WEBVTT - Why Inflation May Not Be Heading Back to 2% 0:00:00.400 --> 0:00:04.240 John, Hello him, John, listen, I have a question for you. 0:00:04.400 --> 0:00:07.560 Have you ever seen a UFO hey Mason a UF 0:00:07.600 --> 0:00:09.799 four points when I was like twyolve in a scot camp. 0:00:09.840 --> 0:00:13.200 But it's quite possible of a drunk christ You Scott's 0:00:13.520 --> 0:00:18.000 Jesus right, Listen. UFO sightings in Scotland have gone up 0:00:18.000 --> 0:00:20.320 twenty percent from the last year. I haven't looked at 0:00:20.360 --> 0:00:22.439 the English sightings, but I'm sure they've done the same. 0:00:23.200 --> 0:00:25.320 And here's something else I bet you didn't know, despite 0:00:25.360 --> 0:00:27.040 the fact that you were from Glasgow and you should 0:00:27.120 --> 0:00:29.720 note this stuff. There's a town in the Central Belt 0:00:29.760 --> 0:00:33.960 called bonnie Bridge, which is one of the most well 0:00:34.040 --> 0:00:40.120 known UFO sighting places on right, three hundred ver sightings 0:00:40.120 --> 0:00:44.560 the year so Texas, New Mexico bonnie Bridge. So why 0:00:44.640 --> 0:00:48.199 is bonny Blood the UFO central Absolutely no idea and 0:00:48.200 --> 0:00:51.320 then close to not caring. So you know that I'm 0:00:51.320 --> 0:00:52.839 just putting that out there is a little bit of 0:00:52.840 --> 0:00:55.080 trivia for anyone who wants something to talk about over 0:00:55.120 --> 0:00:57.760 dinner tonight. The key point is that, and you and 0:00:57.800 --> 0:01:02.160 I have discussed this before in sightings, UFO sightings go 0:01:02.400 --> 0:01:07.200 up everywhere when societies are tense, when people feel uncertain 0:01:07.319 --> 0:01:10.280 when there is change effort, when there is unrest. Right, 0:01:10.280 --> 0:01:13.360 So UFO sightings in the US went up massively just 0:01:13.400 --> 0:01:18.160 before Donald Trump was arreted. Hang on, donald Trump was elected. 0:01:19.800 --> 0:01:21.520 There was I don't know if you remember when we 0:01:21.640 --> 0:01:23.880 were both working at Dennis Publishing at the time and 0:01:23.920 --> 0:01:27.120 they owned a magazine called The Fourteen Times. Do you 0:01:27.120 --> 0:01:30.720 remember that their headline is Donald Trump an Alien? Yeah. 0:01:30.720 --> 0:01:33.800 I think they stall that headlines from National enquired art anyway. 0:01:33.840 --> 0:01:36.920 So there is this correlation, which I was telling an 0:01:36.959 --> 0:01:38.560 acquaintance at the Bank among Then the other day that 0:01:38.560 --> 0:01:40.360 they really should put in their models because it's kind 0:01:40.360 --> 0:01:42.080 of handy. There is a correlation. We won't go as 0:01:42.080 --> 0:01:47.920 far as causation between rising sightings of UFOs and political 0:01:48.000 --> 0:01:50.840 and economic change. I just wanted to let you know 0:01:50.880 --> 0:01:52.880 that and put it out there because obviously there's a 0:01:52.920 --> 0:01:54.720 lot of political and economic change going on at the 0:01:54.760 --> 0:01:57.080 moment where at there's a turning point that we've talked 0:01:57.120 --> 0:02:01.560 about before demographically firstically, monetary policy. Everything everything is at 0:02:01.560 --> 0:02:06.160 a at an inflation interest rate, everything's turning right. Actually, 0:02:06.920 --> 0:02:09.720 I suppose the other interpretation is that people will see 0:02:09.840 --> 0:02:14.000 uf always because whenever times are just stub that's partly 0:02:14.040 --> 0:02:17.680 because geopolitics is an upheaval and maybe governments around the 0:02:17.680 --> 0:02:20.919 world of like tests and new weapons like stealth bombers 0:02:20.919 --> 0:02:23.839 and things like that. How so you think that there's 0:02:23.840 --> 0:02:26.280 secret jets in the sky, you know. Welcome to John 0:02:26.280 --> 0:02:30.400 and Marrin's Conspiracy Theory podcast. Yeah, that would be very popular. 