The always moving equilibrium

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2:00Well, that is the US Treasury Secretary Scott Besen talking about equilibrium in the global economy, although he has earlier said he wasn't sure that it really existed. But the fact that he felt the need to intervene with massive bond buybacks to stop longer dated bond yields getting out of control surely shows equilibrium doesn't exist otherwise why they need for so much intervention surely equilibrium. If it's self-correcting that would mean that he wouldn't have to do anything and neither would central banks. That's this week. So Steve, I want to talk about equilibrium this week which I know is one of your favorite jobs topics because you love fantasy. But Scott Besen this week almost said that it's a fantasy while also saying that he wanted to get back towards it because of what he's been doing with bond. So this fantastic thing that the market looks after itself but the government has to be there

3:02to influence it as well which means it doesn't. I mean even if you look at central banks, I mean if the market looked after itself he wouldn't need central banks to interfere with things. I mean if they've got a fantasy about capitalism being the self-equilibrating system and then whenever they try to find it seeing the real world it breaks down and the government has to intervene to keep the thing going going forward. I've actually now proven this as it happens not just making an argument that the market cannot take care of itself but I can prove it which has worked out with the mathematicians using what's called persistence theory. But in the conventional thinking they have this absolute religious belief that the economy heads towards equal to Riem and so in Eurichlibrium Y change and then they put it in the real world. Oh Jesus what the hell's going on here the government has to intervene to stop the financial system collapsing. So it's right and the but the interesting thing is so the core of equilibrium is this idea of the supply demand curve and how they cross and so everything is always trying to get back to

4:06the point at which they cross which is a static point. And yeah exactly. So much of the economy that they're talking about is moving. So when they say equilibrium do they mean static equilibrium because they talk about inflation getting back to equilibrium by that they mean it's getting to a constant level of growth not a not a static point at all so I'm confused as to what they mean when they say well they're confused about what they mean as well but I had a recent fight with I don't know as much fight I just watched this bullshit being pumped out on Twitter by economists with a wonderful Jesus Villa Verde something or other quite a lovely rolls off the tongue very nicely unlike his thinking which is all equilibrium thinking. So what I found quite amusing was that he like it's 20 years since the global financial crisis now pretty much coming out to the 20th anniversary. These bastards didn't see it coming with the equilibrium are in the models but what's happened it's 20 years later gee we've forgotten about that let's push our equilibrium based models as if they didn't completely fail to see the global

5:10financial crisis coming two decades ago so they get to the stage they forget about their problems. Now if there are any other crisis created at the equilibrium so it's it's it's it's it's it's it's they haven't talked about the crisis what's the crisis what crisis you remember the old super Trump go record cover yeah okay that's their state of mind crisis what crisis yeah but it's so we looked at house prices for example as an example right now so they've gone down maybe 10% bit more now perhaps in Australia that the perhaps got further to go and some people would say well that's the housing market just adjusting itself so that adjustment is an example of equilibrium at work equilibrium is a deadly word to use without defining what the hell you mean and the trouble is what is often meant by equilibrium people the people they talk about my body isn't equilibrium no it's not if it's an equilibrium you'd be dead and also forever let's look on the positive side that's true that's true that's but yeah it's it's it's homeostasis is

6:14often what people mean by equilibrium so the system is in a sense of coordinated balance between all the various parts of your body that are changing at different times so like like your your pulse changes over the day even the nostril through which you breathe air fluctuates through time you know the the the heart can be described as a chaotic generator when it gets into regular rhythms then you're in trouble so all there's so many things that are changing in our bodies in any one time but if we're walking around healthy we're not an equilibrium we're in homeostasis in us and that the mean of the systems all these various systems are in not outside the boundaries of survival of the of the the in no sense you're in equilibrium so the term itself is a is a philitis maybe maybe okay well maybe it's just a terminology thing then because isn't that the same thing I mean I quite like the idea of comparing it to the human body because if you look after yourself and you go running or whatever you get your heart great comes down you you you breathe easy you probably live longer so isn't that the case with

