Why Inflation May Not Be Heading Back to 2%

note this stuff. There's a town in the Central Belt called bonnie Bridge, which is one of the most well known UFO sighting places on right, three hundred ver sightings the year so Texas, New Mexico bonnie Bridge. So why is bonny Blood the UFO central Absolutely no idea and then close to not caring. So you know that I'm just putting that out there is a little bit of trivia for anyone who wants something to talk about over

dinner tonight. The key point is that, and you and I have discussed this before in sightings, UFO sightings go up everywhere when societies are tense, when people feel uncertain when there is change effort, when there is unrest. Right, So UFO sightings in the US went up massively just before Donald Trump was arreted. Hang on, donald Trump was elected. There was I don't know if you remember when we were both working at Dennis Publishing at the time and

they owned a magazine called The Fourteen Times. Do you remember that their headline is Donald Trump an Alien? Yeah. I think they stall that headlines from National enquired art anyway. So there is this correlation, which I was telling an acquaintance at the Bank among Then the other day that they really should put in their models because it's kind of handy. There is a correlation. We won't go as far as causation between rising sightings of UFOs and political

and economic change. I just wanted to let you know that and put it out there because obviously there's a lot of political and economic change going on at the moment where at there's a turning point that we've talked about before demographically firstically, monetary policy. Everything everything is at

a at an inflation interest rate, everything's turning right. Actually, I suppose the other interpretation is that people will see uf always because whenever times are just stub that's partly because geopolitics is an upheaval and maybe governments around the world of like tests and new weapons like stealth bombers and things like that. How so you think that there's secret jets in the sky, you know. Welcome to John and Marrin's Conspiracy Theory podcast. Yeah, that would be very popular.

I think we shouldn't not it would dismiss it. Like you know what, we get a lot more listeners than we do talking about inflation and interest rates. Listen, Timmy done. There is a lot of change. What's the thing that you've seen this week that to you represents that the biggest change, the biggest inflection Well much as I'd like to see the based inflection point is the drop in house places which are falling uponly for the first team since twenty twelve, I actually think they can A base

thing that happened this week was the exit deal. I think we've been going on about Brexit for a long time, but I think that this could be a catalyst for long neglected UK equities to finally attract some of those flows that have been vanishing from them over the past seven years. I mean You can spend lots of time arguing about the economic impact of Brexit, but thing it's pretty clear that over the last seven years, global fund minders at least have taken it as an excuse to

just put the UK in the two hard bin. And I think that that will be much more difficult now, particularly as you know, everyone's looking for new things to invest in and cheap assets to invest in. Now that the kind of fangs, aren't they only game in town? Excellent. Finally, and don't forget everybody that if you're investing in equities, the best hedge gainst inflation is your dividend income. And where do you get the best dividend income? The UK?

Of course, yes, the UK? Right onwards. Thanks John. Welcome to Marando Money in the podcast in which people who know the markets explain the markets. I'm there in some stweb this week. Our guest is Dr Pipperman. Group's an author, an expert in geopolitics, and has served a special assistant of President George W. Bush as an advisor for reckono and policy on the National Economic Council. And she's a former member of the US President's Working Group on Financial Markets.

And she knows something about UFOs. By the way, we begin our conversation discussing Russia's invasion of Ukraine. Pepper, thank you so much for joining us today. It's absolutely brilliant to have you on. Thank you. I'm glady to be here. We are talking around the first year anniversary of the Russian invasion of the Ukraine. Now, when that began, it looked like a little war, a localized war, local conflict.

But a lot has changed in the last year, right, And I've been looking at some things that you've been saying and you've been writing, and what looked like a local conflicts is expanding globally. This is not a local conflict anymore, is it. No. And I wrote a piece in October twenty twenty one which was very boldly entitled world War three has already started, And that really sounded crazy at the time. But I think we're now seeing that this is not about one country, it's not about

one location. It's a grand strategy, and it's pitting the West, NATO, the United States against an aligned Russia and China. And also, just to be clear, because the phrase world War three is so terrifying for people, this is a very different kind of war, and I don't think it is going to look like World War One or World War Two, where lots and lots of civilians were engaged in direct combat. I think this is a technology war. This is an invisible war where the combatants fight each other in ways

that are not visible to the public. I can elaborate on that, but bottom line is it's still not a great situation. But when I say world War three, I don't mean to imply that we're going to end up in that kind of conflagration. However, what we have now, in my opinion here on the anniversary of the day the tanks rolled into Ukraine, is well, there's a word that everybody needs to know. There's a word called irredentism, and irredentism is when a nation says, we have nationals

