This transcript has been automatically generated.

Paul Musson: It’s a myth that an economy needs 2% inflation to grow. In fact, the economy should be experiencing what’s called good deflation.

Colin White: Welcome to the next edition of Barenaked Money. Overly thrilled to have an old buddy of mine. I’ll I’ll use that term liberally. Paul Yeah. For sure.

Paul, was one of the guys back in the day when I was wearing my suit, walking around Downtown Toronto. I’d make a point of dropping in to see on a regular basis to sit and have a completely unscripted conversation with that. I thoroughly enjoyed, and he kept accepting the invitation, so he must not have hid it. But Paul is now fully fully moved on to the independent chapter of his life, and he’s getting to find his own voice, and he’s got some interesting things to say that I thought maybe our listeners would would enjoy hearing. So welcome, Paul.

Paul Musson: Thank you, Colin. It’s great to be here and great to great to see you again. Yeah. And I did it really enjoy all those meetings we had. I was always impressed with the amount of due diligence you did on the IV funds, and they’re always constructive conversations for sure.

Colin White: Yep. Well, thank you. Thank you. It was a fun period, and it was fun to watch the arc. And we went through some times together in the industry and different moments in time that all the young folks have all forgotten about.

But you’ve you’ve you’ve written a book

Paul Musson: Yes, sir.

Colin White: With the big passion project. So you’ve you’ve got the the all of the plans to fix the planet and, you know, at least the economic side of it. You wanna Yeah. Well Give us a short version of of of your prescription to fix what’s everything that’s wrong in the financial world.

Paul Musson: Okay. Yeah. Well, it’s one thing to prescribe it. It’s another thing for someone to take the medicine. Right?

The book is called Capital Offense. Why some benefit at your Expense? And it really was sort of many years in the making, you know, coming out or going into the great financial crisis. I got very frustrated with what the Federal Reserve was doing, which we can get into, and just started learning about economic theory, monetary theory. That was all my sort of spare time reading for the last, you know, fifteen, twenty years or so.

And not knowing I was gonna write a book. And, that sort of came to me around 2019 when I started it. But the goal of the book is to help explain to people in easy to understand terms. Crazy financial sophisticated jargon to help people who are not economists, who are not investors understand what is happening, why life is becoming more difficult for them. It’s not a conspiracy theory.

It’s good intentions gone bad that result. Kick the can down the road, you know, free lunch mindset, which always leads to greater consequences in the future. And the only way that we’ll be able to change this is when people demand change. Now there’s an old saying that the people always get the government that they deserve. Right?

You voted for them, so shut up. Well, only if two things are are going on there. First, as long as it well, three things. As long as you were part of the majority, not the minority who voted. Second, if the government actually does what they said they were gonna do.

And third, and I think this is most important and why I wrote the book, if people truly understand what is going on, if you don’t understand how the system works, then it’s hard to demand the right actions from our policymakers. And our policymakers are not bad people. They’re good people. They wanna do the right thing. But doing the right but difficult thing today is political suicide because we’ve all been convinced that we can have our cake and eat it too.

And so nobody’s going to make the right decisions because they’re not going to last and they won’t be around to make those right decisions for very long. And so it’s got to come from the people. And I think the average person is very smart. And as you know, and particularly you guys know, people are very smart when it comes to what they should be doing with their own hard earned capital. Yes, they need a little bit of advice here and there, but they also want to understand what’s going on and they’re smart people.

Also, they’ve accumulated that that capital in the first place, not because they’re stupid. And and I have great faith in people. I think most people want to do the right thing. They want to see others succeed. They like to help other people.

But we also all have it in us to not be nice people. We all are capable of our not finer moments. And this happens when you’re in a bad environment, a bad corporate culture. Know, used to talk about corporate culture a lot at Ivy, at the Ivy, and bad corporate cultures, bad environments, bad systems can bring out the and vice versa. And so what I’m trying to do is just help people understand.