0:02:30.520 --> 0:02:33.120 I think we shouldn't not it would dismiss it. Like 0:02:33.440 --> 0:02:35.400 you know what, we get a lot more listeners than 0:02:35.440 --> 0:02:38.760 we do talking about inflation and interest rates. Listen, Timmy done. 0:02:38.800 --> 0:02:40.680 There is a lot of change. What's the thing that 0:02:40.760 --> 0:02:43.920 you've seen this week that to you represents that the 0:02:43.919 --> 0:02:47.360 biggest change, the biggest inflection Well much as I'd like 0:02:47.400 --> 0:02:49.800 to see the based inflection point is the drop in 0:02:49.960 --> 0:02:53.440 house places which are falling uponly for the first team 0:02:53.440 --> 0:02:56.600 since twenty twelve, I actually think they can A base 0:02:56.680 --> 0:03:01.360 thing that happened this week was the exit deal. I 0:03:01.400 --> 0:03:03.680 think we've been going on about Brexit for a long time, 0:03:03.880 --> 0:03:05.920 but I think that this could be a catalyst for 0:03:06.600 --> 0:03:10.320 long neglected UK equities to finally attract some of those 0:03:10.320 --> 0:03:12.600 flows that have been vanishing from them over the past 0:03:12.639 --> 0:03:15.239 seven years. I mean You can spend lots of time 0:03:15.360 --> 0:03:18.760 arguing about the economic impact of Brexit, but thing it's 0:03:18.800 --> 0:03:21.760 pretty clear that over the last seven years, global fund 0:03:21.760 --> 0:03:23.640 minders at least have taken it as an excuse to 0:03:23.680 --> 0:03:26.400 just put the UK in the two hard bin. And 0:03:26.440 --> 0:03:28.680 I think that that will be much more difficult now, 0:03:28.720 --> 0:03:31.920 particularly as you know, everyone's looking for new things to 0:03:31.919 --> 0:03:34.920 invest in and cheap assets to invest in. Now that 0:03:35.440 --> 0:03:39.320 the kind of fangs, aren't they only game in town? Excellent. Finally, 0:03:39.360 --> 0:03:42.200 and don't forget everybody that if you're investing in equities, 0:03:42.200 --> 0:03:44.960 the best hedge gainst inflation is your dividend income. And 0:03:45.080 --> 0:03:47.920 where do you get the best dividend income? The UK? 0:03:48.120 --> 0:03:59.360 Of course, yes, the UK? Right onwards. Thanks John. Welcome 0:03:59.440 --> 0:04:01.640 to Marando Money in the podcast in which people who 0:04:01.720 --> 0:04:04.280 know the markets explain the markets. I'm there in some 0:04:04.440 --> 0:04:07.800 stweb this week. Our guest is Dr Pipperman. Group's an author, 0:04:07.960 --> 0:04:10.760 an expert in geopolitics, and has served a special assistant 0:04:10.760 --> 0:04:13.800 of President George W. Bush as an advisor for reckono 0:04:13.880 --> 0:04:16.440 and policy on the National Economic Council. And she's a 0:04:16.480 --> 0:04:20.200 former member of the US President's Working Group on Financial Markets. 0:04:20.240 --> 0:04:22.960 And she knows something about UFOs. By the way, we 0:04:23.080 --> 0:04:29.719 begin our conversation discussing Russia's invasion of Ukraine. Pepper, thank 0:04:29.760 --> 0:04:32.039 you so much for joining us today. It's absolutely brilliant 0:04:32.080 --> 0:04:34.880 to have you on. Thank you. I'm glady to be here. 0:04:35.440 --> 0:04:39.800 We are talking around the first year anniversary of the 0:04:39.880 --> 0:04:42.840 Russian invasion of the Ukraine. Now, when that began, it 0:04:42.880 --> 0:04:46.000 looked like a little war, a localized war, local conflict. 0:04:46.560 --> 0:04:49.480 But a lot has changed in the last year, right, 0:04:49.520 --> 0:04:51.280 And I've been looking at some things that you've been 0:04:51.320 --> 0:04:54.240 saying and you've been writing, and what looked like a 0:04:54.360 --> 0:04:58.240 local conflicts is expanding globally. This is not a local 0:04:58.240 --> 0:05:02.160 conflict anymore, is it. No. And I wrote a piece 0:05:02.240 --> 0:05:07.479 in October twenty twenty one which was very boldly entitled 0:05:07.760 --> 0:05:11.600 world War three has already started, And that really sounded 0:05:11.680 --> 0:05:15.320 crazy at the time. But I think we're now seeing 0:05:15.520 --> 0:05:19.760 that this is not about one country, it's not about 0:05:19.800 --> 0:05:25.280 one location. It's a grand strategy, and it's pitting the West, NATO, 0:05:25.400 --> 0:05:30.599 the United States against an aligned Russia and China. And also, 0:05:30.720 --> 0:05:33.280 just to be clear, because the phrase world War three 0:05:33.360 --> 0:05:37.320 is so terrifying for people, this is a very different 0:05:37.480 --> 0:05:39.560 kind of war, and I don't think it is going 0:05:39.640 --> 0:05:41.760 to look like World War One or World War Two, 0:05:41.800 --> 0:05:46.560 where lots and lots of civilians were engaged in direct combat. 