Okay.

Welcome back to Gary’s Economics.

Today we are going to introduce

the first part of our online course.

Video number one, which is going to be What is Wealth.

Okay so I was at a conference

the other day, a conference about economics media,

and there was a guy who basically spoke about how

when people watch Jordan Peterson's videos,

they don't just watch his recent videos,

they go back to the beginning

and they watch it through.

Because what people want is an online course

where they can follow the subject through

so they understand it completely.

And he could do a MOOC. Massive Open Online Course.

And it got me thinking about this channel.

Basically,

this channel in my eyes is an educational channel

which is to teach

and educate ordinary people about economics,

basically pushing a specific narrative,

which is that living

standards are falling

because wealth inequality is increasing.

If you want to stop the decrease in living standards,

we need to stop the increase in wealth inequality.

But obviously I'm out here every week, making a video

every week.

You see a different video every week.

And I kind of worry that if somebody actually comes in

and they want to,

you know, understand exactly what we're doing here,

they just see like 100 different videos.

They don't know where to start.

And it becomes quite difficult

for people to educate themselves.

And, you know, we often get people asking us questions

which have been addressed in previous videos.

Like, for example, people say,

what do you mean when you say government gave hundreds

of billions of pounds to the rich during Covid?

The question we get asked tons recently is

can you really tax the rich?

If you tax them, won't they just leave?

We can asked questions about money,

questions about debt,

which are answered in previous videos,

and I suppose I could try

and go back to historical videos

and try and link something together.

But what I wanted to do was start creating

in amongst the other videos

we make,

a set of videos which are structured

and designed to be watched in order

such that anybody who comes to this channel

in a year's time or in two years

time, can go and watch basically this online course

that is really structured

and explains everything in a step by step fashion

about what

I'm saying and about my ideas

about wealth inequality in the economy,

so that you can understand things

in a really structured way, basically.

I wanted to add

basically a structured element to the channel

so that we keep the videos every Sunday.

But over time we start to build up

certain videos

which are designed to be watched in order,

and we put them together as an online course.

And today we are going to start that

and we are going to do video number one in the course.

And video number one is going to be called

What is Wealth, which is a very simple video

which is introducing the concept of wealth to people.

Because often economists don't talk much about wealth.

They talk about things like income.

They talk about things like jobs,

they talk about things like unemployment,

but they don't talk about things like wealth.

When I talk about inequality,

I'm always talking about wealth inequality

rather than income inequality.

And then in order to understand that,

you need to understand wealth.

So what is wealth?

First thing is wealth is different to income.

Now I think for most ordinary people

their financial situation

is basically about their income,

which is about what job they do.

When I was a kid,

I thought that if you wanted to be rich,

you got a job in a bank and you made,

you know, £100,000 a year.

If you can make £100,000 a year salary,

you're super rich.

And the difference between financial positions

of most ordinary people

is largely about what job do you do.

It's important to understand

there are a group of people

whose income does not come from their work.

Their income comes from wealth.

What is wealth?

Wealth is about ownership of things, of assets.

Now, the most

practical and close to ordinary

people's lives example of wealth is housing.

So some people own their own house they live in.

Some people don't own their own house

they live in and they rent their house.

Some people own their house with a massive mortgage.

Some people own the house

with a very small or no mortgage.

This is the most obvious example

of how some people have wealth and some people don't.

If you own your house

with no mortgage, you don't need to pay interest.

You don't need to pay rent.

You simply can live in that house essentially for free.

If you don't own a house, you will have to pay either

interest on a very large mortgage,

or you’ll have to pay rent.

So these houses exist the house that I live in exists.

Outside there's lots of houses and lots of flats.

Everything exists. Everything is owned by somebody.

That's the first thing.

If you don't own your own house, somebody else owns it.

Either through lending

you money for your mortgage or directly

they own it and you pay them rent.

So the first form of wealth, housing, it exists.

It's everything... it's everywhere.

Everything is owned by somebody.

I think this is quite visible.

People know that housing is important.

People know that either they own their own home

or they don't own their own home.

If they don't own their own

home, they have to pay rent.

I think what

people often fail to realise

is that there is much more wealth

other than housing in our society.

So I'm looking out here through this window.

I can see Whitechapel, there's a massive hospital right

there, that's Royal London Hospital,

that's worth an enormous amount of money.

It's owned by somebody. That's a form of wealth.

If I look out here back then to my right,

I can see Canary Wharf.

There's a bunch of enormous skyscrapers.

These skyscrapers are worth

an enormous amount of money.

They are owned by somebody. That is wealth.

There's a railway line out here

that is owned by somebody, that is wealth.

If I go just out here onto the main street,

that's Commercial Road,

there's lots of shops, there's lots of restaurants.

If I go over there

to Stratford, Westfield,

there's an enormous shopping centre.

In the centre of London there are tons of skyscrapers.

There are theatres.

There are pubs, bars, restaurants, shopping centres.

This is commercial wealth.

Now, what is interesting about commercial wealth

is ordinary people don't normally own it, right?

Ordinary people often struggling to own their own home.

They don't consider when they go to work in an office

or whether they go to shop in Tescos,

whether they go to a restaurant

that these commercial buildings are also owned as well.

Now, this is a massive part of wealth

and the fact that ordinary people

often don't own their own homes.

But more...

but

very often

don't own a significant chunk

of the commercial property

tells us another real fact about wealth,

which is that

property in many cases

is owned by ordinary people, by the middle class.

