Speaker 1: 0:00

Hello, welcome to another edition of Equital Conversations. I'm Gerald Ashley and as usual I'm joined by my good friend and colleague, george Cooper, and today we're really pleased and lucky really to have as a guest speaker Helen Thomas. Helen has a quite stellar biography, which you will find in the show notes, but she's very much an expert in financial risk and its impact in the wider world, really with politics as well, so we thought she was an ideal guest today. I should also mention that, if you want to, you'll find she pops up on lots of media, not least of which she's a columnist for City AM. Helen, welcome.

Speaker 2: 0:46

Hello, great pleasure to be here with the both of you. Thank you.

Speaker 1: 0:49

Well, there we go Now. I came up with the title of this podcast and called it Mission Impossible, and I think that's kind of a nice angle for you, George, to kick the conversation off and explain what we're driving at here.

Speaker 3: 1:07

Yes, I mean Mission Impossible. I guess you're alluding to the fiscal situation for the British government and probably the other major governments around the world. The more I look at the government deficit, helen, the more it does look like mission impossible. Do you see a way out of this? I mean, we're waiting for the budget, we're waiting for the forecasts to get the new budget framed, but it looks to me like it's a very difficult job to get this budget anywhere. It won't be balanced, but to get anywhere near sensible. What are your thoughts, helen?

Speaker 2: 1:47

Well, as both of you probably know, my latest research note on this was the anatomy of a rolling fiscal crisis. So we are headed for a crisis, and unfortunately, not one that will be instantly resolved. It will roll forwards and that is because of what I'm calling, you know, the irreconcilable political constraint and fiscal constraint. So we're all extremely aware of the fiscal constraint, as you alluded to there, george. It's a major issue in many developed economies after the pandemic the huge amount of debt that was incurred and the big deficits that a number of countries were running and are continuing to run, and run up, in fact, and increase even so. Those deficit dynamics are a real problem. But we know quite a lot about that on the market side of things.

Speaker 2: 2:38

But I think what's been thrown into sharp relief has been this political constraint, which is sometimes underappreciated by markets, partly because it's hard to quantify, and that's actually a lot of what I do in my work.

Speaker 2: 2:52

But the political constraint being MPs, lawmakers, being unwilling to make choices, difficult choices, where there isn't a best option, there are only least, worst options, and I think that's perhaps what you're getting at there with this Mission Impossible is when or will we ever have a constellation of politicians who can get us out of this worsening debt situation. And I will just say I'll conclude in my comments on this by saying that politics does proceed crisis to crisis. I call it the Superman effect, in the sense that Superman would probably win an election, but Clark Kent wouldn't. You need the burning building and you need someone to swoop in and save the damsel in distress to win the election. So there's a slightly strange dynamic going on. People may sometimes be surprised by that, but sometimes politicians need a crisis, and I actually think that's a little bit what's going on in France, which I'm sure we'll probably talk about, so I'll leave it there.

Speaker 1: 3:53

Yeah, I'm just going to put a couple of numbers on this. I mean, people look at that as GDP, and you mentioned France. That's actually quite a bit over 100%. Now I think it's about 114. And here in the UK we're congratulating ourselves on being sort of 97%. My question, or my thought on this, is which timetable is running? Which? Is it the political timetable that will pick up the speed, or are we going to wake up one morning and the fiscal crisis will have arrived? What do you sense?

Speaker 2: 4:27

Well, now you're touching on a really interesting point about markets and how they've changed over the last sort of 15 years thanks to quantitative easing, and I know, george, you've done lots of work on this about how quantitative easing has affected the way risk is priced into markets. Basically, in the times before we had such huge liquidity injections, prices in the market would reflect at any given moment, a balancing of probabilities, of known, unknowns, unknown unknowns, all the new information, and they would shift. They would shift and they would swing back and forth to reflect new information. When we got quantitative easing and huge liquidity injections, it was designed to chop off the left tail of the distribution, not allowing prices to move freely. And whilst there were arguably good reasons for that, it seems to have set in motion, as a lot of models now drive markets, an extended period where the price doesn't reflect the cumulative, second by second repricing of risk. So what that means is there are these periods where it looks like the market's got its head in the sand about political risk until all of a sudden it becomes incredibly important. It all gets priced in at once. So when you're saying you know which one goes first, it's a bit of one than the other and they're kind of catching each other up and, frankly, I'm getting to a point now.

