National Capitalism & Death of the International Monetary System | Russell Napier

In Episode 392 https://hiddenforces.io/podcasts/national-capitalism-death-of-the-international-monetary-system-russell-napier/ of Hidden Forces, Demetri Kofinas speaks with author, investor, and financial historian Russell Napier https://www.libraryofmistakes.com/, about how to navigate a seminal transition in the global trade and monetary order. This episode aims to provide you with the tools to understand, value, and manage the assets, exposures, and risks in your portfolios and to capitalize on opportunities that come along only once every hundred years. In the first hour, Demetri and Russell Napier discuss the origins of the non-system that came to shape international trade and finance in the decades after the breakdown of the Bretton Woods international system of fixed exchange rates. They discuss the de-pegging of the RMB from the USD, the closing of the gap between the discount rate and the growth rate in developed economies, and the implications of America's escalating economic war against China. In the second hour, which is available to premium subscribers only, Russell Napier and Kofinas focus most of their time on the implications of this breakdown in the international trade and monetary system for investors. They discuss how developed world governments are likely to repress capital, what you want to own in such a world, what you don't want to own, and how to tell the difference. They also discuss what a new Chinese monetary order might look like, which countries would participate, and how such a system would build off China's efforts to digitize the Yuan and create a Chinese-built digital payments infrastructure that extends beyond China's borders as part of the Digital Silk Road initiative. They also discuss the prospects for a strategic Bitcoin fund, the use of stablecoins as an extension of Dollar hegemony, and the fate of the Euro in a world torn between Beijing and Washington. You can subscribe to our premium content and access our premium feed, episode transcripts, and Intelligence Reports at HiddenForces.io/subscribe https://hiddenforces.io/subscribe. If you want to join in on the conversation and become a member of the Hidden Forces Genius community, which includes Q&A calls with guests, access to special research and analysis, in-person events, and dinners, you can also do that on our subscriber page at HiddenForces.io/subscribe https://hiddenforces.io/subscribe. If you enjoyed listening to today's episode of Hidden Forces, you can help support the show by doing the following: Subscribe on Apple Podcasts https://podcasts.apple.com/us/podcast/hidden-forces/id1205359334 | YouTube https://www.youtube.com/channel/UC8URhgYos5fjHqFSO4RSIEg | Spotify https://open.spotify.com/show/0TK6u251zGSlMgJKH6cOaP | Stitcher https://www.stitcher.com/podcast/demetri-kofinas/hidden-forces | SoundCloud https://soundcloud.com/hiddenforces | CastBox https://castbox.fm/channel/2629539 | RSS Feed http://hiddenforces.libsyn.com/rss Write us a review on Apple Podcasts https://podcasts.apple.com/us/podcast/hidden-forces/id1205359334 & Spotify https://open.spotify.com/show/0TK6u251zGSlMgJKH6cOaP Subscribe to our mailing list at https://hiddenforces.io/newsletter/ https://hiddenforces.io/ Producer & Host: Demetri Kofinas http://www.demetrikofinas.com/ Editor & Engineer: Stylianos Nicolaou Subscribe and Support the Podcast at https://hiddenforces.io https://hiddenforces.io/ Join the conversation on Facebook https://www.facebook.com/hiddenforcespod/, Instagram https://www.instagram.com/hiddenforcespod/, and Twitter https://twitter.com/hiddenforcespod at @hiddenforcespod Follow Demetri on Twitter at @Kofinas https://twitter.com/kofinas Episode Recorded on 11/27/2024

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Demetri Kofinas?

  What's up everybody? My name is Demetri Kofinas and you're listening to Hidden Forces, a podcast that inspires investors, entrepreneurs, and everyday citizens to challenge consensus narratives and learn how to think critically about the systems of power shaping our world. My guest in this episode of Hidden Forces is Russell Napier, the author of the Solid Ground newsletter, the keeper of the Library of Mistakes, and the founder and course director of The Practical History of Financial Markets, which is available as both an online and in-person course through the University of Edinburgh Business School. This is Russell's fourth appearance on the podcast. He was first on nearly four years ago to discuss his experience living through the

• 0:44Demetri Kofinas?

  Asian financial crisis and how it helps inform our understanding of the world we live in today. Another time to discuss his macroeconomic and political framework, and most recently to join in a panel with historians Helen Thompson and Edward Chancellor for a discussion about the new political economy and the reversal of multi-decade trends in demographics, globalization, and energy. Today's conversation builds on all of those discussions and could not come at a more important time for investors. We are living through the early stages of an interlocking set of political, economic, financial, and geopolitical transitions that will fundamentally alter the investment landscape and make or break fortunes in the process.

• 1:27Demetri Kofinas?

  The next two hours are meant to help you navigate this transition by giving you the tools to understand, properly value, and manage the assets, exposures, and risks in your portfolios, and to capitalize on opportunities that come along only once every hundred years. In the first hour, Russell and I discussed the origins of the non-system that came to shape international trade and finance in the decades after the breakdown of the previous system of fixed exchange rates established at Bretton Woods. We discussed the de-pegging of the RMB from the US dollar, the closing of the gap between the discount rate and the growth rate in developed economies, and the implications of America's escalating economic war against China.

• 2:10Demetri Kofinas?

  In the second hour, which is available to premium subscribers only, Russell and I focus most of our time on the implications of this breakdown in the international trade and monetary system for investors. We discuss how developed world governments are likely to repress capital, what you want to own in such a world, and equally importantly, what you don't want to own, and how to tell the difference. We also discuss what a new Chinese monetary order might look like, which countries would participate, and how such a system would build off of China's efforts to digitize the yuan and create a Chinese-built digital payments infrastructure that extends beyond China's borders as part of the Digital Silk Road Initiative. We also discuss the prospects for a strategic Bitcoin fund,

• 2:53Demetri Kofinas?

  the use of stable coins as an extension of dollar hegemony, and the fate of the euro in a world torn between Beijing and Washington. If you want access to that part of the conversation, and you're not already subscribed to Hidden Forces, you can join our premium feed and listen to the second hour of today's episode by going to hiddenforces.io/subscribe. All of our content tiers give you access to our premium feed, which you can listen to on your mobile device using your favorite podcast app, just like you're listening to this episode right now. If you want to join in on the conversation and become a member of the Hidden Forces Genius Community, which includes Q&A calls with guests, access to special research and analysis, in-person events, and dinners,

• 3:38Demetri Kofinas?

  you can also do that on our subscriber page. And if you still have questions, feel free to send an email to [email protected], and I or someone from our team will get right back to you. Lastly, because this conversation deals with investing, nothing we say on this podcast can or should be viewed as financial advice. All opinions expressed by me and my guests are solely our own opinions and should not be relied upon as the basis for financial decisions. And with that, please enjoy this profoundly enlightening and deeply educational conversation with my guest, Russell Napier.