abroad that need to be protected. And that was the irrationale behind Russia rolling into Ukraine, right The Russians in Ukraine were under siege and they needed protecting. They're now expanding that strategy to new places like Transnistria, which is on the border of Moldova and of Kasia, and places like basically places people haven't heard of, you know, Artsak is another one of them. Spulbard in Norway. I think it's going to be one of them. So it's the

same strategy, just expanded to new locations. That's one element, and i'll just finish with the second. The second is the Russians have basically decided to do a reverse Star Wars. So I was an intern working for Ronald Reagan in the White House when they introduced the Star Wars strategy, which was laser based systems in space on satellites, so you could take out the other guy's intercontinental ballistic nuclear

missile using this system. Basically it forced the Russians to spend a ton of money they didn't have trying to keep up with the technology. Well, they learned and today they're reversing. So they're saying we're going to drop out of the nuclear Mutual Weapons Inspections treaties. We're going to put nuclear weapons on our submarines and our ships, which Norwegian intelligence this week confirmed. And this will force you to spend a huge amount of money monitoring all the

borders so that you can catch any potential inbound. So I don't think anybody wants to actually launch a nuclear weapon, and I want to be clear about that, I do think that raising this threat threshold is going to be enormously expensive for the West, and the real strategy is

how to bankrupt the West. When you talk about an invisible war, is that part of what you mean a war basically an economic war, a cashual and let me make you spend a vast amount of money on things that will make it hard for you to manage economy outside that. Yeah, it's also a little bit more than that. It's about the return of spy games, of kind of Cold War style spies that are implanted in Western countries and organizations, and probably it's happening in reverse as well.

So the spy game is back, and you can see that if you google for it, you'll see lots of arrests have been made and spies are being captured, and so that's an element. But it's also things like TikTok, which the US government is about to potentially ban as a basically military instrument. That it's something that's been used

by China to weaponize public opinion. And so, for example, the Chinese balloons that we recently saw, on one level could be seen as a highly staged TikTok event that resulted in a reduction of confidence by the American public in their own government. That's a kind of invisible war, right, So there are many layers to it. And again I've written a piece called Invisible Wars on January tenth this year on my substock column. It goes into greater detail

about this. But it's a useful concept right now, Okay, And can I just take you back, fum one other thing you said about the Russia wantingle saying that what they're trying to do is protects Russian citizens in other parts of the world, and you mentioned a part of Norway where there may be Russian citizens living. How on earth does that manifest itself? How does Russia do something to protect citizens living in a country such as Norway. Well, so,

super intring. First, let's be clear about the geography. There's a place called spall Barge. It's an island in the Arctic Circle. It's extremely remote. I actually went up there this summer. And because of the messy end to World War two, Small Bard has a highly unusual situation that it is technically Norway, but many countries under the Small Bard Treaty have the right to be there. So for example, I think they're thirty two or thirty four countries that

are signatories. So there's a large Russian population there. Now. Historically they had been involved in coal mining, but then the governor of spall Barge shut call mining down for climate change reasons, and suddenly the Russian nationals who mainly live in Barrensburg in Spalbard suddenly couldn't make an income.

So then Russia had to subsidize them to stay. Now they've just said in the last week or so that they're basically giving away apartments in spal Bard to Russian nationals, so you can just basically have a free place to stay. Why because as long as there are Russian nationals physically present on Svalbard, that creates the reason why they might need to be protected. And what we've seen is a

much more aggressive stance by Russia around spaal Bard. We've seen Russian submarine surfacing and when you go up there there are loads of native ships. Basically the whole place is not high alert. And remember, actually this is just a key point. Small Barge has the fastest Internet connection in the world. Why because virtually every high altitude satellite whether commercial or military, or the International Space Station connect to Earth at Spaullbark. Why do you know, I don't

know exactly why. There must be technical reasons for this. I think it does have something to do with it's easier for calms to happen at the polls, and it's easier for the North pole than the South pole. But for whatever reason, that is the point of connection. And in fact, to my mind, this war that we're seeing in Ukraine didn't begin with the tanks rolling in to Ukraine a year ago. It began about eight weeks earlier when somebody cut that Internet cable, thus signaling we can

shut down all your communications. And remember all these missiles need satellite guidance, so none of your systems will work if we cut your calms off. And since then we've had loads of Internet cutting exam apples. There again, no fingerprints, nobody knows who did it. This is part of this

invisible war and that I was talking about. So small Bards suddenly is on the radar and Russia is trying to increase the number of Russians who are actually present there with free flats like probably get a lot of about British people to go there anything. He said, this is really interesting. So a lot of the Invisible War and a lot of what we're going to cool World War three, even though it's a very different kind of war.