But commercial property is overwhelmingly owned

by the rich.

So what is wealth?

Largely in this country it's property,

residential property, but also commercial property.

Residential property is often owned by ordinary people.

Commercial property

is overwhelmingly owned by the rich.

One other big form of wealth

which is important to recognise is debt.

Now when you first hear that,

that might sound a little bit counterintuitive

because you think, okay, debt is not wealth,

debt is like a bad thing to have.

Debt is like negative wealth.

One thing you need to understand

is that debt always balances out.

If one person is in debt, another person is in credit.

So if you owe £400,000 on your mortgage,

that ultimately is owed to somebody.

One form of debt which gets an enormous amount of press

at the moment is government debt.

So the government has an enormous amount

of debt, it's equivalent to something like,

I haven't done the numbers recently,

but I think it's like £30 - 35,000

per person in the UK.

This enormous amount of government

debt is owed to somebody.

Debt often confuses slightly

the real ownership of wealth,

because the main form of wealth

which ordinary people own in this country,

the UK, it’s the same in

a lot of other countries, is their home,

but very often

they own their home

by using an enormous amount of debt.

So if, for example,

you live in London

and you own a home that costs £500,000,

which is a pretty

average cost for a home here in London,

you might have a mortgage of 400,

maybe even £450,000 on that house.

If you own a £500,000 house with a £400,000 mortgage,

basically you only own

20% of the wealth in your home,

and the other 80% is owned by

essentially whoever owns your mortgage.

Debt, like commercial property,

unlike residential property,

is another form of wealth

which is overwhelmingly owned by the rich.

Now, there are a lot of ways which...

there are lot of misunderstandings

about wealth, firstly, a comment

we often get is, no actually ordinary people own

their commercial property,

they own the debt to their pensions.

And to a tiny degree this is true.

If you have a pension, if you have some savings,

you will own some other people's debts.

If you own some stocks and shares,

you will own some small

share of the commercial property.

But really, it's a little bit of a red herring,

because overwhelmingly,

the amount on which ordinary people own

is tiny compared to the amount that the rich own.

Rich people have enormous funds, stock and share

portfolios, enormous pension

funds through which they own these things.

Ordinary people do own a little sliver

through their pension funds, but ordinary people own

only a very small percentage.

So what is wealth?

Wealth is not about income.

Wealth is not about your job.

Wealth is about who owns the physical

things in your country, the buildings, the property,

the natural resources.

You know, we didn't mention farmland.

The kind of wealth that is relevant

is different in different countries.

You know, if you're talking about

a country like Saudi Arabia,

like Qatar,

who owns the oil is an enormous part of the wealth.

You know, in a very agricultural country,

who owns the land is a big part of the wealth.

In this country, the UK, and it's similar

to a lot of

developed countries, it's largely about properties,

which is residential property, commercial property.

In some countries you might have a lot of factories.

You know, obviously China has a lot of factories.

Germany has more factories than we do.

But basically there is a lot of physical wealth

in the country.

Properties, buildings, natural resources, land,

productive things like the energy production capacity,

the windmills, the coal plants,

the oil plants, the nuclear plants.

There is all this physical wealth in the country.

Ordinary people

in most cases own only their own property.

And in many cases that's only through debt.

All of the rest of the wealth is owned by

essentially very wealthy people.

And this leads to cash flows.

The people who don't own the wealth

have to pay the people who do own the wealth

in order to use the wealth.

The most obvious example of

this is if you don't own your own home,

you will have to pay rent

to the person who does own your home.

If you do it in your home,

but using a massive mortgage,

you will have to pay interest

to the person who does own your mortgage.

And we spoke about the commercial property.

So this extends all through the commercial property.

So when you go shopping at Tesco,

part of the money that you pay

will go to the owner of that physical building

that your Tesco superstore is based in.

Some of it will go not just to

the farmer who maybe produced the food you buy,

but also to the landowner who owns the land.

Some of it will go to

the people who owned the energy resources that

transported the food to the supermarket.

When you pay your taxes, a big chunk of your tax

goes as interest payments

to the people who own the government debt.

So real wealth exists.

Debt exists.

Ordinary people have to pay the wealth owners

every single time. They basically spend any money.

Your rent, your mortgages, your food,

your bills, your taxes.

When you go to a restaurant,

when you go to a pub, when you go on holiday,

when you go to the supermarket,

a little chunk of every single thing

you spend is going to the wealth owners.

Which means there is a big net flow of cash

every day, every week, every month, every year

from ordinary people who don't own much wealth,

to very rich people who do own wealth.

These are basic concepts.

But it's important to understand,

because I think a lot of people

who are not rich don't

realise how much wealth there is,

and they don't realise they're paying to use it.

Mainly, they don't realise

how wealthy, wealthy people are.

And we're going to go in

in our next video in the online

course to how that affects you

and how that affects the economy.

Okay.

So that's video one of the online course,

What is Wealth.

We’re going to keep doing these videos

alongside the other videos.

We’re going to put them up on the YouTube

in a separate...

what do you call them, those things?

Yeah. In a separate playlist.

We're going to put them up

in a separate playlist on the YouTube,

so that over time

we build up a course that people can watch

from the ground up

and start to understand everything

in a really clear, simple way what we're doing.

We're not going to stop the other videos we're doing.

The more topical videos, the more salacious videos,

which I know you all love.

And the more,

yeah, educational videos

pushing for changing the tax system.

But hopefully this will give newcomers over the years

a place to really develop all of their understanding.

Okay. Thank you.