• 4:22Demetri Kofinas?

  Russell Napier, welcome back to Hidden Forces.

• 4:26Speaker 01

  Dmitry, it's great to be back. Thank you.

• 4:28Demetri Kofinas?

  It's wonderful. And I told you, you look very snazzy in your outfit. You're not recording from the library this time, but the acoustics are really great. I'm really stoked to have you back on the podcast. We're going to have a chance to update me and our listeners on your framework, which I have told people I think is the most complete economic framework that I have ever come across from any analyst or researcher that is most appropriate for the world we live in today. And the thing I want to also mention before we get into that conversation is that you have, besides the solid ground newsletter, you also have, you're the keeper of the library of mistakes, and you have a course on the practical history of financial markets

• 5:12Demetri Kofinas?

  that you do in conjunction with Edinburgh University. And you have been kind enough to provide a special offer to our premium subscribers and to our Genius members. Now, people know that we don't take advertisers or sponsors on this podcast, which is why we're able to offer this really great offer, because there's no compensation that comes to me or Hidden Forces for it. We're going to provide the information on how you can access that at the top of the second hour. But I do want to give people a sense of what the course is, what it's about, before we get into the conversation about your framework. So just kind of top of, top level, who is this course ideally for?

• 5:47Speaker 01

  Well, it's for anybody who is a professional, number one. But secondly, quite a lot of people who take this are people with their own savings, who have to make important decisions with their own savings. Increasingly, that's the case for 101ks or what we have over here are SIPs. People are having to make asset allocation decisions for themselves. And this is aimed at educating them. I should say, the framework comes from the course. The one is derived from the other 20 years of teaching. Hopefully, we learn something. So the course is about changes and structural changes in the world when they come along, and much, much more than that. So increasingly, our audience is individuals who are making those crucial decisions about their own savings.

• 6:29Demetri Kofinas?

  So I didn't mention, this is, again, it's an incredibly generous offer. It's a 50% reduction of the price for premium subscribers and 75% for Genius members. And again, I'll mention how they can do that in the top of the second hour. You know, something I came to appreciate while taking this course, because I know, you know, your views and opinions. Is that it's actually meant to provide investors, as you said, with the tools that they need to navigate this transition from the old global monetary and trading system that we're going to talk about today to the new one, or the new systems that you believe are emerging. And you do this, in my opinion, by structuring the course into five sections. So you are not the only lecturer in this course. You provide the concluding lecture, but the first lecture is on valuation and expected returns. The second one is on monetary

• 7:14Demetri Kofinas?

  theory and its effect on asset prices. The third is on behavioral finance. And the fourth, which is extremely relevant to the world we live in today, is investing in different inflation regimes. And then the fifth one, it's about mean reversion, but it's also really about financial history. Do you feel like that's like a, that really kind of captures the intention of the course and how it weaves in with your larger framework?

• 7:39Speaker 01

  Absolutely. I should say where those key constituents came from. In 2002, we had a conference in Edinburgh. We invited along fund managers. The qualification to be there is you had to have at least 30 years' experience. And we said to them, very simple question, what do you know today that you wish you'd known 30 years ago? Based on that, we constructed the syllabus for this course. Now, you've got to remember, in 30 years from 2002, they had seen a massive change. They had just arrived in the markets as the Bretton Woods system was breaking down. They'd seen the snake, they'd seen the Smithsonian, they'd seen the exchange rate mechanism. So they'd been through quite a lot. Number one, they wanted to know the long-term history of valuations because each of us is born

• 8:21Speaker 01

  into our own valuation paradigm, and we think that's the way it's always been. And they learned very, very quickly that that was not the way it had always been, and things had changed and valuations were shifting. So in this course, we can begin valuation data in this course in 1800, but the valuation data we really focus on runs from 1881. And then they gave us the key forces they thought produced mean reversion of equity valuation, which is changing inflationary expectations, liquidity, psychology. That's where we came up with this framework from. And therefore, because I put it together, it's the framework that I've been using now for All of that period and actually prior to that, I had a sneaking feeling that that was that framework that we should be using anyway, but it's kind of solidified over the years.

• 9:06Speaker 01

  And it's been exceptionally helpful to me and certainly my, my first book really fits in with that. I should mention that actually, that when you see the, if you like, the times when US equities have been cheap begs the question, why? And that's why I wrote the book. So really most of what I've done over the last 24 years now has been informed by what I've learned from those older fund managers about what we should be thinking about. The crucial thing about finance is to ask the right questions. My day job is advising financial institutions and the number of times we sit in a room and everybody gets the right answers to all the wrong questions. And that's what financial history brings to us. That's what the course is supposed to do. You can't do everything. This is too big a pursuit to do everything. So it's trying to hone us in on the four or five

• 9:51Speaker 01

  things that you need answered. And with the benefit of hindsight, there's really never more than four or five answers that you actually need. So every morning we wake up and we try to come up with 32 answers to 32 different questions.

• 10:02Demetri Kofinas?

  That might be my favorite line that I mean, I've heard it from you before. I actually quoted it to you in your last solo appearance in April of 2022, which was, you know, the worst thing that investors can do is to get all the right answers to all the wrong questions. So I want to focus today on the right questions. We're going to do that in a second, but I just want to reemphasize something, which is that I do really feel like having taken the course, it's about 18 hours. It's a long course and I do really feel like it is a complement to your existing framework as it is conveyed both through your public writings and you recently published an article in American Affairs, which we're going to talk about, as well as your writings in the Solid Ground Newsletter.

• 10:44Demetri Kofinas?

  And I think it is especially useful for investors, people that want to take these ideas and put them further into practice. So this is my two cents in terms of what it's about. You can learn more about the course at libraryofmistakes.com/course and then you can listen to the top of the second hour for more information on how to access it at the preferential offer that you've given our premium subscribers and our Genius members. Russell, as I said in your last appearance on the podcast, I cited a recent investor letter you wrote to your subscribers where you said that when regime change occurs, the greatest risk that for any investor is that they get all the right answers to all the wrong questions. And I asked you what those wrong questions were that investors were asking. And you said that while there are many wrong questions, they all derive

• 11:28Demetri Kofinas?

  from a belief that we live in a market-based system and that there's a link between interest rates and the rate of inflation. What did you mean when you said that?