Speaker 2: 5:48

I'm a macro fundamentals person but I've had to keep a close eye on these liquidity measures. Specifically, a lot of it comes down to something called gamma in the stock market and the level of the VIX. So we're almost in a world where, when the VIX is above about 25, risk gets suddenly priced in and you could have a huge step change in a bond yield, for example. But if we're under 20 in the VIX and at the moment everything's been very benign as we're recording this it's like oh, happy days, everything's great, record highs, risky assets, love them, you know? No, no, nothing to see here. Please move along and so and so it's sort of amazingly a very strange situation where it seems to all be hinging on the sort of price of risk in the market as to whether the market then forces the politics. I mean, I ultimately think, to be frank with you, that the markets are going to force the politics because markets move a lot faster and, I might add, politicians struggle to understand financial markets as well.

Speaker 3: 6:49

Yeah, I'm going to agree with you there, helen, because it seems to me that you know Keir Starmer came into power with a very big majority but has been unable to use that majority to achieve anything really on the fiscal discipline side. They've balked at everything. So it seems to me that even with his majority, he doesn't have the power to address the fiscal problems. He's going to need somebody to come in and help him, to give him the burning building, if you like, as you said, or whoever is his replacement, which may be sooner rather than later, and that I can only see is effectively a bond buyer strike. People are going to bond investors are going to look at the not just the UK, but maybe the French markets, maybe even the US markets, and just say enough is enough, we're not buying the bonds anymore.

Speaker 1: 7:41

There's a trap here for investors as well, though, isn't it? Because you look around world equity markets and they're not exactly cheap, and if they decide investors decide they don't want to be in government bonds, they may not want to be in corporate bonds either. Do they go to cash, where we may be seeing signs that inflation has not been killed? Some commentators think in the States it might start to take up a bit, and without making too much of it. This is where precious metals, I suppose, come on the scene, and that slightly worries me, because if that's all that's left to be safe to invest in, we're just waiting for the spark for your fire in the building, aren't we, helen?

Speaker 2: 8:30

We are and, of course, historically there's been any and every attempt made to kick the can down the road. Even when the fire begins, you know, every single bucket of water must be thrown on it to keep the game going. So that's sort of why I was trying to look at this as a rolling crisis. It's I hate to say this, it sounds quite ag, quite agonizing. But you know, we're not going to get, uh, you know, the 90 minute hollywood movie. Uh, superman. We're going to get the six part, uh, you know, marvel universe or whatever, I can't remember which comic it is.

Speaker 2: 8:55

I'm sure we'll get people writing in telling you, telling me, I'm totally wrong on that, but, um, it'll be fits and starts and and that does well, it's interesting of interesting, of course, as an investor, because it depends on your time horizon. Then, if you've got a 20-year time horizon, I still think there will certainly be value in equities because we're in a higher inflationary environment than we were before. But, yes, you probably do want a bit more in the precious metals or gold, and maybe you do even want a bit in Bitcoin. I don't know. You know that might be controversial to some.

Speaker 1: 9:26

Ooh, shock, horror. That is a thought, but there we are.

Speaker 2: 9:30

Yes, I know, you know it's been talked about for the last. What sort of two years really, that the 60-40 portfolio is dead. That bonds. Well, the interesting thing is, of course, bonds have had some horrific years. Is it? 2022 was the worst, or 23? I mean, it's been awful.

Speaker 2: 9:45

It's hard to imagine it can get worse, but it certainly can. But, of course, don't rule out periods of return to QE or I would think more like yield curve control. But it is quite an invidious position for central banks. It's pretty lazy complacency to just think that when there's a repricing, central banks will somehow ride to the rescue, because a fiscal repricing is not something central banks really want to get involved in. Because imagine the choice there.

Speaker 2: 10:19

First of all, it could be a rational repricing that might turn into some sort of dysfunction and you could do a market maker of last resort intervention, which would be fine, but that would only be short term. You 'd still be left with the policymakers having to make these difficult decisions, and you want the price to act as a discipline on the policymakers. So, even though I'm talking about yes, the can will be kicked down the road, because we are now in a world far more like the 1970s and 80s than the world of 2000 to 2020,. I would imagine we will start to get more crises more regularly, but they may well be maybe hopefully not quite as violent and vicious as, say, 2008, 2009.

