Podcast episode

Democratizing VC Investment Opportunities w/ James Kwan, VentureCrowd – EP197

Show host Gene Tunny chats with James Kwan, in-house counsel at VentureCrowd, about venture capital. VentureCrowd describes itself as “Australia’s leading equity crowdfunding investment platform, leveraging the power of crowdfunding for investments that back a better future.”  Gene and James discuss how VentureCrowd is bringing venture capital investment opportunities to a wider audience through equity crowdfunding. Tune in to learn about the significance of venture capital in financing and supporting innovative ideas and businesses, particularly in the early stages when traditional sources of capital may be less accessible. Of course, listeners are reminded to do their own research and seek professional advice before making any investment decisions. 
Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

What’s covered in EP197

  • James’ thoughts on venture capital and what he does at VentureCrowd. (1:31)
  • Initial thoughts on government policy towards VC (6:26)
  • The valley of death for startups (12:05)
  • What’s the range of funding for startups? (13:07)
  • Challenges in accessing the private capital markets. (17:29)
  • Crowdsourcing VC investment  – example of success: Be Fit Food (19:50)
  • What is VentureCrowd’s pitch to investors? (21:41)
  • ESG investments and societal values. (24:13)
  • What are the different ways people can invest through VentureCrowd? Is it based on specific startups? (25:54)
  • Tricky legal issues in VC. (27:01)
  • What’s the impact of blockchain on venture capital? (32:04)
  • Government assistance for entrepreneurs e.g. Breakthrough Victoria Fund (37:51)

Links relevant to the conversation

Venture Crowd website:

Democratizing VC Investment Opportunities w/ James Kwan, VentureCrowd – EP197

N.B. This is a lightly edited version of a transcript originally created using the AI application The transcript was then checked over by a human, Tim Hughes from Adept Economics, to pick out any clangers that otters may have missed. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:07

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory, evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show.

Hello, thanks for tuning in to the show. In this episode, I chat about venture capital with James Kwan. James is in-house counsel at VentureCrowd. VentureCrowd describes itself as Australia’s leading equity crowdfunding investment platform, leveraging the power of crowdfunding for investments that back a better future. In this episode, you’ll learn about venture capital and how VentureCrowd is trying to bring venture capital investment opportunities to as many people as possible. Nothing in this episode should be construed as financial or investment advice. Wherever you’re choosing to invest, do your own research and seek advice from a professional financial advisor if required. Okay, let’s get into the episode. I hope you enjoy my conversation with James Kwan from VentureCrowd.

James Kwan, welcome to the programme.

James Kwan  01:31

Great to be here Gene, longtime listener, first time guess, so

Gene Tunny  01:35

yeah, very good. Well, it’s I should have had you on earlier. I’ve recently discovered you, you’re the in house counsel at VentureCrowd, and you’re involved in venture capital and venture capitals has been an interest of mine for a while or as a as an observer of it, and is keen to get your thoughts on venture capital and what you’re doing at VentureCrowd. So if you’re happy to chat about that, that’d be great.

James Kwan  02:05

I’d love the opportunity. Look, can I just give a disclaimer, Gene? So yes, and I’ve loved you know, I’ve wanted to do this for a while so pilfered this from an American lawyer I listened to. Now what he says is, I’m VentureCrowd’s lawyer, obviously, I’m kind of swapping in a couple of different words, but I’m VentureCrowds’ lawyer, I’m not your lawyer. So anything I do say here, please don’t take it as legal advice. If you do need such advice, please solicit your own lawyer. So with that out of the way, I’d love to actually talk about venture capital.

Gene Tunny  02:34

That’s very good. Is that Jordan Harbinger? He says that on some of his podcast episodes, you know, the did you hear from Jordan Harbinger or from

James Kwan  02:43

He’s a bit of a new name. I think I’ve heard it from a couple of American lawyers speaking in the blockchain space. And we can talk about that as well, because that kind of feeds into the VentureCrowd vision, but it might just be an Americanism right?

Gene Tunny  02:57

No, it’s good advice, though. I mean, yep. I’m not your lawyer. So yeah, exactly. Get your own independent advice, professional advice. So and this is all for general information only. There’s no investment or financial advice in or legal advice in this episode.

James Kwan  03:12

Not even life advice, I think.

Gene Tunny  03:14

Okay. So James, to kick off with, could I just make sure I understand what we’re talking about with venture capital, we’re talking about financing for early stage businesses, typically startups they’re not they’ve got an idea. They might have a few employees, they’re looking to get some funding so they can can grow. What’s, how do you think about venture capital?

James Kwan  03:37

Yeah, look, the best way to probably explain it is that crazy uncle you’ve got in the garage, right? Who’s forever tinkering away on and, you know, a harebrained idea, they’re the people which you attract into the venture capital space, it is the idea, are the ideas which are crazy slash revolutionary, but really stand a chance at completely reforming, you know, how we think about doing life, because of the speculative nature of the ideas and the relative lack of business history behind a lot of, you know, these ventures, it’s very difficult for them to get funding from your traditional sources of capital, right? AKA, the bank. So what that leaves, for VC entrepreneurs really is four different options. You can go to your family and friends for a handout. Secondly, you could go to a benefactor with deep pockets, so high net wealth individual or their associated family office and the family office is just their army advisors to, you know, facilitate investments into the venture capital space. And lastly, I would historically have stopped at venture capital funds, so professional funds, who are looking to make an investment in a early stage venture on the prospect of a, you know, just hitting it out of the park in terms of you know, its financial performance five years down the track. VC funds do that on the understanding that, let’s say, the VC fund makes 10 investments, five of them go under, three of them break even and two of them really hit it out of the park. And I said, there are actually four options for VC entrepreneurs to go to for capital. And the fourth entrant into that are the government backed funds right? Now, the one people think about, I think, mostly in this space, just because it’s been so successful, is probably Temasek. Over in Singapore. So Temasek is Singapore’s sovereign wealth fund and they also have a ventures arm. But a little closer to home, there is an organisation a small organisation called Breakthrough Victoria with, I think, circa 2 billion funds under management. And they’re also looking to attract entrepreneurs in the VC space to the great state of Victoria. This probably because I know this is an economics podcast on that fourth source of venture capital, capital, probably a discussion to be had around whether or not that’s crowding out private investment, right. And to what extent you want the government maybe picking winners, but I leave it over to you as the host.

Gene Tunny  06:26

Yeah, exactly. Well, yeah. I mean, I mean, I’m not a great fan of government picking winners. And we might have to chat a bit later about how you think it’s crowding out. I mean, yeah, to the extent that the government gets involved in the deals, or does the financing rather than the private sector, then yeah, sure. I mean, that’s crowding out, I guess they would argue that they’re meeting, there’s a market failure, there’s not enough venture capital funding in Australia. And yeah, there wouldn’t be anyone else who would, who would fund it. Because I know, years ago, it was very difficult for startups in Australia, or people doing something innovative. So someone that Nick Gruen, and I both know, and I know you had a chat with Nick, recently, Anthony Goldbloom, who founded Kaggle years ago, he was at Treasury when I was there. And then he went to the Reserve Bank and he developed this Kaggle, the data science competition website, but he had to go over to the States to get the necessary financing. And you know, he ended up doing really well and selling to Google. So I think there’s been that view, historically, that we just haven’t had the the venture capital here in Australia. And if you want to get venture capital you for something that really innovative, really breakthrough, you need to go to the States to San Francisco to Silicon Valley to get it. What’s your take on that? James, do you think we’ve actually got an emerging private VC sector here?

James Kwan  07:51

I mean, it’s difficult to tell over the last decade, right, just because, I mean, on one interpretation over the last decade, there’s just been so much easy money, which is poured into, you know, people’s pockets, and it’s needed a home investment wise, right. So whether or not we have a working innovation framework in this country is probably something the jury’s still out. Right? There is, I think, good criticism, I think, and it’s, you know, was articulated by Kim Carr, who was the ex Minister for Innovation. And now, the, I think, believe the Chancellor of Victoria University, who says, in a nutshell, the innovation framework within Australia is just fragmented, right? It’s not that it’s nonexistent. But when you, you know, have to go to one arm of government to talk r&d tax incentive than another one to get something known as the early stage venture capital Limited Partnership, the tax incentives associated with that, that’s a particular structure, you can make VC investments through in order to obtain some sort of, you know, tax incentive. And then also litany of incentives. Like I said, you know, at the state level, think, Breakthrough Victoria, it’s very, very difficult for an entrepreneur who simply wants to build a business to tap into the government assistance in an aggregate way, right. So there is, you know, putting to one side, whether or not the existing architecture for innovation in this country is working, I think you could probably say, with a fair degree of certainty that it would substantially benefit from a degree of consolidation.

Gene Tunny  09:38

Right. Okay. Okay. So back to the, the startup. So you’re talking about what your uncle in the backyard garage or in the backyard shed, you know, as an example, I mean, are there any data or do you have a sense of who’s founding these startups? I know that, like the image of startup founders is that they’re all sort of just out Uni, they’re all sort of in their 20s, and if you don’t make it by 30, you’re a failure. But the reality is different. Is it? I mean, what what are you seeing in the startup space? Do you do have any observations on that, James?

James Kwan  10:13

Yeah. And look, I posed that early illustration of, you know, crazy uncle in the garage merely as an illustration. But really what I wanted to capture, and that was, the ideas which live and inhabit the VC space are just far fetched, right? They, you know, stand a minute chance to completely change the world and along the way to make an outsized financial return. But it is interesting that you touched on this. And I suppose to answer your question directly, I don’t actually have any data. But there is very much this dynamic, arguably perpetuated by Silicon Valley, which worships at the fountain of youth, right. So in order to be a entrepreneur in the VC space, you need to be somewhere between the ages of 18 to 35, you need to wear a black turtleneck. And I think, certainly from the VentureCrowd, side, we really want to expand people’s conception as to where great ideas can come from, because as we see it, VentureCrowd’s mission is simply to fund great ideas, and great ideas can come from anywhere.

Gene Tunny  11:23

Okay. So there are angel investors which are wealthy individuals who might give small amounts, I don’t know, whatever they give nowadays, bu you need a few angel investors, typically, to be able to get the funds, you need to scale up. And so they’re there. And then there are also the venture capital firms, so established ones, they might give you a bit more a larger amounts of funding. What are the different series of funding? Are you across that James, what they talk about?

James Kwan  11:55

Yeah, taking a step back from that, okay, I think some of the policy work, which has been done in this space to inform our innovation framework has identified something called the Valley of Death. And that’s simply a poetic expression policymakers have attached to that very early or infant stage in a company’s life, businesses life, which are very, very difficult to attract capital for the reasons we’ve just gone over, right? They don’t have a track record. And the idea is just far-fetched, it hasn’t been proven. So going to your question about you know, what do Series A, B, C, what does precede mean? These are essentially an effort by the venture capital industry to categorise that very infant stage in a company’s life. And they do that in order to introduce or inject funding in at defined milestones. So company would start a precede, there may be a couple of different stages before that before advancing to Series A, then to B, then to C. And then each stage at each progression, that the checks get bigger. And the prospect of a return gets hopefully more certain.

Gene Tunny  13:07

Right, gotcha. Okay. So so A is the first is that right?

James Kwan  13:12

Yes. So I think they call it following the alphabet in some circles. You would start off at A, well you would start off at precede nowadays and then you would go to A then to B, and then to C,

Gene Tunny  13:24

and is there any accepted understanding of what scale of funding is involved? I mean, so for precede, are we talking in the order of 100k? Or a couple 100k? Or under a million? Or what’s, is there an accepted range of funding term?
James Kwan  13:38

Yeah, look, that’s actually a really good question. It’s one I usually one I kind of leave up to our capital managers who might actually kind of slice that up. But really, they are kind of stages to know, you know, at what level or stage an early stage startup is at. And you know, that’s a way to, again, to kind of size the amount of funding investors would like to put into that company.

Gene Tunny  14:02

Yeah, I might look it up and see if there are any, any guides to that. Just interested. But I mean, one thing I’ve noticed is that, like, it’s so risky, isn’t it? Because one of the reasons banks don’t want to invest is because there’s, there’s not a lot of collateral there. I mean, banks want to lend against, you know, they want to lend you money to buy assets. So they’ve got something they can actually repossess, or foreclose on if, if you can’t meet the repayments. So yeah, startups are a really risky proposition, because you might end up with with hardly anything at the end if if everything goes wrong, if it …

James Kwan  14:39

absolutely. And yet we have this problem with lagging productivity, right. So you kind of you know, take that as a, you know, necessary ingredient to nurturing and expanding Australia’s economy into the future. These are the ideas which need to be funded in order to give that objective a real shot.

Gene Tunny  14:59

Right, Yeah, yeah, exactly, exactly. So it’s across, you know, it’s IT. It’s technology. There’s biotech. There’s I know that there’s a lot of discussion about medtech, biotech, particularly up here in Brisbane where I am medtech is quite popular, we’ve got the Olympics coming up. So everyone’s, sportstech too, I mean, there’s fintech, all sorts of things.

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  15:31

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, We’d love to hear from you.

Gene Tunny  16:00

Now back to the show.

Could I ask you about Venture Crowd? Where do you fit in this constellation of venture capital, financiers or funders or however you describe it?

James Kwan  16:15

Good question. So go back to what I was saying, what I said a little bit earlier about VentureCrowd’s mission, because it has been around since I think 2013, has always consistently been to fund great ideas. And sorry, we’ll take the detour path to you know, the response to your question about where VentureCrowd kind of sits in the space. What we have seen as the two main hurdles to fund great ideas would be a lack of diversity of thought and imagination from the traditional sources of capital entrepreneurs would normally go to right. So if you can’t persuade a family office or a VC fund to fund you, I mean, you’re pretty much out of pocket in terms of, you know, getting someone to, you know, to back you. My boss loves giving the example of Airbnb, right, who faced rejection letter after rejection letter after rejection letter in Silicon Valley. One of those rejection letters, I think said, and I’m paraphrasing here, we just don’t think travel is a sexy idea. And yet, and yet, we know Airbnb is an eminently profitable commercial idea, because you see it everywhere, right? So entrepreneurs have had to contend with, you know, the biases in the people who they would traditionally go to for funding. On the investor side, investors have had to contend with challenges in accessing private capital markets. That’s happening in a context of companies, good companies staying private for longer, are not even contemplating listing at all. So what VentureCrowd want to do in this space is to really democratise access to founders, access to early stage startups for normal investors. And on the founder side, expand the investor base. So they actually have people with the right alignment of values, to really buy into the founders vision and to make it a reality. So where VentureCrowd sits, you know, in the constellation of VC funds, as you’ve put it is really, that idea of democratising access to private capital markets, both for founders and investors. It doesn’t have a particular mandate, although we have a number of products which align along those segments, which you just mentioned. So there’s a VentureCrowd Health Tech fund. But what we’ve seen is that investors, particularly in an area as speculative as venture capital, want to be able to invest not just in something which will make an outsize financial return, but also align with their values. And we’re actually seeing this in the suppose more conservative end of investments, right with the rise of ESG ETFs. We think the way to do this is by giving communities out there the tools to invest in a broader range of investment opportunities, which hopefully, engages that flywheel dynamic of more investment opportunities available for investors incentivizes more investors to come into this space, which incentivizes more entrepreneurs to come to VentureCrowd to seek capital raising activities through us. So that’s basically it in a nutshell. There’s a couple of nuts and bolts kind of sitting under that. I might just leave it at that.

Gene Tunny  19:43

Yeah, we’ll certainly delve into that. What are some of the successes so far James? Are you able to take us through any of those. I saw that you’ve got a there’s a meal prep business is there health.

James Kwan  19:54

Yeah Be Fit Foods is our one which we’re currently conducting a crowd source funding campaign for. So crowd source funding if you think Kickstarter, but for shares and equities, you’re basically right on the mark. So they’re doing really, really well over an established, you know, relatively new space for an established business. And the great thing about them seeking funding through the CSF, a crowdsource funding regime, is that really opens up the doors again to you know, the Mum and Dad investors I alluded to earlier.

Gene Tunny  20:27

So, yes, yeah, sorry, James, I’m just interested in that, because you’re talking about Mum and Dad investors. So normally, these type of opportunities would be for the wealthier individuals who could be angels or sophisticated investors, where you have to meet certain income or net wealth requirements. With Mum and Dad, are you talking about just ordinary people or people with which don’t, who don’t meet the normal, those requirements for sophisticated being a sophisticated investor or an accredited investor? Yeah,

James Kwan  20:58

Absolutely, I mean, there’s probably a kind of parallel conversation to this, right. But when you look at financial services regulation, you have that split between wholesale investors, and that includes sophisticated investors, investors with experience, investors with a certain amount of annual income, on the one hand, and everyone else who gets put in the retail basket. Now that’s fine from a regulatory perspective, if the objective is to have additional protections, which retail investors may avail themselves of, but increasingly what we’ve seen is the categorization of a wholesale investor actually allows you to access a broader range of investments. So go back to what I was saying about companies staying private for longer, and you know what that means in terms of, again, normal people being able to build wealth into the future. That’s really a big part of what’s motivating VentureCrowd to democratise access to these markets. Right. Because why should they be the purview of the already rich?

Gene Tunny  22:05

Yeah, look, I think I generally agree with that, that viewpoint and that philosophy, I mean, the the issue is, of course, that it is it is a risky, sector isn’t it and and I mean, potentially, there are much higher returns, but you don’t get that without taking on a lot of risk. So how do you explain it to investors? What’s your, what’s your promise? Or what’s your, yeah what’s your pitch to investors?

James Kwan  22:31

So the first thing probably to say is, and again, you know, not legal advice, not financial advice. But venture capital, probably, you know, again, because of its, you know, speculative nature, will probably only ever occupy a very, very small part of, you know, someone’s portfolio. But it’s interesting, you mentioned the riskiness of, you know, this area, and, you know, that is a deserved reputation. But when we look at, you know, the volatility in asset classes, which we’ve traditionally treated as less risky, and I’m thinking US Treasuries, right. I mean, as an economist, you’d probably be aware about the volatility that asset class has gone through over the last 24 months. So it’s interesting when we talk about, you know, these asset classes as having a permanent risk profile, and maybe that needs to be revisited. But parking that venture capital investments will, you know, tend to occupy a fairly small portion of an investor’s portfolio. It probably also engages that part of the investor, which, again, what I said earlier, wants to invest not just because of the financial value inherent within that company, but also the values which that company represents.

Gene Tunny  23:47

Yeah, do you find that, that is a, you know, people are really looking for that, that is something that, you know, that will affect materially affect people’s investment decisions.

James Kwan  23:58

I don’t think people can deny the fact that people bring their personal values to investments. I don’t think there’s any other way to describe the, you know, explosive growth in ESG funds over the last 12 to 24 months. I think as a society, we’ve just been, we’re getting less prepared to accept the cost to society, which traditionally had been externalised and separated out from the company’s financial performance.

Gene Tunny 24:25

Yeah, fair enough.

James Kwan 24:28

Yeah. I wouldn’t read into that, though. So the qualification there, Gene would be that I am not an absolute supporter of ESG. I think there are a number of important questions which need to be asked in terms of how you reconcile the values which ESG is intended to stand for on an internal basis. So how do you reconcile the E standing for environment with the S which is for social with the G right when those things come into conflict? And I certainly do think those values aren’t always in alignment. Certainly that broader proposition of people investing, because they see something which, you know, they see a value as in a social or an ethical value they want to advance, in addition to the financial value they hope to realise in the future, I don’t think anyone can really deny that.

Gene Tunny  25:18

Right. So how does this work at VentureCrowd? Do you have a specific investment vehicle or a specific fund that is making ESG investments? Is that what your, is that the case?

James Kwan  25:30

We don’t, and you’d have to ask the people developing products as to why we don’t. But what we do have, and again, getting going back to what I was saying about ESG, having a couple of internal inconsistencies, it’s perfectly fine to invest on the basis of your values, but it probably needs to be a little more specific than something as amorphous as ESG.

Gene Tunny  25:54

Yeah, good point. Yeah. Well, what are the different ways people can invest through VentureCrowd James, just interested in that you have specific funds? Or is it based on specific startups? There’d be a startup, and you, you were mentioning before you went and crowdsourced for Be Fit, was it? Is that right?

James Kwan  26:12

Yeah Be Fit Foods, so probably the best way to think about and I think this kind of applies broadly, is you can either invest into a single asset, or you can invest into a portfolio, right? A number of our investments right now would fall into the former basket. So investments directed into single company. But we do have and the example which I gave earlier being the VentureCrowd Health Tech fund, that would be one which grants people exposure to you know, a number of companies playing in a particular sub sector of the economy, namely Health Tech.

Gene Tunny  26:44

Yeah. Yeah, gotcha. Okay. Okay. Very good. And James, you’re a lawyer, aren’t you? You’re the in-house counsel.

James Kwan  26:53

For my sins, they never take me out of the dungeon.

Gene Tunny  26:55

Right. Yeah. So, I mean, what sort of, are there tricky legal issues involved in VC? I mean, what what are the, can you give a flavour of the types of issues that people in your sector or, you know, in venture capital have to think about please?

James Kwan  27:11

On any given day, you will have, I think this is the way I would describe it, you would have work which is driven by the broader economic climate. So when, yeah, when times are good, no one ever looks at the contract, but when interest rates are rising, and people are finding it difficult to put food on the table, you know, that’s when people actually, you know, start taking, you know, a magnifying glass to the investment contracts and seeing whether or not they can withdraw their money at a particular time noting that venture capitals, you know, tends to be a mid to long term investment. You have companies who you may have, you know, I’m not singling anyone out, in particular, I’m just kind of painting this sector in a broad brush. But you may have companies who, who you got along famously when you’re raising capital for them, but as soon as that capital is raised and transferred into their account, you no longer hear from them. So you having to chase them up. So there’s a lot of things of a transactional nature, which are driven by again, the broader economic climate. The other parts of my job, what really the other half of my job really would be dedicated to standing up the technology platform, which VentureCrowd wishes to move its financial services and financial products onto and that’s a way of engaging online communities to make investments. We think, within that the, so I again alluded to blockchain has been a bit of a part of the VentureCrowd strategy. And we think, so putting aside cryptocurrency, which is a particular, you know, use case of blockchain, we think that there is something within that technology, which neatly aligns with this idea of democratising investment, because what blockchain allows you to do is to represent ownership in a virtual context. And it allows you to do that as potentially as seamlessly as sending an email, you know, between you and I. So, we have, you know in the works, a development of a blockchain platform, which we hope to leverage to facilitate investments in a virtual slash digital context. And there’s a long list of items of a regulatory nature which we’ll need to tick off before we can do that in a compliant and safe way. So that’s probably the other part of my job, which is probably a little less applicable to other VC funds and more specific to the job I currently occupy right now at VentureCrowd.

Gene Tunny  29:54

Right, and so is this why you’re in, you’re based in Canberra aren’t you James and is this why because you have to talk to Treasury I guess and maybe APRA, the Australian Prudential Regulation Authority.

James Kwan  30:04

So APRA does actually have I think it’s a little known secret. But APRA does actually have a Canberra office. But you know, the headquarters are still very much ensconced in Sydney CBD.

Gene Tunny  30:15

Right, gotcha yeah,

James Kwan  30:16

I’m actually in Canberra, because I’m a born and bred local, so this is kind of in the personals. And, you know, it’s probably safe to say that, but for, you know, the broad based acceptance for remote work, which has happened over the last 12 to 24 months, because of COVID, I probably wouldn’t be where I am right now that, you know, we now live in a world where you can work in a, you know, industry where, you know, you are very much separate, except for a virtual connection with your employer, and pros and cons, but it’s working out pretty well, for me.

Gene Tunny  30:48

Ah very good. This blockchain platform sounds terrific. Would this be a first to the world? Do you know if anyone else is looking at this worldwide? Are there any examples of this sort of thing?

James Kwan  30:58

Yeah. So there’s a couple of people who, you know, have also twigged to the idea of blockchain being, you know, a potential, you know, next generational platform to make investments. So, you know, the effort to tokenize, they call it, you know, real world assets. But, you know, you could also include shares traditional financial instruments into that definition, definition of real world assets. And there’s definitely a couple of people doing that, again, over in Singapore, which, by the way, I should probably mention VentureCrowd’s also recently announced that it’s established a branch office over in Singapore, which is why I know about this. There’s a couple of companies, the one which comes to mind is ADDX, which is an exchange, which is hoping to tokenize a bunch of financial instruments and put them onto the blockchain. And it’s just, you know, again, there are certain efficiencies which you know, businesses see, which make developing, you know, a market exchange on that technology on the blockchain and attract a prospect.

Gene Tunny  32:04

Yeah, I’ll have to look more into that. I know, that wasn’t ASX looking at this. And then they had an issue that just didn’t work out for them. They blew a lot of, 200 million or something on investigating a blockchain exchange for the Australian share market. But you know, they had a go at it. I mean, you know, you may you’ve got your own tech guys and your own ideas. So yeah, I think it’s worthwhile looking at for sure.

James Kwan  32:28

The ASX post-mortem Gene is actually really interesting to read because blockchain at its heart is the idea that you can scale up peer to peer transactions, right, whereas the current model of financial services and financial transactions very much and the realm with which ASX sits in is very much based on intermediaries. So you know, how you reconcile a technology which promises peer to peer transactions with also the presence of intermediaries is somewhat difficult to reconcile. And I think that’s, you know, something which comes out in the post-mortem on a ASX chess replacement project,

Gene Tunny  33:09

I’ll have to have a look. So you were saying what they were trying to do if they, the way they were coming at it was never going to work? Is that what you’re suggesting? Because it was incompatible. There’s this incompatibility with their model and why would you use blockchain for that? Because they just, they didn’t want to surrender their role as the as the intermediary? Is that what you’re arguing?

James Kwan  33:31

I think that’s something which definitely kind of comes through quite clearly in the report, or at least if not quite clearly, and then reading between the lines, right, because ASX is, you know, an existing financial service has a number of stakeholders, which, you know, it needs to accommodate. And those, you know, stakeholders make money. You know, they have business in the existing financial system, which is predicated on money passing through different entities before it hits, you know, kind of, you know, the end investor.

Gene Tunny  34:03

Yeah you’re talking about the brokers as their stakeholders and the banks. Okay, gotcha. That makes sense. I’ll have a close look at that. I just thought of that then when you mentioned this, and just remembered ASX blew a, a whole bunch of bunch of money on that. But look, you know, there are going to be failures, in any when we’re innovating and before you get to the successes. I want to ask you about one thing you said before where there are concerns, sometimes the founders, they’ll get the money deposited, and then you don’t hear from them. But one of the things with venture capital, I mean, the way I understood it is that, I mean one of the benefits of this approach is that the the founders can get the benefit of these people who’ve been in venture capital like the or the angel investors have been successful business people, and they’ve got a lot of experience and the, and the venture capitalists have seen it before. And so they can provide them with the founders with the benefit of that experience. So will they sit on a board, they could be advisors, I mean, I know that someone like Tim Ferriss, you know, he would be an advisor to Uber or Shopify, and then they’d have an IPO and then, you know, make ridiculous amounts of money. Like, how does it work with VentureCrowd? Do you have a role in how the company runs day to day or the strategic direction?

James Kwan  35:19

Again, good question Gene. So, ideally, the investment is tied also to some sort of ongoing engagement with the company. Right. And while that is the perhaps the ideal let’s say, it doesn’t always happen. And it really is kind of horses for courses right. Some founders, you know, may be reluctant to relinquish the control, which is represented by having, you know, an external person sit on their board. And it really is, I suppose, on investors VC funds, the onus is on them to actually persuade founders of the value of having a fresh set of eyes, an experienced set of eyes stewarding the company as it kind of goes through, you know, its various stages of maturity. And I suppose, where that doesn’t happen, right, where the company just, you know, takes the money and run that is, you know, a risk, which, you know, needs to be considered.

Gene Tunny  36:15

Yeah, I mean, just thinking about it, what I’ve seen with these, a lot of these startups is that it’s so long until they’ve actually got any significant amount of revenue, right. So for their first few years, they’re just burning cash. And they have a burn rate, don’t they? So they figure out oh, this is how much money we’re burning every month. And this means we can, you know, we’ve got to basically have the product up and running, earning revenue by this date. And, yeah, it’s, it can be tough that that sort of business. And if you’re investing in it, yeah, you’d have to, you really have to have nerves of steel, I suppose. Because a lot of it…

James Kwan 36:45

It’s not for the faint-hearted Gene

Gene Tunny 36:48

Yeah, that’s, that’s a good way to put it. Okay. Right. James, I should ask you about policy, you, you were talking about policy before. And Kim Carr, he was Industry Minister when I was in Treasury I remember. And he had an innovation review. And I think his idea was to try and connect everything up and have a more integrated system. And so he was Minister for Industry and Innovation for a while. So I guess he was probably trying to make, to improve the interconnectedness or whatever you want to call it when he was there, but you’re saying that there’s fragmentation? Is that, is that the case? You think that there are, that we could have better policy settings for venture capital here in Australia? Is that your view?

James Kwan  37:37

Yeah I don’t think I really have too much more to say, apart from you know, what I said earlier about fragmentation. But again, as I put it before, as an entrepreneur, right, your focus, the reason why you get up every day is to build a business. It’s not there to fill in a form. And so it is a little puzzling, that in order for people to access government assistance in this space, but it’s not just one form, it’s multiple forms. And those forms are Byzantine in nature. And you’ve got to deal with a host of government bureaucrats in order to access those those incentives, you know, those assistance packages, it may simply be, you know, a symptom of government being a complex creature, right. I mean, you would know that perhaps better than most people right Gene, but if that is the case, that the assistance is out there, it’s just not readily accessible. It’s not easily accessible, then perhaps one way of nurturing, you know, the venture capital industry in Australia, is to simply make it easier for entrepreneurs to do that on a personal basis with, you know, the least amount of friction possible in the least amount of time and attention taken away from building their own business.

Gene Tunny  38:55

Yeah, it sounds like what, is it about information, getting the information out there? Just trying to think how they can do that. Improve that accessibility? Maybe I’ll look into it and just see what the, yeah, I mean, I might have to try and connect with some founders and see what issues they’re, they’re facing moving. It’s, it’s a good point to, to make. I’ll also have to look at the break through fund and break through funding through Victoria, right BreakThrough Victoria. I’ll have to see how it’s gone. It’s, Ill have a look at its financial disclosures, and, gee, it’s risky for governments to do that sort of thing. And one thing that, it’s interesting it’s being done in Victoria, because Victoria, historically, I guess everyone’s forgotten it now but back in the late 80s and early 90s, there was the Tricontinental which was the merchant banking arm of the State Bank of Victoria. And it lost a lot of money on commercial real estate, if I remember correctly, and that basically led to the downfall of the State Bank of Victoria. And you know, huge issue at the time. So in, you know, venture capital’s arguably more risky than commercial property. So it’s it’s interesting that they’re doing that I guess they, if you’re upfront if you’re clear that you could lose money and it’s highly risky then, and they’ll argue that there’s a public benefit to it. Maybe you can, maybe you can get away with it if you limit your losses I suppose, limit yeah…

James Kwan  40:23

Yeah, what is it people say, Gene, don’t put money in to an investment which, you know, you’re not happy losing right, and I think that applies on the individual level. It probably also applies at the level of state governments.

Gene Tunny  40:34

Yeah, I think that’s a very good point James. Absolutely. Okay, James, anything. Any final points before we wrap up? This has been great. I’ve learned a lot about your business. And yeah, really appreciate your perspective, is there anything more you’d like to add before we wrap up?

James Kwan  40:48

No, I think you’ve done a pretty good job of covering everything. I’ve really appreciated the opportunity just to come here and have a bit of a chinwag. And you know, if there’s an opportunity to do it in the future. You know, who knows?

Gene Tunny  40:58

Absolutely. Okay, well, next time I’m in, in Canberra, and yeah, not during the winter, though. And it’s winter there at the moment. And I remember those Canberra winters, so stay strong, stay warm. Very good.

James Kwan 41:12

Thanks again for that Gene.

Gene Tunny 41:16

Pleasure. Thanks, James.

Righto thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this, or to begin your own podcasting journey head on over to


Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business

Full transcripts are available a few days after the episode is first published at Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Podcast episode

Do central banks stabilize or destabilize economies? w/ Addison Wiggin, NYT-bestselling-author – EP196

The episode delves into the effectiveness of monetary policy by central banks in managing the economy over the business cycle. Do the actions of central banks stabilize or destabilize economies? Show host Gene Tunny chats with Addison Wiggin, a bestselling author, market economist, and host of the Wiggin Sessions podcast, about monetary policy and financial crises. Addison also shares some reflections on the US debt ceiling drama. This is part 2 of the conversation Gene held with Addison in early June 2023, the first part of which was released as EP192 on the US banking crisis. 
Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About this episode’s guest: Addison Wiggin

Three-time New York Times best-selling author, Addison Wiggin, is a 30-year market economist with a passion for the real-world impact of financial markets on our lives. Addison is the author and host of The Wiggin Sessions, a podcast that connects key thinkers and industry experts for a deep dive into history, politics, and economics. Some of his most accomplished works as a writer, publisher, and filmmaker include the New York Times Best Seller The Demise Of The Dollar and the documentary I.O.U.S.A, an exposé on the national debt crisis in America.

What’s covered in EP196

  • How is it that the US dollar can be the reserve currency of the world? (2:37)
  • Why not just accept that the business cycle is a thing and not do anything about it? (7:25)
  • Minsky’s instability thesis. (11:42)
  • The debt ceiling is just political theater. (16:52)
  • Central bankers and economists thought we’d solve the problem of business cycle management. (21:29)
  • How monetary policy was determined during the Gold standard era (25:06)
  • When the Federal Reserve presided over the contraction of the US money supply as multiple banks failed, the money supply fell 30% from 1930 to 1933. (30:17)
  • What does all this mean in the current context? (35:54)
  • Central banks need to choose wisely and they need some methodology to do so. (41:23)

Links relevant to the conversation

Part 1 of Gene’s conversation with Addison:
US Federal Reserve on what happened to monetary policy during the Great Depression, “From the fall of 1930 through the winter of 1933, the money supply fell by nearly 30 percent.”:
Episode with Stephen Kirchner in April 2022 in which the “lean versus clean” debate was discussed:
Till Time’s Last Sand: A History of the Bank of England by David Kynaston:

Do central banks stabilize or destabilize economies? w/ Addison Wiggin, NYT-bestselling-author – EP196

N.B. This is a lightly edited version of a transcript originally created using the AI application It was then checked over by a human, Tim Hughes from Adept Economics, to pick out any clangers that otters sometimes miss. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory, evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show.

Hello, thanks for tuning in to this show. In this episode, I chat about monetary policy and financial crises with Addison Wiggin, The New York Times bestselling author, market economist and host of the Wiggin Sessions podcast. This is part of the conversation that I had with Addison in early June 2023. I broadcast the bulk of that conversation in an episode on the US banking crisis a few weeks ago. But this bit I’ve held back I held it back to this episode, because I wanted to have more time to reflect and comment on the excellent points that Addison makes in this segment. Please stick around until after my conversation with Addison for some additional thoughts from me on the issues. I should note that this conversation that we have about monetary policy, it was triggered by an observation that I made about recent market movements in the Australian dollar in early June 2023. So my observations about the exchange rate are dated. But the discussion which follows is evergreen. Okay, let’s get into the episode. I hope you enjoy my conversation with Addison Wiggin.

It’s interesting how markets react Yeah, it’s just, we just had this situation where because we had this surprise, monthly inflation number, and then we had the minimum wage decision or the award wage decision yesterday, then the markets go oh that makes it more likely that the central bank here the Reserve Bank will increase the cash rate. And so what we’re seeing now is that the dollar has appreciated against the US. So it was going down, it was going down to below 65 cents US and now it’s back up to around 66. Yeah, it’s funny how…

Addison Wiggin  02:37

And that’s one thing that I wanted to point out, because I think it’s it’s a concept that a lot of people either have trouble with, but in this book, I so I’m going to hold up the book again, because I think it’s worth the read. It’s pretty short. And my son helped me write it for millennials. So it’s like a quick read. But I was trying to wrap my head around, how is it that the dollar can be the reserve currency of the world? Meaning it’s the place where people, other banks and like big corporations hold their asset value? And how can we have that at the same that gives the United States a massive amount of advantage globally, when making trade deals, and whatever selling guns to go shoot Russians or whatever, whatever people want to do, we can do that, at the same time that we have inflation domestically, because there’s a difference between the reserve currency of the world which, you know, the Central Bank of Australia is going to is going to make deals with the Federal Reserve. Like that is an exchange trade thing. Or if I don’t know if Apple wants to open a plant in Brisbane or something like those exchanges happen in US dollars. And a lot of the commodities that Australia exports are priced in dollars, gold, and their earths and copper, like those things, they’re all priced in dollars. So there’s a tremendous advantage for the for the US economy that we have the reserve currency of the world, but at the same time, we have a payment currency, which is the stuff that we buy eggs in or we finance our homes or, or we take out loans to put our kids through school, whatever, that you can have massive inflation in that at the same time that the stability of the reserve currency. You know, you were talking about a penny between, it used to be five now it’s six or six like it’s pretty, pretty stable, globally. It’s a freaking nightmare at home when they can’t figure out how to slow prices down or the bizarre thing that we were just talking about. They want people to they want the unemployment and the jobs number rate to go up, but they actually want that to be the result of slowing the economy.

Gene Tunny  05:00

Well, yeah, I mean, they want a sustainable rate of economic growth and you want to avoid the overheating economy, you want to avoid the, the huge boom and followed by the, the big bust. And that’s a concern. I mean, in Australia what we’ve had because particularly because in a combination of the massively generous pandemic response, I mean, just like nothing that was just ever expected. And I mean, incredibly generous to, particularly to small business people, and also to welfare recipients who had their, if you’re on the Jobseeker you had that doubled, compared with what it was before, for maybe six months to a year. And there’s all this and people were allowed to pull money out of their retirement savings, their superannuation, their compulsory super, so there’s all this extra money. And I mean, the boom we had was just incredible. And unemployment nationally got down to three and a half percent. And I mean, I never thought it would go below four, like we we thought full employment in Australia was around, or the natural, the non accelerating inflation rate of unemployment or natural rate of unemployment, we thought it was around 5%. And then suddenly, it’s got unemployment rates got down to three and a half percent never thought we’d see it. Cutting off immigration was possibly part of that for a time. But the idea is to try and set the interest rate so that the economy doesn’t get on, I mean, you know, this, it doesn’t end up in that boom bust cycle or that or it’s not as amplified as it as it would be, if you…

Addison Wiggin  06:33

Yeah, so that I my issue with that is that they that’s that was the idea of lowering interest rates for as long as they did is that they wanted to mitigate the boom bust cycle. They wanted to use the tools that they had from history to figure out a way to mitigate the booms, but also mitigate the busts, they wanted to like level the whole thing out. And look what happened, we had a pandemic. And then we had, we had to throw a bunch of money at citizens, and then they saved it, the savings rate went higher than the credit rate at one point on each money. And then as soon as the market I mean, as soon as the economy started opening again, it plummeted all the way to the lowest rates, we saw the the fastest rate of disposable income drop, since 1933. It just went whoo bump. Like they did anything but mitigate the business cycle. In, in my view, I mean, I’m just a guy who studies and writes about it and talks about it write books about it, whatever. But in my view, why not just accept that the business cycle is a thing and not do anything about it? Let, let credit go to the market price that is this, it’s designed to go to, don’t have a central bank that is trying to manipulate overnight rates so that their buddies on Wall Street can get, can keep funding their projects and stuff. It messes with the natural cycle of booms and busts. And that’s what I honestly believe would would do away with these kinds of massive inflationary cycles that we go through, or the opposite, which they’re really afraid of, which is a deflationary period where they can’t sell anything, and the economy just falls apart. That’s what happened in the 30s. I’ve been reading a lot recently about what’s going on, what went on in the 30s. And that’s when we got all these regulatory agencies, it’s probably about the time that Australia started enacting its own financial regulatory systems too. They don’t help. And in fact, they’re always late and they’re always wrong. So it’s like, they’re not mitigating the business cycle. And they’re not actually helping anyone be more honest and truthful in the marketplace. It’s it’s politics, and it’s nastiness. And nothing actually, like they’re not achieving anything. And I’m costing, casting a wide net here because I’m talking about regulatory agencies within the financial network, like we’ve got the SEC, we’ve got the FTC, we’ve got the CFTC, there’s a bunch of lawyers out there trying to stop people from doing anything under the guise that they can mitigate the boom and bust cycle, and that’s just the natural order of things. That’s capitalism. Let’s, let’s go. That’s the way I look at it.

Gene Tunny  09:44

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  09:49

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, We’d love to hear from you.

Gene Tunny  10:19

Now back to the show.

Yeah, look, I think there’s, I think some of the fine tuning they’re doing or if that’s the right term, I think there’s there is a concern that some of it may actually be contributing to the instability of the economy. I, I think that’s right. What Bernanke would argue is that if he hadn’t, so if we go back to say, ’08, I mean, he would argue in, you know, Paulson and Tim Geithner, they would argue that if they hadn’t done what they did, or some variation of it, you could have had a rerun of the 1930s. And you could have had unemployment of 20%, or something, or whatever you saw during the Depression. I don’t know to what extent that’d occur, but that’s what their argument would be. Yeah, it’s a it’s it’s something I’ve been thinking about. I mean, I don’t really know the answer myself. I am concerned like you that a lot of the actions that they’ve taken have contributed ultimately contributed to instability rather than making things more stable.

Addison Wiggin  11:26

Yeah, well, let me go back to Hyman Minsky who was writing in the 50s. And he was mostly describing what he read, he lived through the 30s. And then when he was an adult, he was a professor, I think, at MIT. And he was talking about, like, his area of study was the 1930s. And he studied like Schumpeter, and those guys who were writing during that time, Garet Garrett is another one that I’ve been sort of fascinated with. Because as we’re moving through our own like situation, the the stuff that I read, sounds like it was written yesterday, but it was written in like 1932, or whatever. So Minsky’s idea was the longer you have a period of stability, the stability, it, it’s actually called the Minsky Instability Theory, that the longer you have periods of stability, the more mistakes get made, and the inevitability of a crash is going to happen. So artificially creating periods of stability by lowering interest rates, or by keeping them low for longer than the market demands, or by incentivizing the couple of the things that were talking about before 2018, were alternative energy, and areas of the market that had been underserved by the regular stock market, they were passing political motives, or political policies that encouraged, you know, wind and whatever, I wish they had gone into nuclear at that time, but they failed, they missed on that one. But there was a lot of money going into areas of the market that that weren’t rewarded by a return on equity, like money that was put in was not rewarded. And so there was a shit tonne of money going into areas of the market that didn’t deserve it for a long period of time. And so the Minsky instability thesis is that when you do that, for a long period of time, there’s people make mistakes, they don’t, they don’t get punished by the market, that’s a kind of a harsh way to say it. But they don’t, they don’t lose their money, they get rewarded for making bad mistakes that are based on policy. And if that goes on long enough, when you have to clean up the mess after that, which is what Powell has been trying to do, it’s hard to figure out what Powell even thinks, but when you have to clean up the mess, then all of those mistakes that were based on false premises. They come to light in that, like if you’re watching anything of the financial news, currently, that’s each headline is about the mistakes that were made in like 2015 or 2018. Or what the hell happened during the pandemic. Like we’re still cleaning up that mess and we don’t know, a way forward other than this debate of whether the Fed is going to lower either pause or lower rates again, like that’s the only tool they have. They will they have two tools, they have one, they can lower rates and then other central banks around the world will follow. Or they can engage in another round of QE and support specific industries. Like I think we’re gonna see a heavy push either later this year or early next year to support in industries that are trying to develop new technology for cleaner energy, just because there’s so much private equity going into that space right now. That when they start losing money as they have been, there’s going to be a push for government to step in and bail them out.

Gene Tunny  15:24

Right, okay, even though, I mean you, you’ve just you’ve narrowly averted a debt default, haven’t you? And they’re going to have to have some cuts in discretionary spending. So yeah, I guess, yeah, maybe they’ll find some way to do it. But the

Addison Wiggin  15:39

let’s let’s talk about the debt default for just a second. It’s so absurd. Like, I’m like just a citizen of the United States. I grew up here. My dad is mildly conservative. I don’t really give a shit about politics at all, because I mostly think that they’re talking out of one side of their mouths, and then they’re making deals behind doors somewhere else, right. So the idea that we have a debt ceiling came about because Congress used to have to justify all of their spending every year, they had to, once they pass the budget, they had to like stand up and say, We want to spend money on this highway to do this, or this pipeline to do that, or whatever. They had to justify it. But when we went into the very expensive wars that we’ve been involved in World War One, World War Two, Korean War, war on poverty, war on drugs, war in Vietnam, war in Afghanistan, that’s our longest one, like you can’t justify spending that hasn’t happened yet. So they put the debt ceiling in place in 1960. Saying that, well, you can just spend money on whatever you want. But it can’t go above this amount. And 78 times now, I think it’s 79. Now that they’ve just reached a new deal, they’ve had to raise the debt ceiling since 1960. Like, the whole concept of a debt ceiling is just political theatre and it’s not even a useful tool to anyone. It just makes people anxious. I actually started watching the market. I was like, When is this gonna start impacting the market May 18. Nothing in the financial news. Like the banking crisis got wiped off the headlines, which I think is still sustaining right now. We’re gonna see more banks fail. And people other than the NVIDIA boost that we got last week, when AI started grabbing all the tech people’s attention, the markets were just trending slower and slower, lower, like, they were just kind of trending now. And everybody was waiting for Kevin McCarthy and Joe Biden, to come to an agreement. That’s it, it was like really boring. And all they were trying to do is figure out how much they’re going to pay their defence contractors, their buddies who make weapons to send to Ukraine, and that’s literally all they were talking about, one of the things they were talking about is the Republicans wanted work requirements for food stamps. And the Democrats didn’t want that. They just wanted people to get food stamps. And then there was a third one that was a pipeline from West Virginia to Virginia and the Democratic Senator Manchin, Manchin, wanted it to go through and the Democratic senator from Virginia didn’t want it to go through because his constituents, it was going to go through their farms, and they didn’t want it to go through their flocks. The details that they were fighting over were minuscule compared to that $31.4 trillion debt ceiling that they were arguing about. It’s all politics. It’s meaningless, and it’s it’s a charade that comes up and they supposedly put a cap on it for two years, but I’m gonna guess they’re gonna spend more than they agreed to. And we’ll be in this boat again next year or, or in 2025.

Gene Tunny  19:16

Yeah, because you’ve still got the problem of the unsustainability a lot of the the automatic spending really the

Addison Wiggin  19:24

Oh, yeah, that wasn’t even, that was off the table from the beginning. They’re like, Yeah, of course, they Social Security and Medicare and Medicaid and all that. We’re gonna pay that and that is adjusted according to the inflation rate, which earlier this year or late in 2022, it was 9% so that the adjustments were already baked in.

Gene Tunny  19:51

So unless they’re gonna do something about that, or you know, the alternative is to actually increase tax revenue, but no one wants to do that. And so if you not gonna do do that, then you do have to tackle those entitlement programmes. And again, you know, Donald Trump says, I’m not going to touch them. And so the other GOP people, they’re probably not going to do it want to do anything about it?

Addison Wiggin  20:12

It’s kind of ridiculous because one of two, or actually, both of two things need to happen. And I’m like, Libertarian, I don’t I I’m not, I don’t even vote. So for me to say this is like, I’m just talking about the economics, not the political side of things, but they need to raise taxes. And they have to cut spending, there’s no way out of this any other way, unless they can get a bunch of dumb ass central banks around the world to keep funding our debt by buying bonds. Like that’s, it’s just like, if, if I tried to teach this to a, you know, a class of like third graders, they would be like, those don’t make sense, like we can’t spend more than you take in and you have to borrow it from people who don’t like you. Pretty obvious that it’s unsustainable. And yet we tell ourselves day by day, week by week, month by month, year by year that we can do this forever.