It’s not a book about trying to torch people, if you will, and trying to get people to work together. So that’s why I wrote the book, and now I just gotta get people re

Colin White: Well, I’m I’m on chapter four. I’m working my way through it. Paul, one of one of the things I’m curious if you bumped into this because, again, I haven’t gotten all the way through your book. But one of the things that I tangentially kind of noticed or I’ve observed the percentage of GDP in developed countries that is made up by the financial industry seems to have based on some of the information I think prepped up. From something that was fairly modest to something that’s very substantial And, you know, again, all we really do is move money around.

We don’t actually create anything.

Paul Musson: Exactly.

Colin White: It’s it’s it’s a little bit disappointing. Now does that line up with the research that you’ve done and and the lens that you’ve looked at things through over the years? Is that part like if I finish reading your book, am I going to stumble on that?

Paul Musson: Yes. Yeah. You will come to that part, Colin. And, yeah, we’ve always had this mind melt going on, I guess. And, yeah, I talk exactly about that.

The finance industry, which we’re both a part of, which we’re all a part of, is very important. We have a very important role to play, but our role is more of a a facilitator role. We don’t actually create capital ourselves. We take capital that our clients have created, and then we allocate that capital into the real world to companies that are gonna put that capital to the most productive use and, of course, at the the best risk. The government also very important but also do not create any capital for the most part.

They are facilitators of capital creation. You need you need rules. You need regulation, but you don’t need too much regulation. You need the court. You need protection from the police, from each other.

You need the army. You need protection from other countries. But over the years, very important, I’m not anti government at all, and I’m pro welfare state within reason. But government spending has grown to an enormous percentage of the total economy. And so you have government and finance both growing as a percentage of the economy, but they don’t produce any capital.

So the real economy is being dragged down more and more every year, trying to drag all us facilitators along with it as it continues to invest and try to grow. And it’s still growing not because finance and government has increased in size. It’s kept growing because of the incredible entrepreneurial spirit and hard work and ingenuity and smarts of of so many amazing people. What’s happened is we’re still growing, but not nearly as fast as we should be. And that is what also enables all the system to persist because it’s that which isn’t seen.

There was a famous economist, Frederic Bastiat, French economist in the 1800s, he would talk about that. So a bad economist just looks at the first order effect consequences of their actions. We print money, stock markets go up. Okay. That’s good.

Then they go get a coffee. They don’t worry about it. The good economists like Bastiat says that they will look at the second and third order consequences of the actions, the act the consequences that are yet to come. And the reason that people get away with it today, just focusing on first order consequences is that people have a hard time connecting the dots from consequences three, four, five, ten years in the future that are a result of actions that are taken today. And so, yeah, so no, you’re absolutely right and impressed that you, you got onto that.

Colin White: Okay. Don’t be too impressed. I’m about to get mean economics. Isn’t a thing. It it is a sum total of all the incentives in the system.

And I think that, you know, to your point, there’s very few incentives in the system that individuals ascribe to that have a ten year time horizon. You know, many, many people are in much more of a survival mode or feel either they are or they feel that they’re in survival mode and they have to maximize a much shorter time horizon. So, you know, the the observations of the economic observations that yeah. I absolutely agree with. And thank you for confirming that.

You just saved me a few hours of research because I haven’t found my sources yet. I’ll read your book and steal your sources. Okay. But those are just the the grand sum total of all the the incentives in the system. And, you know, again, I forgive my listeners, but some of my stories I do repeat.

You know, the the quote that’s attributed to Warren Buffett by a reporter who been following around and made the offhand comment. It’s like, well, thank god you’re a very ethical man. And I said, what do you mean? She goes, well, every story you’ve told me, like, you know, you hope you tried to do the right thing. He goes, never been standing outside of a liquor store with a sick kid at home and a gun in my hand.

Yeah. Right? So sometimes it’s it can be very situational. If you look around the world right now, there’s some populations that are in really, really dire circumstances and to ask them to aspire to a ten year time horizon might be a little bit lofty. And I think that that’s part of what is feeding us into this doom spiral that we get into because having the luxury being able to live my life based on a level of comfort that allows me to have longer time horizons is more difficult.

