August 23, 2024 • 49 mins
Ruffer Fund Manager Duncan MacInnes, Dominic Frisby, British author and comedian, and Adam Dixon, Adam Smith Chair in Sustainable Capitalism join Merryn for the first day of her run at Adam Smith's Panmure House for the Edinburgh Fringe Festival.
They tackle questions like are political leaders dulling innovation with regulation? Is too much protectionism bad for capitalism? And how should investors position themselves at a time when politicians are too focused on dividing the pie, rather than growing it?
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Speaker 1 (00:03):
Bloomberg Audio Studios, podcasts, radio news, Hello, Bren Talks Money Listeners,
It's Maren Sunset Web. We are bringing you something very
special over the next week, recordings of the conversations I
had at Pamier House for the Edinburgh Fringe Festival. Now,
for those of you who don't know, and I'm sure
(00:23):
there aren't very many of you who don't know this,
The Fringe is a three week arts and culture festival
that began in nineteen forty seven and takes place in
Edinburgh in Scotland every August. For the past few years,
I've been hosting conversations about markets, economics and investings from
one of the most special locations as part of this festival.
I do it from Pamier House, which is the last
home of Adam Smith, philosopher and father of modern economics.
(00:45):
It's where he completed the last editions of his best sellers,
The Theory of Moral Sentiments and The Wealth of Nation's
top reads, both of them. This year we did a
four day run in mid August, and we are bringing
you the slightly edited conversations from three.
Speaker 2 (00:58):
Of those days.
Speaker 1 (00:59):
For this battle, I spoke with Dominic Frisby British author,
comedian and financial writer Adam Dixon, will holds the Adam
Smith Share and Sustainable Capitalism at Pama House, and Duncan McGinnis,
who is a fund manager at RAFFA enjoy listening. I'm
sorry were a few minutes later everybody, but they started
(01:21):
arguing in the green right.
Speaker 2 (01:25):
I had to get them out here now right.
Speaker 1 (01:27):
Thank you for coming, Thank you for choosing us from
the many wonderful things you have to choose at the fringe.
Speaker 2 (01:31):
We appreciated enormously.
Speaker 1 (01:33):
Before I start, can I just ask how many of
you have been to this conversation before?
Speaker 2 (01:38):
Okay, so a lot of you know already how it works.
Speaker 1 (01:41):
Basically, we have these three wonderful guests who I will
introduce properly in a minute, And in a minute I'm
going to ask each of them to come up with
their favorite Adam Smith quote, and then we're going to
talk about those quotes. We're going to talk about those quotes,
their relevance when Smith wrote them, and their relevance today,
and it's going to be fascinating and they're not going
to fight.
Speaker 2 (01:58):
And then we will have a Q and A at
the end, and as we go along.
Speaker 1 (02:03):
I want you to start thinking about your questions and
the things you want to talk about when we get
to Q and A, because there will be a.
Speaker 2 (02:08):
Prize for the best question. Now, the prize was.
Speaker 1 (02:11):
Going to be a copy of my book, my latest book,
but I forgot to bring it with me, so you
get something better, better, which is a copy of Adam
Dixon's book, which he's just told me retails for ninety
quid right, so you can flog it and buy yourself
tickets to a couple more.
Speaker 3 (02:30):
Because we shall publish it.
Speaker 4 (02:34):
Or you can download it for free because it's open access.
Speaker 1 (02:36):
Oh okay, or download it for free, or download it
for free right now. I think you got you a
little little blurb about the house downstairs, didn't you about
how wonderfoot it is now Adam Smith lived here, etc.
And how he wrote second editions of Wealth of Nations
and Moral Sentiments here. So this is a point when
I asked you all, who has read the Wealth of Nations,
as there's always always a liar in the audience.
Speaker 2 (03:02):
Who has read Moral Sentiments? No one dares. Okay, well,
you know they're difficult reads. They really are.
Speaker 1 (03:11):
They're they're long, they're you know for some language block,
but when he wrote these books they were absolute best
sellers up and down the Royal Mile. You could, you know,
you could buy pictures of Adams souvenirs related to Adam Smith.
A Wealth of Nations sold out first edition in six
months and was reprinted over and over and over and over.
Speaker 2 (03:28):
You know, today we.
Speaker 1 (03:28):
Think of him as an academic and moral philosopher, but
he was in fact a massive celebrity at the time.
Speaker 2 (03:35):
And this house obviously is suitable for a celebrity.
Speaker 1 (03:39):
But he also had and I have tried to think
of more interesting things to talk about Adam Smith about,
but I can't get away from his pension arrangements. And
looking at all of you, I think you're probably mainly interested.
Speaker 2 (03:49):
In pensions as well. Yeah I am. I at pensions too.
Speaker 1 (03:53):
I think of nothing but how I can get my
hands on a defined benefit pension. As regular listeners to
the podcast will know, now, Adam Smith had after under
three years work, I'm right right under three years under
three years work he did as a as a tuto
going on grand tour with the young Duke of Laclu
grand children what we now call the gap year. In
(04:15):
those two and a half years, which he had to
come back from earlier than he expected. He ended up
with the equivalent of an inflation adjusted sixty thousand pounds
every year for life. Sixty thousand pounds was a base income,
and that was one of the reasons he was able
to afford to live here.
Speaker 5 (04:30):
With his only topped by reason.
Speaker 1 (04:34):
Or so many And today, of course bus drivers because
they had to find benefit pension goes up with their salary. Right,
we won't well on that now. He also lived here
with his mother, and we were talking earlier about how
how woke or not woke pamel houses and whether it
should be woke or not, and I thought that right,
(04:55):
we just introduced the fact that Adam Smith was facilitated
by the women around him. I was looking up to
see when his mother died, because there seemed to be
some fuss about it on the internet, because she did
live here with him all the way through. He only
got six years in which he had to manage his
own household for dear.
Speaker 2 (05:11):
And I found a book called.
Speaker 1 (05:13):
Who Cooked Adam Smith's Dinner? Right, Adam Smith has a
permanent entry in world history.
Speaker 2 (05:20):
Margaret Douglass does not.
Speaker 1 (05:22):
Adam Smith developed the idea of the success of self
interest of the free market. Margaret Douglass cooked his dinner,
and the book is all about how he couldn't possibly
have done it without her.
Speaker 2 (05:31):
But of course I doubt that.
Speaker 1 (05:33):
On the sixty grand a year as a base and
all his celebrity income, his mother cooked his dinner either.
Speaker 2 (05:38):
So I think we'll write a new book on that.
Right onwards said she.
Speaker 6 (05:42):
Was ninety one she died, must have been one of
the oldest people in Europe.
Speaker 1 (05:46):
Yeah, do you think, I mean, we might come on
to this later, but you know, all the stuff about
how we're living longer. In fact, if you didn't die
in childbirth, and you didn't die of some nasty accident,
dan coal mine, etc. The lifespan of people who didn't
die all of those things was similar then to now.
If people who didn't have master your stuff lived to
their age in the nineties, you think, yeah, maybe anyway, Interestingly,
(06:09):
you know, at that time it was relatively normal, wasn't it,
to live as families, to live with your mother, etc.
Speaker 2 (06:13):
Now it increasingly is again.
Speaker 1 (06:15):
I don't know if you saw the numbers out a
few days ago about the percentage of young people who
still live with their parents, and in Italy it is
now over fifty percent of people between twenty five and
thirty five still live with their parents. Yeah, anyone got
an adult child living with them? Anyone like them to leave?
(06:35):
We got under house prices later anyway. Dominic Frisby our
first guest, who writes the very popular substack newsletter, The
Flying Frisbee.
Speaker 2 (06:43):
Do we all know about substack? Yep? Okay, brilliant, so
sign up for that.
Speaker 1 (06:47):
He also makes comic videos which are excellent, and sings
excellent comic songs. And we might haven't got your haven't
got your friend with you?
Speaker 7 (06:54):
Ah?
Speaker 1 (06:54):
No, ug, this is a shame because my son's absolutely
favorite song is one of dom its top hit.
Speaker 4 (07:01):
Right.
Speaker 2 (07:02):
I think the lyric not that one, not that other one.
Speaker 7 (07:08):
We can we can all harmonize under so we can
if you wait, wait a bit, the show is going
to get better.
Speaker 1 (07:14):
And what rhymes with fer just called us massage, So
the lyrics are great anyway.
Speaker 2 (07:18):
That's Dominic.
Speaker 1 (07:19):
He's also the author of free books and a well
known financial writer. He's for those of you who read
Money Week, with which I am no longer involved.
Speaker 2 (07:25):
Do you still write for money?
Speaker 3 (07:26):
Occasionally?
Speaker 1 (07:27):
A regular writer for Money Weekend, and some excellent advice
on things so that we'll get on to you later.
Duncan mc guinness who is a fund manager at Er
and no substack podcasts on your podcast, the odd article
on Ruffer's website, or a Roffer.
Speaker 5 (07:43):
Review annual periodical which which is pretty good, actually.
Speaker 3 (07:47):
Really really good.
Speaker 1 (07:48):
I'll tell you what you're on again later in the week.
If you bring it, then we'll make that the free
gift for the best question.
Speaker 8 (07:54):
Wow, thank you.
Speaker 2 (07:55):
I don't think I'll be a seller for ninety.
Speaker 1 (07:58):
And Adam Dixon, who holds the Adams fiftche in sustainable
capitalism here at amath.
Speaker 2 (08:05):
Right. First quote was going to first, Adam was going
to give us this quote first.
Speaker 4 (08:10):
Okay, so.
Speaker 7 (08:13):
My quote Adam's quote, not this Adam. In such improvements,
each nation ought not only to endeavor itself to excel,
but from the love of mankind, to promote, instead of
obstructing the excellence of its neighbors. These are all proper
objects of national emulation, not of national prejudice or envy. Now,
(08:40):
and this is from the theory of moral sentiments, not
from the wealth of nations. So this chose to show
that Smith was thinking globally about geopolitics even when he
was writing The Theory of Moral Sentiments, and this quote
mostly pertained to differences between France and Britain at the
time and the competition between the two. Even later on
(09:01):
and down the page he mentions and this says, most
people here in Britain wouldn't really care about what's happening
in China and Japan because it's way over there. Now
you fast forward to twenty first century, what kind of
world do we live in? One of I would say
in my recent book state Capitalism, and that state capitalism
(09:22):
is not limited to China, but Chinese state capitalism, i
would argue, is actually begetting more state capitalism elsewhere here
in the West, in Britain, in Europe, in the United States,
we're all becoming state capitalists. Now this doesn't mean necessarily
state ownership or state investment funds.
Speaker 4 (09:44):
It's all the panoply of.
Speaker 7 (09:46):
The tools of the state, from subsidies to sanctions to
investment screening regulations. The world's becoming increasingly fractured. Just this
last week I was in Helsinki at the Helsinki Geoeconomic
Next Week as part of the new geoeconomic society. And
this was a grouping of lawyers and consultants and people
(10:08):
from the defense industry and a handful of academics that
nobody cares what they have to say, and you know,
things were being said about, Wow, this is going to
be a compliance tsunami coming. And I had a conversation
with a lawyer, and an American lawyer was saying, this
is great for us. We have all kinds of business
because governments are saying we need to check these investments.
(10:29):
And it all constrains I think possibly innovation. It constrains
and makes us, you know, not be open to trade,
open to sharing ideas. Now, certainly what's driving this, it's
because China is becoming increasingly competitive. Some of that competition
and the market share that it's getting is certainly one
(10:52):
of taking ideas and running with them. But at the
same time, what worries me is can increasingly we're looking
at China and we're looking at it as.
Speaker 4 (11:02):
A national security threat.
Speaker 7 (11:04):
And all these economic policies are about national security, but
often it seems that it's about protecting national industries, protecting
the incumbent firms. And I wonder, is this good for capitalism.
Is it good for societies? Because yes, sometimes China has
an unfair advantage that's driven by state subsidies or or
(11:28):
some policy that the Chinese are doing to protect their
own industries. But often you think, well, actually, no, China's
doing well because they go to scale quickly. They identify
a problem in the world and look for a solution.
I mean, we think of electric cars as this is
going to be the future. Maybe not as soon as
(11:49):
we think, but it's probably going at least for urban transport.
And Tesla is doing very well, but Tesla is still
mostly a luxury car. And who's driving the new Ford,
the new model T It's Chinese automakers. And the bigger
question is are they doing that because the Chinese government
has supported them?