Gene Tunny  21:24

Okay, I hope you found that informative and enjoyable. I think Addison made some great points about the effectiveness of monetary policy. At times, it may well have contributed to economic instability. Prior to the 2008 financial crisis, central bankers and many economists had thought we’d solved the problem of business cycle management. Inflation targeting policies were seen as contributing to the period known as the Great Moderation with low inflation and less volatile economies. But as we know, now, the victory was short lived. The fundamental problem of business cycle management has not been solved. It’s possible inflation targeting central banks, they didn’t pay enough attention to the financial risks that were building up in economies. They were too willing to cut rates to shore up financial markets with a view to preventing a wider panic which could cause a recession. There was the so called Greenspan put, named after Alan Greenspan, who chaired the Federal Reserve from 1987 to 2006. It was called the Greenspan put through a comparison to a put option in financial markets. So that’s an option, which allows the owner of stocks to lock in a certain price at which they can sell the stock in the future. There was a view in financial markets that Greenspan would intervene to shore up stock prices so they wouldn’t fall too much. Arguably, this created a moral hazard and encouraged excessive risk-taking in financial markets. So monetary policy could actually have been destabilising. I should note, there is an active debate on the extent to which and whether the central bank should intervene with a view to avoiding the accumulation of financial market risks. So this is the so called Lean versus Clean debate that I discussed with Steven Kirschner in Episode 135 in April 2022. So please check out that episode if you haven’t listened to it yet. I will put a link to it in the show notes. There’s no doubt that the monetary policy actions of Central banks can have significant impacts on economic activity, whether on the whole they are stabilising or destabilising is difficult to assess. In the 60s and 70s, Milton Friedman argued that the best thing for central banks to do would be to adopt a money supply growth rule, so committing to growing the money supply by a certain percent each year. This turned out to be easier said than done and Friedman’s approach known as monetarism was widely seen as a failure. We might come back to monetarism in a future episode for a closer look at how it was implemented and what went wrong. There’s a fascinating story there. The key point is that there’s been a an active debate for decades on the right way to conduct monetary policy and various approaches have been tried. We we’re still grappling for the right approach. The challenge is that central banks need some Northstar for setting monetary policy. So whether it’s inflation targeting or nominal GDP targeting, the latter being something that Stephen Kirchner advocated for in that discussion I had with him last year. It’s no longer as easy as it was during the gold standard, for instance. So if we look back to that period in history. In a 1908 speech to his Manchester constituents, Winston Churchill, who was then the President of the UK Board of Trade, he explained how the gold standard guided the hand of the Bank of England in setting its monetary policy rate, known as the bank rate. If England buys from America or Germany, more than she intends to buy having regard to our own productions, instantly, there is a cause for the shipment of bullion, that is gold, and bullion is shipped to supply the deficiency, then the bank rate is put up in order to prevent the movements of bullions. And the rise of the bank rate immediately corrects and arrests the very trade, which has given rise to this disparity. That quotes from David Kynaston’s excellent history of the Bank of England. Till time’s last sand, if I remember correctly, I’ll put a link to that book in the show notes. So if you want to get a copy of it, you can find it on Amazon. It’s a terrific read, and lots of great history in there. And yes, that quote from Churchill, is in there. So as the quote from Churchill suggests, setting the bank rate, or the federal funds rate in the age of the gold standard, would have been much simpler. Now, that’s not necessarily an endorsement of the gold standard as that system had its problems and economists such as I think it was Eichengreen, Barry Eichengreen have argued that the gold standard ended up contributing to the Great Depression. So there’s a, there’s a big debate around that, that we probably don’t have time to go into now. Going back to the gold standard, isn’t realistic. I’m just making the point here that in history, when there was a gold standard, it was more obvious what should be done with the monetary policy rate, the bank rate in the UK, the federal funds rate in the United States, or the cash rate in Australia. So we’re no longer in that era of the gold standard or even Bretton Woods, the era of fixed exchange rates, which ended in the early 1970s. And because of that, it’s much less obvious what should be done with with these policy interest rates of central banks, so we’re still trying to figure that out. Econometric evidence is only so convincing so any econometric evidence on which monetary policy regime might be more effective than others, which one might have lower inflation and lower economic volatility measured by the volatility of GDP, for example, it’s only going to be so convincing, it’s not going to convince everyone that there’s just so many influences on the economy, that it’s just very difficult to determine whether any particular policy, whether it’s making the impact, the size of the impact, it’s difficult to know what would happen in the absence of a specific monetary policy change. It’s difficult to know what the right counterfactual is so we can’t run controlled experiments in macro economics, there’s no, we can’t treat the economy like a laboratory in which we can test alternative monetary policy so we’re left with questions that are difficult, if not impossible to answer. For instance, what would have happened if the Fed hadn’t intervened so aggressively during the financial crisis or the pandemic? Would we have had repeats of the Great Depression? That was what the policymakers that was what the central bankers were worried about. Look, it’s hard to know there are many factors to consider, for instance, is fiscal policy fiscal policy is is set in a much better way in the post war era than it was during the depression or before that. We have automatic stabilisers in the budget such as progressive taxation and unemployment benefits and they can help prevent economic activity from collapsing and so therefore, there may be less case for an aggressive monetary policy response. So there are other things to consider it’s a very difficult question to answer. Regarding times of economic crisis we could ask, was aggressive monetary policy, so an aggressive monetary policy stimulus was that required, so was it required, or instead, did we simply need a monetary policy that didn’t make things worse. So there is an argument that the Great Depression was caused by bad monetary policy. When the Federal Reserve presided over the contraction of the US money supply as multiple banks failed. The US money supply fell nearly 30%, from 1930 to 1933. So that’s a statistic that you can find on the US Federal Reserve website. I’ll put a link in the show notes. As Ben Bernanke admitted to Milton Friedman in 2002. Regarding the Great Depression, we did it. We’re very sorry. We won’t do it again. That was Bernanke responding to the strong argument that Milton Friedman and Anna Schwartz made in their famous monetary history of the United States from the early 60s. It only took the Federal Reserve 40 years to to admit they agreed with Friedman on that. Now, if you do have a, an emergency, a major economic crisis, then look, the arguably there is scope for a monetary policy response, most economists, the large majority of economists would accept that there has to be some sort of central bank policy response, and probably even a stimulus of some kind, although there’d be debates on just how much that should be and how large it should be. One of the problems I think we’ve been we’ve had recently is that the well, the monetary policy response during the COVID period, when combined with the fiscal policy response was just massive, and it’s been massively destabilising. And it contributed to a very strong recovery, I mean, massive, massively. A very strong recovery in excess of anything that we really expected. And that’s contributed to the inflation that we’re experiencing that that we’re seeing in the United States and the UK and Australia. It’s, it’s what’s happening in Ukraine, of course, but it’s also a lot of it to do with just that, you know, the after effects of that massive fiscal and monetary policy response. So unintended consequences of of that, that policy response. So look, I think economists would accept that there is scope for some stimulus, some response in the face of a massive shock, adverse shock like that, but it looks like it was really over done. And then there’s the issue of just what central banks should do. Outside of these major crises just in the sort of normal course of events or the over the course of the business cycle, to what extent they, they should be actively managing interest rates, trying to control the money supply, trying to influence the course of the economy. There’s a big debate over that, this idea of fine tuning. Now, when I was studying in the early 90s, when I was at uni, the leading macroeconomics textbook at the time was, well it was called macro economics. It was by professors at MIT. So very famous professors Rudiger Dornbusch, and Stanley Fischer. I think Stan Fischer went on to be the governor of the Central Bank of Israel, if our if I remember correctly, he was a former Vice Chair of the Federal Reserve, and he served as the eighth governor of the Bank of Israel, from 2005 to 2013 so very distinguished economist, and what he wrote with Rudiger Dornbusch, in that textbook, they wrote that in discussing the desirability of activist, monetary and fiscal policy, we want to distinguish between policy actions taken in response to major disturbances in the economy. So, I was just talking about that earlier when we think about incidents like COVID or the financial crisis, or the depression. So there, so back to the quote. So in discussing the desirability of activist monitors monetary and fiscal policy, we want to distinguish between policy actions taken in response to major disturbances in the economy. and fine tuning in which policy variables are continually adjusted in response to small disturbances in the economy, we see no case for arguing that monetary and fiscal policy should not be used actively in the face of major disturbances to the economy. Fine tuning presents more complicated issues. The case for fine tuning is a controversial one. I think that’s a good summary of how economists think about monetary and fiscal policy as well, that was written in the early 90s but I think that is still a good summary of, of what the consensus would be. So what, what Dornbusch and Fischer were getting at in terms of the problems with with fine tuning, they’re thinking about the problem there is that you’re not sure whether a particular shock to the economy, is it permanent? Is it transitory? Is this just a normal part of the business cycle, and therefore, you shouldn’t really react to it. There’s also there’s the issue of of lags in policymaking, it can take time to recognise disturbances in the economy, then can take time to implement policy and for that, to have an impact on the the economy. So there are these lags, which complicate macro economic policy. And they mean that the case for having an activist policy, so trying to be clever in how you’re setting interest rates and making these fine adjustments to interest rates. It does make you wonder, just the extent to which we can do that the extent to which our policymakers will get that right, and won’t actually contribute to instability in the economy, which I think is a significant risk. What does all this mean, in the current context? Well, it probably would have meant after we got out of the, the emergency period during COVID, and it was clear that the economy was recovering very strongly. And inflation was a risk, I think, thinking about this, all these points that, that I’ve been discussing here, I think, possibly central bank should have increased interest rates much faster, they should have got them up to perhaps what you might call a neutral rate, or a bit higher than a neutral rate much more quickly than they did. And then leaving them there and not not adjusting them every month or every couple of months, depending on how various economic variables are tracking. I mean, it gets a it gets very difficult to, to do that, and to be sure that you’re making the right judgement. So perhaps that’s one, that could be an interpretation of what central banks could have done if they recognised that this whole approach and fine tuning so to speak, is is not really optimal. I think it’s an open question. I’m not necessarily saying that I’m not saying okay, this would have been the right approach that there isn’t, there isn’t still the potential to fine tune the economy, there may well be, but it’s not clear that some other approach may not be superior. And so therefore, I don’t think you can actually reject the hypothesis or reject the argument that these frequent adjustments of policy interest rates, they could actually contribute to economic instability. We, I think that’s, that’s a question economists should be thinking more about. So there are certainly real examples of where the monetary policy response as part of a fine tuning approach was probably excessive, and it sent the economy into recession. The example I always come back to is the early 1990s recession in Australia, which was arguably deeper than it should have been, much deeper. The unemployment rate went up to around 11% in 1992, our central bank, the Reserve Bank, increased interest rates to around 17 to 18% to slow down the economy so in Australia, we had this colossal boom in the 80s. It was the age of the entrepreneur. And there was a lot of investment particularly in commercial property. And the central bank intervened aggressively, it was also worried about the balance of payments, the it was worried about the current account deficit. And it thought that very tight monetary policy was justified. And at the time, they thought, Oh, well, the economy can handle this, they did their economic modelling the Treasury and the RBA, they were forecasting a soft landing for the economy, it turned out to be the worst downturn since the Great Depression. So when I think of that incident, I’m always reminded of just how difficult it is to fine tune the economy, so to speak, and, and looking back on it that early 90s recession, it happened when I was in high school, and it was something that really made me interested in economics. And it made me actively think about studying economics and, and even eventually becoming an economist. So that was one of the incidents that that stimulated my interest in economics for sure. Okay, so we’re going to start wrapping up this afterword. Central banks, they do need to set policy rates, so they’re at the centre of the monetary system, they can control the amount of liquidity in the overnight money market. So in the cash market, as we call it, in Australia. And that ends up setting the benchmark for interest rates across the economy. So central banks are playing a very important role in our monetary system in our, in our payment system in our financial markets. They need to choose wisely. And they need some methodology to do so. So whether it’s set and forget, some sort of set and forget methodology or some type of rule, whether it’s inflation targeting, nominal GDP targeting, some other method, they need something to help guide their decision making. And we still haven’t figured out what that should be. So for a while, we thought that inflation targeting was the right methodology but that’s imperfect, we’ve learned. Some critics of inflation targeting they argue, it’s given us too much financial instability. Other critics come at it from another direction, they argue central banks, they actually didn’t fully follow the inflation targeting policy, it hasn’t been properly implemented. So they would argue that central banks should have had looser monetary policy during the 2010s so that they could have got the inflation rate up. So it got into the target range. And, and they would argue that what we ended up getting was lower growth, lower employment, higher rates of unemployment than otherwise. So we’ve got criticisms of inflation targeting for a variety of reasons. So it looks like it hasn’t. It hasn’t lived up to the promise it, it’s been imperfect. Okay, in summary, there’s still an active debate over how to conduct monetary policy when it comes to fine tuning the economy. It’s possible that at times central banks have actually contributed to economic instability. We can’t say definitively one way or another, whether their policy actions have been stabilising or destabilising on average. I think that’s fair to say. That’s my interpretation of things. If you’ve got a different view, then please let me know. I would love to hear from you. I think that central banks are trying to do the best they can, I mean arguably, they have helped prevent a rerun of the Great Depression at at certain times, particularly in 2008, you could probably argue that actions by the Federal Reserve, in particular did help prevent a much more severe downturn, although that was a very bad downturn already. But look, outside of those sort of incidents, I guess maybe during COVID, the assistance was was was definitely some assistance was needed but then they overdid it, and now we’re suffering from the high inflation. So look, possibly they do some good in times of crisis, but then, in other times, it’s hard to know they could actually be destabilising. This is one of these issues where it’s difficult to read the evidence. And it’s, it’s unclear, and we’re still trying to figure things out. So that’s not a great answer. But that’s my understanding of what the evidence and the theory tells us at the moment. So yep, if you’ve got a different view, let me know. So any thoughts you have on what Addison or I had to say in this episode, please get in touch. You can email me via Thanks for listening.

Righto, thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this. To begin your own podcasting journey, head on over to

Podcast episode

The Paradox of Debt w/ Richard Vague, ex-Sec. of Banking & Securities, Pennsylvania – EP195

Economics Explored host Gene Tunny chats with Richard Vague, a prominent American businessman and investor, about his new book, “The Paradox of Debt: A New Path to Prosperity Without Crisis.” Richard, who has previously written about “The Case for a Debt Jubilee”, shares powerful insights into the benefits and drawbacks of debt, discussing how it can help grow household wealth while also promoting economic instability and rising inequality. He also offers thought-provoking ideas for helping households and businesses manage and reduce their debts. 

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

Note: this episode was recorded in mid-June 2023, i.e. before the Supreme Court decision regarding student loan relief, which is why the decision isn’t mentioned in this conversation. 

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About this episode’s guest: Richard Vague

Richard Vague served most recently as Secretary of Banking and Securities for the Commonwealth of Pennsylvania. As the author of The Paradox of Debt (2023), The Case for a Debt Jubilee (2021), A Brief History of Doom (2019), and The Next Economic Disaster (2014), Richard Vague established himself as a clear and independent voice in the ongoing conversation about the role of private sector debt in the global economy.

What’s covered in EP195

  • [00:04:39] Debt and the global financial crisis. 
  • [00:11:23] Debt always grows faster than the economy, Richard argues.
  • [00:12:53] Increased debt and higher net worth. 
  • [00:17:23] Paradox of debt and inequality. 
  • [00:23:01] Type one and type two debt. 
  • [00:28:50] Regional banking crisis in the US. 
  • [00:32:13] The paradox of debt: summary. 
  • [00:35:10] Debt forgiveness in the private sector. 
  • [00:41:43] Debt restructuring in banking. 
  • [00:47:48] A win-win-win solution. 
  • [00:49:53] Massive job training as something Richard would like to see.

Links relevant to the conversation

Where you can buy Richard’s new book The Debt Paradox: A New Path to Prosperity Without Crisis:

Richard’s previous book The Case for a Debt Jubilee:

Gene’s conversation with Allen Morrison about the Enterprise China model which he mentions this episode:

The Paradox of Debt w/ Richard Vague, ex-Sec. of Banking & Securities, Pennsylvania – EP195

N.B. This is a lightly edited version of a transcript originally created using the AI application It was then looked at by a human, Tim Hughes from Adept Economics, to correct anything an otter might miss. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show.

Hello, thanks for tuning into the show. This episode I chat with Richard Vague about his new book, The Paradox of Debt, a new path to prosperity without crisis. Richard Vague is a prominent American businessman and investor. He’s a former secretary of Banking and Securities for the Commonwealth of Pennsylvania. He sits on the University of Pennsylvania Board of Trustees as well as on the boards of other prestigious organisations such as the Institute for New Economic Thinking. As you’ll discover Richard has some powerful insights into the good and bad aspects of debt. He talks about how it helps grow household wealth, while also promoting economic instability and rising inequality. Richard offers some thought-provoking ideas for helping households and businesses de-leverage and get their debts under control. Richard’s book is definitely worth a read. So I’d encourage you to grab a copy of it after you listen to this episode. I’ll include a link to the Amazon page for the book in the show notes. Okay, let’s get into the episode. I hope you enjoy my conversation with Richard Vague on the paradox of debt.

Richard Vague. Thanks for joining me on the programme.

Richard Vague  01:54

Thank you so much for having me.

Gene Tunny  01:55

Excellent. Richard, I’m keen to speak with you about your new book The Paradox of Debt. Debt’s a huge issue around the world. I’ve had recent shows on the debt ceiling in the US and and also the, what they’re calling the emerging economy debt crisis, there’s been a lot of discussion about that. And it’s one of those things that seems to come back every now and then we have these, these debt crises in various places. And in your book, you’ve got, I think, a good description of historically what’s been happening in this, this process that we’ll talk about. Could I ask to start off with what made you want to write this book? What motivated you to write the paradox of debt?

Richard Vague  02:42

Well, thank you so much for asking. And thanks, again, for having me on your show. We had done a lot of work for a number of years about financial crises be it in the Great Depression, or the great financial crisis of 2008, and so forth. And really, all of those are tied up in private debt and really rapid escalations of private debt. And we wrote a book called A Brief History of Doom that chronicled the 43 largest financial crises in the world over the last 200 years. And as we went around and presented that folks would love what we had to say, but ask you know, what about the other side of the balance sheet? You know, what about the assets that these individuals have? And? And can you put this together with the government debt story that we normally spend more time on? So I after hearing that for a few years, I finally said, well, that those questions are legitimate, they’re productive. So let’s roll up our sleeves. And let’s get into it. Let’s look at the entire balance sheet of countries of the sectors within those countries. And that’s this book.

Gene Tunny  03:54

Okay. So you wrote a previous book, and you’ve been speaking with various different people about that. And this gave you the idea. You’ve had a distinguished career in business and public service. Are you taking lessons from that? Are there things you that you saw in your career that have helped inform this book that you’ve written?

Richard Vague  04:14

Absolutely, you know we were in the banking business. So I studied debt, from the context of being a president of a bank. For years and years and years. It’s all I did, but I didn’t think you know, when you’re CEO of a company, you really thinking about the results of that company, and you don’t step back and think about the equation as a whole. And so that’s that really changed in 2000 and 5,6,7, when we began to see this tsunami of mortgage debt in the United States that ultimately ended up being the great global financial crisis. So we I honed my ability to look at debt and my interest in debt over an entire 30 year career, but it took the GFC for me want to step back and look at it holistically.

Gene Tunny  05:11

Gotcha. Right. Okay. And you mentioned the balance sheet. So you wanted to look at all of the you want to look at the debt, you wanted to look at the, well the liabilities for the people who owe the money. But you also wanted to look at the the assets. So is that part of the problem is the problem that a lot of the money that was borrowed was spent on unproductive investments? Is that is that one of the issues that you’ve been looking at?

Richard Vague  05:41

Well, yeah, and I want to be careful with the word unproductive. There. But yes, when you see a great financial crises, as we’ve had in this country, many, many times, we had one in the Great Depression, we had one and the 1980s, we of course, had one in 2008. You see lenders lending too much. And really, what we see is they’re doing loans that in normal circumstances would be just fine, mortgage loans, commercial real estate loans, but they overdo it. They do too many mortgage loans, they do too much construction debt. And not just a little bit too much, an egregious amount too much. So let’s take the 08 crisis, mortgage loans in 2002, were 5 trillion in the US by 2007. They’re 10 trade. So they doubled in five years. Well, you had to be a blind man to miss that. Or you had to have economic theories that excluded debt as a variable. And that’s really the way the Mac, the Orthodox macro economics profession looks at the economy, then their models don’t even take debt as a factor. So if you were looking at debt, it was easy to spot. It was egregious. And clearly, it’s one of the things we study.

Gene Tunny  07:16

Okay, so a couple of things that I’d like to discuss, Richard, what do you mean by their models? Don’t consider debt is a factor is that you? Are you saying that they’re too short term that they’re not thinking about the longer term and debt is in the short term, maybe you can get away with a buildup of debt. But in the long term, there can be a reckoning. So I just want to understand exactly what you’re saying there?

Richard Vague  07:41

Well, it’s surprising. But what’s called the DSGE model, which is the core model used by the Federal Reserve and academic economists everywhere, simply does not have bank and other forms of debt as a variable in the model, period. And you know, as as a career banker, I find that shocking. I’m not sure how you can study an economy without studying debt. But that is, in fact, the case. And it’s pervasive in orthodox economics. And that’s the very simple, straightforward reason that, you know, in 2005, and six and seven orthodox economists, were absolutely sanguine about the economy. At the very moment, it was about fall apart.

Gene Tunny  08:35

Yeah, yeah. I understand what you’re saying. And, and that’s true. So you’re talking about these DSGE models, these dynamic stochastic general equilibrium models of the economy. And yet you look at the macro models that the central banks run, and yeah, I mean, they’ve got a lot on inflation expectations on they’ve got their, their Phillips Curve and their Taylor rule. So they’ve got all of these traditional macro economic equations in them. But yeah, I have to look at what our RBA our Reserve Bank of Australia is doing here. But yep, I take your point and understand what you’re saying there. Now, I might have to have another look at that. And, yeah, I mean, I agree about in the lead up to the financial crisis. I mean, what was extraordinary about that I was in the when I was in the treasury at the time. So we were following it from the government perspective, also what was happening in the private sector, of course, because that was relevant to the state of the economy, government revenue, and what we’d have to borrow. But yeah, I remember just how much it did take a lot of people by surprise that suddenly everyone was talking about Hyman Minsky again. And someone who was considered a heterodox economist. And suddenly, everyone’s talking about the Minsky moment. So yeah, very, incredibly revealing time that one. So yeah, that’s more of a comment.

Richard Vague  09:56

Yeah, what I would say is, you know, I spent my career as a financial analyst, you know, as a as a bank executive, as a bank CEO, as in any of these capacities, you look at companies and industries, in the context of a balance sheet and income statement. And all any economy is, is the sum of the individuals and businesses and other institutions, primarily government institutions. In it, you just add those all up, and you have the aggregate balance sheet of the country. And so, you know, not coming up through a traditional economics route. I just took it as a given that the proper way to study an economy is the way I studied businesses and industries as a financial analyst. And this book, The Paradox of debt is that exercise, we just go in, and we look at it the way, you know, a financial analyst would look at it. And you’ll see for all seven of the largest countries in the world, we have assets, liability, income and expense, and we draw conclusions from that.

Gene Tunny  11:12

Okay. From that framework, Richard, what would you say are your key insights, and how that are different from the traditional way of looking at it?

Richard Vague  11:23

Well, one of the key insights is that debt always grows faster than the economy itself. And I spent decades in my banking career not even thinking about that. But to the extent I did, assuming that debt, you know, ebb and flow that it went up went down. But you know, over time, it was in a similar rein. That’s not even remotely true. Debt always grows faster than the economy. And we see that in the seven largest economies in the world that together constitute 60 plus percent of GDP. In the US, you know, circa 1980, debt to GDP, total debt, government debt, and private sector debt was 125% of GDP. Today, it’s more than double that level. So there’s no equilibrium, we are getting more and more leveraged as economic entities. So that’s the first thing that kind of hit you in the face, like a two by four, you know, we’re getting more and more leveraged. One of the other things that really is, you know, a central conclusion of this book, and again, was something that I hadn’t thought about, but is abundantly ever evident from the data is, the more debt you have, the higher the net worth of households go? So in 1980, at the time, you know, total debts 125% household net worth is about, let’s call it 350% of GDP. Here we are, you know, what is it 40 Something years later, debt has doubled. Net Worth, the net worth after subtracting debt of households is now almost 600%. So we should we actually demonstrate in the book that debt increased debt actually causes asset values to go up? And, you know, that’s good news insofar as it goes, but we also see show that it, it severely increases inequality, because the top 10% are the primary asset holders. So they’re seeing their net worth go up, you know, abundantly and folks kind of in the middle class and below, are not seeing increases in their net worth to GDP.

Gene Tunny  13:51

Gotcha. Okay. So yeah, a few things there. The so you talk about the tendency of debt to grow faster than the economy, and you’re talking about both private and public sector debt?

Richard Vague 14:03

The two added together.

Gene Tunny 14:06

Okay. And that you call this a debt staircase? Is that correct?

Richard Vague  14:11

Yeah, we’re very intentional about that, because most people call it the debt cycle. And while that’s, you know, somewhat accurate, it implies that debt returns to the previous level. Well, that essentially never happens. Debt will go up rapidly and then might come down, you know, a little bit it almost never comes down at all, frankly, and only in a calamity. And then it might plateau for a little while, and then it rapidly ascends again, to an entire new level. So we felt like debt cycle in a certain sense was misleading. So debt staircase really talks about we jump up to a new level plateau jump up in either higher level. That’s really been the history of debt in most countries.

Gene Tunny  15:05

Yeah. So I think this is that Ray Dalio, his idea of a debt cycle. I’m trying to remember who you are, I guess plenty of people, commentators talk about a debt cycle and leveraging

Richard Vague  15:16

it’s a natural tendency to think of things going up and down like a sine curve or something.

Gene Tunny  15:21

Yeah gotcha. Okay. Now, I want to go back to this, yeah, this tendency to go more and more into debt. And you mentioned that it does increase net worth. household net worth over time, and it’s increasing inequality. Yeah, I guess I’d probably Yeah, maybe I think too much in terms of the cycle. So I guess the story, many commentators or economists will tell us is the boom bust cycle. And there’s the exuberance, the over exuberance, and there’s too much lending, because there, there’s just too much optimism or frothiness, about the state of the economy and potential investments. And we see this time and time again, whether it’s railroads or whether it’s IT, whether it’s housing, there’s a there’s a new boom, and that’s when all the new debt gets created. So I’m just wondering, but it sounds like it’s not just a boom and bust phenomenon is it, you’re saying that this is something that actually has a there’s a trend increase in, in debt over time,

Richard Vague  16:30

you’re hitting the nail on the head, you know, I think that when people say boom, bust cycle, debt cycle, things like that, they kind of the unspoken implication is things return to the way they were previously. But that’s simply not the case. We instead, we have a boom, we have a bust, but we’re at an entirely new and higher level of leverage or indebtedness.

Gene Tunny  16:58

Hmm. Okay, I might ask you about this, what you call the paradox of debt. In your epilogue, you’ve got a really great summary of what this is. So I’ll just read this out, because I think this is really, really great. “This has revealed the paradox of debt, debt builds household net worth while also increasing inequality is essential for economic growth, and yet in excess leads all but inevitably to periodic economic calamity and stagnation. As a result, the paradox of debt portends the certainty of economic challenges and difficulties going forward, unless we are willing to get creative, and ambitious.” So I think that’s a really great summary of your of your arguments in this book, I want to unpack that I’d like to ask first, could you just explain again, how does this it builds household net worth, I get that because households are borrowing to invest in housing, but also in some other assets. But it also increases inequality. How does that work, Richard? How does it increase inequality at the same time?

Richard Vague  18:11

Well, this gets back to the relative distribution of stocks in real estate. Right now in the United States, household net worth is about $150 trillion. Let’s put that in perspective. Aggregate government debt is 31 trillion. So you can see household net worth really dwarfs anything else, it’s the biggest factor in any economy, and typically somewhere near 70%. So at least 60%, maybe near 70% of all household net worth is two things. Real Estate net of the debt to acquire that real estate, and stocks net of the debt to acquire those stocks. So your wealth really boils down typically, to those two things, your ownership of stocks and real estate. Well, the top 10% of households in the United States own 65% of all the stocks and real estate in the country. The bottom 60% That’s six zero % That’s surely most if not all of the middle class, collectively only own 14% one four % of all the stocks and real estate. So if stocks and real estate values go up, well then inequality by definition increases. And I think that is the fundamental equation in every developed economy. Debt goes up pushing asset values up. And since assets are held unequally, inequality widens.

Gene Tunny  20:04

And is it access to credit to then? And obviously the I guess the wealthier you are, the higher income, the more access, you have to credit. And that allows you to grow your wealth that way?

Richard Vague  20:15

Well, certainly that’s part of it. But even if we took the extreme example, where somebody in the top 10%, you know, had an asset had real estate, and a company selling goods, it is often the debt that the bottom 60% are accruing, or acquiring to buy the goods from the top 10% that contribute to this rising inequality. You know, famously, Apple didn’t really have much debt as a company and still doesn’t. But I guarantee you that the financing that’s provided to its customers, are what allow them to buy all the laptops and Macs and iPhones and, and other goods. I actually was a banker that provided some of that at one point in my career. So it’s the debt of the 60% that are buying the goods owned by from companies owned by the top 10%. That is part of this equation as well.

Gene Tunny  21:18

Right. And that’s, it sounds like that’s a sign that a lot of that is consumer debt. And so it’s not good debt, so to speak. So. Okay, what I want to understand which I’d love to know, your views on to what extent is this a good bet for the different players in the economy? So it sounds like so households seem to be on? Well, so far, they’ve Well, at least the the top 10% And maybe a larger share, they’ve done well out of this out of, you know, borrowing to invest? It’s, it’s been beneficial to them. I mean, that we’ve, you’ve had a housing crash, and you had one in LA, of course. So it’s not always, it’s not always smooth, but in general, have households benefited from it? What about business? I mean, clearly, some businesses have been able to access finance to grow, but then you do mention that, you know, this can lead to periods of economic stagnation. You talk about this debt, there’s a tax buyer, so the debt is favoured in the tax system in the states relative to equity finance. So how do you think about all of this in terms of is it rational to the whole debt? Or is it? How do you think about this? What about for business? And what about for government trying to regulate all of this, the central bank looking at it? I mean, to what extent should we be concerned about this growth of debt? There’s a lot there sorry, that I’m trying to understand the rationality, what your views are on that, please?

Richard Vague  22:52

Well, I would, what we do in the book is we divide debt, private sector debt into two categories. Type one debt and type two debt. And type one debt is debt for spending on new things, you know, and type two debt is spending to acquire an asset. Now, I’m being a little simplest, overly simplistic here. But, you know, from my perspective, if you borrow to go on a vacation, that debts a little bit more problematic, than if you buy you borrow to buy a house, or a company or something like that, you know, you might, you know, buy a small, you know, gift shop, or a retail store, you might borrow to buy a house or buy a rental property, those have a better chance of increasing your wealth, then the debt you incur to buy that motorcycle you’ve always wanted or go on that trip to Haiti, or what have you, and that that’s a little bit too simplistic, but directionally, I think, that would reveal the direction of our thinking about, you know, what debt we would encourage individuals to enter into and not.

Gene Tunny  24:17

Okay, so that’s for individuals, you mentioned this tax, this the tax system and how that works and how it favours debt finance. Is this part of the story? Is this does this mean that companies end up borrowing too much money and then to an extent, they can then invest in unproductive assets? Is this part of the story this, this tax treatment of the debt because of the interest payments are tax deductible and therefore, the other reforms? Is there any reform to that system that you see to the tax system that you you would propose?

Richard Vague  24:56

Well, you know, this is I think, is something that’s been debated endlessly for a long time. But you know, the, what we want to do, I think, and I think this would be true of all of us, I don’t think you’d find a lot of disagreement around this, what we want to do is we want to encourage stock ownership. And what we would like to somewhat avoid is the accumulation of too much debt. The irony is that the tax code would drive us in the opposite direction, because, you know, much of the interest we incur on debt is tax deductible. That’s a little less true than it was a generation ago. But it’s still, you know, broadly true. And at the same time, companies are double taxed, you know, on the stock side of things, so, you know, they’re taxed on earnings, and then the holder of the equity is taxed on dividends, but it’s famously referred to as double taxation. So, you know, I don’t think changing that changes the world irrevocably or radically, but I think at the margin, if we switch that around, you know, and made, you know, took away the tax penalty on the equity side and took away the remainder of the advantage on the borrowing side. At the margin, it would make a difference over time.

Gene Tunny  26:23

Okay, yep. So, so some difference, but it wouldn’t be the it wouldn’t completely solve this.

Richard Vague  26:29

It’s not the magic bullet

Gene Tunny  26:31

Not the magic bullet. Okay. Okay. Fair enough. Right. Well, I want to ask now about back to your, your summary of the paradox of debt. So “paradox of debt portends the certainty of economic challenges and difficulties going forward unless we are willing to get creative and ambitious” first, how bad could those economic challenges get? So when we were talking about risk, see you talk about how this debts leading inevitably to periodic economic calamity, calamity and stagnation? Are you seeing another financial crisis down the track for the US and the global economy?

Richard Vague  27:10

Well, we measure that by how rapidly the escalation in private debt to GDP is in a short period of time. And we do not see that as a problem in the US at the moment. It’s certainly a problem in China. You know, the Evergrande debacle that we all read about this past year was a direct result of an escalation in the equivalent of private so you know, there’s no private sector in China to speak up. But, you know, non government debt or the equivalent of private debt has shot up since 2008, in China in an unprecedented way. And I think one of the things you have there as a result is something on the order of 100 million empty dwellings, buildings were built in the interest of economic growth, that there are overcapacity, and thus, there are no buyers for so, you know, I think most western economies developed economies right now are not in danger of an imminent financial crisis. I think China’s got got its hands full.

Gene Tunny  28:23

Right, right. Yeah, yeah, absolutely. Good point about China. I had a guest from the business school in Arizona, I think it was on last year to talk about the enterprise China model where just the close links between the business in China and the the the administration over there, so you know, good, good point about that. What about the regional banking crisis in the US? Is that something you’re concerned about? Richard? That’s something that’s been talked about recently.

Richard Vague  29:00

Yeah, it’s it’s a minor concern. It’s not a major concern. You know, there were some banks that broke the, one of the fundamental laws of banking. In banking, you’re supposed to match the maturity of assets and liabilities. You know, I entered banking as a young cub in the late 1970s. And, you know, I think one of the very first reports I was asked to prepare was the asset and liability matching report. So if it, you know, 5% of your assets, were at a 10 year maturity, then 5% of your liabilities were supposed to be at a 10 year maturity, and if 30% of your assets were at a, you know, one month or less maturity, you know, 30% of your liability, so, it matched so that if interest rates went up or down, the spread between the two would be relatively constant. What you didn’t want to have is a lot of long term assets, five year, ten year twenty year bonds, for example, funded by zero maturity liabilities, checking accounts, basically, or what we call demand deposits in the industry. You didn’t want to have that. Because if interest rates go up sharply, you’re screwed. That’s not a new concept. That’s banking 101. Well, what happened was interest rates were so low, and you had certain institutions like Silicon Valley Bank, who had way more deposits than they needed or should have had. And it was actually a penalty to them, because the yield on those assets was so low. Well, what you do to increase the yield on your excess assets is to buy long bonds. It’s the tempt, it’s like, you know, the forbidden fruit in the garden of Eden, you’re not supposed to do that. And everybody knows, you’re not supposed to do that. And yet they did it. And they did it in a huge way, they made a huge bet, has nothing to do with credit quality, has nothing to do with, you know, the fundamentals of the banking system as a whole. It represents their falling to the temptation in a in a gigantic way. And they weren’t the only ones. But it’s not so pervasive, that it’s a sustaining threat to the US banking system, it’s, you can go look at any banks, you know, call reports and other financial information. And we know exactly how much of this misbehaviour occurred and which institutions that occurred in and it’ll it’ll hurt, it’ll hurt a few and it’s hurting a few. It does not represent, you know, I’m gonna put a put a dimension on it. It’s a several 100 billion dollar problem in in an industry that has well over 2 trillion in capital, so it’s not a sustainable growth.

Gene Tunny  32:05

Okay. Okay. That’s, that’s fair enough. I’ll go back to your points on the paradox of debt. Yes, the creative and ambitious solutions you talk about, one of the things you talk about is a debt jubilee? Could you please explain what you mean by that, Richard?

Richard Vague  32:23

Yeah, this is, this is a hard problem. If as the evidence shows, debt always grows faster than GDP, You’ve almost got an engineering problem. You know, it’s as if you were designing an engine, and you found out after you had built it, that the temperature of that engine grows perpetually? Well, as an engineer, you could predict that that engine is going to explode from time to time. So you would introduce some kind of exhaust system or heat valve escape system to try to combat or overcome the perpetual increase in the temperature of that engine. I think we’ve got the same problem. You know, in modern developed economies, they always get more leverage. And so we’ve got, you know, put put your ideology aside put, you know, put all you’ve learned aside, you’ve got a problem here. And, and unless we solve it, we’re going to continue to have a couple of things happen, we’re going to have periodic crises. And we’re going to continue to have a slower and slower economic growth, as businesses and individuals get, you know, what I would call stultified by high levels of death. That leaves you with kind of only one solution, and that is ways of taking away debts that do not involve paying down that debt. Because paying down debt and aggregate just produces GDP, right. So we get into this quite a bit in the book. But there’s no easy way to do this. So I propose, you know, I kind of go out on a limb and try and propose some areas that maybe hopefully will provoke some thinking. So for example, student debt, which has gone from in the United States, a couple of 100 billion dollars to over one and a half trillion dollars really within a very short period of time. So you got all these students who graduate and then you know, lug around too much student debt for the next 20 or 30 or 40 years of their life. How about a programme where even I don’t support a programme of just forgiving all that debt, because it penalises the folks that were that did pay their debt. But I do think a programme whereby we let them do you know, a certain amount of voluntary community or civic work, you know, over, you know, five or 10 year period as a way to get relief on their student debt is something that we could consider. So, right now, if you graduate with student debt, and you enter government service, and you stay there for 10 years and you make 10 years worth of payments, you get whatever’s remaining of your student debt forgiven? Well, let’s, let’s create something that’s similar to that for the private sector. If you did 800 hours of community service, let’s say, after 10 years, the remainder of your student debt would be gone. That’s what I mean, when I say let’s get creative. Let’s try to think of ways to do this.

Gene Tunny  35:43

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  35:48

If you need to crunch the numbers, then get in touch with Adept Economics, we offer you frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world, you can get in touch via our website, We’d love to hear from you.

Gene Tunny  36:18

Now back to the show. So debt jubilee is about debt forgiveness in in some form or another and there might be some community service for two so people could reduce their student debt. What about a more broader programme of debt forgiveness? Is that what you’re proposing in the private sector debt banks forgiving part of the debt? How does it all work?

Richard Vague  36:44

Here’s another idea. Because like I said, I stopped short of just getting a magic wand out and forgiving everyone debt, which, by the way, is what in ancient civilizations, rulers would do. And I think, you know, guys like Michael Hudson and your countrymen, Mike, Steve Keen and others have have talked about, you know, this is Hammurabi, this is Ancient Egypt, this is even ancient China. We don’t have that luxury. So let’s get creative. And, you know, another possible programme would be, after the ’08 crisis, when, you know, it was probably on the order of 15 million mortgages in the United States that were underwater by 10% or more. How about kind of a debt debt to equity exchange, you know, if the lender would write the mortgage down to the new current market value, appraised value. So maybe you bought a house that was 300,000. And now it’s only worth 200,000, you’ve still got a $300,000 mortgage? If the lender will write it down to that new value, and write your payments down proportionately? Well, then you would, in exchange, give the lender certain ownership of the house, which would be realised only on the event of a sale of the house. So they would get the upside. And the way the government could facilitate that is by going to the lender and saying, if you do this, we won’t make you take that as a hit against earnings in the current period. We’ll let you amortise that over, pick a number 30 years. So it’s kind of a win win win at that point that the bank deals with problem loans, the individual gets a lower payment. And the lender has the potential upside down the road if the house is sold.

Gene Tunny  38:49

Okay. Okay. So you’re talking about something that is voluntary, you’re not going to compel banks or lenders to to forgive part of their loans or force them into restructuring your you want this voluntary, but there may be some policy tweaks that could facilitate this restructuring. Is that the argument that you’re making, Richard?

Richard Vague  39:12

Yeah, to make it real, legislatively realistic or feasible? You, you have to construct it. So it there’s something in it for everybody.

Gene Tunny  39:22

Gotcha. Gotcha. And I think one of the interesting points you make is that, look, debt’s a contract. Do you quote, Dave Graeber on this, if I remember correctly, and look, these things get renegotiated. Well, throughout history, we see various periods in which there’s restructuring of debt. I mean, what’s extraordinary is that, you know, some countries seem to the periodically defaulting or and then there’s restructuring and then the banks keep lend to them 20 years later, and then you go through the same thing.

Richard Vague  39:55

Yeah contracts are contracts, you know that you know, if you are a data servicing provider and somebody wants you to write a programme and have it done by August 1, and you don’t have it done by August 1, you haven’t done by the following February. That’s not a moral failure. And, you know, but somehow, and folks like Hudson would argue for good reason. People have conflated morality with performance in a commercial contract. So if an individual doesn’t repay their debt, that’s, that’s a moral flaw or moral moral failing. Well, in my career, I was in banking for 37 years and debt contracts with companies get renegotiated all the time, you know, the company, you know, was manufacturing XYZ product and a competitor came along selling for half of what XYZ was being sold for, and we all knew that this debt was never going to repay. And if we absolutely enforced that repayment, we would cause the company to fail and get zero of our money back. Well, instead, we restructured the note so that we get paid half of what we rode back, the country could company could survive and compete. So you know, a rational restructuring of debt goes on in the banking industry all the time, all day, every day. And I think the light bulb that went on for me was, you know, 10 years or so ago when David Graeber’s book, delightful book, you know, ‘Debt: The First 5000 Years’ and he, and he just says, you know, this is not a moral issue. This is a contractual issue.

Gene Tunny  41:43

Yeah, yeah. Want to ask, What about the policy changes? So you in a official position, you’re in a very senior position in Pennsylvania, but I imagine that this would require a federal change regulatory or legislative changes do have you thought about what, what could be done at a policy level to help smooth things to help make it easier to help make it easier for restructuring to to help households and businesses deal with this higher debt that that we’ve seen?

Richard Vague  42:19

I think the federal regulators in the Fed in particular have this ability. And there are a couple of famous instances of this. And to me, the most famous and applicable would have been in the early 1980s, when the New York money centre banks had been making lots of loans to less developed countries, the predominance of which were in South America. And, you know, they got to a point where the what were called LDC or less developed country debt was equal to, I think so, you know, well over 100%, of the capital of those New York money centre banks. So, you know, 150, 100, and the number that comes to mind is 170% was a big, big number, such that when things turn because of interest rates and the rising price of oil, if the regulator’s had come in and enforced their normal rules, all the New York banks would have failed, which, you know, by the way, would not have been a good thing for the country for, New York, for anybody. And so Paul Volcker, one of the giants of economic history came in, this was in the days before Twitter, and all those other ways in which information leaks, so porously, called those bankers into a room and said, We’re not going you know, you kind of put a fence around this, we’re not going to deduct these loans, from, you know, our analysis of your capital reserve adequacy. But you guys better get busy. And over the next several years, all your earnings ought to go towards building up reserves, again, so much of this as you can muster over the next few years. And then whenever you get a big enough cushion, we want you to write it down. That is exactly the kind of thing and by the way, they did this in a more structured and overt way relative to the savings and loan industry, which at that exact time had a very similar problem. That’s a way the regulators can step in the case of the LDCs. It was a regulatory matter. In the case of the same Solomons, it was actually a legislative matter. But those are ways you can do this. And sure enough, but I can I think it was 86 or 87 when Citibank announced a billion dollar write down of its LDC debt? Well, it shocked the world. But it related to a conversation that actually been held four years earlier. And for Citibank to do that was actually an announcement, they were now in good shape, rather than an announcement that they were in bad shape. They’d been forced do the same thing in 82 they would have failed. They had four years worth of earnings to cushion that. And it was it was actually a positive cleanup sign.

Gene Tunny  45:30

Yeah, yeah. So just, just to be clear, I mean, the reason I’m just just want to make sure I understand this properly in your, in your view as a banker, so what’s the, how are bankers looking at this when they do agree to a restructure or write down, they’re figuring that we can extend the term of the loan, or maybe we can cut the interest rate, or we take a haircut ourselves, we write down some of the value, they figure that well, this makes it more likely that they’ll actually be able to pay us back the full amount is that they’ll survive? Is that the logic from a bankers perspective?

Richard Vague  46:03

Yeah, if you’re the banker, the first thing, let’s just say it’s $100,000 write down, if you’re allowed to take that over 30 years, the hit to earnings this year is what? Roughly $3,000 instead of $100,000. You know, the second thing I would do in that case, is let them take the full deduction for a tax standpoint, because you know, most companies have regulatory accounting and tax accounting are two separate things. So they don’t have to take it, from a regulatory standpoint, they get to take it from a tax standpoint. So probably from a current earnings standpoint, at that point, they’re just fine. But in the meantime, the consumer who was struggling with their, you know, their loan now has a loan, they can make payments on adequately. So they they go from having a credit that is a troubled, questionable credit, to a credit, that is a solid credit. As it relates to the consumer, the household, they now have breathing room, they can go back to being kind of a regular participant in the economy, they now have a little extra money not only to make their payment, but to go on vacation and go out to restaurants and this that the other. And their give up is seven years down the road when they sell their house and they they get a gain of you know, $50,000 or whatever they might have give a third or a half of that to the bank, whatever they negotiated. So it makes it comfortable and possible for everyone. That’s why think of it is kind of a win win win.

Gene Tunny  47:50

Yeah. Okay. Very good. Richard, we’re coming to the end of our time. Any final thoughts, any additional thoughts on what other policy measures may be desirable? Or that you’re someone who’s concerned about the inequality in the US? And, you know, clearly that has grown over the last few decades? Are there any other policy measures you’d be recommending to address that?

Richard Vague  48:14

Well, I would make the observation that if the bottom 60% of the US population only holds 14% of the stocks and real estate, that you can probably afford to actually give tax incentives? You know, because we talked earlier about just modifying the penalties. But how about a tax credit, if you buy stock or a tax credit, if you buy real estate, for those, that bottom 60% It’s such a small number, that you have the room to do that without affecting the tax receipts of the government by much, if any, might actually be a positive there. So I make the point that there’s the latitude to create incentives for accumulating asset ownership among that group that we could be taking advantage of that will probably that we’re not. And there’s other things in that final chapter that we touch on too. And they may all be terrible ideas. Hopefully, some of them are good ideas. But, you know, having set up the problem in the first 90% of the book, we we take a stab at, you know, maybe some ways to deal with it in the last chapter.

Gene Tunny  49:29

Yeah, yeah. So, I mean, we talked about forgiveness or the debt jubilee as a possibility, renegotiations. Then you mentioned some, you’re trying to encourage asset ownership and then there are some others one other one or two that you you’d like to highlight.

Richard Vague  49:45

You know, it kind of kind of gets off the subject a little bit, but I put it in there anyway. I think there needs to be massive job training because if you want the bottom 60% to accumulate assets, you got to give them a little more income. We got a situation in the US that I think it’s parallel, at least to a certain extent elsewhere, that we’ve got a lot of jobs that need training that are going unfilled. We got a lot of under under employed people that don’t don’t qualify for that job that feels to me like a perfect place for government to step in, in conjunction with the private sector, and especially the companies and underwrite that, you know, I think it’s kind of the spiritual equivalent of, in the US what we call the GI Bill, where after World War Two, we underwrote college education for pretty much all the returning soldiers. And I think that helped fuel the increased size of the middle class and the 50s and 60s, I think there’s that opportunity here.

Gene Tunny  50:47

Okay. Well, Richard, thanks so much. And I’ll put a link in the show notes to your book. And yeah, I’d encourage people to buy it and read it. So it’s published by the University of Pennsylvania Press.

Richard Vague 51:16


Gene Tunny 51:18

Very good. So very distinguished publisher, and yeah, well researched, and lots of lots of good facts and figures. And yeah, very interesting analysis. And, but very good. But Richard, thanks so much for your time. I really appreciate it. And good luck with the book sales. Yes. And I hope you, you get a lot of a lot of readers and a lot of people are engaging with you on the issues, and I certainly enjoyed our conversation. So again, thanks so much.

Richard Vague  51:29

It’s a privilege and I’m all thanks go to you.

Gene Tunny  51:32

Very good. Thanks, Richard.

Richard Vague 51:36

Bye bye

Gene Tunny 51:39

Righto, thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this. To begin your own podcasting journey head on over to

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business

Full transcripts are available a few days after the episode is first published at Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.

Podcast episode

Invisible Hand, social media, money & crypto w/ John August – thoughts on recent episodes – EP194

In this episode of the Economics Explored podcast, host Gene Tunny chats with John August, Treasurer of the Pirate Party of Australia and host of the Roving Spotlight show on Radio Skid Row in Sydney. Together, they discuss previous episodes on topics such as the invisible hand, Goldbacks, and cryptocurrencies. Listeners are encouraged to share their thoughts on these topics.

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

What’s covered in EP194

  • [00:02:44] The invisible hand. 
  • [00:04:27] Hidden assumptions in economics. 
  • [00:08:15] Problem with gambling addiction. 
  • [00:14:39] Soviet Union. 
  • [00:26:03] Military expenditure and Soviet collapse. 
  • [00:30:16] Social media and liberty. 
  • [00:33:37] Censorship in social media. 
  • [00:39:01] History of currency. [00:40:47] 
  • [00:44:25] Central Bank Digital Currency. 
  • [00:50:34] Crypto as a solution. 
  • [00:55:46] CBDC concerns and conspiracy theories.

Links relevant to the conversation

John’s website where you can find his writings and a link to his radio show:

Gene’s previous conversations with John:

Recent episodes mentioned in the conversation:

Invisible Hand, social media, money & crypto w/ John August – thoughts on recent episodes – EP194

N.B. This is a lightly edited version of a transcript originally created using the AI application It was then looked over by a human, Tim Hughes from Adept Economics, to check for mondegreens, things that otters might have misheard. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you could join me for this episode, please check out the show notes for relevant information.

Now on to the show.

