...but if we were to see Wages fall by seven times,

people would be out in the streets rioting, saying “Oh, it's economic collapse”

but if you see House prices rise by seven times, people say,

“Oh my God, the economy is so strong!”

Okay so the devaluation of money is a big feature of our economy for the last

20-30 years, especially the last three or four years.

It's going to continue to be a big feature of our economy for probably a long time to come.

It's very often misunderstood.

If you want to understand what is happening and what is going to happen,

you need to understand it.

So I think the first thing we need to talk about is basically

what is meant by the ‘devaluation of money’?

It can be a little bit of a confusing concept, right?

Because I think a lot of us have deeply internalised the idea

that the value of money is constant.

£1 is worth £1, $1 is worth $1.

If the price of things in the shops go up,

we tend to think that's the price of the things changing.

We don't think that the value of money is changing and this is basically completely incorrect.

The value of money is very volatile.

It changes a lot. In fact,

systemically, we have we have designed our economic system

to basically ensure that the value of money falls over time.

What does this mean and how can you understand it?

So I was a foreign exchange trader for a number of years

from 2008 to 2013-14.

And when you offer an exchange traded, you're literally sitting there

and you're seeing all of the different currencies that exist in the world.

Every currency, every country has its own currency.

And you're seeing the different prices of the different currencies move up and down over time.

So if you watch the business news, they might say the value of the pound has fallen

1% against the value of the dollar.

It has fallen to one and a half percent against the value of the euro.

And this is one way of understanding that the value of of money and of

different currencies is not constant, different currencies are going up and down every day.

Sometimes they can move really big amounts, like when Brexit happened the value of the pound fell.

Something like 10-15% against the dollar and the euro in a very short period of time.

So this is your first indicator that the value of of money is not constant,

but actually

money is even more volatile in its value than you might think.

If you just look at the foreign exchange markets.

And the reason for that is very often the different

currencies of different countries move together.

So in my opinion, in the couple of years after COVID,

what we saw was a simultaneous devaluation of a number of currencies.

At the same time, the value of the pound fell, the value of the euro

fell, the value of the dollar fell, the value of lots of currencies fell.

Now, if the value of the pound and the euro fall together

and you are accustomed to valuing the pound by looking at

how much it costs in terms of a euro, then you won't see that movement.

Imagine the value of the pound and the dollar and the euro all fall at the same time.

If you look at the value of the pound

in terms of euros, in terms of dollars, you might see that it's constant.

So what's happened there is money has been devalued and you have not seen it.

So what does it mean to you and how would you see it if the value of a number

of different currencies or all of the main currencies fell at the same time?

Because you wouldn't see it in foreign exchange markets, right?

Well, if that happens, what you see

is the price of a wide variety of goods

and services, wages, asset prices going up

because those prices are valued

in terms of pounds or euros or dollars that are going down.

So essentially what i'm trying to explain to you, what i'm trying to get you to see

is that the devaluation of currency

can be seen as inflation.

In fact, I'd probably go so far as to say

inflation and the devaluation of currency are the same thing.

And it's probably worth sitting and thinking about that for a while because it's not

I think it's not something that we take in easy.

I think a lot of us have deeply internalised this idea

that the value of money is constant, and if the price of, say, a carton of eggs

or house or milk in the supermarket goes up,

then it is those things that have changed.

But in actuality, when all of the prices go up together,

it's much more likely that the value of money has changed.

And I think during COVID, what we saw was a really interesting situation

where governments all over the world printed and gave out enormous amounts of money.

So the UK government gave out £700 billion.

That's £14,000 per adult.

The US government gave out $8 trillion, which is

$25,000 per person in the country

and immediately afterwards we saw all the prices go up

of basically everything and very few people in the media said

whats probably happened is money has been devalued, even though I think that's

very likely that the most likely cause.

So what I want you to understand is that the value of money is very,

very volatile, very, very variable.

It tends to go down over time.

And we don't necessarily

see that in foreign exchange markets because the different moneys

and the different currencies tend to move together.

And when that happens, different money, different currencies being devalued together,

what we see rather than moves in the foreign exchange market,

what we see is inflation.