7:17the economy if you keep it in check and under control it's that's getting more balanced that is where equilibrium is the problem because it's it's it's the the way that this I'll go back to that a Ville Verde conversation because he argued that if you don't understand equilibrium you don't understand economics now my but it's exactly the opposite if you believe in equilibrium we don't understand economics but nonetheless he said that if an issue of equilibrium they use is the one developed by one Irving Fisher in 1907 in his PhD thesis I was just called the Theory of Interest and he republished that paper in 1930 when he was now a famous economist they went from you know an academic to somebody who's globally he remember the old movie you know people might not know about movie tones is we used to get unused segments through the little you know 10 minute segments shown in the movies movie tone yeah and they were all very over the top and

8:17then came again with another one of his crazy theories and Irving Fisher has bought out a new book yeah it was all exactly you've got to give nailed it that's the way okay so I stocks have reached what looks like a permanently high plateau etc etc reassuring people there wouldn't be a stock market crush which wiped him out okay sent bankrupt part so what he the definition that he used in 1907 of equilibrium is that nobody has any incentive to change their current behavior okay and that's in that sense it is like a home of stasis definition because we're all looking at what everybody else is doing what we're doing I'm going to continue doing what I'm doing that's that's the definition of equilibrium that Fisher effectively defined then when that means expectations are consistent your expectations are consistent with everybody else's so there's no need to change now as part of that to make that work in his own model he was building a model of the finance market and it was basically supply and demand analysis same sort of thing okay but applying supply and demand to finance now the problem with finance supply and demand for bananas you

9:22pay your banana you get your banana you reach your banana in effect it's in a moment in time but in finance you you pay for your you you take out your mortgage you've got to pay it for the next 30 years okay and there's repayment taking place and so on and so forth so to handle making the model work through time Fisher added two little assumptions one is that the market is an equilibrium and respect to all moments in time so rather than just assuming equally being at a point in time which is what the supply and demand drawing does for ordinary commodities is you've got to move it through time and it presumably always remainder that equilibrium point that's one thing secondly says debt must be repaid all debts are repaid okay now he violated those assumptions himself in 1929 when the stock market crashed 10% in one day and so he was totally devastated he was financially wiped out he would have gone bankrupt except that he had a wealthy sister-in-law who kept him a float he would have been homeless in this Columbia University Board of Menu House he lost his house

10:26as well so you can imagine how severe a shock this was to that guy and then in the aftermath of that he reconsidered what an earth led me astray how did I get myself in this situation and his final conclusion was the reasoning made the mistakes he made was because he believed in equilibrium and he didn't and he's okay so then equilibrium is that that's the problem so what he wrote in his debt deflation theory of great repressions paper I recommend people to read it's accessible on the web in 1933 and he said that we can we can assume that all economic variables tend in a general way towards equilibrium and I'm not going to have any idiot bloody neoclassical telling me that Fisher doesn't know what he's talking about because they're using his definition okay so this is Fisher the guy who used the definition that modern neoclassicals like this the laverte character teach to their students now and using their models 2026 back in 1933 1933 Fisher saying this this equilibrium is misleading and so what he said was

11:29we can assume that variables tend towards equilibrium but the equilibrium sort of self maintained and always subject to further disturbances associated in real world any variable is either above or below its ideal equilibrium value so his argument was just no that's not equilibrium it's all then but not an equilibrium we're outside it the real world you might imagine that your system will move towards equilibrium and he defined what they call equilibrium now so you know I'm quoting the bloca defined their modern definition but he then said you're going to be out of equilibrium so you have to have an analysis based out of out of equilibrium behavior otherwise you're misleading about capitalism but it's it's the argument and you know I'm sure it's wrong but isn't it a bit like a pendulum in that the pendulum is swinging on a base point it's never there but it's always swinging backwards and forwards from it it's actually yes you know it yes you're right it is like it is like a pendulum only there's one problem well you don't you're you're not going back to the base point you're never going back to the problem is it's too