0:05:46.880 --> 0:05:50.880 I think this is a technology war. This is an 0:05:50.920 --> 0:05:56.600 invisible war where the combatants fight each other in ways 0:05:56.640 --> 0:05:59.640 that are not visible to the public. I can elaborate 0:05:59.680 --> 0:06:02.640 on that, but bottom line is it's still not a 0:06:02.680 --> 0:06:05.200 great situation. But when I say world War three, I 0:06:05.240 --> 0:06:07.480 don't mean to imply that we're going to end up 0:06:07.480 --> 0:06:11.560 in that kind of conflagration. However, what we have now, 0:06:11.600 --> 0:06:14.080 in my opinion here on the anniversary of the day 0:06:14.120 --> 0:06:18.320 the tanks rolled into Ukraine, is well, there's a word 0:06:18.400 --> 0:06:21.960 that everybody needs to know. There's a word called irredentism, 0:06:22.000 --> 0:06:27.760 and irredentism is when a nation says, we have nationals 0:06:27.760 --> 0:06:30.719 abroad that need to be protected. And that was the 0:06:30.800 --> 0:06:36.080 irrationale behind Russia rolling into Ukraine, right The Russians in 0:06:36.279 --> 0:06:40.320 Ukraine were under siege and they needed protecting. They're now 0:06:40.480 --> 0:06:46.600 expanding that strategy to new places like Transnistria, which is 0:06:46.640 --> 0:06:51.600 on the border of Moldova and of Kasia, and places 0:06:51.680 --> 0:06:55.279 like basically places people haven't heard of, you know, Artsak 0:06:55.480 --> 0:06:58.480 is another one of them. Spulbard in Norway. I think 0:06:58.480 --> 0:07:00.760 it's going to be one of them. So it's the 0:07:00.800 --> 0:07:06.320 same strategy, just expanded to new locations. That's one element, 0:07:06.320 --> 0:07:08.839 and i'll just finish with the second. The second is 0:07:09.120 --> 0:07:14.000 the Russians have basically decided to do a reverse Star Wars. 0:07:14.560 --> 0:07:16.960 So I was an intern working for Ronald Reagan in 0:07:17.000 --> 0:07:19.720 the White House when they introduced the Star Wars strategy, 0:07:19.800 --> 0:07:26.240 which was laser based systems in space on satellites, so 0:07:26.280 --> 0:07:29.960 you could take out the other guy's intercontinental ballistic nuclear 0:07:30.000 --> 0:07:36.400 missile using this system. Basically it forced the Russians to 0:07:36.480 --> 0:07:39.280 spend a ton of money they didn't have trying to 0:07:39.360 --> 0:07:42.600 keep up with the technology. Well, they learned and today 0:07:42.640 --> 0:07:45.760 they're reversing. So they're saying we're going to drop out 0:07:45.760 --> 0:07:50.560 of the nuclear Mutual Weapons Inspections treaties. We're going to 0:07:50.840 --> 0:07:55.120 put nuclear weapons on our submarines and our ships, which 0:07:55.200 --> 0:08:00.960 Norwegian intelligence this week confirmed. And this will force you 0:08:01.320 --> 0:08:04.920 to spend a huge amount of money monitoring all the 0:08:05.000 --> 0:08:09.320 borders so that you can catch any potential inbound. So 0:08:09.400 --> 0:08:13.360 I don't think anybody wants to actually launch a nuclear weapon, 0:08:13.400 --> 0:08:15.480 and I want to be clear about that, I do 0:08:15.640 --> 0:08:19.240 think that raising this threat threshold is going to be 0:08:19.760 --> 0:08:23.440 enormously expensive for the West, and the real strategy is 0:08:23.440 --> 0:08:25.800 how to bankrupt the West. When you talk about an 0:08:25.800 --> 0:08:29.880 invisible war, is that part of what you mean a 0:08:30.000 --> 0:08:33.040 war basically an economic war, a cashual and let me 0:08:33.120 --> 0:08:35.520 make you spend a vast amount of money on things 0:08:35.520 --> 0:08:37.440 that will make it hard for you to manage economy 0:08:37.679 --> 0:08:43.320 outside that. Yeah, it's also a little bit more than that. 0:08:43.480 --> 0:08:48.920 It's about the return of spy games, of kind of 0:08:49.000 --> 0:08:54.760 Cold War style spies that are implanted