Speaker 8 (12:09):
Yes?
Speaker 7 (12:09):
Possibly, but it's partly because the German auto makers were
kind of asleep at the wheel.
Speaker 4 (12:15):
And even now they don't want to ember race.
Speaker 1 (12:17):
We're arguing for state capitalism, not against.
Speaker 2 (12:20):
Things seem to be going better for China than for us.
Speaker 1 (12:22):
And when you talk about national security, yes, we take
it back to electric cars and back to energy. So
for example, one of the reasons why possibly we're seeing
a lot more state capitalism is the energy transition because
we are in a very unusual situation where we're trying
to do something that doesn't make economic sense, that might
make climate sense, but certainly doesn't make economic sense. We're
trying to do that, so you need massive state intervention
(12:42):
for it. That so that might be one of the
reasons we're seeing more state intervention. And you look to China,
who are now the global leaders in solar and nuclear,
which is probably what we're going to be using, what
we should be using, and the rest of us are
falling behind massively on that because we're terrified of nuclear,
we haven't got much.
Speaker 2 (12:59):
Solar, and America don't really care about nuclear.
Speaker 1 (13:02):
Or solar because they've got so much al So that's
where the problem might be. And so we should be
looking at national security in terms of energy, and that
feels to me like that's where a lot of it
is coming from.
Speaker 4 (13:14):
Yes, but there's even more. I think there's there.
Speaker 7 (13:16):
It's more than just I mean, it's a level of
scrutiny and concern around national security and dual use for
military and civil use for technologies. There's a lot of
concern that it's it's that bleeds into other parts of
the of the economy.
Speaker 4 (13:35):
I agree.
Speaker 7 (13:36):
I mean, the scale of the energy transition means we
need to put a lot of money in. There needs
to be a lot of forward thinking and planning, and
maybe the private sector isn't there to do it. But
my concern is that this state capitalism bleeds into the
rest of the economy when and it partly is do
I think, and going back to Smith's quote, is this.
Speaker 4 (13:58):
National prejudice envy.
Speaker 7 (14:00):
There's a bit of envy that China is doing so
well when I actually I think we need to put
the mirror up to us. And again it's not as
saying that we need the state to come in and
push us, but that we actually need to think about
you know, what are we doing. Are we protecting the
incumbents instead of actually and how much.
Speaker 2 (14:16):
Are we dulling productivity by overlaying regulation of regulation after regulation.
Speaker 1 (14:21):
And Adam Smith would have been horrified, right, I've got
loads of quotes that show how strongly he felt about
government directing his But.
Speaker 7 (14:30):
He wouldn't be necessarily against large scale public works.
Speaker 4 (14:34):
I mean.
Speaker 7 (14:36):
Pro those, right, And so I think that's where we
have to separate out the kind of good state capitalism,
if you like, from from the bad and and my
concern is is that we're not the global economy that
we came to be used to. The openness and trade
is increasingly being closed and we are seeing more and
more protectionism, and that I think is bad for capitalism.
Speaker 2 (14:59):
There is way back from then. I'm going to bring
Duncan Higgin because you've talked about this a lot. There
is from here.
Speaker 1 (15:04):
We have talked about the rise of protectionism across the world,
and you know, the reversal of the of the great
stability and peace.
Speaker 2 (15:12):
That we've had over there in the postport period.
Speaker 5 (15:14):
What sort of Adam says feels pretty hard to argue
against sort of the idea of this rise of state capitalism.
You look at the increasing tax take, the increasing proportion
of people that work for the public sector. It seems
sort of inexorable. And you're right, there's there's probably a
good form of state capitalism, which would be more public
investment in infrastructure, and there's probably a less good form
(15:36):
of state capitalism, which is gold plated public sector pensions
and you know, pay rises for everyone as soon as
as soon as we get in the door. Those the
return on those investments are probably lower than on something.
Maybe HS two is too political a topic, but you
know things like that. So I think that the West
(15:58):
does appear to be sort of rifting into sort of
managed decline, doesn't it. There's a lack of ambition from
our leaders. You look at Trump looking like he's going
to be pretty isolationist if he gets in the in
the US. But if I was to contrast state capitalism,
if we want to call that, versus some sort of alternative,
more free wheeling sort of capitalism, I saw an unbelievable
(16:23):
start this week that I had to go and go
and fact check because I didn't believe it. If you
look at MSCI China over the last thirty years, the
return is zero zero in the Chinese stock market over
thirty years. And of course the Chinese economy has achieved
an extraordinary amount in thirty years of growth in GDP,
(16:43):
growth in living standards, lifting literally hundreds of millions of
people out of poverty, but it's not been anything like
the sort of capitalism that we would ida find.
Speaker 1 (16:53):
This historically standard in that one of your mistakes that
investors make over and over and over again, absolutely assuming
economic growth translates into stock market returns, and it almost
never does because of the vast amount of capital you
need to create the growth means that there isn't the
excess available for stock market it is. This is what
it should have been expected, but instead everyone got terribly
(17:14):
excited by the market.
Speaker 8 (17:16):
Flat over thirty years.
Speaker 5 (17:17):
But it is one of the most sort of fundamental
points that everyone should think about before they start investing,
is that there is almost no correlation between GDP growth
and investment returns. And in fact, you've you've had several
people in your podcast talking about things like the capital cycle,
which might sort of imply actually the opposite.
Speaker 8 (17:36):
So yeah, definitely worth noting.
Speaker 5 (17:37):
You hear people talk about chasing where the growth is,
it doesn't matter. Well, look at the last five ten years,
Like I just said, China's had a zero turn over
the last thirty years. Japan notoriously low growth and yet
a very strong.
Speaker 8 (17:50):
Stock market return.
Speaker 3 (17:52):
But see one hundred one hundred's next.
Speaker 2 (17:55):
But Japan as well.
Speaker 1 (17:56):
I mean, the big mistake everyone makes with Japan is
just looking the GDP members, not the GDP per head
numbers and GDP per head As I say on the
podcast every single week, all we should care about is
GDP per head Because we care about people's individual living standards,
we don't care about GDP as a whole.
Speaker 2 (18:10):
Right.
Speaker 1 (18:11):
I want to come back to state capitalism briefly, and
I want to come back to the new National Wealth Fund,
which of course is absolutely nothing of the sort. It's
a new national debt fund. Let's say that it really
was a wealth fund. Let's say it really did have
actually seven billion in it, as opposed to seven billion
that we're going to borrow and put in it. What
would be a good thing to do with it? What
(18:32):
would be a good type of state sponsored.
Speaker 7 (18:35):
Yeah, so I think it's important that you note that
the National Wealth Fund is nothing like the sovereign wealth
funds that we we think about.
Speaker 4 (18:43):
And I've got a book on that, a couple of
books on that as well.
Speaker 7 (18:45):
So not like my books, Maren, the latest one is
open access too.
Speaker 4 (18:50):
But it's important because I.
Speaker 7 (18:51):
Think what we think of sovereign wealth funds is either
the big Norwegian funds that have a lot of money,
but there are a number of the smaller, more nimble,
what we call strategic investment funds. So that's the Tamasek
and Singapore or Mobadala and Abu Dhabi that make really
targeted investments. They're involved in national development plans. They're global
(19:16):
in scope, increasingly as more and more sophisticated investors.
Speaker 4 (19:21):
But that's not what.
Speaker 7 (19:22):
We have here in Britain with this new national Wealth fund.
So it's on the one hand, but the point to
say about these strategic investment funds is you don't need
that much money. You can actually leverage through the market.
You can use existing state assets to do that. But
that doesn't seem to be what they're doing in this case,
because the strategic investment funds that we think of in
the sovereign wealth fund world are those that are they're
(19:44):
set up with an independent governance structure. They look very similar,
if not almost equal to what you think of as
a venture capital firm or a private equity fund. The
managers come from the private sector. The interactions with the
the political class is maybe at a high level in
terms of oversight and saying well, we're interested in you
(20:06):
going to do this, but then they.
Speaker 4 (20:07):
Are usually left to do their own devices.
Speaker 7 (20:10):
What we see here with the new national wealth funds
is it seems to be well, we're just going to
use some existing state institutions, which I think is a
good thing. Right, Let's let's not create new things when
we have existing things like the British Investment Bank or
the Infrastructure Investment Bank.
Speaker 4 (20:26):
So that's a good thing.
Speaker 7 (20:28):
But my view on it is that, you know, why
in a country that has one of the deepest and
largest capital markets, with international banks, countless private equity funds,
venture capitalists, high net worth individuals, why isn't the market
developing these assets in Britain if they're enough, we aren't
(20:51):
they're doing and if the state is going to invest
and this is nothing to say that there's there's you know,
there's nothing wrong with state investing in roads and things.
I mean, this goes back to Smith, but it's it's
that shouldn't Parliament use its existing tools. Shouldn't they do
you know, good old fashioned public works where they're not
trying to to you know, beat Goldman Sex.
Speaker 4 (21:11):
They're saying no, no, we're outside.
Speaker 2 (21:13):
I think what he's trying to say is just fill
in the potholes, Just fill in the.
Speaker 3 (21:16):
Poms, exactly right.
Speaker 7 (21:18):
And so I think that's that's the concern I have,
is that why is labor trying to you know, they're
kind of trying to be sort of city like when
actually just go back to being just just do government.
Let's have a separation, and then more importantly, try to
figure out why this big, deep financial market is not
investing in this country and change the policies to make that.
Speaker 2 (21:40):
So fair enough.
Speaker 1 (21:41):
What would you put in it, either of you to
if you were you got the seven billion, which by
the way, is probably going to come from your pensions.
Speaker 8 (21:47):
I would I would agree.
Speaker 5 (21:49):
I think a low conviction opinion with the idea of separation.
Speaker 8 (21:54):
I think there's a difference.
Speaker 5 (21:55):
You should make some investments in pursuit of investment returns
to fund future future expenditure, like you do with your pension,
and then there should be public works, which are governmental
investments where the objective is not returns per se, but
to sort of push out the what was it called
the production possibility frontier, you know, to grow the potential
(22:15):
for future growth within the economy. And it's absolutely fine
for governments to make low returning investments if they add
broader societal benefits. But I just think you you head
down a difficult path when you conflate the two and
when you end up with projects that fall between two stools.
Speaker 1 (22:34):
Well, I did get when I wrote about this recently,
and I concurrently wrote a column about the UK's bitcoin
the amount of bitcoin that we have seized from criminals,
and it's quite a lot now, I mean, well into
the probabilions right, what we should do with it, in
my view is that we should sell it immediately before
we think is hardly wrong, and then take the money
and do something useful with it. But I got a
lot of responses saying, I'm getting.
Speaker 2 (22:53):
To Dominic, I'm getting Domini.
Speaker 1 (22:55):
I got a lot of responses going, don't be ridiculous.
This is the most valuable in the world, and it's
going to go to the moon, and you need the
UK needs to take all that bitcoin and put it
inside on National Wealth Fund and then one day we
too will have a Norwegian style national Wealth Fund And
Dominic But what is your view on that?
Speaker 6 (23:13):
I definitely think. I mean it might be that legislatively
we're not allowed to do it.
Speaker 4 (23:18):
I don't know what.
Speaker 2 (23:19):
Don't worry about that in.
Speaker 6 (23:21):
Terms of first principles, were absolutely hoddle that's what we
should be doing.
Speaker 5 (23:26):
What is that?
Speaker 2 (23:27):
Remind me what it stands up?
Speaker 6 (23:28):
Hold on just what's hold but something.
Speaker 2 (23:34):
Hang on, hang on, they mean something hold on for
dear life.
Speaker 6 (23:41):
But the it was the origin of the thing. It
was just the time he said, I'm the guy. It
was one of the bitcoin bear markets, and there was
a guy who was very frustrated and he said, damn this,
I'm hoddling.
Speaker 3 (23:52):
And it was a it was a TYPEO.
Speaker 1 (23:54):
Okay, any bitcoine hoddlers in the audience.
Speaker 2 (24:01):
God, it's picking up. I'm gonna have to change my
view on.
Speaker 8 (24:03):
This real world adoption.
Speaker 2 (24:07):
Yeah, we were early adoption, right, you were very early.
Speaker 8 (24:10):
We were well, not as early as.
Speaker 1 (24:13):
Rougher at some point held bitcoin in in the fund
and it was much discussed in the financial industry.