12:29powerful to move the middle right okay now that's one of the world's first famous chaotic models because if you have a pendulum there's nothing more regular than the motion of a pendulum in this sense except Donald Trump lying but that's that's another form of regularity okay so but with the one the all it can do is do that and it can define it you get us you know a sine wave out of the fluctuations is all very mathematically precise you were you had to put a pendulum on a pendulum and it's absolutely chaotic it's absolutely hilarious to watch one they fly all over the bloody place so the real world has more than one linkage okay with more than one linkage you you there's no way that the pendulum is the right model but you've got to have it a two-part pendulum and they get chaos not not regularity not equilibrium and in any case even if you didn't do that and you just had a pendulum swinging you're saying well okay prices are moving around this base price which is where it would settle down to eventually it's not settling down because we started out it's

13:31it the economy is not just living through time yeah yeah so you're never going to get back to that point you exactly swinging around it but the point itself is moving so that's right you're moving through yeah so when you're moving through time is non-equilibrium analysis and that's stock standard in general in actual sciences economics thinks it's a science it's a load of garbage and instead in mainstream economics there's it's better way as far better ways to do it which is borrowing concepts from engineering and physics in terms of modeling dynamic systems and those systems are always out of equilibrium so the whole idea that a system reaches the equilibrium is just a 19th century fallacy from before we learned about thermodynamics before we learned about complex systems and so economists are hanging on to stuff which was really advanced in 1850 okay so I don't know if you had a date today I don't know if you formed an opinion about Scott Besson the US Treasury Secretary but so he talked about equilibrium this week this is why I thought we should revisit it and he was talking about his intervention in bond yields which would be interesting in

14:32itself as a topic in that the second part of this discussion but he was saying it was his job to push markets towards equilibrium but then he also said but nothing's ever in equilibrium he's sort of like confessing that he does actually has a background with George Thoros and so Thoros also had a non-equilibrium analysis of finance markets and Thoros was arguing it was that the conventional theorist's finance markets are in equilibrium and the process reflect the discounted net present value of expected revenues streams from the investments of the company and gearing has no effect at all total garbage what and then markets are supposed to be you know pressing it they can predict the future. Thoros's argument and then this is where Besson would be quite in line with him because he was involved in the raid on the on the British pound is that markets underreact and user initially and then overreact later so when you see a trend you bind to the trend knowing the market's not going to be taking notice of it then the trend will

15:33strike bang the value of your option goes up get to the top and you sell out again and that's how they made their money so he understands not equal to bring them thinking that's actually a positive in his favor. Right because he's used it to his advantage yeah and now he's trying to well look we'll take it we'll take it right now because I because what he's been doing with bond markets is interesting probably ineffective but it is an example of the complexity of systems so I think we should revisit that because a lot of it is to do with government bonds versus other forms of purchasing debt as well so look at all of that let me come back on the podcast. This message comes from Jackson taxes aren't something you can only think about once a year with investments planning for tax days year round fortunately Jackson offers tax efficient products visit jackson.com for more information on how our products can make your tax bill a little bit less painful jackson is short for Jackson financial incorporated jackson national life insurance

16:37company lands in Michigan and jackson national life insurance company of New York purchased New York. The best time to recommit to your gut health goals right now take charge of your gut with nature made are clinically studied ingredients support digestive health digestive enzymes breakdown nutrients probiotic and prebiotic fiber nourish good gut bacteria and super greens with probiotics empowered daily digestive health try to full line up of gut health support from nature made the number one pharmacist recommended vitamin and supplement brand he statements of not being evaluated by the food and drug administration these products are not intended to diagnose treat cure or prevent any disease. This is the debunking economics podcast with Steve Keane and Phil Dobby. So Steve though Scott Besson had to intervene or he felt he had to intervene in the bond markets because the yield for longer dated bonds was rising and rising and rising it was a