Hello, thanks for tuning into the show. In this episode, I chat with previous guest and regular listener John August about some recent episodes. John is the treasurer of the Pirate Party of Australia. And he hosts the roving spotlight show on Radio Skid Row in Sydney. When he was in Brisbane, recently, John dropped into my office and he gave me some thoughtful and provocative feedback on some recent episodes. First, we discuss my conversation on the invisible hand with Dan Sanchez from the Foundation for Economic Education. John and I went on to chat about goldbacks and cryptocurrencies. They were the topics of some other recent episodes. I’ll put links to all those recent episodes in the show notes. If you have any thoughts on what John and I have to say in this episode, or previous episodes, then please get in touch via Okay, let’s get into the show. I hope you enjoy my conversation with John August.

Gene Tunny 01:44

John August, good to be chatting with you.

John August  01:48

Yes, well, you do say at the end of the show, you know, we’d like to know what you’re thinking and boy have I listened to a lot of shows. And boy, have I done a lot of thinking about your show. So so I’m here to sort of follow through on that invitation, I guess you might say,

Gene Tunny  02:01

very good, John. So yes. Good to be chatting with you again. So we’ve previously chatted about things like advertising and, and some other issues. I was on your show talking about economics and philosophy of economics. If I remember, correctly,

John August  02:15

well, I think I was inviting you to talk about three famous economist three issues, three things important. So I think there was a sort of nine things to talk about. And okay, oops, oops, I can’t remember the

Gene Tunny  02:28

Okay, I’ll put a link to it. I remember that was good fun. But you’ve you’ve had some thoughts on some recent episodes, as you said, and I mean, one of the ones was the one I did with Dan Sanchez, from Foundation for Economic Education on the invisible hand. So I’m interested in what do you think about that conversation? What are your reactions to that one?

John August  02:51

Well, in a narrow sort of way, I guess I do celebrate elements of the, you know, the invisible hand. But you know, the overall position, I guess he had just too a naive, a sunny view of things, and I’m going to maybe say, you know, things that I strongly disagree with him. But I hope at the end of the day, maybe I could buy him a beer or something like that. I don’t want it to be that negative. But yes, there’s a lot of things I disagreed with, with him on now, one of the things that he was saying is, look, you know, there are atheists out there that disagree with the whole idea of the invisible hand, just because the guy made one reference to God saying that. Now look, I can’t speak for other atheists. And maybe he has experienced some atheists who have actually said that. But I would never say that a religious view has got no validity to it. Now, I would say to the extent that it does have validity, it’s because people lived certain things. They thought about the world around us, around them, and they tried to put into writing and try to think it through. In other words, it may have some merit, but it’s not revealed truth from God, but it can still have merit. What I’m trying to say is, as an atheist, I think deeply about religion and the ideas and how they propagate. So so that’s a bit of a diversion. But what I’m trying to say is, I would never dismiss something, merely because someone mentions God once, twice or three times in developing their argument. So I would never challenge the idea of the invisible hand on that basis. But as far as the story of the pencil goes, Look, it is remarkable that there’s so much coordination to make the pencil. Okay, that’s impressive. But there’s also a decent number of hidden assumptions built in. Now one is that we’re assuming everyone in that chain are paid reasonably. We’re also assuming that there’s no particular externalities like people are mining whatever minerals they need to make the to make the pencils or they’re cutting down trees or whatever. And we won’t need to assume that. We’re also assuming that people are buying those pencils for legitimate needs. Now, let’s say someone’s buying pencils, because they’re addicted to chewing the ends of it, not because they actually want to design a building with those pencils that people will benefit from. And notice I’m, I’m sneaking in, to some degree, what I think you call in economics, a normative judgement. But keep in mind, if you say, here is this system, it is good. You’re making a normative judgement. So I think I can push back and challenge the normative judgments and say, if people are buying these pencils, because they’re addicted to chewing the ends of the pencils, and they’re addicted to that, like they’re addicted to heroin, well, is it really such a good thing that these pencils are being made. So there’s one equilibrium where things are made that people legitimately need. And, you know, the market coordinates itself in very impressive ways to do that. And I won’t deny that. That’s the good side of the invisible hand. But I think there’s other equilibrium that can also arise in the market, the equilibrium between people’s ability to be manipulated, and the market having the energy to manipulate them, because there’s money to be made from that. Now, we’ve discussed advertising before. But let’s say there’s so many things where there’s a legitimate side, and as you slide down the slope, it gets worse and worse. Now, let’s say someone makes a bet on a footy game of $10. Okay, that bet is recreation. Now, but then at the other end of the scale, you have people who queue up at the clubs at 9am, waiting to go in and play the pokies. Right. And clearly, that’s gone to the end of being addiction. So an in between, I mean, this is one of the things that Dan is also thinking, look, I guess, on one sense, I do celebrate the idea of the sovereign individual, but the psychologist is sort of unpacking the way our brains work, and realising that it’s not such a simple story. Now, we may well struggle to lose weight. And then when the cake is sitting in front of us, you know, we’ll sort of indulge and there’s in a sense there’s two people inside of us that want different things that are struggling for control. And, you know, this naive idea of here is this sovereign individual that wants X Y, Z, they know what they want. And it’s the government that is getting in the way. Now, look, I do not believe in paternalistic intervention, I suppose. But equally, the story Dan Sanchez is telling us just doesn’t seem to be engaging what I think is a much more complicated reality. I mean, let’s talk about or maybe I’ve told this story before, someone’s a heroin addict, did they go out in the market, seek amongst the options and decide and end up becoming a heroin addict because they engage with those options? You know, other stories coming out of AFL? You know, yes, notice I’ve said a certain amount of gambling is a recreation. At the other end, you can say you’re just pandering to someone’s addiction. And there’s this movement within AFL, which is saying, follow the game, not the odds. Because while people do not mind, you know, the single bet on the game sort of thing, which is adding to your experience, when the odds are flashing onto the screen, every advert while the game is playing. A lot of people I think, are getting legitimately concerned about that. And as I say, I’ve got nothing against gambling, per se, but when there’s this big feedback loop, which is I guess ceding to its excesses, then you have a problem there. So that’s one problem that I have with that sort of idea. So notice, I am acknowledging the magic of the pencil. At the same time, I’m also saying there are all these other equilibrium that can happen. And we’ve had the discussion about advertising before. And this is I guess, part of that thing, so. Okay, so we’ve talked about gambling, people queuing up at 9am. Okay, the fact that we struggle to lose weight, and that’s telling us things, okay, then yeah, I mean, it’s the perspective from the affluent society by John Galbraith. He sort of says that in the ideal, we are a sovereign people who have our, to have our wants, we go out into the market, and we satisfy those wants. But he’s saying advertising is a lot more pernicious than that advertising actually shapes our wants, rather than being something a means by which we’re informed of the options to satisfy our wants. So I guess this is a subtle philosophical point. But I would still say, advertising can inform us of our options, or basically our options for satisfying our wants, or it can actively shape our wants. And I think there’s a bit of a conceptual muddle there. So I suppose Dan Sanchez’s view is like, you go out into the world, and the world is this passive thing. And you just, you just pick and choose as a sovereign individual who knows what you want, is totally clear unstressed, no psychological hammocks. But in fact, when you go out in the world, it’s an active thing. It’s reaching out to you. Right. So I think that a lot of his story is problematic there. But at the same time, I do endorse the idea of distributed innovation, people thinking, and, you know, elements of that story. So, so what am I trying to say, look, I acknowledge part of that story of the pencil and that integration. But it’s just that I think people are going too far with it. And taking it’s past its load limit. So in a sense, this is a bit of a bigger dip point of disagreement between myself and Dan Sanchez, and perhaps others, you do say, look, there is this bad stuff going on in the economy, and maybe we need to manage it or have antitrust regulation, and so on. But it’s a matter of how we relate to it. I think, I think people on the other side of the fence, say, it’s over there, we quarantine it conceptually. And then we get on with the interesting stuff, which is thinking about the magic of the pencil, while I sort of say Hang on, it’s all very strongly integrated together. And you can’t really separate them out so clearly or neatly.

Gene Tunny  11:31

So what do you mean by on the other side of the fence? So you see yourself as philosophically different from Dan? Because you, I mean, I’ll have to go back and, you know, really pay close attention to what Dan was saying, because I will, my view was he was making a really good argument that let’s not dismiss what this idea of the market as some sort of fairy tale, because that’s what it all some sort of mystical thing. That’s, that’s what he was reacting to. He was reacting to some commentary that he’d seen where people were saying, Well, you believe in this Invisible Hand thing, and it’s something mystical or religious concept. It’s not something that is, is guiding our, it’s not something legitimate, but he’s saying, well, actually, this is this is what’s supporting the bulk of our society, really, I mean, this is what leads to a higher living standard, higher living standard than, say, in the Soviet Union, which tried a different system. And it proved not to work. So I think he’s making a legitimate point. I would I probably differ from Dan in some of the judgments as you know, what regulations needed. But broadly, I agree with him. I would say that, yeah, I take your points about what economists would call market failures they’re clearly market failures of some kind of different kinds that there could be scope for government intervention to address those. And yeah, people aren’t always rational, they’re not this idea of consumer sovereignty is that’s questionable. And that’s why we have behavioural economics now. So I would say that, largely, Dan is, is on the right track. And I mean, you you yourself, acknowledge the pencil story, there’s some there’s some legitimacy in it. And I guess what you’re saying, or my interpretation is that you think that in telling that story, you you’re not giving enough acknowledgement of these other these deviations from

John August  13:25

I guess so look, I suppose who knows, maybe I need to talk to Dan face to face to sort of get to the bottom of it. But yeah my recollection of that episode was not only was he defending the story of the pencil from unfair criticism, and I think there’s a narrow sense in which I do feel that anybody who dismisses something just because someone mentions God, two or three times, that is wrong. That’s that that’s not right. So in a sense, let’s just say, I will defend Dan against the atheists who make that claim. But then Dan goes a lot further than that. And that was sort of my recollection of the episode that, so notice, I’m saying, Look, I will defend Dan against fellow atheists who, who do behave in the way that he identifies but yeah, there’s a lot more to the story than that. But I suppose there’s some other things that I can talk about that come out of Dan’s story. Now, one of them was social media, but the other one was actually the Soviet Union. Yes. And I suppose you’ve actually mentioned that. And this whole thing of the Soviet Union does actually go into the US and Ukraine. I don’t know whether we want to park that for a later discussion. But let me get started on some stories about the Soviet Union. So my heritage is Lithuania, Lithuanian. And I did actually go to Lithuania, some time after the revolution, and they had sort of, basically they’ve gotten gotten rid of communism on the one hand, and the interesting thing is, the first government that took over Lithuania was not communist, and then they had a successive election and they actually put the old communist back in. Now depends on what you mean by Communism. Now my uncle who was seriously anti Russia and anti communist, he said, Well, if they’re willing to subject themselves to a democratic election and leave based on that, then he says, Well, they’re not really communist. Now this is madder than that. What you mean by communist? Do you mean state control? And obviously, I think the sentiment was those notional communists were Lithuanians first and communist second. And yeah, that was the sort of the way they related to the story there. But there’s this view that like the Soviet Union had shoddy workmanship, but I spoke to people. And there was this idea of, I guess, in the West, you’d call it branding. But people said, if you get a washing machine, or a refrigerator from a factory of known repute, it will just go on and on and on and keep working. Because as far as design goes in the Soviet Union, okay, quality of workmanship, may have been an issue. And it may have varied a bit with the factory. But the engineers were not constrained by what we in the West might call, you know, trade offs to make profit, or, you know, planned obsolescence or those sorts of things. Their design principle was, we make this to work, we make it to last. And if you actually got a factory that did a decent job with putting the bits together, it really did work and last, and what some other stories as you wander around, you see little country towns that have, you know, two storey brick buildings. And if you wander around Australia, you’d say you, you only get two storey buildings when there’s a sufficient density in the township. So on the abstract, you could say that’s wasteful, you know, you don’t need a two storey building in this small township. But you also have the benefits of uniformity, right, a scale, if you know what I mean. Like it’s basically they have one unit that runs around making two storey buildings and makes them wherever and so you have the benefits of scale. So for me, it’s not quite that bad. But let me also tell you a story. Now, this is I’m not sure that people on your show have exactly made this critique, but I know there are commentators who talk about Soviet Union was a place where culture went to die. And now there was a woman I know from Lithuania, who came to Australia to start a family, and she was very musically inclined. And her she actually took her family back to Lithuania, because under the Soviet system, and they actually kept this after the revolution, if your child is musically talented, they can go off to a particular school where their talent is developed, at no particular cost to the parent. Now, we can do that in Australia, but there’s private tuition going to the Conservatorium, this sort of thing. So someone actually went back to Lithuania because of that. So there’s some good things going on there. But let me say, you know, I went to those museums, where the former Soviet Union with the three stamps of the judge, you know, before they execute someone for being a political dissident or whatever. So there was that, you know, evil stuff going on there. And I suppose this is going away from Dan Sanchez, to some of your other commentators that basically I’m very strongly pro Ukraine, partially because of that, that heritage from Lithuania and, and, you know, sure, there are some people on the internet who say that they’re American and very strongly pro Ukraine and I have to take their I take them at face value, but you know, I look at it I’ve seen my my relative with her family from Lithuania. And it’s like, the US theme feels like they’re playing geopolitical chess. But for Poland, the Baltic states, you know, Lithuania, Finland, whatever the Soviet Union is, Russia, I should say is over there and they’re a geographical proximate threat. So they’re actually shall we say, Lithuanian seem more Lithuanian government even seems more pro Ukraine than the US government not to criticise, there are some very strongly pro Ukrainian individual Americans out there who are identifying themselves on the internet. But you know, there’s, there’s an interesting subtlety there. I do actually say that there are some pro Ukraine forces that are stronger even than the US not to deny the US has given us a bucketload of positive aid there. But I suppose with Dan Sanchez, you were having that discussion. You know, what is the story about the Soviet Union there? There are a few little little strange things with the Soviet Union, like compared to China, they’ve got more social capital, you stumble while you’re on the stairs, getting on the train people will be concerned and try to help you up or whatever. But the other story is, remember, once upon a time, when everyone was getting their car stereos pinched out of their cars and and people were putting in the boot and had these special connectors and this sort of thing. And then you went to the stage of having you know, encoding so if I remove it from the power you had to get the code put back into there. Yeah, the thing is you talk to people in Lithuania. And I remember my, my cousin there, you know, people were saying to Oh, why are you putting the stereo in the boot and you don’t have these like, like security keys? And she says, I know, in Lithuania, if you know if there’s money in it, and there’s some technician who can sort of blag the codes, well, you know, it’s not very secure. Now, in Australia, let’s assume that you are some sort of automatic technician that does have access to the codes. And you abuse that I’m not sure it may, maybe you’ll never end up being taken seriously by any automotive firm again, maybe you’ll end up in prison. It’s a very different deal in Australia, if you were to betray that sort of trust. Yeah. But you can see that the degree to which you submit to those sorts of regulations, you know, there were obviously some, I won’t say that. I mean, obviously, yes. Lithuanians will be concerned about you in the street if you stumbled and you know, had that sort of thing. But there was also that sort of aura of criminality, I suppose there as well. And I hope, hopefully, Lithuania is not going to take a swipe at me for saying that. But there’s, I guess, some complexities of the story about the Soviet Union. And I suppose I can but say even though I’m a lefty, I’m certainly not in favour of the Soviet Union or Russia in the way that it was. I mean, going back far enough, I’m aware of that history, you know, way back when, if you’re a dissident in Russia, you would be executed, then the next step is you’d be shipped off to a gulag in Siberia, you might not survive the trip. And then at the end of it, they they locked you up in a lunatic asylum because only the insane would not believe that the Soviet Union could not effective, then right at the end of the thing, if you’re inconvenient, but they didn’t particularly want to lock you up, they’d ship you off to an anonymous township in Siberia would sort of be like the Tower of London, you live a reasonably comfortable but irrelevant existence. So. So anyway, there’s my sort of, I guess, glib summary of the Soviet Union, acknowledging all of the sins along the way.

Gene Tunny  22:07

Yeah. Okay. So I just want to ask one more question about Soviet Union. So look, I acknowledge there were some, there were some positives, and I mean, some I think they had some of the greatest conductors. And certainly there’s some great music that came out of the Soviet Union Shostakovich, for example, or they had great dissident writers too. So that so I mean, that’s, that’s not a positive for the Soviet Union. That’s a that’s a positive for the people, and Solzhenitsyn, who wrote the Gulag Archipelago about the sins of the Soviet Union. But certainly, yeah, this system did encourage the Arts and Sport. They had great sporting achievements. Some of them were assisted by, by doping, of course,

John August  22:51

Well, though, one thing, there were the Olympics in Montreal, and afterwards, they were trawling the river and they found all these syringes there. Anyway, that’s one story about the Soviet Union. Yeah. Was that the 23rd? Olympics? Well, anyway, it was in Montreal.

Gene Tunny  23:11

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  23:16

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, We’d love to hear from you.

Gene Tunny  23:45

Now back to the show. Well, what led to the collapse of the Soviet Union, in your view? I mean, partly it was because of the oppression and partly it was because of the inability to deliver the consumer goods that the people needed and wanted. I mean, would you agree with that?

John August  24:02

Partially Yes. Well, I would say broadly speaking, it was corruption. And I guess endemic corruption was what what I would say was the downfall of the Soviet Union. I know that I think it may have been Dan Sanchez, but I know that one of your guests was talking about the price mechanism and the great things about the price mechanism. And goodness me I don’t want to go down. Well, I guess my my endorsement of the price mechanism is somewhat guarded. But yeah, I guess I would focus on corruption and lack of democracy and lack of transparency as being the things that undermine the Soviet Union, rather than a lack of price mechanism. But I suppose it’s, that’s a matter of judgement. I acknowledge.

Gene Tunny  24:51

Well, maybe I’ll do a another episode where I look at the economy of the Soviet Union because I acknowledge that it’s, yeah, it’d be good to get the nuance in there and just understand exactly what was going on and to what extent these stories about the bread lines, people queuing for bread, the shortages to what extent they were true. I mean, it looks like they were in many circumstances…

John August  25:13

Well, going off on quite a tangent. But there’s, you know, Hugh White, who’s the Australian academic. And I know, he’s someone who says that he did actually see the downfall of the Soviet Union before it happened, because he looked at it, did his economic calculation, thought, hang on, this is not sustainable. And maybe it’s worth checking out his analysis. But the very interesting contrast is, he’s an academic and like whether the Soviet Union collapses or not, he’s still got a job, right? Yes. But the very interesting thing is that there were all these people from the CIA, who were saying the Soviet Union is a threat, and will continue to be a threat. And this, this Australian academic with a degree of objectivity could actually see clearly that the collapse of the Soviet Union was coming. So I think that’s a very interesting contrast.

Gene Tunny  25:59

I’ll have to have a look at his stuff, whether was he making the argument that it was because of the economy that was just unsustainable, was it because of the big increase in military expenditure that they had to undertake to match what the US was doing? I mean, this is the this is the story. The the the Americans tell, isn’t it that I mean, Reagan defeated the Soviet Union, because he just massively ramped up US defences

John August  26:22

Well there was also, there was also SDI, which I think was, you know, basically, you know, lasers in space lasers on Earth, whatever, which was ultimately ineffective. But you could say that it was a propaganda ploy that prompted the the Soviet Union spend all this money on stuff that they didn’t need to do so. And that that was one of the things that broke the Soviet Union. Well, let’s just say all these things are possible. Notice I mostly tell the story about Hugh White because it’s a cute story. I don’t carry around all of his conceptual detail, although I’m sure he’d made quite a considered judgement at the time,

Gene Tunny  26:58

I’ll look into it. I’ll look into it. Okay.

John August  27:01

So I suppose the last thing Dan Sanchez was also talking about was social media and the government getting its mitts in and causing problems. And let’s just say, Look, if you are into social media, if you were into the internet, and you understand the development of the Internet, now, look, I actually, as a pirate, I’m certainly concerned about government surveillance, I’m concerned about the protection of whistleblowers, more obviously concerned about companies sort of harvesting data and that sort of thing. You know, that rubric of thing. I mean, I am concerned about government and I’m concerned about business. But let’s focus on social media. The the history is, even of people who are very much, shall we say, anarchist inclined in the way that they relate to social media, the big problem has always been that a positive forum gets taken over by trolls, and you know, people who want to abuse the situation, it basically gets taken over by bad actors, if you’re not careful. And you need moderation to control that. And that is something that elements of the internet, you know, anarchist inclined elements on the internet, have struggled with to get on top of yet. And in a sense, if you set up a chat group, a forum, you know, you’re gonna have to be careful about trolls, to some degree, you’re going to be careful about obnoxious people, or you’re going to have to be careful about, you know, people trying to take over your website and promote gambling or something on it, you know, all those threats. But the idea that the government might come in, and censor you, you know, I just think that that just seems to me to be so naive compared to the lived experience, if you’re actually on the internet, trying to manage these things. Now, one of the things that has actually happened on the internet, it’s a concept they call it, this is the environment here is an amicable dinner party. Right? And this is the thing I do not want to send to someone based on what ideas they’re putting forward. But it may be appropriate to, to call someone out if they’re being obnoxious. And, you know, I thought I, you know, Facebook is a bit controlling and whatnot. Let’s go to some of the alternatives. And rather than the alternatives being a hotbed for interesting political debate and divergent opinions, they tend to get taken over by conspiracy theorists. And that’s my own lived experience on the internet. And it just seems polls apart from Dan Sanchez’s view and look, notice, I’ve told you a few things. You know, I’m not really impressed with government censorship. I’m not really impressed with lack of transparency, protection for whistleblowers, all those sorts of things. Those are a part of the things that I bring to the table. And I suspect we’ll get into it later on. But while I’m not totally against government involvement in society in the economy, by golly, there can be some obnoxious bureaucracy developing very easily. Yeah. And we’ll perhaps get to that.

Gene Tunny  30:04

Yeah. Can I ask you about social media, John? Because I’m actually surprised that your point of view on this, I want to make sure I understand it fully. Because isn’t the biggest threat to our liberty, really the government or government overreach or, you know, factions taking over the government and wanting to impose a totalitarian state? Isn’t that the biggest threat to liberty? Not some trolls online? I mean, you can ignore the trolls, can’t you? And isn’t it better to have a robust debate to have that exchange to? This is why Voltaire didn’t what’s the line from Voltaire about how I disagree with what you say, but I’ll defend, to

John August  30:47

defend to my death your right to say yes, yeah, the person Voltaire was talking about. He was probably saying something Voltaire disagreed with, but he was probably doing it in the context of an an amicable discussion over dinner. Okay, right. And remember, I’ve just I’ve just said, I guess I’m repeating myself. I’m not against people who disagree with me, I am against people who are assholes. And there’s a fundamental difference there. And my concern is not over ideas. Or to some degree, there’s an idea, like someone over there thinks blah, okay, they can think that I don’t care. Are they in my face yelling at me telling you this stuff? Okay, then I have an issue. But I don’t have an issue with someone over there thinking x y Z. So as far as like threat to Liberty now look, maybe you’ve got a point in terms of threats to liberty. Okay. Let’s see now that forget the social scientists who were sort of talking about the state having the monopoly on on violent coercive force, violence, being able to jail people, and so on. So one of the things is you got to understand there are corporate platforms, who are making choices, and some people call that censorship, I tend to think censorship is only something that government does, because the government is backed up by its legal monopoly on force. Right? So So when corporations make a corporate choice, to allow something on their platform, or not allow something on their platform, that’s more of a commercial choice than censorship. But when you have, let’s say, Facebook, or whatever, and there’s only one place you can go to to express yourself, then they’re starting to give state like power, because there’s only one place you can go to. So that’s where things start to get a bit murky. But, you know, let’s say that if there’s multiple platforms, and this platform decides, well, we’re not going to allow blah, for commercial reasons. And there’s other platforms you can go to, then I guess, you know, that’s the old thing of, you know, the, the world of possibilities. And that’s not really a problem. But it’s sort of like what’s, what’s the sentiment, you know, this is a, this is a private entity, but it’s becoming like a public utility. And even though it’s privately run the fact that it’s like a public utility, that makes it more complicated. So let me try to engage with what you’re saying in a more complicated way. If you’re talking about freedom, and the fact that government is the one with the legal, the legal monopoly on force, and that is something we should be concerned about. Okay, I agree with you. If you are saying here is this thing called social media, we want social media to be a social good, that does good things in our world, and is pleasant to use. Maybe that’s a different issue to whether we are free or not. But it is still a legitimate concern, that here is something going on in the world that basically shouldn’t have barbs or we shouldn’t be, we should be able to pick the roses without getting our thumbs sort of on the thorns or whatever. You know, it’s, it’s, as I say, it’s not an issue about freedom. But it’s an issue of is this thing actually worth doing? Is this effective? And I still think that then maybe if Dan Sanchez just wants to bang on about freedom, and ah the states got its legal monopoly on force, blah, blah, blah, okay, if that’s his argument, well, there’s a degree where I’ll back off and say alright if that’s what you want to say, but if he’s want to say, look, here’s this wonderful thing called the Internet, and the major threat to it being effective is the state and I’m sort of saying, no, that’s not the major threat to social media being effective. There’s other things going on that you’re totally blind to. So am I making sense there if you want to narrow your argument to freedom government with coercive monopoly on coercive force? Okay, but that what I guess I’m trying to say is, you’re confusing two different arguments there. And who knows, maybe Dan started out talking about personal freedom and then somehow sort of oozed into is social media effective or pleasant to use and he’s confusing those two concepts. Am I making sense there?

Gene Tunny  35:02

I think you are. Look, I mean, my view would be that we want to be careful how much we censor social media. And if there’s demand for that platform you’re talking about, then you would expect someone would try to set that up. And therefore you would sign up for some sort of moderation. So I don’t mind if people sign up for that, if they go into that. And there’s, you know, when you’re going when you join a platform, you’re conscious that yeah, there will be some moderation because people who are coming to this platform, they want to go to that dinner party you’re talking about. So I guess LinkedIn’s sort of like that, where people are talking about their professional accomplishments, and they’re sharing things on that, that seems to be well more behaved. And they they are expressing some opinions, it seems to be a lot better behaved than say, Facebook or Twitter. I mean, Twitter is bad, because it’s anonymous, isn’t it? So that’s one of the problems there. Yeah, yes. Yeah. Yeah. I mean, my view would be to look, I see the problem with trolling. I think the best thing is to ignore it. And you know, you can block trolls, can’t you?

John August  36:10

Well, look, there are ways of engaging with this. But I’m just saying I guess it’s making the whole thing a bit bit more difficult to use. And let’s just say it’s betraying the promise of social media I suppose would be my sentiment. And yes, whatever problems there are, there are workarounds. But the fact that you need to apply workarounds, I think is perhaps telling.

Gene Tunny  36:32

Right. So, John, we’ve had a good chat about your thoughts on the invisible hand episode with Dan Sanchez. And I’ll have to let Dan know, and I might see if he has any reactions in, in reply

John August  36:45

Yes maybe it would be a bit simpler if we basically just had a face to face discussion some time. Because as I say, I’m yes, I strongly disagree. But I hope at the end of the day, maybe I can buy the guy a beer you know, I hit that.

Gene Tunny  36:56

Yeah, I think he might be in Atlanta, but we could certainly have a, we can certainly have a catch up on Zoom. Or if he’s coming over here to Australia. Or if you’re in Atlanta, you could get in touch with him. Okay, so we chatted about the invisible hand. You also had some thoughts on the goldbacks episode that I did with the gentleman who was who’s setting up the he’s got his goldbacks in the state in, in Utah, which is quite fascinating. Yeah, Jeremy Corden. That was, that was a conversation I really enjoyed. And I learned a lot. So what were your reactions to that conversation? John?

John August  37:32

Let’s just say as a as a pirate, and I say people can do whatever they damn well, like, you know, that within reason, I suppose obviously, the within reason is the big rider. But if people want to have these goldbacks, well, good luck to them, they can do that. And I suppose that it’s more people who were in terms of challenging the current norm. I think that was more something to do with crypto, but let me try to focus on on the goldbacks. I sort of scratched my head over whether this really is that useful? Or whether the mainstream monetary system is that corrupt that we need to bail and go down a different path. So in that sense, I wonder about the motivation. But at another level, I say people can do that whatever they damn well, like, and I don’t think anyone who’s buying goldbacks or trading goldbacks is hurting anyone. So good luck to them. They can they can do that. Now, if people want to have goldbacks, like for, like the imminent political crisis, when money becomes worthless then all the institutions of the US unravel, and they’re sort of survivalists, and that sort of thing. And that’s the way they relate to things. Well, I guess that’s your choice, you can do that. But one of the things where I do actually defend what was the gentleman’s name, Jeremy Corden, Jeremy Corden now one of the things where I defend Jeremy Corden and this goes back into the history of currency and the history currency more relates to modern monetary theory but nevertheless, I’ll talk about it now is that once upon a time you had coins, okay, and and the thing is, before you had coins, you actually had lumps of gold or lumps of silver or lumps of whatever. And when you use them to buy stuff, you’d actually have some scales and every time you bought something’s people would weigh out the gold or the whatever. And what you then had was the king would run a stamping unit and probably stamp their their impression onto the coin. And and what you did then, basically by counting out a given number of coins, you have confidence that that was a given weight of gold. So those coins you’re gonna understand it wasn’t theat currency it was obviously the the underlying value of the metal was what made this coin valuable, but the fact it was stamped made it more convenient than the metal itself. So that was the benefit you had. But let’s look at this stamping unit the Emperor running it. Now keep in mind, we didn’t have advanced economies with like, you know the amount of money you need for anything, because like, let’s just say even if people have got the proverbial licence to print money, even if they’re forging currency on their colour printer, the colour printer costs some dollars, the paper costs, the ink costs some dollars, the the electricity costs some dollars. So even if you’re forging currency, yeah, it still costs you some stuff. And going back to the Emperor with his stamping rig, you know, someone is sitting there, measuring out the gold, putting it there applying the stamp, and I guess they probably whacked it with a mallet or something to form it into a coin. That’s a labour intensive activity. Right. So that is a reasonable thing. So the thing is that this gentleman was charging for his goldbacks. And I think that was legitimate. The other thing is that the another metaphor here is, this goes back to the time of coal, okay, you someone will buy 10 tonnes of coal, and then sell it off in bags of coal. And basically, they’d buy those 10 tonnes of coal at a very cheap rate by volume. And because they were segmenting it out into smaller amounts, you know, you’d pay basically more per lump of more per pound of coal, I guess it would have been then. And the service was taking a large amount and turning into small units. Now, let’s say you go down to the service station and buy some petrol. Now I’m sure the person who runs a servo buys that petrol at a very cheaper amount than you would put in into your car, but you are buying the, the petrol one tankful at a time, that’s convenient, that is the service that the service station is providing you, they’re taking something of a large volume, and segmenting it into smaller amounts, smaller quantities that you as consumer can then officially use, and they are charging for that. And okay, they’re going off on quite a tangent, you know, farms will actually have a very big container of petrol. And you know, they’ll have a truck that visits you know, once every, I know, weeks or months, and that will fill up the container. And that’s because for someone who is on a farm, it’s a lot of effort to drive down to the servo to top up, yeah, right. So they have to go through that. But you and I can buy our petrol one tank at a time. And the servo person running the servo is charging, and I think they’re charging legitimately, it’s a reasonable thing to do for them to charge for that. And so running all these things back, it’s a legitimate thing for this gentleman to charge for the goldback in the same way as all these things. The only issue is, is he making a monopoly profit, who is competing with him? Is that a legitimate amount of money he’s charging. And, you know, if he actually wanted to be transparent about these books, we could all sort of look at that if he wanted to be that public about and then go Oh, yeah, okay. That’s a fair return. Okay. Fair enough. If he wanted to be that transparent, the thing that would keep him totally honest, would obviously be other people competing, then again, look, notice I said, Oh, it doesn’t hurt people, people can do what they damn well, like, blah, blah, blah. But I would still say this guy has been innovative. He’s putting himself out there. He’s trying something out. I guess there’s a legitimate moral return for taking that sort of risk and just having a go. Yeah. And that’s the thing, some things, you know, you wonder, is this a monopoly profit? Or is it a legitimate return on your creativity? Bit of a rubbery distinction between those things, but I don’t know how much he’s morally entitled to charge. He’s certainly morally entitled to charge something there.

Gene Tunny  43:35

Well, I mean, that whole question of what’s he morally entitled to charge? I mean, who’s to say, I mean, this is, that would be a value judgement, wouldn’t it? So? Yeah, I mean, I asked the question, I asked him a question. Because when he will, how much of the value of the goldback is due to the gold? And it was a half? Was it a bit a bit under half? Or maybe half? Oh, okay. And I wasn’t, I should have thought more of the time. Okay. So he’s this, he’s got this new process, and he’s got some equipment, and he does need to earn a profit. Of course, I don’t have a problem with him earning a profit. And I guess this is a sort of thing where yeah competition that potentially this is something where there could be competition from other providers of goldbacks a similar type of currency.

John August  44:23

And you wonder if he’s got a patent on the technology. And yeah, my whole concern about IP, that is a pirate thing that for another time,

Gene Tunny  44:33

what about your thoughts on crypto? You had some thoughts on the crypto episodes that I’ve had recently had? Well, in the last several months or so?

John August  44:41

Yeah, yeah. Well, I suppose one of the things is that I guess I do have some understanding of the mathematics of it but I know you had one gentleman there who was trying to say, look, Bitcoin is good and Ether is about some sort of oligopoly controlling the flow of money. Yeah, and I will would differ with that based on what I understand. Now. Let’s also say there’s something called the central bank digital currency. And let me tell you some banks are actually doing trials in association with the Reserve Bank doing a central bank digital currency. And let me tell you, there are some people out there that are freaking out about this. They’re, they’re really going down the conspiracy, the conspiracy theory, rabbit hole. And I can but say, I tend to think it’s too contentious, you want to increase seriously increase the level of trust in government and the financial affairs, because a lot of people are going neurotic about this stuff. But the thing about Central Bank digital currency, and I think your guests identified this too. Central Bank digital currency is not crypto, metaphorically, it is a spreadsheet somewhere in the bowels of the Reserve Bank. And you’ve sort of put up your hand and someone changes the entry in in that spreadsheet in the Reserve Bank. Crypto is much more distributed. Like in order to run Bitcoin, you have computer many, I don’t know how long well have, let’s say, 1000s of computers around the world, but don’t quote me on that one. And the thing is, for something to be validated, more than 50% of those computers have to agree that x y Z is the case. Yeah, now that makes it very resilient against failure, very resilient against fraud, you know, various things like that. And yes, there has been fraud and dodgy stuff happening in crypto. But that’s been exchanges, not in, you know, the actual crypto itself. So your reserve bank, digital currency is a spreadsheet. Bitcoin is basically a consensus thing where you have to have more than 50% of those computers to say that certain thing is the case. And what that mean, that means it’s resilient, it means that it’s actually not subject to the whims of government policy not subject to the whims of the Reserve Bank, crypto is or bitcoin is, and it will continue to roll along, according to its algorithm that was predetermined however long ago. So so that’s a story with crypto. That’s one that’s a story with Bitcoin, I should say. And at the other end of the scale, you’ve got your central bank digital currency, which is just in so notice this thing, it’s a single point of failure. If someone hacks into the reserve bank, it can be compromised. You cannot meaningfully hack Bitcoin, the only way you can turn bitcoin is to control more than 50% of the computers around the world are doing Bitcoin. Right? Right. So and then the thing that’s in the middle is Ether. And my understanding is ether is still run by a pool of like, you know, let’s say 1000 1000 computers. And what you can say is that, okay, it’s in between the two, it’s not a total dispersion like Bitcoin. But equally, the idea that ether could somehow be swung by vested interests is hard to believe, right? Let’s, let’s say for the sake of argument, 500 people, and Ether is mostly running by its predetermined algorithm. You know, it’s hard to believe certainly, you had a guest who was critical of Ether as a quid, I sort of say it’s in between the point is, now the other thing that’s also an issue is, is our mainstream financial system that corrupt or that bad? Now, your guests were basically they were expressing their concerns. But I tend to think, look, you can say that this financial system, our democracy is messed up, and you can bail or you can say, Well, why is democracy not working to the point where we might have these dodgy policy outcomes and spend some time thinking about that? You know, it’s I have this feeling that they’re, that they’re, they’re bailing without due consideration, I suppose, right? In a sense, if people are free to do that. Now, the other thing they talk about, they do talk about the threat of banks suddenly denying us access to our funds. And people have some concern about that. So far, banks haven’t done that. I’m not saying this is a bad thing. But there are narky things like garnishee orders, like if you have a debt, yeah, you can actually make an arrangement. And the banks will sort of basically grab some, grab some of your money as it could flow through your account, and you have no control over that. That happens, but maybe that’s a legitimate thing for the government to enforce. But the point is, the stories of the banks being in some way arbitrarily abusing their power. I don’t think that really happens. I think the concern is overstated, but it’s a matter of judgement. If you really are that upset with the banks and you want to go your own way. Well, fair enough.

Gene Tunny  49:48

John, just on that, I mean, there have been some cases where the banks have denied access to funds to people, where the US Treasury has issued one of those what does it call the, there was that Russian businessman or was he? was he killed? Yeah.

John August  50:05

So it’s the whole thing of Ukraine being pulled out of the SWIFT network. There’s a few dodgy things like that. But, but yeah, okay. You’re, you’re telling me something new? I must say,

Gene Tunny  50:14

No. I mean, so one of the one of the reasons people would, they’re concerned, and maybe this is something that’s a bit of an edge case, or it’s an extreme sort of scenario. But there are situations where government can tell banks deny people access to the funds. And you might argue, Well, okay, well, that’s a good thing, because these people are siding with a dictator, or they’re associated with a rogue regime. So fair enough that

John August  50:42

well, if that is a concern for you, then maybe crypto is a way of dealing with that. Now, let me say that there is there’s there’s one legitimate use case I can think of for crypto, that let’s say you’re a Filipino worker working in Saudi Arabia, or United Arab Emirates, or something like that, you want to get your money back home? My understanding is if you can play the game with crypto, you can actually do it with a much lower overhead than a means of international money transfer. Yeah, I mean, there’s cute stories about in Africa, I think telephone credits on mobile phones become used as currency. Now, again, that’s a centralised currency, like the spreadsheet at the Reserve Bank, but it’s still an interest in digital currency that sort of used instead of money. So there’s a use case there. Now the other thing I would say is that maybe crypto is keeping Visa card and so on honest. Now one of the things about if you’re I want to I’m not sure on the exact details, but if you are I wanted to transact in crypto would probably have to pay the miners like $100 to process our transaction. But that’s a fixed amount. These sorts of charges you a percentage, while you would imagine the amount of computational power to process my purchase of $1, or $1,000 is the same. While with crypto, it’s a fixed charge. Also, the banks run some pretty strange trade offs involving fraud because the calculations are there’s a nonzero quantity of fraud, which is acceptable, because otherwise you just make life too difficult and things don’t happen. So there’s some complicated trade offs that banks are making. And what I’m saying is maybe crypto is keeping the banks honest, is keeping Visa honest. But what I will also say the thing weird thing about crypto is once upon a time, you had all the evangelists, the people who really believed in an alternative currency that wasn’t controlled by the banks, or the government, and they really believe that whether they were right or wrong, they really believed it. But now I think you’ve got a lot of snake oil merchants, you know, people who just want to make dollars. And the scene has become dominated by the get rich quick people, rather than the genuine evangelists. And for me, that sort of changed the whole feeling of it. Yeah, you know, if it never left the, you know, you’ve got to be a nerd to really get into crypto. On the one hand, it’s limiting the market, but it would also have been kept its purity, you know, so yeah, there’s some stories there. Okay, so that’s a bit of a ramble. But I hope I’ve sort of said said some useful things about crypto.

Gene Tunny  53:16

It’s made me think, John, I like it. I’ll just ask one more question, because we’ll have to wrap up soon, unfortunately. But I know we could keep on talking. The thing I was thinking of was the Magnitsky Act. I don’t know if you’ve heard of that, which was there was a bill passed by US Congress and reading from Wikipedia signed into law by Obama in December 2012, intending to punish Russian officials responsible for the death of Russian tax lawyer, Sergei Magnitsky in a Moscow prison in 2009, and also to grant permanent normal trade relations status to Russia. Hang on. And then there’s another act of 2016 it authorises the US government to sanction those foreign officials worldwide, that a human rights offenders freeze their assets and ban them from entering entering the US. Now, I don’t have a problem with any of that, because some of these people probably deserve it. Yeah. But there is this concern that the banking system could be subject to political influence.

John August  54:11

Well, the thing is, at some level, how corrupt is democracy? Do we have faith in democracy? Do we have faith in the means by which the US government makes those decisions? Now this is going off on a whole ruddy other rabbit hole, but the US government has form in terms of meddling in global affairs. You know, there’s Diego Garcia. Goodness me, I think there was, you know, in El Salvador, that’s right. 1986 there were US trained trained soldiers that killed some priests and nuns, a whole family. The list will go on in terms of like the US doing dodgy shit around the planet. And it’s sort of like you know, they give a lot of foreign aid but equally they like, they like they run a protection racket. You got to pay your protection money along the way to participate in the rules of US rules based order and they, you know, they ignore the International Criminal Court and yada, yada yadi. So, look, the US does have a dodgy record. But notice I’ve shifted the ground a bit I’ve sort of said, look, what is the legitimacy of the US in broader terms, and it’s got its things to criticise, maybe those decisions you are making are valid decisions for the US government to make. And yeah, this is I guess, I’m not really answering any question. It’s getting a bit messy and awkward but yeah, if you think that participating in this global framework, and giving the US that sort of discretion is too much, then maybe crypto is the way to go.

Gene Tunny  55:43

Or any government. I mean, I don’t mean to pick on the US. It’s just that it’s the you know, the dominant country. And that’s, that’s very topical. Finally, because this will have to be the last question. What about the concerns people have about CBDC?, you mentioned, I’m trying to understand what your response is. You said, well, there are some people who may be there. You know, there are conspiracy theories about what it is. But you also said that this is CBDC, but you then also said that, are you concerned about political stability? Are you concerned that this is something that will make people more distrustful of government?

John August  56:21

Yes, I guess so, let’s say, look, this may not be what government is up to but there are people who are out there who are saying the banks and the governments are trying to wean us off cash, yes. So we do not use cash. And whatever, whatever these people are thinking they’re thinking government does not have good reasons for having that agenda. They wanting to wean us off cash, so they have more control of us. Right now, there’s a certain conspiracy theory, rabbit hole here, but a reasonable number of people. I don’t know what the proportion is, you’d have to talk to people who know more than me, but some proportion of people are very concerned about the government trying to stop people from using cash. And they see that as part of an agenda. And obviously, you can have your international connections. I do want to do not want to go there. But you know, there’s this whole constellation of conspiratorial concerns, and the government going down the route of central bank digital currency is feeding these people’s concerns. And whether you say that’s right or wrong, people are going to get very neurotic and conspiratorial about this.

Gene Tunny  57:28

Okay, yeah. All right. John August. Any any final thoughts before we wrap up, but it’s been great hearing your reactions to recent episodes, and it makes me think a lot more about these issues. So I appreciate it.

John August  57:43

Okay. Well, I’ve got many more things to say. But that’s probably the appropriate for the present, I think. Yes.

Gene Tunny  57:49

We’ll catch up again soon. John, for sure.

John August  57:55

Sounds good.

Gene Tunny 57:59

Okay, thank you. Thank you.

Righto thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this or to begin your own podcasting journey. Head on over to


Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business

Full transcripts are available a few days after the episode is first published at Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.

Podcast episode

The importance of physical & mental health for top CEO performance w/ Andrew May – EP193

Andrew May, a leading Australian performance coach and host of the Performance Intelligence podcast, discusses the relationship between physical & mental fitness and CEO & business performance with show host Gene Tunny and his colleague Tim Hughes. Andrew shares insights into the areas he focuses on when coaching top performers, including CEOs and elite athletes. 

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About Andrew May

Andrew May is CEO and founder of StriveStronger, a digital consultancy that partners with organisations to create cultures of wellbeing. He presents inspiring presentations and is recognised as one of the world’s leading performance strategists. Andrew works with a number of elite athletes and is the Mental Skills Coach for the Parramatta Eels National Rugby League Club. Andrew is a former middle-distance runner who was an assistant coach at the Australian Institute of Sport in Tasmania. He has worked with multiple Olympic/international athletes in track and field, tennis, swimming, hockey, netball, basketball and AFL; culminating in working as the Physical Performance Manager for both the NSW and Australian Cricket teams. Andrew has dual degrees in the body and brain – completing a Bachelor of Applied Science in Exercise Physiology (body) and a Masters in Coaching Psychology (brain). 

For further information about Andrew, check out his full bio:

What’s covered in EP193

  • [00:01:10] Physical and mental fitness in performance. 
  • [00:04:24] Well-being and Performance. 
  • [00:08:21] CEOs and high performance sport. 
  • [00:10:57] Male vulnerability and authenticity. 
  • [00:13:14] Life’s purpose and meaning. 
  • [00:16:49] Building sustainable operating rhythms. 
  • [00:19:59] Slow brainwave patterns.
  • [00:23:00] More on building sustainable operating rhythms. 
  • [00:26:24] Sleep and recovery for CEOs. 
  • [00:30:16] Wearable device metrics. 
  • [00:32:57] Cycling culture and health. 
  • [00:38:29] Longevity through lean muscle. 
  • [00:39:40] Biological age and VO2 max. 
  • [00:43:24] Performance Intelligence Mastermind. 
  • [00:47:26] Work-life balance. 
  • [00:49:46] Managing stress for executives. 
  • [00:53:12] Wearable tech and data analysis. 
  • [00:56:32] ROI. 
  • [01:01:00] CEO Health Coaching Benefits. 
  • [01:04:02] CEOs and Health Performance.

Links relevant to the conversation

Andrew’s podcast:

Andrew’s book Match Fit and related online course:

Regarding DEXA (dual x-ray absorptiometry) scans:

Studies mentioned by Gene in his debrief with Tim at the end of the episode include the following.

Study published in Leadership Quarterly in June 2023 “CEO health”:

Here’s the abstract:

“Using comprehensive data on 28 cohorts in Sweden, we analyze CEO health and its determinants and outcomes. We find CEOs are in much better health than the population and on par with other high-skill professionals. These results apply in particular to mental health and to CEOs of larger companies. We explore three mechanisms that can account for CEOs’ robust health. First, we find health predicts appointment to a CEO position. Second, the CEO position has no discernible impact on the health of its holder. Third, poor health is associated with greater CEO turnover. Here, both contemporaneous health and health at the time of appointment matter. Poor CEO health also predicts poor firm outcomes. We find a statistically significant association between mental health and corporate performance for smaller-firm CEOs, for whom a one standard deviation deterioration in mental health translates into a performance reduction of 6% relative to the mean.”

Leibniz Information Centre for Economics & Centre for Financial Research (CFR), University of Cologne working paper titled “Does CEO fitness matter?”

Here’s an excerpt from the abstract:

This study provides evidence suggesting that CEOs’ physical fitness has a positive impact on firm value, consistent with the beneficial effects of fitness on, e.g., cognitive functions, stress coping and job performance. For each of the years 2001 to 2011, we define S&P 1500 CEOs as fit if they finish a marathon. CEO fitness is also associated with higher firm profitability and higher M&A announcement returns.

The importance of physical & mental health for top CEO performance w/ Andrew May – EP193

N.B. This is a lightly edited version of a transcript originally created using the AI application then checked over by a human, Tim Hughes from Economics Explored, to pick out the bits that otters might miss. It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory, evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show.

Hello, thanks for tuning in to the show. In this episode, my colleague Tim Hughes and I chat with Andrew May, a leading Australian performance coach. Andrew’s worked with sporting teams and he now coaches CEOs of major companies, including the CEO of one of Australia’s biggest banks. Andrew is also the host of the Performance Intelligence podcast, which I can highly recommend. Tim and I had a great chat with Andrew about how physical and mental fitness can translate into CEO and business performance. We got some great insights into the areas that Andrew focuses on when he’s coaching top performers, whether CEOs or elite athletes. Okay, let’s get into the episode. I hope you enjoy our conversation with Andrew May.

Andrew May thanks for joining us,

Andrew May  01:33

Good to chat looking forward to this conversation. Yes,

Gene Tunny  01:36

yeah, it’s great to connect with you Andrew, Tim’s you know Tim from way back. And Tim has put me on to some of your work. And I’ve been reading MatchFit and enjoying it. I guess what prompted this conversation was an article in the financial review a couple of months ago, which was about Generation X Men and given I’m one of them, that was, I took note of it, how they are tackling their mortality. And it mentioned you and to Tim, it already mentioned you to me and so I noticed it and it said you’ve been coaching CEOs of ASX 50 companies, so major corporations in Australia such as, Matt Comyn, the CEO there and then it got me thinking. I’m wondering, how do you go from being a performance coach to the Australian cricket team? If I’m getting that right to coaching CEOs? Can you tell us a bit about that story, please, Andrew?

Andrew May  02:35

Yeah absolutely but before I do, if you want to know about being match fit, look at the guy sitting on your left. I first met Tim 20 years ago, he still looks the same full head of hair. So it’s great to reconnect

Tim Hughes  02:47

smoke and mirrors.