• 11:37Speaker 01

  Well, that is economic theory that those two things would be linked. And most people in our business have now studied economics and economic theory. What they haven't studied is economic history or the comparative economic thought. So there have been throughout history prolonged periods when those two numbers were not linked. The obvious one that everybody would do would be a communist system where those two numbers don't have to be linked at all. But sometimes when you put together a monetary system, it leads to prolonged divergence between these metrics. And in recent times, one could probably think of the European Union and the single currency and it produced, let's talk about Greece again, Dimitri, produced

• 12:20Speaker 01

  this incredible divergence positively for Greece and then a incredible divergence negatively for Greece. Greece didn't have its own central bank. And the idea that it would be a stable relationship between the rate of growth and the discount rate in Greece was nonsense the day it joined the single currency. So that's a pretty good recent example of how the economic textbooks don't really admit to this being a possibility, but we've all lived with it as a reality. And the key question really today is that happening anywhere else? Or hasn't happened on a global basis? And we just really haven't noticed it yet? And really, what I've been writing about is how that's really been going on since I did its birth to 1994. And once again, it's imposed externally in a global monetary

• 13:04Speaker 01

  system. It's not chosen individually by each country. And therefore, we've all had to live and cope with that system. And central bankers, if you like, have adapted and adopted to the system rather than shape the system.

• 13:16Demetri Kofinas?

  So I'm really glad that you brought that comparison with the European Union, because it's a good analog for the global system, the informal non-system, as Paul Volcker has called it, or the hybrid system, that I think he's also called it, that we're going to talk about. What do you mean when you say that under the old system, or in the case of Greece and the European Union, there was a persistent gap between the growth rate and the discount rate in the developed world?

• 13:39Speaker 01

  Yeah, so if you look at charts of leverage or charts of asset valuations, something really just seems to go very different in the mid 1990s. Something very strange happened. So the valuation metric we like to use in this course, well, there's two of them, the cyclically adjusted P or the Schiller P suddenly starts elevating, and it goes way past its 1929 previous high, which was 1929, to a particularly high level by the year 2000, the end of 1999. And it's kind of stead, it's oscillated up there, but it's kind of stead at that higher level. Also, when you look at debt to GDP levels across the developed world, particularly America, but elsewhere, you see that they begin to elevate as well. So something happens. The fact that it's been underway now for

• 14:20Speaker 01

  nearly 30 years suggests that it was structural in nature. So here's the proposition. What happened is that when China devalued its exchange rate, it began to intervene to hold its exchange rate down. And in so doing, it became a massive buyer of treasury securities, but of other government bonds as well. And a non-price sensitive buyer of those securities, it was not interested in the yield one bit, it was on autopilot. And that initial action, there's a two-part action here, that first action decouples the discount rate, the risk-free rate, as we call it, from the growth rate. It isn't related to US growth, it's not necessarily related to domestic levels of inflation, because part two, China is also investing

• 15:04Speaker 01

  in a way that we've never seen in human history before. That extra capacity it's adding spills into the global marketplace for goods, depresses US inflation again. And once again, we have this action of China, this dual action, turning into something that depresses the global risk-free rate, but it does not negatively affect the global growth rate. And so we get the gap between the two opening up. And for anybody who's ever run a discounted cash flow calculation, you will know that actually your net present value is a product of really the gap between those two variables. And in a business cycle, that gap, it oscillates. And sometimes it closes, let's say the Fed was to drive up rates to tackle inflation, then the gap would close and growth might come down as well.

• 15:46Speaker 01

  But in this system that we put in place, the gap never, I mean, there were times when it closed, but it stayed at a structurally higher gap than before. And the market adjusts, the market gains the system, particularly in terms of adding leverage. It's a beautiful system to add leverage in if you think the discount rate is permanently low and the growth rate with some oscillations is significantly higher. So that's the system that was imposed by China. And just one further thing, by 1998, lots of other people joined in. Asia has its financial crisis, currencies devalue, but their central bankers also decide not to allow their currencies to go back up again. And really, in a 20-year period, all the way to 2014, there was massive purchasing

• 16:28Speaker 01

  of these securities and that decoupled them because they weren't being set by investors who judged the price relative to inflation expectations. They judged the price. Well, they didn't judge the price. They were on autopilot. So there's a lot more to it than that, but that's the basic framework and it sustains after 2014 by massive Chinese investment and China's been exporting deflation well past 2014. That's the framework. That's the global monetary non-system, as Volcker liked to call it, and it's coming to an end.

• 17:00Demetri Kofinas?

  Right, so there is much more nuance to it, as you said. Let's dig into that. First, I want to mention also, the first time you were on the podcast was to talk about your book on the Asian financial crisis, which is totally relevant here, and we'll have a chance to explain how that is. I want to talk a little bit about the origin story of the non-system because I want to suss out the distinction between that decade or so after Nixon closed the gold window and China's decision to peg itself to the dollar in 1994. But let's just suss out something when it comes to theory here and this relationship between interest rates, asset prices and inflation. First of all, is it your view that central banks were largely impotent?

• 17:41Demetri Kofinas?

  Even if they wanted to change that relationship between the discount rate and the growth rate, that they would have been unable to do so because policy was being set in Beijing? And with their willingness to manipulate the exchange rate and to support the treasury market and to press rates on the long end?

• 17:58Speaker 01

  Well, the timing here is really unfortunate because it comes just at the time when developed world governments give central bankers an inflation target. That's the problem. And if you give someone a target, they'll play to the target. So China is effectively importing deflation to the developed world, but central bankers are targeted with generating the 2% inflation. So that's a problem. What can you do? Should you be doing something about it if you're actually getting the target you were told to get? Now, in reaching that target, they ignored the rise in debt. They ignored, I mean, remember back to the very early stages of this, Dimitri? We had the infamous quote from Alan Greenspan about irrational exuberance. You know, just for a fleeting moment, there was a suggestion that Greenspan thought the

• 18:41Speaker 01

  asset prices were overdone, that there was too much leverage in the system. But he then did absolutely nothing about it. And I think then the telltale event really is September 1996. We have a collapse in asset prices, particularly in Europe, and we have a major default in a, or potential default in a hedge fund called LTCM. And Greenspan comes to the rescue of LTCM. So this was the moment where there was an opportunity to say, well, wait a minute, is this imported deflation really something that we should be concerned about? Should we be going to the government and explaining that the 2% target of a local CPI really needs to be rethought? And do we have to worry that this hedge fund has gone bust?