Speaker 2 (24:17):
We will find it.
Speaker 1 (24:18):
We all find it either rather exciting or rather disturbing,
one of the other.
Speaker 5 (24:21):
I think when we when we sold, which which was
relatively well well timed, we wrote an article or I
wrote an article called that we waddled, not hoddled.
Speaker 8 (24:33):
We have not revisited it.
Speaker 1 (24:35):
That's why I need the Rougher review. Jokes like this,
they just keep coming. Right, let's move on, Duncan, let's
have let's have you.
Speaker 5 (24:42):
A quite right minus slightly less high fluting. There is
no art which one government sooner learns of another than
that of draining money from.
Speaker 8 (24:52):
The pockets of the people. That you know that.
Speaker 5 (24:57):
It's pretty straightforward, which which which drew me to it
felt very sort of suitable for this, for this moment
in time, you know, the the the black hole that
Rachel Reeve discovered that anyone would have a brain already
knew knew was there, and the it sort of bring
(25:17):
brings me back to this this phrase that I've I've
used frequently with friends, family, private clients that we that
we deal with, if they have if you have money,
they are coming for you. It's as simple as that,
and various different means and methods, taxes and inflation, they
(25:39):
are coming for your wealth to fill the very large
hole in government finances that's been accumulated over multiple decades,
multiple governments.
Speaker 8 (25:48):
No real specific apportionment of blame here.
Speaker 2 (25:51):
Blame.
Speaker 8 (25:53):
The political class.
Speaker 5 (25:54):
But but, but, but the voters that vote for them
are culpable.
Speaker 8 (25:57):
Just justice culture.
Speaker 2 (25:58):
So really democracy is culpable. Right. We endlessly vote, endlessly.
Speaker 1 (26:02):
Vote for more and more and more and more and
more in our politicians spend more and more and more,
so who's the blame?
Speaker 2 (26:07):
Is it us? I mean had who was it? As you?
Yes it was.
Speaker 1 (26:11):
It was a guest on the podcaster some years ago
who told me that the national debt should be blamed
on women.
Speaker 8 (26:20):
Controversial opinion, right, okay.
Speaker 2 (26:23):
And so then he should be charged.
Speaker 1 (26:25):
And it is absolutely true that government spending went berserk
around the same time that women got the vote.
Speaker 2 (26:31):
And when you start to think about it.
Speaker 1 (26:32):
It makes complete sense because until women have the vote,
politicians don't have to promise, you know, good healthcare. They
don't have to promise childcare, they don't have to promise
much in the way of education, they don't have to promise.
Speaker 2 (26:45):
Social care, because this is all ladies work.
Speaker 1 (26:47):
But as soon as women get the vote, to buy
those votes, you have to start promising to pay for
all the things that women normally pick up. And so
suddenly the role of the state massively expanded fast. I
don't feel guilty about this, by the way, but it
was interesting.
Speaker 2 (27:03):
Sorry.
Speaker 5 (27:04):
I think that sort of comes back to this, this
idea of managed decline. Increasingly we fight over the share
of the pie, you know, how, we divide the pie
rather than attempt to grow the pie. And and that's
why people people vote for politicians that will tax some
sort of other, you know, the rich, which which is
always defined as more money than I have, and we'll
(27:28):
take from the rich and reapportion it, hopefully to me.
Speaker 1 (27:31):
So which taxes do you think do this well of
audience have to worry about?
Speaker 2 (27:36):
Is it capital gains tax?
Speaker 8 (27:37):
Yeah?
Speaker 5 (27:38):
This is not financial advice, but I think the the
obvious one that I think has a plausible sounding justification
is the equalization of capital gains and income.
Speaker 2 (27:50):
Tax, but without inflation indexing, because that's where my concern
is that if capital gains tax came with an indexing
to inflation, I kind of wouldn't mind.
Speaker 1 (28:01):
Because you've been being taxed on genuine wealth. But if
it's not indexed to inflation, you are being taxed on to.
Speaker 8 (28:07):
Come back to your earlier point.
Speaker 5 (28:09):
That would be a huge win for the lawyers and accountants, Yeah,
because the administration of constantly adjusting your book cost by
inflation would be I.
Speaker 2 (28:17):
Mean, that's a win for them.
Speaker 1 (28:18):
But without it, there will be a genuinely, a genuinely
high wealth tax in the UK. Already is a wealth
taxt in the UK, but it's not indexed at the moment.
But if it suddenly was forty percent or forty five percent,
you would find your wealth would disappear extremely quickly.
Speaker 6 (28:32):
Then they're not going to index it. They should do,
I couldn't agree more. But they're not going to one
because of the administrative headache that it will create, and
two because of the tacit of mission of how FIAT
money loses its power.
Speaker 1 (28:47):
But remember it was indexed until very recently. It was
rather removed index index action.
Speaker 6 (28:51):
But that's more than fifteen years ago. Everyone's forgotten. I
couldn't agree more about the Adam Smith. If you look
at the rise of income tax when it was first
brought in in the early I mean it was originally
tried out in the Napoleonic War, was but it really
only became a thing world War One and World War two,
and countries pretty much once it was shown to work
(29:13):
in one place, countries around the world copied it very quickly,
and income taxes just allow normal everywhere. Fifty percent of
government revenue around the world comes from income tax. You
then look at vat a French invention. Another thing we
should play in the French it was an extremely effective tax,
very simple to administer and I think now they don't
(29:37):
have it in the States, but more than one hundred
countries around the world now have VAT or you know
forms of VAT. So when a tax is shown to
work in one place, other countries will very quickly copy.
And it's not so much a tax thing, but it's
a regulatory thing. But we saw it like mad in
the response to COVID. You know, administrations around the world
were floundering. They didn't know what to do, and one
(29:59):
country did this and it brought in these regulations, masks
and distancing and all the rest of it, which has
since been proven. It wasn't really into that now, but
it seems to be proven. It wasn't effective. But every
country just copied everyone else, and I think that's it's
the inherent thing of career risk. It's like, oh, well
they did it, so we can do it, and it's
(30:20):
absolutely fine. You know, we're not having to stick our
next out and make a decision. And the only country
that went to game against the game with Sweden. So
countries do copy each other.
Speaker 2 (30:28):
But then we have we do now have, we're about
to have.
Speaker 1 (30:30):
We're on the verge of having a massive global competition
to get the super rich to move. So everyone will
have seen the charts showing that the UK is top
of the list of having them very well off leave
leaving is that there.
Speaker 2 (30:43):
Is an excellent quote for this. Even China is actually.
Speaker 1 (30:47):
China first and then us a lot of Yeah, I'm
going to read you this one of my favorite quotes
on this. It's not actually written about non norms, but
nearest down it, the proprietory of stock is necessarily a
citizen of the world, and is not necessarily attached to
any particular country. He would be apt to abandon the
country in which he was exposed to a vexatious incrementsition
in order to be assessed to a burden some tax,
(31:07):
and would remove his stock to some other country where
it can either carry on his business or enjoy his
fortune more at ease, which is why pretty much every
rich person in the UK is currently trying to buy
a house in Milan. Right.
Speaker 6 (31:17):
Yeah, but I do think if if one like wealth,
the problem with wealth taxes is that there's lots of
sort of slight wealth taxes, but a pure wealth tax
they're actually very difficult from a practical point of view
to actually impose.
Speaker 3 (31:34):
For all sorts of reasons.
Speaker 6 (31:36):
But if one country finds a way of imposing an
effective wealth tax, and it might just be simply raising
capital gains tax in line with income tax, and it works.
And when I say works, I mean works from the
point of view of easy to administer, easy to impose,
raises a lot of money. I mean works from the
government's point of view, not from the people's point of view.
(31:58):
But if one person can, if one cany makes it work,
then other countries will copy it very quickly.
Speaker 8 (32:03):
Can I just see, Yes, you can do.
Speaker 5 (32:04):
Dominic has achieved the impossible by actually writing an interesting
book about taxation matter today.
Speaker 8 (32:10):
It's called d Robbery highly recommended.
Speaker 2 (32:13):
Thank you, very very highly recommended.
Speaker 1 (32:15):
Now, the other interesting thing you will know about this
from that very book is that there is a new
swell of support for a land value tax. I don't
know if you saw it yesterday, Dominix thing with me
at the moment. So we're reading the same newspapers in
the Ft and the Times yesterday or possibly the day before,
there were articles about a.
Speaker 2 (32:31):
Land value tax and how land should be taxed.
Speaker 1 (32:34):
And this is something that we write about a lot
because in a perfect world of taxation, you would have
a land value tax and nothing else. But of course,
in the imperfect world, the very very imperfect world we
live in, it looks like that we may see some
version of that on top of our current tax.
Speaker 6 (32:49):
That's the problem. I'm a big fan of land value tax.
If you go back to its original George's principles, it
replaces other tax and I actually call it in daylight robbery,
I call it location value tax rather than land value tax,
because if as soon as you say land value tax,
farmers tear their hair out and they think they're.
Speaker 3 (33:06):
Going to be killed.
Speaker 6 (33:07):
Whereas it's it's based on the location, and it's prime
city center real estate like Buckingham Palace that would pay
the most tax, not you know, Johnny Farmer, where the
rental value of the land is very low.
Speaker 3 (33:20):
So I call it location value tax. But where I
see it.
Speaker 6 (33:25):
The problem with imposing a land value tax is that
there is a long history of governments trying to impose
new taxes and then losing the gig of being government
as a result, people rising up, and you know, the
community charge Margaret Thatcher is the most recent famous example.
So it's and the other problem with locate land value taxes.
It's very hard tax to explain, and so people won't
(33:49):
like it because most people's prime, most valuable thing is
their home and they don't want to have to pay
tax on that on top of paying tax.
Speaker 3 (33:57):
On everything else.
Speaker 2 (33:57):
Of course, no other tax at all. Yeah, but that's
times on where they live.
Speaker 3 (34:01):
That's the idea.
Speaker 6 (34:03):
Happen in the real world, We'll get a bastard eyed
version of land value tax in addition to other taxes.
It'll be more like the mansion tax. There'll be all
sorts of exemptions. They'll be exempting exactly the wrong people,
and it'll just end up being, you know, crony capitalist
and unfair, and the middle class will pay rather than
what Henry George originally intended.
Speaker 2 (34:23):
Just like everything else.
Speaker 1 (34:24):
Now there is, and some of you may feel like this,
a large group of well of people who say they
would like to pay more tax, who would like to
pay more tax. There's a group in the US called
patriotic millionaires who say that they would love to be
taxed more, and they spend a lot of time lobbying
the government for higher taxes on the very well off.
When we have a similar group here not a very
(34:45):
big one, mind you, but a similar one.
Speaker 2 (34:46):
Sut of exactly.
Speaker 1 (34:48):
And one of the things that we keep saying to
them is if you would like to pay more tax,
you can do so.
Speaker 2 (34:52):
There is a mechanism for that. You can call the debt.
Speaker 1 (34:54):
Office in the UK and you can just hand over
as much cash as you like. I've written a few
Collins about this, and it does that that it's happening.
So last year I think something like four and a
half thousand pounds was given to paying the UK debt,
which obviously is not going to.
Speaker 2 (35:09):
Make much of a debt.
Speaker 3 (35:10):
It's not even one pothole.
Speaker 1 (35:11):
But this year, this year so far, we're up to
over seven hundred thousand pounds already. So there are patriotic
millionaires out there who are very keen to pay more tax.
Speaker 2 (35:21):
I believe they should be allowed.
Speaker 5 (35:22):
To have stunning lack of imagination. Same that they can
think of to do with their money is to give
it to the government to allocate on.
Speaker 8 (35:30):
No particular charity that they would rather get it to, and.
Speaker 1 (35:32):
Also really really bad in numbers. If they think that's
going to make a difference.
Speaker 3 (35:36):
This is I would rather play lower taxes and then
I do more good work.
Speaker 2 (35:39):
And it's kind of it's the UK net zero of
debt management, isn't it this joke? Right Dominic?