in Western countries 0:08:54.800 --> 0:08:58.320 and organizations, and probably it's happening in reverse as well. 0:08:59.400 --> 0:09:01.600 So the spy game is back, and you can see 0:09:01.600 --> 0:09:03.480 that if you google for it, you'll see lots of 0:09:03.559 --> 0:09:06.560 arrests have been made and spies are being captured, and 0:09:07.160 --> 0:09:11.800 so that's an element. But it's also things like TikTok, 0:09:12.200 --> 0:09:16.960 which the US government is about to potentially ban as 0:09:17.000 --> 0:09:22.680 a basically military instrument. That it's something that's been used 0:09:22.760 --> 0:09:28.280 by China to weaponize public opinion. And so, for example, 0:09:28.320 --> 0:09:31.760 the Chinese balloons that we recently saw, on one level 0:09:31.840 --> 0:09:35.240 could be seen as a highly staged TikTok event that 0:09:35.400 --> 0:09:39.240 resulted in a reduction of confidence by the American public 0:09:39.280 --> 0:09:43.400 in their own government. That's a kind of invisible war, right, 0:09:43.720 --> 0:09:46.040 So there are many layers to it. And again I've 0:09:46.040 --> 0:09:50.280 written a piece called Invisible Wars on January tenth this 0:09:50.480 --> 0:09:53.800 year on my substock column. It goes into greater detail 0:09:53.960 --> 0:09:58.600 about this. But it's a useful concept right now, Okay, 0:09:58.640 --> 0:10:00.560 And can I just take you back, fum one other 0:10:00.559 --> 0:10:03.760 thing you said about the Russia wantingle saying that what 0:10:03.800 --> 0:10:06.120 they're trying to do is protects Russian citizens in other 0:10:06.160 --> 0:10:08.080 parts of the world, and you mentioned a part of 0:10:08.160 --> 0:10:10.800 Norway where there may be Russian citizens living. How on 0:10:10.800 --> 0:10:15.120 earth does that manifest itself? How does Russia do something 0:10:15.240 --> 0:10:20.960 to protect citizens living in a country such as Norway. Well, so, 0:10:21.320 --> 0:10:24.120 super intring. First, let's be clear about the geography. There's 0:10:24.120 --> 0:10:26.800 a place called spall Barge. It's an island in the 0:10:26.920 --> 0:10:29.760 Arctic Circle. It's extremely remote. I actually went up there 0:10:29.840 --> 0:10:34.040 this summer. And because of the messy end to World 0:10:34.040 --> 0:10:38.000 War two, Small Bard has a highly unusual situation that 0:10:38.120 --> 0:10:43.440 it is technically Norway, but many countries under the Small 0:10:43.480 --> 0:10:48.600 Bard Treaty have the right to be there. So for example, 0:10:48.640 --> 0:10:51.000 I think they're thirty two or thirty four countries that 0:10:51.080 --> 0:10:56.480 are signatories. So there's a large Russian population there. Now. 0:10:56.520 --> 0:11:00.319 Historically they had been involved in coal mining, but then 0:11:00.520 --> 0:11:03.559 the governor of spall Barge shut call mining down for 0:11:03.840 --> 0:11:08.120 climate change reasons, and suddenly the Russian nationals who mainly 0:11:08.120 --> 0:11:12.520 live in Barrensburg in Spalbard suddenly couldn't make an income. 0:11:12.840 --> 0:11:18.080 So then Russia had to subsidize them to stay. Now 0:11:18.120 --> 0:11:21.000 they've just said in the last week or so that 0:11:21.040 --> 0:11:26.720 they're basically giving away apartments in spal Bard to Russian nationals, 0:11:26.720 --> 0:11:28.839 so you can just basically have a free place to stay. 0:11:29.320 --> 0:11:32.920 Why because as long as there are Russian nationals physically 0:11:33.000 --> 0:11:38.080 present on Svalbard, that creates the reason why they might 0:11:38.120 --> 0:11:41.680 need to be protected. And what we've seen is a 0:11:41.880 --> 0:11:46.560 much more aggressive stance by Russia around spaal Bard. We've 0:11:46.600 --> 0:11:50.560 seen Russian submarine surfacing and when you go up there 0:11:50.559 --> 0:11:53.160 there are loads of native ships. Basically the whole place 0:11:53.240 --> 0:11:56.360 is not high alert. And remember, actually this is just 0:11:56.559 --> 0:12:01.640 a key point. Small Barge has the fastest Internet connection 0:12:01.679 --> 0:12:07.199 in the world. Why because virtually every high altitude