Andrew May  02:50

So how did I end up coaching executives and doing mental skills for elite athletes around the world? There was no definitive plan, Gene, and a lot of your listeners are going What do you mean, you didn’t have a 20 year plan? No. I was a good athlete, not great. I won multiple state championships but never won at the national level had a scholarship at the IOS in Tasmania. And we moved down to Hobart, which was wonderful in my early 20s. And I just finished studying exercise science, I had a physiology base and then went to the Institute of Sport. And it was a great learning in that high pressure environment. And when I look back, I got to the level I believed I could get to and I believe coaches should coach what they’re good at or what they’ve stuffed up. And if you can combine the two, you’ve got a really interesting mix. I left talent on the track literally. For any athlete, any executive I work with my real fuel is to help them fulfil their potential. So back to in Hobart. As a runner in Australia, you don’t get paid a lot of money. Unless you’ve been Craig Mottram or perhaps Sally Pearson So I had to supplement my income back then it’s not politically correct. And I used to walk fat blokes. It’s now called personal training. So the clients I had that’s Timmy when I met you, when I moved back to Sydney, after I finished down in Tasmania, and during a lot of the clients, I were training, they would lose 10 or 15 kilos. And then they’d say, Do you realise I’m not as cranky with my wife or my husband on the weekend and the kids are not saying I’m an A hole, and I’m actually conscious of their school sport. And I’m not just thinking about what’s going on here and I’m making better decisions and I’m more creative and we’ve opened up these other options in Asia. What have you done to me? I don’t know. Just keep walking. Don’t drink as much alcohol on the keep swimming in the ocean. So I’ve been really started to look into Whoa, there’s a link between well being physical and psychological well being and executive performance that was 20 plus years ago. When I moved back to Sydney. As you mentioned, I was working in cricket as a fitness trainer for the New South Wales Cricket team for 8 years And then an amazing opportunity was to travel the world with the Australian cricket team. For a couple of years did some work with the Sydney Swans. I’ve always danced between corporate work. And because the personal training then evolved to corporate work, because the men and women I was training ran companies and they said, Hey, can you do this for our company? And, Tim, you know this with a personal trainer background, you walk in there and go, how on earth do I run a programme for 100 people, well if you’ve been doing a one on one, you just work out how to add group dynamics and amplified, because you’ve done a lot of the reps and sets. So that’s really the evolution Gene, studying and then as an athlete, and then experience that’s over 25 years and I added psychology I did a degree a master’s in, in coaching psychology, I finished that about five or six years ago. And that not only gave me confidence, because when you’re in sport, you’re actually not coaching at the higher level you’re often telling, because I wouldn’t say to my cricketers ah guys, what do you think? Let’s have a dialogue around that. It’s like do this and get on with. And I found when I shifted and some executive started to say, Hey, can you come and work with me, some of them left because I was very didactic, here’s what you got to do. I was treating them like an athletic. So I really needed to learn about conversations and listening but still having a bit of a hard edge. And I say that to my clients, I’m not the coach who’s going to sit down with you have a cup of tea and sticky buns and talk about everything. That’s great. We’re going to talk about real challenges and have some of the robust conversations. But I was very, one way, here’s what you do rather than listening. So 25 years later, I look at a blend of science, exercise physiology, primarily about the body, coaching psychology, primarily about behaviour change and the brain, working in sport as an elite athlete, but being good not great and then working across multiple sports. And now I’ve gone back into sport. I worked for the last two years with the Parramatta Eels, as their mental skills coach, and I’ve signed on this year with the mighty Manly Sea Eagles. And I work with a range of other aspects. One of those being Tim Tszyu, the wonderful young boxer who’s got another fight in two weeks. And then experience in the corporate world has given me a unique set of skills that as I said, I’ve never targeted to say, hey, here’s a career plan. And I just find that blend between science between high performance sport and between having some experience really helps to conversations with some of those high end executives, because they’re just like, the three of us, they have challenges, they have problems, they might be leading a company, but that doesn’t mean you know how to lead your thoughts and your body and everything else in between.

Tim Hughes  07:37

I was gonna ask you with that jump to training CEOs. Obviously it attracts a certain personality type, alpha males or females to that role. How did you go in? Because you mentioned about, you know, a didactic approach? How did you manage to work that in with different personalities with the stronger personalities to be able to get them to change?

Andrew May  08:01

Stronger personalities I found easier, because I’ve had a number of strong personalities in sport

Tim Hughes  08:07

Right is there a is there a strong correlation or comparison between high performance sport and CEOs?

Andrew May  08:14

Yeah, it’s an interesting question. I think there’s a correlation. Up until 10 years ago, we’ve rounded it out. Now 10-15 years ago, a number of the CEOs or execs I’d work with, they’d been taught even if it was just subtle messaging that you don’t bring your full personality to work so leave your shoes at the front door and also leave your full personality and come in here and just be robust and be strong. A coach I had that really shaped me and he’s still a good mate of mine is Steve Rickson who was a wicket keeper and then he was coach at New South Wales Cricket and Stump has evolved a lot over the years as well. We laugh about this. The my interview with Stumper back at New South Wales Cricket and went for about five minutes. I was wearing a suit. He rocks up. He’s in a tracksuit and I said hello mr. Rickson. He says that’s my dad. Call me Steve or call me Stumper. Do you have a nickname? I said yeah it’s Maisie. I said is there a job description? This was my first role in sport back in Sydney as the strength and conditioning coach for New South Wales Cricket Team – can I swear on your podcast I do. Like I said job description. You come to a session tomorrow the guys have got a recovery session if they like you stay if not fuck off. And I said is that it? He said I know there’s one other rule. So what’s that? He said it’s rule number one. What’s that? Don’t ever be late. Because if you’re late fuck off, rocked up the next morning. So nervous, like I was 45 minutes early. And seven, eight years later, I’m still there. And in the initial couple of years, Stumper would be like alright, we’ll do the fitness and now Maysie fuck off. It’s cricket but to his credit, he saw how it was integrated it wasn’t just to fitness and then play cricket. So I had some great role model models like Stumper who were quite didactic, who were very strong. So Tim, I found that personality I knew, and I knew with a lot of those people, like Stumper underneath it all he’s a, he’s a teddy bear. He’s a lovely guy. And he’s very connected and very warm. The person I found more challenging was the person who wasn’t as forceful on that. And they maybe weren’t telling me exactly what was going on, but find someone false. Well, at least it’s out on the table and have a bit of a healthy banter. And with that personality pushing back, or at least talking to them, and having that dialogue, a respect comes, where I was struggling was if I had someone who wasn’t open, or who maybe was struggling, I didn’t know the levers to open up that conversation.

Tim Hughes  10:43

So that’s people armoring up basically, and not really wanting to let anybody have a look into the inner workings of who they are. I’ve seen a shift towards a greater vulnerability, and then acceptance of being vulnerable and being authentic, which has been really positive. And I think you’ve displayed that really well through your podcast, which is great. I know, I’ve got so many great episodes that I’ve enjoyed. I’ve had days when I woke up miserable and grumpy. And by the time I’ve got to where I’m going, I’ve listened to 20 minutes of a podcast with one of your guests and is back on you know, it’s great, because it’s,

Andrew May  11:17

I’m glad you got that sequencing, right. Better after listening podcast. I woke up, I listen to your podcast, and I felt tired and grumpy. So good boy getting the sequencing, right. Yeah.

Tim Hughes  11:29

But I’ve seen a definite shift in that acceptance, especially with guys to be able to, to open up. And it’s it’s not seen as a weakness to say if you’re struggling with something, or to be vulnerable, which is definitely a good thing now.

Andrew May  11:43

Yeah for the three of us, our generation. Our dads weren’t as expressive in their emotions. And I noticed with my dad, now he’s in his mid 70s. He tells me he loves me every time I get off the phone. Now, dad didn’t tell me he loved me to my mid 20s. The first time it was really awkward. And so it’ can be’s taken me a number of years, I was in my mid 20s. And now when he says that I’m saying back then I love you. Yeah. And I feel it and it doesn’t feel awkward. And I’m sure lots of people listening will go Ah he’s talking to me. I feel like that as well. Up until 40. When did I meet you Tim?

Tim Hughes  12:19

I reckon it was around 2008 2009?

Andrew May  12:23

Yeah, so it’s just before I went through a couple of years before I went through marriage breakdown, right. And at that stage, the persona I had, I was selling I was working to on TV, I’d written a book, I was doing some speaking, but I set myself up as a high performer because I’d been good at school. I’d been good at sport, and then I’d been up and sold a business. And I was good at that. So people got me because I was in inverted commas high performer. And then I went through a marriage breakdown. I was 40, I had two young kids from an Irish Catholic background. And I walked around I now know I walked around with functioning depression. And I’d hop on stages and talk about well being and all this stuff. And I would shift into a state and then I go into back into my hotel room and burst into tears. Who had no wife or partner. No kids permanently. It was half the time. No house living in apartment, no dog no purpose, no meaning, because I built this game of this this story that life is all about winning and achieving. And then what happened when I fell down? So the two years having to pick myself back up and drop the bullshit drop the facade. My best mate Mario, who I finished school with in Dubbo is a great man. And he said to me, Andy, I know you’re not okay. He asked me a question. I won’t say what it is. And I answered. He said, I know you’re not okay. Go see someone. We laugh about it now. And I saw a wonderful psychologist Jill McNaught who helped me unpack the schema I had that, that winning and life is about all these wonderful achievements. It’s actually also about how you pick yourself up. So Tim, and I sort of talk about the evolution of science. Yeah, science helps. And then working in sport helps. But where I think I really get traction with an exec or a CEO. When I say to other bits on my B side, so we often lead with the A side – you both remember cassettes – that’s your top hits. And my B side is I had cancer, and I judge that on my daughter’s age I had cancer, a melanoma on the left scapula removed just before Mickey was born. She’s now a gorgeous 15 year old. But with cancer I lived my spiritual father a man named Bruce Eaton who was my masseur in Hobart and Bruce died three months after he was diagnosed with cancer. He was diagnosed two days after me. So when I went to say goodbye to Bruce, I thought, oh my god, the DICE can roll different ways. Why is Bruce not here? But then I got on with it. I didn’t really learn from that. It was like I had cancer and lived but I’m going through a marriage breakdown the story of this scheme arrived built in from an Irish Catholic background, mum and dad are still together. After 50 plus years, I felt like such a failure. So if I saw you Tim in those early years, I probably would have avoided you. Because I didn’t want to talk about where I was. Or I would have made something up. And then I just now go, Hey, we all have highs and lows. And that’s part of the human experience. And when I talk to an exec like that, especially men, they go, here’s my story, and then the bullshit facade comes down, and they’re real. And then you get on to some practices and some coaching around it.

Gene Tunny  15:36

Andrew, can I ask, I’m interested in that, because I can see how you having had that experience that can help the your advice? And well your empathy? And then your advice to the executives? What do you find are the biggest things that they need to work on? Are there commonalities or is it different across executives? What are some of the big things that you’d work on with them?

Andrew May  15:56

Yeah, it look, I did learn a lot from that Gene from that experience, but it was expensive. So

Gene Tunny  16:01

Oh, yeah, yeah.

Andrew May  16:03

When you go through a marriage breakdown, anyone who has, it’s extremely expensive, and not just from a financial from an emotional from every our spiritual point of view. So I like to tell my male and female clients who lean in and listen, because you can save seriously can a lot of people can save a relationship breakdown by putting some of these building blocks into practice. But there’s five when I talk about leadership capacity. And these are the essential building blocks. If you don’t do this, we don’t get to the fancy stuff. Because I’ll often get someone come to me say, I want to do presentation skills. Can you? Can you work with me on high order mental skills I had someone recently said, Look, I know you’re working with Tim, Tszyu. And I’ve seen a real shift in him. Can you teach me with confidence? I might. Yeah. Let’s start with storytelling. And the narrative you tell yourself. So we’ve started the basics first. So the five basics are number one is operating rhythm. And we’ve got to get the the work and the year in balance. But if I look out of my office, where I’m recording from the beautiful sunny day today, the sun rose this morning, it’ll go down tonight tides rise tides fall, there’s this natural rhythm in nature. And we need a similar rhythm in the corporate cycle.

Gene Tunny  17:12

So you’re in Sydney. Are you Andrew? Sorry, you’re I’m in Sydney. Yeah. Yeah. By the beach. Are you?

Andrew May  17:16

I’m in Lavender Bay. Yep. Yep. Yep. So the first one is operating rhythm. The second one, we look at his energy balance. And this is where I’d say, Gene, what’s draining your energy? actually need a boost of energy champ? No. First, let’s put a plug in the bath and stop you draining energy. And that can be relationships, very pertinent to your great podcast, finances. Make sure you’re basic on wealth management and spend less than you earn. Where else are you draining energy, and then we can look at boosting energy. The third one I’ll look at is downregulation. And I blame Pierre de Coubertin, the little Frenchman back in 1894, who carved out the Olympic motto Citius Altius, Fortius. Do you both know what that means? How’s your Latin?

Tim Hughes  18:07

I remember you talking about this on one of your podcasts. And I know the bit that you’re gonna say, which is missing. And I can’t remember exactly what it is. But I know the missing bit faster, higher, stronger. And rest is what’s missing.

Andrew May  18:18

There’s no rest and recovery. So the Latin word for that is Rika partea. So if we could go back to 1894 Pierre de Coubertin, love what you’ve created with the Olympic movement, but you’ve missed recovery champ. The fourth one is mental skills. If I said to both of you, if you want to get your body fit, fast, flexible and strong. What do you do? Go to a gym, join a sport, get a personal trainer. If you want to get your brain fit, fast, flexible and strong, what do you do go to the mental skills gym. And then the fifth one is using wearable tech to track it. So they go through the five number one is get a sustainable operating rhythm. Number two is get the right energy balance, get rid of what’s draining energy. And then we’re going to amplify what boost energy. Number three, we look at downregulation which is Psychological detachment and parasympathetic activation. So that rounds out the Olympic motto. Four is mental skills and five, get a wearable. So you can get some KPIs to see exactly where your body is tracking. They’re the building blocks and when I get someone on that, I know they’re going to be sustainable, and they’re going to be able to get to that next level.

Gene Tunny  19:23

I keep forgetting what parasympathetic means. Andrew, are you able to explain what what you mean by Paris? Was it parasympathetic,

Andrew May  19:31

parasympathetic, so stress is sympathetic nervous system recovery is parasympathetic. So parasympathetic just means everything goes down. So heart rate drops, okay, your restore your recovery rates go up, your digestion drops down, your blood pressure drops, your muscle, contractile, it all drops. But interestingly, when your body down, regulates and gets into parasympathetic, one thing goes up. Slow brainwave patterns. So for your cerebral people listening to this going, Well, why do I need to do all these fitness stuff or body stuff, or when you slow down your body? Just slow brainwave patterns go up that slow brainwave pattern. So when we get out of beta, which we would be at now thinking, talking, reflecting, and when you drop into those, those Alpha brainwaves, that’s where you come up with your best decisions. That’s where you problem solve. And that’s where you get creativity. So it’s getting this nice dance Gene between your body up and down. But we’re geared. Everything’s up, everything’s about regulate, and recovery, or downregulate is seen as a weakness. So that’s rubbish. It’s a strength.

Gene Tunny  20:43

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  20:48

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, We’d love to hear from you.

Gene Tunny  21:18

Now back to the show. Can I ask you about this operating rhythm? I think I understand what you’re talking about. Because I’ve read MatchFit. And what I liked about that, as you talk about how in, if you’re a sports person, you’ve got the season, you’ve got the off-season. And then you’ve got the game day, and then you’ve got the days of recovery. So it’s built into the the actual game itself or the or the sport? Are you encouraging people to think like that, like if I’m a business executive, I’ve got to be thinking about that at work, I just can’t be full on all the time, because I’m going to burn out, I need to have the periods, those performance moments, as you call them. And then in other times, I’ve got to take it a bit easier. So I can recover. Is that what you’re

Andrew May  22:02

Yeah, absolutely. Taken it a bit further since MatchFit that was the genesis of this thought. But if you look at your year, look at a calendar, there’s two components, which have really influenced this one is having kids, I’ve got four of them. So there’s something called school holidays. So school terms go for 10 or 11 weeks, unless if your kids are at private schools, you pay more money and they’re at school less, think about that. It’s like a Seinfeld episode. Let’s say you go hard for 10 or 11 weeks, and then you have holidays, you might be able to take one week, five days. So you downregulating then go hard for 10 or 11 weeks, and downregulate. So that you understand as a parent with a school term. Second one was from working with companies like Comm Bank, at the executive level, it’s called a corporate reporting cycle. But every quarter, they do reporting, so they have a board meeting and then wrap out that quarter, and then a lot of the execs downregulate for a week, so And those two patterns are in sync Gene. So for anyone who works at the higher level, and if you have kids, or if you just understand the education cycle, it’s been built in on sustainability, where we stuff it up, because we go hard for 10 or 11 weeks. And we think more is more. There’s a term in the military and I’m blessed to do a lot of work with the Navy now. It’s slowing down in order to speed up. Yeah. So you’re down regulating you’re giving your body and brain chance to recover. And then you’d bounce back up. So with the podcast, as an example, my podcast Performance Intelligence, we do 10 episodes, yeah, four times a year. And in between the two weeks, we down regulate and have a break. And then I have summer off. Now I know I can do that podcast for years. But with the workload and other stuff I do. If I was punching out a podcast every week, I’d find it too much. So that’s an example where I’ve set up the operating rhythm of the podcast, to our business operating with them. And it works. Yeah.

Tim Hughes  23:59

And then you’ve got that on a micro level as well on a daily basis that you’d still need to down regulate on regular building habits, I guess into into your day. So you can do that on a in a 24 hour cycle.

Andrew May  24:11

sounds like the personal trainer physiologists coming out of you there Tim. So you gotta go macro. So go, Yeah, your quarterly rhythm. And then there’s a monthly Well, there’s an annual rhythm. There’s a quarterly a monthly, a weekly and a daily. So let’s just bookend we’ve done the big, big annual, then every day fully in a couple of moments to just help you even micro recovery. And you can do it in 30 seconds or three minutes. That’s all you need, anyone listening to this who’s too busy to do some activities for 30 seconds or three minutes. You’re You’re fooling yourself, and you’re operating inefficiently. If you don’t build in some moments to just switch off and then go again

Tim Hughes  24:53

It’s a case of prioritising then the importance of this can’t be overlooked but too many times I’ve done it myself, as I’m sure you have where you’ve overlooked it in the past, and you just keep burning at both ends. And before you know it, you’ve run out of wick.

Gene Tunny  25:08

Yeah I mean, what I’d like to ask Andrew is, does this apply to all businesses? Because there are some businesses like you think about investment banks, there’s almost as expectation in investment banks that you just work. You’ll do all these all nighters and, and just work yourself to death almost. And there’s a real sort of macho culture in some of these investment banks. Can you do that? Is that something that’s, I mean, obviously, it’s not sustainable. But I’m just wondering, like, what sort of advice do you give people? Do you advise that look, you just got to try and get rid of that culture in your organization’s because it’s not healthy? Or do you recognise it in some places such as investment banks, if you’re trying to get a deal? Together? You’re doing due diligence on a big deal? Would you advise? Okay, you can do that? Sometimes, but then you do need the brakes. I mean, how do you? How do you balance that out? I mean, are there times when you do have to act in that extreme manner? Or work? Really, you know, do an all nighter every now and then?

Andrew May  26:10

It’s giving me the curly questions like that aren’t you? Let’s answer that on three levels. Yeah, let’s answer that on science. Let’s answer that on outliers. And let’s answer that on money, the big M. Yeah. Science shows the majority of people need about six and a half to seven hours of sleep. Yeah, science would show that most people can probably work 45 or 50 hours a week, if they’re engaged and get recovery, and they’re going to be sustainable. outliers and working with some CEOs shows that that’s not for everybody. Some people don’t need that much sleep. But if I look at those names, you mentioned earlier, Matt, Nick and Shelley they all prioritise recovery, and they are all wonderful students, I think there’s no, no surprise that some of the execs I work with who perform at a higher level, when you look behind the scenes, you’d be amazed some of your listeners would be amazed the detail at which some of these people have gone into understanding nutrition, and personalising Tim, their nutrition based on their profile. And they understand heart rate variability, they understand terms like vagus nerve, all these big technical terms, but they get it, one they know. But then they know how to use it. And that’s the experience part. So yeah, I’ve worked with some, and I think to be a CEO of a large publicly listed company, or a big private or a startup, you’ve got to be a little bit deranged. And I mean that with respect, because you’ve got to be super passionate, you’ve got to put any notion of balance, and I don’t like the word balance, but you’ve just got to go, I’m going to pour my heart into this and do 70,80 90 hours plus, and do that for an extended period of time. And that often leads to the third one. And if you’re going to do that, and make 5,7,8, 10 million a year, and some of the people I work with, I’ll say, but what you’re going to do, I’m going to help you, you can’t do this for the rest of your life. But if you’re going to retire and have 20 or 30, large in the bank, go for it. But just make sure you don’t do too much damage now. So that’s why I’m a realist coach, I’ll look at right What does science Tell me? Where are you there? What are your physiological points? So what’s your psychological capacity? And then what’s the upshot? Because we’ve all seen people only focus on the money and then they burn out. Yeah. And that’s a reality. Dr. Tom Buckley, who co-wrote MatchFit with me, we work and we have worked with a number of execs over the years, who’ve pushed themselves that hard words like downregulate words like operating rhythm words, like mental skills, words, like you know, using wearable tech. Words like energy balance, they think it’s a crock of shit. But they get to a stage where then they actually have to leave the career they’re in. And the research shows there’s no practical experience, because they’ve gone their heart. They’ve cooked themselves that much. There’s no going back. So at times during the year, I’ll go hard. Part of my job is keynote speaking. So in February, mid year, and October, November, I’m for sale, like I’ll be on planes, I’ve been overseas, as well. So if I’m complaining end of October, I’m so busy, I’m so tired then get a new job. So I can do that three times a year. So I now know what I need to do to get up for that. I then recover. But then I drop intensive in the rest of the year. So that’s that experience working out. What can you do? How hard can you go? And it’s a real art. There’s science in it. But then it’s an art.

Gene Tunny  29:37

Yeah. On the wearables what sort of wearables are you talking about? Do you mean a Fitbit? Is that what they are?

Andrew May  29:43

Yeah, look, I wear a Garmin and I’m aligned to Garmin. But whether it’s a Fitbit or Garmin, a lot of people are wearing the whoop bands as well, which is really good on heart rate variability. What have I missed on this Timmy

Tim Hughes  29:58

Oura rings, I don’t know if they have the same capability as those ones you’ve mentioned, but they look cool.

Andrew May  30:04

They do look cool look, and they’re all they’ve all got different pros and cons. Gene what Doctor Tom and I look at on wearables, there’s a couple of key metrics, when I’m working with a high end exec one is, I want to know their resting heart rate, that shows me how well their body is adapting to the physiology or to the demands of their role. Also, when you’re sick, or stressed or inflamed, your heart rate will be up. So you can see that there’s something wrong in the system. And then you know, to back off a little bit, the second one I’ll look at is sleep. Now, the wearable devices aren’t super accurate, but you get a pattern around that. Yeah, we’ll look at exercise and minutes, because we all sit down way too much. So the actual time and exercise we need is a hell of a lot more than it was because we’re all so inactive. I’ll then look at heart rate variability, if the device has one. And then to two simple ones. And you can go off and get a DEXA scan, which Tim you and I do with our clients. But you can also just know, what’s my weight? And what’s my waist. So personally, I know I want my weight to be at around 90 kilos. And my waist at 85 or 86 centimetres. And that’s it. I’ve kept that there for years. So if my waist balloons up after Easter, after a holiday after whatever, you then know what to do, just to get back to that setpoint.

Gene Tunny  31:25

Right. What’s this thing? A DEXA? Scan? Is it did you say?

Andrew May

Yeah, so Timmy what does it stand for?

Tim Hughes  31:29

That’s a very good question that I can’t answer, right now! I’m gonna put it in the show notes. It’s alright, Its body composition. But it’s the most accurate way. Because it will give you the most accurate measurement of body fat bone density. Yeah, it’s a little bit loose on muscle. Because I did this on a I did a 21 day keto challenge for myself last year. And I was really surprised at how much muscle you can lose on a restricted calorie keto diet. But I challenged myself to do it, I lost almost 10 kilos. And I was so surprised. After the first week I did an extra DEXA scan, I threw another one in, you shouldn’t do too many. But I’ll put an extra one in to see what was going on. But it will measure your water, you know, your hydration levels. But you hold a lot of water in your muscles. And so it’s a little bit, it will come over as being muscle loss. Whereas in fact, it wasn’t quite that dramatic. Yeah, because as soon as you then recharge with carbohydrate, you absorb more water.

Andrew May  32:32

The big the big thing that does show to two or three metrics I like with a DEXA. And I’ll again tell my high-end execs, go get a DEXA done every six months, bone density is really important. So it picks up bone density. And I’ve had a number of Mamils but cyclists to cycle hips, but they’ve come back and their bone density is quite poor because they’re not getting that impact. So that leads to change in their programme. The middle aged men in lycra who scare women and young children at Coffee Shops

Tim Hughes  33:01

everybody really

Andrew May  33:02

beautiful. themselves. So bone density from a DEXA. fat mass is a big one, because you really get a true fat mass. But look, you don’t need to do that. Go do the simple ones, what’s your weight? What’s your waist and get a get a set point.

Tim Hughes  33:18

And that that measurement, you mentioned is absolutely right like that single measurement around the waist will tell you everything else that’s going on. So if it’s going out, you know that everything else is going to be increasing somewhat. And it’s it’s the canary down the mine as well. It’s the first one, if you start to put weight on, it’s the first place to for it to show

Andrew May  33:38

and why that is in my five for those base building blocks. You got a lot of really intelligent high end cerebral men and women listening to this podcast and advice. So tell me about your business KPIs, or we’ve got this metric. And we know customer side of this and here’s our market penetration and don’t just flip that back and go, Alright, what’s your resting heart? Why should I know my resting heart rate? Well, that shows how you’re responding to stress. Stress is awesome. As long as you have recovery or parasympathetic, what’s your exercise minutes, so we just really turned the language back here’s your KPIs to run project you, your body, your brain and make that efficient, and then business and everything else revolves around that rather than Oh, shit, I should look after myself. Do it first. Yeah,

Tim Hughes  34:27

I wanted to just about first of all, thanks for sharing your story. I really appreciate that. Because I know that that’s a big thing I didn’t realise about your cancer. So yeah, thank you for sharing that. And also, I wanted to expand on the, with the CEO, for instance being trained with a shareholder, a company, etc. Have you come across this at all, or is it something that’s been mentioned, where shareholders should be invested if you like in a healthy executive team? So for instance, if a CEO has been trained, if I was a shareholder I be quite happy about that. And don’t want tobe health-shaming anybody who’s not being trained or not being coached. But certainly I don’t know if there’s any stats, or if there’s ROI or data on this, where shareholders or companies can see a difference in the performance of the company with the performance of their executive team, or the health, the health and performance of their executive team.

Andrew May  35:22

It’s a dream that I have a dream, I think every allied health professional has is to show that when executives, physically, psychologically emotionally, every other ally, socially healthier, there’s a return on the bottom line. The data from US is, is the main data we look at. But you’ve got to understand the majority of US companies are self insured, so they need that data. So we don’t unfortunately have that in Australia. Tim, I’ll give you the flip side first. But I just used to think it’s all about being healthy and fit. But you could have a really healthy male or female executive, and they are narcissistic, toxic, aggressive arsehole. So where does that fit? Are you better to have someone who has gotten really good emotional regulation and good understanding of others that EQ and we look at social contagion theory, how you show up this how others around you show up. So if you show up in a nice state, and you’ve got this open or growth mindset, and you’re nurturing talent, others will do the same as well. I think if you get the balance of both, if you have health as a basis and I’m biased, right, I studied Ex Phys for years, I’d spent time with lots of sports. I absolutely know that when you have a physical base, and Dr. John Ratey, wrote about this in his book, one of the first neuroscientists to show, if you’ve got a physical base, you’re going to think better. But I just want to balance that out as well, because I have worked with a number of men and women who you know, they don’t have the body fat they want or they may not look in the mirror and flex, but they’re a wonderful person. And they’re really good at community and they got amazing citizenship. And I think getting the blend of both is optimal

Gene Tunny  37:06

This is a question I’m interested in, what level would you want to get a CEO up to? I mean, you know, you want to get them to a weight where they’re not overweight, at least. And there may be an ideal weight they’re shooting for but I mean, I’m just I’m just wondering, they don’t need to get to an elite level of performance athletically, do they or in the gym?

Andrew May  37:27

No, no, they don’t some some I work with do but I just say anything now you’re getting into territory, which is more around your goals, performance, your crazy brain, and it’s not actually going to help you. And it can be detrimental. It can also be really boring, like no one wants to sit next to the age group triathlete, vegan champion, dinner party, and they’re going vegan and not having dessert like it run away from those people. They’re boring as batshit. Right. So you also got to be normal around this. But two factors I want all my executive chasing. And this is linked to longevity, Dr. Peter Attia I’ve got his book up here, Outlive, which is a great book. And the two factors and then Dr. Tom and I’ve been saying this for a number of years, Attia backs that up but he’s just so articulate, you want to be chasing one, VO2 Max and maximum volume of oxygen per millilitre per kilogramme per minute. And a lot of the watches will tell you that, two, if you want to chase muscle, lean body mass. So on all the programmes that I do, and Tim, I can’t help myself, I still get on the tools a bit. But I cut out the long chunked bike rides, you don’t need to do three or four hour bike rides. And in fact, that has some problems around that. But do a shorter sharper one to get the VO2 max up, but then get in the gym, and lift. So if you’ve been doing that blend between some short, sharp exercise and some weights that’s shown to really help with longevity. Now, another marker on this, which is not aesthetics, it’s more around science is biological age. So with my business, StriveStronger where you have and a lot of people have a biological age, but Dr. Tom Buckley, Associate Professor at Sydney Uni and some leading neuroscientists, psychologist, physiologist, behaviour experts, we’ve come up with a score. It’s the live life score, which is a biological age, and a mental fitness gauge on the biological age and Timmy you and I’ve been doing this stuff for years. I want all of my clients to be five years younger. Let’s say you’re 42 your birth certificate 42 I want your biological age to be 37. And that buffer in physiology allows you to have extra capacity, extra energy for demands you don’t know is coming. Who was ready for lockdown and COVID No one. So if someone had a biological age, 10 years older, and they’re tired, and they’re in inflammation, and they don’t have energy And you whack on a change like that, you’re not going to respond really well. So the two metrics we want to chase VO2 max, and we want to chase lean body mass or muscle, that we use a biological age score, and that gives everyone a really good metric. Are you five years younger or not? And I get people that are that may look like big bones or you know, German heritage. Just be five years younger. Yeah. And then we’ll have a chat.

Gene Tunny  40:25

So VO two max is the best thing for that interval training, high intensity interval training, right?

Andrew May  40:30

Yeah. Yeah, within a certain range, like you don’t want to go if you’ve been doing nothing, don’t get a 400 metre now. Because you’ll keel over.

Gene Tunny  40:37

Yeah. And what I like about your, your work, Andrew is you you’re a big proponent of people just getting out and walking and going, you know, getting your 10,000 steps a day in, I think that’s really good.

Andrew May  40:48

I love the word pulse. But we’ve got a pulse, train hard, high intensity, that’ll get your VO to max up, yeah. But then you’ve just got to walk. You should eat food, and good food. And Tim can tell you all the details on this, but you also should fast. If you’re a male listening to this, and you’re 40 to 45 plus years age and you’re not fasting, you’re doing yourself a disservice because it will do wonders for taking off fat wonders for lean body mass wonders for your hormones, as well. Which should get hey, like I’m a big proponent of regular sauna. And the right person as well can make sure your heart’s okay, but cold, cold water, and we should stress the body, which should recover the body. So the teaching and Gene it’s taken me a while to realise this. It’s the range go hard, but then down regulate, eat food and then fast. Because what so many people do under stress is we’re in standard linearity. There’s no high, but there’s definitely no low.

Tim Hughes  41:50

And with with that comparison, that’s where energy comes from having that comparison, like you know, when you’re talking about being on that level, and it just flat, nothing happens. But when you down, regulate and recover and all those things. So more and more, I can see that. It’s what people bring the energy that people bring to work or to relationships or to whatever they do. It’s all about energy. And what you’re describing there is perfectly describing energy management.

Andrew May  42:17

You know, this from your training, but the energy exchange is carbohydrate plus oxygen. Yep. Which gets water and carbon dioxide. So C6H12O6 plus O2 leads to Co2 plus H2O

Tim Hughes  42:29

I wouldn’t, I wouldn’t quite have recalled it like that. But

Andrew May  42:33

but there’s physical energy. And that’s just your body’s fundamental basic. And if you don’t work with that, from a physical point of view, every other energy source is going to be interrupted. And then you’ve got the psychological and emotional. And it’s all interrelated,

Gene Tunny  42:49

right? Love it. Andrew, we’re coming to the end of the time. So just want to ask, what coaching do you offer? And how can people get in touch with you?

Andrew May  42:59

I coach the high end. So executive coaching. And I don’t have a lot of vacancies on

Gene Tunny  43:11

online as well, yeah,

Andrew May  43:13

I allocate half a day a week to coaching and there’s a couple other, we’ve got to start soon. And then why I do half a day because I love coaching. But I do a lot of other things as well. So I’ll just try and keep it to half a day. But we are launching a group coaching programme as well, which is calledpperformance intelligence Mastermind. So that’s going to be a 12 month programme with a quarterly focus. So q1 is all about getting that fit. q2 is about working smarter, and being productive. q3 is around mental skills. And then q4 is around habit stacking. Yeah, so if anyone wants to find out about that, they can go to my website, And you’ll be able to find the details there. And I’m looking forward to that. It’s taking a lot of what I’ve learned and getting some other people in my business to really try and scale. So that’s a nice challenge we’ve got is to take the message out to a larger group. And I see a lot of the Americans, especially doing masterminds. And I’ve thought for a while. I’ve got to do that. And I’m doing a couple of our family business forums using this format, and it’s have you done group coaching, like that Tim it’s amazed me mate the results. And in fact, as good similar results as you get one on one.

Tim Hughes  44:24

Yeah. Now I’d like to talk more about that. I mean, I know you’ve got so much good stuff I’ve seen with MatchFit, which is an excellent book that I recommend people get in and get a copy. And you’ve also got an eight week programme with MatchFit as well that people can sign up to so that’s for anybody Maysie is that right individuals, whether you’re executive or not.

Andrew May  44:46

Yeah, MatchFit is one of those absolute basics to get physical fitness and psychological fitness. And so that metric now the Live Live Score is aligned to that. So your biological age and making sure you have that psychological flexibility. So yeah, the MatchFit book is a good start for people as well, that’s, it’s 30 bucks a bargain, it’s a lot cheaper than the coaching programme,

Tim Hughes  45:05

It’s a bargain. But I have to say like, it’s the basics where people often slip up, you know, like, it’s, there’s so much good information out there, there’s so much it can be overwhelming with the amount of information that’s there. And quite often I think it can distract people from getting the basics right. You know, you get those, those simple things, right. You know, how you eat, how you move, how you sleep, and how you connect all the things you talk about. So that MatchFit programme, the eight week one, I think, is very accessible for anybody. But yeah, hopefully, if anyone’s out there listening and you, you want to get in contact with Andrew, for some executive coaching, you’re gonna have to be quick by the sound of it.

Andrew May  45:45

Or just jump into the mastermind. Yeah,

Gene Tunny  45:46

put the link in the show notes to your website and your podcast. Andrew, Andrew, May, thanks so much for your time. We’ve really enjoyed it and appreciate your insights. Thanks so much.

Andrew May  45:56

Yeah you’ve asked some good questions. So you had me dancing a bit. So I appreciate those as well.

Tim Hughes  46:01

Thanks Maysie really appreciate it good to connect again.

Andrew May

Yeah ditto

Gene Tunny  46:11

Okay, Tim, good to be catching up with you again, after our conversation with Andrew May.

Tim Hughes

Yeah, that was really good. I really enjoyed it.

Gene Tunny

Yep. Thanks for setting that up. I thought that was that was terrific. He had a lot of really good things to say. I thought,

Tim Hughes  46:27

yeah, I mean, he’s at the top of his game with the position he’s in have an understanding you know he talks about the link between physical and psychological well being and executive performance and elite performance for athletes, and he has a CV that is beyond compare, I think, certainly in Australia. So what he brings to that whole conversation, all those different aspects about what we as humans go through with our needs, and what affects performance and our health. He’s in such a good position to be able to comment and coach on all of that.

Gene Tunny  47:04

Yeah, absolutely. What were the main takeaways for you, Tim?

Tim Hughes  47:07

Many, and it was great, because I hadn’t been in touch with Maisie for a while. So it was great to reconnect. And I’ve followed his podcast for the last year or two. And he talked about his, those five elements that he used in his coaching. So I’ve made a couple of notes here. So we’ve got the operating rhythm for the first one, getting the work and the year in balance. And he talked about that in terms of well as like we do with schools, and they have their terms and, and sort of following that. And that made a lot of sense. I think breaking it down into different chunks. And everyone can relate to that of you know, because that that feeds into, you know, some of the other things that he talked about, where you’re not necessarily going at the same pace all the time. So there’s a light at the end of the tunnel, energy balance, he talked about putting a plug in the bath. So yeah, stopping draining energy first. So instead of just looking to see where you can boost it, the first step was to stop draining energy. And again, everyone can relate to it, you know, you can sort of see it, and sometimes you need it pointing out to all of us, I think can benefit from having someone to we get into the rut and the habits of doing things which are probably not to our advantage.

Gene Tunny  48:22

Over indulging, drinking too much alcohol is no good for your performance. Yeah, yeah. staying out late. So yeah, I think that’s that’s a good point. You want to stop the things that are draining your energy? Or it could be a bad relationship?

Tim Hughes  48:37

People? Yeah, absolutely. You know, and work practices, you know, so many different things. And I think it is that thing of, you know, sometimes I mean, we do it ourselves, you know, a lot of us, I’m sure self correct, you know, we sort of put your head above the parapet every now and then and see things a little bit more clearly. And then before you know it, your head down, bum up, just getting on with the work at hand. And so you need those sorts of times above the parapet to sort of get a clearer view of the direction of everything. And, you know, like I said, we do it ourselves, we self coach, but you can see where somebody else can have that clarity, and help us towards getting these operating rhythms and energy balances, right? He talked about downregulation. It feeds in Psychological detachment and parasympathetic activation.

Gene Tunny  49:24

Yeah, yeah. I had to ask him what parasympathetic meant? Yeah, that’s part of the downregulation, isn’t it?

Tim Hughes  49:33

It is, I mean, like, it’s these natural sort of balances that we have, you know, where we are responses a largely, you know, we have so many primal responses where, you know, stress levels can hit the roof and all of these different things that gets talked about a lot, you know, and in our history, we would have had life threatening situations that we would have come across where all those stress hormones and the cortisol and adrenaline all those fight or flight responses had their place. But we get that in front of a computer nowadays. So the responses through the body, the hormonal responses are still there. And the stress we feel and the stress the body takes on, and the ill effects of that are far greater than, you know, a simple sprint, simple sprint from a tiger or whatever. But you know, it’s not as life threatening as it is. And so getting those responses in place, and being able to recognise or manage those stress responses to a healthier level, you know, because we need stress a certain amount of it, but we don’t, we don’t want to say that heightened levels. Yeah,

Gene Tunny  50:36

I thought that was interesting for the executives. So what I was trying to get out of Maisie is how do executives apply this and it’s not as if he’s telling the executives, you got to chill out right now, or you’re maybe I don’t know, exact language he uses, but it’s not as if he’s saying that, okay, this, you know, intense workload you’ve got, you should take it a bit easier. He does recognise that CEOs to get that high performance, there is a period in which they do have to push themselves, but he’s saying you got to make sure that’s balanced out later on somehow. Yeah. And it could be, you’ve got to look forward to a break in the future or, you know, a few years. Because saying, at that level, if you’re going to perform at that level, you can only do it for a few years or not for an extended period. And then you’ve got to be thinking about when when you do get a break, or when you do something, when you do you’ve got to look forward to that time when you can down regulate. So although that was good, yeah.

Tim Hughes  51:36

It’s that thing of like, you can’t sprint constantly. And if you do, then there’s, there’s a payoff for that, you know, there’s a debt to pay. Yeah, yeah. So it is that thing of like not none of us are bottomless pits that we have to manage our energy and our time well, and, yeah, one of the other things, number four, on his list of five was mental skills. We didn’t go into too much detail, but I guess it was covered with the general conversation, you know, he’s talking about resilience and the things that we can put in place, the sort of, you know, the things that we can control, and, you know, being able to, I guess, put all of this into practice, you know, because to, to be able to apply all of these different areas, you need to have the mental capacity to be able to keep it in your day and to, to make it work to make sure that you give it priority.

Gene Tunny  52:27

So that journaling and meditation was that what was that under mental skills

Tim Hughes  52:32

didn’t go into that in detail, it would be I would say, yeah, that’s part of the tool box to increase your mental skills.

Gene Tunny  52:39

That might be downregulation, too.

Tim Hughes  52:42

I think this is where they cross over we’ll have to get Maisie on for another chat. But it but it’s that thing of absolutely. You know, you can imagine, to be able to keep it all going to be able to get your head around everything that you need to do well. And resilience is definitely a big part of that. Yeah. And the fifth one was wearable tech. And this is a fascinating area, because this is changing very quickly. In some levels, it’s gone beyond the basic pedometer that the first wearable techs really were. I know, I listened to something from Will Ahmed the other day, he was the guy who started Whoop, yeah, he talks in terms of this wearable tech being version one was really the pedometer, version two is where it’s at now, version three and four, like, the more data that it can give us, and this is what Maysie was talking about was like, you know, getting data KPIs using, using this information, this technology for our good. So it’s not just smothering ourselves in more detail, it’s actually using something that can be relied upon to be able to further what we’re doing or to see that we’re on the right track. And also to show that we need to downregulate this as part of where the current version of wearable tech is, it’ll tell you when to That’s enough where you need to slow down.

Gene Tunny  53:57

So I mean, ultimately, what are we heading towards? We have all of these monitors in our bodies or nanobots or whatever, and they connect to the device, neural link and it connects to our mind and will be able to tell us about our how we’re feeling how our brain activities going, what parts of the brain are firing, how emotional we are that day, that’s

Tim Hughes  54:17

you’ll have a direct line to Elon, you’ll be able to speak to any point, I think,

Gene Tunny  54:22

just on Elon because I mean, one thing it’d be good to talk about is what you took out of it in terms of firm performance because this is an economic show. So I know like this episode, we’ve gone a bit into health and fitness. We’re not really a health and fitness podcast or economics podcast, and that’s the angle I was interested in. And I guess what I found fascinating from talking to Andrew is just the dedication that some of these CEOs have or just how much they’re optimising. Right. I guess it makes sense given they’re running, you know, billion dollar companies or companies with hundreds of billions of dollars. In some cases, it makes sense that they’re doing this. But yet, I was fascinated by Andrew describing the extent to which they’re trying to optimise all these things. And you know, seeing someone like Andrew and in what he knows and what I think he’s talking to them about, which is the stuff you were going on about those five things. It’s really Yeah, you think, yeah, that’s how these guys and girls stay at the top of their game, and they can perform at that high level. Now, the next thing I want to know is to what extent that go turns into firm performance. And the evidence on that is a bit, you know, it’s early days, it’s not that clear, I found one study, it was a University of Cologne working paper. So German working paper, and they looked at whether the physical fitness of CEOs is relevant to firm value, and they looked at whether CEOs completed a marathon, how many marathons or I think was marathons, maybe half marathons they they finished in that year, and whether that can be related to firm performance. And they they found that it had a positive impact. But look, it’s one study, it’s a working paper doesn’t look like it’s been published or peer reviewed. But my conclusion based on looking at the what’s out there is there’s still not a lot of evidence or data on this. I mean, it’s, it’s clearly good for you as an individual, but does it translate into into firm performance? And is this something that the Board should be monitoring? Should they be telling the CEO? Look, we need you to work with someone like Maisie? I think that’s an important question that you asked that question, didn’t you

Tim Hughes  56:31

it’s along those lines. I mean, because it was about ROI. Yeah. And it’s one of the things is because this has already been, Maysie has been looking into that, anyway. But it’s the hardest thing with it is to get good data pre. So it was something we’ve been looking into for a while I know. And so this might be a good opportunity to mention, if any of the listeners out there have a business that they’re interested in doing a study on. Because the most accurate way, or one of the most accurate ways is if we can get data before intervention. And then data after so at least we’re working with the same test group.

Gene Tunny  57:07

Yeah, and you want a treatment and a control group. So you have to ideally, you’d randomise it in some way who goes into the treatment and who stays in the control?

Tim Hughes  57:16

And so those sorts of things. No, so we’re, we’d be really interested in running those experiments, if you like. But at the end of the day, it’s about what makes a difference. And I think it would be fairly safe to say that there’s going to be a positive impact. I mean, that then that’s just from evidence I’ve seen in the work I’ve done. Andrew May, will be able to talk to you about evidence he’s seen. But it’s difficult to put it down on paper as being like really, as an ROI. That’s something for the accountants to be able to say, okay, yeah,

Gene Tunny  57:48

I think it’d be, it’d be difficult to actually identify it. In terms of firm value, particularly given there’s so much else going on that affects our particular businesses going, it’s gonna be really hard to just tease out the impact of, you know, health healthier CEO, but I can see the mechanism. I mean, if someone’s healthier, and Andrew was right there, there’s good evidence or good evidence from what’s the literature, physiology or whatever the whatever the discipline is, is medicine, there’s good evidence that better health if you’re physically fit, or that the healthier you are, that translates to your mental well being, and your your emotional well being. So there’s definitely a link there. And I can see that would lead you to make better decisions. Because when you make poor decisions, when your judgment’s impaired, it’s when you’re not sleeping properly. That’s when you’re a bit rundown. And that’s in the workplace. I know, that is when you make poor decisions, and part of getting back on track, if you’re ever in that sort of that slump. If you ever have a rough patch at work, part of it is actually improving your health and fitness. So I know that from personal experience.

Tim Hughes  59:02

Absolutely. I mean, we’re all human at the end of the day. And there is plenty of good evidence to support the positive impacts of exercise of eating well, of getting enough sleep. All these basics that are really within reach for most people is really more of a daily practice that needs to be implemented. And it’s available for all of us. There’s nothing really super tricky with a lot of this.

Gene Tunny  59:26

Yeah. And they reinforce each other, don’t they? So if you exercise, the more you exercise, the more you move that helps you sleep. It also encourages you to eat better as well doesn’t you

Tim Hughes  59:37

I think sleep’s foundation of the whole thing because if you get a good night’s sleep, you can do all the other things well, but is that thing about just keeping on track with a simple daily practice? Something I’m fascinated with and doing more work on with the work I do. It is it’s the benefits are really well documented for what that is, and if anyone’s concerned about, not concerned but interested in seeing what impacts it have. Try it, you know, because we’re all test group of one. And you can see yourself, you know what sort of difference it makes. And then you can correlate what that might mean to a business or a CEO. And it can only be positive you would imagine.

Gene Tunny  1:00:16

Oh, mate, yeah, it’s obviously it’s been working out for you. I mean, you got the high praise from Maysie at the start of the conversation. So he was impressed by.

Tim Hughes  1:00:27

He’s a very kind man. Might need to check his eyesight.

Gene Tunny  1:00:32

I think that’s great. Any final thoughts before we wrap up this wrap up?

Tim Hughes  1:00:37

Now? I really enjoyed it. And it is an area that I’m a part of that. So I was I was really looking forward to that chat. And I got a lot from it. Yeah. Looking forward to round two, I think they’ll be a round two at some point in the not too distant future.

Gene Tunny  1:00:51

Yeah, I think I’d like to look more at that evidence and just do a wider review of what’s out there. And what might be underway. What was he think this this should be an active area of research? I would say? Because it’s such a it’s such a fascinating question. And, and I think people in management, people in economics should be interested in it, because it looks like an intervention that could be highly cost effective. If you can get a coach for your CEO and have them performing at a higher level. And they can make better decisions, provide better leadership. And that could have a big impact on bottom line, potentially. So I can see the mechanism. Just, I just like to see some data. And yeah, I think it’d be difficult to tease it out. But I think the links there the mechanism, the mechanism is is established. Just need to see some data and figure out a clever way to demonstrate that link.

Tim Hughes  1:01:49

If you were a shareholder. What would you think if you could see the CEO or the executive team were into their health and valued their health? How would that

Gene Tunny  1:02:00

makes you feel better? I think and I think if you look at the current vintage of CEOs, say of the banks look at someone like Matt Comyn, who Andrew works with fit Yeah, young guy, well, Gen X guy. He might be my age, or just maybe just a bit older or younger, younger actually might be younger, actually. Yeah. And there’s also Shane Elliot, ANZ. I’ve worked with ANZ. I mean Shane’s superfit, right, he’s in good condition. So I think they are and I think a lot of them are and they’re probably healthier than the, the generation before them. And certainly the generation before that. I mean, there’s that generation who were born before the war, or born in the early part of the 20th century, who dropping dead at 50 in their 50s and 60s because of overindulgence.

Tim Hughes  1:02:49

So the Don Draper effect.

