WEBVTT - Emergency Podcast: Why Britain's Political Turmoil Will End In Crisis

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Marine

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<v Speaker 1>Talks Money Market Rap, where we talk about the biggest

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<v Speaker 1>moves in markets this weekend, what is driving them. I'm

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<v Speaker 1>marin someums that we're better at large for Bloomberg UK Wealth.

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<v Speaker 2>And I'm joined Stepead, senior reporters of Bloomberg and author

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<v Speaker 2>of the Money Is Still News Later. I was just

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<v Speaker 2>carried a week because this is an emergency podcast.

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<v Speaker 1>It's not an emergency podcast. There's a regular podcast that's

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<v Speaker 1>done slightly more quickly than usual. That's spoiling all right

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<v Speaker 1>now coming on. There's a lot going on. And we

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<v Speaker 1>are speaking on the thirteenth of May, mid afternoon. And

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<v Speaker 1>normally I don't bother telling people exactly when we're speaking,

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<v Speaker 1>but I'm telling them today because there is a lot

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<v Speaker 1>going on. We're just sitting here are we were waiting

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<v Speaker 1>for a resignation from Gastarma or a mention of a

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<v Speaker 1>resignation or a possibility of resignation, And at the moment

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<v Speaker 1>we are hearing that possibly he might denounce a possible

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<v Speaker 1>resignation tomorrow or something like that, or maybe next week,

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<v Speaker 1>or maybe in a month, for maybe in two.

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<v Speaker 2>Months, what I've heard is the way Streeton is considered

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<v Speaker 2>in resigning tomorrow and then launching leadership battle. Just to

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<v Speaker 2>be very clear and maybe completely wrong. Yet I'm not

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<v Speaker 2>a political expect but I don't think your Stamma's ever

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<v Speaker 2>going to resign as involuntarily or I think.

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<v Speaker 1>Giving as I read them, by this morning, he's given

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<v Speaker 1>giving all the kids of great lessons and resilience and

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<v Speaker 1>him are finally finding out what he's good at the

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<v Speaker 1>face of adversity. Ghostmer.

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<v Speaker 2>They also of trying to make this sort of like

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<v Speaker 2>a big thing of him being ruthless and then the

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<v Speaker 2>surprise when he is actually literally ruthless in terms of

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<v Speaker 2>protecting his own possession.

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<v Speaker 1>But yes, he's not going to go by himself, probably not,

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<v Speaker 1>and even if he did, political uncertainty isn't going anywhere

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<v Speaker 1>because you knows who comes next, and if it ends

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<v Speaker 1>up with the party being shoved further left, even further

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<v Speaker 1>left than the bone market is not going to like

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<v Speaker 1>that either. So it's hard to see how his resignation

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<v Speaker 1>or his forced resignation anyway would improve matters.

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<v Speaker 2>I mean, not from the blind market's point of view.

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<v Speaker 2>It depends on I mean, I think that people object

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<v Speaker 2>to this because you know, they think, oh gosh, it's

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<v Speaker 2>more infighting. But the end of the day, the country

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<v Speaker 2>has actually given its verdict quite strongly and the local election,

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<v Speaker 2>And if I'm onre Ines Sad, I don't really have

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<v Speaker 2>a big issue with parties changing leaders in the middle

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<v Speaker 2>of the game if it is clear that the population

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<v Speaker 2>is not happy with the way things are going. Yeah,

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<v Speaker 2>and I don't think we need to necessarily can have

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<v Speaker 2>a general election that gave them a mind date. But yes,

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<v Speaker 2>so we've streeting the candidates so far that we're aware

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<v Speaker 2>of us streeting possibly Angela Ray and are A those

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<v Speaker 2>she seems to be falling in behind Andy Burnham. So

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<v Speaker 2>basically that's it. You get Andy Burnham, who isn't an MP,

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<v Speaker 2>but they're all trying to find some convoluted way to

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<v Speaker 2>let him stand and streeting and streeting is regarded has

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<v Speaker 2>been on the right of the Labor Party to most

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<v Speaker 2>listeners who may have a more kind of neutral political perspective.

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<v Speaker 2>That doesn't mean his right wing. It just means that

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<v Speaker 2>he's less addicted to spend and than the people.

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<v Speaker 1>It's definitely a little bit more pro market. He's being

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<v Speaker 1>more pro market on public services. You know, he's been

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<v Speaker 1>talking about using the private sector in the NHS. He's

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<v Speaker 1>a little bit less pro relentless expansion of welfare than

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<v Speaker 1>some other people, a little bit more more hardline or

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<v Speaker 1>crime there. He's kind of hiny bit more pro business.

