27,239 --> 00:50:31,080 Speaker 1: And also it's it's it's entirely possible that not only 899 00:50:31,160 --> 00:50:33,840 Speaker 1: are they not right, they're literally perfectly exactly wrong. 900 00:50:35,400 --> 00:50:40,440 Speaker 3: Yeah, and that yeah, they tried out the like the 901 00:50:40,440 --> 00:50:45,400 Speaker 3: the econometric jargon long and variable lags when people say, 902 00:50:45,600 --> 00:50:48,719 Speaker 3: when our interest rate's gonna cause unemployments arise, when our 903 00:50:48,760 --> 00:50:51,360 Speaker 3: interest rate's gonna cut down on inflation by themselves and 904 00:50:51,400 --> 00:50:54,719 Speaker 3: not some other supply chain phenomenon, And they say like, well, 905 00:50:54,760 --> 00:50:57,959 Speaker 3: the monetary transmission mechanism has long and variable lags, which 906 00:50:57,960 --> 00:50:59,919 Speaker 3: means that like nine to eighteen months from now, it'll 907 00:51:00,000 --> 00:51:02,160 Speaker 3: settle down and then we'll know it's from interest rates. 908 00:51:02,280 --> 00:51:03,920 Speaker 3: Trust us, right, And. 909 00:51:04,680 --> 00:51:08,480 Speaker 2: Even their purported explanations are demonstrably false. So theoretically, the 910 00:51:08,480 --> 00:51:11,760 Speaker 2: mechanism by which this happens is that the monetary that 911 00:51:11,800 --> 00:51:15,319 Speaker 2: the money supply will go down. Well, yeah, M two 912 00:51:15,440 --> 00:51:18,200 Speaker 2: is our best estimate for the monetary for the money supply, 913 00:51:18,640 --> 00:51:21,720 Speaker 2: and it's not even a perfect one. You know, interest 914 00:51:21,760 --> 00:51:24,320 Speaker 2: rates go up, interest rates go down, M two keeps 915 00:51:24,320 --> 00:51:26,799 Speaker 2: going up. And this is over the course of like 916 00:51:27,520 --> 00:51:30,799 Speaker 2: from the seventies to the nineties, you know, like like, yes, 917 00:51:30,840 --> 00:51:32,120 Speaker 2: another graph of the mussios. 918 00:51:32,440 --> 00:51:36,240 Speaker 3: That's another important point that like the money, it doesn't 919 00:51:36,280 --> 00:51:38,399 Speaker 3: even get the money supply down. 920 00:51:38,960 --> 00:51:42,960 Speaker 2: Yeah, So like it's quite questionable whether this interest rate 921 00:51:43,360 --> 00:51:47,480 Speaker 2: adjustment thing even works at all on its own terms, 922 00:51:47,760 --> 00:51:50,960 Speaker 2: because all the evidence says that there's at least and 923 00:51:50,960 --> 00:51:52,560 Speaker 2: this is what I mean by the weak version of 924 00:51:52,560 --> 00:51:55,239 Speaker 2: the Vicis argument, that all the evidence shows that there's 925 00:51:55,280 --> 00:51:58,520 Speaker 2: at least no relationship between interest rates and the price level, 926 00:51:58,600 --> 00:52:01,799 Speaker 2: that there is like no relation ship whatsoever. It basically 927 00:52:01,960 --> 00:52:04,960 Speaker 2: just is useless for controlling prices one way or the other. 928 00:52:06,080 --> 00:52:10,120 Speaker 2: The uh. Now, the strong version of argument is he 929 00:52:10,320 --> 00:52:13,040 Speaker 2: takes the he takes the the the fact that interest 930 00:52:13,080 --> 00:52:16,520 Speaker 2: rates track prices very seriously, and he's like, well, what 931 00:52:16,680 --> 00:52:22,759 Speaker 2: if making finance more expensive actually raises business costs and 932 00:52:22,960 --> 00:52:26,120 Speaker 2: businesses choose to respond to it by raising their prices? 933 00:52:26,760 --> 00:52:29,799 Speaker 2: You know, what if you what if you actually, by 934 00:52:29,880 --> 00:52:33,640 Speaker 2: raising the interest rate, are contributing to inflation. Now, this 935 00:52:33,680 --> 00:52:35,879 Speaker 2: is this is kind of how we framed the whole 936 00:52:35,960 --> 00:52:40,120 Speaker 2: article in our title editors make titles, not not not 937 00:52:40,120 --> 00:52:44,000 Speaker 2: not writers do interest rate hikes worsen inflation? And I 938 00:52:44,040 --> 00:52:45,640 Speaker 2: remember showing this to some of my friends who were 939 00:52:45,640 --> 00:52:47,680 Speaker 2: financed bros. And they were like, what what are you 940 00:52:47,719 --> 00:52:51,480 Speaker 2: talking about? This is a crazy idea, But like it 941 00:52:51,600 --> 00:52:53,279 Speaker 2: makes a lot of sense because if you look at 942 00:52:53,320 --> 00:52:56,360 Speaker 2: things as a supply chain. At the very least, rising 943 00:52:56,440 --> 00:52:59,719 Speaker 2: financially rising cost of loans would be a higher cost 944 00:52:59,719 --> 00:53:02,920 Speaker 2: for some businesses. Theoretically they could respond to that by 945 00:53:02,960 --> 00:53:07,040 Speaker 2: raising their prices. Now, in actual fact, it probably at 946 00:53:07,120 --> 00:53:09,960 Speaker 2: least my solo opinion is this is a small effect, 947 00:53:09,960 --> 00:53:12,360 Speaker 2: if it exists at all, it's much more plausible that 948 00:53:12,400 --> 00:53:15,960 Speaker 2: there is simply no relationship. Yeah, and the general price. 949 00:53:16,040 --> 00:53:17,680 Speaker 1: Yeah, and that and that and that and that, Like 950 00:53:17,800 --> 00:53:20,040 Speaker 1: the fact that they're correlated is just it's just a 951 00:53:20,080 --> 00:53:23,080 Speaker 1: panic index on the on the on the on behalf 952 00:53:23,120 --> 00:53:26,319 Speaker 1: of the fed that they just get scared and do 953 00:53:26,400 --> 00:53:28,440 Speaker 1: this thing and it doesn't it has no effect, but 954 00:53:28,560 --> 00:53:30,560 Speaker 1: like you know, they've got to press the panic button. 955 00:53:31,800 --> 00:53:34,880 Speaker 3: Yeah. I think I'm for a variety of reasons, I 956 00:53:35,320 --> 00:53:40,920 Speaker 3: think I'm a weak form demusiist on this point. I think, like, like, 957 00:53:41,160 --> 00:53:45,719 Speaker 3: especially these days, there's so many other like a relatively 958 00:53:45,800 --> 00:53:51,160 Speaker 3: small percentage of commercial and business credit is variable right 959 00:53:51,239 --> 00:53:54,000 Speaker 3: to begin with, These days, more of it is fixed rate, 960 00:53:54,600 --> 00:53:58,279 Speaker 3: and like especially for more well certainly for mortgages, like 961 00:53:58,760 --> 00:54:02,920 Speaker 3: it's it's like eighty percent plus approaching eighty five percent 962 00:54:03,000 --> 00:54:06,600 Speaker 3: even fixed rate, which will not be affected. And then 963 00:54:06,800 --> 00:54:10,719 Speaker 3: businesses have other so many other means of liquidity other 964 00:54:10,760 --> 00:54:16,000 Speaker 3: than loans these days, particularly the like medium large scale businesses, 965 00:54:16,080 --> 00:54:18,760 Speaker 3: like the you know, you can go to the capital markets, 966 00:54:18,840 --> 00:54:21,840 Speaker 3: private equity or the stock market and get the funding 967 00:54:21,920 --> 00:54:27,120 Speaker 3: you need. That I'm in ways that don't don't depend 968 00:54:27,360 --> 00:54:30,439 Speaker 3: upon what the federal funds rate is doing or only 969 00:54:30,480 --> 00:54:34,000 Speaker 3: weekly depend upon it. So it's just like there's so 970 00:54:34,040 --> 00:54:37,160 Speaker 3: many other liquidity sources, especially like in the last thirty 971 00:54:37,239 --> 00:54:40,399 Speaker 3: years or so, like well since since the Vulcar Shock. 