Gene Tunny  1:02:52

Yeah yeah I mean, you’re there’s quite a bit of that. So yeah, I think the modern CEO, they’re probably healthier. And yeah, there’s evidence from Sweden, this is one of the studies I’ve found, that I’ll link to in the show notes. If I remember correctly, it looks like the the CEOs are actually are actually healthier than the people working below them. Right. So there are a lot of fit CEOs out there. And they can be healthier than the Yeah, the CEOs are often healthier than other individuals of their cohort and gender. They also suffer less from mental diseases. And, and better make sure I’ll, I’ll check exactly what that is and put it in the show notes. Yeah, but that’s what I found interesting about that Swedish study, it looks like the CEOs are reasonably healthy to begin with. And then Andrews work is about getting them up to a higher level.

Tim Hughes  1:03:45

Yeah, I mean, I think the correlation with people’s own capacity for discipline probably plays quite a bit, in that. There’s certainly discipline in being healthy and staying healthy and doing the things that need to be done. And so I guess there’s a certain amount of discipline, although there’s many stories out there, I’m sure. But for someone to be a CEO, it’s a fairly, you’ve got to play yourself pretty well for a long period of time. So it should go hand in hand that the people who managed to get to the top of the executive pyramid would also be people who would perform well. And in health.

Gene Tunny  1:04:23

Absolutely. Okay. Tim, I think that’s a good place to end. Thanks so much for setting up that conversation with Andrew. And, yeah, we’ll catch up again soon. And hopefully, with Andrew sometime in the future.

Tim Hughes  1:04:37

Yeah. And in the meantime, if anyone out there is interested in doing a study, reach out to us, let us know.

Gene Tunny  1:04:43

If you wish to be experimented upon, let us know. Okay. All right. Thanks. Thanks,

Righto thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. If you can send me an email via Or a voicemail via SpeakPipe, you can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if you’re podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this or to begin your own podcasting journey. Head on over to


Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business

Full transcripts are available a few days after the episode is first published at Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Podcast episode

Exploring the US Banking Crisis with Addison Wiggin – EP192

Economics Explored host Gene Tunny interviews Addison Wiggin, a New York Times bestselling author and market economist, about the US banking crisis. Addison shares insights into the origins and impacts of the crisis, and discusses the future of the US economy and financial markets. Listeners can download Addison’s recent report “Anatomy of a Bust: Winners and Losers in the Banking Crisis of 2023” for free via a link in the show notes. 

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About Addison Wiggin

Three-time New York Times best-selling author, Addison Wiggin, is a 30-year market economist with a passion for the real-world impact of financial markets on our lives.

Addison is the author and host of The Wiggin Sessions, a podcast that connects key thinkers and industry experts for a deep dive into history, politics, and economics. Some of his most accomplished works as a writer, publisher, and filmmaker include the New York Times Best Seller The Demise Of The Dollar and the documentary I.O.U.S.A, an exposé on the national debt crisis in America.

What’s covered in EP192

  • Addison’s background and how he came to the conclusion that the US financial system is in danger of collapse. (1:53)
  • Will the Reserve Bank of Australia increase rates again? (10:46)
  • The uncertain lender of last resort: The Federal Reserve. (17:11)
  • The Fed’s job is to make sure fewer people have jobs. (21:52)
  • Banking crisis and the failure of regulation. (26:21)
  • FDIC and confidence. (32:00)
  • Why it’s important to understand how booms and busts even take place. (37:07)
  • Cryptocurrency as part of the story. (41:47)
  • What has happened to the dollar since 1913, when the US Federal Reserve was established. (46:41)

Links relevant to the conversation

Special download link to Anatomy of a Bust for Economics Explored listeners:

Presentation by Addison that Gene mentions early in the episode:

Anatomy of A Bust: Banks Go First | Special Presentation by Addison Wiggin 

Exploring the US Banking Crisis with Addison Wiggin – EP192

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning into the show. In this episode, I chat about the US banking crisis with Addison Wiggin. He’s a New York Times bestselling author and market economist and commentator with three decades of experience. Allison has his own podcast the Wigan sessions, in which he talks to key thinkers and industry experts for a deep dive in history, politics and economics is the author of the best selling the demise of the dollar, and one of the writers of the 2008 documentary I O USA. Thanks to Addison for providing economics explore listeners with a free copy of his recent report, anatomy of a bust winners and losers in the banking crisis of 2023. I’ve included a link in the show notes so you can download it as well as sign up for Addison’s content if you’d like to read and hear more from him. Personally, I think Addison, someone with following if you’re interested in the US economy and financial markets, and if you’re listening to this show you probably okay, let’s get into the episode. I hope you enjoy my conversation with Addison Wiggin on the US banking crisis. Addison Wiggin, thanks for joining me.

Addison Wiggin  01:53

Yeah, no worries, I’m happy to actually meet you. As I was saying before, I’ve been forwarded some of your material in the past. So I know your name. And I feel like it’s a good opportunity for us to banter a bit about economics.

Gene Tunny  02:07

Absolutely. Thanks, Addison. And I’ve, yeah, I’ve seen the very know your research. And you’ve, you’ve been doing a lot of deep analysis of what’s been happening in banking and what’s been happening in financial markets. And you’re very keen to chat with you about that. In particular, I’ve come across a recent presentation, you’ve given anatomy of a bust, banks go first. And in that presentation, you make the argument that, well, we’re in a panic of the panic of 2023. America’s financial system is in danger of collapse. We’re here to protect ourselves. Would you be able to take us through what leads you to this conclusion? Addison, please. And also, perhaps maybe to begin with, what a bit about your background? How’d you? I mean, you’ve had, as I mentioned, you’ve had deep experience of this, it sounds like you’d be looking at these issues for decades. Can you tell us a bit about your story and how you come to this conclusion, this threat of collapse, please?

Addison Wiggin  03:17

Yeah, absolutely. I’ve been studying booms and busts for a long time. Since the mid 90s. This is literally the only work I’ve done in my adult life. And just to do a shameless plug right at the beginning, I just published a book called The demise of the dollar, which looks at booms and busts as they pertain to fiat currencies in the world. And US dollar is deeply connected to the Aussie dollar. And I addressed some of that, and also, the dollar is a reserve currency of the world. So like even the Aussie banks or New Zealand or Japan or European banks, US and China as well, which is a big part of the story, use the dollar to store their wealth in. So there’s, there’s a symbiotic international connection between my currency and yours. And that’s what that’s what I’ve been interested in for this particular book. But I’ve also been studying booms and busts going all the way back to the famous ones like the tulip bubble and the Mississippi scheme from John La, back in the early 1700s. And then the South Sea bubble which the bankers from from London just ripped off John Maas idea and then they went bust too. So booms and busts are pretty common in the financial cycle of of our lives. And we’re we have just gone through one and that’s what anatomy of a bust. It’s just a special report we put out because it was interesting to have our very own movement boss how Ben right in front of our faces, it starts really in 2018, where a lot of people were using low interest rates that the Fed was fed had kept interest rates low to recover from the 2008 bus for such a long period of time, that there’s like a whole group of traders who grew up in a world where interest rates were at zero or less than that. And so money was free, and they were speculating on all kinds of things. And one of the things they speculated on was cryptocurrencies in 2018. We had this massive bubble in, in cryptocurrencies and a lot of the banks that started failing in March of 2023, which we’re still I maintain, we’re still in that crunch. And I’ll explain why I think we’re still in it, and why we don’t talk about it that much anymore. But a lot of the banks like Silicon Valley Bank grabbed the headlines when they went bust in 48 hours, because they had invested all of the money they were getting from tech entrepreneurs. They had invested it in treasuries, and then the Fed started trying to battle interest rates. And they didn’t account they didn’t either believe the Fed would they didn’t have any risks. There actually was no risk officer on the payroll at Silicon Valley Bank at the time. And they didn’t realise what the impact of an aggressive rate rate hike policy by the Fed was going to be. And that was happening simultaneously with the collapse of X FTX, which was the crypto currency trading firm that a lot of tech startups had their money, had their money. So when they when FTX went bust, they had to pull their money out as fast as they could, or they just lost their money. And in the meantime, the startups were being also financed by Silicon Valley Bank, notably, and they needed their money back to keep their their startups going. So the conflicts of different trends follow the theme of booms and busts that we’ve seen throughout history. So when when it was happening, I was like, Oh, my God, this is our very own like we could write about, it’s actually happening right in front of us. So it’s, that’s what the special report is about is like how that actually happened. And when Silicon Valley Bank collapsed, it collapsed in 48 hours, because all these people wanted to take their money out to cover their own losses in crypto, that was technically what was robbing and they were just yanking their money out. And even though as you know, as credible bankers, we would look at the way that Silicon Valley had put their assets, more than 50% of their assets were in treasuries, which are meant to be, you know, the risk free asset that banks should hold anyway. But they didn’t calculate for the rising interest rates from the Fed to combat inflation. And then when there was a run on the bank, that’s what we call it. It wasn’t I mean, it’s a modern day, extraction of digits really. But when people started taking their money out, Silicon Valley Bank had to sell their treasuries at a loss. And it it happened very quickly. No one thought that with the FDIC, which is the Federal Deposit Insurance Corporation that was set up by the Treasury to like help small banks, stay solvent help, depositors stay solvent, nobody thought that can actually happen anymore. The FDIC was set up in the 30s, to combat some of the forces that were going on in Great Depression. And then the Treasury itself gets together they get all the Wall Street banks together, and they then they construct these bailout plans like what they did for first republic. So those, all of those things happen, and they were grabbing the headlines from March until like the beginning of May. But then our debt, what we call the debt ceiling debate. I prefer to call it the debt default debate over the dancin, and nobody’s really paying attention to the banks anymore, but the underlying issues of the Fed fighting inflation and over capitalization in treasuries. There’s 36 banks in the US that are still under FDIC protection, watch conservatorship, whatever you call it. And then there’s a bunch of other banks that are borderline if what happened in March where people started pulling their money out of banks as a sector in on Wall Street than those banks are going to be in trouble too. There’s a couple others that I’ve been keeping an eye on that that have the word PacWest was one of them. And they’re just banks that are lending to more risky clients. And then depending on the depending on treasuries to rule out there, or to keep their their investments safe. And depending on how long the Fed keeps raising rates, which I think they’re going to raise them again, because inflation is not under control. It’s not only under control here in the US, it’s not under control. In Australia, I think Australia was getting really aggressive recently. Why don’t they? Well,

Gene Tunny  10:46

they increased rates more than people expected. There was a surprise rate hike. And now the the question is whether they will increase again, we’ve got a Reserve Bank meeting next week, there’s it’s a bit unclear, there’s a lot of debate about what the bank will do. Everyone expects that they’re going to have to increase at least one more time by the end of the year, possibly two. It all depends on what’s happening with inflation, we’ve got a monthly indicator that on through the year terms has, has increased or as worsen. But there’s a debate about well, what it’s it’s very noisy month to month. So it’s difficult to read much into that we need to see what happens with a quarterly figure. They’ll be watching services, inflation, so goods inflation has been coming down but services inflation is has been rising. So that’s and now we’ve got a minimum wage hike of six to 8% or something, depending on the actual, whether you’re right on the minimum or if you’re on an award. So yeah, there are, there are concerns about the future of inflation.

Addison Wiggin  11:52

I’d like to ask you a question. I spent some time in Australia. And also we had an office there for a while. So we were trying to manage our own finances there. And it might just be a myopic point of view of my own, because I am an American and the Federal Reserve is what it is. But when the Fed makes moves, often the Ozzie bank or like Japan or EU will follow, like a month later, if to you to think that that’s true. I don’t want to sound like an arrogant American, which I probably am, but But it always feels like the Fed is sort of like the central banks of the world.

Gene Tunny  12:30

Yeah, that’s true. It’s not automatic. It doesn’t always happen. But certainly one of the things that our central bank is conscious of is what’s happening with the exchange rate. And if if we keep our interest rates too low, then that leads to a depreciation of the the Australian dollar. And that’s bad for inflation. So we start importing inflation. So that’s something that they are conscious of. And when the Fed started lifting, was it last March or March?

Addison Wiggin  13:04

A little over a year ago? Yeah. Yeah. And

Gene Tunny  13:07

so the first few rate moves increases by our central bank, we’re pretty much in line with what the Fed was doing. And I mean, my take on an Earth in Michael Knox, who’s a commentator here, and he’s, he’s Morgan’s financial chief economist. I think he’s one of the best market economists in Australia. That was his view on it that, you know, by essentially copying the Fed that they had, the Fed was moving. So our, our guys had to I mean, we read our, our central bank, really, I don’t know if asleep at the wheels the right way to phrase it. But our first rate increase didn’t happen until I think it was May last year. And so it was a couple of months after the Fed, the Bank of England had gone earlier. I think Reserve Bank of New Zealand really got on to it early. But yeah, I think our central bank just wasn’t concerned enough about the risk of inflation. They were too much in that secular stagnation paradigm that they had, prior to the pandemic and those that decade or so they thought, Oh, well, we’re in this world of permanently lower interest rates, and there’s no no concern about inflation. We don’t have to worry about that anymore. For various reasons.

Addison Wiggin  14:23

I mean, that’s literally what thought some of these regional banks, asleep at the wheel was the Fed got really aggressive picket quickly, and even in the books that I’ve been writing? So I have this one, but I’m also looking at another one that’s kind of like the political analysis of how we got to a position where we have 31 trillion in debt, which is just ridiculous, right? Looking at the trajectory of Fed policy from really from 1987 When, when there was a stock market crash and Alan green The internet just become our Fed chair, he dropped rates as a response so that people could get free money in and prop up their balance sheets. That has been the response since 1987. Until now, and no one I like they caught a lot of banks sleeping, when they started raising rates as aggressively as they did, and they were afraid of 1980 81 scenario where inflation would just get out of control. There’s no anchor to the dollar. And everything is based on the dollar index, which is a basket of currencies and including the Aussie dollar that determines what the value is. There is a tone. It’s just astounding to me, actually, with all the history that we have with banking, and even the Federal Reserve since 1913. Like there could be backers who still have jobs. what was gonna happen? Yes. Well,

Gene Tunny  16:04

I mean, it’s an but they play an important role in the economy. But yes, there’s a lot of monetary mischief with a lot of mistakes that a an aid for sure. Absolutely. I like to ask Allison about. You mentioned that this started in? Was it 2018? So you think this started before the pandemic? Is that right? And then the pandemic, all the policies during the pandemic made it worse or contributed to the instability?

Addison Wiggin  16:30

Yeah, well, I would say, though, is that there were separate events, I think that the policies really started in about 2012, when we were seeing QE two, meeting that the Fed was still buying bonds in the market, or in even actually buying up mortgage backed securities in response to what the federal what the, what caused the crash in 2008, which was a global event also, because all the big pension funds and hedge funds, they’re all interconnected globally. So when when we ran into our housing crisis in 2008, it affected everyone. And we saw the ripple effect really quickly. And what the Fed did to head that off, was they dropped the interest rates, we had zero to negative interest rate real interest rates for a number of years between 2012 and 2018. But they were also buying up assets in the market, they were buying bonds in the treasury market to support bonds, because they needed to fund the government. And then they were also buying, they were actually buying assets on Wall Street, which is like, that’s an extreme measure. The bank is not supposed to be buying assets to prop up the market. But anyway, so there was a period of time where we had zero, I mean, money was free. And there was the like, I like to phrase the, the uncertain lender of last resort, that’s what they call the Federal Reserve, you never know what they’re going to do. But in the end, they’ll come in and bail out, you know, they, if they had to, they bail out, gee, JP Morgan, which has literally the fifth largest GDP of any economy of the world, and it’s a private bank. So they would come in and bail them out. That’s just thinking

Gene Tunny  18:25

that on that point about had this, what was it the unexpected lender of last resort?

Addison Wiggin  18:32

Charles Charles, my book I forgot his last name, but he wrote us. Yeah, he wrote an entire book about there needs to be a lender of last resort, but it has to be uncertain. You can’t count on them. You just have to know that they’re there in case the shit hits the fan. And yeah, and that’s what the Fed has been trying to do. But what they’ve been telegraphing what they telegraphed from 2012 until 2018, was we’re gonna keep rates low, and we’re gonna keep buying assets to keep the market propped up. And the beneficiaries of that policy are Wall Street banks, big ones, you know, yeah, Oregon, Citigroup, Bank of America, those companies, those those corporations are beneficiaries of just an extended period of ridiculous monetary policy. And a whole generation of bankers grew up in that in the environment where they believed that the money was just going to be free forever. So when the Fed turn, turned around and started trying to combat inflation, then we started having a serious problem. And the first people that got taken out, were the regional banks who weren’t paying attention to risk policy at all. So that’s why I say it started in in 2018, because there was a big boom in cryptocurrencies stable coins. We’re coming out. Bitcoin had already like fluctuated up to 60,000 and then dropped and like it was already an object of speculation and Aetherium was sort of like its step cousin, you know, it was doing its thing. But there was a lot of money getting pushed into the market because of low interest rates, that tech firms and Wall Street banks the like, and new new banks, like the FTX exchange that that was built, that was only founded in 2017. Like it became one of the largest traders have actual money, dollars to crypto currency in like, under two years, there was a lot of money flowing into the system. And that’s when if you follow Austrian economics, like I do, but a lot of other people do, too. I’m not making any kind of claim to it. But all the mistakes that are made get, they happen in the blue, when there’s money, that’s cheap credit, and people are spending money on things that they don’t understand. That’s exactly what tech entrepreneurs especially were doing, because they were excited about this new money that we could trade. It wasn’t traceable. And then banks grew up around it, that silver gate was one Silicon Valley Bank was another first republic was another pack glass was involved. And so when the tech entrepreneurs started getting nervous about their, their investments, or even their own companies, they wanted to remove the money from banks, and was sort of targeting Silicon Valley Banks specifically because they were getting a lot of deposits. And they didn’t have to loan out money to make money. So they were buying treasuries. And then when the Fed started tackling inflation, which itself, inflation itself was a result of 10 years of, of low interest rates, like we had, of course, we had the pandemic, and then we had the war in Ukraine, which cut off some supply chain, so it created like pain points. But at the same time, there was so much money flowing around in the system, that the natural outcome just in economic terms of that much money flowing into the system is that prices go up. The amount of money chasing goods is more than what the goods have, in what I would call intrinsic value. So it just costs more if you want gas, it cost more if you want eggs, eggs were a big deal. In the US. They were in, in Australia, but they were a big deal for like two years, because they went from like, I don’t know, an average of three bucks for 12 eggs to something like seven bucks. And people were like, What the hell, you know, I need an egg a day. And now it costs Yeah, three times as much. So that’s that’s the way that people feel inflation, but the cause of inflation, inflation is rising prices, but the cause of it is money supply money going in to the system. And they did that in reaction to the 2008 housing crisis, they were pouring money into the system and making it cheap for years to a degree where people just started thinking that was the new norm. But when Powell got in place, and he started raising rates, there was a lot of bankers, especially who were like, Oh, he’s not going to do that. Because this is the new norm. And it wasn’t the new norm, because there’s they still don’t have inflation controlled. So my guess is they’re going to raise another quarter point and they meet again. And then that’s going to ripple out to banks in Australia, in Japan. And mostly, those are the three that I looked at Australia, Japan and EU. Yeah,

Gene Tunny  24:14

it’s quite quite possible. I saw that the US had a good was a good jobs figure was was that what I saw? Yeah. And so that they’re saying the economy is more robust than they expected. And so yeah, they’re doing isn’t it? conundrum a little bit that the feds job is just to make sure that less people have jobs. Yeah, well, that’s the Yeah, that’s the Elizabeth Warren take. And then she was trying to pin it really gets stuck in a jay Powell over that, I think in the in Congress, wasn’t she? Oh, I’m trying to remember. Was it Powell or was it she was given?

Addison Wiggin  24:53

That was a couple of weeks ago, she was giving a speech in front of Congress, but she was taking Jay Powell to test. So he wasn’t actually even talking to him. Right. But that’s just a weird thing that that the feds job has suddenly become too slow the economy down, make sure that more people are unemployed, so that the government can then take care of them. It’s like, it’s, it’s not a free economy, like we like to think that America runs a free economy, we don’t run a free economy at all. And their goal right now is to slow everything down. And then we got the jobs report that you’re talking about. It was, I believe, is yesterday or the day before, it was more robust than what they were expecting. So they’re saying, oh, yeah, the economy is still growing, we gotta raise rates more to slow it down. Like, if we got a jobs report that wasn’t as positive as it was, then the stock market would have actually rallied. But when the draw four came out, down because people were like, Oh, that means they’re gonna raise rates again, we can’t borrow money cheaply again. It’s like, yeah, Pretzel Logic to me. But it’s kind of fun in a way to follow it, because it’s like, it doesn’t really make that much sense.

Gene Tunny  26:19

Yeah, yeah. I better get back on to banking, because I want to ask you about where we’re going there. And this banking crisis. There are a couple of things I just wanted to just quick things a good to get your views on. So you mentioned that this SBB didn’t have a Risk Officer. Is that right? Which I find extraordinary. Is that a failure of regulation? Yeah, I

Addison Wiggin  26:42

only found it in passing. So there were two kind of oversight errors that took place. They didn’t have a Risk Officer evaluating what the impact of rapidly rising interest rates would be on their the holdings that were like the core of the bank. That was one thing. And I think it was just in transition or some of the there wasn’t somebody in that position at the bank for like a year. And that was the year that the Fed started aggressively raising interest rates. And at the same time, no, nobody in the bank thought that the Fed actually pretty much nobody in the economy, though did Wall Street banks didn’t think that they would do it either raise interest rates as aggressively as they did. So even while it was happening, we were like, Oh, they’re going to stop. So there was a lot of speculation of when they were going to pause or when they were going to pivot. I remember back in even before the banking crisis started, the big phrase in the headlines was, when is the Fed going to pivot, meaning they’re going to stop raising and they’re going to turn around and start dropping among regional banks anyway, the first ones to get under stress. They didn’t have people that were taking the Fed seriously at their word, the Fed was saying we’re going to we’re going to fight inflation until it’s done, which is a tough battle. And nobody believed that. So when the cost of treasuries went down, and the interest rates went up, it was harder for a bank, like I just use Silicon Valley Bank, because it was so pronounced. It was harder for them to raise the capital to pay back their depositors when they wanted their money back. And a lot of those depositors had just lost money in the collapse of fts. So it was just sort of an act of boom and bust, you know, a line of love crumbs from what was going on in the crypto market to what happened to the regional banks. And then you saw the entire banking sector get whacked in the market, like, there were other banks that were reasonably sound that were getting taken down because everyone was trying to get out of the banking sector. So when their stocks get are getting punished by institutional investors and by pension funds, then that messes with their balance sheets, as well. And the only reason we haven’t been hearing about it in since I actually tried to pinpoint it was May 18, that the debt ceiling debate sort of took over the headlines. All the issues with the banks still exist. And that was really just a speculation on my part. But if they didn’t, for some stupid reason, come to a political agreement. On the debt ceiling, we would have seen a massive wipe out of bets because Treasuries are supposed to be risk free ish. I mean, they’re about as risk free of an investment you can make other than maybe gold or precious metals, and banks had piled into treasuries for so long because it was cheap. And it was easy and it was risk free. If we had a debt ceiling debate, I mean, that the vault if that debate failed, and we had a default, then treasuries would have been become an object of speculation, like other assets in the market, people would be like, I’m betting they’re going to do this, I’m going to bet that they’re going to do that, and the risk free part of that, where you store your money would have disappeared, that would have been a nightmare for a lot of smaller banks. And then the thing that is kind of a nightmare too, would be that JP Morgan, Citibank, Bank of America, the big Wall Street firms would have just gobbled up all of the, those assets at pennies on the dollar, which is exactly what they did with SBB. And with first republic, they just went in and just took all the assets for like, it was three cents on the dollar.

Gene Tunny  31:04

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  31:10

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, We’d love to hear from you.

Gene Tunny  31:39

Now back to the show. So can I ask Allison, where are we going? Now? I mean, over the next six months or a year or so will we see more banks fail? Will we see a contagion? Or will we see impacts on the broader economy? Where do you think this is all going?

Addison Wiggin  32:00

Well, I’ll answer that in two ways. There is a certain level of confidence in the FDIC to like bank to back individual depositors. So like the fear of bank runs is probably abated a bit. Because the FDIC and Janet Yellen to the Secretary of Treasury, she has been going out saying no, we’re not gonna bail everyone out. But if it gets bad, we’ll bail some people out like she’s being that lender of last resort. So I think that the crisis part has abated. But that hasn’t fixed any of the the challenges that banks are facing right now with rising interest rates, and the battle against inflation in the uncertainty of of how committed the Powell Fed is going to be to that. So it would. So that’s why I say I’m going to answer in two ways. One, I detailed all of this special report that we were talking about anatomy of the anatomy of a bust, this is exactly how it happens. And I actually got that phrase from Garrett Garrett, who was writing about how all the banks failed from 1932. Until about they were still failing into the 50s. So they failed for a long time. But the three banks that failed in march into the early part of May, were larger in capital by percentage than all 25 banks that failed in 1932. So like, that doesn’t happen by mistake. And that also doesn’t happen without repercussions. And I expect that that we’re going to be talking about banking places like three years from now, because it hasn’t worked itself out yet. And they’re still trying to fight inflation. So so I don’t know if we’ll have a panic or a crisis period like we had between the beginning of March and mid May. But I think the tension is still there. And it’s definitely something that we want to pay attention to. Because the banking system is the the bedrock for all of the other stuff that we get, like when we buy and sell stocks, when we get mortgages, when we buy cars, send our kids to school and stuff like that that system needs to be. We need to have confidence in that system. And I don’t think it’s there yet. Brought we get a paper version of the confidence from speeches from Janet Yellen. And we forgot her name already, but that was the woman who runs the FDIC. But it’s just a fact the FDIC has like 300. Now they have $37 billion to support $17 trillion worth of deposits like it’s It’s, it’s absurd. Other than me and I’ve written this to this is it’s a competence game. Like, just like the way people, you know, take advantage of retirees because they gain their competence and competence gain is what it is. It’s a it’s a sham. Yeah. Yeah, right now the government is running a competence, that literally people have confidence that the government will figure this out. And so they’re they’re just biding their time. And what are they going to do next? My, my guess is they’re going to drop interest rates. As soon as there’s like a real crisis, they’ll drop interest rates, and now get another speculative boom going on Wall Street. And usually what happens when, when that happens is that mutates into bubbles in other markets, too, like Australia always benefits from booms in the commodities market. And China always benefits from new tech development and the Europeans benefit from new speculation in travel and tourism. Like it’s it’s almost predictable. What’s going to happen next,

Gene Tunny  36:11

abroad. Okay, so this is your report anatomy of a bar stock and put a link in the show notes to that. Can I add in just trying to think about what the risks are? I mean, you make the case that more banks are probably going to fail. What do you think the chances of something like 2008 happening again, or something worse than that? What would you put the probability of that ad in the next couple of years

Addison Wiggin  36:36

right now, I’d say it’s pretty low. Because one of the things that happens is like human beings that the people who run the government also learn. And they did what they thought they had to do in 2008, I’ve written about this many times, the Paulson, delivered a three page memorandum to Congress and said it at like midnight, and said, You have to bail out these banks, otherwise, the entire global economy is going to fall apart. There’s three pages, and they just followed it. So I think they’ve learned that through monetary policy, and also working in concert with other federal, like the Federal Reserve system of the world, that they can mitigate crises. But that doesn’t mean the problems aren’t still there. So that’s why it’s important to understand how booms and busts even take place, you can’t keep interest rates at zero for 10 years, and then expect that no inflation is going to pop up. But it is ridiculous. But it’s worth understanding the mechanisms behind the banks and whatnot, because that’s the that’s where the money flows, if that’s how the markets work. That’s how, you know, they determine interest rates for all kinds of things, credit cards, and student loans, and banks and cars and all that kind of stuff. The economy functions on credit. And banks are the source of that credit. And they’re all connected to the Federal Reserve System. So it’s worth paying attention to what they say. And I hate that. I don’t like politics. And I don’t like the banking system. But I warn people that they ignore those things at their peril. Because when you need to do something financially in your lives, you’re sort of dependent on decisions made by people who live far away from you, and don’t have your interests in mind.

Gene Tunny  38:45

Yeah, yeah, I just want to try to understand what this all means. So does this mean that, like, we’re in a situation where the Federal Reserve and the government is going to have to continuously? Well, maybe not continuously, but every now and then bail out the banks? And, you know, we’re gonna keep trying keep interest rates low, keep the flow of credit going? And therefore, ultimately, this is inflationary? Are we back in? Because we had a period of very low inflation? Are we going to be in a period of higher inflation for for longer than we expect? Is that one of the arguments was that a conclusion?

Addison Wiggin  39:22

Yeah, my conclusion is that we would, it’s not a conclusion because it’s an ongoing story. But we’re going to be in a period of inflation longer than, you know, the headline news tells us like, you can’t just stop inflation. And once it starts, it’s very hard to stop. And I actually got that quote, I, I interviewed, I did a documentary about 15 years ago, and I interviewed Paul Volcker, who was famously the inflation fighter of the early 1980s. He was the Fed chair at the time. And when he said to me, he said two things that have stuck with me he said a lot of other things and I published all buddy But, but he said a couple other things that are two things that have really stuck with me one he’s like, actually, I’m going to set the stage. So this is after walking past a couple of cartoon pictures of him that he had framed in his office of him like turning off the inflation spigot. And then another one where he was like wielding a sword and a shield, and he was like fighting inflation. So he was kind of like a caricature of that time. And that was the worst inflation that the world had seen in since the late 1800s, since the panic of 1893. And the reason was, we had gotten off the Bretton Woods, dollar peg to gold that there was a lot of reasons why it happened. But when I spoke to him, and this is on camera, and in the interviews that I’ve published, he’s, well, first of all, once inflation gets started, it’s very hard to stop. Because it, it creates, like a psychosis in people where they start thinking, if I don’t spend my money for that refrigerator, in June, by September, it’s going to be 30, Luxmore, or something like that. And they start thinking like they have to spend their money now. And that creates inflation, psychosis of sorts where people are just spending more money more quickly, because they think it’s going to be worth less later. And you’d like if the Feds goal is to slow down the economy, that inflation psychosis works against any Fed policy that they can put together.

Gene Tunny  41:43

Okay, just a couple of things. Because yeah, it’s great conversation quickly. What about crypto? You mentioned crypto as part of the story?

Addison Wiggin  41:51

Well, I have a theory about crypto. And it’s the same thing that it’s the same philosophy I have about the internet itself is that we had in 2001, we had a big boom in Internet stocks, like even Toronto, like right now. But the company that makes insulation for houses was doing fibre optic and they dropped on the end of their name. They weren’t even a tech company. And they they exploded in value. Yeah. What’s the pink insulation that we all use? But I don’t even know why I’m drawing a blank on the net. But it’s because it’s a big installation. The point I’m trying to make is that during, boom, there were just ridiculous investment being made. Yeah, all kinds of things. And then they busted. But we were, in the end, after all, the detritus fell to the floor, and people sort of like woke up from their hangovers. We ended up with internet and things like zoom, like I’m talking to you from Australia. Right now. I’m in Baltimore. And these things are possible because of that massive innovation and the investment that went into that period. Like that it even with a Gora, the company I’ve been working with for a number of years. We exploded when we went online, and we benefited greatly from the innovation of email, or changed our lives. So I have the same sort of perspective on crypto, is that I think it’s speculative. And I think there’s booms and busts and we saw that 2018 was crazy. Yeah. And then we saw another spike in in different like Bitcoin and Aetherium. And some of the stable coins in like 2021. Last year was a nightmare. We called it crypto winter, because the underpinning actually doesn’t part of the story I’m telling to is that two of the stable coins that FTX and Alameda research were investing in the traders that were supposed to be pegged to the US dollar, but the traders on pegged them without telling anyone and that started the FTX. So I think you’re gonna continue to see that kind of speculative nature in crypto. And we’ve got this spectre of central bank digital currencies coming up. We don’t know where that’s gonna go. Suppose there’s going to be a vote in the US in July, on whether the Federal Reserve should adopt one or not. But they keep saying that to that story is going to be ongoing, I think the real benefit of the the innovation and the spikes in the highs and lows and, and, you know, the turbulent market that Kryptos has gone through up to this point will ultimately be beneficial because we’ll we’ll end up with Blockchain as a more efficient way to to conduct transactions in the financial markets. So you can make money you can lose money in crypto. I’m not a crypto evangelist. Like I believe that it’s going to be a substitute to the US dollar or the world banking system. But I do believe it efficiencies that are brought to transactions are going to be beneficial to everyone. And that’s kind of how I look at it even from an investment standpoint, I’m like, oh, bitcoins at 15,000, neither should buy some, and then it’s at 27. And then it’s at nine. And it’s like, no, I’m not getting somebody tried to buy some property from a couple years ago, I think it was in 2021. And but they would only do the exchange and in Bitcoin and I’m like, I don’t know if my property is going to be worth less or more if I take your Bitcoin, but I do know what the value of the property is. Yeah. So I think the speculative nature of it is, it’s too early to, to like I prefer gold and silver to Bitcoin or Aetherium. At the moment, maybe there’s a time when, when it makes sense to like use it as a banking tool, but not right now. too speculative for me, and, but I do think that the benefits of blockchain are going to be like email to us a couple years from now, where everyone’s going to be using Blockchain for efficiency, which I think is great. In the boom, bust cycle, that’s what happens, people invest a lot of money quickly into innovative projects, and a lot of people get burnt, a lot of people get rich. And then what we end up with is the core technology that benefits humanity as a whole. I love technology.

Gene Tunny  46:31

Yeah. One thing I wanted to cover too, is this demise of the dollar you talk about? So is that a this is this is a long run concern of yours about where the US dollars going. And I mean, this is related to the point you’re making about.

Addison Wiggin  46:43

Yeah, the thing is, like, I mean, I could slip through the book is that one great chart that shows what has happened to the dollar, I’m not going to be able to find it and make it make sense to your viewers. But since the Federal Reserve was founded in 1913, the original goal of the central bank was to stabilise the currency, and maintain its purchasing power in the economy, for payment, currency users like me, like it’s supposed to be able to, I’m supposed to be able to figure out what my dollar can buy and for how long. But it’s lost more than 97% of its purchasing power since 1913. And it’s, it’s a steady slope downwards, the more money they pour into the system, the like every dollar that you print becomes worth less than the one that was printed last. And the entire banking system of the world is dependent on the dollar as a reserve currency. And at the same time, we’re losing the value of its purchasing power, every debt, and it’s been going on for more than a century. There, their main task was to preserve the purchasing power of the currency that we use in the payment system in the economy. And they have done anything but that it’s, it could be its historic fiat currencies never worked. It accelerated after 1971, with the Bretton Woods system fell apart, the only thing you can do is understand it and then try to move your money around into assets that accumulate value over time. That’s why I like gold and silver, because yeah, there’s a little bit more speculative, but gold when I was younger, and first trying to understand how these things correlate. Gold was trading at like 253 bucks an ounce in 1999, I think and now it’s trading on average, a little bit above 2000. Over that time, he has to be 500. It’s outpaced the s&p 500, which is a broadest measure of big stocks. It’s just been a better investment over time. And that’s that’s just generally what I think is it’s a reverse correlation to the dollar, which is supposed to be managed by the bankers who keep sort of forgetting about risk and inflation and those kinds of things.

Gene Tunny  49:20

I might have to come back to fiat currencies. Yeah, it’s a big, big topic, but another time, because I’ve really picked your brain and it’s been I don’t mind it. We’re very good. That’s great. And yeah, maybe if you if you wanted to sum up your the broadly, the anatomy of a bust. Would you like to summarise it? Or is there anything else you’d like to say before we wrap up?

Addison Wiggin  49:43

No. I mean, I would just say that it’s it was my attempt when, when I was already following the story of FTX and I knew there would be a knock on effect, and I had starting in about December of 2022. So like six months ago, I was like this story is not going to go away. And there’s going to be a knock on effect in other parts of the market that we’re not aware of right now. And that was in December. And then by March, we started having banks fail, which nobody thought was even possible anymore. With the Federal Reserve System and the FDIC backing out small depositors, like nobody thought we would have bank runs ever again. And and then we had the three largest ones within a six week period. So I had already been kind of following the story, and trying to just try and understand how it would even be possible. So that’s what’s in the report is like, here’s what happened, here’s why it happens. Here’s what you need to pay attention to. And here’s how it fits into the historical perspective of booms and busts, the credit cycle is a real thing, even if the government is trying to mitigate it. It does exist and impacts everyone. Because you need a bank, to save your money to borrow to do things that we want it to, to run your business you need, you need a bank that works with you. And if they’re making dumb choices with the assets that they have, it’s better to know that in advance. So that’s what the report is about. And then there’s a couple of recommendations on investment investments you can make. Once you understand what’s going on. We actually recommend bank.

Gene Tunny  51:31

Yeah, yes, it’s for US banks, a lot of to have a lot of have to have this conversation. I don’t know if you look at Australian banks, if I don’t, I

Addison Wiggin  51:40

haven’t looked at Australian banks, except for in a macro sense, where I’m aware that the Federal Reserve decisions that move rates also has a knock on effect in Australia, New Zealand, China, and Japan and Europe. Those are like the big ones. Russia was at two until they decided to destroy their neighbours. Yeah, the

Gene Tunny  52:09

general view here is that our our banks are in a much better position than

Addison Wiggin  52:14

it could be. I haven’t studied them closely enough to know, I think their requirements are different in Australia than in the US too.

Gene Tunny  52:23

Yeah, there. There are definitely differences. So you might have to I’ll have a close look at that myself. But look at us. And it’s been terrific. Yeah, probably more time than you might have expected, delving into it. Because I think what’s great is you you do deep research, and you make a big calls, I suppose what you make you make you really let us know what you think. And I think it’s great. And yeah, it’s it makes me think about what’s going on so much more. So really appreciate all the work you do. And I’ll put links in the show notes to your work. And, and thanks for making that. That report available for listeners. That’s terrific. Yeah.

Addison Wiggin  53:03

It’s information that I like, I would just caution people that I’m learning about it as fast as I can. But I’m also passionate about it. That’s why I do it. This whole project that I have the Wigan sessions is a passion project. I like talking about this stuff. And then it makes me think just like you’re saying, it makes me think. And I want to give away the report just to spread what I’ve learned, because I think it’s important stuff for, especially if you’re trying to manage your own money, it’s really important for you to understand the bigger trends. And, you know, I have a philosophy degree and I studied literature in school and stuff. So I’m interested in the stories of what’s going on. It’s late sound perverse, but I was actually excited when we started having our own banking crisis. It’s happening right in front of my face. I just have to read the news.

Gene Tunny  53:59


Addison Wiggin  54:01

get the report. It’s it’s interesting. And it’s helpful to like, make sense of what’s happening in the news, too.

Gene Tunny  54:07

Yeah, certainly, I guess it could be exciting, stressful. I remember being in Treasury. And here in Australia during the world of financial crisis. We didn’t have it as bad as it was in the States. But it was still quite, quite stressful at a time when we started seeing the drop in government revenues. And yeah, borrow lots more money. And yeah, well, my

Addison Wiggin  54:28

biggest concern, and I put this in the report to but my biggest concern right now is, we were talking about the savings rate during the pandemic. I think the same thing happened in Australia to the savings high because there was a lot of government stimulus, like direct payments to citizens. So the savings rate and then nobody could go anywhere. So the savings rate went really high. It actually peaked above consumer credit for like a, you know, like, a month, and then as the economy started opening up and people started travelling and Like making decisions I, oh, we’re free, we can go to one, the savings rate plummeted. And then the consumer credit rate for all of the things that I’m only talking about the US, but I’m sure it’s mimicked in other Western economies, the consumer credit rate, skyrocket skyrocketed before the Fed started raising rates. So like, all these people are taking on adjustable rate, credit cards and loans and mortgages and things. And then suddenly, the the debt service that they have to pay on those rates went through the roof, it’s tripled. So you had a plummeting savings rate, and at the same time that you have a service to debt ratio going through the roof. It’s not a good scenario. And we haven’t even really seen that impact on, like earnings in the s&p 500, the big retailers and stuff like that. We haven’t seen what that impact is going to look like yet. So that’s not kind of like, I guess, yeah. So other than the banks themselves, because they do it for there’s two points there that I’m keeping an eye on.

Gene Tunny  56:09

Yeah, fair point. We’ll definitely I’ll keep an eye on it, too. I think they’re really good points. Okay, Addison, we’re gonna thanks so much for your time. I really enjoyed that. That was terrific. Good luck to you, man. Very good. Thanks, Addison rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via contact at economics Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if you’re podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this or to begin your own podcasting journey head on over to


Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business

Full transcripts are available a few days after the episode is first published at Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Podcast episode

Immigration & Australia’s housing crisis w/ Alan Kohler – EP191

This episode delves into the pressing issues of housing and immigration in Australia, featuring a conversation with renowned financial journalist, Alan Kohler. The discussion revolves around the impact of high immigration rates on housing demand and affordability, emphasizing the need for coordination between immigration and housing policies. The episode also highlights the supply-side factors contributing to the housing crisis, such as restrictions on housing development and protections for character housing and heritage. The host Gene Tunny suggests the need for a national debate and parliamentary inquiry into Australia’s immigration rate and population growth to weigh the benefits of immigration against the challenges of housing and infrastructure. 

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

What’s covered in EP191

  • [00:01:58] Australia’s housing crisis. 
  • [00:06:47] The need to coordinate immigration and housing. 
  • [00:08:00] Short-term vs long-term rental – the impact of AirBnB, etc. 
  • [00:13:05] Local governments and the housing shortage. 
  • [00:18:30] Drop in average housing size. 
  • [00:22:32] Increasing housing supply as a solution. 
  • [00:24:17] Immigration and housing affordability. 
  • [00:28:07] The pandemic response and the housing crisis.

Links relevant to the conversation

Alan Kohler’s articles:

Labor immigration and housing policies are an explosive mix

Alan Kohler: Population growth equals economic growth, but for whom? 

RBA research on average household size:

A New Measure of Average Household Size | Bulletin – March 2023 | RBA

Previous Economics Explored episodes on housing:

Odd way to fix housing crisis proposed by Aus. Gov’t: invest in stocks first w/ Dr Cameron Murray, Sydney Uni. – Economics Explored

The high cost of housing and what to do about it w/ Peter Tulip, CIS – EP134 – Economics Explored

Missing Middle Housing podcast chat with Natalie Rayment of Wolter Consulting | Queensland Economy Watch    

Australian Financial Review articles on housing:

Housing supply crisis: How Auckland took on the NIMBYs and won 

1.3 million missing homes blamed on councils and NIMBYs 

Immigration & Australia’s housing crisis w/ Alan Kohler – EP191

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning into the show. In this episode, I chat with renowned Australian financial journalist Alan Koehler about housing immigration in Australia. These are related highly topical issues in this country at the moment. You’re in Australia, you’ll probably know Alan from his nightly finance report on ABC News. Alan was usually popular in Treasury when I was there, because he’d always feature an interesting chart and his finance report, and would often talk about it the next day. In addition to being a finance reporter, and presenter at the ABC, Alan was the founder of the Eureka report and business spectator now owned by News Corp. Many thanks to Darren Brady Nelson for connecting me with Alan, please make sure you stick around after the end of the interview, because I’ll have a few words to say to wrap up. Okay, let’s get into the episode. I hope you enjoy my conversation with Alan cola. Alan cola. Thanks for joining me.

Alan Kohler  01:43

Not at all.

Gene Tunny  01:45

Alan, you’ve written some really great commentary on what’s been happening with housing and immigration here in Australia really frank and fearless commentary. And I’m glad to have you on the show to chat about that. In October last year, you wrote, If the Labour government doesn’t start coordinating immigration and housing, the mixture will be explosive, because Australia’s housing crisis is going to be horrific next year. I’d like to ask to start with Have there been any developments since you wrote that article that makes you more or less optimistic,

Alan Kohler  02:20

I suppose less optimistic in the sense that the increase in immigration this year has confirmed it’s 400,000. It’s it’s mainly catch up. But it’s clear that we’re back into higher levels of immigration. And the rental vacancy rate has not really moved. It’s gone from 1.1%, nationally to 1.2%. So that column II referred to was really just investigating job vacancies, and rental vacancies in various places around the country as well as nationally. So what I did was I went around to various places in the country, both cities and country towns, and looked at the number of jobs that were advertised on seek and compare that with the number of rental properties available on RPA. And just found that the number of job applications of job heads were vastly in excess of the number of places to live, if it was available. So you know, you’re wondering what’s going to happen. And when all these businesses needing staff advertising for staff in places like Warren ball or the Sydney Hills district or Cannes or Calgary? I mean, I looked at all these places, and there was a vast difference in the number of job vacancies and job ads and the number of places to rent.

Gene Tunny  03:50

Yeah, yeah, absolutely. And you, you suggested that it could be horrific next year. Do you think it’s horrific at the moment?

Alan Kohler  03:57

Well, it’s certainly not getting any better. For sure. I mean, the government’s plan is to is to have a housing. Future Fund, as it’s called, was $10 billion in which and the earnings from that fund will be used to build houses, and they’re proposing to build 30,000 over five years. But really, that’ll scratch the surface. I mean, the number of places that are needed is vastly in excess of that.

Gene Tunny  04:23

Do you have any thoughts on the structure of that Future Fund? There’s been some criticism of it by various commentators such as John Corrigan, and Cameron, Mary and the greens are that they think it’s a bit futile. Do you have any thoughts on that yourself? I mean, I know you just said that. You think it’s just scratches the surface, but any thoughts on the structure of it what they’re trying to do there?

Alan Kohler  04:44

Well, the only thought I have is that it’s better than nothing. It seems to be quite complicated. The way they’ve got the money is going to be given to the the actual Future Fund Manager and then there’s kind of various places that the earnings go to some some of the states Some of the Commonwealth I mean, I look at this kind of bureaucratic structure and feel like the money will disappear before it gets anywhere. Because, you know, bureaucracies tend to make money disappear.

Gene Tunny  05:15

Yes. And the fund managers or, you know, they’ll they’ll earn some fees off it, too. Of course, I think that’s one of the points that that Cameron mentioned. Can I ask, what do you have in mind by starting to coordinate immigration and housing? What what sort of things do you have in mind there? Alan, have you thought about how they could do that?

Alan Kohler  05:37

Well, I think the main thing they need to do is actually have a hard look at how many houses are required, given the immigration policy that they have initiated. So they, they make a decision about immigration, they decide how many people are going to come to the country, right. And then they, they also have data on how many houses are available. And therefore they can know what housing is required to house, the people who are being invited to come to Australia, and also the people who are here and what the sort of current demand is. And then I need to find a way to create to make that housing available. Because otherwise, what you end up with is a soaring in rent, which is what’s occurred, there’s been huge increases in rent over the last couple of years. And also you get huge increases in house prices, because of the demand. And there’s just simply a lack of supply. So what I suppose what I’m talking about is, you know, actually doing something at the government level to create the housing. Now the question is, what will it be because, you know, there’s not enough, it takes too long to build houses, even if they even if the housing Future Fund had enough money in it to build enough housing, it will take you know, a couple of years to build the houses. So it’s not as if that’s going to be a quick solution. But one of the things I’ve been I’ve also been investigating is the question of short term rentals and Airbnb. And I did another column in which I kind of observed that the number of rental properties available in Australia, at the time, I think was a month or two ago, the number of rental properties on raa that were available in Australia was 51,000. And the number of properties on Airbnb and other short term rental sites was 300,000. Right? So there’s a huge difference. And also, I looked into the difference in rent that you get, for the same property as a as a lease on our a and on Airbnb and the differences about three times I think that there needs to be a difference because putting it on Airbnb is risky, because you might get a party or you might rent it at all. So there is a need for a risk premium. But the question is how much of a risk premium and I think it’s self evident that the risk premium currently, that’s available on Airbnb is too high, because not too many people are putting their properties on Airbnb rather than putting it on REO for lease, which is leading to a bit of a shortfall. The question is, how do you how do you redress that imbalance? How do you get, say 100,000 properties off Airbnb? And onto the long term lease rental market? I think there’s some way that the government needs to find to to achieve that. What I suggested was some some use of the Kevin Rudd rental subsidy scheme for the introduced I can’t remember the name of it now. But there was a rental subsidy scheme that was abolished by the coalition that was introduced by Kevin Rudd that was aimed at low income earners. And maybe there’s a way of modifying that in some way that could, in a sense, redress the imbalance in rent between short term and long term rental. But look, you know, I don’t have all the answers. I’m just saying that there needs to be some thought put into, not just into, into getting people into the country, which we clearly need. I mean, we need the immigration, it’s not I think the answer is to not have the immigration because the staff shortage is everywhere. Businesses are screaming for staff. And, you know, and also the care, the care industry, the care sector, healthcare, aged care, childcare, you know, we’re all struggling for staff so we need the immigration and also baby boomers and they’re retiring so there’s needs to at a higher level in general of immigration, to deal with baby boomer retirement, what I’m saying is that they need to combine some sort of housing policy with immigration policy and think about what they’re doing.