17:38it was across the whole yield curve but particularly long dated bonds and so that meant that the cost of borrowing not just for the government because as you I know you answer would be well in terms of the government costs who cares but generally the longer term borrowing costs were rising because the yields were getting higher. So he felt as though he had to intervene with buybacks which the treasury does quite a lot of but they did a lot more of it and in fact they've done it a couple of of times since as well so what they do is they take those 30 year bonds and then they buy them back and then they reissue them as shorter duration bonds in the hope that there are because there's less 30 year bonds around that means that the price of those 30 year bonds will go up because there's less supply of the bonds and that will bring the bond yields down. It's not really worked for him but the fact that they have to intervene in that way is like saying well you know we're intervening in the markets the markets as he said you know he's trying to bring

18:41things back to equilibrium but equilibrium doesn't exist I mean is it is it pushing on a string of it? No I mean this is sensible in its own bizarre way even it's coming out of the Trump administration because this is what the government always does it's always buying and selling bonds there used to be a well called open market operations were much more common back in the days before the global financial crisis but it's always trying to manipulate the value of the bonds it sets the price and there's like the when the when the government sets the price on its new bonds it then has a whole range of operations to make sure the price remains the interest rate remains within a band around the target that they've set so therefore ever buying and selling bonds to achieve that and this is just a larger larger scale version of the same regular operation. This isn't a centrum right by the government by by the treasury not by the central bank so that's the interesting thing isn't it? Well they can both do it I mean they've both got to convey to you to buy bonds indefinitely and like it's a it's a question like the the basic way the money is created is by the treasury going

19:45with a negative equity which creates positive equity for everybody else so it can be doing the buying the central bank could be doing the buying it's it's a it's a toss-up as which institution can do it they can both do it. So why do you think you'll tap in gang up so much? There's actually is a massive uncertainty on the global economy for obvious bloody reasons it's read by Scott Bessert what else could he indeed? Sorry but yeah it's you know the market the bond market is the biggest speculative hallhouse on the planet and they're looking at what's going to happen they're forever trying to outdo each other I recommend people watch the big short to get a Nigerian behavior big short and also the wolf of Wall Street to get an idea of the personalities involved there. They're cutsy movies yeah yeah. Brilliant move he really truly brilliant so this this sort of you know trying to outdo each other by picking which direction the market's going to go in and they're making capital gains and they've also capital losses on buying and selling bonds that's that's all they do and so it's nothing to do with government debt because that shouldn't matter.

20:49Government debt I mean government debt is this is the panic the the market would be panic on the basic government debt because the idiots in it and pardon me you're idiots if you believe neoclassical economics it takes your brain away so you might have an IQ of 130 but it's three after you've done an economics degree they believe this stuff and they expect dollars panic's going to happen that's why the what's called the widowmaker trade came from you know the beliefs that the last what is it now 30 years that Japan's on unsustainable path with this government debt and people have been buying expecting that have to you know have a huge loss and do a sort of a like the English did back in the 80s and they're they're going to make a killing and fact they end up being that the speculators end up with the killing because the central bank has an unlimited capacity to buy bonds issued in its own currency so the idea that there won't be buy this is what's going on that's it backstopping its own sales and you don't you got because they got close they I mean yeah the government bought almost all of them you know we got close to 100% they were

21:49buying so many Japanese government bonds weren't they so yeah and a huge part of the share market these days as well so and this is why you have to understand the accounting and that's why I built a reveal and and most people think they understand the accounting but they literally get it wrong they're doing it in their heads they don't they don't necessary balance the lines gravel forces you to do that and you can see straight away that the government with the so since it has a central bank has an unlimited capacity to buy bonds that it's issued in its own currency and that means that there's no possibility of those bonds not being sold if if there was a chance with the market or the the third party bars the banks and the apparently now the American government lets individuals bid then bonds which is stupid but that's the sort of thing you get when people who design the system don't understand it but they the if the government if the bonds don't get sold and the central bank and buy the lot and like my little cute if you worry about government debt tell