972 00:54:40,480 --> 00:54:43,400 Speaker 3: Basically they've like all of these like private equity and 973 00:54:43,520 --> 00:54:46,200 Speaker 3: other capital markets methods for liquid you have opened up, 974 00:54:47,080 --> 00:54:50,359 Speaker 3: and a good deal of the debt, a good deal 975 00:54:50,440 --> 00:54:52,680 Speaker 3: more of the debt, that's a percentage of total debt 976 00:54:52,800 --> 00:54:55,799 Speaker 3: is fixed rate. So like on that basis, I'm like, 977 00:54:56,200 --> 00:55:00,120 Speaker 3: all right, well, maybe it doesn't maybe it doesn't increase prices, 978 00:55:00,120 --> 00:55:10,120 Speaker 3: but there is at the very least it's like non correlated. 979 00:55:14,640 --> 00:55:17,360 Speaker 2: This caught a lot of people's attention, Like once Stevens, 980 00:55:17,480 --> 00:55:19,440 Speaker 2: you put this paper out there, this is one of 981 00:55:19,480 --> 00:55:23,600 Speaker 2: our most successful essays because it got picked up by 982 00:55:23,640 --> 00:55:27,919 Speaker 2: a bunch of folks. I mean, Investipedia cited it as 983 00:55:27,960 --> 00:55:30,440 Speaker 2: a source Economy called this a blog and not a magazine, 984 00:55:31,440 --> 00:55:34,160 Speaker 2: you know, like like it ended up being taken up 985 00:55:34,200 --> 00:55:37,839 Speaker 2: by another capital as Power influenced economists Blair Fix, who 986 00:55:37,880 --> 00:55:41,920 Speaker 2: found yet more empirical evidence that there is no relationship 987 00:55:41,920 --> 00:55:46,360 Speaker 2: whatsoever between interest rates and like the general price level, 988 00:55:47,920 --> 00:55:49,919 Speaker 2: you know, and to the extent that there is, it's 989 00:55:49,920 --> 00:55:53,200 Speaker 2: only because you induce a recession, you know, that that 990 00:55:53,200 --> 00:55:56,040 Speaker 2: that puts people out of work, in which case you've basically, 991 00:55:56,320 --> 00:55:59,480 Speaker 2: you know, you've in order to deal with a paper cut, 992 00:55:59,480 --> 00:56:01,840 Speaker 2: you've cut off your hand, right and even then, like 993 00:56:01,880 --> 00:56:04,759 Speaker 2: they can't they can't reliably get unemployment up, you know, 994 00:56:04,880 --> 00:56:07,759 Speaker 2: by raising rates. So like what like what use is 995 00:56:07,800 --> 00:56:11,080 Speaker 2: that even if you accept that mechanism. So they found 996 00:56:11,080 --> 00:56:14,240 Speaker 2: more evidence and they got even more attention. Cory Doctoro, 997 00:56:14,440 --> 00:56:17,120 Speaker 2: the science fiction writer and futurist and kind of left 998 00:56:17,120 --> 00:56:22,960 Speaker 2: wing all around public intellectual, he found both Demusia's study 999 00:56:23,000 --> 00:56:25,960 Speaker 2: and Blair Fix's study and was like really excited about it. 1000 00:56:26,000 --> 00:56:28,800 Speaker 2: And after that it really took off. It started getting 1001 00:56:28,840 --> 00:56:32,280 Speaker 2: debated all over the place. There's a heterodoxy economics international 1002 00:56:32,360 --> 00:56:35,160 Speaker 2: organization called Rethink Economics, which is all about like, you know, 1003 00:56:35,280 --> 00:56:38,720 Speaker 2: inciting pluralism and the discipline, and in their Australian blog 1004 00:56:38,719 --> 00:56:43,080 Speaker 2: because they're all over the world, an economist called Matthew Harris, 1005 00:56:43,120 --> 00:56:45,960 Speaker 2: you know, took up took up the controversy and basically 1006 00:56:46,000 --> 00:56:51,080 Speaker 2: sided with with Demusio like and JW. Mason writing in 1007 00:56:51,160 --> 00:56:55,759 Speaker 2: Baron's also basically sided with us in an essay called 1008 00:56:55,800 --> 00:56:58,920 Speaker 2: the Fed Can't Fine Tune the Economy. JW. Mason's a 1009 00:56:59,000 --> 00:57:02,680 Speaker 2: very important hederodox economists who's often on the cutting edge 1010 00:57:02,719 --> 00:57:05,640 Speaker 2: of a lot of these kind of theoretical developments. Interestingly, 1011 00:57:05,680 --> 00:57:10,080 Speaker 2: the first fellow though, Matthew Harris at Rethink Economics, he 1012 00:57:10,080 --> 00:57:12,200 Speaker 2: actually found a study which I was not aware of, 1013 00:57:12,239 --> 00:57:14,719 Speaker 2: which is why I love these. When we started all 1014 00:57:14,719 --> 00:57:16,840 Speaker 2: these conversations all over the place, people dug up stuff 1015 00:57:16,840 --> 00:57:19,040 Speaker 2: that we didn't even know about. There was a study 1016 00:57:19,280 --> 00:57:22,200 Speaker 2: done by the National Bureau of Economic Research by two 1017 00:57:22,280 --> 00:57:26,880 Speaker 2: professors from the University of Chicago, but notably they were 1018 00:57:26,920 --> 00:57:30,200 Speaker 2: not University of Chicago economists. They were in the University 1019 00:57:30,200 --> 00:57:34,360 Speaker 2: of Chicago Business school. And as many people have pointed out, 1020 00:57:35,120 --> 00:57:38,080 Speaker 2: you know, capitalists started business schools because economists are basically 1021 00:57:38,120 --> 00:57:41,080 Speaker 2: just propaganda. But like you actually also need people who 1022 00:57:41,120 --> 00:57:43,000 Speaker 2: know how the world actually works in order to run 1023 00:57:43,000 --> 00:57:45,680 Speaker 2: your companies. So that's why economics and business schools are 1024 00:57:45,720 --> 00:57:48,120 Speaker 2: two separate schools. 1025 00:57:48,800 --> 00:57:50,960 Speaker 1: This is like a real like I remember this on campus. 1026 00:57:51,000 --> 00:57:52,640 Speaker 1: This is like, this is a real thing, where like 1027 00:57:53,120 --> 00:57:56,680 Speaker 1: if you're so the business school, if I'm remembering correctly, 1028 00:57:56,760 --> 00:57:59,520 Speaker 1: the business school is like is most I think it's 1029 00:57:59,560 --> 00:58:02,000 Speaker 1: I think I only be a grad school for han 1030 00:58:02,040 --> 00:58:04,360 Speaker 1: sot me let me look this up. Yeah that was 1031 00:58:04,360 --> 00:58:04,880 Speaker 1: my memory of it. 1032 00:58:04,960 --> 00:58:05,120 Speaker 2: Yeah. 1033 00:58:05,160 --> 00:58:08,720 Speaker 1: So so this is a real thing because because the University 1034 00:58:08,760 --> 00:58:13,720 Speaker 1: Chicago doesn't have an undergrad business program, you get people 1035 00:58:13,920 --> 00:58:17,040 Speaker 1: who want to do business who go into ECON, and 1036 00:58:17,080 --> 00:58:20,240 Speaker 1: the ECON people fucking hate them because they see them 1037 00:58:20,240 --> 00:58:23,439 Speaker 1: as like like they see them as sort of like 1038 00:58:23,440 --> 00:58:26,000 Speaker 1: like these like inferior like fly by night people who 1039 00:58:26,040 --> 00:58:29,200 Speaker 1: don't care about like the sort of deep like the 1040 00:58:29,280 --> 00:58:32,560 Speaker 1: deep math and like the deep sort of like you know, 1041 00:58:32,640 --> 00:58:36,439 Speaker 1: like intellectual like political pursuit of economics. They just want 1042 00:58:36,480 --> 00:58:41,120 Speaker 1: to like go be a business person. And this has 1043 00:58:41,240 --> 00:58:45,720 Speaker 1: really interesting effects because it means that like you know, 1044 00:58:45,800 --> 00:58:47,720 Speaker 1: like the business school. I say, it's not like the 1045 00:58:47,720 --> 00:58:50,160 Speaker 1: business school is like a bastion of leftist or whatever. 