satellite 0:12:07.240 --> 0:12:11.520 whether commercial or military, or the International Space Station connect 0:12:11.559 --> 0:12:14.440 to Earth at Spaullbark. Why do you know, I don't 0:12:14.480 --> 0:12:17.640 know exactly why. There must be technical reasons for this. 0:12:17.760 --> 0:12:19.760 I think it does have something to do with it's 0:12:19.840 --> 0:12:22.319 easier for calms to happen at the polls, and it's 0:12:22.360 --> 0:12:24.600 easier for the North pole than the South pole. But 0:12:24.800 --> 0:12:27.800 for whatever reason, that is the point of connection. And 0:12:27.880 --> 0:12:30.960 in fact, to my mind, this war that we're seeing 0:12:30.960 --> 0:12:34.400 in Ukraine didn't begin with the tanks rolling in to 0:12:34.640 --> 0:12:39.200 Ukraine a year ago. It began about eight weeks earlier 0:12:39.840 --> 0:12:45.600 when somebody cut that Internet cable, thus signaling we can 0:12:45.679 --> 0:12:49.760 shut down all your communications. And remember all these missiles 0:12:49.880 --> 0:12:53.520 need satellite guidance, so none of your systems will work 0:12:53.600 --> 0:12:56.400 if we cut your calms off. And since then we've 0:12:56.400 --> 0:13:02.040 had loads of Internet cutting exam apples. There again, no fingerprints, 0:13:02.080 --> 0:13:05.000 nobody knows who did it. This is part of this 0:13:05.080 --> 0:13:08.440 invisible war and that I was talking about. So small 0:13:08.480 --> 0:13:11.439 Bards suddenly is on the radar and Russia is trying 0:13:11.480 --> 0:13:15.840 to increase the number of Russians who are actually present 0:13:15.960 --> 0:13:18.760 there with free flats like probably get a lot of 0:13:18.800 --> 0:13:23.400 about British people to go there anything. He said, this 0:13:23.440 --> 0:13:25.560 is really interesting. So a lot of the Invisible War 0:13:25.720 --> 0:13:27.480 and a lot of what we're going to cool World 0:13:27.559 --> 0:13:30.200 War three, even though it's a very different kind of war. 0:13:30.320 --> 0:13:32.840 It happens in places that most of us have no 0:13:32.880 --> 0:13:36.000 connection with, never heard of, and consider would previously have 0:13:36.040 --> 0:13:42.040 considered to be completely irrelevant, far distant Norwegian islands, etc. Completely. 0:13:42.080 --> 0:13:45.280 I call them sort of magical kingdoms that sound like 0:13:45.320 --> 0:13:48.920 they belong in a Hairy Potter novel, like Abkhazia and 0:13:49.040 --> 0:13:52.800 South Ossetia. And they do, they do. Yeah. And if 0:13:52.800 --> 0:13:56.640 you notice this week the Russians have been doing military 0:13:56.679 --> 0:14:01.880 exercises off South Africa where they're working with Swotini, and 0:14:02.240 --> 0:14:04.720 you know, again, for a lot of people they are like, wait, 0:14:04.760 --> 0:14:09.560 where's a Swartini? What is that? So yeah, these magical named, 0:14:09.920 --> 0:14:13.960 magically named kingdoms, as it were, are right at the 0:14:13.960 --> 0:14:17.319 heart of modern geopolitics. Okay, everyone's going to need to 0:14:17.360 --> 0:14:20.400 get an Atlas out. I have on the wall of 0:14:20.440 --> 0:14:23.720 our sitting room a giant world map so I can 0:14:23.760 --> 0:14:26.160 try and keep some sense of geography. And as soon 0:14:26.200 --> 0:14:28.120 as we finished talking, Peper, I'm going to go down 0:14:28.120 --> 0:14:29.760 and look on it. See if I can find some 0:14:29.800 --> 0:14:32.520 of these places and get a sense this is super interesting. 0:14:32.960 --> 0:14:35.760 But listen, Okay, So here we are a different kind 0:14:35.760 --> 0:14:39.040 of war, lots of strange stuff going on, but it 0:14:39.080 --> 0:14:42.920 doesn't turn, you think, into either a nuclear wall, please God, 0:14:43.000 --> 0:14:46.320 let hand what happen, or into a massive ground wall. 0:14:47.200 --> 0:14:50.000 So given that, what effects does it have on the 0:14:50.000 --> 0:14:51.840 thing that we're actually supposed to talk about it in 0:14:51.920 --> 0:14:54.920 this podcast on the global economy? For example? What a 0:14:55.000 --> 0:14:59.520 fact does that have on the way the global economy 0:15:00.040 --> 0:15:03.520 developed from here? On