It happens in places that most of us have no connection with, never heard of, and consider would previously have considered to be completely irrelevant, far distant Norwegian islands, etc. Completely. I call them sort of magical kingdoms that sound like they belong in a Hairy Potter novel, like Abkhazia and

South Ossetia. And they do, they do. Yeah. And if you notice this week the Russians have been doing military exercises off South Africa where they're working with Swotini, and you know, again, for a lot of people they are like, wait, where's a Swartini? What is that? So yeah, these magical named, magically named kingdoms, as it were, are right at the heart of modern geopolitics. Okay, everyone's going to need to get an Atlas out. I have on the wall of our sitting room a giant world map so I can

try and keep some sense of geography. And as soon as we finished talking, Peper, I'm going to go down and look on it. See if I can find some of these places and get a sense this is super interesting. But listen, Okay, So here we are a different kind of war, lots of strange stuff going on, but it doesn't turn, you think, into either a nuclear wall, please God, let hand what happen, or into a massive ground wall.

So given that, what effects does it have on the thing that we're actually supposed to talk about it in this podcast on the global economy? For example? What a fact does that have on the way the global economy developed from here? On globalization, on energy, on this kind of thing. Okay, So one layer of this very complicated onion is what Russia did was to demonstrate that anything can be weaponized, and so Ukraine is not just a

war on the ground. It was about weaponizing food prices and energy prices and creating inflation at a time where the West was very vulnerable to that. Now, what's been the response. Initially, everybody's heating bills obviously went up, and that's been a big social issue, no question about it. But also there's been this incredible entrepreneurial innovation response. So suddenly Norway has replaced Russia as the main supplier of

oil and gas to Western Europe. Morocco has replaced Belarus as the main supplier of fertilizers and potash component parts for agriculture, and so it just goes to show you how resilient and robust the world economy is and how quickly it adapts. Similarly, this return of conflict, it happened to coincide with COVID as well, has caused a lot of people to say, my goodness, the world is a complicated place, and I don't know if I can trust my government or my company to look after me in

the future. I'm going to start my own thing. And we see this wave of entrepreneurial response, and I think we're going to see a lot of those companies are going to do well. They're going to create value. People are learning how to work independently from institutions. So while there are bad things happening, there are also really good response functions as well. Now, in terms of the big picture,

the markets have been expecting that eventually we'll get a resolution. Here, what I'm arguing is this may take longer, and this may be a more expensive process than you thought to finish. What China is doing is very clever. So the minute Russia. Putin said nuclear was a real possibility of threat. Within an hour, the Chinese came out and said truce, one word truce. Then they said constructive negotiations to China doesn't want to go to a nuclear confrontation, and neither does

the US. But by threatening that, and by having Russia and China much more aligned than we've ever seen before, it pushes US and NATO to come to some kind of agreement over Ukraine's So right now we're in a moment where the question really is is the West going to put pressure on Ukraine to cut a deal or are we really going to fight to the bitter end?

And I think that the appetite in the West to fight to the bitter end, especially if the Russians are now going to up this anti by taking the Ukraine's strategy to many other locations. Basically, it's creating an environment where eventually we're everybody has to cut an unpalatable deal. Russia won't get it what it wants, Ukraine won't get it once, the West won't get what it wants. But we may be able to bring it to an end.

And I'll just say one tiny last thing, otto bone Bismarck put this so well, and nobody knows much about diplomacy today as he did during his era when he ran the ground strategy of all Western Europe, and he said, diplomacy is the art of building ladders for others to climb down. And right now we do not have anybody building any ladders for people to climb down. And even though it's an awful thing to have to do, I think in the end we're going to have to end

up in that place. It's interesting because the rhetoric q hit coming out of the West suggested even if there was an absolutely perfect ladder made of gems, no one would climb down it. Yeah. Yeah, And I visit the Conservative Party shind ignite where Hunac spoke, and you know, the line from the West we will fight to the

end is getting harder, stronger. Well, given everything that's happened, one of the things that we've been talking about a lot over the years, and I think you and I've talked about before, is the reversal of the great globalization of the last couple of decades and the effect that that will have on individual economies and on inflation. Now, do you still think that globalization will continue to all to go backwards. I know you're terribly optimistic in lots

of areas. So where do you see that going? The rebuilding of supply chain, resilience, etcetera. Which has given us bouts of inflation over the last couple of years, how do you see that playing out over the next couple Totally? So I had to make up a new word for you. Always make up new words. Words are great, you know, by the way, listeners who aren't used to hearing Pipper speak, It was Pipper, I believe, who invented the word shrink flation. Right, Well,

the words of yours. Well, here's the thing. Actually, it turns out so I did. I came up this word sreinflation, and I remember talking to your conference about it at the time. You know, this was back in twenty sixteen or earlier, because there wasn't a word to describe this thing about your candy bars at the shop keep getting smaller but you're paying the same price, and it's an early indicator than inflation is building and it's going to come.