1046 00:58:50,240 --> 00:58:55,200 Speaker 1: But they don't agree on stuff a lot because they're 1047 00:58:55,400 --> 00:59:00,200 Speaker 1: like like the University of Chicago Economics program. It it 1048 00:59:00,240 --> 00:59:03,360 Speaker 1: produces basically two things. It produces like a bunch of 1049 00:59:03,400 --> 00:59:05,760 Speaker 1: people who go on to be investment bankers where you 1050 00:59:05,800 --> 00:59:07,919 Speaker 1: don't actually need to know how a firm works at all, 1051 00:59:09,520 --> 00:59:12,200 Speaker 1: and then it goes on to produce a bunch of 1052 00:59:12,200 --> 00:59:15,240 Speaker 1: people who become economists. And so like it's it's actual 1053 00:59:15,280 --> 00:59:19,560 Speaker 1: sort of ideological purpose is is specifically it's it's a 1054 00:59:19,600 --> 00:59:22,480 Speaker 1: school that trains other economists, right, it's a school that 1055 00:59:22,520 --> 00:59:24,920 Speaker 1: teaches like the ruling class what to think, whereas the 1056 00:59:24,920 --> 00:59:27,320 Speaker 1: business school is like the school that teach And this 1057 00:59:27,360 --> 00:59:30,240 Speaker 1: is like this is a very very very explicit It's 1058 00:59:30,240 --> 00:59:33,120 Speaker 1: it's something that like when you're there you can like 1059 00:59:33,600 --> 00:59:36,240 Speaker 1: watch like in practice, the fact that these aren't the 1060 00:59:36,240 --> 00:59:39,240 Speaker 1: same thing and the fact that like you know, they're 1061 00:59:39,240 --> 00:59:42,000 Speaker 1: they're they're they're going to produce different conclusions because you know, 1062 00:59:42,120 --> 00:59:47,800 Speaker 1: the the like because like because their actual like purpose 1063 00:59:48,000 --> 00:59:51,560 Speaker 1: is different. One is ideological, the other one is like 1064 00:59:51,880 --> 00:59:53,440 Speaker 1: making money. 1065 00:59:53,640 --> 00:59:56,720 Speaker 2: Yes, and and and this is a great case study 1066 00:59:56,720 --> 01:00:00,320 Speaker 2: of it because these folks at the Business school their 1067 01:00:00,400 --> 01:00:06,840 Speaker 2: names are Nil's, Nils Gormson and Killian Huber, they actually 1068 01:00:06,880 --> 01:00:11,479 Speaker 2: went and asked companies what they do when credit gets 1069 01:00:11,480 --> 01:00:14,320 Speaker 2: more expensive. Now, according to the theory, and this is 1070 01:00:14,360 --> 01:00:16,280 Speaker 2: the most sophisticated theory the theory that people at the 1071 01:00:16,320 --> 01:00:18,240 Speaker 2: FED will tell you, which is, you know, you might 1072 01:00:18,320 --> 01:00:20,000 Speaker 2: need to put a few drinks into them first, but 1073 01:00:20,080 --> 01:00:21,680 Speaker 2: you know, it's like we have to induce a partial 1074 01:00:21,720 --> 01:00:24,040 Speaker 2: recession in order to make it so that people have 1075 01:00:24,080 --> 01:00:26,479 Speaker 2: less spending money in their pockets and prices get bidded down. 1076 01:00:26,800 --> 01:00:26,960 Speaker 3: Right. 1077 01:00:27,280 --> 01:00:29,680 Speaker 2: Theoretically, the mechanism by which this works at the individual 1078 01:00:29,720 --> 01:00:31,400 Speaker 2: firm is that the firm sees that the cost of 1079 01:00:31,400 --> 01:00:34,640 Speaker 2: capital goes up and they invest less, you know, or 1080 01:00:34,760 --> 01:00:38,480 Speaker 2: just outright go out of business. Right, But in fact 1081 01:00:39,280 --> 01:00:42,440 Speaker 2: future investment is only weekly correlated to the cost of 1082 01:00:42,440 --> 01:00:45,800 Speaker 2: capital because of the limited transition into discount rates, you know. 1083 01:00:45,960 --> 01:00:51,520 Speaker 2: In other words, like basically, there's no real effect. So yeah, 1084 01:00:51,600 --> 01:00:53,480 Speaker 2: they go around and do business service. 1085 01:00:54,800 --> 01:01:03,200 Speaker 3: Sorry, go ahead, companies. Yeah, they do a good amount, 1086 01:01:03,800 --> 01:01:08,080 Speaker 3: if not perhaps most, of their capital investment from cash 1087 01:01:08,120 --> 01:01:13,000 Speaker 3: on hand before going before seeking out finance. 1088 01:01:13,520 --> 01:01:15,760 Speaker 1: Yeah, and that and that, like and that means that 1089 01:01:15,800 --> 01:01:16,840 Speaker 1: it doesn't have an effect. 1090 01:01:17,160 --> 01:01:20,280 Speaker 3: And then even if you need financing their non debt finance. 1091 01:01:20,480 --> 01:01:24,080 Speaker 3: So there's like equity finance, either private or republic that 1092 01:01:24,240 --> 01:01:27,520 Speaker 3: you have as an option site alongside the debt options. 1093 01:01:28,160 --> 01:01:32,320 Speaker 2: Exactly. So we go from like a situation where we 1094 01:01:32,440 --> 01:01:36,000 Speaker 2: publish this article in twenty twenty two, right, and it's 1095 01:01:36,360 --> 01:01:39,480 Speaker 2: got a title that for a mainstream economist, even a 1096 01:01:39,520 --> 01:01:44,520 Speaker 2: very sophisticated one, is unthinkable, like do interest rates hikes, 1097 01:01:44,920 --> 01:01:48,800 Speaker 2: you know, cause inflation to get worse or even just 1098 01:01:48,840 --> 01:01:54,320 Speaker 2: don't matter for inflation. But then suddenly, like you have 1099 01:01:54,360 --> 01:01:57,320 Speaker 2: a bunch once it gets taken up by a larger discussion, 1100 01:01:57,440 --> 01:02:00,400 Speaker 2: you have a bunch of quite reputable people saying the 1101 01:02:00,440 --> 01:02:04,440 Speaker 2: exact same thing, citing this directly, and even in one case, 1102 01:02:05,160 --> 01:02:08,360 Speaker 2: six months after our article comes out, Lo and behold 1103 01:02:08,560 --> 01:02:12,240 Speaker 2: that a certain little known economist rights in the Guardian. 1104 01:02:13,920 --> 01:02:16,640 Speaker 2: In fact, raising interest rates could do more harm than 1105 01:02:16,680 --> 01:02:19,320 Speaker 2: good by making it more expensive for firms to invest 1106 01:02:19,320 --> 01:02:23,480 Speaker 2: in solutions to the current supply constraints the US federal reserves. 