globalization, on energy, on this kind 0:15:03.560 --> 0:15:07.960 of thing. Okay, So one layer of this very complicated 0:15:07.960 --> 0:15:14.160 onion is what Russia did was to demonstrate that anything 0:15:14.320 --> 0:15:17.480 can be weaponized, and so Ukraine is not just a 0:15:17.480 --> 0:15:20.760 war on the ground. It was about weaponizing food prices 0:15:20.840 --> 0:15:25.440 and energy prices and creating inflation at a time where 0:15:25.440 --> 0:15:28.600 the West was very vulnerable to that. Now, what's been 0:15:28.720 --> 0:15:32.720 the response. Initially, everybody's heating bills obviously went up, and 0:15:32.760 --> 0:15:35.880 that's been a big social issue, no question about it. 0:15:35.920 --> 0:15:42.120 But also there's been this incredible entrepreneurial innovation response. So 0:15:42.280 --> 0:15:47.000 suddenly Norway has replaced Russia as the main supplier of 0:15:47.160 --> 0:15:51.840 oil and gas to Western Europe. Morocco has replaced Belarus 0:15:52.040 --> 0:15:57.120 as the main supplier of fertilizers and potash component parts 0:15:57.120 --> 0:16:00.880 for agriculture, and so it just goes to show you 0:16:00.960 --> 0:16:03.680 how resilient and robust the world economy is and how 0:16:03.760 --> 0:16:09.840 quickly it adapts. Similarly, this return of conflict, it happened 0:16:09.840 --> 0:16:13.720 to coincide with COVID as well, has caused a lot 0:16:13.720 --> 0:16:16.160 of people to say, my goodness, the world is a 0:16:16.160 --> 0:16:18.760 complicated place, and I don't know if I can trust 0:16:18.960 --> 0:16:22.040 my government or my company to look after me in 0:16:22.080 --> 0:16:24.560 the future. I'm going to start my own thing. And 0:16:24.600 --> 0:16:29.520 we see this wave of entrepreneurial response, and I think 0:16:29.720 --> 0:16:32.680 we're going to see a lot of those companies are 0:16:32.720 --> 0:16:36.160 going to do well. They're going to create value. People 0:16:36.160 --> 0:16:40.920 are learning how to work independently from institutions. So while 0:16:40.960 --> 0:16:43.400 there are bad things happening, there are also really good 0:16:43.440 --> 0:16:47.640 response functions as well. Now, in terms of the big picture, 0:16:47.920 --> 0:16:52.240 the markets have been expecting that eventually we'll get a resolution. Here, 0:16:52.960 --> 0:16:56.160 what I'm arguing is this may take longer, and this 0:16:56.280 --> 0:16:59.840 may be a more expensive process than you thought to finish. 0:17:00.200 --> 0:17:05.000 What China is doing is very clever. So the minute Russia. 0:17:05.200 --> 0:17:10.000 Putin said nuclear was a real possibility of threat. Within 0:17:10.040 --> 0:17:14.240 an hour, the Chinese came out and said truce, one 0:17:14.240 --> 0:17:18.800 word truce. Then they said constructive negotiations to China doesn't 0:17:18.840 --> 0:17:21.880 want to go to a nuclear confrontation, and neither does 0:17:21.920 --> 0:17:27.120 the US. But by threatening that, and by having Russia 0:17:27.160 --> 0:17:30.920 and China much more aligned than we've ever seen before, 0:17:31.960 --> 0:17:35.760 it pushes US and NATO to come to some kind 0:17:35.800 --> 0:17:39.640 of agreement over Ukraine's So right now we're in a 0:17:39.680 --> 0:17:42.879 moment where the question really is is the West going 0:17:42.920 --> 0:17:46.920 to put pressure on Ukraine to cut a deal or 0:17:47.160 --> 0:17:49.400 are we really going to fight to the bitter end? 0:17:49.640 --> 0:17:52.960 And I think that the appetite in the West to 0:17:53.160 --> 0:17:56.280 fight to the bitter end, especially if the Russians are 0:17:56.280 --> 0:17:59.560 now going to up this anti by taking the Ukraine's 0:17:59.560 --> 0:18:05.520 strategy to many other locations. Basically, it's creating an environment 0:18:05.520 --> 0:18:09.280 where eventually we're everybody has to cut an unpalatable deal. 0:18:09.520 --> 0:18:12.240 Russia won't get it what it wants, Ukraine won't get 0:18:12.240 --> 0:18:14.919 it once, the West won't get what it wants. But 0:18:15.720 --> 0:18:17.560 we may be able to bring it to an end. 0:18:17.680 --> 0:18:20.680 And I'll just say one tiny last thing, otto