Speaker 6 (35:45):
So my quote is this one, and it's from Wealth
of Nations, Book four, And it is the natural effort
of every individual to better his own condition is so
powerful that it is alone and without any assistance, not
only capable of carrying on the society to wealth and prosperity,
(36:06):
but of surmounting one hundred impertinent obstructions with which the
folly of human laws too often encumbers its operations. And
we see a marvelous example of this very dynamic at
work here in Edinburgh at the Fringe. So you may
(36:26):
not know this, but there's no other event in the
world that sells more tickets than the Edinburgh Festival. There's
only one event in the world that does the Olympic Games,
and apart from that, the Edinburgh Fringe sells more tickets
than any other event. It is an incredible economic success story,
and yet outside of the bubble of Edinburgh, hardly anyone
(36:47):
knows about it. And you ask yourself, why do people
whider performers come to the Edinburgh Fringe and they don't
come here out of charity. Performers don't come here to
fix climate change, house the homeless, or sort out famine
in Africa. Every single performer comes here out of self interest.
(37:07):
There are four reasons why a performer comes here. Either
he comes here to get noticed. He wants to be
the next fleabag or the next flight of the concourse
or the next tom stop ard. Or he comes here
to get better to practice and hone his act or
he comes here to make money.
Speaker 3 (37:24):
And I'm saying.
Speaker 6 (37:25):
He, he or she or they come here to have fun.
And normally it's all four of those reasons put together,
but they all boil down to self interest and as
a result of that self interest we have this incredible.
Speaker 3 (37:44):
Fringe.
Speaker 6 (37:45):
There are something like one hundred and ninety five countries
in the world. There are visitors to Edinburgh from one
hundred and seventy of them over the course of the festival,
and way more than the population of Edinburgh passes through
Edinburgh during the festival itself, loads of opportunities for people
to make money.
Speaker 3 (38:03):
And then you look.
Speaker 6 (38:04):
At all the impertinent obstructions that get thrown in the
way of this festival, mostly by the Scottish government doing
stupid things like you know, their accommodation legislation, meaning it
just because of fortune to get accommodation up here, or
you know, hate speech laws just get in the ways
of you know, what artists can and can't say, and
(38:28):
you know a million other things over the years that
we all know about, and yet performers, acting in their
own self interest find a way around all of them.
Speaker 3 (38:36):
They just find a way.
Speaker 6 (38:37):
The perennial problem at the fringe is not just accommodation
to live in, it's finding somewhere to perform. And yet
you know, all sorts of invention and imagination takes place,
so you have people acting to better their own condition
and the result is this incredible event that is the
Edinburgh Fringe.
Speaker 5 (38:57):
That was very uplifting, Dominate represented and yet my hometown
of Glasgow seems to pretend it doesn't exist.
Speaker 8 (39:08):
Grew up there in my whole life and never came
until I moved here.
Speaker 1 (39:11):
Well, Dominate, do you think the number of acts is
falling given the accommodation difficulties and all that kind of thing.
You've told a great story, but I keep hearing about
acts that don't come, can't come because they can't.
Speaker 2 (39:23):
They come ready to sleep, let's alone a venue.
Speaker 6 (39:25):
So it's just extraordinarily expensive now to come. Like a
very good friend of mine is a comedian and she's
just renting a room in somebody's house way out of town,
and just one room in one house is two grand
for the three and a half weeks to the festival
and she just won't make any money this year, and
(39:46):
so that's a deterrent. And I'm afraid the Scottish government
have taken the Edinburgh Fringe for granted, you know, it
needs nurturing, it needs protecting, and they've just filt sort
of well it's there, you know, and so numbers have
you know, the big hit was obviously COVID and it's
(40:08):
never yet regained the numbers that were there prior to COVID.
But until COVID the fringe had grown. It was it
first happened in nineteen forty seven, i want to say,
and in every year but three the fringe grew until
twenty twenty. But I'm afraid it's fallen every year since then.
Speaker 7 (40:26):
So I just wanted to kind of contrast what Dominic
said about the Fringe being this amazing arts festival with
what Duncan said about we're in a situation of managed decline.
And I keep hearing this managed decline thing, not simply
here in Britain, but across Europe and even to a
certain extent well less so in North America. And I
(40:47):
actually think we need to change that narrative because what
Dominic says is that we still have something here in
Scotland and Britain in Europe that says to me, we
are not in decline. We might have kind of regulations
that make things more difficult to do, but if you
think about the capacity we have here in the West
(41:10):
to be innovative, to drive forward, whether it's the arts
or innovation, we should embrace that to.
Speaker 1 (41:17):
Think that when you've got rint controls and press controls
and this control and micro control, and you know, wouldn't
it be nice if we could squeeze an extra thirty
people in here, But we can't because we've got a
massive overlay of regulation even in this rum, right.
Speaker 5 (41:29):
I think the difference is that the fringe is an
organic sort of event where everyone is pursuing their own
individual objectives and the cumulative result is this phenomenal explosion
of creativity and fun and it's amazing. The managed decline
that I sort of referred to, I think is more
to do with the lack of ambition of our leaders.
It's more to do with managing the economy to the
(41:52):
twenty four hour news cycle or if you're lucky, a
five year election cycle and not looking beyond that.
Speaker 7 (41:58):
But I think we need to just stop saying managed
to client and say something different and put it to
our political leaders to do better to either whether that's
that's getting up the way.
Speaker 2 (42:09):
Which doesn't change reality, right, Yeah.
Speaker 7 (42:10):
But I still think there's a mentality. I mean, someone
tell me yesterday. But you're Americans, so of course you're like,
you know, everything's possible. But I think you know there's
no reason if you think about what happened here in
the eighteenth century, in this very home with Adam Smith
and other luminaries of the Scottish Enlightenment, and we think
about what happened to Edinburgh, how it changed the world.
Speaker 4 (42:33):
I say this because I have a future.
Speaker 2 (42:34):
Okay, I'm going to move from this.
Speaker 1 (42:36):
From there some extreme optimism which makes me really uncomfortable.
Speaker 4 (42:39):
And that's not what I'm saying. It's not about extreme optimism.
Speaker 7 (42:42):
It's the sense of its Yeah, no, there's many reasons.
Speaker 1 (42:46):
Well, we're all great believers in human ingenuity. But there
does come appointment. It can be squashed, doesn't it Anyway.
We're gonna go questions, but questions. Otherwise no one will
win the book. That's great, right, right, questions. We have
ten minutes and we have a prize, and we have
a microphone. And if you don't ask questions, I will
(43:07):
have to let these guys talk more and you won't
like that, and the book is still.
Speaker 2 (43:11):
Up for grabs. Got to say, microphone, microphone coming. You
need the microphone.
Speaker 1 (43:15):
And by the way, if you say anything awful hate speech,
except we will take it out.
Speaker 2 (43:19):
We don't want anyone in.
Speaker 1 (43:20):
The audience you've just got after this event. Okay.
Speaker 9 (43:27):
I live in Hongong, where i've lived for forty years.
It has a very simple tax system. In my retirement,
I'm paying no tax. Would I be mad to come
back to the UK?
Speaker 2 (43:39):
Yes, yes, thank you very much.
Speaker 1 (43:44):
Well, I mean you've seen the shift Kevin's you're already against.
It's where is the money? The money rests with pension?
Is it rest in your pensions? It rest in your income?
It rests in your houses, not yours. Going on comment,
most that's where the money is. And if you if
you want to get people's wealth, you're going to go
after all people. And we see it already inside the
pension system. We know there's going to be all kinds
(44:04):
of shifts in there. So but at least do you
want to bring a pension bag on shore?
Speaker 3 (44:08):
They're coming after our ships, are they?
Speaker 8 (44:09):
Oh?
Speaker 2 (44:10):
Yeah, definitely coming after your sir.
Speaker 4 (44:11):
But the value of.
Speaker 7 (44:12):
Breadlas that we can criticize the government and we can
question what they do, whereas you're not allowed to do
that in Hong Kong, not now, not now, you were
until twenty twenty right.
Speaker 2 (44:22):
So yeah, and who knows where we're going in the UK? Right, Well,
spend some time, spend some time with Twitter.
Speaker 5 (44:26):
Yes, I think the last couple of weeks shows that
the level of criticism that you're allowed to em in
certain directions is less than we may bee thought.
Speaker 4 (44:35):
There's a there's a growing illiberalism.
Speaker 7 (44:37):
I think that that is troubling across the so called
liberal democracies.
Speaker 10 (44:42):
Well, how do you feel about the effectiveness inheritance tax?
Speaker 3 (44:46):
And another question is.
Speaker 1 (44:50):
You know you don't win the book by asking lots
inheritance tax, I will answer very quickly, and then don't
I think they have of you?
Speaker 2 (45:00):
Inheritance tax I think is an appalling.
Speaker 1 (45:02):
Tax and it should be shifted to a gift tax,
which would be much much better. So you know you
had a gift allow us throughout lifetime, ideally none of it,
but if you must have one, a gift tax is fairer.
Speaker 6 (45:11):
My objection to inheritance tax. I have all the normal
objections to inheritance tax. It doesn't fall on the super rich,
it falls on the middle class. You know you've paid
taxes all your life, why should you pay them in death?
All of those arguments that you hear, But my biggest
objection to inheritance tax is an argument that you don't
(45:32):
hear very often, and it is this when it is
an attack on the institution that is the family, and
the family is the most important institution there is, and
the family home is in many cases what keeps a
family together. And when a family is going through a
period of mourning, when they have to then go through
(45:54):
do all this admin that you have to do, and
then they're forced to sell the family home, and it
it erodes that I wont say it destroys the family,
even although in many cases does it just erodes it away.
And the family home should be the core of that family,
and it keeps families together. And and that's why I
don't like Harry.
Speaker 2 (46:13):
I'm never sure about that. They was flog the home anyway. Sorry,
they was flogged the home anyway, not.
Speaker 3 (46:18):
Always always many would keep it if they could.
Speaker 2 (46:22):
Maybe that last question here on the front, thank you.
Speaker 10 (46:25):
So the apage person is encouraged to invest in stock
markets in order to get real returns and to shadow
and growth in their company if there's noning between stock markets,
and what should the average person.
Speaker 5 (46:38):
Do by the S and P, by the SB Yeah,
well so, so the average person invests in the stock
market so that they can get a claim on the
earnings of the companies in the stock market. So you know,
Warren Buffet says you should invest in the SMP. Dominic
says you should invest.
Speaker 8 (46:50):
In the S and P.
Speaker 5 (46:51):
I might suggest a wealth preservation fund that's relatively well
known in the UK, but it doesn't begin with our
But yeah, I think that's the distinction. You invest in
the stock market to get your proportionate clean of the
earnings of that company and the growth and the creativity
of that company that hopefully happens in future years. Ultimately
(47:12):
that does add up to the whole economy. But there
is that sort of the severing of that link.
Speaker 3 (47:17):
We have a thing in my newsletter, the Flying Frisbee.
Speaker 6 (47:20):
I've created a thing called the Dolce Fadnente portfolio, which
is a portfolio designed around doing nothing. You don't have
to keep worrying about your investments. We have a little
bit of gold, a little bit of oil and gas,
a little bit of the S and P which is
the American stock market, and a tiny amount of bitcoin.
And we just have those four assets and we might
(47:40):
roll out of oil and gas at another time, but
we think, you know, whatever's going on in the market,
they all point to ownership of those assets.
Speaker 3 (47:49):
For the time being, we had to stop.
Speaker 1 (47:51):
But I will just say one last thing, based on
mote Dominic says, but being a very good idea to
do nothing. There was a study from Fidelity four or
five years ago that looked into the counts that people
held with them and the ones that were the best
performing and the best performing accounts across the board were
held by guests who they did.
Speaker 2 (48:10):
Dead people.
Speaker 8 (48:12):
The glowing endorsement of my industry.
Speaker 2 (48:15):
Because they never fiddled.
Speaker 3 (48:18):
Another argument for inheritance tax.
Speaker 1 (48:20):
I can't do a bit where I ask them each
you give us their favorite investment because we've run out
of time unless they want to do it.
Speaker 6 (48:25):
In one word at the moment, all I guess just
one quit.
Speaker 4 (48:32):
The United States for America stock.
Speaker 2 (48:34):
Market excellent and that is it.
Speaker 1 (48:37):
And thank you so much, my wonderful guest, and gee've
been good the Marvel body. Thanks for listening to this
week's Marin Talks Money. If you like, I show, rate, review,
and subscribe wherever you listen to podcasts, and keep sending
your questions or comments to Merrin Money at Bloomberg dot net.