1107 01:02:23,480 --> 01:02:27,080 Speaker 2: Monetary tightening has already curtailed housing construction, even though more 1108 01:02:27,080 --> 01:02:29,080 Speaker 2: supply is precisely what is needed to bring down one 1109 01:02:29,080 --> 01:02:32,080 Speaker 2: of the biggest sources of inflation housing costs. Moreover, many 1110 01:02:32,080 --> 01:02:34,280 Speaker 2: price setters in the housing market may now pass the 1111 01:02:34,320 --> 01:02:37,400 Speaker 2: costs of doing business onto renters. You know. So in 1112 01:02:37,440 --> 01:02:40,080 Speaker 2: other words, like maybe higher interest rates can actually induce 1113 01:02:40,160 --> 01:02:42,720 Speaker 2: price increases as the higher interest rates, and do businesses 1114 01:02:42,720 --> 01:02:45,200 Speaker 2: to write down the future value of lost customers relatives 1115 01:02:45,200 --> 01:02:47,880 Speaker 2: to the benefit of higher prices to be sure, a 1116 01:02:47,920 --> 01:02:50,880 Speaker 2: deep recession you know, parenthesis like the kind of they're 1117 01:02:50,880 --> 01:02:54,240 Speaker 2: trying to induce. That's my parenthesis. Back to the quote, 1118 01:02:54,320 --> 01:02:57,400 Speaker 2: a deeper session would tame inflation. But why would we 1119 01:02:57,480 --> 01:03:01,320 Speaker 2: invite that, you know her own Powell and his colleague 1120 01:03:01,320 --> 01:03:04,720 Speaker 2: seemed to relish cheering against the economy. Meanwhile, they're friends 1121 01:03:04,720 --> 01:03:06,880 Speaker 2: in commercial banking are making out like bandits now that 1122 01:03:06,880 --> 01:03:09,640 Speaker 2: the Fed is paying four point four percent interests on 1123 01:03:09,720 --> 01:03:12,040 Speaker 2: more than three trillion dollars a bankers or balances. Blah 1124 01:03:12,040 --> 01:03:14,960 Speaker 2: blah blah blah. Now, this little known economist writing for 1125 01:03:14,960 --> 01:03:18,000 Speaker 2: The Guardian is Joseph Stiglitz, who won the Nobel Prize 1126 01:03:18,040 --> 01:03:23,640 Speaker 2: in economics. Now does he cite our article who's talking 1127 01:03:23,640 --> 01:03:26,760 Speaker 2: points he's basically going through point by point? No, does 1128 01:03:26,800 --> 01:03:29,840 Speaker 2: he cite any of the better known places that cited 1129 01:03:30,000 --> 01:03:33,800 Speaker 2: us that are header box. No, he basically presents it 1130 01:03:33,800 --> 01:03:35,920 Speaker 2: as if it's his own idea. Now, maybe he did 1131 01:03:35,960 --> 01:03:38,840 Speaker 2: have this idea six months after we started. 1132 01:03:38,600 --> 01:03:42,720 Speaker 1: Extension in like Stingletz has not had a single idea 1133 01:03:42,800 --> 01:03:47,480 Speaker 1: in like fifteen years. Like that man, Oh, that man 1134 01:03:47,560 --> 01:03:50,320 Speaker 1: is a transpe parent medium through which the stuff that 1135 01:03:50,360 --> 01:03:53,480 Speaker 1: he reads appears on a page. I'm going to be made. 1136 01:03:53,880 --> 01:03:56,560 Speaker 1: I'm I'm sick of doing this bullshit. 1137 01:03:57,760 --> 01:03:59,920 Speaker 2: And you know the worst part is, like, you know this, 1138 01:04:00,000 --> 01:04:03,520 Speaker 2: this is something that happens a lot. There's an orthodoxy 1139 01:04:03,680 --> 01:04:07,320 Speaker 2: that says certain things that are nonsense. The heterodoxy goes 1140 01:04:07,320 --> 01:04:09,560 Speaker 2: through the hard work of like figuring out the reasons 1141 01:04:09,560 --> 01:04:13,000 Speaker 2: why it's not true and presenting an alternative model. It's 1142 01:04:13,040 --> 01:04:18,880 Speaker 2: denied at first, but then increasingly it's just plagiarized, you know, 1143 01:04:18,960 --> 01:04:24,000 Speaker 2: perhaps accidentally, probably not, you know, like like and that 1144 01:04:24,120 --> 01:04:26,720 Speaker 2: it's presented as if actually, this is what the theory 1145 01:04:26,840 --> 01:04:29,600 Speaker 2: has always been all along, you know, and like, how 1146 01:04:29,600 --> 01:04:32,680 Speaker 2: can anyone think differently? And it's this, it's this unfortunate 1147 01:04:32,680 --> 01:04:36,800 Speaker 2: thing because since the neoclassicals control the discipline, they control 1148 01:04:36,840 --> 01:04:40,320 Speaker 2: advancement through the ranks of the economists, so they're always 1149 01:04:40,320 --> 01:04:43,200 Speaker 2: wrong and never right, but they're never punished for it, 1150 01:04:43,520 --> 01:04:45,640 Speaker 2: and they control all the leavers of who gets to 1151 01:04:45,680 --> 01:04:49,880 Speaker 2: be an economist. So it's this sort of like continual sad, 1152 01:04:50,040 --> 01:04:53,200 Speaker 2: unfortunate thing. But on the bright side, we were right. 1153 01:04:53,320 --> 01:04:56,320 Speaker 2: We were right early A bunch of people picked it up, 1154 01:04:56,360 --> 01:04:58,800 Speaker 2: and our talking points ended up making it too very 1155 01:04:58,920 --> 01:05:01,360 Speaker 2: very distant and well regarded places to the point where 1156 01:05:01,440 --> 01:05:05,840 Speaker 2: now it's it's a viable alternative that exists out there 1157 01:05:05,840 --> 01:05:08,640 Speaker 2: in the world in terms of like, you know, why 1158 01:05:08,800 --> 01:05:11,480 Speaker 2: keep raising rates. It's not doing any good. It could 1159 01:05:11,520 --> 01:05:13,840 Speaker 2: even do bad. And that's the talking point that I 1160 01:05:13,880 --> 01:05:15,760 Speaker 2: don't think would have existed if it hadn't been for 1161 01:05:15,800 --> 01:05:19,080 Speaker 2: Democillo's research, which depended entirely upon the supply chain theory 1162 01:05:19,080 --> 01:05:21,880 Speaker 2: of inflation framework that Steve developed out of Fred Lee's work, 1163 01:05:22,080 --> 01:05:25,040 Speaker 2: which is basically a research program that now the magazine 1164 01:05:25,040 --> 01:05:28,360 Speaker 2: has put out there in the world that and it 1165 01:05:28,400 --> 01:05:31,760 Speaker 2: is continuing to build up on that. That actually makes 1166 01:05:31,800 --> 01:05:32,680 Speaker 2: it make more sense. 1167 01:05:33,480 --> 01:05:35,520 Speaker 1: Yeah, And I want to just sort of like take 1168 01:05:35,560 --> 01:05:37,760 Speaker 1: a second to highlight like how impressive it is had 1169 01:05:37,760 --> 01:05:41,240 Speaker 1: this happened, because like again like like a year and 1170 01:05:41,320 --> 01:05:44,880 Speaker 1: a half even like like like even like even like 1171 01:05:44,920 --> 01:05:48,240 Speaker 1: a year ago, right for the entire time I have 1172 01:05:48,360 --> 01:05:51,840 Speaker 1: been alive. If you tried to say that raising interest 1173 01:05:51,920 --> 01:05:56,640 Speaker 1: rates raises inflation, like people would have thrown bananas at you, 1174 01:05:56,960 --> 01:06:00,400 Speaker 1: like like volleys of tomatoes, like they would have like 1175 01:06:00,480 --> 01:06:02,680 Speaker 1: you would you would have gotten sixteen contracts to be 1176 01:06:02,680 --> 01:06:05,920 Speaker 1: a professional clown Like this. This was a thing that 1177 01:06:06,000 --> 01:06:08,920 Speaker 1: like you could not you couldn't even like suggest this, 1178 01:06:10,200 --> 01:06:13,080 Speaker 1: and you know, like within a pretty rapid span, suddenly 1179 01:06:13,120 --> 01:06:15,960 Speaker 1: like Stinglets is being like, ah, what this is really 1180 01:06:16,000 --> 01:06:18,240 Speaker 1: really maybe this is a plausible thing. It's