• 19:24Speaker 01

  And instead, all we did was keep cutting rates to ensure that the system was sustained. And that, I think, is when the game began to get gamed. And one final quote, I used to meet Paul Volcker usually about once a year. And the first time I met him was 2002. And I said to him, very arrogantly, actually, where did US monetary policy all go wrong? And he said, L, P, C, M. So the reaction function was, let's sustain this. But the sympathy you can have for central bankers, they were told to deliver 2% inflation. And they did. And for a long time, people thought they were geniuses for delivering it. But because China was forcing this adjustment process on them, they really should have gone back

• 20:07Speaker 01

  after the devaluation and had a different conversation. Now, the American Affairs article is available online, and there's a tremendous quote in there from Bill Clinton in November 1998 about what we should have done when the Chinese moved to this system and how we should have negotiated. But frankly, everybody stuck with a 2% target. Lots of people loved it. Inflation was low, debt was there, asset prices were going up, and there was no political will in the developed world. So I don't really blame, I blame the central bankers a little bit, but this was a problem for politicians to solve. And Clinton told them what they had to do, and nobody did anything.

• 20:42Demetri Kofinas?

  So I want to clarify something, and then I want to, I want to follow up on my original question about central bank impotence and what could or could not be done by policymakers on the monetary side. When you use the term import inflation, what you're describing is that the Chinese production and export was exporting goods to the United States that kept inflation low because the price of those goods were low. And because central banks were targeting the price of the CPI and PCI, they weren't looking at, at the effect that interest rates and credit were having on asset prices, which was leading to financial instability, which erupted in, in 2008. Greenspan also, besides the irrational exuberance quote, also had that famous quote about the conundrum. And I think that was 2005. It was, was it

• 21:24Demetri Kofinas?

  2005? I don't remember. But it was when he started raising interest rates and he saw that the long end continued to be depressed and it remained inverted. I'm curious sort of what, you go ahead and tell me what, what date that was.

• 21:34Speaker 01

  Well, I can't remember the date he said it, but I thought it was a very silly thing to say. It was the thing you'd say that if you believed in a market system, because where else would all that buying come from except from excess savings? Well, actually, if it's a non-market system, if the currency, the Chinese currency is not determined by the free flow of capital, but determined by intervention of the Chinese, this doesn't really represent. The excess savings of the people of China represents a policy of the Chinese government. Now, I'm sure he would argue that, well, look, if the Chinese people had spent all the money, they would have sucked at imports, China wouldn't have had a huge external surplus. But I'm not so sure about that. I mean, it was coming from structurally utilizing a lot of labor, which had been underutilized, building a lot of capital, which it just didn't have before.

• 22:18Speaker 01

  And the currency should have been going up, the currency should have been going up dramatically. I mean, at one stage, its current account surplus was 10% of GDP, not long after it joined the WTO. And it shouldn't be a great surprise to anybody that the so-called conundrum was actually direct interference by the Chinese Central Bank buying treasury bonds. And that, because they were non-price sensitive, meant that they wouldn't necessarily respond as Greenspan thought they would. So Greenspan, and he said this, of course, in his famous testimony, I think it was 2008 or 2009, that he was astounded that the market system didn't necessarily work the way he thought it was. That's because it wasn't a market system. So if you see the world through that prism, and if you're determined to see it through that prism and ignore government action,

• 23:01Speaker 01

  then I think you'll often come to the wrong conclusion. And that's what was going on here. It shouldn't have been a great surprise. I mean, there were lots of people all around the world pointing this out. It wasn't as if it was a bolt from the blue to discover that the Chinese were buying lots of treasury bonds and non-price sensitive buyers.

• 23:18Demetri Kofinas?

  Yeah, and that's also a really great lesson for investors, which is we all have the tendency to put blinders on. And if you're determined, as you said, determined to see things a certain way, you're going to see them a certain way, and it takes effort to change your perspective. Let's talk about the mechanics of how China did this for a minute here. So when it came to pegging their exchange rate to the dollar, while concurrently maintaining chronic current account surpluses, capital controls and other measures that shepherded foreign capital and corralled domestic Chinese savings into investment to create the conditions for the embalances that we live in today, how did they do that? What were the mechanisms through which they accomplished it?

• 23:52Speaker 01

  I think the best way to do that is on a day-to-day basis. So let's say you and I are running the PBOC and we walk into the office. And on that day, the tendency is there's more buyers than sellers on the international exchanges of our currency and it's tending to go up. And we don't want it to go up. What do we do? Well, what we do is we walk into the marketplace and we sell renminbi. Now, the crucial thing here is it's not renminbi that we have. We didn't have it sitting around in a great big pile somewhere as a central banker. We create it out of thin air. That's the joy of central banking. That's what you get to do. And when that transaction is complete, we, the PBOC, have lots of dollars. But we've also created lots of new renminbi. And we do that transaction over and over and over again. And it's worth adding that we weren't just taking the current account surplus of China

• 24:37Speaker 01

  and the savings of the people of China. We're actually taking the savings of the people of America as well. If in any given year, the savers of America tried to put 20 billion into China, they also intervened at that stage. And they also ended up with the dollars and they also put them into the treasury market. So this is a really peculiar situation because that's that movement of capital, that movement of savings is a movement of a stock that has been accumulating, well, since the first person got off the May floor. And if you try to move that stock into a managed exchange rate regime, it ends up back in your own government bond market. And it ends up being held by the PBOC and you end up holding the Chinese assets you so wanted to hold. So this thing was supercharged and nobody, and I mean this really very seriously,

• 25:22Speaker 01

  if we'd ever held a conference like we had at Bretton Woods to design this system, nobody would have accepted that. Everybody would have realized how incredibly dangerous such a system was. And if you like, we can go through why this is so different from the Bretton Woods system. But hadn't we designed this in a conference? This plan would have been thrown out on day one as dangerous and unacceptable.

• 25:43Demetri Kofinas?

  Yeah, I do want to. Just, I want to comment on something because I think this is going to be difficult for lots of people to understand, including me. I have a difficult time understanding how a country can run both a current account and capital account surplus simultaneously because we learn in economic theory that when you, and in practice, in free market economies, that a current account surplus leads to a capital account deficit. But in China's case, that wasn't true because of the specific mechanisms that we were talking about.

• 26:11Speaker 01

  Yeah, so the balance of payments, the clue is in the title, it balances just exactly as you said, in a free market system. But when you intervene, it still balances, but the balancing item is this adjustment in the foreign exchange reserves of the intervening central bank, either a rise in those reserves or a decline. So it still balances, but the balancing item now is having a direct effect on the monetary policy, certainly of the domestic economy. But when it's big enough, as it was in the case of China, it's actually having a direct effect on monetary policy outside of the country intervening as well. So in the situation where there's exchange rate intervention going underway, the balancing item is movement in reserves.

