Key: Rob’s comments in italics. Derek’s comments in normal font.
Back in maybe the first episode, we shared a quote from Martin Luther King, who said that:
“Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity. The ultimate tragedy is not the oppression and cruelty by the bad people, but the silence over that by the good people. The time is always right to do what is right. The question is not whether we will be extremists, but what extremists we will be. Will we be extremists for hate or for love?”
Should we revisit this idea?
Well, of course, the main context we were thinking there is that the ignorance and stupidity of the way that the banking system and the world finance system has been successively eroded is a prime example. I think that in the six or seven months that we've been producing these episodes, things in the world have become more and more dire. There's still a large majority of the general population who are either not perceiving it or not believing that they have any control over it or that saying anything would be of any significance. So this is even more relevant now than when we first looked at it.
The Concept of Sovereign Finance
Also, let's say a word or two about the title we've given to this series, "Sovereign Finance," and why we use that term. There's quite a significant conversation out there in the public sphere about sovereign money, or just money as an alternative to the increasingly unjust systems of money, which are really becoming more and more oppressive and are clearly a form of expropriation of the assets of the population at large into the hands of a small elite. There's also the concept of personal sovereignty in terms of being responsible and accountable for our own lives, which, of course, includes our finances, rather than being at the mercy of the actions of other people.
It's interesting because this is really at odds with the sense in which the word sovereignty is often used. It's often used in the context of entire nations, implying that the nation itself has sovereignty rather than focusing on the individuals within it.
You think of THE sovereign?
Yes, it obviously comes from the idea of the sovereign, the ruler of the nation. There was a lot of rhetoric about sovereignty at the time of the Brexit referendum, for instance. A lot of people were really exercised by the idea that we were at the mercy of faceless bureaucrats in Brussels and being in the EU, which was not entirely an invalid point of view, but it ignored a great many practical advantages of being within that union.
The Most Dangerous Superstition
And, of course, in the last eight months or so, there's been a lot of rhetoric about Israel's right to defend itself, as though Israel was a thing distinct from all the individual human beings who are being massacred on one side or another.
It's a very interesting turn of language where it absolves any one individual from responsibility for what happens, things like that.
Exactly. And, of course, to the extent that it would be advantageous for independent countries to be in charge of their own affairs, that's largely a myth in the present world. We live in an integrated world with dominant actors on the international scene, and we all have a pretty good understanding of how that works in reality.
Have you seen any reference to a book called "The Most Dangerous Superstition"?
No, I don't think so.
This superstition is the idea that we need rulers at all.
That's the basis of anarchy, isn't it? And they deliberately demonised anarchy to mean chaos. And that isn't actually what it means.
No, exactly. It means devolving decision-making to the lowest possible level. There's a catchphrase for this, the principle of subsidiarity, which is a very valid principle. What we lose sight of is that until very recently, in practical terms, that was what happened. Medieval kings may have had nominal sovereignty over their entire nation, but they had very little control over how people conducted their day-to-day affairs.
The fact is that the number of psychopaths and sociopaths who are prepared to take advantage of the rest of the world is a very small proportion of the population. It's only because they have been much better at bamboozling the rest of the population into either not noticing the extent of the imposition on everybody else that their behaviour represents, or believing that the operation of those in charge, whether they are kings, emperors, popes, or bureaucrats, is necessary.
The reality is that 99% of the people could regulate their own affairs, their own family's affairs, their own community's affairs, and their own district's affairs without anybody bossing them around.
We've recently had the UK election, and this has been the main question on my mind: why do we even have this party system? Why are they not just independent, representing the people of their constituency?
Yes, exactly.
The Absurdity of the Current System
The phrase "reduction to absurdity" crossed my mind. Reduction to absurdity is a term in formal logic and mathematics where you prove something by assuming the opposite and then developing from that opposite until you reach a contradiction, which proves that the original proposition is incorrect.
If you look at the way things are unfolding in the world right now, you see that in all kinds of areas, including the finance system.