like, oh my, 1181 01:06:18,480 --> 01:06:20,960 Speaker 1: like I don't know, I think it's I think it's 1182 01:06:21,040 --> 01:06:27,080 Speaker 1: it's really it's really impressive watching how fast I don't know, 1183 01:06:27,160 --> 01:06:31,200 Speaker 1: like how fast the combinations of like reality and having 1184 01:06:31,240 --> 01:06:34,480 Speaker 1: an explanation of reality that actually like lines up with 1185 01:06:34,520 --> 01:06:38,160 Speaker 1: it has been able to change, like has been able 1186 01:06:38,160 --> 01:06:40,840 Speaker 1: to actually just sort of like change what the discourse 1187 01:06:40,840 --> 01:06:42,640 Speaker 1: at like the highest levels of power and sort of 1188 01:06:42,680 --> 01:06:46,480 Speaker 1: like what what has actually been happening in the economy 1189 01:06:46,520 --> 01:06:51,240 Speaker 1: like has shifted. And that's wild, Like I would not 1190 01:06:51,360 --> 01:06:53,320 Speaker 1: have guessed that that that was a thing that was 1191 01:06:53,360 --> 01:06:56,520 Speaker 1: even remotely possible, And and yet we are now here. 1192 01:06:57,320 --> 01:07:01,280 Speaker 3: Yeah, at the Overton windows has shifted so far that 1193 01:07:01,440 --> 01:07:04,640 Speaker 3: like the idea that interest rates just don't seem to 1194 01:07:04,640 --> 01:07:08,000 Speaker 3: have any discernible effect upon the price level is kind 1195 01:07:08,040 --> 01:07:09,439 Speaker 3: of like becoming the base case. 1196 01:07:10,960 --> 01:07:11,360 Speaker 2: Yeah. 1197 01:07:11,600 --> 01:07:17,320 Speaker 3: Yeah, so like the entire yeah, the entire spectrum has shifted, like, yeah, 1198 01:07:17,440 --> 01:07:21,640 Speaker 3: it could be a strong form and have like I'm 1199 01:07:21,680 --> 01:07:27,440 Speaker 3: starting to use that phrase now by the way, and okay, 1200 01:07:27,480 --> 01:07:30,160 Speaker 3: people won't be throwing a ton of They'll still throw 1201 01:07:30,320 --> 01:07:34,080 Speaker 3: some things at you, but like it's it's like manageable now. 1202 01:07:35,840 --> 01:07:38,560 Speaker 2: I mean, you can always point to that argument from authority, 1203 01:07:38,640 --> 01:07:41,880 Speaker 2: but Stitz says it might be so yeah, so you know, 1204 01:07:42,000 --> 01:07:42,400 Speaker 2: it's like. 1205 01:07:43,840 --> 01:07:51,640 Speaker 1: Question he won the Nobel Prize prize too. 1206 01:07:57,840 --> 01:07:58,640 Speaker 3: This is a whole. 1207 01:08:01,360 --> 01:08:04,040 Speaker 2: The so called Nobel price in economics is not actually 1208 01:08:04,360 --> 01:08:08,480 Speaker 2: the Nobel Prize in economics. It's that there's Nobel prices 1209 01:08:08,520 --> 01:08:13,560 Speaker 2: in science and you know, literature and all this stuff 1210 01:08:14,080 --> 01:08:17,760 Speaker 2: that's administered by the Alfred Nobel Organization and the and 1211 01:08:17,840 --> 01:08:21,960 Speaker 2: the fund that he left and whatever. This started in 1212 01:08:22,000 --> 01:08:24,360 Speaker 2: the sixties, like I think some seventy years after the 1213 01:08:24,360 --> 01:08:27,160 Speaker 2: Nobel started or something like that, and it was started 1214 01:08:27,200 --> 01:08:29,880 Speaker 2: by the Swedish Central Bank to imitate the Nobel Prize. 1215 01:08:29,920 --> 01:08:33,679 Speaker 2: So technically it's the Nobel Memorial Prize in economics, you see, 1216 01:08:33,800 --> 01:08:36,800 Speaker 2: and it's and it's just it's basically like peeling off 1217 01:08:37,000 --> 01:08:38,920 Speaker 2: the skin of the face of the Nobel Prize and 1218 01:08:38,960 --> 01:08:41,320 Speaker 2: then wearing it, you know, and saying, where we have 1219 01:08:41,360 --> 01:08:49,720 Speaker 2: a Nobel price too. Totally basically it's not and you know, 1220 01:08:49,760 --> 01:08:51,840 Speaker 2: it puts the loution on its skin or else it 1221 01:08:51,880 --> 01:08:57,680 Speaker 2: gets the hose again, you know. And they did this specifically. 1222 01:08:58,000 --> 01:09:02,840 Speaker 2: There's a historian of of economics. Oh my god, what 1223 01:09:02,880 --> 01:09:06,800 Speaker 2: the hell is his name? The it's it's the it's 1224 01:09:06,880 --> 01:09:11,680 Speaker 2: the more heat than like guy. He's Oh my goodness, 1225 01:09:12,080 --> 01:09:16,240 Speaker 2: I cite him in the Friendly thing and I can't. Morowski. 1226 01:09:16,600 --> 01:09:19,240 Speaker 2: That's the guy. Yeah, okay. So he actually like went 1227 01:09:19,360 --> 01:09:21,880 Speaker 2: and like studied the origins of it, and it turns 1228 01:09:21,920 --> 01:09:25,000 Speaker 2: out that they specifically did it as a scheme to 1229 01:09:25,080 --> 01:09:27,439 Speaker 2: only give the Nobel Prize to people who are basically 1230 01:09:27,439 --> 01:09:31,960 Speaker 2: like neoclassical economists, and they mostly have so sometimes they've diversed, 1231 01:09:31,960 --> 01:09:34,760 Speaker 2: but mostly they've done it to very reactionary economists in 1232 01:09:34,840 --> 01:09:37,360 Speaker 2: order to promote neoclassical economists in Europe. Because it was 1233 01:09:37,360 --> 01:09:40,439 Speaker 2: stronger in America than it was in Europe. And in 1234 01:09:40,520 --> 01:09:43,120 Speaker 2: order to promote the idea of central bank independence, which 1235 01:09:43,160 --> 01:09:47,080 Speaker 2: is a fancy term for uh, you know, a central 1236 01:09:47,080 --> 01:09:53,519 Speaker 2: bank should not need to operate under a political, uh 1237 01:09:54,240 --> 01:09:58,680 Speaker 2: a democratically controlled you know, legislature that says, actually, we 1238 01:09:58,720 --> 01:10:01,320 Speaker 2: don't want more unemployed because that would be bad, so 1239 01:10:01,400 --> 01:10:04,200 Speaker 2: don't do that. Like, instead, they should have independence, the 1240 01:10:04,240 --> 01:10:07,479 Speaker 2: independence that allows them to technocratically decide that it's time 1241 01:10:07,479 --> 01:10:09,240 Speaker 2: for people to get out of work, you know, and 1242 01:10:09,280 --> 01:10:12,839 Speaker 2: and and that kind of thing. So you know, that's 1243 01:10:12,880 --> 01:10:15,400 Speaker 2: that's the story of the so called Nobel Prize. It's 1244 01:10:15,400 --> 01:10:17,559 Speaker 2: really the fake Nobel, yeah, which is I just call 1245 01:10:17,600 --> 01:10:19,559 Speaker 2: it the fake Nobel yeah, which is. 1246 01:10:19,520 --> 01:10:22,040 Speaker 1: Also really funny if you talk to other people, like specifically, 1247 01:10:22,160 --> 01:10:23,800 Speaker 1: one of the things that happened to me when I 1248 01:10:23,800 --> 01:10:25,280 Speaker 1: was in the university was like I knew a bunch 1249 01:10:25,320 --> 01:10:28,880 Speaker 1: of people who were like really really good at math. 1250 01:10:29,360 --> 01:10:32,679 Speaker 1: Like one of my friends was like like like actual 1251 01:10:32,800 --> 01:10:36,040 Speaker 1: genuine prodigy was doing like like was doing like like 1252 01:10:36,120 --> 01:10:38,600 Speaker 1: graduate level like math in high school. And if you 1253 01:10:38,640 --> 01:10:40,360 Speaker 1: talk to these people and you talk to like math 1254 01:10:40,439 --> 01:10:43,519 Speaker 1: professors about the Nobel Prizes, they like, they will like 1255 01:10:43,720 --> 01:10:46,439 Speaker 1: yell about it for like twenty minutes because the math 1256 01:10:46,520 --> 01:10:48,600 Speaker 1: is so bullshit. It's like, yeah, this guy like the 1257 01:10:49,040 --> 01:10:51,680 Speaker 1: like the math involved in these Nobel prizes are like 1258 01:10:51,680 --> 01:10:54,120 Speaker 1: they figured out too plus two weekos four and they 1259 01:10:54,160 --> 01:10:56,760 Speaker 1: gave them like this fucking fake Nobel prize. You look 1260 01:10:56,800 --> 01:10:59,439 Speaker 1: at like the fields metal and it's like, I don't know, 1261 01:10:59,520 --> 01:11:02,160 Speaker 1: like it's it's, it's, it's it's it's really nonsense. All 1262 01:11:02,160 --> 01:11:03,800 Speaker 1: the math people are really mad about the fact that 1263 01:11:03,840 --> 01:11:05,800 Speaker 1: the econ people think that they know math because they don't. 1264 01:11:05,880 --> 01:11:08,040 Speaker 1: And the consequence of this is you get these like that, 1265 01:11:08,280 --> 01:11:10,479 Speaker 1: you get people handing out Nobel prices for saying shit 1266 01:11:10,680 --> 01:11:14,360 Speaker 1: like the economy can't miss like the market can't miss price, 1267 01:11:14,600 --> 01:11:17,639 Speaker 1: like in like assets that are like the price of houses, 1268 01:11:17,720 --> 01:11:20,640 Speaker 1: and then the entire housing market immediately implosed because it 1269 01:11:20,680 --> 01:11:23,400 Speaker 1: was all miss priced. It's it's it's a disaster. It 1270 01:11:23,439 --> 01:11:27,439 Speaker 1: has been. I don't know. We should everyone at all 1271 01:11:27,520 --> 01:11:31,479 Speaker 1: times should be doing anti fake Nobel price propaganda against 1272 01:11:31,520 --> 01:11:35,160 Speaker 1: the economics Nobel price because it's it's it's fake and 1273 01:11:35,280 --> 01:11:36,880 Speaker 1: bad and we should all say it more. 1274 01:11:37,280 --> 01:11:41,080 Speaker 3: Uh, you know, there's on the heterodox side of things. 1275 01:11:41,080 --> 01:11:45,160 Speaker 3: There's some really promising uses of mathematical economics to create 1276 01:11:45,240 --> 01:11:49,559 Speaker 3: like input output matrices. Yeah, and to model, like do 1277 01:11:49,640 --> 01:11:53,680 Speaker 3: an io model of the economy that the math is 1278 01:11:53,840 --> 01:11:57,920 Speaker 3: very much subservient to empirical data that is coming in 1279 01:11:58,160 --> 01:12:01,320 Speaker 3: that trains the model. And then like like to so 1280 01:12:01,400 --> 01:12:04,960 Speaker 3: much of economics is well, data fits, data fits the model. 1281 01:12:05,280 --> 01:12:07,599 Speaker 3: Data fits the model, like over and over again when 1282 01:12:07,640 --> 01:12:09,160 Speaker 3: it should be the other way around. 1283 01:12:10,200 --> 01:12:13,200 Speaker 2: Yeah, absolutely, does the model fit the data, because if 1284 01:12:13,200 --> 01:12:14,720 Speaker 2: it doesn't, then you got to throw it out. Like 1285 01:12:14,800 --> 01:12:18,599 Speaker 2: this whole like raising interest rates is going to control prices? Bullshit? 1286 01:12:19,320 --> 01:12:22,519 Speaker 2: When has that even happened? Theoretically happened in the seventies. 1287 01:12:22,560 --> 01:12:24,559 Speaker 2: But then you look at it and yeah, it doesn't 1288 01:12:24,560 --> 01:12:27,880 Speaker 2: tell you that story, so you know, do they throw 1289 01:12:27,880 --> 01:12:28,160 Speaker 2: it out? 1290 01:12:28,240 --> 01:12:37,439 Speaker 3: No, Like brief brief callback to Fred Lee's table table 1291 01:12:37,439 --> 01:12:38,160 Speaker 3: b was it? 1292 01:12:39,160 --> 01:12:39,240 Speaker 2: Oh? 1293 01:12:41,000 --> 01:12:43,759 Speaker 3: Yeah, is the Blinder study in there? I forget, Yes, 1294 01:12:43,920 --> 01:12:47,120 Speaker 3: yes it is. That's like an instance. That's an instance 1295 01:12:47,160 --> 01:12:51,679 Speaker 3: where Alan Blinder is neoclassical economists who like he messed 1296 01:12:51,800 --> 01:12:58,160 Speaker 3: up and did real science and what he found was 1297 01:12:58,160 --> 01:12:59,759 Speaker 3: was the administrative price theory. 1298 01:13:00,200 --> 01:13:03,880 Speaker 2: Yeah, he made a terrible mistake of thinking that his 1299 01:13:03,960 --> 01:13:06,960 Speaker 2: bullshit theory would be vindicated, and then it turns out 1300 01:13:07,000 --> 01:13:07,559 Speaker 2: that it was not. 1301 01:13:08,400 --> 01:13:13,880 Speaker 3: Yeah, there's just like the history of intellectual thought for 1302 01:13:13,960 --> 01:13:16,479 Speaker 3: economics is like replete with examples where they kind of 1303 01:13:16,479 --> 01:13:18,960 Speaker 3: like they screw up and they actually do real science 1304 01:13:18,960 --> 01:13:21,639 Speaker 3: for a change, and like find things like cost plus 1305 01:13:21,640 --> 01:13:24,559 Speaker 3: markups happening, and he. 1306 01:13:24,520 --> 01:13:27,759 Speaker 2: Tries so hard to explain it away, you know, he's like, well, 1307 01:13:28,720 --> 01:13:32,720 Speaker 2: supply and demand exists. It's just that these prices are 1308 01:13:32,720 --> 01:13:35,439 Speaker 2: sticky because the cost of changing the price on the 1309 01:13:35,479 --> 01:13:39,920 Speaker 2: menu is actually too expensive, so they choose not to 1310 01:13:40,280 --> 01:13:42,639 Speaker 2: and that's why prices are sticky. They can't they can't 1311 01:13:42,720 --> 01:13:46,439 Speaker 2: change the stickers. You know, it's completely insane. 1312 01:13:46,960 --> 01:13:49,000 Speaker 3: It's like the cost of admit, there's a cost to 1313 01:13:49,080 --> 01:13:54,479 Speaker 3: administering prices themselves, and that's why they don't change prices. 1314 01:13:54,600 --> 01:14:01,640 Speaker 3: Like the price mechanism for neo classical economics would suggests. 1315 01:13:59,360 --> 01:14:03,080 Speaker 2: Look for the stickers, and he couldn't find it. You 1316 01:14:03,120 --> 01:14:06,000 Speaker 2: couldn't find the costs. So he's like, well, I guess 1317 01:14:06,040 --> 01:14:09,000 Speaker 2: it's not sticky because of menu costs. It's like, I 1318 01:14:09,080 --> 01:14:13,560 Speaker 2: wonder what it could be. What a mystery? 1319 01:14:14,600 --> 01:14:16,679 Speaker 1: Okay, so we should we should start wrapping up because 1320 01:14:16,720 --> 01:14:18,479 Speaker 1: this has been this has been a very long episode already, 1321 01:14:18,479 --> 01:14:22,200 Speaker 1: but I wanted to ask before we go, what what what, 1322 01:14:22,400 --> 01:14:24,960 Speaker 1: what are you all doing next? And what other incredibly 1323 01:14:25,760 --> 01:14:29,479 Speaker 1: funny economics discourses can we expect to have giant like 1324 01:14:29,960 --> 01:14:33,040 Speaker 1: creators punched into in the next couple of years. 