And leadership is gonna get rewarded for the short term wins. You know? So until we decide that we’re gonna multiply what we pay our politicians by a factor of 50, reduce the number by two thirds, you know, which is probably not gonna happen. I think we’re gonna we’re gonna struggle on pushing through some of the marvelous changes that you’ve you’ve suggested in your book. I’m assuming they’re marvelous because I haven’t got to the end of the book, but I I’m sure they’re fine.

Paul Musson: Well, I’m sure they’re fine too. The trouble is is they, will not come without pain.

Colin White: Alright. So, Paul, let’s let’s set that aside for a second because I think we’re in lockstep. And I and I think your book is a good read for for those who are interested in the mechanics of things, and it is explained very step by step, at least the first four chapters. But we have a we have an audience here that are trying to make decisions for their own families and their own situations in the real world. So if we accept the premise, the system is flawed.

And, you know, things are gonna continue to be on the path that they’re currently on. What is there to learn from accepting that, you know, things are gonna be inefficient? You know, what what learning is there for a standard person who’s just trying to make their way in the world right now as to how they can run their own situation to be minimally impacted or control the impact of a system that’s broken?

Paul Musson: Well, I guess it depends on exactly what it is you’re talking about. So learning about what’s going on in the system and how it’s flawed, you know, it’s gonna take some time. In the meantime, you’re at risk of the current system. And and as you know, we never made predictions about what’s gonna happen in the world.

Colin White: You’re you’re you’re around one of my inspirations in never making predictions. If you go back and listen to our our podcast, our prediction episode, it’s a bit of a first, and you you you were part of what inspired that. So there’s there’s some credit

Paul Musson: for you. Well, thank you. Yeah. And, yeah, we don’t make predictions. I don’t make predictions for the very simple reason.

I don’t know what’s gonna happen, and no one else knows what’s gonna happen. You know? There’s just lots of opinions out there, a lot of smart people, and you’re have two very smart people who think two completely different things are gonna happen. Right? And it all sounds plausible, so forget it.

So just in terms of what people do today, it won’t be any surprise to you to hear me say this is that you should be diversified. This is my opinion, and I’m not licensed to give financial advice. So Don’t worry. We’ll do it

Josh Sheluk: for you, Paul. You can Okay. We we we can transpose the message.

Paul Musson: Okay, Josh. Thank you. Yeah. Just I’ll just say what I do. So I’m diversified in extremely high quality equities, and, I mean, all I do is buy IV funds.

So I hold them all, and I know what the guys are doing on a day to day basis. They’re investing in very high quality, strong balance sheet companies who have a competitive advantage that we think is sustainable because of their great corporate cultures and all the constituents of the business model, benefit from it. And we can talk about corporate culture and why it’s important if you want. And then I’ve got some gold a little bit. I don’t think you need too much, but my gold is is is simply a central bank lunacy hedge.

If and you’ll hear a number of you’ll hear a number of people say that the only way out of this debt morass is via financial repression. Oh, yeah. We’ll just have to resort to financial repression as if that’s an acceptable, a morally acceptable method of dealing with the profligate actions of governments over the no, it’s not. Financial repression is extremely painful for a lot of people, and but it’s the least painful for politicians and central banks to take. And so if they do go that route, I mean, gold will protect you really well.

Now, ironically, if they decide instead to, take my prescription and fix things, then gold will plummet. Unless gold becomes part of the answer in terms of a gold standard instead of a fiat standard, then it could also do well. But I’m not trying it’s it’s just a hedge. Yep. And then I’ve got some cash and some high interest savings vehicles.

I’ve got one bond, I think that’s it. And I, and I never look at my portfolio.

Colin White: Yeah.

Paul Musson: I don’t. Nice. Yeah. You know? No.

You know? And I know what the guys are doing and, and, yeah, I don’t like worrying about stuff like that. So, but that’s just me. I’m a very,

Colin White: you know, that that that’s fair. Like the that that’s probably the best defense of investing in gold I may have ever heard. Yeah. I I think that that’s probably the only rationale that that would hold any water. But Josh, just for a second, you flip over to Polymarket and see if we can bet on whether or not they’re gonna listen to Paul and accept his prescription.