(48:58):
This evidence were produced by he Married Sunset Web. It
was produced by SOMEERSIDI production support and sound by Moses
and a special thanks of course to Dominic Frisbie, to
Adam Dixon, Duncan McGinnis, and to Blair Barrows at Pama
House for all his help. And be sure to follow
me in John on Twitter or exit Marinus w and
at John Underscoes.
Speaker 2 (49:19):
Stepic thanks for listening
Bloomberg Audio Studios, podcasts, radio news, Hello, Bren Talks Money Listeners,
It's Maren Sunset Web. We are bringing you something very
special over the next week, recordings of the conversations I
had at Pamier House for the Edinburgh Fringe Festival. Now,
for those of you who don't know, and I'm sure
(00:23):
there aren't very many of you who don't know this,
The Fringe is a three week arts and culture festival
that began in nineteen forty seven and takes place in
Edinburgh in Scotland every August. For the past few years,
I've been hosting conversations about markets, economics and investings from
one of the most special locations as part of this festival.
I do it from Pamier House, which is the last
home of Adam Smith, philosopher and father of modern economics.
(00:45):
It's where he completed the last editions of his best sellers,
The Theory of Moral Sentiments and The Wealth of Nation's
top reads, both of them. This year we did a
four day run in mid August, and we are bringing
you the slightly edited conversations from three.
Speaker 2 (00:58):
Of those days.
Speaker 1 (00:59):
For this battle, I spoke with Dominic Frisby British author,
comedian and financial writer Adam Dixon, will holds the Adam
Smith Share and Sustainable Capitalism at Pama House, and Duncan McGinnis,
who is a fund manager at RAFFA enjoy listening. I'm
sorry were a few minutes later everybody, but they started
(01:21):
arguing in the green right.
Speaker 2 (01:25):
I had to get them out here now right.
Speaker 1 (01:27):
Thank you for coming, Thank you for choosing us from
the many wonderful things you have to choose at the fringe.
Speaker 2 (01:31):
We appreciated enormously.
Speaker 1 (01:33):
Before I start, can I just ask how many of
you have been to this conversation before?
Speaker 2 (01:38):
Okay, so a lot of you know already how it works.
Speaker 1 (01:41):
Basically, we have these three wonderful guests who I will
introduce properly in a minute, And in a minute I'm
going to ask each of them to come up with
their favorite Adam Smith quote, and then we're going to
talk about those quotes. We're going to talk about those quotes,
their relevance when Smith wrote them, and their relevance today,
and it's going to be fascinating and they're not going
to fight.
Speaker 2 (01:58):
And then we will have a Q and A at
the end, and as we go along.
Speaker 1 (02:03):
I want you to start thinking about your questions and
the things you want to talk about when we get
to Q and A, because there will be a.
Speaker 2 (02:08):
Prize for the best question. Now, the prize was.
Speaker 1 (02:11):
Going to be a copy of my book, my latest book,
but I forgot to bring it with me, so you
get something better, better, which is a copy of Adam
Dixon's book, which he's just told me retails for ninety
quid right, so you can flog it and buy yourself
tickets to a couple more.
Speaker 3 (02:30):
Because we shall publish it.
Speaker 4 (02:34):
Or you can download it for free because it's open access.
Speaker 1 (02:36):
Oh okay, or download it for free, or download it
for free right now. I think you got you a
little little blurb about the house downstairs, didn't you about
how wonderfoot it is now Adam Smith lived here, etc.
And how he wrote second editions of Wealth of Nations
and Moral Sentiments here. So this is a point when
I asked you all, who has read the Wealth of Nations,
as there's always always a liar in the audience.
Speaker 2 (03:02):
Who has read Moral Sentiments? No one dares. Okay, well,
you know they're difficult reads. They really are.
Speaker 1 (03:11):
They're they're long, they're you know for some language block,
but when he wrote these books they were absolute best
sellers up and down the Royal Mile. You could, you know,
you could buy pictures of Adams souvenirs related to Adam Smith.
A Wealth of Nations sold out first edition in six
months and was reprinted over and over and over and over.
Speaker 2 (03:28):
You know, today we.
Speaker 1 (03:28):
Think of him as an academic and moral philosopher, but
he was in fact a massive celebrity at the time.
Speaker 2 (03:35):
And this house obviously is suitable for a celebrity.
Speaker 1 (03:39):
But he also had and I have tried to think
of more interesting things to talk about Adam Smith about,
but I can't get away from his pension arrangements. And
looking at all of you, I think you're probably mainly interested.
Speaker 2 (03:49):
In pensions as well. Yeah I am. I at pensions too.
Speaker 1 (03:53):
I think of nothing but how I can get my
hands on a defined benefit pension. As regular listeners to
the podcast will know, now, Adam Smith had after under
three years work, I'm right right under three years under
three years work he did as a as a tuto
going on grand tour with the young Duke of Laclu
grand children what we now call the gap year. In
(04:15):
those two and a half years, which he had to
come back from earlier than he expected. He ended up
with the equivalent of an inflation adjusted sixty thousand pounds
every year for life. Sixty thousand pounds was a base income,
and that was one of the reasons he was able
to afford to live here.
Speaker 5 (04:30):
With his only topped by reason.
Speaker 1 (04:34):
Or so many And today, of course bus drivers because
they had to find benefit pension goes up with their salary. Right,
we won't well on that now. He also lived here
with his mother, and we were talking earlier about how
how woke or not woke pamel houses and whether it
should be woke or not, and I thought that right,
(04:55):
we just introduced the fact that Adam Smith was facilitated
by the women around him. I was looking up to
see when his mother died, because there seemed to be
some fuss about it on the internet, because she did
live here with him all the way through. He only
got six years in which he had to manage his
own household for dear.
Speaker 2 (05:11):
And I found a book called.
Speaker 1 (05:13):
Who Cooked Adam Smith's Dinner? Right, Adam Smith has a
permanent entry in world history.
Speaker 2 (05:20):
Margaret Douglass does not.
Speaker 1 (05:22):
Adam Smith developed the idea of the success of self
interest of the free market. Margaret Douglass cooked his dinner,
and the book is all about how he couldn't possibly
have done it without her.
Speaker 2 (05:31):
But of course I doubt that.
Speaker 1 (05:33):
On the sixty grand a year as a base and
all his celebrity income, his mother cooked his dinner either.
Speaker 2 (05:38):
So I think we'll write a new book on that.
Right onwards said she.
Speaker 6 (05:42):
Was ninety one she died, must have been one of
the oldest people in Europe.
Speaker 1 (05:46):
Yeah, do you think, I mean, we might come on
to this later, but you know, all the stuff about
how we're living longer. In fact, if you didn't die
in childbirth, and you didn't die of some nasty accident,
dan coal mine, etc. The lifespan of people who didn't
die all of those things was similar then to now.
If people who didn't have master your stuff lived to
their age in the nineties, you think, yeah, maybe anyway, Interestingly,
(06:09):
you know, at that time it was relatively normal, wasn't it,
to live as families, to live with your mother, etc.
Speaker 2 (06:13):
Now it increasingly is again.
Speaker 1 (06:15):
I don't know if you saw the numbers out a
few days ago about the percentage of young people who
still live with their parents, and in Italy it is
now over fifty percent of people between twenty five and
thirty five still live with their parents. Yeah, anyone got
an adult child living with them? Anyone like them to leave?
(06:35):
We got under house prices later anyway. Dominic Frisby our
first guest, who writes the very popular substack newsletter, The
Flying Frisbee.
Speaker 2 (06:43):
Do we all know about substack? Yep? Okay, brilliant, so
sign up for that.
Speaker 1 (06:47):
He also makes comic videos which are excellent, and sings
excellent comic songs. And we might haven't got your haven't
got your friend with you?
Speaker 7 (06:54):
Ah?
Speaker 1 (06:54):
No, ug, this is a shame because my son's absolutely
favorite song is one of dom its top hit.
Speaker 4 (07:01):
Right.
Speaker 2 (07:02):
I think the lyric not that one, not that other one.
Speaker 7 (07:08):
We can we can all harmonize under so we can
if you wait, wait a bit, the show is going
to get better.
Speaker 1 (07:14):
And what rhymes with fer just called us massage, So
the lyrics are great anyway.
Speaker 2 (07:18):
That's Dominic.
Speaker 1 (07:19):
He's also the author of free books and a well
known financial writer. He's for those of you who read
Money Week, with which I am no longer involved.
Speaker 2 (07:25):
Do you still write for money?
Speaker 3 (07:26):
Occasionally?
Speaker 1 (07:27):
A regular writer for Money Weekend, and some excellent advice
on things so that we'll get on to you later.
Duncan mc guinness who is a fund manager at Er
and no substack podcasts on your podcast, the odd article
on Ruffer's website, or a Roffer.
Speaker 5 (07:43):
Review annual periodical which which is pretty good, actually.
Speaker 3 (07:47):
Really really good.
Speaker 1 (07:48):
I'll tell you what you're on again later in the week.
If you bring it, then we'll make that the free
gift for the best question.
Speaker 8 (07:54):
Wow, thank you.
Speaker 2 (07:55):
I don't think I'll be a seller for ninety.
Speaker 1 (07:58):
And Adam Dixon, who holds the Adams fiftche in sustainable
capitalism here at amath.
Speaker 2 (08:05):
Right. First quote was going to first, Adam was going
to give us this quote first.
Speaker 4 (08:10):
Okay, so.
Speaker 7 (08:13):
My quote Adam's quote, not this Adam. In such improvements,
each nation ought not only to endeavor itself to excel,
but from the love of mankind, to promote, instead of
obstructing the excellence of its neighbors. These are all proper
objects of national emulation, not of national prejudice or envy. Now,
(08:40):
and this is from the theory of moral sentiments, not
from the wealth of nations. So this chose to show
that Smith was thinking globally about geopolitics even when he
was writing The Theory of Moral Sentiments, and this quote
mostly pertained to differences between France and Britain at the
time and the competition between the two. Even later on
(09:01):
and down the page he mentions and this says, most
people here in Britain wouldn't really care about what's happening
in China and Japan because it's way over there. Now
you fast forward to twenty first century, what kind of
world do we live in? One of I would say
in my recent book state Capitalism, and that state capitalism
(09:22):
is not limited to China, but Chinese state capitalism, i
would argue, is actually begetting more state capitalism elsewhere here
in the West, in Britain, in Europe, in the United States,
we're all becoming state capitalists. Now this doesn't mean necessarily
state ownership or state investment funds.
Speaker 4 (09:44):
It's all the panoply of.
Speaker 7 (09:46):
The tools of the state, from subsidies to sanctions to
investment screening regulations. The world's becoming increasingly fractured. Just this
last week I was in Helsinki at the Helsinki Geoeconomic
Next Week as part of the new geoeconomic society. And
this was a grouping of lawyers and consultants and people
(10:08):
from the defense industry and a handful of academics that
nobody cares what they have to say, and you know,
things were being said about, Wow, this is going to
be a compliance tsunami coming. And I had a conversation
with a lawyer, and an American lawyer was saying, this
is great for us. We have all kinds of business
because governments are saying we need to check these investments.
(10:29):
And it all constrains I think possibly innovation. It constrains
and makes us, you know, not be open to trade,
open to sharing ideas. Now, certainly what's driving this, it's
because China is becoming increasingly competitive. Some of that competition
and the market share that it's getting is certainly one
(10:52):
of taking ideas and running with them. But at the
same time, what worries me is can increasingly we're looking
at China and we're looking at it as.
Speaker 4 (11:02):
A national security threat.
Speaker 7 (11:04):
And all these economic policies are about national security, but
often it seems that it's about protecting national industries, protecting
the incumbent firms. And I wonder, is this good for capitalism.
Is it good for societies? Because yes, sometimes China has
an unfair advantage that's driven by state subsidies or or
(11:28):
some policy that the Chinese are doing to protect their
own industries. But often you think, well, actually, no, China's
doing well because they go to scale quickly. They identify
a problem in the world and look for a solution.
I mean, we think of electric cars as this is
going to be the future. Maybe not as soon as
(11:49):
we think, but it's probably going at least for urban transport.
And Tesla is doing very well, but Tesla is still
mostly a luxury car. And who's driving the new Ford,
the new model T It's Chinese automakers. And the bigger
question is are they doing that because the Chinese government
has supported them?
Speaker 8 (12:09):
Yes?
Speaker 7 (12:09):
Possibly, but it's partly because the German auto makers were
kind of asleep at the wheel.