1325 01:14:33,720 --> 01:14:35,880 Speaker 3: So one thing we've started to work on, and we've 1326 01:14:36,240 --> 01:14:40,840 Speaker 3: discussed a little bit on this podcast, I believe, Yeah, Well, 1327 01:14:40,920 --> 01:14:45,639 Speaker 3: Beck was the importance of for X foreign exchange for 1328 01:14:46,040 --> 01:14:49,960 Speaker 3: all sorts of microeconomic things, like inflation being one of them. 1329 01:14:50,280 --> 01:14:56,080 Speaker 3: Like if you're a small country that that does not 1330 01:14:56,280 --> 01:15:00,680 Speaker 3: have hegemonic monetary authority like the US do is to 1331 01:15:00,960 --> 01:15:03,400 Speaker 3: get people to use its currency and you have to 1332 01:15:03,439 --> 01:15:06,479 Speaker 3: go out and import things and some other currency, how 1333 01:15:06,520 --> 01:15:09,800 Speaker 3: does that affect your ability to socially provision yourself as 1334 01:15:09,960 --> 01:15:14,439 Speaker 3: a nation state and like do development work. And we're 1335 01:15:14,520 --> 01:15:18,599 Speaker 3: developing a theory of for X essentially that is it's 1336 01:15:18,680 --> 01:15:24,759 Speaker 3: a it's an extension of the chartlist framework that informs MMT, 1337 01:15:25,680 --> 01:15:30,320 Speaker 3: but with some important criticisms about how like the central 1338 01:15:30,800 --> 01:15:34,439 Speaker 3: MMT insights sort of is like you can create if 1339 01:15:34,439 --> 01:15:39,040 Speaker 3: you're the sovereign issuer of your own fiat currency. You 1340 01:15:39,040 --> 01:15:41,880 Speaker 3: can always provision enough of it to you can always 1341 01:15:41,920 --> 01:15:44,439 Speaker 3: spend as much of it into existence as you need 1342 01:15:44,520 --> 01:15:49,320 Speaker 3: to to do productive things. And yes, that's true. You 1343 01:15:49,320 --> 01:15:52,080 Speaker 3: can create infinity of your own money, but your own 1344 01:15:52,400 --> 01:15:56,479 Speaker 3: not other people's money. Yeah, So other currencies like if you're. 1345 01:15:58,479 --> 01:16:05,639 Speaker 1: Like, uh, really Sri Lanka for example. 1346 01:16:06,439 --> 01:16:11,639 Speaker 3: Problem if you're Sri Lanka or Mexico or whoever, most 1347 01:16:11,680 --> 01:16:15,280 Speaker 3: of most of the world, basically you need to maintain 1348 01:16:15,880 --> 01:16:20,040 Speaker 3: and augment your balance of like the trading the major 1349 01:16:20,080 --> 01:16:25,439 Speaker 3: trading currencies US dollars, yen, the euro, to name three, 1350 01:16:26,720 --> 01:16:31,120 Speaker 3: and have balances of those. You need to maintain your 1351 01:16:31,120 --> 01:16:35,840 Speaker 3: balance of payments and your balances of specific currencies in 1352 01:16:35,960 --> 01:16:41,760 Speaker 3: order to meet the biophysical obligations that your whatever your 1353 01:16:41,800 --> 01:16:48,639 Speaker 3: development strategy necessitates, because in most instances, not all, but most, 1354 01:16:49,240 --> 01:16:51,599 Speaker 3: you're going to need to Like no one's going if 1355 01:16:51,600 --> 01:16:54,760 Speaker 3: you're Sri Lanka, no one's going to want to to 1356 01:16:54,920 --> 01:17:00,160 Speaker 3: transact in your currency for major purchases of like staple goods, 1357 01:17:00,800 --> 01:17:03,080 Speaker 3: You're going to need to use like dollars or euros 1358 01:17:03,200 --> 01:17:05,720 Speaker 3: or end or are you on perhaps you know who 1359 01:17:05,800 --> 01:17:10,200 Speaker 3: knows exactly one of the major trading currencies, and this. 1360 01:17:10,120 --> 01:17:12,040 Speaker 2: Also raises the question of how it currency becomes a 1361 01:17:12,080 --> 01:17:15,479 Speaker 2: major trading currency, and that almost invariably takes you in 1362 01:17:15,520 --> 01:17:19,559 Speaker 2: two directions. One is which countries are powerful and able 1363 01:17:19,600 --> 01:17:22,559 Speaker 2: to industrialize and make capital goods that nobody else has 1364 01:17:22,600 --> 01:17:25,800 Speaker 2: that everybody wants a piece of. And two, which are 1365 01:17:25,800 --> 01:17:29,120 Speaker 2: the powerful imperialist great powers. And it turns out that 1366 01:17:29,120 --> 01:17:34,920 Speaker 2: those are the nexus that's created between imperialism, development, and 1367 01:17:34,960 --> 01:17:38,040 Speaker 2: the balance of payments. Those three things can't even be 1368 01:17:38,120 --> 01:17:42,360 Speaker 2: discussed independently of each other. And the politics of what 1369 01:17:42,520 --> 01:17:44,479 Speaker 2: is going to be used as the what Steve and 1370 01:17:44,479 --> 01:17:47,840 Speaker 2: I are tentatively calling the international means of payment, in 1371 01:17:47,880 --> 01:17:52,080 Speaker 2: other words, what you can use in international transactions across 1372 01:17:52,120 --> 01:17:55,400 Speaker 2: a whole region or across the entire planet. That is 1373 01:17:55,439 --> 01:17:58,960 Speaker 2: a hugely political question that all the major great powers 1374 01:17:59,000 --> 01:18:02,240 Speaker 2: in their interimperial conflict or constantly fighting over. So right 1375 01:18:02,280 --> 01:18:05,360 Speaker 2: now it appears that China is attempting to make a 1376 01:18:05,400 --> 01:18:07,800 Speaker 2: bid for a global UoN. First they tried to do 1377 01:18:07,840 --> 01:18:10,680 Speaker 2: it through the digital UoN. Now they're seemingly trying to 1378 01:18:10,680 --> 01:18:13,240 Speaker 2: do it through bricks by getting the other bricks countries 1379 01:18:13,280 --> 01:18:15,879 Speaker 2: to agree to a kind of EUON gold standard, mirroring 1380 01:18:15,960 --> 01:18:19,280 Speaker 2: the Breton Woods Agreement that was basically the dollar piggybacking 1381 01:18:19,280 --> 01:18:22,760 Speaker 2: off of gold to reach global pre eminence. Will it work, 1382 01:18:22,960 --> 01:18:26,400 Speaker 2: will it not? Nobody really knows. It's a total mess. 1383 01:18:26,760 --> 01:18:29,720 Speaker 2: But in theory, that could be one way that you 1384 01:18:29,720 --> 01:18:32,960 Speaker 2: could suddenly have, like the YUON, at least in a 1385 01:18:32,960 --> 01:18:36,479 Speaker 2: certain currency zone, be used as the main way of 1386 01:18:36,560 --> 01:18:41,799 Speaker 2: doing imports. And if the US suddenly needs an import 1387 01:18:41,840 --> 01:18:45,600 Speaker 2: from that zone, which hypothetically, if it existed right, they 1388 01:18:45,680 --> 01:18:48,920 Speaker 2: couldn't use dollars anymore, or or maybe dollars would be 1389 01:18:49,040 --> 01:18:51,400 Speaker 2: at a high disadvantage, you know, in the exchange rate 1390 01:18:51,400 --> 01:18:54,000 Speaker 2: between dollars and that currency at that point, or maybe 1391 01:18:54,000 --> 01:18:56,240 Speaker 2: they would just be banned entirely from using dollars. They 1392 01:18:56,280 --> 01:18:57,840 Speaker 2: have to get it in that currency, which means is 1393 01:18:57,840 --> 01:19:00,400 Speaker 2: suddenly the US, which has basically been able to print 1394 01:19:00,439 --> 01:19:03,840 Speaker 2: for X, to print the international means of payment for 1395 01:19:03,960 --> 01:19:06,920 Speaker 2: some fifty years now, would suddenly have to actually hold 1396 01:19:06,960 --> 01:19:09,320 Speaker 2: reserves of this thing. Now, if we have to hold 1397 01:19:09,320 --> 01:19:10,840 Speaker 2: reserves of it, that means that we have to sell 1398 01:19:10,880 --> 01:19:13,920 Speaker 2: something to the people who issue that currency. That means 1399 01:19:13,920 --> 01:19:17,240 Speaker 2: that we suddenly have to worry about which firms are 1400 01:19:17,320 --> 01:19:20,680 Speaker 2: the most profitable exporters. And I bet you anything that 1401 01:19:20,880 --> 01:19:24,040 Speaker 2: none of our listeners know what the most important company 1402 01:19:24,080 --> 01:19:30,799 Speaker 2: in America would become if that situation happened. Is it Luber? 