Gene Tunny  10:16

Yeah, yeah. I’m just trying to remember it was the Kevin Rudd policy, it may have been the National Rental Affordability Scheme. Was it N RAS? I can correct? Yeah. Yeah, it might put a link in the show notes or a few N RAS properties. out near Bowen Hills, I’m in Brisbane. So I think I think there are n RAS on with immigration and housing. So you mentioned I mean, we do need immigration. But we’ve suddenly got this 400,000 per year of immigration. Would there be scope for adjusting that from year to year, depending on labour market conditions of housing? Is that something that they should be actively considering? And more broadly, do we need a national? Would you say we need a national housing and population policy? And we need to have that debate about what’s the optimal rate of immigration given these other circumstances? Well,

Alan Kohler  11:13

it’s not 400,000 per year, it’s just 400,000. This year as a catch up for the pandemic when there was no immigration. So, you know, I think the what we’re heading back towards, as a long term rate of immigration is somewhere between 202 130,000, demographers are struggling to say there’s more likely to be 200,000, the Treasury forecast in the budget was 230,000. Long term. You know, I don’t know what it is. But it’ll be something around about 200,000, I guess. And that seems to be what’s needed, you know, to replace the baby boomers and to, you know, just to keep the place ticking over. So I think if what you’re talking about is some sort of adjustment separately to immigration to, you know, meet the housing that’s available. I think that to be the other way around that, really, the immigration needs to be the starting point. And they need to do something about the housing, short term in a hurry, and not just muck around with long term solutions.

Gene Tunny  12:21

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  12:27

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, We’d love to hear from you.

Gene Tunny  12:56

Now back to the show. To what extent you see the housing shortage as a result of restrictions at the local government level. Is it due to zoning? Is it due to character protection of character housing of heritage?

Alan Kohler  13:14

Oh, yeah, no doubt about it. I mean, I had a coffee the other day with a bloke who’s running a campaign in Melbourne, called EMB. Yes, in my backyard it stands for and it was started in San Francisco, which is got to Herrera to horrendous NIMBY problem in San Francisco. There’s there’s also a chapter in Canberra and one in Sydney, one in Brisbane. So there’s, they’re starting up here. They’re all young people, and they’re trying to get medium density housing built in the suburbs. You know, I really admire them going on, I think that that’s what’s required. That’s one of the problems in Australia is that we have a high density housing in and near the city with high rise. And then we have large blocks. We don’t have anything much in between we don’t have we don’t have the sort of four storey buildings that other countries do through the suburbs to allow people to allow a lot more people to live close to the CBD. I mean, one of the problems we have in Australia is that we have each city has one CBD. And so the further out you get, the more inconvenient it is, and so that that really puts a premium on housing, that’s, you know, within half an hour or an hour of the CBD. And because of councils zoning, there’s a limit on the amount of housing that’s, that’s being built in those, you know, within the hour commute from the CBD. And so, you know, that’s, that’s what’s required really, I mean, the characters the these people in in the MB movement going on and what they’re doing is they Going to the council meetings. So they’re not just putting out press releases, they’re going to the council meetings and speaking in favour of in favour of developments, housing, you know, apartment developments in those suburbs, because the one of the points they make is that when councils consider these proposal development proposals for, say, a five to 10 Storey, housing apartment block, the only people who bother turning up at the council to talk about it are those who are against it. And there’s never anybody who’s speaking in favour of it apart from the developer, which I think is an interesting point. You know, so the council’s really aren’t a hiding to nothing. I mean, they’re elected by the local constituents in, in their wards. And, you know, the constituents are all against anything being built. So, you know, they’re more or less on a hiding to nothing, you know, and I think so, there’s a bloke called Simon Kirsten maca, who’s a demographer in Melbourne, who I talked to a bit than his solution is for the federal government to give councils a quota of dwellings that they need to approve each year. And if they fail to meet the quota, they lose funding. And if they fail to meet the quota for the second year running, the administer administrators put in they they sacked, which is a pretty tough kind of solution. But he you know, he makes the valid point that this is a real crisis. Yes, we’re just not building enough housing. And we’re not building enough medium density housing, in places where it’s convenient to live. I mean, speaking in Melbourne, I’m not sure where love the place to be speaking about Melbourne, there’s a lot of fear a bit of housing being built in places like where are we in tan Eaton, you know, far our suburbs. But they’re incredibly inconvenient. I mean, the infrastructure is no good, you can’t get out of the place. People are spending an hour in the car, just to get their kids to school. You know, I just think that, you know, there’s there’s a real mismatch, there’s a real problem with where the housing is being built, and the amount of housing that’s being built in places that are convenient.

Gene Tunny  17:29

Yeah, I agree regarding the mismatch. So in Brisbane, here, the only places in the inner city where we’ve really seen an expansion of suppliers in former light industrial commercial areas where they’ve been able to redevelop such as at West End, or Milton and a new state, and we’ve got a lot of high density there. But yeah, we’re missing that, that more medium density, which I think would be really desirable. And I liked that idea of the financial penalties for council. I think that’s, that’s terrific. Another thing I’d like to ask Alan is about the there was a huge drop in the average housing size, and that’s associated Well, there are various factors. But during the pandemic we had, we had cheap money, we had people moving out of home earlier or leaving group houses. And we’ve got also a greater desire for space due to people working from home. And this has been people argued, some commentators or analysts are arguing that this is the big problem. Now it was this unexpected drop in that average housing size. And that’s what’s causing all the problems we’re seeing now. What I’d like to ask is, do you think that was, was that something that should have? I mean, is that something that’s unforeseeable and therefore, well, this is a, you know, this is a problem, obviously, but it was something that you really couldn’t do much about, and therefore, we just have to let it sort of play itself out. I mean, there’s, there’s not time for panic. I’m trying to think of the best way to ask this well, where I’m going with that. But that’s that’s one of the first things we’ve seen, is this drop in the average housing size? Do you have any thoughts on what’s happened there?

Alan Kohler  19:02

Well, the average house size, the average, the average number of people per house has definitely declined. It’s, I think it’s down to two and a half. I can’t remember what it is. But it’s certainly down from four to two and a half, something like that over over a decade. And I certainly when I was a kid, all the children that shared bedrooms, I mean, our I’ve got three sisters, there’s four of us. And it was a three bedroom house. But these days, all kids have to have their own bedroom, right? I mean, start the houses have to be bigger, to have the children, but also there are a lot of shared housing, that no longer exists. Look, you know, the number of people per house has definitely declined, but it’s not an act of God, but it’s certainly something has to be taken as a given. It’s not something the government can do anything about. You know, it’s not going to be able to say to we need to have more people that are housing, you know, let’s sort of cram in more on it’s not going to that’s not something government can do so it needs to happen. needs to be taken as a given that that’s the way it is. I mean, I think it’s starting to rise again now is because of the cost of rent, which is driving, particularly young people back into more shared housing. So I think I think the number of people who are house metric is on the rise again. But I don’t think it’s gonna get back to the where to where it was.

Gene Tunny  20:21

Right. Yeah. I think there was some RBI analysis that showed that prior to the pandemic, it was was over 2.55 or something like that. And then it dropped down to 2.4. A, and they’re saying that this meant that there was demand for an additional 120,000 houses or something. So that’s part of the problem. We’ve got it. At the moment. It was this. That’s one of the shocks that’s been experienced. And but I mean, so there’s this debate currently between or is it just that due to that shock, or is it due to the long term problem with building enough housing? I mean, I tend to lean toward the the fact that, you know, we haven’t built enough to because of restrictions in the past, or the restrictions, we’re still got. But yet, we’ve also got this shock that’s occurred. So it’s a combination of factors, what we’re seeing now,

Alan Kohler  21:11

certainly not one factor. I mean, there’s a number of factors. Yeah. Supply being restricted, declining household size, immigration increased in 2006, from 170 to 260,000. And kind of more or less stayed there. So, so that was a huge increase in the number of people coming into the country. And that’s kind of has continued and will continue. So there’s so there’s been a step up in immigration at the same time as house, household size falls and suppliers restricted. And also, don’t forget negative gearing and the capital gains tax discount, which is encouraging demand from investors. And also, the other thing that’s been driving prices up is all of the first homebuyer grants, which tend to just go on to the price.

Gene Tunny  22:03

Okay, Alan, Carl, or any final remarks on immigration and housing. I’ve really enjoyed this conversation. Just anything you’d like to add before we finish up?

Alan Kohler  22:13

No, I think we’ve pretty well covered it and I’ve enjoyed the conversation. Two.

Gene Tunny  22:17

Very good. Thank you, Alan. Really enjoyed it. Thank you. Okay, I hope you found that informative and enjoyable. The main takeaway that I took from my conversation with Alan is that he sees the way to tackle the housing affordability problem is by increasing housing supply. He’s highly conscious of the demand for foreign workers by Australian industry, so he wouldn’t want to tighten up visa requirements to reduce the rate of immigration. Alan is absolutely right about the need to increase housing supply. I must say, however, that I’d be more willing than Alan to adjust immigration policy settings, given how difficult it is to increase housing supply in the short run. Certainly the Australian government’s proposed housing Australia Future Fund wouldn’t do much as I discussed with Cameron Murray in a bonus episode in late March. In my view, we need to have a national debate, possibly even a parliamentary inquiry into Australia’s rate of immigration. And we need to work out an optimal rate of immigration and indeed, of population growth. There are many benefits from immigration, of course, but they need to be weighed up against the short run challenge of housing so many new people and ensuring that we have sufficient infrastructure. In my view, we should possibly consider population decentralisation strategies. For example, we could relocate some administrative functions of governments to regional areas and hence we’d relocate the public servants. There are several regional cities out there will many regional cities out there that could could be good destinations such as Townsville, for example in North Queensland. We should also ask, why do we need to rely so heavily on immigration to boost our workforce? In the case of skilled labour? Why aren’t we training enough Australians to meet the needs of business? Furthermore, I’d note that students are a big part of the Margaret intake into Australia. And it’s difficult to argue that they’re mostly filling skilled jobs. The impact of our high rated immigration on housing demand and hence rents and house prices is probably large enough that we should ask whether the benefits to industry are sufficient to offset any adverse impacts on the broader community. Of course, as I discussed with Alan, housing affordability is a multi dimensional challenge. There are demand side factors such as immigration and the reduction in average household size, but there are also supply side factors. One of the supply side issues is definitely the restrictions on housing developments in our Cities, there are too many rules which are constraining the supply of housing and making it more expensive. We have various protections of character housing of heritage, and it makes it much more difficult to develop the housing stock that we need. If you’re a regular listener, you may recall that I spoke with Natalie Raymond from the Brisbane yimby group a couple of years ago. As Alan mentioned, yimby stands for yes, in my backyard. It’s a fantastic movement. I’ll put a link in the show notes to my conversation with Natalie, so you can listen to that episode if you haven’t yet. Again, if you’re a regular listener, you may recall that I also chatted with Peter tulip last year about the high cost of housing. Peter is a former Reserve Bank of Australia economist. He’s now chief economist at the Centre for independent studies where I’m an adjunct fellow. Peters estimated that for detached houses, planning restrictions are estimated to raise house prices 73% in Sydney, 69% in Melbourne, 42% in Brisbane and 54% in Perth. I’ll link to my conversation with Peter in the show notes too. I think it’s a great one. And Pete has done some really rigorous research on how these planning restrictions impact housing, so I recommend checking that out. Another former RBA economist Tony Richards, he’s just published some analysis of the impact of planning restrictions on housing supply, and it’s received some great coverage from my old Treasury colleague, John Keogh, who’s now at the Financial Review. John has summarised this research by Tony Richards as follows. Australia could have built an extra 1.3 million homes over the past 20 years. But costly zoning planning and building red tape imposed by local councils is chiefly to blame for a huge housing under supply. That sounds plausible to me. Indeed, I’ve been on the news here locally because I’ve gone up to the site of a of a redevelopment or proposed redevelopment up in Paddington on the corner of Latrobe and given terrorists with a page of workers club is and they wanted to redevelop that as a mixed use development with residential and commercial. But it was opposed by local residents. And yep, there’s no development there. And I mean, we really need to develop prime sites like that that are well located and think about the interest the greater community interest rather than just the the interest of people within the neighbourhood. We need to think about the greater good. Okay. I should note that there’s some evidence out of Auckland in New Zealand regarding the impact of up zoning on housing affordability, so up zoning is allowing redevelopment or high density uses of land that’s zoned for low density residential use. After up zoning began in Auckland and 2016, there was a building boom. And since 2016, rents in Auckland have only increased 10 to 20%. Compared with 40% in Wellington, it looks like there’s an even starker difference for house prices. So they’ve gone up only 20% in Auckland compared with 70% outside Auckland. So I took those figures from a recent financial review article, which I’ll link to in the show notes. So check out the show notes for any links to any studies or reports I mentioned also for any clarifications in case I miss remembered something or I’ve got something wrong. Okay, I might come back to the Auckland experiment in a future episode to have a closer look at the evidence. As always, we need to make sure we understand all the facts, we need to be conscious that correlation doesn’t necessarily mean causation. And just because something follows something else. That doesn’t mean that they’re related, or there’s a causal relationship. That said the evidence from Auckland does look promising, and it makes sense from a theoretical perspective. Finally, I should note that the housing crisis we’re having in Australia is probably partly due to the pandemic policy response, including Ultra loose monetary policy, cheap money, and the lock downs. These policies stimulated demand for larger houses for those who could afford them. People demanded more space. They demanded studies so they could work from home and the international border closure for nearly two years, followed by its reopening in late 2021. That’s led to a huge amount of catch up immigration. As Alan noted in our conversation, all these new people need places to live in a rental market that is already extremely tight. So in different parts of the country. We’ve had vacancy rates for rental properties of around 1% In some cases under 1% Good paid with around three to 4% Normally, increasingly, we’re learning about the adverse unintended consequences of our pandemic response. Next time, our political leaders should think much more carefully about adopting such extreme policies, given the negative After Effects we’re now seeing, not to mention the adverse impacts including the restrictions on civil liberties that we saw at the time. We need to do much better next time if there’s another pandemic in the future. Okay, that’s about it for me, please let me know what you think about either Alan or I had to say about housing and immigration in this episode, you can email me via contact at economics I’d love to hear from you. Thanks for listening. rato thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if you’re podcasting outlets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this or to begin your own podcasting journey. Head on over to


Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business

Full transcripts are available a few days after the episode is first published at Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Podcast episode

US debt ceiling & Gene’s Aussie debt ceiling experience in the GFC | Emerging economies debt crisis – EP190

Host Gene Tunny discusses the US debt ceiling and the emerging economies debt crisis with his Adept Economics colleague Arturo Espinoza. Gene shares a memory of his own experience with the debt ceiling the Australian Government had at the time of the 2008 global financial crisis (GFC). 

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

What’s covered in EP190

  • [04:35] US debt ceiling negotiations. 
  • [09:18] US hitting its debt ceiling.
  • [14:51] The trillion-dollar coin as a possible workaround. 
  • [16:14] Spending and revenue challenges. 
  • [26:05] Australian debt ceiling legislation in 2008-09. 
  • [29:05] US debt limit and consequences. 
  • [33:25] Argentina’s economic struggles. 
  • [40:02] IMF’s Nightmarish Identity Crisis & emerging economies debt crisis. 
  • [42:27] China’s role in emerging markets debt. 
  • [45:13] PNG and China. 

Links relevant to the conversation

Links relevant to the conversation

Noah Smith’s Subtack post:

Treasury to take ‘extraordinary measures’ as US hits debt ceiling | Financial Times 

Michael Knox’s note on the debt ceiling:

AUS_ESQ_230523_US government shutdowns and why US treasuries never default.pdf

Federal Spending | U.S. Treasury Fiscal Data

The future US fiscal crisis and how to avert it w/ Romina Boccia, Cato Institute – EP159 – Economics Explored

The IMF faces a nightmarish identity crisis

How China changed the game for countries in default | Financial Times

There Is No Chinese ‘Debt Trap’ – The Atlantic 

Fiscal Monitor April 2023

Argentina raises interest rate to 97% as it struggles to tackle inflation | CNN Business 

Argentina inflation smashes past every forecast to hit 109% | Reuters

US debt ceiling & Gene’s Aussie debt ceiling experience in the GFC | Emerging economies debt crisis – EP190

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Hello, thanks for tuning in to the show. In this episode, I chat with my adept economics colleague Arturo Espinosa about the US debt ceiling in the emerging economies debt crisis. We recorded this episode last week on Thursday the 25th of May. A few days before we learned the White House and the Republican leadership have agreed to a deal to avert the US government from running out of money and having to choose between paying bondholders or Social Security recipients. So please keep that in mind when listening to this episode. I thought the Republicans would hold out longer than they did and I was surprised they reached this agreement over the weekend, particularly given the new estimate of when the government will run out of money is June the fifth. That is Monday next week. They may have been worried about how the financial markets might react if an agreement wasn’t breached. And they wanted to avoid suffering politically for any market falls. Also, House Speaker Kevin McCarthy probably figured he needed to reach agreement with the White House over the weekend. So we could get the debt ceiling lifted by Congress this week. Apparently things can still go wrong, as the debt ceiling does need to be lifted by Congress. And it’s up to Speaker McCarthy to ensure his deal is backed by his Republican colleagues. From what I can tell the agreement between the White House and the Republican leaders doesn’t go far enough to fix the structural problems with the US deficit, which I’ve talked about on the show before. Prominent substack analysis Smith is written a manufactured crisis leads to an ineffectual solution. I’ll link to his post in the show notes because it contains a good summary of what the deal covers, including a freeze on discretionary spending in 2020 for 1% growth in 2025. And this will amount to a significant real cut in discretionary spending given inflation. However, as Arturo and I discussed in our conversation, the problem with the US budget is that a large part of it is non discretionary. Around two thirds of it is mandatory as a result of legislation and regulations defining eligibility for different government benefits. That’s an issue for budgets around the world. I should note of course, and we have a similar issue here in Australia. The point I’m making is that it’s very difficult to actually fix these budgetary problems without getting stuck into some major welfare programmes that that can be quite popular. So the Republicans got some concessions from the White House such as a spending freeze and expanded work requirements for food stamps. But I expect the US government will still have a sizable budget deficit and it will keep on accumulating debt. Again, the can has been kicked down the road, as they say. However, at least we may have avoided what could have been a new economic crisis for now. I’d be interested in your thoughts on the US debt ceiling? Do you think having a ceiling is good or bad? How can the US get its budget repaired? You can email me via contact and economics explored. I’d love to hear from you. As always check out the shownotes relevant links and information. I’m recording this introduction around 24 hours before this episode gets published. Anything major happens between now and then I’ll mention it in the show notes. Right oh, now on to the show. Thanks for tuning into the show. In this episode, I’m going to have a conversation about some topical global macro economic issues with my colleague at adapt economics. Arturo Espinosa, Arturo, thanks for joining me again on the programme. Hey, now happy to be here. Excellent. Out here. I thought given all of the the news around the US debt ceiling and the it’s unclear what these negotiations will bring that there’s a possibility the US Treasury could run out of money on the the first of June, according to Janet Yellen. So in early June, there are other estimates of when that will occur. But there’s a general view that things are going to be very difficult for the US Treasury in well next month. So yeah, we’re really at the The point in the negotiations was something has to happen, or else we’re going to have a real serious problem, aren’t we? So I thought we could have a chat about the US debt crisis first, then we might talk about the developing economy, debt crisis. And then if we get time, we might touch on what’s been happening in in Argentina with inflation and interest rates. There’s some big news coming out of there. So does that sound like a good approach? Good thing? Good agenda?

Arturo Espinoza Bocangel  05:29

Yes. It sounds interesting.

Gene Tunny  05:32

Very good. So when we’re talking about the US debt ceiling? Well, given we’re talking about I should know that we’re recording this on the On Thursday, the 25th of May. Now when this episode comes out, the week after, who knows? I mean, something could have happened, there could have been some development. I mean, I’m expecting they’ll just go right down to the wire, though. The Republicans, they will just hold out as long as they can. Before they agree to some package or some they make some compromise with the White House, with Biden and with the Democrats. Just because it’s politically advantageous for them to do this. And so there’s politics involved. And it’s very difficult to, to see how that how this, how this will play out. My view is that we won’t have the US government defaulting, there may be some sort of shut down for a few days, a week, a couple of weeks. The US government has shut down in the past. I mean, it’s shut down some agencies that shut down some national monuments you couldn’t get in to see them. And there were public servants that were temporarily laid off. But generally the US government does meet its its obligations to bondholders. It hasn’t defaulted. In fact, there’s a clause in the amendment to the Constitution that says it has to respect the the I think the executive has to respect the full faith and credit of the US or make sure that that is implemented. Was it the 14th Amendment, I’ll put it in the show notes. But I think it’d be it’d be such an extraordinary situation to see. This era, the US government effectively run out of money, and then not have to pay bondholders. And this is, this is something that Michael Knox has written about in a really good note that I’ll link to in the show notes, where Michael writes that he’s written this note US government shutdowns and why US Treasuries never default. And what Michael’s written so Michael is Chief Economist at Morgan’s here, a major financial advisory firm in Brisbane here. So they, while a stock broking, they do stock broking wealth management. He said in practical terms, the first right of payment for US Treasury bonds continues when the government shuts down us taxation revenue is used to pay the money owed on US Treasury bonds first, and US government employees second, this system has continued from 7091 until this day, this is why US Treasury bonds never default. So, Michaels fairly optimistic about how this plays out. Michael’s a keen observer of, of what’s happening in the States. And I think he’s someone that I respect a lot. So let’s hope he’s, he’s right there. Because I mean, it clearly would be a really extraordinary thing if the US Treasury couldn’t pay or couldn’t meet its debt re payments or couldn’t pay the interest on Treasury bonds, it would be extraordinary. And this is all come about because they have a limit, a legislated limit on how much the national debt can be what the total amount of bonds on issue can be. And that was around I think it’s around 31 trillion. I had that. I’ve got that in the notes somewhere. I’ll put it in the show notes. And they basically hit that limit earlier this year. So around around January, so January 19, the US hit its debt ceiling of $31.4 trillion. And since then, what they’ve been doing, they’ve been taken what Janet Yellen, the Treasury Secretary has called extraordinary measures. So they’ve been not making certain payments that they would into trust funds and so forth. I think retirement benefits for public servants have I remember correctly. So there are certain things that they’ve they’ve been doing to delay the the inevitable when you you run out of money. This is a sort of thing you can do if you’re in a Treasury or a finance ministry there. There is some flexibility there but you you can only do that for so Long. Yep. So I’ll put this in the show notes. There was a great article in the Financial Times earlier this year, which explained this. And it wrote that in order to create additional borrowing capacity, Yellen on Thursday said the Treasury would cease investments into the civil service retirement and disability fund, as well as the Postal Service retiree health benefits fund. So that’s one of the extraordinary measures that they’re being taken to, to really just delay the inevitable when that lack of ability to borrow new money from the market, so the ability to issue new debt, I mean, eventually, you’re going to need to do that. And, and Janet Yellen has previously said that, that critical date is essentially first of June or early June. So as you said that before and we’re fast approaching that date, aren’t we? So? Any thoughts so far, Arturo?

Arturo Espinoza Bocangel  11:02

Well, he’s a very important issue, the in well, in the worst case, or worse scenarios, one effect on the global economy.

Gene Tunny  11:15

Right. So you’ve found there’s a note from the White House, isn’t there? They’ve done some analysis? Yes,

Arturo Espinoza Bocangel  11:21

yes. In the White House, they have published I article, which is a potential economic impact of various debt ceiling scenarios provided by the CEA, the Council of Economic Advisers. The point to be highlighted here is that, for example, there are some estimates about economic effect of debt ceiling standoff for the third quarter 2023. For example, in terms of jobs, the American economy would lose around a point three millions of jobs, just in terms of real GDP, annualised growth, they will lose 6.1. And then deployment will reach almost 5%

Gene Tunny  12:13

G. Given Yeah, okay, I’ll have to I’ll have to look at the night to see how they’ve calculated or given those job losses you reported, I would have thought unemployment would would end up being higher than that in that scenario. Now, a couple of things to think about. It’s from the White House. So it’s they’ve got an agenda clear. They want the debt ceiling increase, they want the Republicans to agree to that with very few conditions. So we’ll come in, it’s going to be self serving to an extent. And I mean, it’s one of these things, how do you actually model this? This scenario? We haven’t really seen it before. We’ve seen plenty of government shutdowns. before. I think Michael had an estimate in his note that there’s been a it’s been over a dozen since 1980. If I remember correctly, I’ll put a link to that. I thought, Michaels No, it was really, really great. So yeah, I mean, it’s clearly would be bad. I mean, it’s a US government just completely was unable to function effectively, because it couldn’t borrow any new money, but it still had to make it was still obligated legally to pay Social Security benefits Medicare, and it also still wants to fund defence and all the other things the US government does, there. Yes, it’s got a problem there. And there have been various ideas floated for how the government could possibly get around it, but the legality of them is a bit suspect. There’s a view that Well, Congress is effectively saying, one view I’ve heard is that, because Congress is sent two different sets of instructions to the White House to the executive, it’s up to the executive to the White House to choose which set of instructions to follow. So on the one hand, Congress is saying you can’t borrow any more than $31 trillion, you are sorry, you can’t have that as your total debt, anything more than that. So once you hit that, bad luck, you’re not going to get any new funding. But then, at the same time, Congress has also told the White House has told the executive government that you have to fund these social security benefits, you have to pay this in Medicare, etc. And so there’s this conflict there. And and so one view is that we’ll the Biden administration should just ignore the the debt ceiling, but then yeah, then it’s operating in a very legal grey area, or probably a red area or however you describe it, it’s possibly illegal. The other idea is is trillion dollar coin. Have you heard this idea that the because the US Mint has the power to well, the US Treasury, the US Mint can mint coins, it has the power to do that it could essentially meant a $1 trillion coin, like a platinum coin would stay $1 trillion. This was one. This was one idea this was floated over 10 years ago, the last time they had a debt crisis. And the idea was your walk that trillion dollar coin after the Federal Reserve, and then say, Oh, here’s our deposit, can you put this in our bank account? So suddenly, we’ve got an extra trillion dollars. And that’s another thing that the legality of it was probably questionable. And, and look, it doesn’t, it doesn’t solve the problem. And in that sort of getting into the modern monetary theory, approach, where the government’s just printing money, creating new money, whereas what you want to be doing is, you do want to be selling the bonds into the private market so that you’re not adding to the money supply with your fiscal policy. So it’s important to be able to borrow from the market if you are going to run deficits. So yeah, really, really tricky. tricky situation there. Any any questions on that? Arturo?

Arturo Espinoza Bocangel  16:14

Probably the equity or the share market is like, quite volatile at this moment, given this, this issue.

Gene Tunny  16:22

Yeah. And imagine what would happen. I mean, the markets would just go crazy if they don’t resolve, which tends to suggest that they will resolve it somehow, because the Republicans there. They believe in America, they don’t want to harm America, they’ve got donors who, who don’t want the economy to crash. And so I think ultimately, there will be some sort of compromise, but it’s a bit of a game at the moment. It’s brinksmanship, as they call it, they want to get as much as they can. The problem is, and there was a great conversation I had last year in October last year, with Romina Bochy, she is a fellow at the Cato Institute in Washington, DC. And she was explaining how this is, it’s about it’s a spending issue. It’s that they’re spending too much relative to their revenue. And we talked about the structural deficit in the States, as in Australia, we’ve got this structural budget deficit, we’ve got this gap in sort of normal times, or if you think about trying to abstract from the economic cycle, try to control for that you’ve got this gap between revenue and spending. And given that tax increases are unpopular, and it’s so difficult to for governments to raise taxes, and there is an economic efficiency, cost with taxes. So you do want to keep taxes as low as possible. That’s not something they can adjust. But then at the same time, they’ve got these entitlements, such as Medicare and Social Security, that mean that government spending is just going to keep increasing. And it’s a big challenge. And they’ve also got the military now that could argue that I mean, does the I mean, America does spend a lot on the military. I saw the numbers from the US Treasury, the US Treasury fiscal data. I’ll put a link to this in the show notes. And you can see where the the federal government is, is spending its money or spending the money of US taxpayers, I should say, That’s stopped working on my machine. But it was a great chart. I’ll put a link in the show notes that I think it’s about $800 billion or something is it that’s spent on defensive you got it there, Arturo.

Arturo Espinoza Bocangel  18:45

You talk about the national defence? Yes. Is 767 767

Gene Tunny  18:54

billion was that in 2022 2020? Yeah. So there’s a lot there. Now, the US spends much more on national defence than any other country, but at the same time, it is one of the global superpowers and plays an important role in global security. So that’s a big, that’s a big challenge. Maybe you can get some efficiency gains in the Pentagon, there is a bit of concern about the efficiency of spending of defence spending. There’s concerns about the Pentagon failing audits. I don’t know if you’ve seen that John Stewart really ripped into one of the Pentagon officials department.

Arturo Espinoza Bocangel  19:36

So the problem there

Gene Tunny  19:39

are essentially she was asking her well, should we? Is it good enough? It’s been he’s employed, implying is not good enough that the defence department can’t account for all the all the money that it’s spending and it’s failing audits. So then she was saying, yeah, it is a problem. We’re trying to fix it. And he was really going after it. And rightly so they’re spending nearly $800 billion. But guess what, what if you look at the spending data, what I’m trying to say is that it’s difficult, given what they’re spending money on, and the big ticket items are health, Medicare, Social Security defence, you can’t really make the budget adjustments without touching some of those spending areas if you don’t want to raise taxes. And that’s probably not going to happen. But then if the problem that they’ve got in the US is that all of the the way you would fix this is by modifying programmes that are popular or going after the defence budget, and that’s going to be difficult because of the concern about the conflict with grants, growing risk of a conflict with China, so they won’t be able to do that. And politically, it’s very difficult to do anything about Social Security and Medicare, and Donald Trump came out and the other the other month, I think, a month or so ago and said, Look, I’m not going to touch it. So given Trump has declared that other Republican candidates, they won’t be able to, to propose any changes. So it’s, it’s going to be very difficult that they might be able to make some savings in, in other areas, but then you’re talking about things like the Department of Transportation or, or the EPA, other agencies like that Housing and Urban Development, perhaps, if that’s still around. So it is, it’s going to be very difficult for the US. Okay, yeah, yeah, HUDs. Housing, urban development certainly does still exist as an agency. Okay, so that’s the debt ceiling. I mean, we don’t really know how it’s going to play out, I think most likely, they’ll come up with some deal. So they will have to be some cuts to non core, maybe non core is not the right word. But they’ll have to be some cuts to agencies within programmes which are less popular. So that’s what we’ll we’ll end up seeing the Republicans will declare a win of some kind, maybe they’ll get some commitment that over five or 10 years, there’ll be there’ll be particular reductions relative to the baseline. But I mean, some they’ll have to, they’ll have to lift the debt ceiling, because the alternative is just so unknown, and new cause such global uncertainty, really, and potentially, lots of economic, economic pain for the US and for the world, given the role of the US and the global economy. And he thought so to her

Arturo Espinoza Bocangel  22:49

while thinking about the when I talk about when we talk about a ceilings of any timing economics. I think that individuals tend to spend spare, for example, if you say to your friend, you, you’re allowed to spend $100, yes, some maximum money they can pay you in order to pin one, let’s say to buy alcohol or drinks. Of course, the the train is gonna spend $100, I think that kind of ceilings are not optimal in economics, because people tend to reach that point, every time they have the opportunity.

Gene Tunny  23:37

Right. I think I understand what you’re saying. So psychologically, but wouldn’t that be suggesting that there could be a benefit from a ceiling? I mean, I don’t I don’t think that I don’t think there should be a ceiling on on this sort of thing, because I don’t think it’s helpful. And it does lead to situations like this. But if you’re saying like, psychologically, that this is, I think, in some cases, like, if there’s someone who has impulse control problems, then maybe they need to have some ceiling to control their, their, their behaviour. So I think, part of the logic for having the ceiling in the first place in the States and we had one in Australia, I’ll talk about that in a moment. It was the limit the the potential of the President to go and borrow a lot of money because there was a concern 100 years ago, or something that the President could go and borrow a lot of money for the to, you know, fund their own programmes and, and get around the Congress. And so they imposed a debt limit of much lower than it is now because it’s been increased over the years as the economy has grown, the federal government’s grown and they’ve, they’ve have needed to increase it. So you can see why they they might introduce it. The problem comes when you’ve got legislation that tells the government to spend money on other things and the spending is mandatory. There’s not there’s no discretion there. It has to provide the Social Security benefits by law or Medicare based on the legislation. And so you’ve got one active congress this priorities. Yeah, that’s conflicting with the other legislation. So this is why I think there is some logic to this, the concept that the Congress has sent two sets of instructions that are incompatible with each other, and therefore the White House should have some discretion in how in how to deal with it. I mean, I’m quite sympathetic towards that argument. I just think legally, it’s, it’s, it’s problematic, it’ll, it’s most likely problematic. So yeah, but one thing I would have thought I’d mention is that we had this issue in Australia here, about 14 years ago, when I was in the treasury, and this was one of the things I was responsible for, we had to amend the, what was called the Commonwealth inscribed STOCK Act. This is quite amusing. When you think about where federal debt is now. I mean, maybe it’s not amusing, or it’s amusing. It’s black humour. It’s, it shouldn’t laugh about this. But prior to the financial crisis, we only had $50 billion of government bonds on issue, because we’d pay down all this debt, partly because we sold off some public assets or government owned businesses like Telstra. And they set in the legislation in Section five, I think it was at the Commonwealth inscribe STOCK Act, they set a limit of $75 billion for government bonds on issue. Okay. And then as soon as we have the, we get into the financial crisis, and they only I think they set this limit in 2007. Okay, so come, we get to the end of 2008. And this is when I’m in budget policy division in the treasury. And we do the forecasts as to, you know, what’s happening with revenue. And then what’s happening with with the borrowing requirement, I mean, we suddenly had to start borrowing new money, we had to start increasing debt, because we’d have to be running deficits. We this federal government wasn’t running deficits. But now with the collapse in revenue, and the possibility of, of stimulus spending that the government wanted to enact or bring in, then we’re going to be running deficits would have to borrow, borrow money, and add to the debt. And this was going to be difficult, because there was a $75 billion limit. Now, when we did the budget update over the next month or so. And we published it in early February. And it was clear that the debt was heading toward 200 billion. So we had it was 50 billion before the financial crisis, then and the debt limit was 75 billion. But when we did the projections are the forecasts in Wait, oh, eight, early Oh, nine, we ended up figuring out we needed to lift that limit to 200 billion. And so we had to change the the act of parliament, it’s just changing one number, we had to change 75 to 200. But our cause such a political mess, and Malcolm Turnbull, the opposition leader decided to oppose it. And yeah, and the government got it up with the support of the crush the crossbench senators with the greens, I actually remember going with David Parker, who was acting treasury secretary at the time, and we had to go and talk to Bob Brown and his staff. He was he was head of the greens in Parliament House, we had to say why this was important? Well, it’s the same thing. I mean, the government has these commitments, it’s required to spend money on these different programmes. And you then can’t say that they can’t borrow the money to meet that to actually meet those commitments. It’s, it’s inconsistent. It’s not, it’s not right, you should lift the you need to lift the the debt limit, or there’s going to be bad consequences, the government might be able to pay to make payments or it won’t be able to enact stimulus measures. Now, there’s a debate about whether stimulus measures are unnecessary or desirable. And I’ve had some episodes on that. I might link to one with Tony Macon. So that’s an that’s an issue for another another day. What I was just emphasising is that the US is now I think I’ve heard it expressed that it’s the only country which has this actual debt limit, or it’s got this conflict between what the debt limit is and what other legislation tells the government to do. But we did have this in Australia about a well over 10 years ago, they amended it they got rid of this legal was about 10 years ago or so now, but we did have this issue. So I just thought I’d note that was that something I was personally involved in in Costa It caused a little bit of angst at the time, it was a huge political issue. Yeah. So yep. So there’s a again, we’re recording this on the 25th of May. So who knows? It may be resolved by the time this episode is published, but I doubt it. I think there’ll be negotiating right until the last minute and the Republicans will be trying to extract as much as many wins or gains as they can. Now, I’m not saying they’re badly motivated. I think they genuinely believe that there’s too much federal government spending and, you know, they, they do want to make savings there. But, look, it’s so difficult politically, because the programmes they probably need to cut according or to adjust, according to Romina had that great conversation with her last year. They are politically popular programmes, so it’s going to be very difficult. Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  31:00

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, We’d love to hear from you.

Gene Tunny  31:29

Now back to the show. You’ve been looking at what’s happening in Argentina, I saw a news report the other week that the as a central bank have to they’ve had to put the interest rate up to 98% or 90%. Yeah, that’s, yeah. So what’s going on in Argentina? Well,

Arturo Espinoza Bocangel  31:49

I think Argentina in the last decades, is facing these problems, economic problems in terms of inflation, and also exchange rates. Both problems are the most important that Argentina are not able this case I’m an internet is not able to deal with it, or solve it. Currently in Argentina, there they are facing a soaring inflation. Also, there is a what there is a lack of USA dollars,

Gene Tunny  32:26

or on what’s the inflation right there.

Arturo Espinoza Bocangel  32:28

In April, the monthly inflation rate reach 8.4% 8.4%. Monthly. Yes. And the annual inflation rate was more than 100%. More than 1%.

Gene Tunny  32:42

Yeah. And is it the problem we talked about in our episode on hyperinflation? I mean, it’s not a hyperinflation yet. Technically, because then you Hyperinflation is when you have 50% a month, I think, is it just bad government? Fiscal policy? Is it money printing?

Arturo Espinoza Bocangel  32:57

The main one of them employment or mayor permanent is? Lack of fiscal rules at the school? What sorry? Rigorous?

Gene Tunny  33:07

Do you mean, they don’t follow good public finance practices? Yeah. Right. Yeah. Yeah. Okay, I might have a closer look at that. But I was just really stung by the what’s been happening there with the inflation and the interest rate, because it’d be there a country that in the past, they’ve had, you know, problems have borrowed too much money they’ve had to default effectively, and, you know, renegotiate with creditors. Yeah, I’ve

Arturo Espinoza Bocangel  33:35

found also that this inflation, has pushed one in four people into poverty in our country, in this case, Argentina that has battled for decades with high inflation. Yeah. And also, if we had another problem, which is the historical the historical drove, seen last year, which has damaged the Argentinian soybeans because they are the major producer of corns with and soybeans and they rely on on the export of those. Yeah, also, they are not receiving enough use of American dollars. So there was there’s no problem there.

Gene Tunny  34:17

Yeah. The extraordinary thing about Argentina is that it was once one of the richest countries in the world wasn’t it in the late 19th century? During the gold during the gold rush? Yeah. Yeah. And just bad policy over the 20th century. Was it? Was it the bronze who are in Argentina Yeah. Why and Aveda Braun? Yeah, yeah, just really beyond bad economic management. So yes. Anything else on that odd zero on Argentina,

Arturo Espinoza Bocangel  34:50

just to that there is a mediatic presidential candidate named Emily has allowed to burn to burn The central bank so they, they want to Oh, he wants to shut down the Argentinian cell from bang. If he assume HIV takeover the president, she’ll office.

Gene Tunny  35:11

So what did you say he’s a candidate is? Did you mention his party? Did you or?

Arturo Espinoza Bocangel  35:16

No, I haven’t mentioned the party, but he’s leading the boring.

Gene Tunny  35:22

Right. So he wants to get rid of the central bank. Does he want to replace it with a new central bank?

Arturo Espinoza Bocangel  35:27

Probably? Yeah, sure.

Gene Tunny  35:30

Well, given the given the problems that have gone in Argentina, I mean, who knows? I mean, maybe you need some radical approach like that? I really don’t know. I’d have to look more closely at it. It’s, yeah, it’s a bit of a mess. Right. Okay. Well, I mean, luckily, in Australia, and I mean, even in the US, we’ve, I mean, despite all the problems we’ve been talking about, we do have, we have had generally better management than, say, Argentina. But but let’s say they sorted out because you I think you made a very important point that the, the misery that this causes the misery that comes from bad economic policy, was it one in four people who’ve gone and been thrown into poverty? And that’s what inflation does, right? It erodes the value of, of the money that you’re holding? And, yeah, it’s really bad. And if you’re on a fixed income, or if you’re on a pension that’s been paid in dollars, a certain amount of dollars, then inflation goes up, you’re in a whole lot of trouble.

Arturo Espinoza Bocangel  36:33

They’ve retired. Suffering from

Gene Tunny  36:37

Yeah, and I mean, our pension is here in Australia, as suffering from the inflation we’ve experienced. And now we’ve just learned about 22%, or whatever it was increase in electricity bills. Right. Okay. So that’s, that was Argentina. The other thing I wanted to talk about Arturo, is this, this developing market or developing economy, emerging market, debt crisis that we’ve that’s become quite prominent and was talked about at the the IMF World Bank spring meeting that they have in, in DC, and this was in April, but it’s still still going on. This is something that an issue which will be with us for some time. And what we’ve seen is that there’s been this big increase in, in debt of many developing economies over the last decade or so. And China’s playing a part in that. And this whole debate about China debt trap is China and trapping countries, by lending the money and then seizing their assets when they can’t repay as at lending them for and knowing that they’re not going to be able to repay. Now there’s a big debate about that. I might have to cover that in a specific episode, because I know one of the things we’ve been looking at on this show is, to what extent should we worry about China? To what extent is China a threat? What does that mean for the global economy? And I mean, I’ve been trying to get a wide range of views on that. There was a paper in the wall, there was an article in The Atlantic Monthly from some quite prominent academics in the States. So Deborah Browder, gam from the China Africa Research Initiative. And she’s a professor at Johns Hopkins, very famous school over there. And Meg rothmeyer. Meyer, who is a associate professor at Harvard Business School, so an equally famous school. And they argued that the Chinese debt trap is a myth. So I’ll put a link to that. And they go over all the complexity of what actually happened in Sri Lanka when, when the Chinese bank, I think it was took over that, that port. So there’s a bit of a debate about that. But there’s no doubt that there is this developing economy debt crisis at the moment, we’ve had large increases in debt to GDP. And one of the things that the managing director of the IMF pointed out in the, in her opening remarks is that of this very high percentage of well, not well, you could say it’s, it’s high, if you think about what it means. So 15% of low income countries were already in debt, distress. And so we’re talking about countries like Zambia is is one of those countries in various other African countries. And they’re having they’re having problems paying back their debts. And then there’s this need, potentially to restructure their debts reach a new agreement with their creditors. And one of the one of the issues that we’re we’ve, we’ve discovered, and this is something that’s concerning commentators, and it’s also concerning the IMF because they’re caught in the middle of this. The Economist has called this a nightmarish identity crisis. For the IMF, it said it’s caught between America and China, its purpose is unclear, because an increasing amount of the debt that that has been accumulated by emerging economies, it’s coming from China. And that’s, and that was before Belt and Road Initiative. But it’s also associated with this new Belton Road initiative that Xi Jinping has introducing that is introduced, because a lot lot more of it’s coming from China, then it’s, it’s difficult because the IMF when it wants to assist countries, if they get into trouble, because the role of the IMF is to try and guarantee financial stability and one, one thing they do is to provide emergency lending, Short Term Lending to countries that get into trouble. But what we’re finding now is that because China is involved, it’s one of the creditors. Usually the IMF wants the country to renegotiate its, its debts with its its creditors. It wants to make sure it’s sustainable. It can it’s got sustainable debts, that it’s it’s going to be in a good position to to repay the IMF, if the IMS gonna lend to it, it’s going to provide some emergency assistance, that that countries might need to help shore up their exchange rate or to help them actually meet their their debt obligations. Because part of the problem is that if you’re an emerging market economy, you typically have to borrow in foreign currency you have to borrow in US dollars. For example, actually,

Arturo Espinoza Bocangel  41:50

Argentina has received almost 44 billion from the IMF,

Gene Tunny  41:54

sorry, Argentina has received 44 billion Yep. So Argentina is part of this part of the story. Yeah, but what they’re finding, and this is, this is something that is really a concern to the people in in DC and London and the other, the other Western capitals. The problem is that China is playing hardball in the negotiations, and it’s been difficult in terms of the renegotiation of the debt. I mean, support is a China also has just been like any other creditor in the past, like US banks may have been in the past. But it’s essentially saying that if the US or if the IMF is gonna come in and lend money, then they have to lend on concessional terms to they have to share the pain with with China or with other creditors. So historically, the IMF has been superior to the IMF and World Bank, they’ve been superior to other creditors. But now that China’s involved there, China’s pushing back. And yeah, it’s a rather fast, fascinating story. I’ll put some links to these articles from the economist in the FT but possibly paywalled. So maybe I’ll also try to find some some articles that don’t have a paywall. But basically, this is part of this new conflict that we’re seeing between the US and its allies and China. So we’re seeing, you know, this is another area of tension and other another aspect of that, that conflict. That is that’s heating up. So I just found that really fascinating that we do have this emerging market debt problem again, I mean, this was a huge issue in the in the 80s, then it was Latin America. And now it’s a wide range of countries, including Papua New Guinea to our north, apparently, I saw that they’re a country that’s high risk of fiscal distress where they, they need to, yeah, they may need to renegotiate their debts. So it’s countries in Africa and

Arturo Espinoza Bocangel  44:11

in the case of PNG, Australia, would play an important role in case they they fail in some economic indicators, or

Gene Tunny  44:23

Yeah, I mean, we do provide assistance already to PNG and I think yeah, worst case scenario, we would have to do something because it’s, it’s to our north,

Arturo Espinoza Bocangel  44:33

but now with the Chinese presence is that is gonna be different.

Gene Tunny  44:39

Well, I know they’re in the Solomons ought to look at what China I mean, I guess China is trying to get influence all around the Pacific. But yeah, I mean, I think we would try to, you know, make do it. Do as much as we can for to, you know, to help out p&g Given that it’s to our north, and it’s strategically important. I mean, when we fought the Japanese during World War Two, there was fighting in PNG. Right. So that was a battlefield. Okay. So, yeah, it’s strategically important. Now, yeah, I’ll put a link to some information about PNG and this, you know, how it figures in this conflict with China or this geopolitical tension, maybe not maybe conflicts around work, because I’d like to, I’m hoping that that we are going to be able to, to maintain peace. The alternative is just so horrific at the same time, we need to we do need to protect our national interests, and be conscious of any attempts to go against that. Yeah. So yeah, China’s Yeah, the Chinese President Xi Jinping visited Papa New Guinea four years ago, there was no doubt about China’s green ambitions in the region. This is saying that much of China’s promised aid and investment never materialised. So Beijing is trying to ingratiate itself with PNG. It’s a great defund construction of a hospital for PNGs. Military. So I guess it is an issue that we do need to watch. But we’ve got a star, we’ve got historic links with PNG, Australia is very close to PNG, the Australians living over there. And so I’d like to think that PNG is not a country, we need to, to worry about. And I’m confident that maybe there’s a bit naive, but I expect that we would be able to work, we will be very conscious. And we will we will make sure that we don’t lose png if it if it comes to any sort of any sort of conflict with China. Okay. So there, my thoughts are, I’ll put links to relevant data, there’s a great statistical annex that the IMF puts out, and it’s public debt monitor that shows just how much these public debts have been going up. There’s some great material on what’s been happening with the IMF and how it’s facing this identity crisis. And it’s part of this whole. The problem we’ve gotten now is that, well, we had a post war world, which was essentially underpinned by American preeminence. And I’m talking about the Western world, the communist world did its own thing. But then it collapsed in 89 to 91. So that’s no longer an issue. You know, Russia, of course, is a threat and of its, its decoupling from the West, China, I mean, very difficult, because it’s such an it’s a very populous nation. There are great benefits from trade. But there is this growing tension that we’ve talked about on this show. And one of the aspects of, of this tension is in the international financial system, and it looks like the the preeminence of will, the massively important role the IMF and the World Bank have played in the past. Now they’re in competition with, with China and China’s making life difficult for the IMF, it appears from what I’ve been what I’ve been seeing. And the IMS seems to be failing in this mission, really, it’s had all of this additional, what’s got all this capital that will finance or these got these financial resources that could deploy, that it’s been unable to deploy? So the effectiveness of the IMF is in question. So the economist talked about how nearly $1 trillion so 1000 billion has been injected into the funds since COVID. began to spread, but its loan book has grown by only $51 billion. So yeah, the the economist is painting this picture of the IMF is as really not as effective as it can be. It’s and caught between America and China. So Well, I mean, we may need a we may need a rethinking or re creation of these international financial institution. So that might be something we find some international expert on and talk about on the show in the future on on Argentina, we’re going to try and get a local expert on Argentina to talk about that. So yeah, Julie, so that was a bit of a whirlwind tour of some major macro economic issues that we’ve been monitoring. Arturo anything before we wrap up anything else?

Arturo Espinoza Bocangel  49:57

No, I think this Question was very informative.

Gene Tunny  50:01

The one takeaway I would, I would suggest, as a takeaway I always like to make is that it’s so critically important to get those your government budget under control to get your institutions, right. And, yeah, really, really try and avoid accumulating unnecessary debt. I mean, you can borrow to build arguably, but when you’re in a situation when you’re borrowing money just to to meet recurrent expenses, which is essentially what’s happening in the states now. And you know, it’s happened in multiple countries around the world, when you you’re not getting a return on that investment, then you’re gonna get into trouble. And we just see this time and time again, unfortunately. So just the main takeaway, I think, is just be very conscious of, of what you’re spending if you’re, if you’re in government, if you’re a policy advisor, just be really cautious. And that’s, that’s what I’d say there. And that’s what you’d probably expect a former Treasury person to say. So. Very good, Arturo. Again, thanks so much for your time, and thanks for listening. If you’ve enjoyed this, if you have any questions, let me know. I’d love to hear from you. Contact at economics explored. Thank you. Right Oh, thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this. To begin your own podcasting journey. Head on over to


Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business

Full transcripts are available a few days after the episode is first published at Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Podcast episode

French Journalist Guillaume Pitron argues the Digital World is Costing the Earth – EP189

French journalist Guillaume Pitron discusses his book “The Dark Cloud: How the Digital World is Costing the Earth” with guest host Tim Hughes. The book explores the environmental impact of the digital world. Pitron delves into concerns about energy usage, e-waste, and the carbon footprint of the internet. The episode concludes with a debrief of Tim by regular host Gene Tunny on the conversation. 