But then it got into the Merriam Webster Dictionary this year, which was amazing. It's amazing However, now it turns out there are some other people who were also using it, but I didn't know it at the time, so I think it's an open question who really invented it, But a bunch of us kind of spotted that there was a need for a new word. So today my new word is globalization, and what that means is globalization and localization coming together. And I think that is where we

are with globalization. So the old definition of globalization was really that all the jobs would go to China. Right we just said, Okay, we're going to outsource all manufacturing of hardware to China and software will be done in the West, and that was the definition of globalization. Well, today we have a situation where we are relocalizing supply chains.

We are manufacturing everywhere in the world now, and because China isn't competitive anymore through inflation, through their slowdown, the destroyed belief that they're going to get rich before they get old, they don't believe this anymore, so they're not

working in the same way they were. All that taken together means that we have a relocalization of production everywhere, and I think fundamentally we're going to end up with more competition, more market entrance, a greater distribution of jobs around the world instead of just everything going only to China. And so glocalization is a more advanced, more comprehensive version of globalization than what we used to have. It's a better version, actually, even though it's been a hard process

to get here. Now, the problem for China and the problem for the world is that if they're not competitive anymore, we can't just say to a billion people, oh well, too bad for you, right, we have to find a way to reintegrate those billion workers into the world economy in some way or another. And that is our sort of task of our generation now. And I would add that we have to do it with Russia too. You know, it's not that every Russian citizen supports what President Putin

is doing. And you can't just cancel economies, right, You can't just say, oh, well, everyone in Russia has to suffer forever because they once had a bad leader. I mean, heck, I'd hate to be held accountable for any of our recent US presidents, right as an American citizen. So one day, when something changes and we get a deal, we're all going to have to figure out how to reverse on a dime and reintegrate all those brilliant Russians who had nothing to do with all this back into the world economy.

And unpalatable as all that sounds right now, I think it's essential because if we don't reintegrate the Chinese and the Russians, we will end up in this fight again. Okay, but how do you reintegrate those tens of millions of Chinese workers who may now be slightly priced out with the global market when it comes to making localst goods.

How does that turn around? Well? And it's further complicated because President she has introduced the Great Digital Wall as they're calling it, which is he cut off access to the global Internet. So if you're in China, you cannot connect to the top four or five thousand websites. And how are you going to innovate if you don't know where the cutting edge of innovation is? And so I'm very concerned that the leadership in China are making it impossible for the average person to figure out a better

way forwards. Right in the West, we can do it because we have personal freedoms which we often take for granted. But you know, you can just upsticks as many people have, right the great quitting that we all talk about, and they say, I'm just going to start my own thing. I'll be a digital nomad, I'll go create online, I'll we don't even think about how wonderful it is to have that freedom. And in China you don't have that freedom.

Not only can they not connect to the internet, but they have the social credit system now where you get scored on all your behaviors, and so if you express opinions that are contrary to the government, you try to go buy a train ticket, but your card won't work, so they start locking you into digital prisons, physical spaces that you can't burst out of, and thought processes that you can't burst out of. None of this is conducive

to productivity. So I think within China there's been a big argument and g has been under pressure from the party as the party begins to realize that China's future is being impeded by this strategy. Yeah, do we need to worry about about social credit systems coming to the UK. There's lots of conversation around digital ID cards and the type of information that can and can't be held on those cards, etc. And it is making the kind of people who worry about the sort of thing. And I

have a tendency to worry about the sort of thing myself. Say, you know, we look at China and we're horrified by the digital control systems there that this could be coming to the West. I think it has come to the West. We've done it with private companies, right, we do with Amazon and Google and every company that you interact with. And for me, the issue is people always say, well, I have nothing to hide, and then I ask, Okay, when's the last time you ordered ice cream on Uber

eats at midnight? And they're like, yeah, I do that. Okay, Like okay, so you think you have nothing to hide. But the thing is the correlations that the algorithms generate will tend to say that someone who eats ice cream at Bennet is maybe of a little bit emotionally unstable, and then that shows up as someone does a digital search on you, and when you're applying for a job and they see that red flag and now you didn't get the job because you've ordered Uber eats, right, And

do you think, oh, but it's all anonymized. Yeah, it's not so anonymized. Anymore. I mean, it's pretty easy to reverse engineer things. So I think you know, for all our GDPR, the reality is that you have a digital footprint, and is it knows more about your digital twin knows more about you than you know about yourself. And the footprint that you are leaving with every single thing you

do is visible. It's just not visible to you. So I'm very concerned about this intensification of the digitization, which by the way, is coming in the form of new currency, which is to the core of your podcast, right. This is an entirely new form of money that's coming, which

we call CBDC Central Bank Digital Currency. What that will permit is the integration of all of your data, everything on your phone, everything on your computer, everything that has to do with your spending, and that comprehensive picture, in

my view, can be used against you. And you should have some kind of a bill of human rights to either be able to ask to see I think you should be able to go to every company, like you should be able to go to marks and sparks and say tell me what I look like to you, and then it's like a credit right. You should be able to look at your credit record and say what's going on, and you find doubt there's something that you didn't know, so you change your behavior to lift your credit score.