So next what I you to understand

is that this process

the continued devaluation of money

by inflation as inflation you see it as inflation but they are in fact the same thing is

an intentional, purposeful, designed aspect of our economy that we live in.

So the central banks, the Bank of England, the Federal Reserve in the States, European

Central Bank, the basically the government bank,

which is trying to manage your economy,

intentionally targets positive inflation.

That is basically the consensus of mainstream

economists nowadays because we want to have inflation in general

they don't want to have inflation as high as it is now.

Inflation is still above 10% in the UK.

It's not far below that In a lot of other countries.

Economists tend to want to have inflation of about 2-2.5% percent a year.

So what that means is

economists want money to be devalued by two, two and a half percent.

this is part of the way our economic system is designed.

The constant,

hopefully, according to most economists, gradual devaluation of currency.

Obviously, in the last few years it's been much more rapid.

But they want that to happen, designed intentional part of the system.

Why do they want that to happen?

That's quite a big question, which will probably deal with another video.

Economists think that allowing money

to be devalued or allowing inflation to be positive is good for the economy.

I would argue that's probably because essentially it enables

corporations to cut workers wages over time.

It's very difficult for corporations to cut your actual wage

because they have to convince you to sign a new contract at a lower wage.

You probably say no.

But if we are automatically devaluing

money by 2-3% a year, then your wage is automatically being devalued

2-3% a year and your company doesn't have to actively cut your wage.

In fact, you have to actively fight against your wage being cut.

So this is a bigger question, which we'll probably cover

in more detail in another video but economists.

want inflation to happen, which means they want currency to be devalued, I would argue,

because it enables corporations to cut your wages, which which they think is good for the economy.

But this positive inflation rate, this positive rate

of devaluation, of money, of devaluation, of your wages,

it actually significantly underestimates

the real rate at which money is being devalued.

Why is that?

So the inflation rate, which you see on the news in this country, they normally call it CPI.

They could call it a different thing.

Wherever you're watching

those standard measures of inflation, almost all of them

only look at goods and services.

The prices of the things that you buy, excluding asset prices,

so excluding most obviously, house prices, but

also things like stock prices, land prices,

basically the cost of any the price of any assets.

Why is that relevant?

Why is that important?

Well, that is because in the last 20-30 years,

and we cover this in more detail in the video, ‘The Asset Economy’

In the last 20-30 years, asset prices

have very consistently risen at a faster rate than goods or services.

The period where this is most obvious is the 10-15 years after 2008, after the financial crisis,

where for most of that period inflation was quite low, sometimes as low as 1% or 2%.

But asset prices

increased really, really significantly over that period.

It's important to realise it's not just housing.

When I talk about asset prices, people

tend to think immediately about house prices because it's the asset price that is most visible.

But this was a really broad

land prices went up, stocks and share prices went up massively.

Even things like luxury art & luxury cars, durable natural resources

all saw really significant increases in price.

So asset prices are inflating

at a much faster rate than goods and services.

That's not included in the inflation rate that you see.

So what that means is

the inflation rate, which only looks at goods and services,

significantly underestimates the actual rate

at which currency is being devalued.

Okay, so why is this happening? now

This is something that I've been really interested in for a long period of time,

and it's something I've thought about a lot.

And in my opinion, the root cause for this,

the large scale, consistent devaluation of money,

is growth in wealth inequality.

And I will explain why.

And I've touched a little bit on previous videos that one of the key features of growing wealth

inequality is increasing asset prices

relative to wages in goods and services.

The reason for this is most people

in ordinary financial positions or poor financial positions

tend to spend all of their income over

the course of their life on goods and services.

They generally die without any accumulated assets,

which means that they've spent everything on goods and services.

Ordinary people buy goods and services that drives wages.

Rich people, on the other hand, especially very rich people,

tend to spend the majority of their income on buying more assets.

So that means

if wealth inequality increases in society,

ordinary and poor people have less rich and very rich people have more.

Society as a whole will start to want more assets and less goods and services.

And that is because we're moving purchasing power away from ordinary people

who like goods and services towards rich and very rich people who like to buy assets.

