Austerity Jones asks C Thomas Printer if the global growth halts, and why there seem to be a lot of people sitting in cafes when we keep screaming about financial crisis.
Good morning, I’m Austerity Jones and today I’m not with C Thomas. We are sharing with you the record of a phone call C Thomas and I had where I was asking him about the cause of the recent global tensions and then the discussion evolved.
Austerity: So there’s a cake, right? We first inflated the cake and everyone wanted to have more and more pieces of it, but it seems that the cake is not able to grow any further. So the tensions are necessary, so to say, to create a new cake, what’s your take on this?
C Thomas: I think the cake could always be bigger. Think about the US. 200 years ago we had 13 state colonies. But through productivity and the increase in population, we’ve been able to use resources and we’ve been able to grow. So we went from having fires as the source of light to kerosene as the source of light to electricity. And then we were able to work at night because we now had light in our homes and there’s a lot of productivity increases. That is probably the biggest driver throughout the industrial revolution, in the last 400 years, that has grown that cake.
Well, in the last 30 years, China has said “We have a billion people. We’d like to share it and grow our cake, too.” They’ve tried to take a couple hundred million people from farmers making $75 a month in growing rice to factory workers, and move them to the cities, give them apartments, and give them the ability to consume some electronics and move from bicycles to cars, and that is growing their cake. And now India is saying “We have 300 million people that don’t have electricity and they’d like some air conditioning. We would like to do the same thing.” Theirs is a little more difficult because of language and the traditional monsoon season which causes some real issues. But they’re trying to do the same transition America did 100-150 years ago. The US was the second. The British were kind of the first on that, but the British didn’t have the resources, after their imperialism stopped, that America does within its borders.
China and India are doing this transition for which they have to use energy. So they’re using dirty forms of coal and things like that. The same thing America did when it was cheap in America. Now we’re saying to them “We would really like you to be green and this and that. They are like “green is expensive.” If you don’t believe us, look at Europe. Germany’s electricity prices are 9x of what they were 5 years ago. Hold on, Germany is a first-world economy?! But they are going to use wind and solar, and guess what? Those are unpredictable. Those are not the best base load sources of energy. So they have really high prices now. They’ve shut down nuclear, which is clean. And then they said, “we’re gonna be less reliant on Russia.” That’s fine, but do you have an alternative? No.
That cake has been growing, but it hasn’t been growing in America or Europe. It’s been growing in other places and what’s been happening is that America with the dollar – has been exporting the dollars. So what this all comes down to is a big old house of cards of credit. What we’re sitting on is a big house that is made of credit and loans.
Interest has gone down for 40 years. Coincidentally, not long after we went off of the gold standard, now we’re sitting here with a big house of credit – and now interest rates have to rise. Yesterday, the American household credit passed $16 trillion for the first time. Everyone is gonna have to pay this back because no one has the discipline to not buy stuff.
It doesn’t matter who it is. It just doesn’t matter. Everyone wants to pay for this and that, vacations, going out to eat, and everything else, but they’re constantly spending more than they produce. America is spending more than they produce. That’s why we have a big old huge debt of $31 trillion and counting. Europe has the same problem. Everybody has the same problem, worldwide.
Austerity: They’re saying this also for developing countries. I hear this for Turkey and a few others. If there’s a crisis, how come all these people can be sitting in cafes, eating in restaurants, and driving their cars to holidays?
C Thomas: It doesn’t make much sense. Does it? My guess is that they have a brand new credit card. The American credit card debt is spiking too. The reason is, we’ve gotten very used to this lifestyle over the last few years. It’s hard to quit. They’ve tapped out their house, which has been their traditional form of savings, cuz they refinance their house and take that money out so they can support their goofy lifestyle of going to Starbucks and having a $6 drink every. Now, cigarettes or all this other stuff that they spend money on, that’s all going up. Everything is going up in price, but their wages aren’t going up that fast. They’re getting a small raise at work or some people are working multiple jobs now.
I heard a very good point yesterday and it’s something I hadn’t thought about for a couple of years. 75 years ago, one man would support a family and it was a lot bigger family than today’s family. Then the women joined the workforce and the families got smaller because the woman chose to work. Now both of them are working as fast as possible, the families have gotten smaller, yet we have fewer savings, real equity in home or else. And that’s just been out of necessity. Remember dinner time at the table? When everybody sat around the table, mom made a casserole for $1.50 and everybody ate it. Well, now you go out and eat and it’s $75 for a family of four to eat. Part of it is because of this.
People are starting to do this, they are starting to cut back on some fuel usage and smoking. But it is still nothing like what we’d expect. I think it’s because almost three generations have never really, really experienced difficulties. People talk about the great financial crisis. Yes, that definitely affected some people, people lost their jobs, but guess what? Most of the people that lost their house, didn’t deserve that house in the first place. They were well extended and they got an adjustable rate. But the well deserving people haven’t faced this. The new generation Z, then there’s X and then the millennials, all three of them.
In the seventies, your parent would say turn the light off when you leave the room. It saves energy because energy was so expensive. There was gas rationing in the seventies, there was a whole different mindset, and that mindset was carried over from the grandparent to parent that had lived through the depression when there was nothing. There was no food. There was nothing. And everybody that is in that generation is passing away. If you go to Normandy, 15-10 years ago, there were still a bunch of soldiers who fought in the War. That generation that fought through the depression was old enough to fight in that war. Well now, they would’ve had to be over a hundred years old to fight in the war. They’re starting to die out. Those lessons are being taken with them. What we’ve seen is “spend, spend, spend!” Somehow you/we will pay. At some point, you have to take that away. Austerity measures are basically “stop spending!” That’s it.
You have to stop spending as a person, as a family, as a neighborhood, as a city, as a country. That’s how you get your house in order. Go buy green beans and cook at home for $1 versus going out to eat for $20. That just saves you 95% of your meal…
Austerity: I let C Thomas continue doing his meal calculations. Meanwhile, I would like to name the people who were born on this day in history. Thank you for joining us today.
Also born on this date:
Magic Johnson,
Mila Kunis,
Halle Barry,
Tim Tebow,
Doc holliday.