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<v Speaker 1>You know, you could call him slightly right of the

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<v Speaker 1>rest of the Labor Party.

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<v Speaker 2>Yeah, he still believes in a decent sized state by

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<v Speaker 2>he's not going to set there and go Yeah, the

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<v Speaker 2>Boyd market, you know, whatever that can go away. You know,

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<v Speaker 2>somebody who actually understands roughly how things work. Andy Bondum

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<v Speaker 2>clearly keeps sort of trying to allude to a way

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<v Speaker 2>to get around the Boyd market. It's clearly aware that

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<v Speaker 2>it matters, but it's not clear I would say from

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<v Speaker 2>what he says or from what his supports or say,

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<v Speaker 2>particularly that they really get what it's for or you know,

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<v Speaker 2>why it's there or why it's a constraint. And I

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<v Speaker 2>think that's something that can make the obviously will make

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<v Speaker 2>the gelt's market can of you know, worry.

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<v Speaker 1>Yeah, and we awould be very clear on what's going

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<v Speaker 1>on here already, and the UK guilt market is there's

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<v Speaker 1>lots of talk about, oh, maybe our debt to GDP

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<v Speaker 1>races aren't on that bad relative to other people, and

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<v Speaker 1>you know, maybe there's stability ahead, et cetera, et cetera.

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<v Speaker 1>But you can't get away from the fact that net

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<v Speaker 1>public debt to GDP is pushing one hundred percent in

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<v Speaker 1>the UK. You can't get away from the fact that

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<v Speaker 1>Rachel Raves has pushed up spending massively since you got

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<v Speaker 1>in both on current spending and what we might call

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<v Speaker 1>or not call the investment spending.

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<v Speaker 2>And there is the tax take that's also shot of

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<v Speaker 2>that is keeping that in check. It's not careful.

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<v Speaker 1>So you know, there is there is a reason why

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<v Speaker 1>UK debt is priced at a much higher level with

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<v Speaker 1>a higher yield than other debt inside the G seven

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<v Speaker 1>what sixty plus basis points above everybody else. And the

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<v Speaker 1>reason for that is that we have horrible debt levels

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<v Speaker 1>and absolutely no expectation in the minds of most people

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<v Speaker 1>that anything is going to change.

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<v Speaker 2>Yeah, and also we have consistently too high inflation, which

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<v Speaker 2>is basically because the same in friendship part Liberal and

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<v Speaker 2>keeps pointing that we basically ration every part of the

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<v Speaker 2>economy that we need to grow without inflation.

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<v Speaker 1>And this debt level is hideous for public spending. So

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<v Speaker 1>at the beginning of the pandemic, we were spending well

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<v Speaker 1>under five percent of government spending was on debt interest

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<v Speaker 1>and last year was eight percent. And now it's going

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<v Speaker 1>to be significantly higher than keeps going up and up

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<v Speaker 1>and up. When you're suddenly spending ten percent of government

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<v Speaker 1>spending is on interest payments alone, you know you're in trouble.

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<v Speaker 2>Yeah, it's not sustainable, and so yeah, you can see why.

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<v Speaker 2>So I think the main reason the guilt market is

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<v Speaker 2>a bit more worried about the politics than it might

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<v Speaker 2>have been is because of this idea that they may

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<v Speaker 2>throw what little fiscal caution they've got to the wins.

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<v Speaker 2>And as far as I can see, the other problem

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<v Speaker 2>is that whether or not, but we don't know that

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<v Speaker 2>anyone's going to stand in challenge Starmer. But if street

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<v Speaker 2>Thing does it, there's already talk from the left of

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<v Speaker 2>the party that, well, if he if he gets into

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<v Speaker 2>powerble one of them said, we'll kick him out faster

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<v Speaker 2>than they get rid of his trust. And you're like, okay,

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<v Speaker 2>So it's not even as if the next leader is

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<v Speaker 2>necessarily the final leader for this particular parliament. I get

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<v Speaker 2>why guilt markets are at the moment unsettled rather than panicing,

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<v Speaker 2>and we don't. I think it's really important to emphasize

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<v Speaker 2>that this is not like twenty twenty two in the

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<v Speaker 2>Liz Trust situation, because that was a very different set

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<v Speaker 2>of circumstances and you don't have the same level of

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<v Speaker 2>instability and leverage that creates a kind of doom loop.