So as inequality increases, asset prices naturally go up.

Goods and services and wage prices naturally go down.

But if you remember, our central banks are trying to ensure

that goods and services prices specifically

keep going up at 2, 2.5, 3% a year

because we have rising inequality.

Those goods and services prices, they want to go down because ordinary people

who drive those prices are losing their purchasing power.

That means that for most of the last 20, 30 years, central banks have been trying

to convince ordinary people to spend money by cutting their interest rates.

But remember those cutting interest rates?

Not only do they drive up ordinary prices, they also drive up asset prices for the rich.

But asset prices for the rich are going up anyway

because the rich people are getting more and more and more money.

So what's happening is this Inequality is driving down wages,

driving down the price of goods and services, and that forces action from central banks

and governments, central banks to cut interest rates, governments to spend more money

to try and support the economy.

And a side effect of that is the rich get even richer and asset prices go up even more.

So there are two simultaneous things happening at the same time

increasing inequality, which pushes

asset prices up and wages, goods and services down, and stimulus

from central banks and governments, which devalues currency and pushes everything up.

Now, as this happens,

the consequence is that the rich get richer even more and are able to buy even more assets

from the middle class, from the working class, which drives even further

this dynamic of growing wealth inequality, which pushes asset prices up more, pushes

spending power down more, which means we have to do even more and even more so in a sense,

what you're seeing is another one of these sort of death spirals of the economy,

which is inequality is going up and up and up.

That's forcing action from our economic institutions like central banks,

which drives interest rates down and drives asset prices up even more.

Now, this this is something I started to realise in sort of 2010, 2011.

I remember a conversation I had on the trading floor with a trader who I was working with in

I think it was 2011 when he said, I'm going to sell the stock market

because the economy is very weak and the stock market is very strong.

That shouldn't be happening. I'm going to sell the stock market is going to go down.

What I said to him was, listen,

stocks never go down

because when the economy is weak, ordinary people spending power is weak.

That forces governments and central banks to pump more money into the system

that ends up with the rich.

And those people ultimately buy stocks.

And I think one of the most interesting things of the last 20 years and we've seen this

really strongly in the last three years, is that increasingly weak economies are associated

with growth in asset prices, stock prices, house prices.

I think the most obvious example of that is the last three years, and in particular

the last one year.

So in the last one year we have seen in the UK new all time

historic records for gold price, the stock market and house prices.

You record all time highs for the three.

The three significantly significant assets are not supposed to be correlated in the time

of probably the biggest economic weakness we have seen since the Second World War.

And I think this is because whenever there is economic weakness,

our economic

institutions, central banks and governments respond by devaluing the currency,

which tends to drive asset prices up, which tends to support rich people.

And ultimately, as we've seen in the last couple of years,

doesn't really support ordinary working people in working families.

Okay, so what's the conclusion?

Money is being consistently devalued as a result of our economies

and our economic institutions, like central banks and governments

trying to deal with the negative effects of growing inequality.

This will continue to happen more and more, and it's very easy

to predictand very easy to see that in the next 5-10 years

we will see significantly increased growth

in house prices, stock prices, asset prices.

As governments and central banks are forced to pour loads of money into the economy

to try to rescue struggling consumers, which ends up with the rich

driving further spiralling increases in asset prices and stock prices.

I think the most important thing to understand here is that

the institutions which we have designated to protect our economy and to protect

working families

because of their own poor understanding of what is happening,

they are inadvertently fuelling a fire of inequality which nobody is putting out.

And just like I said, in our

death of the middle class video,

we can really there are some things which I can predict

with really, really strong confidence, which is that inequality will increase.

The middle class will cease to exist

and asset prices will continue to go much, much higher.

And that includes house prices.

The conclusion, the effect of that on ordinary people

is that ordinary families will lose their property and will struggle more and more to buy property

and social mobility will collapse.

And we speak more about that in the asset economy.

The asset economy video.

So again, it's another very pessimistic video.

But I think what

it helps us to understand is that

rising asset prices are devaluation of currency, which is driven

ultimately by increased inequality, which nobody's fixing.