I think we're going to need this, and I think it's a reasonable ask, but oh boy, the big data gathering firms and government are probably going to fight this to the bitter end. So I think, you know, it brings the many efficiencies that are very useful, lots of transparency. I wish government would apply it to its own balance sheet and we'd have a better sense of, you know, how public spending is working, which I kind of doubt will happen. Well, old tyranny starts with convenience, doesn't it.

I love that line. Who say, is that yours? I think it might be someone else, But that's a serious Okay, I'm putting that up on the nets. That's a great line.

Starts with convenience. Yes, you know. I mean, I think lots of our listeners do worry about CBDCs because we've talked a lot over the last few years about how a digital currency, a bank sponsor digital currency is effectively the loss of the loss of the last vestiges your privacy, and also, of course it could conceivably come with negative interest rates applied to your cash, and could come with

spending constraints in various areas. You know, a government could decide that actually, you know, what were the tomatoes shortage? No one's allowed by tomatoes or cucumbers, and that can go through a digital currency in ways that we would all find it extremely uncomfortable. So that's something that I think our listeners are very interested in, and thank you for scaring them more. Sorry, but you know, it's like

I'm just the messenger here. Here we have the Prime Minister of Britain saying he wants Britain to be the center for digital asset clearing. Now, on the one hand, jacks are going to be some big benefits to the country if it can become the center of digital asset clearing. But on the other hand, it does mean that this brickcoin concept is going to get rolled out, and now is the time for the public to express their concerns

and desire instead of being ignorant or staying silent. So that's why I'm raising the flag and waving it around on this. We can make this work. We just have to participate and not allow it to be a purely technocratic rollout. And let me ask you then, now, which has you on digital currency? So let me ask you

about where you see inflation going from here. I know you've got a good record of inflation has previously discussed, but you know where the world is not dividing into two camps, people who say, once inflation has gone beyond excent, it's really really hard to get it down, and so we're going to hover around sixty seven something for quite a long time. And the other camp who was saying, well,

actually we're going straight to deflation. Where where do you stand? Yeah, so I have not felt that we're going into hyper inflation. Let's just start at that end of the spectrum. I do think this is tricky because all the textbooks don't apply to what we're in right now. It's a supply side and demand side problem. Usually what you do, and all the textbooks say if you raise interest rates then

inflation will come down. But right now, we don't have enough companies making things, whether it's tomatoes growing things, or whether it's computer chips, or you can put pretty much anything in that line, you know, So how are you going to get more companies to make more stuff? You need to supply capital, so raising interest rates is not helping to increase the supply. So you know, this idea that the two are correlated is just not really working anymore.

And second, this is another reason why CBDCs are probably coming, because governments see that with digital currency you can double or have the money supply in a single keystroke. So then not only that, but you can direct it. So with traditional monetary policy, you announce you know, you're giving away free money and your lowing interest rates, and basically all the cash goes to the banks, and then the banks allocate that capital out, which they typically don't really

actually do very well. Under CBDC, they can say, oh, you're building a new nuclear fusion plant and we want that, so we're going to allocate capital to you. Oh but you are building something we think there's already too much of it, so we're not going to allocate capital to you.

And the danger is that government starts to get into the business of allocating capital to winners and losers, which they are historically just terrible at, and it would be a defiance of the whole system of capitalism, which should allow capital to flow where investors see opportunities, not where government designates there's a socially engineered outcome they want. You know. The other thing is, yes, supply chains are relocalizing, which

means supply is more readily available locally. Great, but it means you have to change your habits. So, for example, the business of buying raspberries in January, it's not so easy in an inflation world. But if people stop buying raspberries in January and they change their habits, then the inflation isn't so bad, right, because the demand for that expensive thing is declining. So I think people are changing their habits, their consumption habits, in quite a remarkable way.