22:54you what I'll get Scott to buy all the bonds tomorrow and that literally could be done so no limitation he he talked about having to buy them to try and quell the fever that that's her that it was all you know it's the animal instincts so again that's that sort of like that that's not equilibrium is it that's that's the human dynamism and this is where you mean thinking in a complex system and thinking about the government as part of a complex system not the entire element but part of that system then when I do my my modeling of approach to economics which I start from macroeconomic definitions and drive the model from definitions and when we built built the model including a private sector which borrows to build the factory so it's I've leaving out speculation in this case wage workers getting wage rises based on the level of employment banks lending money at interest and then the government having countercyclical spending the system is only stable with the government in there if you neutralize the government

23:55then the system can fall into a debt deflation and this is and this this is the last this is the great depression okay so what happened with the the great depression was government spending was too small to counter the downturn in private sector spending that the stock market crash cause and credit went to minus 30 and according to census figures I think they exaggerated but according to census figures adjusted for current measurement systems the negative credit was credit was falling at the rate of 30% of GDP per annum for two or three years now that just caused the biggest downturn in the history of capitalism the longest depression but if the when the government got to be larger so it went from 2% of GDP to 5% of GDP it stabilized the system we didn't continue going down the plug hole so ironically when you look at it in a dynamic sense it's a non-equilibrium system and the government has to take a role otherwise the private sector will fall into the traps like a great depression so even if you have complex

24:55modeling like you've been doing yeah is it is there there's still so many unknowns on there so because for example the reason why Bonnion one of the reasons why Bonnion's but it's the risk element obviously because well Donald Trump is president that's why people are trying to get gold out of the country as quickly as possible I guess they're worried about what he's going to do next but it's but also it's AI has driven the world crazy as well and so there's all of this money being spent on AI so on the one time you've got on one side you've got what is seen as being a risk government debt is seen as being more risky than before and then you've got this massive AI opportunity that people are going well okay the risk is high it's a little bit higher than the government but the difference between a safe government and a risky AI investment with companies that have got high turnover already the risk is diminished somewhat and so that means that

25:56money that would have gone into government debt is now going into private debt and that's pushing the yield up for the government as well it would have been very difficult to you know a few years ago I've said well that's a scenario that's likely to happen who'd have known I mean because we're talking trillions being spent on AI yeah but at the same I mean the AI bubble is what the government they're going to counter at the downturn when the bubble bursts on that front but the big problem that happens when people talk about this they're confusing the secondary in the primary markets for government bonds now the secondary market they're already owned by private individual most of them yeah most most bonds are owned by non-bank financial institutions these days they're gambling about the price so as they change the price that changes the effective yield on those bonds but the bonds have a fixed yield if you've bought a bond offering 4% and it's a thousand dollars bond and it gives things you 40 bucks per year no matter what the interest rate is calculated as being so there's no change in the amount of money being paid by the government but for those for those greats going up and across the government more money

26:56no it's going to pay the same 40 bucks no matter what for the bonds is already issued yeah when would you should yeah but then for the yeah then the new one that's just new bonds people sell the rates why would you buy bonds on the primary market when you get them more cheaply on the secondary market the reason being that the processes of government spending create reserves okay and the reserves and the rate on reserves is set by the Federal Reserve and the rate on bonds is fed by the Federal Reserve now if they want to make the yield on bonds hard and the yield on reserves it means that anybody who takes part in the auction and has reserves on hand and this is mainly talking about banks here then they're turning down they've got one they've got one asset created by the government that yields 4% they've got another asset created by the government that they can buy with the one that yields 4% that yields 5% what are they going to do they're going to buy no matter what the difference is between the primary market price and the secondary market price so it's not

27:57realizing that there are two distinct markets two distinct sales processes and the what happens on the secondary market can influence what happens on the primary but the main determinant of the primary market is the gap between the return on bonds and the return on reserves the interplay between take your point for the interplay between that effective interest rate on government bonds so 30 year bonds for example will influence how much I pay to borrow for 30 years if I want to issue private you so it pushes up the private yields it's pushing up the cost of AI in other words isn't it which which must be part of Scott Besson's concern as well we get all these companies that are borrowing an enormous amount of money if that bubble is going to burst it's going to burst that much faster because they're paying high yields yeah and that's true so in that case that's the reason to try to bring down the price on the secondary market but it doesn't affect the government's so percussive to sell bonds on the primary market nor does it affect the government's