Speaker 1: 10:58

Stretching your analogy a little bit of the fire in the building. Those of a certain vintage remember 76 to 79. I distinctly remember it. There's no reason why either of you two certainly not you, ellen. And of course we did have a so-called guilt strike in 76. And it was the government then was in trouble, but of course Callaghan wasn't actually chucked out till 79. So pulling the focus now back slightly to politics and not just the UK I mean we've got maybe a bigger political crisis in France at the moment and things don't look too brilliant in Germany. The fire brigade could be the IMF, but is there enough funds in the IMF to do it?

Speaker 2: 11:44

No, in a word, there isn't yes, I mean, I think we started all this with Mission Impossible, didn't we? And much as we may see, you know the fire hoses on the conflagration, it's not going to stop the building burning down because the fundamental problem remains, which is huge amounts of debt racked up in an emergency, and the bill always comes due. It always does.

Speaker 3: 12:05

Well, I was going to pose a question because I agree with you on the IMF. The IMF, the idea that the IMF is going to bail out the UK or France, is sort of predicated on the idea that there's a big group of other countries that are basically fine and there isn't, yeah. So you know, we're not far away from needing an IMF bailout for the US, for that matter and if that's the case, then the IMF just doesn't cut it. So the question I'm going to pose to you, which is something I've been mulling for a while we're seeing Donald Trump, you know, being much more vocal and muscular with his criticism of the Fed. Is the exit from this trap effectively the end of central bank independence? Are we coming to the end of the independent central bank experiment and we're going to go to governments taking control?

Speaker 2: 12:57

A great and important question. I think that independence was always a little bit overstated. Of course, they had the nice decade as Mervyn King called it non-inflationary, consistent expansion decade of the 2000s, which made things somewhat easier for them. Frankly, there's well two things there's the point about have they ever really been independent? I mean, I went back and checked, of course, that when Carney took over from Mervyn King in the UK, that was six months before King's term was over and Mark Carney was actually still governor of the Bank of Canada while he was governor elect of the Bank of England. So that was for six months, and in January I think it it was 2013, january Davos. That year, mark Carney gave a speech where he talked about escape velocity. It was considered quite dovish because Mervyn King had been talking about central banks perhaps coming to the end of what they could do and Carney was coming in saying, no, we can do more. And everybody paid attention to that because, of course, mervyn King was yesterday's man. He was, you know, foot out the door. So I think you know it's about. Well, powell's term is up in. Well, yes, just over six months.

Speaker 2: 14:13

It's not unusual for the successor to be announced Arbinomics. A key arrow of Arbinomics was easy monetary policy. That was the third arrow, I think. And Kuroda was chosen as the next governor about four months before the end of Shirakawa's term, and Shirakawa then said oh, I'll go, I'm off in six weeks, I'll retire early. It's normal for new administrations with a new mandate to bring in their person to enact it. So that's why I say it's not always been as independent as people maybe have thought.

Speaker 2: 14:42

And then the second question which I throw back to you guys, or indeed everybody listening, is do you want the central bank to be independent? This is something that I had arguments with when I worked in policy exchange back in 2009. I had been brought up, you know, at that point I'd I had very much, I'm afraid, of another PPEist from Oxford. So I did macroeconomics at Oxford and don't switch off immediately.

Speaker 2: 15:09

And there was this whole is inflation dead? Haven't the central banks done a brilliant job? It's fantastic. It's great Without potentially factoring in this rise of China, which created this huge disinflationary force. But never mind that. The question was should they be independent? Because nine people sitting around a table in the UK, for example, should they decide on the price of money, which is one of the most, if not the most fundamental distributional factors for the people in the country. Kick out the central bank governor if you don't like them, but you can vote out of government, and I do think that's a fair debate to be having, and and I, well, I'm, I'm, I'm sort of throwing around in my head actually as to what the best answer is. What do you think?