Josh Sheluk: They got a lot of crazy things on there. That one might be up there in no time. I don’t know. I don’t know, Paul, but I’m glad you brought the market into it because obviously we did wanna pick your brain about this, but, and maybe you provided the answer. You don’t look at it, so you don’t care.

But the last couple of years, what you’re describing as an investment philosophy hasn’t been as effective as just going out there and buying the market or being heavily allocated to some of the more thematic, I’ll call them ideas that are out there. Namely the whole AI thing, the high quality thing has not really done that well over the past couple of years. So when the market’s seemingly running away from you like that, you’ve been doing this a long time. How do you stay disciplined?

Paul Musson: Yeah, well, again, I try to remind myself and when I was still at Ivy remind our clients and remind my bosses what it is we were setting out to do. Now, yes, our compensation is based on relative performance, But Ivy was a bit different in that we tended to focus and and do focus more on absolute performance. Now that makes life extremely difficult when you’re not keeping pace with the market, and particularly when central banks have now inserted themselves into the equation, distorting the price discovery mechanism of capital markets in order to bail out Wall Street. And this is another reason why the economy, the productive capacity of the economy has struggled for so long because capital is getting misallocated. You have, you know, zombie companies roaming the earth.

The last report I saw from the Bank for International Settlements, it was, like, 17% of listed companies in developed economies or zombies defined as companies that don’t make enough operating profit to even pay the interest expense on their debt. So these companies are allowed to consume cap and destroy capital only because of central bank actions. So when you’re trying and and again, so have this analogy that I use with my clients at Ivy. So the goal for our clients who are financial advisors, planners, brokers, whatever, is to get your clients to their long term financial goals. If your goal is to beat the stock market every year, then go somewhere else.

We’re not going to do that. Our goal, our most important raison d’etre, if you will, is to get you to your long term financial goals. And yes, we can beat the market most years, but if we lose half of it or three quarters of it just before you’re ready to retire, that’s not going to feel very good for me knowing that I’ve destroyed your retirement. And I’m not going to do it. I’m simply not going to risk it.

And so, but it’s important that people understand it. That’s what you’re trying to do. So my analogy was we would have this IV car and let’s say we’re in Nova Scotia and we say, okay, here’s the plan. You get in the ivy car. We’re gonna drive across Canada, and we’ve done it before, and here’s how we’re gonna do it again.

And if we can get you to Victoria in one piece in a good time, then you’re gonna achieve your long term financial goals. You’re gonna successfully retire. How does that sound? Good. Okay.

Get in a car. But before we leave, I say, oh, wow. One more thing. If it starts to snow, we’re gonna slow down. In other words, if stock markets get super crazy expensive, we’re gonna add cash, and your performance is gonna slow versus that of the benchmark.

Are you okay with that? And they said, well, that kind of makes sense. If stocks are expensive, you got a higher risk of a greater fall. So let’s have a bit more protection. Okay, good.

You get in the car off you go. And you get to Thunder Bay and everyone’s happy because they can see that we’re actually, it’s working. We’re getting closer to Victoria. We’re getting closer to our retirement goals. But now it starts to snow, so I slow down.

Then these cars are passing us in the snow. And now the people inside the IV car are getting pissed off. Ma’am, what are you doing? How come we’re going so slowly? Well, snowing outside is dangerous.

Well, how come the those portfolio managers driving those other cars aren’t worried? How the hell should I know? I told you before you got in a car that if it snowed, we’re gonna slow down. And I said, like, don’t some of them might get to Victoria before us. It’s okay.

It’s not a race. Right? I know it feels better if you’re first, but it’s not a race. So some of them might beat us. Some of them are gonna end up in a ditch.