One area we've been covering in these podcasts is specifically information about the principles of personal finance: how to keep track of it, how to manage your income and outgoings, what your long-term plans are, and what actions would be in line with those plans. This is applied common sense, and it's blindingly obvious, so obvious that it's almost embarrassing to spell it out. But it's actually not obvious to everyone, and it's certainly not something that's part of our education.
The Gaps in Our Education
We typically spend 13 years in education or 16 years in the case of probably half the population now. There are a few things that are absolutely critical to having a satisfactory life which somehow don't get mentioned at all, even though a day or two of serious examination would probably be enough to give you clarity. One of them is finance. Another is nutrition.
I was just thinking about how I don't remember being taught how to grow food.
No. And another thing, of course, is just health in general, what it takes to maintain a balanced life. Some exercise is better than none, and you need certain elements in your diet in a certain balance. You could learn that in a day or two, yet somehow we go through 13 or 16 years of education without actually grasping it.
In a similar way, the essence of personal finance, and personal finance as a microcosm of business finance, is not taught. The same principles apply to both.
To summarise, the key elements are to ensure that your income is greater than your outgoings, and to do something constructive with the difference between the two. The three kinds of financial statements – the cash flow report, the profit and loss account, and the balance sheet – cover it.
Economics and Common Sense
People would probably see through the ludicrousness of using GDP as a measure of prosperity and well-being if they understood these principles. GDP is essentially a cash flow statement rather than a balance sheet.
We cover that, and how it relates to entrepreneurial activity. This doesn't even have to be a business. Any activity where people come together to achieve something – a charity, a hobby society, a sports club – follows the same principles. You won't stay in operation unless your expenditure is slightly more than matched by your resources.
This leads into the so-called science of economics. We're subjected to a lot of rhetoric about it. Ever since Margaret Thatcher started selling off the nationalised industries, we've been told that competition is always better. But that's questionable.
People quote Adam Smith as if he were some deity. If you actually read "The Wealth of Nations," you'll see that he was quite sensible and wary of corporations.
He was indeed. But his idea of a marketplace was very different from the abstract concept of a marketplace that we have today.
Exactly. His idea of a marketplace was a literal marketplace where people met and knew each other. If they were dishonest, everyone would know and stop using them. This was the case with the stock market until the Big Bang.
What was the Big Bang?
The Big Bang was the name given to the transition from person-to-person stock trading to computer-based trading. This change came with significant consequences.
Neoliberal Models and Reality
Another aspect is that the neoliberal models of economics taught and broadly accepted bear no real relation to reality. The most prosperous companies generally operate in protected industries. We've applied a free market model to developing countries, but it's a different story in developed countries.
Finally, big missing from economics is any conception that we operate within a finite world with finite resources. This didn't matter 200 years ago, but it does now. We're seeing the exhaustion of raw materials and energy.
The easy extraction of raw materials is long gone. For example, copper mines now involve extracting ore with as little as 1% copper, creating significant pollution. Fossil fuels are similarly harder to extract. We're using energy to get energy, which is not sustainable.
It's using energy to get energy, isn't it?
Exactly. We're reaching the limits of easy extraction for all kinds of minerals and fossil fuels.
Despite these challenges, I believe this is a solvable problem. However, it won't be solved by the official elite conversations about it.
My stance is that there is plenty of energy. We need to learn how to harness it.
All the energy that powered the Earth over geological time comes from the sun. We have technologies to harness that energy, but they need to be appropriate and sustainable. There are exciting prospects for using low-tech or intermediate-tech solutions to provide energy and improve living standards in developing regions.
To be sovereign requires affordable energy. The final aspect of our discussion is the finance system, which is the main focus of this series. We'll look at how the banking system has become increasingly greedy and self-negating.
One other thing I'd like to mention is that we have space for comments on Substack.
We do, yes.
If you're listening to this, reviewing our episodes, or preferring to read transcripts, please engage with us there.
Thanks for reading this episode of Sovereign Finance. For more episodes, transcripts, in-depth articles, and the community, please take a minute now to subscribe free using the button above. You’ll receive a free email notification whenever we publish a new article or conversation.