Speaker 3: 15:53

that's that is really interesting, helen, because that's a topic that I've been wrestling with myself, because I've always been. You know, I I came into. I came into the finance industry just before the Bank of England was made independent, so most of my career has been this colored by this, what you call the nice decade, and, you know, period of, basically, central banks being successful, their independence being seen as a huge success. But obviously, after the global financial crisis and then after the COVID lockdown, or during both of those, the massive amounts of money that were printed to deal with those I'm increasingly asking myself, just as you've said is the central bank independence really an illusion? In the end, they do do the bidding of the government, whatever the government needs, and if that's the case, is it not better to make it explicit and bring them back under democratic control?

Speaker 3: 16:54

So if there's a monetary cock-up, it's then an honest one, as in it is the government that's done it, not the central bank that's pretending to be independent but isn't that's done it, not the central bank that's pretending to be independent but isn't. So I think in a whole host of things not just monetary policy, but a whole host of policy decisions have been sort of outsourced from democratic oversight Monetary policy probably the most important one, and I think now is probably a good time to start being honest with ourselves and saying, no, they're not independent. Bring them back under government control, a genuinely independent monetary policy. I think it's a good idea, but we haven't got it. So let's stop kidding ourselves.

Speaker 1: 17:35

And don't we have a similar picture in the Eurozone where the ECB is quote independent, but just a cursory look so we know who's pulling the strings there, and it's a sort of Franco-German sort of tussle in a way, with the ECB sort of trying to hold the ring. And I suppose there there's an additional problem because you can't exactly push it back down to individual governments or different mechanisms, so I suppose they're stuck with that mechanism.

Speaker 3: 18:08

Well, even the legendary Bundesbank is coming around to printing money now which?

Speaker 1: 18:15

that is end of the coin. If that starts happening, if we just slightly pull out the focus here, obviously, um, we focused here a lot on spending because of the covid crisis and all the rest of it, but, um, and obviously there's accumulated debt sitting in the background, but, uh boy, the run rate is is kind of interesting. In a lot of these countries anyhow I mean we we're still spending huge amounts of money on healthcare, social care, social security. Newspapers are always full of sort of clickbait headlines of amazing stories of people getting subsidies from government or benefits from government. And the wider issue is the political one again, and perhaps we as an electorate all of us as electors are not willing to give up on this sort of entitlement that we now see from the state, and I suppose this is your rolling problem, helen that ultimately, that's where the shift really has to be.

Speaker 2: 19:21

Well, as I mentioned previously, as a PPEist, I do love political philosophy, and we have been thrown right back into that big question what should the state be doing? And it is effectively kind of communism versus capitalism all over again, which perhaps capitalism thought it had won after the fall of the Berlin Wall but then, of course, was deeply challenged by the 2008 financial crisis. I mean, a lot of the current political friction isn't new. It is derived. It began then, right, because talk about people feeling angry, feeling things are unfair. You know, there was a sense that bankers could get paid a lot of money. They were very skilled and clever and knew things the average man maybe didn't know, and that was fine. But hang on a minute, they run up all these huge risks. The banks fell over. The taxpayer was then on the hook and then, you know, not really anybody ended up in prison for it or indeed censured in any way, and of course, that's when we got this establishment versus anti-establishment schism in the electorate.

Speaker 2: 20:22

And then what we've had since 2020 is an additional splintering of the electorate over what we would call authoritarian versus libertarian lines, which is when you have a huge national emergency. Only the state can marshal its resources, get the vaccine in your arm, open up hospitals, whatever you want that they step in, you sort of necessarily have a bigger state. But then that splits people and I often take it back to the take back control slogan of the Brexit campaign, which was a genius way of expressing this discontent. But take back control for what? Take back control for my parliament versus the European parliament, or take back control for me, the individual. And that's kind of where the authoritarian-libertarian split comes.

Speaker 2: 21:12

And if you think about all of those splits, just you know very broadly, if you say there are four quadrants, that means and then it depends on your electoral system. In a first-past-the-post system like ours or in the US, if you get 25% plus one vote, you get a huge majority, but you get three-quarters of the electorate annoyed they didn't get their choice. So that's where we are and that's not going to get resolved any time soon. I'm sorry, I rambled on, gerald. I think I've gone far from your original question.