1403 01:19:31,280 --> 01:19:31,439 Speaker 4: Is it? 1404 01:19:32,400 --> 01:19:35,559 Speaker 2: Is it Amazon? Is it? Is it? All these like 1405 01:19:35,640 --> 01:19:37,280 Speaker 2: Fortune five hundred companies and whatever? 1406 01:19:37,439 --> 01:19:37,719 Speaker 4: No? 1407 01:19:37,720 --> 01:19:39,400 Speaker 2: No, I mean, it's one of the Fortune five hundred, 1408 01:19:39,400 --> 01:19:41,240 Speaker 2: but it's not like towards the top of that list. 1409 01:19:41,560 --> 01:19:47,479 Speaker 2: It's Boeing. Boeing is by far our single greatest exporter firm. 1410 01:19:47,560 --> 01:19:50,839 Speaker 2: It would be, in a situation like this, the national champion, 1411 01:19:51,040 --> 01:19:53,720 Speaker 2: so to speak, to use language that's usually reserved for 1412 01:19:54,960 --> 01:19:58,679 Speaker 2: less developed countries than the US. And this is exactly 1413 01:19:58,720 --> 01:20:03,080 Speaker 2: the kind of like thinking that is important because you know, obviously, 1414 01:20:03,120 --> 01:20:05,000 Speaker 2: the other thing that would happen if dollar hegemony ended 1415 01:20:05,120 --> 01:20:07,040 Speaker 2: is that it would be a huge economic crash in 1416 01:20:07,080 --> 01:20:10,280 Speaker 2: the US, Like suddenly the import the costs of importing 1417 01:20:10,280 --> 01:20:13,160 Speaker 2: anything that we're in that zone would skyrocket, and it 1418 01:20:13,200 --> 01:20:16,040 Speaker 2: would mess up, you know, our balance of payments, and 1419 01:20:16,040 --> 01:20:18,599 Speaker 2: it would cause inflation. Depending on how quickly it happens 1420 01:20:18,640 --> 01:20:21,080 Speaker 2: and how how little, how much or how little time 1421 01:20:21,160 --> 01:20:24,479 Speaker 2: firms have to adjust their supply chains and stuff like that. 1422 01:20:24,800 --> 01:20:27,680 Speaker 2: So it's, uh, this is exactly what you need in 1423 01:20:27,760 --> 01:20:29,960 Speaker 2: order to understand everything from the decline and fall of 1424 01:20:29,960 --> 01:20:34,439 Speaker 2: the Roman Empire to current geopolitics today. And and and 1425 01:20:34,479 --> 01:20:37,320 Speaker 2: I'm hoping that that Steve and I, through developing the theory, 1426 01:20:37,400 --> 01:20:40,120 Speaker 2: will create a general framework that can be used to 1427 01:20:40,200 --> 01:20:43,240 Speaker 2: tie discussions that people usually have in purely political terms 1428 01:20:43,720 --> 01:20:47,880 Speaker 2: about interimperial conflict into economic questions so that there's no 1429 01:20:47,960 --> 01:20:52,560 Speaker 2: longer a kind of division of labor between between economics 1430 01:20:52,560 --> 01:20:54,880 Speaker 2: which denies the existence of imperialism. And then the people 1431 01:20:54,920 --> 01:20:57,960 Speaker 2: who study imperialism as historians or political scientists or whatever. 1432 01:20:58,720 --> 01:21:03,720 Speaker 1: The stage stay tuned for more theories dropping at some 1433 01:21:03,840 --> 01:21:04,839 Speaker 1: point in the future. 1434 01:21:06,720 --> 01:21:09,600 Speaker 2: Oh and we should do our marketing pitch. If you 1435 01:21:09,720 --> 01:21:12,400 Speaker 2: like the stuff that you hear, you should seriously consider 1436 01:21:13,080 --> 01:21:15,360 Speaker 2: checking out the magazine which is at Strange Matters dot 1437 01:21:15,400 --> 01:21:17,880 Speaker 2: co op. And also please consider if you have the 1438 01:21:17,920 --> 01:21:22,479 Speaker 2: ability to subscribe or donate subscription storty five dollars. And 1439 01:21:22,520 --> 01:21:26,640 Speaker 2: it really it really helps because all the money that 1440 01:21:26,680 --> 01:21:28,839 Speaker 2: we get that doesn't just go to our capitalist overlords 1441 01:21:28,880 --> 01:21:31,160 Speaker 2: for basically like you know, paying for the services that 1442 01:21:31,200 --> 01:21:33,360 Speaker 2: we use to keep the website going. And the magazine going. 1443 01:21:33,680 --> 01:21:35,200 Speaker 2: All of it goes to our writers, and we try 1444 01:21:35,200 --> 01:21:37,120 Speaker 2: to pay them a both market rate for little magazines 1445 01:21:37,120 --> 01:21:40,559 Speaker 2: of our size. So if you want to see more 1446 01:21:40,560 --> 01:21:45,080 Speaker 2: of this stuff and more arts, philosophy, anthropology, history, all 1447 01:21:45,080 --> 01:21:48,720 Speaker 2: the other kind of stuff poetry that we publish, definitely 1448 01:21:48,840 --> 01:21:49,559 Speaker 2: please consider. 1449 01:21:50,200 --> 01:21:51,960 Speaker 1: Yeah, well we'll we'll put we'll put a link to 1450 01:21:52,120 --> 01:21:55,559 Speaker 1: the magazine and the description. Yeah, Steve gen C, thank 1451 01:21:55,600 --> 01:21:57,280 Speaker 1: you so much for thank you so much for being 1452 01:21:57,320 --> 01:22:03,040 Speaker 1: on the show and for yelling at the Econobo priced 1453 01:22:03,080 --> 01:22:03,360 Speaker 1: with me. 1454 01:22:06,479 --> 01:22:07,280 Speaker 3: It's been a pleasure. 1455 01:22:07,840 --> 01:22:09,120 Speaker 2: It's been great mana thank you. 1456 01:22:09,640 --> 01:22:12,760 Speaker 1: Yeah, and you can find us at it could Happen here, 1457 01:22:13,040 --> 01:22:17,160 Speaker 1: What that Happened here pod on Twitter and Instagram. Yeah, 1458 01:22:17,160 --> 01:22:20,040 Speaker 1: we have a website where you post our sources. It's 1459 01:22:20,080 --> 01:22:22,080 Speaker 1: cool Onmedia dot com. There's other stuff there. You should 1460 01:22:22,080 --> 01:22:26,400 Speaker 1: go there, and yeah, go into the world and make 1461 01:22:26,479 --> 01:22:34,040 Speaker 1: life worse for mainstream economists. It could happen here as 1462 01:22:34,040 --> 01:22:35,639 Speaker 1: a production of cool Zone Media. 1463 01:22:35,760 --> 01:22:38,439 Speaker 2: For more podcasts from cool Zone Media, visit our website 1464 01:22:38,439 --> 01:22:40,680 Speaker 2: cool Zonemedia dot com, or check us out on the 1465 01:22:40,720 --> 01:22:44,160 Speaker 2: iHeartRadio app, Apple Podcasts, or wherever you listen to podcasts. 1466 01:22:44,720 --> 01:22:46,400 Speaker 1: You can find sources for it could happen here. 1467 01:22:46,479 --> 01:22:49,919 Speaker 2: Updated monthly at cool zonemedia dot com, slash sources. 1468 01:22:50,120 --> 01:22:50,960 Speaker 3: Thanks for listening,