bone 0:18:20.680 --> 0:18:24.440 Bismarck put this so well, and nobody knows much about 0:18:24.440 --> 0:18:28.040 diplomacy today as he did during his era when he 0:18:28.160 --> 0:18:31.560 ran the ground strategy of all Western Europe, and he said, 0:18:31.640 --> 0:18:35.560 diplomacy is the art of building ladders for others to 0:18:35.600 --> 0:18:39.440 climb down. And right now we do not have anybody 0:18:39.440 --> 0:18:42.200 building any ladders for people to climb down. And even 0:18:42.200 --> 0:18:45.520 though it's an awful thing to have to do, I 0:18:45.520 --> 0:18:47.080 think in the end we're going to have to end 0:18:47.160 --> 0:18:49.760 up in that place. It's interesting because the rhetoric q 0:18:49.960 --> 0:18:52.119 hit coming out of the West suggested even if there 0:18:52.280 --> 0:18:55.040 was an absolutely perfect ladder made of gems, no one 0:18:55.040 --> 0:18:57.600 would climb down it. Yeah. Yeah, And I visit the 0:18:58.400 --> 0:19:03.880 Conservative Party shind ignite where Hunac spoke, and you know, 0:19:04.240 --> 0:19:06.639 the line from the West we will fight to the 0:19:06.760 --> 0:19:11.600 end is getting harder, stronger. Well, given everything that's happened, 0:19:11.640 --> 0:19:13.199 one of the things that we've been talking about a 0:19:13.200 --> 0:19:14.560 lot over the years, and I think you and I've 0:19:14.560 --> 0:19:17.800 talked about before, is the reversal of the great globalization 0:19:17.920 --> 0:19:20.240 of the last couple of decades and the effect that 0:19:20.240 --> 0:19:25.560 that will have on individual economies and on inflation. Now, 0:19:25.560 --> 0:19:29.160 do you still think that globalization will continue to all 0:19:29.200 --> 0:19:31.480 to go backwards. I know you're terribly optimistic in lots 0:19:31.520 --> 0:19:34.080 of areas. So where do you see that going? The 0:19:34.119 --> 0:19:37.119 rebuilding of supply chain, resilience, etcetera. Which has given us 0:19:37.200 --> 0:19:40.240 bouts of inflation over the last couple of years, how 0:19:40.280 --> 0:19:43.080 do you see that playing out over the next couple Totally? 0:19:43.720 --> 0:19:46.439 So I had to make up a new word for you. 0:19:46.560 --> 0:19:49.240 Always make up new words. Words are great, you know, 0:19:49.320 --> 0:19:52.240 by the way, listeners who aren't used to hearing Pipper speak, 0:19:52.280 --> 0:19:57.040 It was Pipper, I believe, who invented the word shrink flation. Right, Well, 0:19:57.119 --> 0:20:00.040 the words of yours. Well, here's the thing. Actually, it 0:20:00.040 --> 0:20:03.600 turns out so I did. I came up this word sreinflation, 0:20:03.720 --> 0:20:07.000 and I remember talking to your conference about it at 0:20:07.040 --> 0:20:09.560 the time. You know, this was back in twenty sixteen 0:20:09.840 --> 0:20:14.600 or earlier, because there wasn't a word to describe this 0:20:14.800 --> 0:20:17.520 thing about your candy bars at the shop keep getting 0:20:17.640 --> 0:20:20.000 smaller but you're paying the same price, and it's an 0:20:20.040 --> 0:20:22.920 early indicator than inflation is building and it's going to come. 0:20:23.840 --> 0:20:27.360 But then it got into the Merriam Webster Dictionary this year, 0:20:27.440 --> 0:20:31.239 which was amazing. It's amazing However, now it turns out 0:20:31.320 --> 0:20:33.920 there are some other people who were also using it, 0:20:34.040 --> 0:20:35.560 but I didn't know it at the time, so I 0:20:35.600 --> 0:20:38.280 think it's an open question who really invented it, But 0:20:38.440 --> 0:20:40.520 a bunch of us kind of spotted that there was 0:20:40.560 --> 0:20:42.879 a need for a new word. So today my new 0:20:42.960 --> 0:20:48.359 word is globalization, and what that means is globalization and 0:20:48.560 --> 0:20:52.200 localization coming together. And I think that is where we 0:20:52.280 --> 0:20:56.440 are with globalization. So the old definition of globalization was 0:20:56.600 --> 0:21:00.159 really that all the jobs would go to China. Right 0:21:00.200 --> 0:21:03.000 we just said, Okay, we're going to outsource all manufacturing 0:21:03.040 --> 0:21:06.600 of hardware to China and software will be done in 0:21:06.640 --> 0:21:10.800 the West, and that was the definition of globalization. Well, 0:21:10.880 --> 0:21:17.320 today we have a situation where we are relocalizing supply chains. 