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<v Speaker 2>But in some ways that's worse because actually what we're

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<v Speaker 2>getting now is just a repricing that says that well,

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<v Speaker 2>cable Britain is really kind of unreliable. We're a bit

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<v Speaker 2>worried about. It's not so much achieving. It's not its

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<v Speaker 2>capacity to repays, it's the desire. There are ways, and

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<v Speaker 2>I'm certainly not the first person to say this, but

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<v Speaker 2>there are ways that this does echo the Jim Callahan

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<v Speaker 2>labor government of the nineteen seventies, which is a group

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<v Speaker 2>of people refusing to confront reality with that it was

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<v Speaker 2>the IMF that created the external shock that gave Jim

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<v Speaker 2>Callahan the permission to stand up in front of his

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<v Speaker 2>party and say, look, you get a grip. We can't

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<v Speaker 2>spend money the way we've been spending it, and we

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<v Speaker 2>obviously still get kicked to it of the next election,

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<v Speaker 2>and perhaps we need something similar to some kind of

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<v Speaker 2>market I guess kilt market strike or an FX. I

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<v Speaker 2>don't like using the what crisis being a pound falling

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<v Speaker 2>a lot to make people wake up and realize act,

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<v Speaker 2>you know, we need a change of direction. And that's

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<v Speaker 2>regardless of who they put in at the top.

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<v Speaker 1>It is you here. There's more and more john people

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<v Speaker 1>saying well, you can need an existential crisis to help

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<v Speaker 1>it put itself together. It was not going to just happen.

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<v Speaker 1>Something horrible has to happen before this ridiculous grubbling stops

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<v Speaker 1>and things change, which.

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<v Speaker 2>Is unfortunate, but yeah, I mean, I mean that's it.

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<v Speaker 2>Crises create the opportunity to change things, and I guess

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<v Speaker 2>they always do. It's very rarely see proper change happen

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<v Speaker 2>in the absence, say a crisis, certainly, you know, and

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<v Speaker 2>in our history and also the history of Europe more widely.

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<v Speaker 2>Maybe that's the by signal, you know, whenever everything goes

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<v Speaker 2>horribly pair shaped.

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<v Speaker 1>I don't know, wait for the crisis. Wait for the crisis.

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<v Speaker 1>The crisis be the catalyst. Yeah, Okay, and it's not

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<v Speaker 1>that far away. One would guess at this right.

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<v Speaker 2>Well, you got hope, So it would be nice to

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<v Speaker 2>get it all on before we have another partly in Power, an.

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<v Speaker 1>Entire podcast based on the idea that the best possible

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<v Speaker 1>outcome is a full crisis.

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<v Speaker 2>Yeah, I always saw it's how to Really, I'd say

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<v Speaker 2>a thing overcome is just kind of lumbered in along

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<v Speaker 2>the way that we've been going.

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<v Speaker 1>That can't go on. And definitely you can't go on

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<v Speaker 1>with this, you know, anti growth stuff, and definitely at

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<v Speaker 1>some point something has to change and at some point

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<v Speaker 1>the UK has to be let loose to grow again,

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<v Speaker 1>and all the wonderful things that we often talk about

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<v Speaker 1>about the UK. You know, there's this great base that

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<v Speaker 1>we have, our amazing technology sector, astonishing ability to innovate,

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<v Speaker 1>our great education sector, the factors we've talked about a

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<v Speaker 1>couple of times recently, the very high levels of savings

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<v Speaker 1>that the UK population has, et cetera. We are, we

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<v Speaker 1>are ready to go, if only we're going to have

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<v Speaker 1>a politician who could put in place the policies to

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<v Speaker 1>allow the UK to succeed. Let's not talk ourselves around

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<v Speaker 1>in circles to get up so we're just going to

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<v Speaker 1>have to leave it there before we upset ourselves. Right now,

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<v Speaker 1>the best we can hope for is the kind of

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<v Speaker 1>crisis that lets us restart everything.

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<v Speaker 2>Yeah.

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<v Speaker 1>Control, Yeah, And right now, the next few weeks we

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<v Speaker 1>don't see any particularly good outcomes, and nor do we

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<v Speaker 1>see any particularly good candidates. No, but we have all

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<v Speaker 1>learnt about how amazingly resilient caseddarmor is, and that's something

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<v Speaker 1>that is something. Thanks for listening to this week's Marin

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<v Speaker 1>Talks Money Debrief.

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<v Speaker 2>If you like our show, rate review, and.

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<v Speaker 1>Subscribe wherever you listen to podcasts. Also be Shorwedfullow Me

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<v Speaker 1>and John on ex or Twitter at Marinus, W and

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<v Speaker 1>John underscore stuff like. This episode was produced by some Asadi,

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<v Speaker 1>production support and sound design by Moses and Questions and

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<v Speaker 1>comments on this show and all our shows are always welcome.

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<v Speaker 1>Our show email is miror Money at Bloombergs dot net