• 26:49Demetri Kofinas?

  So we're going to have a chance to continue that part of the conversation about Bretton Woods, but I just want to kind of maybe go back a little bit here and set that up. So the framework that you put forward in the American Affairs piece that we've cited now multiple times and in your Solid Ground newsletters, which I subscribe to and I think are one of the highest signal to noise ratio things out there. It's one that you've been developing for a long time, and I think it's grown ever clearer as time has gone on and as the relationship between the United States and China, the two poles of this non-system, has grown ever more dysfunctional. And it seems like we're caught in this entanglement where both parties have decided for different

• 27:30Demetri Kofinas?

  reasons that the relationship is no longer viable, but where neither is sure how to disentangle itself in a way that limits the damage and doesn't bring the world to the brink of war. Is that the stage where we are at, where we're confident the relationship is not salvageable, but where both parties have a lot to lose from a messy divorce? And the operative question for investors are around how long it will take to reach a resolution, what the resolution space looks like, and how to manage those risks accordingly?

• 28:02Speaker 01

  I think we've gone beyond that. I think we are, and not everybody will agree with this, I think we're already fighting two proxy wars with China. One of those proxy wars is fought in the Ukraine. China provides, buys oil from Russia and finances Russia. Within the last few days, just before we recorded this, the European Union has put sanctions on or is discussing sanctions against various Chinese industrial corporations that are helping build attack drones for Russia. According to the CIA, and the CIA is not always 100% reliable, Dimitri, but you know, it's a source. 80% of all the microchips discovered in Russian armaments are either built in or sourced through China. That's a proxy war.

• 28:44Speaker 01

  Now, the other proxy war is perhaps even more controversial, but obviously China is buying oil from Iran and Iran has certain proxies that it funds in the Middle East. So the idea that we are at a peace with China, I think is an illusion. Now, we have, we fought a cold war before and that never really got to confrontation between the two superpowers involved, but it produced lots of bloody, very bloody and dangerous proxy wars. You know, actually started in Greece, didn't it? I mean, just after World War II with horrible, horrible consequences. So I'd say we've gone beyond this. Now, nothing has ever gone too far that it can't be pulled back, but I think it's worth

• 29:26Speaker 01

  saying that the new Secretary of State, should he make it to inauguration day, Marco Rubio, has got some extremely strong views on China and has tabled in the Senate the Patriotic Investment Act, which effectively forces a divestment of US savings from China. So it would be wonderful if we could see on the horizon something that is going to ameliorate the situation, but there is nothing out there yet that is, looks like doing that. And we are already, in my opinion, fighting two wars with China, indirect wars, proxy wars.

• 30:00Demetri Kofinas?

  So let's dig in on that a little bit deeper, the geopolitics, because it does feel like, despite what you said, which is true, I agree with that framing, the United States is still actively managing the escalation ladder. Now, in the case of Russia, it has fully escalated on the economic warfare side. There's nowhere else to really go. They are now managing escalation in kinetic warfare. Where we are seeing this in China is still, we're not, thank God, in an open warfare with the Chinese. But we are in the process of moving up the escalation ladder on economic warfare. And one area we've seen this is in export controls with semiconductors. Now, the criticism of the Biden administration is that they haven't tightened those loopholes enough to prevent the Chinese from being able to make progress domestically on the

• 30:45Demetri Kofinas?

  scale that they've been able to do. The Biden administration would probably argue that they're afraid. They're afraid of going too tight because they're afraid of what it would cause and the reciprocal actions that the Chinese would take. I'm curious, is your view that we're eventually going to, and that was just to make clear for listeners, when I was talking about this idea of a marriage and a messy divorce and how do we, how do we figure out a way to cohabitate or separate equitably and share the kids? That's what it feels like to me, and I'm, I don't know, and I'm curious from your perspective as a historian, how difficult it is to find some kind of equilibrium there. But the consequences of either rupture is really bad.

• 31:29Demetri Kofinas?

  So I'm sure curious on your end, do you think this is a manageable escalation or that we're eventually going to end up just like we did with the Russians, where we completely disconnect our economies and it's open economic warfare before we move to the next stage?

• 31:42Speaker 01

  I do think that's where we'll end up, but that makes them what I think is going on. I think people are looking back to Japan in the 1930s when we had the League of Nations. Japan invaded China and we began to ratchet up sanctions against Japan, including sanctions on commodities. Arguably, that's what forced the Japanese to be much more expansive. So if you're going to use these forms of sanctions, I think lurking at the back of any policymaker's head might be, well, you're actually just going to force their hands to go in pursuit of those particular commodities. These days, commodities are still the same as they've always been, but actually, more importantly, chips. So this is why so far it's been relatively cautious because you don't want to trigger an outstrike.

• 32:25Speaker 01

  And I think people are thinking back into the 1930s. The reason that I think it can't end well, and I don't, I'm not talking about warfare, I'm just talking about less trading ties, less ties in terms of the free movement of capital.

• 32:39Speaker 01

  Is that the Chinese feel contained. They feel contained because of America's presence in Japan, South Korea and the provision of armaments to Taiwan and potentially now more provision of armaments to the South China Sea. They are the second great power in the world today and they want a sphere of influence like all great powers always have. And as far as they're concerned, that sphere of influence has to include Japan, South Korea and Taiwan. And I don't mean occupation at all, but I just don't want the American fleet or any fleet to be able to operate in those waters and potentially constrain or contain China. The question is, how would we resolve that?

• 33:20Speaker 01

  Could America walk away from its commitments to Japan, South Korea and Taiwan? I think it's very, very difficult. So when two great superpowers meet, as we are now in this situation, it's like the rubbing together of two tectonic plates. We don't know when that shift is going to occur, but it's very unlikely that that shift isn't going to occur. And the only resolution would be to give China its sphere of influence. And I can't see an American president doing it. Maybe I'm wrong, but that's why I think it has to take us into a worsening position, a worsening relationship between the two. And of course, I wake up every morning and hope to be wrong about that.

• 33:57Demetri Kofinas?

  Oh, my God, we all do. That would change our lives significantly. I mean, in a way that we can throw around words, but it's hard for me to really imagine what that would be like. But again, it was hard for me to imagine what February 2022 would be like and waking up and seeing the Russian invasion of Ukraine. It was, it was in no small way traumatic to see that. And in some ways, it also, it also reminded me of the, of March 19th, 2003, the strike on Dora Farms and the commencement of the war against Iraq. There's something really jarring about open warfare.