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

About this episode’s guest

Guillaume Pitron is a French journalist, author and filmmaker. He has written two books, published in some fifteen countries, about the natural resources needed for new technology. He has been invited to share his ideas in the French and international media (Le Figaro, BBC World Service, Bloomberg TV, El País, La Repubblica) and at international forums and institutions (Davos, IMF, European Commission, Unesco).

Link to Guillaume’s website:

What’s covered in EP189

  • Introduction to this episode. (0:06)
  • What is the dark cloud? (1:27)
  • There is no digital life without rare earths. (3:54)
  • What is the real cost of digital technology? (8:06)
  • What’s the cost to the environment? (13:07)
  • What can we do as individuals to make this better? (17:38)
  • Facebook’s Lapland data center. (22:22)
  • Facebook uses hydro-electricity to run its servers. (24:25)
  • What happens if there’s no water? (28:05)
  • What is the future of the internet going to look like in 10 years? (33:18)
  • Are there any governments around the world that are taking steps forward to regulate the internet? (41:02)
  • What can be done to address this issue? (43:59)
  • What were the main takeaways from the conversation? (48:11)

Links relevant to the conversation

The Dark Cloud book:

Digital Cleanup Day:

Jevons paradox:

It appears the Amiga hard drive Gene’s neighbour in the late 1980s had was a 20MB hard drive:

French Journalist Guillaume Pitron argues the Digital World is Costing the Earth – EP189

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Thanks for tuning into the show. This episode features an interview with French journalist Guillaume Pitro, about his new book, The Dark Cloud, how the digital world is costing the Earth. Guillaume visited Brisbane a few weeks ago for the Brisbane Writers Festival. I was in Adelaide when he visited and so Tim Hughes stood in for me and interview VR. I’m very grateful for Tim. First, I’m going to play the conversation between Tim and Guillaume. And then I’m going to catch up with Tim for a debrief on the conversation. I hope you enjoy it.

Tim Hughes  01:27

Okay, so welcome to Economics Explored. I am Tim, you’re standing in for your host, Gene Tunny. And we’re very excited to have with us today Guillaume Pitro. I’ve pronounced that correctly. Very well. Thank you. And Guillaume has a couple of books out that we’ll discuss. But the main one at the moment is called the Dark Cloud. So again, without any further ado, would you mind just letting us give an overview or give us an overview of the Dark Cloud?

Guillaume Pitron  01:56

Well, again, thank you for receiving me here in Brisbane, I am giving Bitcoin, just to introduce myself in a very few words, a French journalist based in Paris, I am an on the field reporter. That’s what I do most of the time, do documentaries and also write books. The Dark Cloud is my second book published by scribe in Australia. It’s basically a worldwide investigation, which took me two years on the trail of my email. Yeah, if I do send an email to you, for example, you’re sitting just less than a minute away from me, where does my email go? What is the real trip of my email between you and I, and actually, the real distance between you and I is that one metre, it’s several 1000s of kilometres, because this data will actually travel through 4g antennas, Wi Fi boxes, but also submarine cables, constellations of satellites, it will be stored in data centres maybe all around the world. So it’s a huge infrastructure that has been built over the last decades by the digital industry, in order to make us live connected. And we are not aware of the physical impacts of the so called virtual life, and also of the environmental costs of being connected. This is what the book is all about.

Tim Hughes  03:18

That some really interesting because I know that this is a subject that has been talked about quite a lot. And one of the areas that I mean, for instance, particularly here in Australia, so we have a lot of rare earths rare metals at our disposal for mining. So some of the areas that you talk about the the environmental cost, the human cost of our digital technology, our use of digital technology. What are the biggest pitfalls or what are the biggest problems? So you talk about, for instance, you know how far that email goes, for instance, what are the costs of us environmentally and a human cost.

Guillaume Pitron  03:54

For the rarest extraction? Yeah, okay. First, there is no digital life without rare earths rares is you find rare earths into your smartphone. And this is the magnet of your phone, which vibrates is made of iron, boron, and a rare earth, which is called neodymium. So you wouldn’t be able to be on silent mode, if you didn’t have rare earths to make your phone vibrates. Basically, this earth is in a way being extracted in Australia, in the Western Australia region. And most of the barriers are being extracted in China, where I’ve been several times I’ve been in rare earths mines and refining areas north of China, south of China for the last years. So I can tell you that extracting these resources is nothing but virtual, everything that is called virtual stems from a scar in the ground which are called a mine. And the refining process of the rare earth is actually very, very dirty. You need to separate the rare earth using water and chemicals. The water which is very polluted is just being rejected directly into, into the nature, it causes cancers, a lot of problems right for the human health and also for the environment. And you have in your phone not only one rare earths, but you have 60 metals in your phone, whether it’s cobalt and lithium and graphite to run the battery, but also a silver, a bit of gold, you have Indium in your phone, on your phone in gym is a mineral, which in the form of powder, makes your phone tactile, so you wouldn’t be able to leave your modern life without having an tactile screen, which is made six to indium, once again, this is being studied in China. So basically, all these metals come from mine, and it comes at an environmental cost.

Tim Hughes  05:45

So is the is the issue of the processing of those minerals. Is that where the impact is largely found mostly? Yep. And so does that vary around the world, I mean, what was the percentage of where these minerals and metals come from?

Guillaume Pitron  06:02

On the initial basis, these metals would come from third world, underdeveloped countries with less strict regulations and the one we would have, if we were in Australia, or in Europe, or in the United States and Canada, we’ve been offshoring the production of this metals for the last decades, we haven’t wanted to have this metals being extracted on our ground, I may make an exception for Australia, because you’re the world’s most producer of lithium. But most of the time, we just have preferred to let poor countries extracting these resources in a way, which is just not consistent with an environmental standards, not sustainable. So that we could just get the metal refined, cleaned. And we could say how we can use this metals for virtual and clean technologies. This is where the paradox is, I wouldn’t be able to precisely give you a figure like in terms of percentage, it depends from a metal to one another. But most of the time, you will find this resources in China, in Burma, in Indonesia, DRC in Africa, and also in South America, for instance.

Tim Hughes  07:12

So DRC, that’s predominately cobalt. Is that right?

Guillaume Pitron  07:15

Yeah, from the Democratic Republic of Congo DRC, you may extract, this is a country, which extracts and trades about 60% of the world’s cobalt production. And you have no smartphone without such a cobalt, which is being used for batteries.

Tim Hughes  07:33

So it’s really the processes in the extraction and the processing of those minerals and metals. That’s the issue.

Guillaume Pitron  07:41

Most of the environmental costs of the digital world comes from the manufacturing of the tablets, the screens, smartphones, sorry, 4 billion units are being used and speak to you right now around the world. Each of them requires such metals. So manufacturing these devices, these electronic devices, is the main cause for digital pollution. This is very first and foremost, a material pollution or resource production pollution.

Tim Hughes  08:14

I think that leads us into one of the other questions which I was going to ask, because part of the this unseen, this invisible side of our digital technology. One thing is the hardware. And then the other one, which he started off with, which is that you know that an email, for instance, appears to be of very little consequence or very little energy needed. However, that’s not the full story. The energy consumption is one of the big issues as well as that right.

Guillaume Pitron  08:40

So once I’ve said that, making a phone stands for the most important part of the digital pollution, that doesn’t mean then that watching video on streaming, or sending an email doesn’t have a cost, right? Basically, I can give you a figure of if you send an email to someone with a big attached piece like one gigabyte, we roughly consider that sending it emits about 20 grammes of co2 into the atmosphere. 20 grammes is as if I was driving 150 metres with my car in for one gigabyte, for such an email. Yeah, so basically, you see, it’s not that much, but it’s not nothing. And if you keep sending emails and emails, and we send every day 363 billion emails, mostly spams, still. And if you add to that, well, you know the costs for the environment or of you know, swiping on a dating site or watching a video, listen to music. I’m not saying here is that we shouldn’t do that. I’m no the Taliban and coming here to tell you don’t listen to music because it has enormous environmental cost. But I’m just saying, even if it’s the short impacts, little impact for each and every tiny action that you have on your phone, if you multiply that by the 4.5 billion users of internet multiplied by the number of digital interaction that they have every day, that starts meaning something,

Tim Hughes  10:12

The invisible part of it is that normally when there’s a resource involved, water, electricity, etc, we have to pay for it, you know, we pay for them as utilities. And, and so it’s clear, if we leave a tap running, we’re going to have to pay for that. So even though it’s, it’s poor management, it’s expensive. And we can see that. So it seems to be there’s a bit of a disconnect with our use of digital technology. And like I say, understanding really the real cost of this because it’s taken up elsewhere. It’s out of sight, all that information. I mean, I was thinking, for instance, I’ve got 20,000 photos on my phone, I don’t need 20,000 photos on my phone, I got 800 videos, I mean, it just accumulates. So that is sitting somewhere that’s taken up,

Guillaume Pitron  10:58

Actually, the photos on on your phone, there are in the cloud. Yeah. So I mean, you believe that these are on your phone, that may be actually, they may be stored on your phone, but they may be on your Apple drive or whatever things and actually you connect yourself from your phone to an account, which is a server, which is somewhere sitting into data centre, wherever it is. So you access the cloud, because you access the pictures, which are once again outside of your phone.

Tim Hughes  11:29

So there’s a there’s a cost to that.

Guillaume Pitron  11:32

The cloud is a data centre, whatever you use your phone, whenever you want to send an email, you’re not sending an email to someone else’s phone, you’re sending an email to someone else’s account, your Gmail account, which is stored somewhere and this person will connect herself or himself from him his phone or her phone to such a server which is stored with other servers in huge warehouses, which are called data centres. And a data centre can be can be as big as dozen soccer size of a dozen of soccer fields. And you find hubs of data centres all around the world. Washington, DC, Sydney, Paris, Frankfurt, London, Beijing, it says a commonly accepted figure that there are around 3 million data centres around the world where all of our data are stored. And these data centres, you know, cannot break down there cannot be any electricity breakdown. Because that means that you can’t access your emails. And you don’t want that right. So if you want to make sure that you get an access to whatever device, whatever internet service for 24 hours a day, you want to make sure that the data centres are running all the time that the data is being replicated in another data centre. So that if the first data centre runs out of electricity, another one is just working instead of the first one. So you duplicate the infrastructure in order to just you know, secure the service continuity of the internet. And this needs electricity to run. And this is where we realise that there’s some points where the cloud touches the ground. And when it touches the ground, it needs to be fed with electricity, which comes either from coal, or from oil, or from a solar power plant or from a nuclear power plant. And this, again, is a cost.

Tim Hughes  13:28

That currently stands at 10%. Is that right? Yeah,

Guillaume Pitron  13:31

10% of the world’s electricity is being used for digital technologies. And that figure is going is increasing at such a fast pace, that there are some, you know, estimations saying that these 10 person may become 20 persons within a decade.

Tim Hughes  13:48

Okay, so it appears to me that like it seems to be, amongst other things, it’s very much an efficiency situate or an efficiency problem. So for instance, like, if emails and pictures and everything was physical, and we could see them, and we were to put them in our backyard, our backyard would become very messy very quickly, we would be compelled to tidy up. This is out of sight. It’s somewhere else we need to as consumers be aware that there’s a cost to this, which is I guess where you’re coming from? Is that right? This is a sure this is a big message. I mean, very much it opened my eyes massively like this. I had no idea. I knew it was something but again, I didn’t really know what understand these terms cloud, etc. A very fanciful or ethereal, whereas in fact yet as you’re pointing out, they’re real.

Guillaume Pitron  14:36

And this is what’s interesting what you’re saying because that maybe that makes me rebound on Education Day, which has been created a couple of years ago by an Estonian lady. She’s an activist, and she created I forget her name right now, but he she created the first World Digital cleanup day. So basically, you’re not going to go into the streets to clean the rubbish on the sidewalk. You’re going to go back to your phone and your computer, and you’re going to follow a course it’s going to take you a couple of hours during that specific day, usually takes place in March depends from countries to countries in my country, France, it takes place in March. And basically, they’re going to tell you how to clean, not your room, or the sidewalk, but to clean your email to clean your cloud. And you’re going to realise that on the rubbish of your cloud, there had been for years old pictures and old videos, yeah, which were still being, you know, kept in the cloud, running thanks to electricity, and you just didn’t know them. So how do you clean that? And how do you actually make a good contribution to the environment by following such a course. But as you said, it’s about cleaning your digital world in a way. The name of the girl is Anilee Overal.

Tim Hughes  15:51

So could you say that again.

Guillaume Pitron  15:54

Anilee Overal, the Estonian militants who created this world digital cleanup day.

Tim Hughes  16:01

That’s really cool. Because it strikes as being an education, which I guess is a big part of your message is like to let people be aware of it, because people will generally do the right thing. If they know,

Guillaume Pitron  16:12

Oh, yeah, we’re turning virtual. Everything is dematerialised, your paycheck in is a cloud. Okay, why not about the cloud, you know, people don’t really understand what that really means. They don’t understand that all these virtual things are really material, very physical. And the first challenge here, as you say, is to educate. And we are just at the beginning of this process, where we just try to understand what this reality is all about. And how do we educate the young generation, the climate generation, they want to do good, they’re on strike on the Fridays, telling me not to take planes and not to eat meat. But actually, they’re spearheading such kind of a pollution. And they’re just not really aware of that. And so the very first challenge is to make people understand that this is becoming big.

Gene Tunny  17:03

Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  17:09

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice, we can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world, you can get in touch via our website, We’d love to hear from you.

Gene Tunny  17:38

Now back to the show.

Tim Hughes  17:42

Part of this is this efficiency, you know, reducing the waste and stopping the habits that produce more waste, you know, so, for instance, if you’re taking photographs to delete the ones you don’t want and try and minimise the ones that you keep thinking about what you send as an email, trying to minimise all of that. And should we be deleting as we go far more because I know that my email for instances and there is this with spam, and all sorts of other things. It’s a massive, I can’t imagine what percentage if it’s easy to put a number on it, it’s okay, if you don’t have one, but spam obviously contributes a lot to it. There’s so much unnecessary information being stored, it’s clear. So we can do some things as individuals, are there any technical or is tech coming to the party with this to try and make it a little bit more efficient.

Guillaume Pitron  18:32

First, where you could do run the next World Digital cleanup day course, maybe all the picture that we’re talking about, I’m just talking about my own example. Yeah, my phone is an iPhone seven, I don’t have much space into my iPhone seven, which is a good thing. So I don’t change my phone. So that, you know, I’m running out of space at some point, so that I have to take my pictures out of the cloud. And I just put them on a hard drive on an external hard drive. And that doesn’t cost much more to the environment that just storing it in this device that puts less picture on the cloud. What you could do personally, individually to, which is a very important thing is to keep your smartphone and other computers as long as you can. Yeah, I mean, once again, my example iPhone seven, I bought it three years ago, it was a secondhand phone already. And for the last three years, I’ve broken it seven times, four times the screen twice, I had to change the battery. And one time I had to change the main button. But that could be repaired. And actually, I still have the same phone and maybe I can keep it for three more years. And maybe once I don’t want it anymore. I can resell it. If we all do this rather than changing our phones on average, every 18 months, 24 months. Yeah, it’s a huge it’s makes a world of a difference because this main pollution impact, which is once again, the manufacturing of the phone, you can developer to issue keep your phone twice as long. So that’s a very important thing to do. And then you ask me another question, which I forgot

Tim Hughes  19:59

well I was going to, part of that was what the tech companies are doing. Like if they’re on board with this, I mean, because clearly, so for instance, in that regard, they’re looking to sell phones, you know, as a business, they’ll be looking to sell their hardware. So, and I know that, in many areas, the quality of many things has dropped in our printers, for instance, like it’s cheaper to buy a new printer than No, nobody gets one fixed anymore, which is an awful waste of resources. And it’s a really bad way of, you know, going around business for us as custodians of this planet, if you like, you know, so is there anybody in the tech space that’s looking to make this better.

Guillaume Pitron  20:39

It starts being something which companies care about, and they care about it, because first, it costs money to change devices every two years, it costs money to run your data on electricity for service company, the digital devices, and running the digital part of the company may account to 30% of the consumption of electricity of such a company. And it’s also becoming a reputational issue you want to have in your company’s new brains from the new data generation very much worried about the, you know, environmental impact of everything they do. You need to have a message here, and you need to do actions. And I’m very much invited myself by companies, which are just like, we want to be better in a way. And suddenly we realise that there is this new chapter of human pollution, which is digital, how do we cope with this? What do we do? And obviously, they’re starting to understand that. And Google and Facebook and Amazon are very much into these things now, because they don’t want to be seen as being ecologically non friendly companies. You know, when you have Greenpeace, you’re flying a huge balloon over the data centres. And the headquarters of Google in California. And what’s printed on the balloon is How clean is your cloud? That is the good for the reputation. So they want first to green, their electricity mix. They want to say, oh, okay, we need electricity. But this electricity come from solar panels and wind turbines. It doesn’t emit any co2. They do offsetting also, which is kind of a problem, in a way kind of a scam. Because you never know, where’s the trees being planted in? I can tell you many more stories about that plane is claimed, basically, yeah, very much. And also, what Facebook is doing is very interesting. Facebook has been moving some of its data centres for European consumers to Lapland, they moved it close to the Arctic Circle to cool your data, because your servers, the servers where your data is, are actually heating to 60 degrees Celsius, that need to be cooled back to 25 degrees. So either you use an air conditioning system, which is very much energy intensive, or why don’t you move the cloud to places where it’s just naturally cold. So your exercise videos of cats and other emails are literally sleeping under metres of snow in the nose of Lapland, where I’ve been? Alright, I’ve been there. I’ve been to send a data centre not inside I was just outside of it. Yeah. But basically, I was where my Facebook account is. Well, the good news for Facebook is to say, well, not only is it cold, so I use less electricity. I don’t need air conditioning devices. But the thing of the thing is, they say whatever electricity I use, it comes from agile electricity plants.

Tim Hughes  23:21

So this is they’ve got one in Sweden. This is face but would you like to tell us more about about that the hydroelectric plants so I’ve

Guillaume Pitron  23:28

been there. I took a train from Stockholm crossed the Lapland in order to meet my friends, because we’re all there. literally speaking. Yeah, there was a lady in the train. And she came to see me she was just she just wanted to discuss her number. She was a tourist. And she said to me, okay, you want to travel? What are you doing here? And I said to her what I was doing and she looked at me she was just like, this is gonna cycle literally speaking, I went to this data centre couldn’t get in and took my stuff on a picture with all this huge warehouse behind thinking my WhatsApp account is here. My I don’t have an Instagram account. Our Instagram accounts are here. My Facebook accounts are here my 600 and something friends are literally here. This is where all of it is. It’s not for the European, the African Middle East consumers, okay for your designers truly, I believe they are storing US States probably in Oregon, where Facebook is. Okay, the data centre from Facebook is in Oregon. So basically there was a story and then I figured out but so the electricity comes from the Lhuillier river. And this is on that reverse that back in the 60s, some electricity dams. Hydroelectricity dams have been built, not for Facebook because no one at the time knew that Facebook would come to an existence, but Facebook is still using this electricity infrastructure in order to actually run my Facebook account. And I found out by travelling through Lapland, that back in the 60s Is the Swedish state had dried up. So small little river for about 15 to 20 kilometres. And this is the driest. This is the longest river ever dried up by human activity in Western Europe, in order to change the direction of the water and feed this hydroelectricity dam, there’s a guy here, a horrible Mo, I had an amazing countering with him because he’s no is in 60s, but even for the times back in the 60s, where suddenly from one minute to the other, this part of the rivers a smaller river just ceased to exist. It’s just disappeared, and is still crying for this Lost River. And is writing is trying to attract Facebook attention, saying, Have you got a single ID about the impacts of running the electricity that makes today your infrastructure work? So that was amazing story that was in place before? Yes, Facebook is not responsible for the, for the building of such an infrastructure. But Facebook does still today use such an infrastructure. And it keeps this river still dried up today.

Tim Hughes  26:15

I mean, I guess, um, any hydroelectric plant that was in Australia, there’s the Snowy Hydro plant down the snowy mountains. I think it’s 2.0. Now, I’m not too sure. But that has been going since the 50s. I believe like a you know, it’s and now they are big, any damage or anything is gonna have consequences, I guess for downstream. It’s the waterways of the world are getting very much challenged by agriculture and the taking of lands and everything. So it’s sort of getting into into different areas in some ways. But what we’re talking about in many ways is resources and not not wasting those resources. And so the amount of electricity used to fund our digital technology, our habits is significant and growing. So water is also one of those resources. Yeah, that’s getting that’s getting challenged. Sorry, gone.

Guillaume Pitron  27:10

No, no, because we are surfing on internet, we are looking videos and streaming. But let’s take it literally these expressions, these phrases, literally, we literally wouldn’t be able to surf on internet, if there was not water for real.

Tim Hughes  27:28

And now when you mean as a resource,

Guillaume Pitron  27:32

as a resource for making the electricity producing the electricity as part of the process as a resource for refining the metals that are being used in your phones and other servers as cranes as a resource for running the air conditioning systems, the data centres, a big data centre may use as much as 600,000 square metres of water every year. So you need such a water for making internet work. And yeah. Is there risks that at some point, you couldn’t serve anymore on internet? Because there is no water?

Tim Hughes  28:06

Well, this is I guess, with any resource, it has to be managed wisely. And with water. There was something with the NSA in America. So we had a quick chat about this before we started recording. So would you mind? Sure, just telling the listeners,

Guillaume Pitron  28:20

the National Security Agency stores that are from everyone. And back, I think it two sons 13 as they started to run their biggest data centre, and they made it run in the city of Bluffdale, which is in the state of Utah. As you will understand this data centre needs water in order to run the cooling systems. The thing is, we are in Utah, which is the secondary states of the United States, some local journalists started to ask the question to the NSA. But what is your consumption of water? The NSA would first reply, I don’t want to tell you because if I tell you how much we are consumed, that will tell you information about how much data store, okay. Eventually, they found out and the NSA replied, and it was clear that the NSA was not consuming that much water, taking water out of the Jordan River, which is just running through Bluffdale city, Byrd suddenly some NGO militants, and we’ve had the moment where it was Snowden hadn’t made the revelations about all this surveillance politican stuff. And they start to think but if the NSA doesn’t have water, there is no operations anymore. What if we strike an action on courts in order to forbid the state of Utah to make water available to the NSA? What if we could afford or to the NSA? Maybe this is the actual tool of the NSA. And if there is no water, we just stopped as a server and stuff, because this is the resource that is being needed for surveillance, which is an amazing story, right?

Tim Hughes  29:58

So with that, so Same with the water would be diverted towards civilian use or towards the NSA is that there

Guillaume Pitron  30:05

was no such a conflict of usages. Okay. So once again, there wasn’t so much question of consumption, so the water would have probably remained in the Jordan River and whatever kind of things. But once again, if the water cannot be fueling the NSA the same way as oil can be fueling a motor of a car. You don’t run this system anymore. And there was a thing a bit crazy ID that this NGO militants were having. They were being supported by also by a local senator or local parliamentary member to stop the civilians literally by by just stopping the availability of such an important resource for such a panopticon.

Tim Hughes  30:48

Right. Okay. So the implications are far reaching, basically. Yeah. Okay. I want to circle back to the question of efficiency. So cryptocurrency? I guess that’s included in our digital technology very much. I know that the the energy consumption for cryptocurrency to perform is really high. I’ve heard statistics that it takes the same amount of energy as Portugal, as a whole country does for all the transactions to happen, especially for the Bitcoin. Yeah, because last year, I think it was last year Aetherium managed to develop a new way of doing their transactions where it’s massively undercut, I think it was 99.9% reduction. That’s right. So that kind of tech, technical, technological improvement, if you like that efficiency, is there anything on the horizon in other areas where we might be able to clean up our act by just reducing the amount of power that we need to run our digital technology,

Guillaume Pitron  31:47

the data centre industry must no respect some specifications, which are being called the P e, u e, the power unit efficiency. So basically, it is a ratio that tells you how much power you need, in order to run a server to run a certain amount of data. And this PUE can be very high, maybe close to two. And then you can go as low as as low as 1.2, which shows that your data centre is kind of more eco friendly. And the more we are going with, you know, investments in researchers, the more the PU E is going down, and the more it’s a good news and the more the industry can say, Look, we’re doing efforts in order to store our data and to run the internet in a more efficient way in a more ecologically friendly way. And once again, this is important that is good. This industry tries for reputational reasons for money reasons to do better, I think is we can take that for granted because we consume more and more and more data. So at the same in the same by the same token at the same time. We keep discovering new ways of using the internet. Yeah, this is new cryptocurrencies. This is maybe tomorrow creating new avatar in the metaverse this in requesting, asking questions to the chat boat chat GPT for Yeah, that’s

Tim Hughes  33:12

the new thing. AI is a massive new one. Definitely arising introduction to this.

Guillaume Pitron  33:18

Yes. And, you know, 10 years ago, we would not have thought that we would be speaking in 2023 about you know, Metaverse and Chad GPT. For what is internet going to look like in 10 years? Nobody knows. But it’s going to be crazy. We are just in the, you know, very early ages of the internet. We’re just turning. We’re just discovering this new technology. Where will it take us in the future? I don’t know, what I’m absolutely sure about is that is going to make us produce more and more and more data. And this is what a techno profits from the Silicon Valley, an American techno profits, cause the Internet of Everything is advocating for the Internet, everything, the internet, the internet of everything is basically we’re going to connect everything, my glass will be connected, your body will be connected with sensors, animals will be connected trees will be connected, we’re going to connect everything because everything that is connected, produces information, produces data speaks to someone else, or some or something else, which is connected. And that is information, which is money and which is power. So we are in a world where on one hand, technologies are getting much better, and much more efficient, very good news. But on the other hand, there is a rebound effects. Oh, because I don’t have any impact on the internet because for each data I produce, it has less and less impact. Why don’t I just you know, produce and consume more data. And the other dynamics here is the fact that in the next 15 years, humankind with will probably produce and consume 50 times more data than what it does today. So there is a race here between the tech nology, which is getting much more efficient, and the fact that our usages of such technologies are getting exponential. So this is where the big story comes. figures tell us that in the next 10 years, the 10%, electricity consumption of the digital world might become 20. And the four persons of co2 emissions, which is more than planes might become eight persons. Yeah, I’m not sure. But if these figures are true, that means that the race is being lost by the technology, and that we consume more new data than the technology is able to offset them in a way,

Tim Hughes  35:35

how much difference can we expect to make through changing our own habits? Like is that just not going to be enough like, because I can’t imagine the way that you say that the way that data is coming to us, it’s coming more and more from different directions. It’s unmanageable, in many ways, on a personal level, to sort of having a habit all in order. What’s the best we can do here? I know, we know, we sort of touched on this week we go back to it. And do we really have to depend, for instance, on the technology changing to suit us, you know, like, rather than us changing our habits to try and manage that amount of data.

Guillaume Pitron  36:12

You’re asking me a difficult question. Yeah. And I wish I would be able to answer to you in a clearer way. But when I look at the way we are using Internet today, when you want to look at the ways young generation is spending, its time, you know, sticked to talk in other kinds of devices. I don’t think there is anything here that relates to the very basic wisdom we should be having while using such devices. And I don’t think any of these new technologies are being offered to us in the future. Whether it’s Metaverse new cryptocurrency is the niche, next version of chat boat would make us use the internet in a more sober way. So I’m a bit worried in a way that we behave like child’s in front of this technology were so much impressed by what they can do. And we don’t want to change our habits. Now, there are limitations, which are starting to appear into the debates, limits to the way we will be using internet in the future. The first one can be ecology, as I speak with you right now, okay, so whenever I am on such devices, I have an impact on the planet. So that may, in the future, play a role in changing your habits, first and foremost, keeping your phone longer. Second, is democracy. We have seen states, including in Europe, trying to, you know, frame the use of certain social networks, because it spreads hatred, because it’s pray to fix news. And we want to protect a beautiful value, which is democracy. So you want to make sure these social networks don’t go too far in the face of such a value, which is democracy. And there’s certainly mutations that I see coming, right now is health, whether it’s your physical health, spending your days on your couch, watching a video on your phone, or whether it’s mental health, and we can’t count today, it’s the number of scientific studies, which are being produced, telling you how that much affects your attention capacities, such tic toc and other kind of things. I would like to believe that ecology, health and democracy may be some hurdles to just keep using these devices, without any real thinking about the impact that they may have. That makes a

Tim Hughes  38:43

lot of sense, because it can feel very insignificant as to what your own contribution might be to a solution such as this problem. But the reality is that we shouldn’t underestimate market pressure. So you know, companies, individuals, demanding or asking of the tech of the companies who are providing the services in this hardware, that they’re not happy with it, they’re not okay with it, and they want it to change. So that kind of pressure coming from the bottom up, is quite likely the thing that will most likely change what happens,

Guillaume Pitron  39:15

I very much agree with you. And we live in such a contradictory age in a way because on one hand, what I’m telling you, in my view, make sense is debatable. But I think we know we can understand this message. And on the other end, everyone understands that the country which in the future will be the most powerful in the cyberspace, cyberspace will, you know hold many strings of the future of geopolitics. So if you want to keep running in this race that we’re all watching right now between the United States and China, you need to be up to date with these technologies. 5g has come to France. And there’s not been such a big debate over the impacts of the environment of 5g antennas. The French that said, but we need to have our own 5g devices. Why not because they know what 5g will be used for. We have no ideas or roughly an ID. But because we don’t want to have Chinese 5g networks installed in France, with potential spying capabilities. So it’s all about geopolitics, accelerating towards the 5g is just because you want to remain independent, sovereign, technologically, independent from the countries, and you will still want to play an important role in the future of geopolitics. So, in a sense, what you were saying just a minute ago is so interesting, because we are codes in this contradictions involved in makes sense, but geopolitics. And independence from other powers makes a lot of sense, too. And I would like to be Macomb my president, or I would like to be Albin ease, and be able to see clearer in the future. How do I make a choice between these two contradictory messages?

Tim Hughes  41:02

That some as funny because that leads me into volley one is going to be one of my, my final questions. So I appreciate the time you’ve given us today. Is there any other any governments that are doing anything in this space, are making positive steps? In my view, what usually happens is what we mentioned before where it’s like, it’s the pressure from the voters, the people at the market demand, you know, that is often the most powerful things. And I think governments around the world are struggling to keep up with this, the speed of this technology. So things are being implemented before legislation can catch up with it. But are there any governments around the world who were making steps forward to try and take responsibility for the direction that this is all going in

Guillaume Pitron  41:45

from an environmental standpoint? So

Tim Hughes  41:47

all all of it really like? Health? Because I think the health perspective you mentioned is really, really valid, because the health implications from this are really quite strong, mentally and physically.

Guillaume Pitron  41:57

I have in mind the example of China, where, you know, there has been some regulations enacted by the state saying that when your Chinese teenager I think I’m not sure when you listen, under 1414, one four years old, you don’t have the right to use tick tock more than like 40 minutes a day.

Tim Hughes  42:17

And is that a regulated it within the household? Or is it on the devices? That’s I wouldn’t be able to tell you because there’s a parent, I know how challenging it is, but it’s not that they can’t be done. But I know, there’s challenges

Guillaume Pitron  42:30

the fact that the state says so in a know how the SLO is being respected. Yeah, tells you something about how the Chinese government can care in a way about the mental health of the young saying, all right, it’s fine to a certain extent with after that, you might get into trouble from mental viewpoint. In the United States, an average a young in the United States is spending seven hours and 22 minutes on internet every day, outside of school. So I would probably mention the Chinese state in terms of environment, the French are doing something right now they have passed a law, which is the first law in the world. I don’t say that they could infringe on here. But basically tackling on a general manner, globally is a question of the impact of internet on the environment. And so there have been many things being decided, whether it is that, you know, the tech companies must inform their consumers about the number of data that have consumed and what it means in terms of co2 emissions. There are some specifications to the data centres, and all this kind of thing. So that is, I think, a good thing that’s just starting, mostly North European countries, Germany are very much in advance when it comes to regulating such kind of ways of using internets, including on the environmental angle. But for the rest of the world, this is just an unknown subject. Yes.

Tim Hughes  43:59

And then that’s good to know that those things are happening in those countries, which is, which is a good start. And I guess it’s sort of points towards the fact that whatever needs to be done, clearly hasn’t been done on any level at the moment, just yet. But whatever can be done. Well, one of the things I guess about this as building awareness, which is what you’re doing is educating, making people understand what the issue is, and what the implications are around the world. The problems with the environment and the human costs that come with this. So that then we can take responsibility for this individually and as communities and countries etc.

Guillaume Pitron  44:36

Yeah, and this is why I quote Stephen Hawking in the beginning of the book, when he says the future is a race between the growing power of technology and the wisdom with which we’re going to be able to we’re going to be able to use it. And the such wisdom can only start with understanding with education. It’s a paradox that the knowledge economy and the knowledge technologies don’t make you knowledgeable about the way the work kind of products is going to take years before we understand all these technologies, which are being up in the air, or donor their feet buried into the ground in the form of wire networks, or laying in the depth of the oceans, in the form of submarine cable optics is going to take years before we really, you know, put some names figures and descriptions over this Leviathan, which we just don’t have an idea of because we haven’t sensed it with our senses. It’s huge battle coming in here, in order to to understand that enormous ecological challenge coming for the decades to come.

Tim Hughes  45:44

Well, that sounds like a good place to wrap this up. Do you have any further closing comments on that gear?

Guillaume Pitron  45:51

Pretty much. I don’t want to be looking like someone was coming to make lessons of normal. Because I use internet every day. I need internet’s to write my books. And I need you to podcast what I’m talking to you about. So I’m going to tell you, you know, you should feel guilty whenever you open your email account, or whatever kind of things. That’s not the position I can hold. And I really would like to make you understand that I’m adopting every day myself, I’m questioning myself all the time. But I keep always in mind this ID, this which is new to us, which is that whenever we will use internet in the future, we’re going to have to make something which we have never done, which is a cost benefit analysis.

Tim Hughes  46:38

Actually, that’s a really good question that I will put to Jim, because that’s his area of expertise. And so the book that you have is the dark cloud. Yep. And that’s now available, we’ll link to everything in the show notes, with some of the things we’ve talked about. And the Estonian activist will make sure she gets a link there. And you also have the rare metals war. So you have you’ve got my first book published was truly a couple of years ago. And I just want to thank you for the work that you do. Because I think it’s so important, you know, and it’s so easy to not be aware of this, I for one was somebody who had a feeling you get a general feeling that things aren’t always as they appear, and that there’s a cost. But thank you for bringing to light, the cost of our digital technology. And also, I would encourage all of us to have these conversations more and to know that it is something that will grow. And that we have a responsibility as we’re here now on this planet to ourselves and future generations to try and sort out this issue sooner rather than later. And if that then comes to how we might vote and what we might do with our personal practices with digital technology. We have the power. We have the power, we have the power. So Graham Photron. Very, merci beaucoup. Merci. Merci. And and thanks for everyone for listening. We’ll have everything in the show notes. And we’ll look forward to seeing you next time. Pleasure. Thank you.

Gene Tunny  48:11

Tim, he is good to be chatting with you again,

Tim Hughes  48:14

playing good to be here, Mike.

Gene Tunny  48:15

Thanks for filling into me for the conversation with Guillaume that was, that was great. I really appreciated it. You had a good conversation with Gam about his book, The Dark Cloud.

Tim Hughes  48:27

Yes, it was fascinating. I really enjoyed it really enjoyed it. Thanks for giving me that chance. And

Gene Tunny  48:32

overall, I mean, how do you think? Or how do you think it went? What were the main takeaways for you?

Tim Hughes  48:39

I was fascinated by what he had to say. And I really appreciate the fact that he was able to bring attention to this issue, because it’s clearly a big issue. And it’s growing. And I thought it was a really good thing to talk about. And to continue talking about because no doubt this is an ongoing problem that we need to work with.

Gene Tunny  48:57

Yeah, it’s important to raise this as an issue. It’s still unclear to me exactly how big a deal this is and how much we should worry about it. I guess what he’s highlighting is that the digital world is not necessarily providing the environmental benefit that people 30 years ago or 20 years ago may have thought it was we moved away from having paper, you know, paper based offices and, and also having more services delivered online rather than us having to travel somewhere or, you know, travel or conferences or whatever. So he’s highlighting that this increasing digital footprint that’s having an environmental impact. I think that’s an important point. It’s still unclear to me exactly. How big a deal this isn’t how much we should be concerned about. I mean, clearly we should be concerned about environmental damage, environmental impacts, and we have various regulations that are that are at attempting to resolve those. There is an issue with climate change, of course. And we know that internationally many countries aren’t really agreeing to on or they’re not they don’t have the framework or the policies in place to really do much about that. I mean, there’s a lot of talk. There’s not a lot of action. Yeah. So that’s, that’s possibly an area where you could argue that better policies are needed. You know, in other cases, there is, well, at least in Australia, there’s very stringent environmental protections. I guess the issue is, well, what if they do you know, that’s what Guillaume was talking about mining in the impact of mining in emerging economies, wasn’t he? So there there are issues. And so perhaps that’s something where it’s worth focusing attention on. And there needs to be there could be some international pressure to improve conditions in those those countries. Did he mention Congo? I’m trying to remember now. Yeah,

Tim Hughes  51:01

he mentioned DRC. And cobalt, most of the cobalt seems to come from there. And without a doubt, it’s the processes with getting these rare earths out of the ground, that are the issues, environmentally, and the human cost of that. So there was really, I mean, I thought it was very clear that there was some big impacts from our digital technology, our digital habits, that we should be aware of. And that can be improved on that was the big, I thought that came over really strongly. So just to repeat some of the figures, he said, 10% of the power that we use currently is running our digital technology. And that’s understandable, there’s going to be an amount that goes into it, we’re highly linked to the internet, really dependent on the all of this new technology. So it’s not surprising that there’s a cost there. However, the rate that that is expected to increase up to 20%. Within the next decade, it currently accounts for 4% of the carbon emissions, and that’s looking to double as well. So this is the tip of the iceberg in the way I guess, there were two main areas that I could see where this inefficiency was a problem. One was in the use of electricity with storing data and unnecessary data, which is, and it was something we were talking about a little bit before we did this wrap up. It’s unknown, I guess as to how much of this data that’s being stored currently in 3 million data centres around the world that Guillaume mentioned, how much of that data is necessary or not, which is, you know, can update for conjecture. But I think personally, we could all see from our own habits, there’s a lot of data that we have, that has been saved, that’s completely not necessary. So there’s an efficiency problem there for sure. That can be improved upon. And whether, you know, for any of us to go through our phones, or whatever storage, we have to retrospectively go through our photos videos is a daunting task that is unlikely to happen to be fair. So if technology can come to the help AI, with some kind of solution with this, which I know they have, they can detect duplicates, and this kind of thing. So that that kind of technology is already there, technology could hopefully come up with something quite clever to try and either compress the amount of data that we have, which is one possibility, I guess, or to somehow diminish the amount of storage that’s needed, because it’s clearly unnecessary for a lot of personal use, we don’t need anywhere near as much as we currently use. You mentioned before that it’s cheap data is cheap, which I think is great for the consumer. But this is, I think, allowing us to have bad habits of just being wasteful with the amount of things that we hold on to just in case or just can’t be bothered to delete because it’s too clunky or too time consuming currently,

Gene Tunny  53:50

well, I think you made a good point there. It’s too. It’s too time consuming. So therefore, if you’re doing this efficiency calculation, you should take into account the fact that if you were to go and clean it up, you’d have to spend all this time doing so. And yeah, I did mention when we were chatting, storage is cheap. And as an economist, I mean, as long as people are facing the irrelevant, or the proper prices at prices, which fully incorporate all the costs, then what’s the problem? I mean, if we want to have a lot of data stored online, there’s no real problem with that. I guess the issue does come if we’re not properly if businesses and are not internalising all the costs that they’re imposing on society if there are these environmental impacts that aren’t properly costed and then priced into the product so that your look that could be an issue, right? I’m not I’m not denying that. But in terms of the you know, the photos I mean, I don’t know how big a bigger deal that is and how big a part of the problem it is. And this 3 million data centres. factoid, that’s not the huge Google or Facebook data centres, there are 3 million of those around the world, he must be talking about various computers, various servers that are associated with different websites around the world. That must be what he’s talking about.

Tim Hughes  55:17

Yeah, I mean, we didn’t go into any detail of the sizes, but clearly, they vary in size, as some of the ones we did talk about with the bigger ones Facebook. Yeah, it’s an Oregon and was it Lapland I forget now, which country was part of that plan? Yeah. And Finland, one of the one of the colder regions, which makes sense, as far as energy expenditure goes, however, I thought it was really clear, like if that were those figures, as they stand 10% is a lot of power. And so there’s a real environmental impact from generating that 10% of electricity. So I think it was really clear that there were impacts big impacts already, which were only expected to grow. So I think whatever inspections can be done, they do need to be considered important, and also to be done as soon as possible. And but I do think that the big steps most likely will be technology steps, you know, somehow of reducing our capacity or not our capacity, but I need to source so much data. So if it’s a compression issue, I don’t know that

Gene Tunny  56:17

well, there is compression already. I think we’re probably solve the compression problem. They’ve got very good algorithms for compressing data. I don’t know how much more efficient we can get on there.

Tim Hughes  56:28

I mean, I’m coming from a non technical background. So I mean, you know, how, for instance, the initial computers were massive, and they became smaller and smaller to the point we had, you know, a small computer in our pocket that can take cameras has all this capability. That is amazing. Yeah. I don’t know how that happens. I just trust that, you know, it has happened. So I just go with it. And I just wonder, like, you know, hopefully, there might be some future leaps and bounds that we can do in the forms of storing data. You know, if that might be something if we might go through the same process of efficiency and finding better ways to to manage this before it gets more of a problem.

Gene Tunny  57:03

Yeah, in terms of storage technology. Yeah. Yeah, I’m not sure. I mean, I’m not an expert on that. Either. You were talking about the, the size, I mean, the compression comes into it, where you reduce something that is 10 megabytes down to two megabytes or whatever. That’s the compression. So it has a smaller storage requirements in terms of storage technology becoming better and, and cheaper. I don’t know. I’m presuming it will. I mean, I remember, back in 1989, my neighbour, Simon had a hard drive for his Amiga computer. And I think it’s stored a couple of megabytes. That was like a big deal for saw.

Tim Hughes  57:48

And that’s the thing, like, you know, neither of us are equipped to sort of see, I mean, clearly, there were constraints. And there are, you know, people are trying to no doubt make this as efficient as possible. Yeah. You know, so if, in, you know, in the meantime, what we can do, though, which are made some really good points is that, you know, we have a couple of options, you know, to store our photos or videos on external hard drives, which, like you said, rightly, before we started recording again, but that would come at a cost, to create that harddrive, etc. But the point being that, once it’s on that it’s not consuming electricity, to keep it stored, it’s not stored in the cloud, etc. So that’s one of the areas I thought was worth mentioning. And again, the digital cleanup day. So he mentioned, I think we worked out it was Anneli overall, as the Estonian activist, and, again, with whatever is at our disposal, now, we can use that technology or that little bit of time, or like, it’s okay. You know, we do the same with our gay marriage, or whatever storage we have at home, I think it’s okay to put a bit of time into into making our digital storage habits more efficient and less, less cluttered. So there’s good information on what does it digital digital cleanup So if anybody wants to check that out, there’s some good information there. So the other part of the efficiency process was back to what you were talking about with the rare earths and DRC, etc. And that was a big one big takeaway I felt was to hold on to your phone. So that’s in the hardware element of our digital habits, so phones, laptops, tablets, etc. The production of those is where all of this comes into it. And so if we can hold on to our phone, get it fixed. I think GM said he had an iPhone seven, and getting it fixed, meant that he wasn’t then getting the latest one, they’re all perfectly good. I don’t have to have quantum leaps of technology. With these things. You can do everything with, you know, a model that’s a few years old. And so there are definitely things we can do to to help with these current issues and to try and slowed down that dependence on requiring more energy to store and the issues that might come from extraction of these rare earths from different parts of the world.

Gene Tunny  1:00:09

Yeah, I’ll have to look up and put in the show notes. What that the size of that Amiga hard drive was it probably, I think it was a bit more than a couple of media or

Tim Hughes  1:00:19

anything I just said, Jane, are you just thinking about that? You’ve been thinking about that for a while. Sorry. That’s totally fine. I’m used to it. I’ve got three kids. But yeah, so quantum leaps in that regard in a relatively short period of Yeah, exactly.

Gene Tunny  1:00:41


Tim Hughes  1:00:45

That’s another big point, I thought was really interesting was the value that you put on democracy, you know, that we have the opportunity in democratic societies to make change. I thought that was a good point.

Gene Tunny  1:01:01

Yeah. Yeah, I think well, certainly is. Yeah, we hope that the changes are sensible. So I guess the challenge here is to come up with sensible policy recommendations and not just react to the fact Oh, there’s a lot of data, we’re using a lot of energy for the digital world? Well, of course, we are because we’re role online now. So what’s the actual problem? I think we’ve got to make sure the policies are addressed at where the so called market failures are addressed at tackling those who were not properly pricing the costs of, of the environmental impacts. So that’s what I would say.

Tim Hughes  1:01:44

I think one of the main points was this is out of sight. So we’re not we’re not aware of this cost, in power, or in environmental and inhuman impacts. It was just bringing it to the fore to bring it into view, I guess, you know, with with rubbish that we do household waste, etc, we can see that it gets picked up. And it’s it still goes into areas that we may not be so aware of. But we’re aware of that daily. Yeah, contribution to. And I guess this is like there’s a digital landfill that we need to be take some responsibility for. And I guess that was what I felt from from.

Gene Tunny  1:02:24

Yeah, look, I think he makes some good points. So I think it was a good conversation. And from doing the some reading on this, in preparation for our chat, I discovered that there isn’t really a lot of information or a lot of analysis of this. And there’s a great article I found on data that I’ll link to that goes through the impacts of digital technology in it right. And in that they write despite recent progress to improve corporate transparency, there’s still significant data gaps and blind spots and the evidence of environmentally relevant digitalization impacts, which I think is true. So it’s something that further research would be useful on.

Tim Hughes  1:03:04

Yeah, yeah. It’s a big subject, and no doubt one that’s going to stay with us for as far as we can predict at the moment. So yeah, it was it was good to get that perspective on it.

Gene Tunny  1:03:15

Very good. And one thing I liked about his book is he, he does talk about the economics of it. He talks about the Jevons paradox. I don’t know if you came across that I needed and talk to him about about that. But the idea is that as we become more efficient in something, rather than using less of it, we can actually end up using more of it because it’s, it’s cheaper, so electricity as we become more efficient, and well, if we become more efficient with electricity, so the use of electricity, more efficient lighting and refrigerators and washing machines, then those savings we just ended up, you know, getting more appliances in we that gives us some room to to use more electricity. And it can be that we ended up using more sounds like

Tim Hughes  1:04:03

Parkinson’s Law where yeah, we fill up the available space to do whatever we can. So if we have more money, we spend it if we have more, fill it.

Gene Tunny  1:04:12

Yeah, so I’ll put a link in the show notes on the Jevons paradox, which was originally discovered by a British economist Stanley Jevons. Thing was William Stanley Jevons in the 19th century with regard to coal. So I’ll put some I’ll put a link in about that. And that might be a good topic to cover in a future episode.

Tim Hughes  1:04:34

And there was a cost benefit analysis that Guillaume mentioned.

Gene Tunny  1:04:38

Well, I think he was saying that you really need to do a cost benefit analysis on any measures to deal with these issues. Was that what he was saying? Or you’d want to do a cost benefit analysis of our use of digital technology? Now my feeling is, it’s going to come out in favour of the use of digital technology,

Tim Hughes  1:04:54

for sure. And he was very clear with that, that he’s not against it, like he uses it. And so it’s not a question of, for or against, it’s a question of better use of and better practice in how we, how our hardware is made, and, and also being mindful of how much power is being currently used. And to see that, you know, wherever we can be more efficient in that whole process that we do what we can. And that was where the democracy sort of comes in, you know, we can, as voters, you know, this is something through discussions through this kind of discussion. And the kind of, you know, I guess this is the awareness that Guianas bringing to us. And it’s just making sure that we can have these conversations and talk about it so that, yeah, at some point, it can be better, or we can be less wasteful.

Gene Tunny  1:05:48

Absolutely. And I think he does the point that we’re not going to solve all these environmental challenges. If we just move to renewables and EVs, there’s still going to be environmental impacts that we need to think about. I think that’s a that’s a good point. So anything else, Tim, before we wrap

Tim Hughes  1:06:03

up? No, I really enjoyed it, Gene. And thanks again for giving me the guest spot. I really enjoyed it.