Speaker 1: 21:45

No, I was just going to add in a thought here that this is also a bit of a ratchet, isn't it? I mean, we have to go back to not my teenage years but certainly my 20s, where there was a really concerted effort and consensus to shrink the state which was really Mrs Thatcher, who now sometimes seen as a demon figure, but she's also deep history. Which was really Mrs Thatcher, who now sometimes seen as a demon figure, but she's also deep history. I mean, we forget that she was out the door in 1989, which is 36 years ago, and Major didn't really have anywhere near as much strength. Blair went down a different route and I would argue Gordon Brown was really in favour of expanding the state a great deal. But I don't see any political movement to shrink the state. And I just want to throw one number at you guys, which comes from the IFS Institute for Fiscal Studies, that currently 50%, just over 50%, of households in the UK receive more in benefits than they pay in taxes. Trouble ahead, folks.

Speaker 2: 22:46

Well, I remembered the word I wanted to use, and that's fairness. And that is what is being challenged through all of this Now, because people are thinking, as you've just said, some people would look at that and say, well, I'm in the other 50% or 49%, what am I doing here? How is this working? And it's why there's so much focus on immigration, of course, because if the pie is stable or shrinking, then people are arguing about fairness. Well, these people are arriving. They haven't put anything in I've put in my whole life, etc. And that isn't going away any time soon. And, of course, any government is going to then have to take the side of one interest group over another, which will always cause discontent. But let's come back to growth, because if that pie were growing, if the pie were growing, it might be all right.

Speaker 2: 23:36

You know, you can survive with high debt to GDP levels. I mean Japan. Famously not, maybe it's a slightly quirky, idiosyncratic economy, but it's sort of managed, until recently anyway, to just about deal with 250% debt to GDP. Italy, I mean Greece. So here's actually, I want to come back to something. Talk about Mission Impossible. Greece is a fascinating example of what could happen. They've effectively gone through it. So they elected a so-called populist firebrand right-wing leader, alexis Tsipras, this Syriza party that were very upset about all the sovereign debt crisis stuff. They had a referendum. They did not want to have to face austerity. He got elected and then, about face, did completely the opposite and Greece ended up in a huge shrinkage of the state and then took the medicine, which was extremely painful, but now are running a primary surplus investment grade bonds. You know it's a painful 10 years, but they've done it.

Speaker 3: 24:38

Yeah, I mean Greece is a is a fascinating example. But if you remember, after the global financial crisis, there was the pigs Portugal, italy, greece, spain and they were all in that camp. But now actually they're all the bright spots of Europe. So there has been a complete change around and maybe we need to go through that pain and come out the other side. But you know, I was interested, helen, with your comment earlier about you know we're back to the old capitalism versus communism, that struggle. And one of the things I'm fascinated about is is we've obviously got president trump elected and he's a. He's a republican. Some were thinking he was the heir to reagan, but he is a very, very different character. He he really is. He's a very big government interventionist. He, he thinks it's. You know, he he's an authoritarian rather than a libertarian and I think that is probably shocking some of his fan base, the extent to which he's going. But it also strikes me it's not the path that's needed here, because it's bigger and bigger government all the time.

Speaker 1: 25:58

It's not going to help growth, I would argue, on a global basis. He is a mercantilist, really, isn't he? And you know America first and all the rest of it. I'm going to suggest there's a magic answer. I can solve all of this for you, and you know the answer. We're going to wash all this debt away with inflation, and this is a tax that we can't avoid, and I think, george, as you always famously say, it's one that governments can pretend they haven't been involved in, and it was nothing to do with me, gov. So does this mean that, if we don't take the pain a la Greece, is it just going to have to be inflation to wash it away?

Speaker 2: 26:42

Well, I mean we're certainly in a more inflationary world than we were prior to the pandemic. I think that's with us for at least the rest of this decade. So it's sort of already here in a sense. You know we should be, instead of a world where we're worried about being towards the end of a zero to two percent inflation target or inflationary data world, we're now 2% to 4%, broadly headed towards the top end of that. I mean I'm talking about the major Western nations, so it's sort of already happening.