• 34:29Speaker 01

  There was a recent speech, and I wish I could remember exactly when it was, but I think it was this year by the Japanese prime minister to the joint houses of Congress. And I think everybody listening to this should go and read that because, and I'm going to paraphrase it and I, you know, we'll get it wrong here. But at one stage during that speech, he says, if you think the murder and mayhem that Russia is causing in Ukraine is a lot, just wait till you see what China will do in Asia. That's from the Prime Minister of Japan. Now, he's got a vested interest in saying that. He's appealing to Congress to give him more armaments. But even so, the language is absolutely stark, not the language that I ever thought I'd hear in my lifetime, to be sure. But this is one of China's neighbors. Yes, crying wolf to some extent to get more

• 35:14Speaker 01

  American support, but in language which is kind of blood curdling.

• 35:18Demetri Kofinas?

  So I've actually hosted a lot of conversations on the security dynamics in Asia and especially with Taiwan. One in particular that comes to mind that would be a good reference point for how hawks on the American side are thinking about this is a conversation with Elbridge Colby, who is in the running for some significant post at the Defense Department. I will say that I haven't done a good enough job representing the Chinese perspective, and that's something that I hope to do better. So let's switch back to the economics conversation. One of the points you've made in all sorts of communications, both private and public, is that you believe China is already moving away from its managed exchange rate system. Why do you think so?

• 35:59Speaker 01

  We only have to go back to April of this year. So in April of this year, an interview with Xi was published, and actually came from November the year before, in which he said that the toolbox of the central bank needed to be increased, and specifically the ability to buy domestic currency bonds. In May, the central bank governor announced that this had now been, you know, it had always been there, but it was going to be utilized. In August, September, and October, the People's Bank of China bought more domestic currency bonds. I'm sure everyone's saying, well, you know, the Fed does that every day, you know, the ECB buys and sells these things every day. So what? Well, there'd been no

• 36:39Speaker 01

  addition to that line of their accounts since 2007, been absolutely flat at 1.5 trillion yuan. And now suddenly it's going straight up and it's going straight up. So what's going on here? Well, when you try to manage your exchange rate, you are buying bonds every day or selling bonds every day, but what you're buying or selling are somebody else's bonds every day. You know, we, we went through the mechanics of that earlier. If you intervene, so we could see a line in their balance sheet moving, which is their foreign exchange reserves, which would be an asset and the offsetting liabilities, which would be the reserves, the local currency bank reserves they create, the money they create when they intervene. But now suddenly they're deciding to just get on with it and create money by buying

• 37:24Speaker 01

  domestic bonds and increasing the size of the balance sheet by doing that without reference to the supply or demand for the exchange rate on that given day. Now, nobody's really very concerned about it because actually it's already got to about two and a half trillion, which is in the size of the balance sheet, still fairly small. But the principle of the thing is very clear. You've added a new tool, you're using the new tool. And if you continue to use the new tool, it's not compatible with also managing your exchange rate. So that's the first one. And the second one is, is a bit easier to explain. They're going to put one trillion yuan of fresh capital. The government's putting fresh capital into the banking system and the banking system uses one trillion of capital. It creates roughly eight trillion of, of lending. That's fractional reserve banking. That's the way it works.

• 38:09Speaker 01

  And once again, if you're just going to unilaterally expand that your commercial banking system and in the process creates so much money, it is not compatible with running your monetary policy in line with sustaining the exchange rate. So that's all quite technical. What I can say to you is the market doesn't care. The market doesn't really seem to think that these things are not compatible with a managed exchange rate. And, you know, I have lots of conversations with professional investors. The reason is they think she wants to control everything and because he wants to control everything, he can control everything. And I disagree on the second part of that assumption.

• 38:43Demetri Kofinas?

  So I just want to clarify something because some of these mechanisms are conditional. If there's a decreased demand for Chinese bonds and the PBOC is buying bonds, that's bearish for the renminbi, even though China runs a large current account surplus in which it accumulates dollars, which would again, conditionally put upward pressure on their currency. So how are you thinking about what a de-pegging of the RMB USD exchange rate would mean in practice? Would it be a revaluation upwards or downwards?

• 39:16Speaker 01

  So the Chinese external accounts get in the newspapers a lot because the trade account is very large and therefore it makes a lot of headlines. But a country's external accounts are not just its trade account. We also have to add into that the services account. One of the biggest elements in a services account actually is tourism. China is running a very large deficit. So you start with a nice positive number on your trade account, but then you have to take off what you got on your services deficit. And then you've got to look at the capital account. And this is where China does particularly badly. As you mentioned earlier, there are capital controls in China on the people of China. They are more honoured in the breach than their observance. And there are lots of ways that Chinese people can get money out, and they do, and that shows up in the external accounts.

• 40:00Speaker 01

  But now, something new has come along as well. Foreigners are pulling money out, and that's been going on for quite some time now. It's obviously portfolio investors selling those Chinese bonds, selling those Chinese equities. But even amazingly, foreign direct investors, I just noticed actually today, the headline that Volkswagen have sold one of their Chinese plants. So even direct investors are getting out. Now, suddenly, you're going to have more, perhaps, more selling than buying of your currency, even though you run a trade surplus, you're going to have more selling than buying. And it's been my argument for some years that in trying to sustain the exchange rate against that selling, they've run too tight a monetary policy. That's why debt to GDP is spiraling out of control. That's why the CPI was close to zero. That's why the PPI was negative.

• 40:45Speaker 01

  That's why property prices were declining. That's why youth employment is very high. It's because the managed exchange rate regime, finally having been China's greatest asset on the metrics we discussed earlier, suddenly when you don't have that scale of surplus anymore, it's not a positive anymore, it's a negative, and it's leading you towards a debt deflation. Many people up until August thought that Xi Jinping was quite happy with that, but we've discussed the changes in policy since then, which indicate the, at least the direction of travel, even though the magnitude at this stage is still relatively controlled.

• 41:18Demetri Kofinas?

  So someone like Louis Gave, who's been on the podcast, I think, has made the argument that the Chinese would de-peg, but that that would lead to a revaluation upward of the Chinese currency and an internationalization of the renminbi. You guys did a conversation together some time ago that I saw. First of all, is that an accurate representation of Louis' view? And two, where is the sort of disconnect between your framework and the framework of folks like Louis who view a de-pegging as bullish for the renminbi?