28:58cash flow fact what I'm finally saying I've got to give I mean Warren most of all I'm going to be attacking the shit out of him over his arguments on trade very brief so get where do you Warren okay so what he did that though guys total nonsense I don't gonna be I don't care I've been people in MMT I'm looking forward to it in fact after they've offended me for the last few years but he made it more and made a very sensible observation about a year or two ago that because the government creates the money that it pays is interest on bonds just like it creates the money that it when it has a deficit that creation of money is the interest rate goes up and you're therefore paying more per bond you're actually stimulating the private economy you're not you're not restricting it you know setting you're increasing the rates that are going to be paid for other people for private borrowing that's one effect of all of the interest rate higher interest rate but a higher yield means that if the government's got debt of 100% of GDP if it was paying on all those bonds the same rate of course it doesn't because those bonds have been around for a long time and

29:58the rates don't change but if the interest rates 5% and the level of debt is 100% of GDP then the government interest on those bonds is the 5% of GDP stimulus for the economy handed out to rich people and financial markets okay so rather than as much as the higher rate makes private debt more expensive the higher rate on government debt is actually a stimulus for the economy and this is some people have I've seen some statisticians starting to look at this and saying we expected like a downturn because of the increase in rates but it seems that demand is risen and the riseners are giving rich people more money to spend they don't spend much but that's where higher set prices come from and you know higher prices for high and consumer goods well they they yeah they use that money to buy those bonds on the secondary market for companies that are investing in AI I guess yeah is that I mean I need to do the accounting but yeah yeah perhaps so all right very good so getting back to the equilibrium thing I mean he's he's he's basically when he's

31:06saying that he's helping the market get back into equilibrium he's using that equilibrium argument in terms of interest rates he's saying well yes they would try to get back even though he's saying but you know nothing's ever in equilibrium but he's at the same time he's trying to say he's trying to get the market back into equilibrium I know the other words that interest rates are too high he's trying to get them back to equilibrium and he doesn't believe it of course but what is the equilibrium that he's talking about in terms of interest rates well I mean the the conventional theory believes there is they call a natural rate of interest as a natural rate of everything in the classical theory yeah like just as a natural rate of unemployment which keeps on changing that's right yeah everything natural never settled down yeah but but it is now the you do you do get a gap between the bridge you've got to pay on bond of interest and the rate of inflation is a serious issue for anybody who's got money to manage so when you get a big gap between the rate of interest and the rate of inflation and that's what's happening now the real rate is

32:09quite high on historical standards then yeah you want to bring it down and so that's what this like operation was intended to do it could work I mean I don't you know I'm not going to trust the Trump administration do anything properly but the idea of using government money creation capability to change the direction of the market is quite feasible so it's not really equilibrium I mean it makes sense in that it's trying to make the markets function better to make bring down the cost of borrowing to reduce the the element of risk associated with that with that investment but it's not equilibrium it's thorough and word as you said it's a question of definition isn't it's thorough and word yeah yeah and it's the I mean I don't mind best at using it because I know from his own background that he doesn't take it seriously but the trouble with the mainstream economic analysis thinks the economy does head to week really really and they they believe that the government it'll get there if they get the government out of the way now you do the mathematics properly which is what I do with my friends in the mathematics fraternity you find that if you

33:11take the government away the system is more unstable more likely to collapse and so their argument so the conventional belief in equilibrium is an anti-government spending equilibrium when they try that in the real world the system crashes with financial bubbles and bust like we've got now so there's two occasions in the 19th century when the government the British government passed rules saying the central bank cannot rebel out the private banks they had to reverse it twice or the system would have crashed completely with stock market crashes so the the whole idea the government can get out of the way and the system will work as simply mathematically false so right so the government should be involved but the government should also understand what they might break when they do stuff as well which is where they don't think that's the trouble that's where a lot of our mess has come from yeah all right so just before we go so you have finished your latest book it's gone off to the editor so tells about the book who it's aimed at what's different to what's