And for those people, they may never get to Victoria, and that’s a really bad outcome. Pretty hard to justify the fees that you’ve taken along the way when they’re sitting in a ditch. But the portfolio manager driving that car, what does he or she do? They get out of the car, leave their clients in the ditch, and they get into another car and see if they can be first to Winnipeg because their goal is not to, well it is, they’re not bad people, don’t get me wrong, but they’re not thinking about Victoria because a lot of them, bonus is based on one year performance or three year performance, so they get paid if they’re first to Winnipeg, then they get paid if they’re first to Regina, then they get paid if they’re first to Edmonton or whatever. Right?

And so key to all of this is, as you guys know, managing expectations. Right? And being honest and truthful as you can be with how you’re doing things and what to expect in different market environments from our investment style. And so you put your clients in the best position to make the most informed decision. So I will put Colin in the best position to make informed decisions with his client’s capital.

That’s not for me to say, oh, you should be doing it. No. Carl’s a smart guy. He knows what to do, so I give him the tools. And so that’s sort of a long winded way of saying how we deal with, you know, not keeping pace with AI stocks.

You know, I’d love to grow faster if I could do so without the risk that comes with it. And then when I think about my own portfolio, when it’s growing steadily and I never have to look at it, I feel great. In part because I’m a worrywart, right? Like, you know, you lose hair when you worry. So my tagline when I was at Ivy was at Ivy, we lose hair so you don’t have to.

Colin White: Is that trademark?

Paul Musson: Maybe I should. Yeah.

Colin White: Actually, I probably can’t use it. It wouldn’t fit.

Paul Musson: No. Exactly. How do you do that?

Colin White: Good genes. Clean living.

Paul Musson: Yeah. There you go.

Colin White: How much of it do you think that, yes, Catherine’s commenting that Dan, one of her other principals, could use that tagline and that that probably would work. Part of it, again, goes goes goes back to the incentives, and and this goes back to the structure of the financial industry. I mean, was was on I get called by one of the media less than Yahoo Finance. They were asking me about the role that Bitcoin should pay play in a millennials portfolio. My response was zero.

It’s the largest Ponzi scheme ever hoisted on humanity and people make money at Ponzi schemes for a while right up until they don’t. So I just now came out against it. But then the next person who was asked had the salesman answer, which was, oh, we believe in a core and explorer. Well, 80% of the assets are allocated to a diversified portfolio that up to 20% can be directed by the client based on their you know, because again, that’s, you know, if if people will buy it, they will build it. And that that becomes the fight that people are trying to do the boring thing, you know, constantly run up against.

And it’s very, very difficult being the most boring guy in the room. It takes a while to to to to, you know, earn enough confidence from people, in order to get them to truly believe in what’s going on because there’s just so much information out there and so much misinformation that makes it a challenge. Yeah. But I kinda backed into you haven’t mentioned Bitcoin as an asset class yet, Aldi. Is Bitcoin an asset class for you?

Paul Musson: It’s not for me. Now having said that, I do understand why the bands of Bitcoin like Bitcoin. You know, it’s they you know, it’s a a way that they believe that they can keep the government’s hands off of their capital. And, you know, it can’t be increased more than 21,000,000, and I would love a stable money supply or even one that grows very slowly like Milton Friedman used to like or recommend. But, you know?

And I don’t know a lot about Bitcoin, so I won’t say too much, but, you know, it’s very volatile. You know? That a lot of people are in it because they made a lot of money and hope to make a lot more money, and that if it does become a money, you know, definition of a medium of exchange is something that is widely accepted. And maybe it does. I don’t know.

But I and it’s just my ignorance. I I I don’t understand, unless the government somehow is benefiting from it, why the government would allow it to happen. And there are various measures that the government could take to make things difficult for Bitcoin. Whether they will or they won’t, I don’t know. But I understand the spirit of it.

I I do, but I

Colin White: don’t many. Well, somebody who listened to the first 20% of this podcast would think that Bitcoin was the answer. Like, it lined up perfectly with your hate of government and and all the rest of it. Yeah. So I mean I think that that’s kind of the genesis of the movement was every everybody wanted to just shut it up.

Right? But I mean the problem is is that it’s there’s no control. And there there’s no but that’s where all the criminals are right now. So if you go hang on that where we had a podcast guest, I’ll plug one of our previous pods on cybersecurity. What was that guy’s name again, Josh?