COVID is probably most responsible for that. People have really shifted and started to think about what's really important to be And do I really need to spend money on raspberries in January? Do I really need to be on a career path of a particular kind? Like the question of what do I really need? Has changed? Yeah? I agree, I agree, and to be you know, behavior changes can obviously change the path of inflation. And so it sounds to me like that like you are a four to

five percenter. Yeah, I would say that's a good description of me. I mean, I anticipated we were going to go to double digit, which again at the time, people are like, that is insane. We will never in the West go to double digit inflation. I'm like, well, will watch it. Watch it. So we have jumped up, right, so we could be more like a five to ten five to ten percent. I think we may face that

for a while. And that's still pretty shocking for pretty shocking for populations that he used to inflation knocking around one two three percent. It's still it's a shocking business. And it makes you wonder something I talk about with several guests. Will the central bank shift their inflation targets?

You know, will they shift the target to meet the radi of inflation rather than hoping that the raatei of inflation will come down to meet the target, the target, of course, being almost entirely random, no one can remember. I often ask people, you know, do you know where the chief scent came from? And of course most people haven't got the faintest idea it always picked out of

thin air. It was what we've actually found, and I've found, and I've mentioned this on the podcast before, we actually found in an all magazine called Status, which is not a fund In an issue of that from the early sixties, we found a report on the paper that an academic had written where he made the suggestion that possibly, conceivably two percent inflation was roughly the right amount to encourage growth in a developed economy New Zealand. New Zealand academic.

I know, I've talked to central bankers about this and they're likely it's just totally random. We picked it out at an air The real issue is what is the pain tolerance of the public. And then the really big issue, and this is the critical issue, is how are we going to fund the future? That's the real basic question. And because there's so much debt, inflation is a way

of getting rid of debt. So if you say two percent inflation is okay, where you're really saying is we erode the debt burden by that much and that shouldn't be so much pain for the general public. But when you get up into these higher numbers, it's just more pain. So you get more political volatility, which we're seeing right.

We're definitely seeing more political volatility. And this is a question of like what's the pain tolerance over the coming years for what's required to fix all this, Just to be clear. In the end, look, we've had much worse inflation than ten percent. People will figure it out, they will adjust, there will be solutions. So it's not that

it's impossible. Right when I was a kid, we got to what was it, twenty one percent inflation and everybody's still here, right, they survived, So we'll figure it out. It's just uncomfortable. We'll figure it out. Yeah, And you know, with a bit of like that level of inflation, will if maybe we say four five percent for a decade, and we'll find that our level of government debt have gone down very significantly relative to GDP, and that will not be a bad thing. Might be uncomfortable on the way,

but it's a good result. It's a good result that let's pepper, I have to ask you because here we are. We've talked a lot about the global environment, the geo political environment, the global economy, inflation, etc. But what on earth does an investor do in an environment like this? So you know, here we are, as ordinary retail investor, sitting here with our ices and our auto enrollment pensions going Oh god, one day I want to retire what

do we do? Why would you put money? Now? Well, so let's start with the word retire, which I think is to retire one day. I hear you, well, but what's the definition of retire in the modern era. It's not this old nineteen fifties sixties idea that you stop and then you spend the rest of your life playing golf. I don't think that really works anymore. The fastest growing component of the labor market now in the US and in the UK are the over fifty fives. Now why

is that? Because frankly, they realize they're going to live till they're a hundred and they don't want to be bored. Now, are they going back to a full time job. No, but they are going back to a portfolio. So they'll be like working with a friend on an entrepreneurial project, and they'll do some consulting for their old boss and there, you know, they create a portfolio of different income streams. And it also gives them something that's productive to do.

And I do think human beings are healthier and happier when they have identity, that they have meaningful work. And so I think that's happening and I can't say that's a bad thing. That also brings all that knowledge and wisdom back into the economy. I always thought it was crazy that we fire people automatically at sixty. I'm like, wait, there aren't those people maybe the most valuable people to have around. Yeah, now I'm tirely agree. Okay, So let

me redefine retirement for you. Let me redefine retire as being the ability to choose when, how and where you work, be the ability to afford to do that. So that's what we want. I think when we hit maybe fifty five pushing sixty, what we want is to be able to fully afford to say, do you know what, there's just one afternoon on that for me, and I'm going to play golf for two days and then may be able to another half day consulting for so and stiff.

So it's still even with the new definition of retirement or growing old, etc. It's still nonetheless a financial equation agreed, and the choice options are fewer in the current environment, which is why people feel like I wanted to retire, but I'm not able to yet. So that's one piece of this second piece of it is, you know, look as interest rates go up. There are lots of very conservative things that are paying better. You know, bonds look good,

and that is what everybody was complaining about a decade ago. Right, So now you can make money being in bonds, government bonds, you know, corporate bonds. And also because of all this innovation and technology and people forget that, you know, the phone in your pocket literally has more computational power than

we needed to send a human to the moon. Right, people are able to create income streams using their phone in ways that were unimaginable twenty years ago, and they are so that means there are lots of new startups. And I mentioned the wave of startups. If you google that, you'll see Bloomberg did a piece a little while ago about this incredible wave of startups that's occurring now. Startups are fascinating to me because our biggest pools of savings

are pension funds. Basically can't invest in them because number one, they're too small, so they can't absorb very much capital, and number two, they're very risky, and that number three they don't really move the performance dial for big institutional investors and for little investors they're just too crazy risky.