Speaker 4 (12:15):
And even now they don't want to ember race.
Speaker 1 (12:17):
We're arguing for state capitalism, not against.
Speaker 2 (12:20):
Things seem to be going better for China than for us.
Speaker 1 (12:22):
And when you talk about national security, yes, we take
it back to electric cars and back to energy. So
for example, one of the reasons why possibly we're seeing
a lot more state capitalism is the energy transition because
we are in a very unusual situation where we're trying
to do something that doesn't make economic sense, that might
make climate sense, but certainly doesn't make economic sense. We're
trying to do that, so you need massive state intervention
(12:42):
for it. That so that might be one of the
reasons we're seeing more state intervention. And you look to China,
who are now the global leaders in solar and nuclear,
which is probably what we're going to be using, what
we should be using, and the rest of us are
falling behind massively on that because we're terrified of nuclear,
we haven't got much.
Speaker 2 (12:59):
Solar, and America don't really care about nuclear.
Speaker 1 (13:02):
Or solar because they've got so much al So that's
where the problem might be. And so we should be
looking at national security in terms of energy, and that
feels to me like that's where a lot of it
is coming from.
Speaker 4 (13:14):
Yes, but there's even more. I think there's there.
Speaker 7 (13:16):
It's more than just I mean, it's a level of
scrutiny and concern around national security and dual use for
military and civil use for technologies. There's a lot of
concern that it's it's that bleeds into other parts of
the of the economy.
Speaker 4 (13:35):
I agree.
Speaker 7 (13:36):
I mean, the scale of the energy transition means we
need to put a lot of money in. There needs
to be a lot of forward thinking and planning, and
maybe the private sector isn't there to do it. But
my concern is that this state capitalism bleeds into the
rest of the economy when and it partly is do
I think, and going back to Smith's quote, is this.
Speaker 4 (13:58):
National prejudice envy.
Speaker 7 (14:00):
There's a bit of envy that China is doing so
well when I actually I think we need to put
the mirror up to us. And again it's not as
saying that we need the state to come in and
push us, but that we actually need to think about
you know, what are we doing. Are we protecting the
incumbents instead of actually and how much.
Speaker 2 (14:16):
Are we dulling productivity by overlaying regulation of regulation after regulation.
Speaker 1 (14:21):
And Adam Smith would have been horrified, right, I've got
loads of quotes that show how strongly he felt about
government directing his But.
Speaker 7 (14:30):
He wouldn't be necessarily against large scale public works.
Speaker 4 (14:34):
I mean.
Speaker 7 (14:36):
Pro those, right, And so I think that's where we
have to separate out the kind of good state capitalism,
if you like, from from the bad and and my
concern is is that we're not the global economy that
we came to be used to. The openness and trade
is increasingly being closed and we are seeing more and
more protectionism, and that I think is bad for capitalism.
Speaker 2 (14:59):
There is way back from then. I'm going to bring
Duncan Higgin because you've talked about this a lot. There
is from here.
Speaker 1 (15:04):
We have talked about the rise of protectionism across the world,
and you know, the reversal of the of the great
stability and peace.
Speaker 2 (15:12):
That we've had over there in the postport period.
Speaker 5 (15:14):
What sort of Adam says feels pretty hard to argue
against sort of the idea of this rise of state capitalism.
You look at the increasing tax take, the increasing proportion
of people that work for the public sector. It seems
sort of inexorable. And you're right, there's there's probably a
good form of state capitalism, which would be more public
investment in infrastructure, and there's probably a less good form
(15:36):
of state capitalism, which is gold plated public sector pensions
and you know, pay rises for everyone as soon as
as soon as we get in the door. Those the
return on those investments are probably lower than on something.
Maybe HS two is too political a topic, but you
know things like that. So I think that the West
(15:58):
does appear to be sort of rifting into sort of
managed decline, doesn't it. There's a lack of ambition from
our leaders. You look at Trump looking like he's going
to be pretty isolationist if he gets in the in
the US. But if I was to contrast state capitalism,
if we want to call that, versus some sort of alternative,
more free wheeling sort of capitalism, I saw an unbelievable
(16:23):
start this week that I had to go and go
and fact check because I didn't believe it. If you
look at MSCI China over the last thirty years, the
return is zero zero in the Chinese stock market over
thirty years. And of course the Chinese economy has achieved
an extraordinary amount in thirty years of growth in GDP,
(16:43):
growth in living standards, lifting literally hundreds of millions of
people out of poverty, but it's not been anything like
the sort of capitalism that we would ida find.
Speaker 1 (16:53):
This historically standard in that one of your mistakes that
investors make over and over and over again, absolutely assuming
economic growth translates into stock market returns, and it almost
never does because of the vast amount of capital you
need to create the growth means that there isn't the
excess available for stock market it is. This is what
it should have been expected, but instead everyone got terribly
(17:14):
excited by the market.
Speaker 8 (17:16):
Flat over thirty years.
Speaker 5 (17:17):
But it is one of the most sort of fundamental
points that everyone should think about before they start investing,
is that there is almost no correlation between GDP growth
and investment returns. And in fact, you've you've had several
people in your podcast talking about things like the capital cycle,
which might sort of imply actually the opposite.
Speaker 8 (17:36):
So yeah, definitely worth noting.
Speaker 5 (17:37):
You hear people talk about chasing where the growth is,
it doesn't matter. Well, look at the last five ten years,
Like I just said, China's had a zero turn over
the last thirty years. Japan notoriously low growth and yet
a very strong.
Speaker 8 (17:50):
Stock market return.
Speaker 3 (17:52):
But see one hundred one hundred's next.
Speaker 2 (17:55):
But Japan as well.
Speaker 1 (17:56):
I mean, the big mistake everyone makes with Japan is
just looking the GDP members, not the GDP per head
numbers and GDP per head As I say on the
podcast every single week, all we should care about is
GDP per head Because we care about people's individual living standards,
we don't care about GDP as a whole.
Speaker 2 (18:10):
Right.
Speaker 1 (18:11):
I want to come back to state capitalism briefly, and
I want to come back to the new National Wealth Fund,
which of course is absolutely nothing of the sort. It's
a new national debt fund. Let's say that it really
was a wealth fund. Let's say it really did have
actually seven billion in it, as opposed to seven billion
that we're going to borrow and put in it. What
would be a good thing to do with it? What
(18:32):
would be a good type of state sponsored.
Speaker 7 (18:35):
Yeah, so I think it's important that you note that
the National Wealth Fund is nothing like the sovereign wealth
funds that we we think about.
Speaker 4 (18:43):
And I've got a book on that, a couple of
books on that as well.
Speaker 7 (18:45):
So not like my books, Maren, the latest one is
open access too.
Speaker 4 (18:50):
But it's important because I.
Speaker 7 (18:51):
Think what we think of sovereign wealth funds is either
the big Norwegian funds that have a lot of money,
but there are a number of the smaller, more nimble,
what we call strategic investment funds. So that's the Tamasek
and Singapore or Mobadala and Abu Dhabi that make really
targeted investments. They're involved in national development plans. They're global
(19:16):
in scope, increasingly as more and more sophisticated investors.
Speaker 4 (19:21):
But that's not what.
Speaker 7 (19:22):
We have here in Britain with this new national Wealth fund.
So it's on the one hand, but the point to
say about these strategic investment funds is you don't need
that much money. You can actually leverage through the market.
You can use existing state assets to do that. But
that doesn't seem to be what they're doing in this case,
because the strategic investment funds that we think of in
the sovereign wealth fund world are those that are they're
(19:44):
set up with an independent governance structure. They look very similar,
if not almost equal to what you think of as
a venture capital firm or a private equity fund. The
managers come from the private sector. The interactions with the
the political class is maybe at a high level in
terms of oversight and saying well, we're interested in you
(20:06):
going to do this, but then they.
Speaker 4 (20:07):
Are usually left to do their own devices.
Speaker 7 (20:10):
What we see here with the new national wealth funds
is it seems to be well, we're just going to
use some existing state institutions, which I think is a
good thing. Right, Let's let's not create new things when
we have existing things like the British Investment Bank or
the Infrastructure Investment Bank.
Speaker 4 (20:26):
So that's a good thing.
Speaker 7 (20:28):
But my view on it is that, you know, why
in a country that has one of the deepest and
largest capital markets, with international banks, countless private equity funds,
venture capitalists, high net worth individuals, why isn't the market
developing these assets in Britain if they're enough, we aren't
(20:51):
they're doing and if the state is going to invest
and this is nothing to say that there's there's you know,
there's nothing wrong with state investing in roads and things.
I mean, this goes back to Smith, but it's it's
that shouldn't Parliament use its existing tools. Shouldn't they do
you know, good old fashioned public works where they're not
trying to to you know, beat Goldman Sex.
Speaker 4 (21:11):
They're saying no, no, we're outside.
Speaker 2 (21:13):
I think what he's trying to say is just fill
in the potholes, Just fill in the.
Speaker 3 (21:16):
Poms, exactly right.
Speaker 7 (21:18):
And so I think that's that's the concern I have,
is that why is labor trying to you know, they're
kind of trying to be sort of city like when
actually just go back to being just just do government.
Let's have a separation, and then more importantly, try to
figure out why this big, deep financial market is not
investing in this country and change the policies to make that.
Speaker 2 (21:40):
So fair enough.
Speaker 1 (21:41):
What would you put in it, either of you to
if you were you got the seven billion, which by
the way, is probably going to come from your pensions.
Speaker 8 (21:47):
I would I would agree.
Speaker 5 (21:49):
I think a low conviction opinion with the idea of separation.
Speaker 8 (21:54):
I think there's a difference.
Speaker 5 (21:55):
You should make some investments in pursuit of investment returns
to fund future future expenditure, like you do with your pension,
and then there should be public works, which are governmental
investments where the objective is not returns per se, but
to sort of push out the what was it called
the production possibility frontier, you know, to grow the potential
(22:15):
for future growth within the economy. And it's absolutely fine
for governments to make low returning investments if they add
broader societal benefits. But I just think you you head
down a difficult path when you conflate the two and
when you end up with projects that fall between two stools.
Speaker 1 (22:34):
Well, I did get when I wrote about this recently,
and I concurrently wrote a column about the UK's bitcoin
the amount of bitcoin that we have seized from criminals,
and it's quite a lot now, I mean, well into
the probabilions right, what we should do with it, in
my view is that we should sell it immediately before
we think is hardly wrong, and then take the money
and do something useful with it. But I got a
lot of responses saying, I'm getting.
Speaker 2 (22:53):
To Dominic, I'm getting Domini.
Speaker 1 (22:55):
I got a lot of responses going, don't be ridiculous.
This is the most valuable in the world, and it's
going to go to the moon, and you need the
UK needs to take all that bitcoin and put it
inside on National Wealth Fund and then one day we
too will have a Norwegian style national Wealth Fund And
Dominic But what is your view on that?
Speaker 6 (23:13):
I definitely think. I mean it might be that legislatively
we're not allowed to do it.
Speaker 4 (23:18):
I don't know what.
Speaker 2 (23:19):
Don't worry about that in.
Speaker 6 (23:21):
Terms of first principles, were absolutely hoddle that's what we
should be doing.
Speaker 5 (23:26):
What is that?
Speaker 2 (23:27):
Remind me what it stands up?
Speaker 6 (23:28):
Hold on just what's hold but something.
Speaker 2 (23:34):
Hang on, hang on, they mean something hold on for
dear life.
Speaker 6 (23:41):
But the it was the origin of the thing. It
was just the time he said, I'm the guy. It
was one of the bitcoin bear markets, and there was
a guy who was very frustrated and he said, damn this,
I'm hoddling.
Speaker 3 (23:52):
And it was a it was a TYPEO.
Speaker 1 (23:54):
Okay, any bitcoine hoddlers in the audience.
Speaker 2 (24:01):
God, it's picking up. I'm gonna have to change my
view on.
Speaker 8 (24:03):
This real world adoption.
Speaker 2 (24:07):
Yeah, we were early adoption, right, you were very early.
Speaker 8 (24:10):
We were well, not as early as.
Speaker 1 (24:13):
Rougher at some point held bitcoin in in the fund
and it was much discussed in the financial industry.
Speaker 2 (24:17):
We will find it.
Speaker 1 (24:18):
We all find it either rather exciting or rather disturbing,
one of the other.