But if we address those growths in inequality, we can we can reverse that relative change, right?

So rather than asset prices going up significantly, while wages stagnate.

We can we can start to see wages catch up with asset prices, which will increase

ordinary families ability to own property, to reach financial security and to have a good life.

And those are things which are possible if we deal with the wealth inequality

and which will not be possible if we don't. So,

yes, support the channel, promote the channel, help us to explain to people the importance

of dealing with inequality and the consequences for ordinary families and for our society.

Thank you very much.

No. So I'm not actually against the currency devaluation.

I think what the currency devaluation does is

it obscures a little bit what is happening.

Because

here's an interesting thing to think about, right?

In the last 30 years, house prices have risen relative

to wages, maybe five times, five or six times.

Right.

And there's two ways

that an increase in house prices relative to wages can manifest

either an increase in house prices or a decrease in wages.

Right.

There is a change in the relative price.

Can be this one going up or this one going down.

And by manipulating

the currency, the value of the currency, you can choose which one of those you get.

So say, for example, you're in an economy where wages were falling and house prices were constant.

If you combine that with aggressive devaluation of currency, you can bring both of them up.

So instead of wages falling, what you see is house prices rising.

Right.

So what is real is relative prices.

But what we can affect by changing the value of the currency is absolute prices.

So we can change wages falling into house prices rising.

That makes sense. Okay.

And what that

does, which I think is really interesting,

is it massively changes

the perception of what's happened.

So falling wages

is very similar to rising house prices

because what matters is the relative price.

But if we were to see wages fall by seven times,

people would be out in the streets rioting saying, Oh, it's economical up.

But if you see house prices rise by seven times, people say,

Oh, my economy is so strong.

If house prices and stock prices go through the roof.

People think it's great.

But if wages collapse, people think it's terrible.

So I think

understanding the devaluation of currency helps us see

what's actually happening, which is that rising house prices is the same as falling wages.

And I think it's

I think that's a really interesting thing for people to understand that

rising house prices are the same as fall as falling wages. So

I think

once you have the growth in inequality,

then you must have the growth

in relative price of assets relative to wages

because you've shifted the spending power to people who want assets.

And then we have a choice through on wages.

The full do want house prices to rise.

Well, the truth is, I think house prices are rising is less painful for society

than wages falling, but it's still painful for society.

So I think and I think this is actually something I see a lot,

both from mainstream economists and from kind of alternative

economists on the Internet, is they focus on problems with the monetary system.

So mainstream economists will say,

oh, the problem is interest rates are too high or interest rates are too low.

And a lot of people on the Internet will sell.

The problem is the banking system.

But very few people are looking

at the real increase in real wealth inequality of real wealth.

And I think once you have that growth in wealth inequality,

probably devaluing the

currency is the least painful way to hit society,

because then you say rather than dropping wages, we're going to raise house prices.

That's not to say that I think house price rises is a good thing.

What I'm saying is the root problem is the growth in the wealth

inequality, not the devaluation of the currency.

I think you had to do that.

You know, if, for example, in COVID we hadn't devalued the currency,

what you would have seen is massive,

massive deflation, massive collapse in prices.

And I think that would have been

more damaging for us.

It would have been more like a Great Depression kind of thing.

I think 2008, I think really probably the main difference in 2008

and the Great Depression, which were both at the heart of it banking crisis,

is that in 2000 we aggressively divided the currency.

And that's not to say that we got good outcomes in 2008.

So a massive decrease in living standards, but it's better than the Great Depression. So

I want to make clear the point I'm trying to make,

which is I actually don't think

the devaluation of the currencies is the core problem.

I think it's the increase in inequality that is the core problem.

And if you try to revalue the currency

without dealing with the inequality, you would actually make the problem worse.

It's it's a little bit like you have a disease

and then you get an immune response and then you get rash and it's your immune system,

you know, I mean, but the problem is not your immune system.

The problem is the disease.

The root cause is the growth of inequality.

So yeah, I think sometimes people think that I'm well,

I get criticised both for being too critical of and not critical enough of the central banks.

I think that the central bank is not the core of the problem.

The problem is inequality.