0:21:17.520 --> 0:21:21.480 We are manufacturing everywhere in the world now, and because 0:21:21.600 --> 0:21:26.840 China isn't competitive anymore through inflation, through their slowdown, the 0:21:28.880 --> 0:21:31.439 destroyed belief that they're going to get rich before they 0:21:31.480 --> 0:21:34.840 get old, they don't believe this anymore, so they're not 0:21:35.000 --> 0:21:37.880 working in the same way they were. All that taken 0:21:37.920 --> 0:21:43.919 together means that we have a relocalization of production everywhere, 0:21:44.440 --> 0:21:47.320 and I think fundamentally we're going to end up with 0:21:47.680 --> 0:21:53.959 more competition, more market entrance, a greater distribution of jobs 0:21:54.000 --> 0:21:57.159 around the world instead of just everything going only to China. 0:21:57.800 --> 0:22:03.680 And so glocalization is a more advanced, more comprehensive version 0:22:03.800 --> 0:22:07.040 of globalization than what we used to have. It's a 0:22:07.200 --> 0:22:10.120 better version, actually, even though it's been a hard process 0:22:10.160 --> 0:22:13.600 to get here. Now, the problem for China and the 0:22:13.680 --> 0:22:17.840 problem for the world is that if they're not competitive anymore, 0:22:18.560 --> 0:22:21.640 we can't just say to a billion people, oh well, 0:22:21.840 --> 0:22:25.159 too bad for you, right, we have to find a 0:22:25.240 --> 0:22:29.760 way to reintegrate those billion workers into the world economy 0:22:29.800 --> 0:22:33.000 in some way or another. And that is our sort 0:22:33.000 --> 0:22:35.600 of task of our generation now. And I would add 0:22:36.320 --> 0:22:39.320 that we have to do it with Russia too. You know, 0:22:39.800 --> 0:22:44.159 it's not that every Russian citizen supports what President Putin 0:22:44.320 --> 0:22:48.080 is doing. And you can't just cancel economies, right, You 0:22:48.160 --> 0:22:50.520 can't just say, oh, well, everyone in Russia has to 0:22:50.600 --> 0:22:53.800 suffer forever because they once had a bad leader. I mean, heck, 0:22:53.840 --> 0:22:56.520 I'd hate to be held accountable for any of our 0:22:56.600 --> 0:23:01.120 recent US presidents, right as an American citizen. So one day, 0:23:01.480 --> 0:23:05.080 when something changes and we get a deal, we're all 0:23:05.160 --> 0:23:07.159 going to have to figure out how to reverse on 0:23:07.240 --> 0:23:12.520 a dime and reintegrate all those brilliant Russians who had 0:23:12.600 --> 0:23:15.280 nothing to do with all this back into the world economy. 0:23:15.440 --> 0:23:18.040 And unpalatable as all that sounds right now, I think 0:23:18.080 --> 0:23:22.399 it's essential because if we don't reintegrate the Chinese and 0:23:22.520 --> 0:23:26.919 the Russians, we will end up in this fight again. Okay, 0:23:27.000 --> 0:23:30.960 but how do you reintegrate those tens of millions of 0:23:31.080 --> 0:23:33.560 Chinese workers who may now be slightly priced out with 0:23:33.600 --> 0:23:36.000 the global market when it comes to making localst goods. 0:23:36.240 --> 0:23:40.120 How does that turn around? Well? And it's further complicated 0:23:40.280 --> 0:23:46.240 because President she has introduced the Great Digital Wall as 0:23:46.280 --> 0:23:49.000 they're calling it, which is he cut off access to 0:23:49.119 --> 0:23:51.719 the global Internet. So if you're in China, you cannot 0:23:51.840 --> 0:23:55.800 connect to the top four or five thousand websites. And 0:23:56.000 --> 0:23:58.000 how are you going to innovate if you don't know 0:23:58.119 --> 0:24:02.000 where the cutting edge of innovation is? And so I'm 0:24:02.200 --> 0:24:05.399 very concerned that the leadership in China are making it 0:24:05.480 --> 0:24:09.400 impossible for the average person to figure out a better 0:24:09.480 --> 0:24:11.760 way forwards. Right in the West, we can do it 0:24:11.880 --> 0:24:15.840 because we have personal freedoms which we often take for granted. 0:24:15.920 --> 0:24:18.600