Speaker 5 (24:21):
I think when we when we sold, which which was
relatively well well timed, we wrote an article or I
wrote an article called that we waddled, not hoddled.
Speaker 8 (24:33):
We have not revisited it.
Speaker 1 (24:35):
That's why I need the Rougher review. Jokes like this,
they just keep coming. Right, let's move on, Duncan, let's
have let's have you.
Speaker 5 (24:42):
A quite right minus slightly less high fluting. There is
no art which one government sooner learns of another than
that of draining money from.
Speaker 8 (24:52):
The pockets of the people. That you know that.
Speaker 5 (24:57):
It's pretty straightforward, which which which drew me to it
felt very sort of suitable for this, for this moment
in time, you know, the the the black hole that
Rachel Reeve discovered that anyone would have a brain already
knew knew was there, and the it sort of bring
(25:17):
brings me back to this this phrase that I've I've
used frequently with friends, family, private clients that we that
we deal with, if they have if you have money,
they are coming for you. It's as simple as that,
and various different means and methods, taxes and inflation, they
(25:39):
are coming for your wealth to fill the very large
hole in government finances that's been accumulated over multiple decades,
multiple governments.
Speaker 8 (25:48):
No real specific apportionment of blame here.
Speaker 2 (25:51):
Blame.
Speaker 8 (25:53):
The political class.
Speaker 5 (25:54):
But but, but, but the voters that vote for them
are culpable.
Speaker 8 (25:57):
Just justice culture.
Speaker 2 (25:58):
So really democracy is culpable. Right. We endlessly vote, endlessly.
Speaker 1 (26:02):
Vote for more and more and more and more and
more in our politicians spend more and more and more,
so who's the blame?
Speaker 2 (26:07):
Is it us? I mean had who was it? As you?
Yes it was.
Speaker 1 (26:11):
It was a guest on the podcaster some years ago
who told me that the national debt should be blamed
on women.
Speaker 8 (26:20):
Controversial opinion, right, okay.
Speaker 2 (26:23):
And so then he should be charged.
Speaker 1 (26:25):
And it is absolutely true that government spending went berserk
around the same time that women got the vote.
Speaker 2 (26:31):
And when you start to think about it.
Speaker 1 (26:32):
It makes complete sense because until women have the vote,
politicians don't have to promise, you know, good healthcare. They
don't have to promise childcare, they don't have to promise
much in the way of education, they don't have to promise.
Speaker 2 (26:45):
Social care, because this is all ladies work.
Speaker 1 (26:47):
But as soon as women get the vote, to buy
those votes, you have to start promising to pay for
all the things that women normally pick up. And so
suddenly the role of the state massively expanded fast. I
don't feel guilty about this, by the way, but it
was interesting.
Speaker 2 (27:03):
Sorry.
Speaker 5 (27:04):
I think that sort of comes back to this, this
idea of managed decline. Increasingly we fight over the share
of the pie, you know, how, we divide the pie
rather than attempt to grow the pie. And and that's
why people people vote for politicians that will tax some
sort of other, you know, the rich, which which is
always defined as more money than I have, and we'll
(27:28):
take from the rich and reapportion it, hopefully to me.
Speaker 1 (27:31):
So which taxes do you think do this well of
audience have to worry about?
Speaker 2 (27:36):
Is it capital gains tax?
Speaker 8 (27:37):
Yeah?
Speaker 5 (27:38):
This is not financial advice, but I think the the
obvious one that I think has a plausible sounding justification
is the equalization of capital gains and income.
Speaker 2 (27:50):
Tax, but without inflation indexing, because that's where my concern
is that if capital gains tax came with an indexing
to inflation, I kind of wouldn't mind.
Speaker 1 (28:01):
Because you've been being taxed on genuine wealth. But if
it's not indexed to inflation, you are being taxed on to.
Speaker 8 (28:07):
Come back to your earlier point.
Speaker 5 (28:09):
That would be a huge win for the lawyers and accountants, Yeah,
because the administration of constantly adjusting your book cost by
inflation would be I.
Speaker 2 (28:17):
Mean, that's a win for them.
Speaker 1 (28:18):
But without it, there will be a genuinely, a genuinely
high wealth tax in the UK. Already is a wealth
taxt in the UK, but it's not indexed at the moment.
But if it suddenly was forty percent or forty five percent,
you would find your wealth would disappear extremely quickly.
Speaker 6 (28:32):
Then they're not going to index it. They should do,
I couldn't agree more. But they're not going to one
because of the administrative headache that it will create, and
two because of the tacit of mission of how FIAT
money loses its power.
Speaker 1 (28:47):
But remember it was indexed until very recently. It was
rather removed index index action.
Speaker 6 (28:51):
But that's more than fifteen years ago. Everyone's forgotten. I
couldn't agree more about the Adam Smith. If you look
at the rise of income tax when it was first
brought in in the early I mean it was originally
tried out in the Napoleonic War, was but it really
only became a thing world War One and World War two,
and countries pretty much once it was shown to work
(29:13):
in one place, countries around the world copied it very quickly,
and income taxes just allow normal everywhere. Fifty percent of
government revenue around the world comes from income tax. You
then look at vat a French invention. Another thing we
should play in the French it was an extremely effective tax,
very simple to administer and I think now they don't
(29:37):
have it in the States, but more than one hundred
countries around the world now have VAT or you know
forms of VAT. So when a tax is shown to
work in one place, other countries will very quickly copy.
And it's not so much a tax thing, but it's
a regulatory thing. But we saw it like mad in
the response to COVID. You know, administrations around the world
were floundering. They didn't know what to do, and one
(29:59):
country did this and it brought in these regulations, masks
and distancing and all the rest of it, which has
since been proven. It wasn't really into that now, but
it seems to be proven. It wasn't effective. But every
country just copied everyone else, and I think that's it's
the inherent thing of career risk. It's like, oh, well
they did it, so we can do it, and it's
(30:20):
absolutely fine. You know, we're not having to stick our
next out and make a decision. And the only country
that went to game against the game with Sweden. So
countries do copy each other.
Speaker 2 (30:28):
But then we have we do now have, we're about
to have.
Speaker 1 (30:30):
We're on the verge of having a massive global competition
to get the super rich to move. So everyone will
have seen the charts showing that the UK is top
of the list of having them very well off leave
leaving is that there.
Speaker 2 (30:43):
Is an excellent quote for this. Even China is actually.
Speaker 1 (30:47):
China first and then us a lot of Yeah, I'm
going to read you this one of my favorite quotes
on this. It's not actually written about non norms, but
nearest down it, the proprietory of stock is necessarily a
citizen of the world, and is not necessarily attached to
any particular country. He would be apt to abandon the
country in which he was exposed to a vexatious incrementsition
in order to be assessed to a burden some tax,
(31:07):
and would remove his stock to some other country where
it can either carry on his business or enjoy his
fortune more at ease, which is why pretty much every
rich person in the UK is currently trying to buy
a house in Milan. Right.
Speaker 6 (31:17):
Yeah, but I do think if if one like wealth,
the problem with wealth taxes is that there's lots of
sort of slight wealth taxes, but a pure wealth tax
they're actually very difficult from a practical point of view
to actually impose.
Speaker 3 (31:34):
For all sorts of reasons.
Speaker 6 (31:36):
But if one country finds a way of imposing an
effective wealth tax, and it might just be simply raising
capital gains tax in line with income tax, and it works.
And when I say works, I mean works from the
point of view of easy to administer, easy to impose,
raises a lot of money. I mean works from the
government's point of view, not from the people's point of view.
(31:58):
But if one person can, if one cany makes it work,
then other countries will copy it very quickly.
Speaker 8 (32:03):
Can I just see, Yes, you can do.
Speaker 5 (32:04):
Dominic has achieved the impossible by actually writing an interesting
book about taxation matter today.
Speaker 8 (32:10):
It's called d Robbery highly recommended.
Speaker 2 (32:13):
Thank you, very very highly recommended.
Speaker 1 (32:15):
Now, the other interesting thing you will know about this
from that very book is that there is a new
swell of support for a land value tax. I don't
know if you saw it yesterday, Dominix thing with me
at the moment. So we're reading the same newspapers in
the Ft and the Times yesterday or possibly the day before,
there were articles about a.
Speaker 2 (32:31):
Land value tax and how land should be taxed.
Speaker 1 (32:34):
And this is something that we write about a lot
because in a perfect world of taxation, you would have
a land value tax and nothing else. But of course,
in the imperfect world, the very very imperfect world we
live in, it looks like that we may see some
version of that on top of our current tax.
Speaker 6 (32:49):
That's the problem. I'm a big fan of land value tax.
If you go back to its original George's principles, it
replaces other tax and I actually call it in daylight robbery,
I call it location value tax rather than land value tax,
because if as soon as you say land value tax,
farmers tear their hair out and they think they're.
Speaker 3 (33:06):
Going to be killed.
Speaker 6 (33:07):
Whereas it's it's based on the location, and it's prime
city center real estate like Buckingham Palace that would pay
the most tax, not you know, Johnny Farmer, where the
rental value of the land is very low.
Speaker 3 (33:20):
So I call it location value tax. But where I
see it.
Speaker 6 (33:25):
The problem with imposing a land value tax is that
there is a long history of governments trying to impose
new taxes and then losing the gig of being government
as a result, people rising up, and you know, the
community charge Margaret Thatcher is the most recent famous example.
So it's and the other problem with locate land value taxes.
It's very hard tax to explain, and so people won't
(33:49):
like it because most people's prime, most valuable thing is
their home and they don't want to have to pay
tax on that on top of paying tax.
Speaker 3 (33:57):
On everything else.
Speaker 2 (33:57):
Of course, no other tax at all. Yeah, but that's
times on where they live.
Speaker 3 (34:01):
That's the idea.
Speaker 6 (34:03):
Happen in the real world, We'll get a bastard eyed
version of land value tax in addition to other taxes.
It'll be more like the mansion tax. There'll be all
sorts of exemptions. They'll be exempting exactly the wrong people,
and it'll just end up being, you know, crony capitalist
and unfair, and the middle class will pay rather than
what Henry George originally intended.
Speaker 2 (34:23):
Just like everything else.
Speaker 1 (34:24):
Now there is, and some of you may feel like this,
a large group of well of people who say they
would like to pay more tax, who would like to
pay more tax. There's a group in the US called
patriotic millionaires who say that they would love to be
taxed more, and they spend a lot of time lobbying
the government for higher taxes on the very well off.
When we have a similar group here not a very
(34:45):
big one, mind you, but a similar one.
Speaker 2 (34:46):
Sut of exactly.
Speaker 1 (34:48):
And one of the things that we keep saying to
them is if you would like to pay more tax,
you can do so.
Speaker 2 (34:52):
There is a mechanism for that. You can call the debt.
Speaker 1 (34:54):
Office in the UK and you can just hand over
as much cash as you like. I've written a few
Collins about this, and it does that that it's happening.
So last year I think something like four and a
half thousand pounds was given to paying the UK debt,
which obviously is not going to.
Speaker 2 (35:09):
Make much of a debt.
Speaker 3 (35:10):
It's not even one pothole.
Speaker 1 (35:11):
But this year, this year so far, we're up to
over seven hundred thousand pounds already. So there are patriotic
millionaires out there who are very keen to pay more tax.
Speaker 2 (35:21):
I believe they should be allowed.
Speaker 5 (35:22):
To have stunning lack of imagination. Same that they can
think of to do with their money is to give
it to the government to allocate on.
Speaker 8 (35:30):
No particular charity that they would rather get it to, and.
Speaker 1 (35:32):
Also really really bad in numbers. If they think that's
going to make a difference.
Speaker 3 (35:36):
This is I would rather play lower taxes and then
I do more good work.
Speaker 2 (35:39):
And it's kind of it's the UK net zero of
debt management, isn't it this joke? Right Dominic?
Speaker 6 (35:45):
So my quote is this one, and it's from Wealth
of Nations, Book four, And it is the natural effort
of every individual to better his own condition is so
powerful that it is alone and without any assistance, not
only capable of carrying on the society to wealth and prosperity,
(36:06):
but of surmounting one hundred impertinent obstructions with which the
folly of human laws too often encumbers its operations. And
we see a marvelous example of this very dynamic at
work here in Edinburgh at the Fringe. So you may
(36:26):
not know this, but there's no other event in the
world that sells more tickets than the Edinburgh Festival. There's
only one event in the world that does the Olympic Games,
and apart from that, the Edinburgh Fringe sells more tickets
than any other event. It is an incredible economic success story,
and yet outside of the bubble of Edinburgh, hardly anyone
(36:47):
knows about it. And you ask yourself, why do people
whider performers come to the Edinburgh Fringe and they don't
come here out of charity. Performers don't come here to
fix climate change, house the homeless, or sort out famine
in Africa. Every single performer comes here out of self interest.