But It's so strange because this is the part of the economy that generates most of the net new jobs is firms that employ less than fifty people, and it definitely is the source of most of the new innovation. Like this week, I was talking at Rolls Royce and they have to figure out how to interface with little startups because they're the ones with the coolest new technology.

It's not coming out of the big majors anymore. So we need to find a way for the people in your audience to be able to engage with earlier stage startups than we have been able to. I also think there's a ninety four percent failure rate of startups in the United Kingdom, which is considered one of the best performing startup markets in the world right at a ninety four percent failure rate, So we should ask question why are they all failing? And often it has to do

with things that are so easily fixed. It's because they have a brilliant idea, but it's never occurred to them how do you actually run a business? So they don't know how to set up a data room for the investors, or they don't understand what kind of legal framework they're going to need to create the business. These are things that are fixable. We could lift the success rate of startups. And I would say that everyone in your audience has an interest in be able to engage and invest in

that space and getting a higher success rate. But you have to be able to accept that. You know, like private equity firms, they go, We're going to invest in twenty things and seventeen are going to fail, and three of them are really going to pay well, they're going to one. One'll ago. Yeah, it sounds like John and I need to write more about VCTs and IT equity. John has been writing a bit about private equity recently.

He's interested there. I'm always mildly suspicious of the structure of the private equity sector, but you know, we'll write more on that. Let me ask you one last thing, which I'm fred asking everybody because I'm fascinated in it. In the answers, you hold any cryptocurrencies? Would you be a buyer of cryptocurrencies, in particular of bitcoin? So I don't, but I'm very active in following this new technology and I I've not been a big bitcoiner. Oh gosh, now

I'm going to get hit on Twitter. N't time for saying yep, you are. But I have been very big on crypto. I have said, this is a fundamentally new technology. It's about decentralizing the world of finance, and it's a democratization of finance. That's very important. But that doesn't mean that every single business model that is within crypto is good.

So the shakeout that we've seen in crypto, you know, the whole sam Bangmin freed disaster, people went, that's it crypto's debt, and I'm like, no, no, yeah, that was me, that was me crypt That would definitely me Crypto's dead. Okay, But I think this is like when the dot com bubble burst and everybody was like, that's the end of the Internet. Were done, and actually it was the beginning.

And the reason is you had the shakeout of all the really bad business models around the Internet that didn't make any sense, and the ones that survived, which weren't many, were good business models. And so I'm watching the crypto space for these better business models that will now begin to exist. And again, as government goes to CBDC, they're gonna say, I think they're gonna say crypto is fine, you can have crypto if one, which has not been their position to date. But I think they're going to

say it's okay, but they're two provisors. Number One, it can't be held anonymously, and number two, you have to declare it. Now the bitcoin crowd is going to say it, but the whole point of being a bitcoin is to be anonymous and not have to declare my money to the government. I'm like, well, good luck with that, because the state is the state. So you know, you can't

run and hide this. You're going to have to pay your taxes and be part of the system, or you can try to find some islands somewhere, but you know, good luck with that. So and the Sam Bankman Freed case is going to demonstrate this that And I actually will go further and say, I think the US government or maybe the British government are going to end up

being the biggest holders of bitcoin and crypto assets through confiscation. Yeah, because as you confiscate all these assets, then you're gonna if you're a treasury and you're at the Justice Department and FBI, you're like, hey, I just confiscated four billion dollars worth of crypto, which was the first big enforcement case that they did. That's how much they got. Now are they going to say that's worthless. No, they would much rather say no, this has real value and it's

ours now and we could spend it. I mean, that's more than the annual budget of you know, most government agencies. So I do think we're going to see crypto that is compliant. Now, that's the whole bunch of people are going to say, well, that defeats the whole point of crypto, and I say, well, I don't think so. I think that we'll see a place for this democratizing of finance, this this dividing up of the capital flows that crypto permits. It's just just going to be compliant with the new