Gene Tunny  1:06:09

Oh, of course. Thank you, Tim. And one thing I should note, as you please check out the show notes, I might put in the the capacity of that Amiga hard drive for 1989. I may have underestimated underestimated that but it was very low relative to what they are now is quite incredible. Was it eight or 20 megabytes? I’m struggling to remember, but I’ll do some research on that. Very good. The 80s wonderful time. Okay, Tim? Yes. Thanks for your time. today. It’s been a pleasure. Right. Oh, thanks for listening to this episode of Economics Explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via Or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this or to begin your own podcasting journey. Head on over to


Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business

Full transcripts are available a few days after the episode is first published at Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Podcast episode

Seaweed: the next big thing in sustainable agriculture? w/ Scott Spillias, Uni of Queensland – EP188

Seaweed is being advanced as a potentially important future food source, the greater farming and consumption of which could avoid environmental impacts associated with other agricultural production, especially of beef. Scott Spillias has recently submitted a PhD thesis at the University of Queensland on seaweed farming, and he’s been getting a lot of attention regarding his findings on seaweed’s potential. Show host Gene Tunny and Tim Hughes talk with Scott about the potential of using seaweed as an alternative food source. 

Please get in touch with any questions, comments and suggestions by emailing us at or sending a voice message via What’s covered in EP188.

You can listen to the episode via the embedded player below or via podcasting apps including Google PodcastsApple PodcastsSpotify, and Stitcher.

What’s covered in EP188

  • The importance of plant-based foods in our diets. (1:36)
  • The market for plant-based foods is growing. (9:39)
  • Estimating the environmental impact of food production – the Economist’s banana index. (14:03)
  • Scott’ Spillias’s research on seaweed farming. (27:27)
  • How do you farm seaweed? What does it involve? (30:04)
  • Where can we grow seaweed in Australia? (35:14)
  • Seaweed has the potential to remove 2.6 billion tonnes of CO2 from the atmosphere per year. (40:02)
  • What kind of seaweed is growing in the world? (44:49)
  • How does seaweed farming prevent biodiversity loss and climate change? (49:50)

Links relevant to the conversation

Scott Spillias’s UQ page:

Australian ABC News article on Scott’s research “Seaweed researchers find bright future for underwater crop”:

Guardian Australia article on Scott’s research “Food, feed and fuel: global seaweed industry could reduce land needed for farming by 110m hectares, study finds”:

Economist article featuring the banana index:

A different way to measure the climate impact of food | The Economist

UN and World Bank reports on food and climate:

Chapter 5 : Food Security — Special Report on Climate Change and Land

What You Need to Know About Food Security and Climate Change

Review of scientific evidence on “Risks and benefits of consuming edible seaweeds”:

Please note the key message of the above review:

“If the potential functional food and nutraceutical applications of seaweeds are to be realized, more evidence from human intervention studies is needed to evaluate the nutritional benefits of seaweeds and the efficacy of their purported bioactive components.”

Seaweed: the next big thing in sustainable agriculture? w/ Scott Spillias, Uni of Queensland – EP188

N.B. This is a lightly edited version of a transcript originally created using the AI application It may not be 100 percent accurate, but should be pretty close. If you’d like to quote from it, please check the quoted segment in the recording.

Gene Tunny  00:06

Welcome to the Economics Explored podcast, a frank and fearless exploration of important economic issues. I’m your host Gene Tunny. I’m a professional economist and former Australian Treasury official. The aim of this show is to help you better understand the big economic issues affecting all our lives. We do this by considering the theory evidence and by hearing a wide range of views. I’m delighted that you can join me for this episode, please check out the show notes for relevant information. Now on to the show. Thanks for tuning into the show. In this episode, I’m talking about a bit of a quirky topic with Tim Hughes. My colleague at Adapt E1conomics, Tim helps me out with business development. We’re talking about seaweed. So a little bit quirky. Yeah, but there’s a reason for it. And I might just have a brief chat with Tim about that. Tim, good to be chatting with you. Yeah. Good to be here, Gene. So Tim, we had a conversation with Scott Sebelius at University of Queensland, he’s been doing a PhD on seaweed. And there is a logic to looking at seaweed because there’s this conversation going on about what future food sources are. That’s where a couple of different reasons. So you thought this would be a good topic, didn’t you to cover?

Tim Hughes  01:36

Yeah, I think it’s really relevant because there’s clearly a huge increase in the demand for meat, certainly in places like China, where the the amount of meat per capita has has gone up remarkably, over the last 20 years. And but around the world in general, and this has been well documented the pitfalls and the dangers for the environment, in that mass production of meat. So there’s a lot of plant based foods or, you know, meat alternatives, for instance, that are coming through, which, you know, there’s a lot of good research to show that that can help the situation. Remarkably, and also be good for us. Like, you know, I don’t think there’s any nutritional advice out there that says to eat less fruit and veg, maybe a bit less fruit but on the whole It’s like eating plants is good for us.

Gene Tunny  02:28

Well, according to Kelly Starrett, oh, we’ve got to eat 800 grams of fruit and vegetables each day, isn’t that right? That’s right. Yeah. optimal health. Now that’s, that’s a challenge.

Tim Hughes  02:38

It’s a really good is excellent book built to move has just been out recently. And I think he borrowed that from someone else. I can’t remember who originally came up with that. But it’s, it’s worth sharing. Because yeah, it’s a very simple premise of having 800 grams a day of plant food. And so the premise being is like, because it’s very easy to just go for the stuff you like, if you’re like kiwi fruit, for instance, if you have 800 grams of kiwi fruit, well, you’re gonna get sick of it. So the idea with just 800 grams and not putting any stipulation on what it is, is that people will generally mix it up a little bit, just to get that variety. But if you want a direction with it, the direction would be to get a good array of colours, primarily vegetables, and some fruit and 800 grams a day is a good target

Gene Tunny  03:30

Right, okay. So I thought this would be okay, this is a bit of a quirky topic, but I think it is relevant. And it’s, it’s something that we should look at on this show or consider on this show. Because, well, food security is incredibly important. And this is another way we could help improve food security, I mean seaweeds and other possible source of macronutrients as they call it. So it’s got some protein in it has an ad. And then there’s some mean carbohydrates, I suppose.

Tim Hughes  04:01

Yeah, I’m not too sure if the nutritional constitution of the different seaweeds but I know, they always score highly on the nutritional scores as in, they’re not high in fat, they have no fairly high vitamin content. But it’s what you can do with it. And this is where one of the questions that comes into I guess that there’s only so much seaweed, I guess that in its raw state or cooked state that people would eat, but it’s the opportunity of using it and processing it to create other foods. That is where a lot of the opportunities are. But it’s also where a lot of the questions are as to well depending on those processes. And you know how healthy the final product would be, because any process generally degrades the food quality or the nutritional quality at some point. Our friend Paul Taylor, who we listen to quite a bit he’s he’s got a really cool way of looking at food which is low a chai, which is low human interference and So if it’s an ingredient and not full of ingredients, and it’s generally good to eat. And so when we look at something like seaweed or kelp or whatever, it’s great. But then we do have to really consider the processes that then it might have to go through before it ends up on the plate as whatever it is. Because there’s, yeah, it’s probably reasonable to expect we’re only going to eat so much kelp or seaweed.

Gene Tunny  05:21

Well, well, yeah. So this is what I want to talk about. And think about, because this has been pushed by certain bodies and such as well, UN and other international organisations. They’re arguing we need to, to eat more plant based food, more plants, essentially. And seaweed is one of those potential foods. And so I thought, well, this is interesting. But and, and the reason that these bodies and I’m not saying whether this is good or bad at this stage, the reason that these international organisations are doing that is because they’re concerned about the contribution of, of agriculture currently for the food that it produces the contribution of that to climate change. They’re concerned that well, this is a major source of greenhouse gas emissions, I think it accounts for on one estimate. Well, looks like it’s a bit, there’s a wide range. In the IPCC report on chapter five on food security, about 21 to 37%, of total greenhouse gas emissions are attributable to the food system. That’s a fairly wide range, I guess that shows how much uncertainty there is about all of this stuff, right. I mean, you know, it could be a fifth or it could be over a third, we, we just don’t know, but I guess it’s hard, because you’ve got to think about the impacts on the land and what it means for vegetation, and also transporting the food to all of the, the emissions involved in that. So

Tim Hughes  06:52

Yeah, and the other thing is like, I mean, I think it’s great, personally, because I think any exploration of securing different plant based foods for human or animal consumption is a good thing. And it needs to be, you know, researched thoroughly and taken seriously. But it is interesting that, you know, this could be done on a scale, because it now this is going to have to take a certain amount of space in the ocean. And so that’s going to be obviously a consideration as to where and how, but it’s certainly not beyond the realms of you know, it’s certainly not a barrier, we have a lot of ocean to use.

Gene Tunny  07:32

And this is what Scott’s research is on. So we’ll talk about, we talked, we talked about that with Scott. Yeah. So that was, that was really interesting. So I might just read from this UN report. But what the UN writes are theirs on their website, I’ll put a link in the show notes, alternative proteins, such as plant based meat and dairy substitutes, insect based proteins and cell based cultivated meat, provide promising prospects and are attracting growing demand financial investment and technological innovation. So there’s all of this research going on and r&d into these alternative food sources. Now, we don’t want a situation of course, where the UN or even our own governments tell us you must eat. It’s so you must eat cricket. So you must eat seaweed. We don’t want that at all, where we that we believe in, in freedom and liberty on the show for sure. So we don’t want that. My take on this would be to the extent there is a concern with the existing food system and contributions to greenhouse gases, and we need to do something about that, then the way to do it is get the policy settings, right. If we can get an international agreement on a carbon price, for example, that’s one way that you could do it. If you’re worried about land clearing for agriculture, then you could you could have things like biodiversity offsets, or that sort of thing whereby they have to try and improve the condition of the land somewhere else, or, or try and protect species somewhere else. Yeah, there are these sort of mitigating or offsetting actions that could be taken that we could require farmers to undertake so I think, so I wouldn’t want to have anybody telling us you’ve got to eat this, this seaweed or you have to eat crickets. But it’s about getting the policy settings right and and assuming that there will be action on greenhouse gases and we will be decarbonizing and we there will be changes over the next few decades, then look, it’s fair enough that there are people like Scott researching seaweed.

Tim Hughes  09:39

Yeah. And I think that the market is really strong in determining these outcomes. Like a lot of people want to eat clean, they want to eat healthily. And there is concern about you know, the amount of meat being eaten so, and it’s not to say that meat shouldn’t be eaten. That’s a choice for the individual. But the amount of meat that has been eaten And it’s certainly of question to the environment and also to your own health. I mean, there’s only, you know, there’s only so much meat that we should eat, I guess. And it shouldn’t be a choice. But I think a lot of people are really interested and willing to try these new plant based foods, you know, plant based meats, but especially if the company can show that they’re doing the best they can towards sustainability, ethical farming methods, etc. People care about that. And I think that market will drive the popularity of a lot of this research and a lot of the companies who might come into the market, because there’s a hunger if you like for, for these solutions, you know, a lot of people want to want to see these foods on the shelves.

Gene Tunny  10:47

We are seeing them on the shelves. Now, Coles and Woollies aren’t really the plant based. Yeah, and it’s good, you know, based meat. And

Tim Hughes  10:55

it’s not cheap, you know, which is one of those things that I guess with scale, the price can come down from that, because it’s hard to pay more for a lot of these, these foods, but if they can be really shown to be highly nutritious, and tick all those boxes of sustainability, etc. I think there’s the market will drive the success of those companies.

Gene Tunny  11:19

Yeah. And on seaweed, there was a study I found, while I was preparing for this, that I think there’s some evidence that seaweed can help reduce some health conditions like if you eat enough of it, and apparently it’s in one in five Japanese meals. So sushi, for example, it’s in sushi, isn’t it? So I won’t have the wrap. Yeah. But apparently, it’s in one in five Japanese meal. So they eat much more of it than we do. And I think that’s what Scott’s looking at. Well, what if Western countries started eating? Or seaweed was making the same contribution as it does in say, Japan? Or perhaps China? Or Yeah.

Tim Hughes  11:57

And to be fair, like him, I’m coming from a very, you know, from a Western background, I guess, like, we don’t eat seaweed in our house as a general thing. And undoubtedly, there are loads of ways to eat natural seafood and a really great way that happens in different countries around the world. That’s part of their staple diet. And so in many ways, it’s just being open to try new things. And yeah, and generally, the closer it is to its natural state, you know, the state that it was when it was harvested, it’s going to be better for you. So there are certainly options there that can be, you know, good healthy options for us to use straightaway.

Gene Tunny  12:32

Yes. Look, I mean, this isn’t a health podcast. So I can’t comment on that. I mean, I think that’s probably true. I mean, the more process something is, the more likely it is to be bad for you. And, and this is why that study, if I remember correctly, I’ll put a link in the show notes is saying that, where you have a diet that has a lot more seaweed in it, the people are less likely to have conditions like diabetes, for instance,

Tim Hughes  13:00

I mean, I am coming from my background in the health industry. With this, I do bring some, some background into it. And it’s, you know, it is that thing of like, yeah, if you can eat these foods, or going back to Paul Taylor, you know, low human interference, then it’s generally going to be good for you if you have something like seaweed before it gets processed.

Gene Tunny  13:22

So Paul Taylor’s got the Mind, Body, Mind Body, Brain Project, Mind Body Brain Project podcast, which is really good. We both enjoy listening to it. Yeah, he’s great. Not actually friends with Paul to

Tim Hughes  13:37

say that, because we talk about him often, as we do with several other podcasts that we listen to. So yes, friends, and

Gene Tunny  13:45

we would love to have him on the show. So if you’re listening for and you want to come on the show, and you know, we’d love to have you on to chat.

Tim Hughes  13:51

But it’s back to the good science. That’s so yeah, sure. It’s not advice, but check out. Paul Taylor, and Andrew Huberman is also really good with nutritional based information. Yeah.

Gene Tunny  14:03

Yeah. So I just wanted to in this intro, I just wanted to give some reasoning for why we’re talking about seaweed just seems like a bit of a quirky thing to have on an economics podcast, but there is a some logic to it. And it’s all part of this thinking about what’s the impact on the environment of the food we eat. And the economist, the international newspaper comes out of London, that that had a recent article that I found really interesting, a different way to measure the climate impact of food. I’ll put a link in the show notes, but it’s probably paywalled. And what they did, did I tell you about this they they estimated the impact of food in terms of bananas, so they compared food, different types of food with bananas. Indexing greenhouse gas emissions to a single food gives a sense of how different foodstuffs rank. Unfortunately for carnivores, beef is bad for the environment, no matter how you slice it. Producing one kilogramme of Minsk causes as many emissions as 100 kilogrammes of bananas, call it a banana score of 109. Adjust for nutritional value and Beast, banana score, it’s a hard one to say, boost banana score falls to 50 for one calorie of beef mince causes 54 times as much carbon emissions as one calorie of banana by protein at scores seven. Okay, so it’s that’s a really cool way of looking at I like that. Well, there’s some great charts in the in that article. So it’s worth it’s worth looking at the economist is renowned for coming up with these quirky ways of looking at the issues. So they had the Big Mac Index, I think, I don’t know if they still do it, I’ll have to check. I haven’t read a physical edition of The Economist in years, I get to digitally and just look at the the articles that that are of interest. But they had this thing called the Big Mac Index, which compared the cost of living in different countries based on what a big man Oh, okay. Yeah. Okay, now trying to use that as an indicator of whether exchange rates are overvalued or undervalued. I think that’s what they’re doing, if I remember correctly. Yeah, so they’re good at quirky things like that.

Tim Hughes  16:13

I mean, as for this subject, being relevant to economics, I think it’s really, it’s really relevant, because, you know, the direction that’s going in it is to try and do these new plants on scale, which can absolutely make a difference, you know, to people’s health and to the back pocket,

Gene Tunny  16:32

potentially. So that’s why it’s one of the things I wanted to, that’s one of the things I think we need more information on is just what will this cost? And in terms of calories, I mean, meat is, although it’s it’s, it can be expensive, but it can be a good way of getting your well the protein, it’s a good way of getting protein in whereas how much seaweed would you have to eat to get an equivalent amount of protein? And that’s where I think the problem is that what’s the cost of that? Will we actually want to do it? Well, will our tastes adapt? I think that’s one of the problems with these. Thinking that we could move to an insect based diet or, or a plant or a plant based diet more broadly, I think there are going to be barriers to doing that.

Tim Hughes  17:23

I think it’s only ever going to make up a part of the daily intake, you know, as any food would. Yeah. But certainly protein is one of the hardest ones to fit in like going back to Kelly’s Tara and his book. He talks about 1.6 to two grammes of protein per kilo of body weight. I think I’m sorry, that was Paul Taylor. And but it’s actually it’s comparable with what Kelly Starr is has in his book. Yeah, it’s funny because he is all about grammes of protein, two pounds of body weight, so it sort of flips over the measurements, but it’s quite a lot, you know, I come to get that amount of protein in from food is is tricky. So that’s where supplements can come in. And sometimes that, you know, that’s where the protein supplements are really useful to be able to boost your protein intake. Because it can be Yeah, it’s harder to do with purely food. Do you mean protein powder? Yeah, protein powder was a supplement is a good way to to boost that, okay. And that’s largely from milk, but you can get it from plants and also pea protein. And you know, there’s, there’s proteins from all over the place. Yeah, that will suit pretty much everyone, you get vegan proteins that have been processed in a way that’s vegan friendly. So it is it can be done. But clearly, there’s a process with it.

Gene Tunny  18:42

One other thing I should mention, and my colleague, Steven Thornton has mentioned this to me in the past, and I can’t remember if I’ve spoken with Steven on this show about about it or not. I have to look through the archives. This is pushed to have lab grown meat. Have you heard about this? Yes, the hub, which I think would be great, because one of the problems with the plant based meat is that it doesn’t have the texture or you just know it’s not meat. Whereas this new the lab grown meat, it’s it’s actually me, but you don’t have to raise you don’t need the actual cattle for the you grow it in a lab. And that’s more arguably more humane or, you know, it’s it’s more ethical to do that.

Tim Hughes  19:29

Yeah, there were a couple of I’m going from memory here and the, from when I looked at it, and that was released a year or two ago. I remember reading about there were two main sources, there was a protein that had been isolated, which could be synthesised to be like meat. And so that was like, fairly straightforward. They were growing that in the lab but the other one involved taking cells from a cow foetus for instance, and then growing it from that. So different ethical sort of origins. And also, you know, I think people might be a little bit uncertain about, you know, people still have ethical considerations when they want to have these foods. And so yeah, there was, it was early days in the lab grown meat, and I’m not too sure where it’s progressed to now. But that’s where the plant based meats come in pretty well, because ethically, there’s nothing really that some too funky that’s happened in the origins, because we all care at the end of the day. I mean, I’m sure most of us care about, you know, for instance, if we are going to eat meat that we would like that animal to have had as good a life as possible before it’s been, yeah, mercilessly slaughtered. You know, but because I mean, there are instances, for instance of beef production where the animals never see the light of day. Peter Singer was talking about that recently. Yeah, he mentioned that. And so ethically, yeah, it’s not great. And

Gene Tunny  20:52

doing poultry production.

Tim Hughes  20:54

There’s poultry, I think it was mentioned about cows as well, based on such scale, where it’s just this, they don’t have any outdoor time or space, I’d have to

Gene Tunny  21:04

look into that. I mean, that was not like we do it in Australia. I mean, we have this was overseas, they spend a few months or however long it is in a feedlot. And then before they go

Tim Hughes  21:13

to the abattoir, but in an ABC article,

Gene Tunny  21:16

I’m not sure whether be efficient. I mean, that it anyway, I mean, I’ll have to look into that. I wasn’t aware of that. I know that I think that’s an issue with the chickens, some chickens that

Tim Hughes  21:27

kind of that kind of those farming practices. No. So it is that thing, ethics has a big part behind the meat. Anyway, for sure.

Gene Tunny  21:36

Just on the chickens, the chalks, that’s a really, they’re really, they’re a lot better for the environment than than beef. So if we can switch to eating a lot more chicken, and I like chicken. So I think that’s, that’s fine, that would improve things that would be good for the environment. And so maybe that’s what we do, we see a lot more poultry. But I think the way to do it, I mean, because people aren’t going to follow any directive from the UN, the UN says, oh, you should eat more seaweed or whatever. Not that they’re explicitly saying that, but they’re hinting at that sort of direction, that we should have more plant based food, rather than the government saying you should do this. If we get those policy settings, right, then people will be incentivized, or they will naturally move to food that is better for the environment, if we are properly pricing, the impact on the planet, the co2 emissions, then, as I’ve talked about, on this show, before, we’re going to make sure everyone else is doing it. Because there’s no point Australia wearing a hair shirt, or Australia, or another major agricultural producer, there’s no point us undertaking these measures if if other countries aren’t doing the same thing. So that’d be the one caveat I have on that.

Tim Hughes  22:55

And I think with that, because it’s a similar scenario to coal, for instance, isn’t it? And I think when technology takes you beyond the point, so for instance, when in the instance of coal, when it’s cheaper to produce renewable energy than it is to dig coal out of the ground, then that’s when people will follow suit. And I guess the same would happen with food, you know, food can be produced economically on a scale, that’s healthy, that’s of no great harm to the planet, people will go towards that when it becomes affordable and available enough.

Gene Tunny  23:28

Yeah, yeah, exactly. And maybe that’s what we need to see, to see happen. Yeah, I mean, it may be that there’s this flywheel effect are there are these economies of scale that they discover as they start doing this in, in life on a larger scale with seaweed, I mean, it looks like Scott and people like that are looking into opportunities to where seaweed could be grown. And then there could be a demand for it to industry starts expanding seaweed production, and then their costs go down. And that reduces the price of seaweed over time. And that could help that leads to additional demand.

Tim Hughes  24:06

So I guess, with government, if they were to champion or back those kinds of projects, and that’s where maybe, you know, their biggest input could be, you know, in making those circumstances in those conditions as available and smooth as possible. And that could also attract, you know, new investment into regions. So there’s no reason why not, you know, so governments can be influential in that regard.

Gene Tunny  24:30

Yeah, well, apparently Australia’s got quite a lot of favourable locations for seaweed growing, which is one of the things we learned from Scots. It’s

Tim Hughes  24:37

got a big coastline. Got a lot of a lot of coast.

Gene Tunny  24:41

Exactly. Okay. So not such a quirky issue, after all, but again, I just want to reinforce we’re not saying you must eat seaweed. We’d never say that. We’re saying that this is it’s one of these alternative food sources that is becoming well there’s a lot more interest in it now because have concerns over environmental impacts of our existing food production system? And also concerns about health. And there are people well, particularly rich role of the Rich Roll podcast. He’s a big believer in the plant based diet. Yeah, I’d find it challenging. But I wonder about the nutritional benefits of it, I can’t see how you can have a balanced diet without me. But then again, I’m not a nutritionist, and this is not a health show. And so that could be a discussion. Well, that’s a discussion for one of those shows, or we’re gonna have that discussion. Outside of the podcast in.

Tim Hughes  25:39

I think it’s relevant. It’s okay, like people shouldn’t be changing their habits on what we say. But I think it’s part of the discussion. And as part of that discussion, it’s, yeah, 100% people can generally do much better by eating more plants, you know, like, ritual is a good example of that,

Gene Tunny  25:57

relative to where we are at the moment that if we’re consuming too much, too many too much meat or too much junk in our diet, then certainly swapping that with plant based food or plants or seaweed, for example, or that probably is a good news. Well,

Tim Hughes  26:15

that’s just one of the premises behind the 800 grammes of plants a day is that if you eat that much, then you’re less likely to eat, or have the appetite to have other highly processed junk food around that. So naturally cuts down the amount of processed food that you would have. So it’s fairly, you know, it makes good sense

Gene Tunny  26:35

to him. Very good. Well, we should get on to the conversation with Scott. Let’s do it. We’ll play that. And, Tim, thanks for the conversation again. Thanks, Jim. Okay, we’ll take a short break here for a word from our sponsor.

Female speaker  26:51

If you need to crunch the numbers, then get in touch with Adept Economics. We offer you Frank and fearless economic analysis and advice. We can help you with funding submissions, cost benefit analysis, studies, and economic modelling of all sorts. Our head office is in Brisbane, Australia, but we work all over the world. You can get in touch via our website, We’d love to hear from you.

Gene Tunny  27:20

Now back to the show. God smelliest Welcome to the programme.

Scott Spillias  27:27

It’s nice to be here. Thanks for having me. Of course. Yes.

Gene Tunny  27:29

It’s good to have you on. Tim, came across an article mentioning your work your research work on seaweed recently and thought it would be great to have you on the show for a chat. So Tim, what was it about that article that that interested you? And made you want to chat with Scott?

Tim Hughes  27:49

Yeah, it was really interesting. You know, we’ve talked before about new sources of food for humans or animals or, you know, as a fuel source and seaweed that I’d heard of before, but not spoken about in the scale that you had been researching Scott with your team? So yeah, maybe you’d like to tell us a little bit about what you’ve been doing? Sure,

Scott Spillias  28:12

yeah. Well, I’m doing a whole bunch of work on seaweed farming and trying to understand kind of what the, I guess Sustainable Development implications of farming seaweed on a large scale would be for the planet, you know, how we can use seaweed to address some of the global challenges that we hear, talk about things like climate change, and food security and energy security, things like that. So PhD that I’m just completing now is covers a wide range of topics. But yeah, the article that was published recently, what we wanted to know is we wanted to kind of see what it would look like from a global perspective, if we were to farm seaweed, almost on a similar scale that we use the land to produce things like food, feed and fuel. And so what we basically did was we came up with a few different scenarios of seaweed use, aiming at looking at those kinds of those things food, feed and fuel. And we use a big economic model called glow biome, which is the global biosphere management model, which is located at a Yassa, which is a research institution and in Vienna. And we basically, what that globe globe icon does is it looks into the future looking at population growth and consumption in different regions. And it basically predicts where you would need to grow certain amounts of food or feedstock to match to meet that consumption into the future. And so we made the scenarios we looked at where seaweed could possibly be produced in the ocean, how much can be produced, and then said, Okay, well, what if we were to, instead of relying completely on the land to provide for the growing global consumption, what if we instead use seaweed for some of that supply? And then we looked at how that would affect potentially potentially land use, climate impacts things like that.

Gene Tunny  30:04

Right? That’s fascinating is go Casca. I’d love to ask a couple of questions. One, how do you farm? Seaweed? What does that involve? Because you’ve got seaweed growing in the, in the ocean, but how do you, you’re doing it in a specific area? And do you have a handoff? What’s it involve? And second, what does the research say about where we could grow it here in Australia?

Scott Spillias  30:29

Yeah, certainly see where you can grow seaweed and a whole bunch of different ways. And to be honest, that actually kind of depends on what kind of see where you’re growing. See where it is? A pretty general term, almost as general is just saying, Wait, can we grow plants? So how do we grow plants, you know, there’s 1000s, of different species of seaweeds, and they all have their kind of unique characteristics, both in terms of what we can use them for, but also in terms of what you would need to do in order to cultivate them. And in some, in some cases, seaweed can actually be quite complicated to cultivate, they have pretty complex life histories. But in some ways, they can also be a bit simpler than like terrestrial crops. For instance, you know, on land, if you want to farm corn, you often have to put in a lot of things like fertilisers and pesticides, water, seaweed, if you’re growing in the ocean, you don’t, you shouldn’t have to input any of those things. So basically, all you need to do is put the soil things out there on the line, and hopefully just grow in places where there’s enough nutrients, you don’t need that water, anything like that. So, of course, the kind of complicated thing. And like I mentioned, there’s two main ways. Seaweed is often grown these days, oftentimes, people so in places like Indonesia, or in Africa, people grow seaweed tend to tend to grow seaweeds, and kind of intertidal areas where you can walk out, stick some sticks in the sand or the mud in the bottom of the ocean, but some strings, some lines between them and grow the seaweed on that. That can have some implications for whatever habitat was there before. But there’s a lot of research these days going into floating farms. And this is something that’s already practised in places like China and Japan and Korea, where you actually have kind of floating lines or rafts that are attached to the bottom, and you’re growing seaweed on lines at the surface like that. And that, you know, you can imagine takes a bit more infrastructure. And certainly, if you want to have a platform that’s going to last for a while it can, it can require quite a bit of investment in materials from that perspective. So yeah, so your second question. Yeah, go ahead.

Tim Hughes  32:38

Because that I’m just intrigued by the, it seems like there’s a few different size or scales, that this can be done, obviously. So I think I saw in your article or the article that I noticed your work, the sort of smaller farmers doing what you were saying, like with the estuaries, you know, putting lines out in a in a small way for their own sort of little income, which is great. But I’m intrigued by what the bigger operations would look like. And if that means then that, you know, it’s the shipping free area that you know, I imagined, any shipping going through that would would cause a lot of damage. Is that the case? Like is that is that one of the big challenges is selling off those areas?

Scott Spillias  33:18

Yeah, I’m not 100%. Sure. I think though, there are definitely a governance issue. And that’s something where that was, that’s something that we had, we could definitely learn a lot. So here in Australia, where seaweed farming is almost non existent at the moment, growing but not like, very small. We can definitely learn a lot from places like China and Korea and Japan where they have been doing this for a long time. Yes, you’d probably want to separate those areas in the ocean from things like marine traffic. It’s, it’s kind of an interesting question, to what extent we can integrate seaweed farming with other marine uses, though, and certainly in places like Europe, there’s a lot of work going into understanding how we can integrate seaweed farms with things like offshore renewable energy, recognising the fact that, you know, if we’re gonna be putting more things like wind turbines in the ocean, which is a certainly a growing industry, then if you already have that infrastructure there, why don’t we just string some lines between the wind turbines basically, and grow some seaweed on them. And so I think, for me, that’s pretty exciting. And that’s definitely something that we need to figure out. Because if we’re going to be investing in this industry on a large scale, and figuring out how it’s going to not compete with other marine uses is going to be a big challenge. And I think an integrated way is going to be the best use of marine space.

Tim Hughes  34:39

And what sort of size of those farms in China the the bigger commercial spaces, what sort of area are we talking?

Scott Spillias  34:46

I mean, off the top of my head, but couldn’t give you an exact figure, but they’re very big. So some bays are completely full of seaweed farms and in many cases, it’s not just seaweed farms, but it’s also I like bivalve farms, and sometimes fish farms. But yeah, certainly you can. You can go on Google Earth and look at some satellite images and zoom in on some coastal areas of China, and they are just absolutely full of seaweed farming. Right. Right.

Gene Tunny  35:16

Wow. And what about in Australia? Where could we grow seaweed? Scott? Yeah. So

Scott Spillias  35:22

when Australia those in our analysis, we find that Australia has a very large amount of potential certainly compared to other regions. Some of that might be a bit biassed just by the species that we actually incorporate into our analysis. And also could also be biassed by the fact that we rely on historical observance of observations of seaweeds. And so there’s a lot more kind of science and recording of those kinds of things happening in places like Australia and Europe and the US. But that being said, yeah, there are lots of places and I think we could probably, you know, there’s heaps of different endemic species of seaweed here in Australia. And like I was saying before, there’s a huge variety of seaweed species with a huge variety of uses. And I suspect that for almost anywhere, any coastal area in Australia, you could find a seaweed that would probably grow there. Whether or not it’s the right seaweed that you want to grow for your given market or anything like that may not necessarily be the case. But there’s a lot of seaweed species here and a lot of a lot of coastline. And not just coastline, but a lot of space in our exclusive economic zone. If we can kind of crack that nut of building offshore farms. So yeah, lots of potential. At the moment. There’s a lot of research happening in Tasmania, where I’m based now into growing seaweed, South Australia. There’s a lot in Queensland, it’s starting to pick up there’s a few in New South Wales, but it’s definitely starting to pop up all over the country,

Gene Tunny  36:50

Ron, and once the seaweed that’s been produced in China, so what’s that been used for? What is it being used for food and how and how is it processed? How is it prepared? And I mean, what does it taste like? I mean, if you can tell us something about that. I mean, that’d be great. Yeah.

Scott Spillias  37:08

I haven’t been to China myself yet. But yeah, pretty sure most of the seaweed that’s being grown in East Asia, a lot of its being used for food. So things like noise. So when you buy, you know, your sushi or whatever, that’s probably some of that’s coming from China. Probably some of it’s coming from Korea and Japan. But yeah, I think globally, food is still one of the main uses of seaweed biomass. If you look at places like Indonesia, where the seaweed industry has grown dramatically in the last couple decades, a lot of that seaweed is actually being used. A lot of the biomass is being used for the hydrocolloid industry. So not necessarily for food, per se, but it’s being processed, and kind of thickeners. So like Carageenan are being extracted from it, and used and sold on for incorporation into other processed things. What does it taste like? Yeah, I mean, yeah, like I was saying, there’s lots of, there’s lots of different seaweed species, and they’re all pretty different. And so they’re all processed in different ways and can be used for different things. And I think, for me, that’s what’s really exciting about all this is that, you know, when we think about seaweed, we think about seaweed, as this one thing that really, it’s this huge, diverse group of things. And I think it’s this diversity that we haven’t really, fully come to understand, we have a pretty good understanding of the diversity of terrestrial crops, and things that we can use terrestrial crops for. And I suspect that seaweeds could be just as diverse and certainly if we put in the time and investment to develop, and domesticate different seaweed species, then we might find that they can be incredibly useful for a wide variety of things.

Tim Hughes  38:49

I was gonna ask as well, Scott. So you mentioned there’s a diverse range of seaweed? Do they have a similar sort of macronutrient build up? Or are they all very, very different, but primarily with proteins and say, omega threes, you know, some of these quite expensive, macronutrients to, to grow or to farm on terra firma? What does the macronutrient look like? In seaweed generally?

Scott Spillias  39:17

Yep. Yeah, that’s a great question. Yeah. I’ve only looked specifically at that we use 34 species in this recent study. And we looked at the nutrient profile of those. And we found there to be a huge amount of diversity in those 34 species. And so I suspect, if you were to look at even more than the ones that we looked at, you’d find just as much diversity and it’s also one of those things where, even within a single species, there’s probably going to be a huge amount of diversity just based on the conditions that it’s grown in. The nutrients it has available to it, how much sunlight it gets, things like that. Yeah.

Tim Hughes  39:55

For instance, with in going to windy this algae farm So, that have been done commercially. And omega three is one of the main sort of

Gene Tunny  40:07

that’s the aspirations, right? Yeah. trialling it at the woods group is trialling at the moment there, which

Tim Hughes  40:14

is great. And I’d be able to get that from a plant essentially, or allegations. So the potential for farming for these, you know, harder to produce macronutrients protein, definitely a big one would be a huge benefit, obviously, the the impacts of farming for beef and chickens, etc. That’s one of the issues that the seaweed potentially can help with. And I saw that there was a 2.6 billion tonnes of co2 removed, or that has the potential to remove 2.6 billion tonnes of carbon dioxide from the atmosphere per year. Is that right?

Scott Spillias  40:53

Sort of so in our analysis, that number is coming from we looked at what would be the mitigation potential compared to a baseline of feeding every ruminants on Earth with this diet that incorporated asparagopsis, which is the red seaweed that recent research has shown if you include it in the diets of ruminants, it reduces the amount of methane they emit. Right? Okay, we should definitely treat this number with a lot of caution and understand that, that is a would be a logistically, very difficult thing to do. And, you know, just remembering that, it’s, first of all, it’s gonna be very difficult to grow that amount of seaweed, even though it’s a relatively small amount, especially compared to the other scenarios we looked at. We definitely difficult to grow that amount of seaweed, but then also, just bringing that seaweed to livestock can be difficult, remembering that a lot of livestock doesn’t spend most of its time within feedlots where it can be easy to administer kind of special diets. That also number also comes from this fact that we project that to 2050 and compare it to a baseline scenario. And so in the baseline scenario, we’re expecting that ruminant production will increase drastically over today. And so if there are changes in kind of the amounts of, you know, the rate at which we’re consuming livestock or anything like that, that might change.

Tim Hughes  42:18

Yeah, yeah. Yeah. Cool. Thank you.

Gene Tunny  42:20

So yeah, it’d be good Scott, just to get a sense of what you modelled and the other shifts the changing pattern of consumption. So are we changing? So humans? Are we changing what we eat? Are we substituting are we bringing in some seaweed? And then we’re, we’re taking out some, some beef or poultry, we’re replacing that. And then, I mean, I understand the what’s happening with the cattle. But you know, what’s happening with humans in terms of our diet? What are you modelling?

Scott Spillias  42:55

Yeah, thanks for asking. Yeah, we, it’s a pretty simple shock that we incorporate into our model, we basically assume that every person on earth will consume seaweed out of it, right, or about 10% in their diets. So that’s a huge increase over what most of us certainly in the western world are, are consuming. People in kind of East Asia, probably eat seaweed at the highest rates, and even the probably the maximum would be somewhere around 2%. And so, you know, that obviously represents a huge increase. And we, we justify that in our in the research by making the case that I’m certain we could all incorporate more seaweed into our diets. And that could be kind of raw seaweed kind of in the same way that you would eat it in sushi, right? You’re actually eating seaweed itself. But it could also be if seaweed is used as a feedstock in some sort of industrial process in the same way that we use corn or soy, where we grow those things, and we break them down into their constituent nutrients. And then we incorporate that into a variety of foods. So just like, you know, you go to the grocery store, and you buy, you know, some packaged food, now thinking that it’s full of corn, but actually, it’s like 90%, corn, you know what I mean? And so, if seaweed were to be incorporated in that way, then we suspect that we could get up to higher rates of inclusion in our diet, so wouldn’t necessarily need some sort of cultural shift. But it would require kind of the economics to align. And also those, those processes to be developed to make that possible. Yeah.

Gene Tunny  44:31

And what did you find about the economic Scott? I mean, how in terms of cost per calorie, how does seaweed compare with other with other foods? Are you modelling an improvement in a reduction in that cost over time? How have you modelled that plays?

Scott Spillias  44:49

Yeah, great question. Yeah, we actually, we declined to do that. So it’s a it’s a very simple, a very simple modelling exercise. So we didn’t want Don’t make any assumptions about that just because we didn’t want to make any hard assumptions about we had to make an assumption, of course, because because there is going to be such a diversity in terms of where the seaweed is grown, what kind of seaweed you’re growing, the quality of it, all those things. So we make the very simplistic assumption that in our model, at least, we make the very simplistic assumption that see, we will reach some kind of price parity with the things that it’s it’s replacing. Of course, that’s not going to be true. But that at least gives us a very general baseline from which to start to understand kind of some of these impacts.

Gene Tunny  45:36

Right. So at the moment, would it be more expensive? Is that?

Scott Spillias  45:39

Probably yeah, at the moment, it would probably be more expensive. And I think, certainly in places like Australia, yeah. But we suspect that as as we develop this industry, and it becomes more sophisticated than that price may come down. And it also just depend on to what extent governments around the world want to support these industries. And if they get subsidies, or in the same way that we subsidise farmers all over the world, in different places.

Tim Hughes  46:05

You mentioned corn before, Scott. So are we talking that this may be possible to replace some high fructose corn syrup? Is that one of the possibilities for seaweed?

Scott Spillias  46:17

I can’t speak exactly to that, because that’s not my area of research. But I suspect it could. And there are certainly lots of people who are researching with different things we can do with seaweeds. And we’re finding that they’re very versatile in terms of what we can use them for. We can turn see we did a whole bunch of different fuels, we can create ethanol from seaweeds the same way we can. Corn. So yeah, it wouldn’t surprise me if we can also create high fructose seaweed syrup.

Tim Hughes  46:45

And I just want to seem like a silly question, because we’re talking about seaweed here. But are there any freshwater varieties that may be viable options? Or is this all purely saltwater plants? No, yeah, that’s

Scott Spillias  46:56

a great point that there’s definitely there’s heaps of freshwater allergies. And again, that’s not my focus of research. So I don’t know. But yes, there’s lots of freshwater algae that could almost certainly be explored for these kinds of different applications. Yep. Cool.

Gene Tunny  47:12

And do you know if anyone is making ethanol out of from seaweed? Scott, are there any? Any?

Scott Spillias  47:21

I couldn’t say if there is a lot of commercial, commercially viable operations, but that it’s a very active area of research. Not just ethanol, but also like Bio Oil. And people are looking at making aviation fuel from seaweeds. Yeah. So yeah, there’s been there’s a lot of exploration happening.

Gene Tunny  47:42

Right. And so it’s got potential, because there’s just so yeah, there are so many places we can grow it, I suppose, aren’t there, if you think about it.

Scott Spillias  47:51

Yeah, and some spirits species are just very fast growing. And so you can get really high yields. And because there are so few inputs, depending, you know, if you’re in the right place, then you could get really high productivity, really high biomass.

Tim Hughes  48:07

Can I ask Scott as well. So Australia, certainly has had a history of introduced species wreaking havoc on the local landscape, introduce plants have just run riot and animals etc. are there any risks with seaweed, but the same kind of issues are being introduced to areas where there may not have normally been, you know, the impact on you mentioned before that the onScale? Clearly the be an impact of some sort. But as far as displacing natives, plants and native marine life?

Scott Spillias  48:40

Yeah, absolutely. That’s a very real and serious concern that we should take very seriously. There have been heaps of seaweed introductions all over the world that have led to exactly that. Even just this, this asparagopsis that is becoming very interesting and popular and exciting because of its anti myth, antigenic properties. A species of that has been introduced in the Mediterranean where it’s highly invasive. So I think any successful implementation of seaweed farming will be done using locally endemic species, and will not include spaces that are being shipped in doing that could be could run a huge risk when there are also examples of introduced seaweeds being cultivated safely. However, you know, you just run a huge risk in doing that to introducing things into the marine environment that could cause lots of problems.

Tim Hughes  49:38

And is there any governance internationally at this stage with with cultivating seaweed

Scott Spillias  49:43

in terms of like preventing those kinds of things? Yeah. The governance around this is pretty weak at the moment. I can’t I don’t know a whole lot about the international space. But you know, in Australia, I’ve spoken to a bunch of folks in the industry here and in government and it’s Generally recognise that there’s a lot of work that needs to be done in terms of getting the government governance in place. So that, you know, we’re making sure that we’re not running the risk of causing environmental damage, but also just making sure that we’re making it accessible for people to get started in this industry. I’ve also heard from people who are really interested in growing seaweed in whatever place they are, and they’re finding that there’s just so much red tape associated with it. And even just in Australia, state to state there’s a lot of there’s different regulations, you know, I don’t think necessarily that we should make any kind of fast track kind of thing for putting seaweed farms into the environment. Because I think we do need to be very cautious about where we’re putting them. And I think there are going to be places that are going to be much better than others. And there is damage that can be done from farming seaweeds in the marine environment. But I think we do need to make it possible for people to get involved. And I think there’s a lot of potential for good to come from them. So hopefully, we can start to introduce or just get our heads wrapped around how we can allow people to get into the market.

Gene Tunny  51:08

So Scott, the takeaway from your study, is it that, and this is from a UK, the UQ media release. So basically, it says expanding global seaweed farming could go a long way to addressing the planet’s food security, biodiversity loss, and climate change challenges. So I understand the food security, because there’s another potential food source, climate change challenges. Well, that’s from the seaweed being used as feed for cattle. What’s the How does it prevent biodiversity loss,

Scott Spillias  51:46

basically just comes from the assumption that if we’re, if we’re farming more in the ocean, then we hopefully won’t need to farm as much on land. And so we already know that land use change is one of the main drivers of biodiversity loss on lands when you change, of course. So if we can relieve some of that pressure, then hopefully we can maintain some of those last remnants of pristine habitat for land. ecologies, that’s that’s also a strong assumption that we shouldn’t. We should also question, you know, if we’re growing lots of seaweed in the ocean, there’s no guarantee that we’ll be growing less things on land. But we’re hoping that that’s what does happen. But we also need to be careful about, you know, growing seaweed in the ocean, we’ll also have biodiversity impacts. This is a hotly debated topic at the moment in the space and the extent to which seaweed farms will provision habitat for marine organisms. I think most people accept that seaweed farms will be their own unique habitat, which may harbour some things, certainly things that grow on seaweeds, but those aren’t necessarily going to be valued by people who are growing or farming the seaweeds. You know, if you have fouling, you have little things growing on your seaweed that could decrease its quality as a as a product. But then there’s also the hope that, you know, if you have lots of seaweed growing in the in the marine environment, it could be habitat for fish, which could improve fisheries. But we haven’t really come to a firm conclusion on the extent to which that happens. And also, it’s just going to depend on where you put these seaweed farms, you know, if you’re putting a seaweed farm in a highly productive area, that’s a place that’s already highly productive, it’s probably going to make it a little less productive, because it’s seaweed farmers are going to be a simpler kind of ecosystem in the same way that, you know, a tree plantation on land is a simpler ecosystem than an old growth forest. But if you’re putting a seaweed farm in a place where there’s not a lot going on already, then it could, it could provide some biodiversity benefits. So there’s definitely a lot more research that needs to be done in that space.

Gene Tunny  53:54

Right. And one final question for me is, is seaweed more climate resilient? That I know there’s a concern that with climate change that will affect the yields of some crops? Is, is this a reason that we might want to switch to seaweed? Yeah, that’s such

Scott Spillias  54:11

a good question. That’s something I’m really interested in. And I don’t have a good answer for that, either. i My suspicion is that might be the case. At this point, it’s just speculation. And that’s something I’d really like to look into further. You know, when I think about some of the main threats from climate change for our food systems, you know, thinking about droughts or thinking about floods, both of which have major implications for growing crops, neither of those things are going to have much impact in the marine environment. If you have a food system that’s diverse, that incorporates terrestrial production and marine production, my feeling is that that’s going to be a more resilient food system all around. So because if your crops on land are suffering, maybe you have your crops in the ocean that are doing okay, now, there threats like marine heat waves can impact seaweeds negatively their diseases, seaweed diseases that are exacerbated by rising temperatures. But but same so if we have a marine heatwave in the ocean that’s affecting our marine crop that maybe there’s a, we have a chance that our terrestrial crops are doing okay. So my feeling is that having more diverse food systems will provide climate resilience. That’s not to say necessarily that seaweeds are more resilient than terrestrial crops. But I think the combination of both is the key here.

Tim Hughes  55:30

I see on that note, Scott, I know, historically, they’ve been kelp forests disappearing from a lot of places where they’ve been for many, many years. Is there an opportunity with this research to replace or replenish those kelp forests?

Scott Spillias  55:45

Yeah, there’s a lot of research going into that right now. Here in Tasmania, that’s very, very active, hopefully, I guess is the short answer. Yeah, we know that. Warm water is not good for many kelp species. And that’s why we’ve lost a lot of kelp. But we also lost a lot of kelp to other kind of human pressures. But yeah, we’re there’s a lot of research into that space, since hopefully, we can keep kelp kelp forests into the future.

Tim Hughes  56:09

Yeah. It’s it’s great research. And it was one of the things he had going back to your original remote, trim it to the article is, it’s so good to see. Yeah, well, we might be able to get a more diverse range of food and is potentially a very healthy food as well, like, you know, it’s a natural, it’s a natural plant. Really interested to see what happens next. So where can people go to find out more about this guy?

Scott Spillias  56:36

So yeah, I would just say keep an eye out for the news. There’s a lot of really exciting work being done in this space by not just me, but many other collaborators, University of Tasmania is doing a lot of really interesting work. That’s the thought I guess all I would say on that. Well, we’d

Tim Hughes  56:49

love to have a chat in the future as well as things develop, because it is a really interesting space. And yeah, it’s, you know, we wish you well with it, because I think it’s a really a great area to be researching. And hopefully, it’ll come to some kind of commercial fruition at some point not too far away. Yeah,

Gene Tunny  57:07

I was just, I was wondering, just finally, another thing occurred to me with the harvesting of Scott, how do you do that? Is that by hand? Is it manual?

Scott Spillias  57:17

It’s done in a few different ways. I think, these days, a lot of it is being done by hands too. Yeah, I think there’s probably a lot of room for improvement or automation in that in that in that area. Just off the top of my head. I’m just thinking about where how it’s done in different places. And yeah, for the most part by hand.

Gene Tunny  57:37

Yeah. Yeah. It’s just interesting. I might look into that, too, because of how that affects the economics of it. It’s fascinating and yeah, okay. Well along. Yeah, that’s great. Scott. Yeah, really appreciate your time. Tim, did you have any other question? No, that

Tim Hughes  57:51

was it. I really appreciate your time with this. Scott. I know you’ve had this conversation a few times. You’re very prolific with your, with your media requests. So thank you for granting us are one and yeah, really looking forward to hearing more?

Scott Spillias  58:06

Oh, it was absolutely. My pleasure. Thank you guys. So much really interesting. questions and conversation.

Tim Hughes  58:11

Cool. Good. Thank you.

Gene Tunny  58:12

Okay, thanks. That’s good. All right. Hey, thanks for listening to this episode of economics explored. If you have any questions, comments or suggestions, please get in touch. I’d love to hear from you. You can send me an email via, or a voicemail via SpeakPipe. You can find the link in the show notes. If you’ve enjoyed the show, I’d be grateful if you could tell anyone you think would be interested about it. Word of mouth is one of the main ways that people learn about the show. Finally, if your podcasting app lets you then please write a review and leave a rating. Thanks for listening. I hope you can join me again next week.


Thank you for listening. We hope you enjoyed the episode. For more content like this where to begin your own podcasting journey, head on over to


Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business

Full transcripts are available a few days after the episode is first published at Economics Explored is available via Apple PodcastsGoogle Podcast, and other podcasting platforms.

Exit mobile version