#213 - Russell Napier - "They Are Stealth-Stealing Your Monday”: Financial Repression is Here

Russell Napier (0:00)

The regulator told the pension funds and the life funds, you need to match your assets and your liabilities, and they bought it, and the guys don't even know they've lost the money.

Peter McCormack (0:07)

So they regulated them to buy the bonds because the government needed the money.

Russell Napier (0:11)

When I talk about financial repression, it is kind of esoteric, so I had to think up a better phrase for it. So I call it stealing money from old people. You denude property of its ability to protect you from inflation. Ultimately, it was about making one asset class less attractive, so you would buy more government bonds. If you bought a French government bond, the 50-year bond with a half percent coupon.

As of yesterday, you'd lost 78% of the capital value of buying the risk-free asset from the French government. So you've effectively had your capital wiped out, buying the risk-free asset.

Peter McCormack (0:42)

It could be quite scary for people listening to this to think, look, I've worked my whole life, I'm looking at my retirement, I've saved, I plan for it. And because our governments have run up such high debts and they can't afford to pay their bills, they're going to come after what I've worked hard for. This show is brought to you by my lead sponsor, Iron, the AI cloud for the next big thing. Iron builds and operates next generation data centers and delivers cut in edge GPU infrastructure, all powered by renewable energy. Now, if you need access to scalable GPU clusters, or are simply curious about who is powering the future of AI, check out iron.com to learn more, which is iren.com. Right, Russell.

Sometimes I need notes. Today is one of those days. I just don't need any notes. I'm trying to understand what is a bigger problem.

Is it that there's part of the vote in public that would rather vote themselves poor than have a party from the country that they are ideologically against or is it that most people just don't understand enough about basic economics?

Russell Napier (1:46)

So we're going to begin by disagreeing. I mean, there are polls of the voters of the United Kingdom. I think we're starting with this country, the United Kingdom, where we're sitting today. And one of the questions is, do you prefer more tax or spend or cutting taxes and lower spending? And there's now a significant majority and former of the latter amongst the population of the United Kingdom. Now, that may not show up at the polling booth. And there's lots of reasons for that, because people usually vote against something rather than for something. But for the first time in a really long time, most people in this country would now prefer lower taxes and less spending.

Peter McCormack (2:17)

Is that because we've hit the middle class so hard?

Russell Napier (2:20)

I think we're way beyond my pay grade here. We're getting into sociology, way away from financial history. But I've got a very simple reason for that. The so-called working class, who, when I was a boy, worked in factories for a big company for a boss, don't. They are what I think, pejoratively, is called white van man. And they take the risk in society. They are the risk takers in society. The middle class are not necessarily the risk takers. A, I might change that. But if you're a risk taker, if you're a guy who's a plumber, or a joiner and go out every day, you're the guys paying the taxes. You're the guys paying for everything else. And fundamentally, we'll just call them blue collar.

I don't really care what term we have. Though it's those people who actually are voting for, sorry, not voting for, but now expressing an opinion that they want lower taxes, less regulation. So we've got this vol fast. Then you have the public sector workers who are in favor of more taxation and more spending, surprise, surprise. So I think the traditional narrative here is that it's the less well-off in society who vote for more stuff is not really that true.

Of course, we can't call plumbers the less well-off in society anymore, can we? Because they're doing very well for themselves. So there's a bigger shift underway here that we're not really focused on.

Peter McCormack (3:30)

Okay. So how bad would you say the financial situation is of the country?

Russell Napier (3:33)

Of the United Kingdom, not that bad. I'm completely non-consensus on this. So of our public sector, very bad, extremely bad. Of our private sector, extremely good. That's the bit that we don't talk about. I wrote a book on looking at the four great bottoms for the American stock market. I read all the Wall Street journals at the bottom of bear markets. Of course, all the bad news is on the front of the paper, and there is good news, but it's in the middle of the paper. Where we are in the UK today is all the bad news is on the front of the newspaper. But our banking system is rock solid. These could be famous last words, of course, but is rock solid. Our household sector is completely de-geared since 2007, and our corporate sector is completely de-geared from 2007 When we look at the macro data, our balance sheet is really quite similar to Germany now on the private sector.