Matt?

Josh Sheluk: Matt Toussaint.

Colin White: Yeah. Yeah. So he made the comment. Was funny. He made it as an offhand comment that, you know, the ransomware attacks that they witnessed who’s kinda going through ransomware and that that all of that was in Bitcoin.

But, you know, one of the first things that many of these organized crime units did was when they received the money in Bitcoin, they immediately translated that to a fiat currency. Because even the criminals don’t wanna hang out in it. And I thought that that was probably the most interesting offhand comment that, you know, somebody who’s tangentially making a comment on Bitcoin. That’s a pretty interesting take on things.

Josh Sheluk: I know you still follow the market Paul and we talked about how the market is kind of running away from some different investment philosophies at this point, but you were managing money through the tech bubble in the late nineties, early two thousands. And there’s been a lot written and a lot said about the differences or the similarities between tech bubble and AI, whatever it is, I won’t call it a bubble, whatever it is today. In your view, what do you see that’s similar and what do you see this different?

Paul Musson: Yeah, well, what’s different is, well, yeah, maybe what’s similar I’ll start with. I mean, first of all, during the nineties, the productivity growth was enormous. I mean, the whole technologyinternet.com stuff. I mean, all that was real and revolutionary. I mean, I remember and I think it was 1993 or 1994 is when we first got the email.

There was no such thing as email, you know, and Which speaks

Colin White: the truth.

Paul Musson: Yeah. No. It was crazy. Like and you had no idea how your life was gonna be revolutionized by all this. And it was.

But, of course, there were a lot of basket case companies. So companies were coming to market. I was working at CIBC World Markets at the time. I was on the institutional, sales desk, and companies are coming to market. And no matter what they do, they put .com at the end of their name.

And as soon as it hit the market, the thing would go three, four, five times. And so there was, you know, pets.com, all that kind of stuff, web van. There was all kinds of nonsense going on, and people lost a a a boatload of money. And valuations were ridiculous. Now with the AI boom, I don’t know that it has yet led to productivity growth.

It depends on what reports you read, but it’s already having an impact and could significantly improve productivity growth in the future. Like it I mean, I think it will. And so I think companies right now are spending more than are benefiting from it, but it’s real. And the companies that are dominating the market today, I think, are much stronger, well positioned businesses than those that were dominating the market back in the late nineties. Now it doesn’t mean that the companies that are dominating today are fairly priced.

I don’t think that they are. And, you know, they used to have very strong balance sheets, and now they’re issuing a lot of debt to fund all this stuff. And which is well, by the way, a sidebar, I’ve seen some numbers over trillion dollars or something that are expected to be issued in investment grade debt this year, and that’s gonna compete with the trillions of dollars of treasuries that are rolling over. And this could pressure interest rates higher, longer term interest rates higher. But this is what happens when you just keep issuing more and more debt.

Eventually the debt vigilantes will come for their pound of flesh. So those are, I guess, the similarities and differences between the two. One more similarity is that, well, I shouldn’t say I was gonna say you don’t know what’s gonna happen. You do know what’s probably gonna happen, but you have no idea when. So the .com bubble, I mean, you know, it’s going to end, but the longer it goes on, as a professional investor, you start to, oh my God, is this ever going to end?

You know, like it just day after day, week after week, year after year, it just keeps going higher and higher and higher. And the main difference between now and then is that you do have the implicit, some say explicit, central bank put. And this changed in particular with Ben Bernanke during the great financial crisis. Some say they give him a pass for QE one. Now Wall Street presented the government and the people with a false dichotomy.

Right? They said, you can bail us out. We know it’s distasteful. Or global financial arm again, which one do you want? You know?

No. There are all kinds of choices in between there. And but you could live with q e one, but there was absolutely no excuse for q e two and q e three, and now Wall Street knows. That’s the ticket for leverage speculation in the markets because they have expected and they’ve been right that the Fed will always come to their rescue because the markets are becoming the economy and it comes at great harm to the economy. But maybe not.