CPDC arrangements. Okay, yeah, you're definitely getting k back. I can fail it coming. Yeah, but we should end that they are taking up enough of your time. But that I would tell you what we didn't do. We didn't talk about space. We're gonna have to we have to talk about by the way that all right, okay, we have to do that. We have to do that, especially here in Britain, because I think the British public are totally not getting the Britain space sector is going to

be massive. I would say it's going to be on a par with the city It's this is going to generate cash gloves for this country that are extraordinary. And people are like, well, why, first of all, why are we even going into space? We've got all these problems here on Earth. And the real answer is because you can solve virtually every earthbound problem with a space based solution, including unlimited energy unlimited US no no, no, stop, SUPs up. How can we get unlimited energy from space? This is

about the Sun and mirrors. It is it is yeah, and Arabus has now done the test and shown it works. By the way, we already knew it worked because militaries knew it worked. All you're doing is put a mirror on a satellite, you beamed the Sun's raised Earth in the form of mainly radio waves, and suddenly you can have cheap unlimited energy anywhere, anytime. And notice that the Saudis have just invested with the British to build this capacity in the North Sea. So you know this is

not like sci fi. This is totally coming and I have friends who are building the prototypes for these things. This will be in two and a half three years, we're gonna see this live. And okay, now that start worrying about the energy crisis. I do start worrying about the energy crisis completely. Honestly, it's gonna be we wake up one morning where to go, Holy moly. And here's the big problem. What the heck is that going to

mean for oil and gas companies? I think their sure price is going to get hit hard by this reality that's coming. So there's a whole bunch more to say. But Britain is at the forefront of this, and the US wants them to be in that position. So it's

scenario that I would be investing in. I would be watching carefully and understanding the implications for other industries, including by the way, I know this sounds so science fiction, but mining of asteroids and suddenly you don't need to rip up Earth anymore, and mining companies on Earth they're going to find they're confronting really high grades silicon, really high grade cobald, really high grade gold that you are getting from an entirely new location and it doesn't create

environmental problems. And so there's a whole bunch of stuff going on in the space space that's worthy of attention, So I write about that too on my subset column. I have a couple of columns called the space space. Okay, okay, one last question. Then I'm gonna ask you to give us the address of that subsex so can go sign up. But why why the UK? Why? I mean you keep saying this is a wonderful of chinkief. The UK well right at the full front of this, But why why

are we at the full front of it? I mean, I'm thrilled, but why ls I think it's partly because the United States wants Britain as their closest defense ally to be deeply engaged in this. It's partly because I think it's the imperial empire path. So the British have a sense of the world and possibility. And one of the things the earliest stage of the space space is communications, and so the British are very involved in satellite networks

for Internet connectivity. For example, British are very strong on the international Internet cabling process around the world, submarines, etc. All that is connected to this building out of Internet access via space. Right like today, only three percent of most Internet connections happen via starlink in space in the future. I think that's going to go to like ninety percent rights.

And so because the British have this global view and this history of working with different parts of the world, they are actually very involved in the communication sector and therefore involved in that space. And let's face it, British are very strong on things like mining globally, so the clever miners are going, hey, we have a whole new

domain to work in. So I think we're gonna send the launch that we recently saw in You and I talked about all the new launch locations here in the UK, the one in um Cornwall and the one you've been to up and I think, yeah, yeah, you said, there's not much there. It's not very exciting that will be, but there will be. That's right. Well, right now everybody's focused on launch. I think launch is almost over, Like

we already know we can launch. The issue is what you're going to do in space, and I think the build in space is coming. And again Britain's very good at robotics, remote control, automation, right, I've you know, been involved in manufacturing drones here in the Okay. I know the British can be very competitive in this space. So, by the way, just to finish, I'll just say this, when you think about the space space, I think they're gonna be a ton of jobs created by this. But

then you won't need to go into space. I think we're going to find there a whole bunch of people that are sitting here on the ground here in Britain working every day managing assets that are in space. That's the future that I see. Well, there we go, everybody, not just global Britain, but into galect. It's seriously interplanetary and I'm not too writing. Give us your substack address.

I'm gonna fail. Everybody wanting to read more about this. Yeah, doctor Pepa dot substag dot com and it's listed as doctor Peppa's pen on podcast. But I haven't launched the podcast yet, but I will be. You better get home. I know it's going to be brilliant. Pippa, thank you so much for joining us today. Absolutely fantastic. We're so grateful, so great to be on with you. Thank you, Thank you for listening to this week's Marion Talks Money. We

will be back next week. In the meantime, if you like our show, and I can't think that you wouldn't rate, review, and subscribe wherever you listen to your podcast. This episode was hosted by me Bear in Sunset Web. It was produced by Samasadi, additional editing by Blake Maple's special thanks of course to Pipmalgram and to John Steppok and his many UFO sightings, and of course our weekly reminder to sign up to John's daily newsletter Money Distilled. Link is

in the show notes. You will not regret signing up right. One more special announcement, I will be doing a live taping of this podcast at the Bloomberg invest event on the twenty second of March. It's called Strategies for Wealth Creation. If you're in London you can join in person. Everyone else join online. The link is in the show notes, so do please register. We would love to see you there