• 41:45Speaker 01

  Yeah, I think that's a fairly reasonable view of what Charles and Louis have to say on the subject matter. I think both of them were of the view that China was going to run a system, let's call it a creative destruction system, which some people will recognize it's from Austrian economics. It's a system that really we don't run in the rest of the world now. We haven't really run it since the 1930s. And it's famously associated with Andrew Mellon, who said, "Liquidate stocks, liquidate capital, liquidate labor, purge the rottenness from the system." And I think Louis and Charles together think that that's what Xi was up to, and therefore that would attract that capital in. If you like, it would be a more pure form of capitalism. I'm trying to put words into their mouth.

• 42:28Speaker 01

  I hope I'm accurately reflecting what they would say. And that would attract capital in. It's never been my opinion that would attract capital in. Yes, it's maybe that element, a form of pure capitalism. But Xi Jinping likes to control things. And the idea that foreign capital would pour into China because it's confident in property rights, confident that the CCP, the Chinese Communist Party, wouldn't interfere with return on equity. So you know, you get one element of the old kind of gold standard discipline, but behind it, you still have this huge issue over property rights. And I certainly never thought that it would keep Chinese people keeping their capital in China. And they've determined to get their money out. So I think the fundamental

• 43:12Speaker 01

  reason that we disagree is really on that. Now, the second reason is that I believe that they're moving to a flexible exchange rate to massively boost the supply of money in China. The reason that they're heading for a debt deflation is that as of a few months ago, they had reached the lowest level of growth in renminbi ever recorded in the history of China, about 6.2%, which is kind of a normal level for a developed world economy, but an all-time low for them. And if they're going to get rid of the fetter, the shackle of exchange rate management, it's to get that number up. And my obvious question would be, if you're going to take something that grows at 6% and perhaps change the growth rate to 15% per annum, price should fall. The price shouldn't go up. And the only way it really goes up is if

• 43:54Speaker 01

  you do attract in a lot of capital, as Lou and Charles think it would. But if you don't do that, and you massively increase the supply of renminbi or the growth rate of renminbi, then I think you have a declining exchange rate and not an appreciating exchange rate.

• 44:07Demetri Kofinas?

  So we're definitely going to have a chance to dig in this more when we talk about the consequences of a Trump administration, tariffs, industrial policy in the US. Before we do that, though, I want to talk a little bit about another argument you've made, which is that we need to create a new international monetary system, both in the West and in Asia, or rather, the two poles between the United States and China. But let's just focus on the developed world for a moment. Your argument is that we need to create a new international monetary system that can unwind the imbalances that have built up under the old one, while hopefully sustaining democracy and free markets. First of all, who are the relevant parties that constitute we in this scenario when we think about the developed world?

• 44:48Speaker 01

  Yeah, well, it's a great question. It'd be nice that China could get into a room with everybody else and we could settle this, but I think that's impossible. I really don't think that we could find a way through, not just because of all the reasons that we've already discussed about the worsening position between the two of them. But I just don't think it's possible that we could design a system that would meet the needs of China and the rest of the world, because China would be very keen to work on a basis of continued surpluses.

• 45:13Demetri Kofinas?

  That we could create the equivalent of a new Bretton Woods, where everyone comes to the table, including the Chinese, and we patch out some kind of global international monetary system?

• 45:21Speaker 01

  Yeah, I think it's virtually impossible to put together. I mean, that's our political decision. It's a monetary system, but it's a political decision. And maybe someone smarter than me could work out how we could agree that with China, but it seems to me you couldn't agree with China. So that leaves everybody else. So that leaves the entire developed world, with the exception of Germany, have got basically the highest level of debt to GDP ever recorded. And I don't mean just government, so I'm looking at government plus private sector. You put those two together. So there is now at least a coalition of interest because at least with the exception of Germany, they're all in the business of doing the same thing. You know, I know Americans think that America is the most indebted nation in the world, but it's not true. There are many developed world nations that are significantly more leveraged even than America.

• 46:05Speaker 01

  This is not defensive American leverage because it's gross and it's dangerous. But at about two hundred and fifty five percent of GDP, government and private, we've got France at three hundred and eleven percent of GDP. We've got Japan at four hundred percent of GDP. So we've got other countries. So this is a developed world problem. It's not a uniquely American problem. So we need to have some sort of stability. Now, this will take us into financial repression and it's just, it'll sound like it's a movement away from this. But what we're witnessing in Europe and the United Kingdom is a desire to marshal the savings of the nation for investment in the nation. And the problem is that a lot of the savings of the nation are invested in America.

• 46:49Speaker 01

  We have a remarkable situation in the United Kingdom where if you take the pension funds of the UK, only four percent of all their investments are in UK equities. They have much more invested in America. So if we begin to repatriate this capital, and the Japanese have got one of the biggest stores of overseas portfolio assets and investment, if we begin to repatriate this capital, America has a problem. America has foreigners own fifty eight trillion dollars' worth of American assets. That's on a gross basis and even on a net basis, it's about twenty four trillion, seventy seven percent of GDP. So in a world where we, the rest of the world ex-America, developed world, wants to repatriate, it doesn't work for America. So at some stage, we're going to have to sit down and work out how this system is going to work.

• 47:33Speaker 01

  Because otherwise, it becomes a dangerous free for all. That is why I think we have to come to a table. But everybody who sits down to design the system ultimately has the same goal, which is dealing with excessive levels of debt in the system. So at least when the meeting finally takes place, there are certain things ruled out. I mean, the gold standard, for instance, is ruled out. But at least there's a coalition of interests. Still be incredibly difficult. I mean, unbelievably difficult. It was quite easy after World War Two. One country dictated the terms, the global hegemon. So I can't tell you what it will look like, except that at its core, it has to have flexibility to permit a level of inflation. That solves the problem too much then.

• 48:14Demetri Kofinas?

  Well, let's try and speculate responsibly on what it would look like. Because as you said, when the victors of World War Two came together at Bretton Woods to devise the new monetary system, the United States was, yes, the European countries were debtors, but the United States was a net creditor. It was by far the largest economy in the world. And its primary objective was to set up a financial architecture that included the IMF, the WTO, the General Agreement on Tariffs and Trade, and a few years later, the Marshall Plan, as part of a larger effort to help rebuild Europe and fight the Cold War against the communists. It would be coming into an analogous conference today as a net debtor, as we established. How would that shape the nature of any agreement? And what would be the analogous, more immediate problem that interested parties would be looking to solve?