Speaker 2: 27:11

I was thinking about this though. I mean it would be. It sounds like that would be great for the politicians. But, as we've just described, there's a lot of discontent and inflation is, by its nature, redistributes and it harms equality and it upsets everybody, even upsets the 1% who get further away from the 0.1%. You know this isn't just a rich versus poor. It stretches the entire income distribution as people can't jump up to the next ladder, and that harms aspiration and hurts people. Look, I mean you guys are long students of history. Inflation is almost always there as a cause of war, regime change, huge political discontent. So in a way, I wouldn't say politicians necessarily want it to happen, because it tends to lead to them being out of office.

Speaker 1: 28:04

Yeah, it's not a get out of jail card in that sense, because you can't control it, can you? That's the issue of it.

Speaker 2: 28:10

And I was thinking about it how would you actually do it in the UK? What are we saying here? Are we talking about a currency devaluation? Would it be capital controls? Would it be huge amounts of quantitative easing? I just think our institutions have been around for so long that it might. I mean, if you did it you'd be burning the credibility completely to the ground. You could go that path. I mean. I just don't think that's very likely.

Speaker 1: 28:35

Right, and obviously, as you say, there's a sort of well, there's not even a five-year electoral cycle. There's probably what your average politician is looking at an 18-month, sort of two-year horizon, and that doesn't easily fit. Maybe we should just focus a little bit, before the end of things, on the political element. Obviously, we're here in England, so we tend to talk about the UK, but there's big trouble in France. Things are not settled in Germany either, are they? What's going to give in all of this on the political front? Have we got some inside tips so I can put a bet on?

Speaker 2: 29:10

Well, the electorate will go more and more to extremes, that's for sure. This idea that you win from the centre, well, it hasn't been borne out by the results and it won't be, and I'll tell you why. Because of look, I mean, let's imagine we're having this conversation in 20 years time and we look back on the pandemic and we say, oh, they locked everybody up. You couldn't literally go out, you couldn't travel, the global economy shut down, Planes were grounded and a war broke out in Europe for the first time in 100 years. Do you think people wouldn't be angry about that? I mean, I'm kind of astonished they haven't been more angry.

Speaker 2: 29:47

We get a lot of interns into our business and I'm frequently surprised that they are not more angry about, certainly for them, their youth has been rather taken away from them. You know, that was a social decision. They may well, people may agree with it, but there may be people who don't agree with helping the elderly. But, you know, restricting the young's movements and things like that. But you know, I think you'd have to be a robot not to be emotionally changed by what's happened.

Speaker 1: 30:17

So yeah, so there are a lot of avenues for sort of almost upstart parties that promise everything and equally disappear quite quickly and in a very sort of fragile political scene really.

Speaker 2: 30:29

This is where I do talk about Greece, because Greece, the reason they're ahead of us is that they have a more flexible political and economic sorry political system. So their voting system they uh frequently have lots of different parties. Parties arrive and disappear quickly. They don't have a long institutional credibility. They did have some core legacy parties that had been around a long time, but they always had a long tail of other uh, of other parties. Their electoral system allowed for coalitions, etc. When you have a more flexible electoral system, it can give and it can reform and it can reshape more quickly. So, actually, somewhere like the UK or the US, where we've historically had these very solid, long-running two-party systems, or two and a half, sometimes three, with a first-past-the-post system, does actually make it harder to change, which means that when the break comes it takes longer to build and then it's more dramatic when it comes and in a way, that's what we are getting to.

Speaker 2: 31:28

We've had a split on the right, we're now going to have a split on the left and that, in a way, the seeds of that have been sown since 2008. I mean, you know, corbyn was just the beginning of that. Because the answer to these questions we're asking is it more government? Is it more intervention? Is it more public sector pay rises and, of course, markets imposing discipline upon that. So I guess what I'm saying here is that the political volatility has to rise. It will be with us for a long time until the extremes actually run governments, and then it either works because they become a bit more pragmatic in government or it doesn't, and then it's like a centripetal and a centrifugal force. You know, the electorate shatters out the extremes and then it sort of regroups further towards the middle.

Speaker 1: 32:19

So we've got an interesting five, ten years ahead, by the sounds of this.

Speaker 2: 32:23

Well, I'm hopeful I'll be able to come back and talk about these things.

Speaker 1: 32:27

George. Yeah well, look, george, I've offered an answer which was shot down. Helen's been more cautious. Where do you think this is going to pan out over the next few years?