34:12gone before and when's it going to be available hopefully i'll ask the last question for some happening February that's like about a six month process to go from the manure script into all the all the you know editorial work is necessary and then distribution and so on it's it's the title is how economists will destroy capitalism okay and i've seriously mean that because it's focusing on the work of neoclassical economists on climate change and it is worse than i could ever have possibly imagined their workers garbage from from the very outset so i show what's the consequences of trusting people who's knowledge of the problem they're talking about is nonexistent and what it means is they've basically told us we're looking on a yellow brick road into the butte future where there's been a slight inconvenience from a bit of a rise in temperature but it's no different than moving from New York to Florida what are you complaining about just to just get air conditioning and stay in just had air conditioning yeah air condition you

35:12feel air conditioning your cows everything will be fine and it basically saying we're on a road to extinction the pathway following right now literally will lead to the extinction of 75 if we're lucky 75 percent of life on the planet including us that's the path we're on and when you look at the the the the scientific research the numbers that economists think will cause minor damage to the GDP have in the past caused mass extinctions and that's what we're talking what's why I go through the how did economists get it so wrong how can I show that they're so wrong and then what are the alternatives so down the end though yeah I got a accuser of being in favor of a world government and that interview on direvacere recently I didn't want this this is this is what comes when you ignore a problem for 50 years okay because we should have changed direction 50 years ago with the limits to growth we didn't because of economists now are about to crash into a brick wall in that situation yes I've got to pull the wheel out of your hands and you know central planning is going to be necessary but I make a hypothetical argument

36:17if we could combine what they call solar solar I say I'm solar resource management I think they call it combine that with so trying to do biologically based sequestration of carbon and within we could get back to pre-industrial levels of carbon by the end of the century and reduce temperatures by two degrees very rapidly with great negative consequences but the alternative is extinction so I go through all those possibilities well it's fantastic because sorry yeah you finish your point sorry yeah and I pull a hard neoclassical economics in the process because the work on by by climate change economists is so bad that the really important question is how they held it this shit get published in the first place now the only reason I got power and I've just shits being pull up polite the only reason it got published is because neoclassical economists were the referees so look at the whole of economics is a guilty for this failure of the people like Nordhouse working on

37:21right so look I mean two things first of all I'm I'm it's really good news that this is not available till February because it could ruin a lot of people's Christmas if if good very bad that's poor present yeah you're done with your stockings yeah enjoy Christmas before you read this and secondly of course AI is making all of this you know happen that much faster because it's using a consuming more energy that much faster which is which is fantastic because this is obviously way nature-intensive AI means that the machines are able to do everything the human race is wiped out because of climate change helped by AI and the machines live on forever and that's your next book Steve we better hope they're intelligent yeah yeah frankly I'm backing the kangaroos I reckon the kangaro is going to take over in 60 or 70 million years once they evolve the pose poseable thumbs they might they might make a better a better fist of of running the planet than thus omnivores of dancing yeah exactly and when they go shopping they don't need to use plastic bags do they

38:25that's right they can put it in the pouch yeah that design yeah yeah exactly I've got you know you know everything built in just it's all there yeah excellent very good there are more sensible discussion as always on the kangaroos and aga podium there we go yeah we will say well they should do bounce around don't they but on the same point yeah that's right they're just on the spot they never go anywhere they just bounce around on the same spot let's leave it there we will see you next time Steve thank you see you mate bye the debunking economics podcast this podcast is brought to you by Thompson Reuters the best don't just do their work they change what's possible cases one audits completed jobs saved behind every one of those moments is a professional who needed to get it right and did Thompson Reuters builds the technology that sharpens insights speeds up decision making and powers the outcomes that matter so when professionals act the impact is felt by everyone be a change maker visit tr.com forward slash change makers

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