• 48:58Speaker 01

  So one thing you didn't mention specifically on that post-World War Two architecture was restrictions on the free movement of capital. You know, when I mentioned earlier on that nobody would have designed the system we'd lived in as we put together a global monetary system with the free movement of capital, and it created huge imbalances. I think it's not to say that there wouldn't be free movement of capital, but it would have to be controlled and constrained. The idea that we could all remove our capital for the United States of America to fund investment in net zero and industrial policy, there was going to have to be some measured way of doing that. It's not in anybody's benefit to do it at a pace that collapses the US economy. For instance, at the minute, all the capital is flowing the other way. It's flowing towards America, but it can be mandated to come back.

• 49:42Speaker 01

  So I would say one thing that has to be at its core is a restriction on the free movement of capital. Now, if we take the owner of the reserve currency before the United States of America, which was the United Kingdom. It found itself at the end of World War II, actually with still lots of people owning its currency as a reserve currency. And it had to go through a long process of restricting how they could get that money out, and a long process of change within the United Kingdom. And I happen to know this because I've read it. The day the UK stock market bottoms in 1974, very dramatic great bottom for the United Kingdom stock market. The headline on the front page of the Financial Times is "A market collapses as Nigeria removes

• 50:24Speaker 01

  foreign exchange reserves." So that was a negotiated long retreat by reserve owners. And I think that's the sort of situation we'd be in with the United States of America. That's why we'd all have to sit down in a room, because we'd have to work out the pace at which that repatriation could happen, because you couldn't allow a free market. So in terms of savers, and this is the really important bit, we always assume that you can move your capital wherever you want and do with it whatever you want. The most important thing for us, all of us, would be the reintroduction of restrictions on the free movement of capital. So I think that would have to be at the heart of this system, two things at the heart of the system, restriction on the movement of capital, if not complete, partial, and secondly, a system that allows a higher level of inflation to reduce debts.

• 51:09Demetri Kofinas?

  So in the case of sterling, they had the unique advantage of being able to operate within a dollar-based fixed exchange rate system. In the case of the US, there would be no alternative to the dollar within this sphere of influence. So how would that work mechanically?

• 51:25Speaker 01

  It's a very good question. You know, the problem with the Bretton Woods agreement is that the liquidity for everybody else could only be provided by the United States running ever bigger and bigger current account deficits, while America starts with a pretty big current account deficit. So I think what you're talking about is the only way we get into this conference, the only way we sit down and work this out, is potentially after some sort of crisis. A crisis that perhaps it reduces US growth, reduces the size of the US current account deficit. But we may have to go on to, what came up at the end of the Bretton Woods agreement were things called special drawing rights, to try and take the pressure off the United States to run bigger and bigger deficits, which was kind of a...

• 52:07Speaker 01

  A form of currency only owned by governments, which was kind of a basket of other currencies. So it may be that in the longer term, the only way this could be, the system could have sufficient liquidity moving around within it, because you couldn't rely on America to run absolutely huge deficits all the time, would be some creation of, well, Lord Keynes called it in 1944, bancor, but when it was finally created, it was called a special drawing right. So, Dimitri, we're, we're deep in the weeds here of what this system might look like. It's exceptionally difficult to know what it might look like, but the ones you raise are absolutely key here, because it is different this time.

• 52:44Demetri Kofinas?

  Well, the thing that's also difficult to suss out is whether this is net, in real terms, net deflationary or inflationary for the global economy, because the breakdown in global trade is a net negative on growth, but industrial policy and what you describe as national capitalism, which by the way, when you use the term national capitalism, is this equivalent to, when we're talking about industrial policy or dirigism, is this the same thing? Are these equivalent?

• 53:10Speaker 01

  Yeah, it's the same thing. I thought I was the first person to use it, but apparently Vladimir Lenin used it long before I did, so I'm in bad company. Yeah, so I changed the name of it, or rephrased it, because people seemed to think it was a financial thing. It was something that would affect financial markets and savers. But of course, you're absolutely right, it's industrial policy. It's bigger than that. And the reason for calling it national capitalism is because it's the use of national savings for national purposes. And I think it just conveys that a bit better than financial repression or industrial policy, the regime policies. Because think of what the consequences are of using national savings for national purposes. It means selling somebody else's asset to

• 53:53Speaker 01

  raise the funds for the national investment. So I think national capitalism is a better way of looking at it. And if it's a retreat, my entire career has been witnessing the flow of capital across the planet, the reduction of home bias of most, probably not America, but of most other countries in the world in their savings system. And now we're about to reverse that. And that's why I think national capitalism perhaps conveys it better. And there is a level, I mean, a lot of that is now driven by the government, which is steering these savings to where they want them to go. And there are quite a few decent examples of that have come up quite recently.

• 54:28Demetri Kofinas?

  So I'm going to move us to the second hour, Russell. We're going to begin that conversation, giving people more information about the course, as I mentioned, and how they can get the special offer that you're providing to premium subscribers. And of course, Genius members will get that separately. And after that, we're going to tie out one loose end, which is what the developed world, the West, whatever term you want to use, the non-China-based system might look like, what it would require, some of the challenges. Let's talk a little bit about China's monetary system. And that will be an opportunity to revisit some conversations I've had in the past about a digital yuan and the Chinese-built digital payments infrastructure that's part of the larger digital Silk Road initiative. And then we'll have a chance to get into the investment implications of all of this,

• 55:11Demetri Kofinas?

  the investment implications of a capex boom, something you've talked about before, how to protect oneself against inflation in this environment, what equities do well, what equities don't do well, or types of equities, how to think about that as an investor, as well as kind of digging deeper into Europe and some of these mechanics of financial repression as they would manifest. For anyone who is new to the program, Hidden Forces is listener-supported. We don't accept advertisers or commercial sponsors. The entire show is funded from top to bottom by listeners like you. If you want access to the second hour of today's conversation with Russell, head over to hiddenforces.io/subscribe and sign up to one of our three content tiers.

• 55:54Demetri Kofinas?

  All subscribers gain access to our premium feed, which you can use to listen to the rest of this conversation on your mobile device, using your favorite podcast app, just like you're listening to this episode right now. Russell, stick around, we're going to move the rest of this conversation on to the premium feed. If you want to listen in on the rest of today's conversation, head over to hiddenforces.io/subscribe and join our premium feed. If you want to join in on the conversation and become a member of the Hidden Forces Genius community, you can also do that through our subscriber page. Today's episode was produced by me and edited by Stylianos Nicolaou. For more episodes, you can check out our website at hiddenforces.io.

• 56:37Demetri Kofinas?

  You can follow me on Twitter @Kofinas, and you can email me at [email protected]. As always, thanks for listening. We'll see you next time.