Maybe the Fed finally wakes up. I mean, there’s all kinds of stuff going on there these days. And and decide to focus more on the economy than on the market, than on asset values. And, you know, that the hazards of driving housing markets higher, which is is a moral issue, which we can talk about if you’re interested.

Colin White: Well, I mean, we’re okay now because the the Canadian federal government’s cutting into building houses. So that problem is just about solved.

Paul Musson: Well, that’s good.

Colin White: Yeah. No. It’s it’s interesting because I think we’re unfortunately headed in the other direction. I think the US Federal Reserve is not gonna get more independent or make harder decisions in the current environment. Yeah.

So there’s probably some room to slip. But short of us getting into a corner that we can’t seemingly escape, I mean, are there any catalysts that you’re looking for that that that would indicate that people are willing to take some tough medicine to fix things? I don’t

Paul Musson: know about a catalyst. Well, if you I mean, inflation is still above the Fed’s target. There should no there should be no inflation target, by the way. It’s a myth that an economy needs 2% inflation to grow. In fact, the economy should be experiencing what’s called good deflation, where because of productivity growth and competition, excess profitability gets competed away, has come down as all to the benefit of the consumer.

And in fact, in the last thirty years of the eighteen hundreds, that’s what you had in The US. You had massive productivity growth and slow money growth until prices fell for thirty years. That’s a really good thing. And so if I saw that the Federal Reserve and other central banks were abandoning their 2% inflation target, not to make it 3%, which a lot of people are saying needs to happen, but actually taking it down to zero. It should be negative, but even zero, that would be a huge sign that they have out face and are going to move in a direction that benefits the economy.

And it will be at the expense of asset.

Josh Sheluk: That’s a fairly radical idea, Paul, that we should be targeting or hoping for deflation rather than inflation. I think there’d be years, maybe decades of economic theory that would counter that and say, deflation is one of the worst things that you could do for an economy, but you think that that would be productive over time?

Colin White: Well, let me try to answer on Paul’s behalf, see if I get it as long as there’s actual economic growth in the background at the same time, like he’s, you know, productivity going up at the same time, I think is the other half of that. Right?

Paul Musson: Exactly. So what matters is why the deflation is happening. So if you have deflation from a contracting or falling money supply, that’s not good at all. It’s really bad. You had that in early thirties in the the great depression.

But good deflation that as a result, the column was just saying, like, massive amount of productivity, you got the same amount of money chasing more and more goods. The prices have to come down. That’s really good. And this justification or for a 3% inflation excuse that governments need to do business spend. And, you know, they get away with it because it all sounds intuitive, you know, but it’s but it’s it’s not true.

And and and the problem is, is that economics is a social science. It’s not a natural science like physics and chemistry. It’s a social science because it’s based on human action. So it’s more like psychology, whatever. And so you have all these different schools of thought.

Yeah. The the laws of and so people try to term action that make them look good at the expense of the economy and others in the future. But these people, they’re well meaning because they’ve been convinced that these are the right things to do. If I saw central banks not targeting inflation, then that would be a really good sign.

Colin White: Or a sign of the coming apocalypse, one or the other.

Josh Sheluk: Paul, so much information here, so much interesting information, so many interesting thoughts. I think we’ll have to do a part two. We will schedule some time to get you back and flash out some of these ideas in more detail, because I think we could talk economics and investing all day. So thanks a lot for joining us for part one, Paul. We will talk to you soon for part two.

Paul Musson: Right. Thanks for having me. Great to see you guys.

Colin White: Thanks buddy. Great to see you again,

Josh Sheluk: Okay. Take care. Take care.

Colin White: We didn’t like the way investment management firms worked in Canada. So we built Verecan, something different. You can find us at annoyingthecompetition.com.

Kathryn Toope: For more information on the subject of today’s podcast or any other financial topic, please visit us online at verecan.com. That’s verecan.com. There’s plenty of information there, or you can reach out to someone on the team. Thanks for listening. Please note, the information provided in this podcast is for general information purposes only.

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