Speaker 3: 32:38

I'm basically with you, gerald. I think there isn't an off-ramp for this other than the inflation path, which is, I think that's basically why you see President Trump effectively trying to take the Fed back under political control, and I think this is probably going to happen elsewhere. I think the central banks are going to have to monetize away the debt, and this is not a good solution. It's just from here. It's, I think, the least worst, and that's a pretty bad one. Or to put it another way, if I were running government, that's what I would do, right, and that's not pretty.

Speaker 1: 33:21

I don't know if it would be a good idea or not if you were running government, george, but we're coming up towards winding up of our little chat today, helen. We have a sort of little theme at the end of every talk where we recommend a book each. I like to go first because I've got the microphone, so I'll get my book recommendation out of the way, and this is the first time I recommended some fiction. A relative gave me a book for my birthday a little while back and it's actually a very well-known book. It's called the Way we Live now, uh, by anthony trollop, and I have to admit I'm not a great fiction writer. But it's quite a racy read of a victorian financial scandal and it is fictional. But you don't have to think too hard to think of some of the scandals the last 20 or 25 years and the echoes from it, set in 1870, are quite extraordinary. So if you, I was going to say, wanted to escape from the real world, you can look at some fictional crises and deaths instead, rather. So that's, as I say, the Way we Live Now, by Anthony Trollope.

Speaker 1: 34:37

We'll let Helen go last. George, what are you going to offer?

Speaker 3: 34:41

I'm going to bring up an old classic, which is George Soros's the Alchemy of Finance.

Speaker 3: 34:48

I think it's a pity, really, because George Soros is now more known for his sort of political dalliances rather than his really rather subtle writings about finance.

Speaker 3: 35:00

And the Alchemy of Finance, I think, is probably the book that's had the most influence on my thinking about how financial markets work and how they interact with the economy.

Speaker 3: 35:10

And the reason I think this is pertinent at the moment is because Soros has got this theory of reflexivity, which is a situation where the asset prices in the economy don't just reflect what the economy is doing, but they start to influence it and start to drive it. So the economy is driven by the asset prices rather than the other way around, and I think that's what's starting to happen. I think we're a long way into it with the AI bubble and the data center build out and all of that, and by that I mean the market cap of the companies involved here has grown so high that they've got so much equity capital to play with that they're now able to seed new ventures which are creating new demand for the very things they're producing. So it's sort of spiraling on itself and creating a self-ratifying bubble, which is pretty much exactly what happened with the housing market prior to the global financial crisis. So I'll just leave it there.

Speaker 1: 36:16

So it's a matter of if you haven't read it or read it, read it now, and if you've got it on the bookshelf, maybe get it out again and take a good look at it. Helen, your offering.

Speaker 2: 36:28

Well, I rarely have time to read a book. I'm so buried into the minutiae of the fast-moving political situation these days. So when I read a book, I do tend to do fiction. Smoothing political situation these days. So when I read a book, I do tend to do fiction. I am currently working my way through David McCloskey's the Seventh Floor, and this is a spy novel. David McCloskey's written other ones. Damascus Station was the one I'd read before, and I do like a good spy novel, which you might think is not very relaxing after what I spent my days doing. But this is one about six CIA officers together. They've stolen other people's secrets. Now they must steal each other's. I don't know. I think it's just quite nice to try and get your brain ticking on something completely fictional. Or how fictional is it? We never know, do we?

Speaker 1: 37:17

Yeah, a little bit of escapism, or at least get away from marketing markets, economics and politics can I do an honorable mention?

Speaker 2: 37:25

yeah, go ahead richard osmond's thursday murder club, which has, just you know, now been made into a netflix film. I know, look at the faces, but I love talk when I talk about like a complete, just something totally easy and different to read. I loved it this.

Speaker 1: 37:39

This is sort of a light read, and isn't this Sunday afternoon TV at some stage, isn't?

Speaker 3: 37:45

it. Yes, I shall put that on my Netflix watching list.

Speaker 1: 37:50

Helen, thank you very much for today. You won't entirely escape. I'm sure we'll get you back sometime in the future, because you're in a field where it's constantly on the move. There's constantly new things going on. But from me and George and from Equital, thank you very much for today. Thank you.

Speaker 2: 38:10

Thank you very much, guys.

Speaker 1: 38:12

Thank you, helen, thank you.