(37:07):
There are four reasons why a performer comes here. Either
he comes here to get noticed. He wants to be
the next fleabag or the next flight of the concourse
or the next tom stop ard. Or he comes here
to get better to practice and hone his act or
he comes here to make money.
Speaker 3 (37:24):
And I'm saying.
Speaker 6 (37:25):
He, he or she or they come here to have fun.
And normally it's all four of those reasons put together,
but they all boil down to self interest and as
a result of that self interest we have this incredible.
Speaker 3 (37:44):
Fringe.
Speaker 6 (37:45):
There are something like one hundred and ninety five countries
in the world. There are visitors to Edinburgh from one
hundred and seventy of them over the course of the festival,
and way more than the population of Edinburgh passes through
Edinburgh during the festival itself, loads of opportunities for people
to make money.
Speaker 3 (38:03):
And then you look.
Speaker 6 (38:04):
At all the impertinent obstructions that get thrown in the
way of this festival, mostly by the Scottish government doing
stupid things like you know, their accommodation legislation, meaning it
just because of fortune to get accommodation up here, or
you know, hate speech laws just get in the ways
of you know, what artists can and can't say, and
(38:28):
you know a million other things over the years that
we all know about, and yet performers, acting in their
own self interest find a way around all of them.
Speaker 3 (38:36):
They just find a way.
Speaker 6 (38:37):
The perennial problem at the fringe is not just accommodation
to live in, it's finding somewhere to perform. And yet
you know, all sorts of invention and imagination takes place,
so you have people acting to better their own condition
and the result is this incredible event that is the
Edinburgh Fringe.
Speaker 5 (38:57):
That was very uplifting, Dominate represented and yet my hometown
of Glasgow seems to pretend it doesn't exist.
Speaker 8 (39:08):
Grew up there in my whole life and never came
until I moved here.
Speaker 1 (39:11):
Well, Dominate, do you think the number of acts is
falling given the accommodation difficulties and all that kind of thing.
You've told a great story, but I keep hearing about
acts that don't come, can't come because they can't.
Speaker 2 (39:23):
They come ready to sleep, let's alone a venue.
Speaker 6 (39:25):
So it's just extraordinarily expensive now to come. Like a
very good friend of mine is a comedian and she's
just renting a room in somebody's house way out of town,
and just one room in one house is two grand
for the three and a half weeks to the festival
and she just won't make any money this year, and
(39:46):
so that's a deterrent. And I'm afraid the Scottish government
have taken the Edinburgh Fringe for granted, you know, it
needs nurturing, it needs protecting, and they've just filt sort
of well it's there, you know, and so numbers have
you know, the big hit was obviously COVID and it's
(40:08):
never yet regained the numbers that were there prior to COVID.
But until COVID the fringe had grown. It was it
first happened in nineteen forty seven, i want to say,
and in every year but three the fringe grew until
twenty twenty. But I'm afraid it's fallen every year since then.
Speaker 7 (40:26):
So I just wanted to kind of contrast what Dominic
said about the Fringe being this amazing arts festival with
what Duncan said about we're in a situation of managed decline.
And I keep hearing this managed decline thing, not simply
here in Britain, but across Europe and even to a
certain extent well less so in North America. And I
(40:47):
actually think we need to change that narrative because what
Dominic says is that we still have something here in
Scotland and Britain in Europe that says to me, we
are not in decline. We might have kind of regulations
that make things more difficult to do, but if you
think about the capacity we have here in the West
(41:10):
to be innovative, to drive forward, whether it's the arts
or innovation, we should embrace that to.
Speaker 1 (41:17):
Think that when you've got rint controls and press controls
and this control and micro control, and you know, wouldn't
it be nice if we could squeeze an extra thirty
people in here, But we can't because we've got a
massive overlay of regulation even in this rum, right.
Speaker 5 (41:29):
I think the difference is that the fringe is an
organic sort of event where everyone is pursuing their own
individual objectives and the cumulative result is this phenomenal explosion
of creativity and fun and it's amazing. The managed decline
that I sort of referred to, I think is more
to do with the lack of ambition of our leaders.
It's more to do with managing the economy to the
(41:52):
twenty four hour news cycle or if you're lucky, a
five year election cycle and not looking beyond that.
Speaker 7 (41:58):
But I think we need to just stop saying managed
to client and say something different and put it to
our political leaders to do better to either whether that's
that's getting up the way.
Speaker 2 (42:09):
Which doesn't change reality, right, Yeah.
Speaker 7 (42:10):
But I still think there's a mentality. I mean, someone
tell me yesterday. But you're Americans, so of course you're like,
you know, everything's possible. But I think you know there's
no reason if you think about what happened here in
the eighteenth century, in this very home with Adam Smith
and other luminaries of the Scottish Enlightenment, and we think
about what happened to Edinburgh, how it changed the world.
Speaker 4 (42:33):
I say this because I have a future.
Speaker 2 (42:34):
Okay, I'm going to move from this.
Speaker 1 (42:36):
From there some extreme optimism which makes me really uncomfortable.
Speaker 4 (42:39):
And that's not what I'm saying. It's not about extreme optimism.
Speaker 7 (42:42):
It's the sense of its Yeah, no, there's many reasons.
Speaker 1 (42:46):
Well, we're all great believers in human ingenuity. But there
does come appointment. It can be squashed, doesn't it Anyway.
We're gonna go questions, but questions. Otherwise no one will
win the book. That's great, right, right, questions. We have
ten minutes and we have a prize, and we have
a microphone. And if you don't ask questions, I will
(43:07):
have to let these guys talk more and you won't
like that, and the book is still.
Speaker 2 (43:11):
Up for grabs. Got to say, microphone, microphone coming. You
need the microphone.
Speaker 1 (43:15):
And by the way, if you say anything awful hate speech,
except we will take it out.
Speaker 2 (43:19):
We don't want anyone in.
Speaker 1 (43:20):
The audience you've just got after this event. Okay.
Speaker 9 (43:27):
I live in Hongong, where i've lived for forty years.
It has a very simple tax system. In my retirement,
I'm paying no tax. Would I be mad to come
back to the UK?
Speaker 2 (43:39):
Yes, yes, thank you very much.
Speaker 1 (43:44):
Well, I mean you've seen the shift Kevin's you're already against.
It's where is the money? The money rests with pension?
Is it rest in your pensions? It rest in your income?
It rests in your houses, not yours. Going on comment,
most that's where the money is. And if you if
you want to get people's wealth, you're going to go
after all people. And we see it already inside the
pension system. We know there's going to be all kinds
(44:04):
of shifts in there. So but at least do you
want to bring a pension bag on shore?
Speaker 3 (44:08):
They're coming after our ships, are they?
Speaker 8 (44:09):
Oh?
Speaker 2 (44:10):
Yeah, definitely coming after your sir.
Speaker 4 (44:11):
But the value of.
Speaker 7 (44:12):
Breadlas that we can criticize the government and we can
question what they do, whereas you're not allowed to do
that in Hong Kong, not now, not now, you were
until twenty twenty right.
Speaker 2 (44:22):
So yeah, and who knows where we're going in the UK? Right, Well,
spend some time, spend some time with Twitter.
Speaker 5 (44:26):
Yes, I think the last couple of weeks shows that
the level of criticism that you're allowed to em in
certain directions is less than we may bee thought.
Speaker 4 (44:35):
There's a there's a growing illiberalism.
Speaker 7 (44:37):
I think that that is troubling across the so called
liberal democracies.
Speaker 10 (44:42):
Well, how do you feel about the effectiveness inheritance tax?
Speaker 3 (44:46):
And another question is.
Speaker 1 (44:50):
You know you don't win the book by asking lots
inheritance tax, I will answer very quickly, and then don't
I think they have of you?
Speaker 2 (45:00):
Inheritance tax I think is an appalling.
Speaker 1 (45:02):
Tax and it should be shifted to a gift tax,
which would be much much better. So you know you
had a gift allow us throughout lifetime, ideally none of it,
but if you must have one, a gift tax is fairer.
Speaker 6 (45:11):
My objection to inheritance tax. I have all the normal
objections to inheritance tax. It doesn't fall on the super rich,
it falls on the middle class. You know you've paid
taxes all your life, why should you pay them in death?
All of those arguments that you hear, But my biggest
objection to inheritance tax is an argument that you don't
(45:32):
hear very often, and it is this when it is
an attack on the institution that is the family, and
the family is the most important institution there is, and
the family home is in many cases what keeps a
family together. And when a family is going through a
period of mourning, when they have to then go through
(45:54):
do all this admin that you have to do, and
then they're forced to sell the family home, and it
it erodes that I wont say it destroys the family,
even although in many cases does it just erodes it away.
And the family home should be the core of that family,
and it keeps families together. And and that's why I
don't like Harry.
Speaker 2 (46:13):
I'm never sure about that. They was flog the home anyway. Sorry,
they was flogged the home anyway, not.
Speaker 3 (46:18):
Always always many would keep it if they could.
Speaker 2 (46:22):
Maybe that last question here on the front, thank you.
Speaker 10 (46:25):
So the apage person is encouraged to invest in stock
markets in order to get real returns and to shadow
and growth in their company if there's noning between stock markets,
and what should the average person.
Speaker 5 (46:38):
Do by the S and P, by the SB Yeah,
well so, so the average person invests in the stock
market so that they can get a claim on the
earnings of the companies in the stock market. So you know,
Warren Buffet says you should invest in the SMP. Dominic
says you should invest.
Speaker 8 (46:50):
In the S and P.
Speaker 5 (46:51):
I might suggest a wealth preservation fund that's relatively well
known in the UK, but it doesn't begin with our
But yeah, I think that's the distinction. You invest in
the stock market to get your proportionate clean of the
earnings of that company and the growth and the creativity
of that company that hopefully happens in future years. Ultimately
(47:12):
that does add up to the whole economy. But there
is that sort of the severing of that link.
Speaker 3 (47:17):
We have a thing in my newsletter, the Flying Frisbee.
Speaker 6 (47:20):
I've created a thing called the Dolce Fadnente portfolio, which
is a portfolio designed around doing nothing. You don't have
to keep worrying about your investments. We have a little
bit of gold, a little bit of oil and gas,
a little bit of the S and P which is
the American stock market, and a tiny amount of bitcoin.
And we just have those four assets and we might
(47:40):
roll out of oil and gas at another time, but
we think, you know, whatever's going on in the market,
they all point to ownership of those assets.
Speaker 3 (47:49):
For the time being, we had to stop.
Speaker 1 (47:51):
But I will just say one last thing, based on
mote Dominic says, but being a very good idea to
do nothing. There was a study from Fidelity four or
five years ago that looked into the counts that people
held with them and the ones that were the best
performing and the best performing accounts across the board were
held by guests who they did.
Speaker 2 (48:10):
Dead people.
Speaker 8 (48:12):
The glowing endorsement of my industry.
Speaker 2 (48:15):
Because they never fiddled.
Speaker 3 (48:18):
Another argument for inheritance tax.
Speaker 1 (48:20):
I can't do a bit where I ask them each
you give us their favorite investment because we've run out
of time unless they want to do it.
Speaker 6 (48:25):
In one word at the moment, all I guess just
one quit.
Speaker 4 (48:32):
The United States for America stock.
Speaker 2 (48:34):
Market excellent and that is it.
Speaker 1 (48:37):
And thank you so much, my wonderful guest, and gee've
been good the Marvel body. Thanks for listening to this
week's Marin Talks Money. If you like, I show, rate, review,
and subscribe wherever you listen to podcasts, and keep sending
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(48:58):
This evidence were produced by he Married Sunset Web. It
was produced by SOMEERSIDI production support and sound by Moses
and a special thanks of course to Dominic Frisbie, to
Adam Dixon, Duncan McGinnis, and to Blair Barrows at Pama
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at John Underscoes.
Speaker 2 (49:19):
Stepic thanks for listening
Host
Merryn Somerset Webb
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