How Much Longer Can This Cycle Run?

Mikkel Rosenvold (0:23)

Hello out there, welcome to Real Vision, welcome to Macro Mondays. My name is Mikkel Rosenvold, I'm joined, as usual, by my co-host, Andreas. We have a great show for you today. We're gonna be covering the turmoil in France, whether to PPP or not to PPP. And the big question, are we mid or late cycles? So lots of that stuff could be misinterpreted.

So hang on and get everything from us, including a view on the just released PMI number. So lots of stuff going on, Andreas. I wanna start with the wonderful, my video of the week, my laugh of the week, the wonderful Tucker Carlson, Jake and Breeze mock interview, because I urge people to watch it. And now I actually have you with me, Andreas.

You actually educated to answer this, but the debate would maybe, let's just have the clip and then we can dive into it.

SPEAKER_3 (1:15)

So let's explain why Russia would wanna pick a fight with Britain. It's got a much larger economy than Britain's, but I think basic-

SPEAKER_4 (1:24)

No, no, no, it hasn't got a larger economy than Britain's. It's got a smaller economy than Britain's. It's got a larger military.

SPEAKER_3 (1:30)

But it has a much larger economy. It has much more wealth and resources, and it has a much larger manufacturing sector.

SPEAKER_4 (1:35)

Its GDP is smaller than the UK's.

SPEAKER_3 (1:38)

Yeah, but GDP is not, I mean, the only measure of an economy.

SPEAKER_4 (1:42)

It's a pretty important measure of an economy. No, the Russia-

SPEAKER_3 (1:44)

It's one measure we can be-

SPEAKER_4 (1:46)

Russia is an economic failure.

That it could have a huge economy, but it's got a small economy because it's deeply corrupt and it hasn't managed to use its resources effectively. And so, although the population of Russia is bigger than that of the United Kingdom, very significantly, its GDP per capita is so much lower that the total GDP of Russia is smaller than that of the United Kingdom. Right.

Mikkel Rosenvold (2:14)

So Andreas, wonderful clip, always wonderful to hear true British accent here. The big question here, are you on Team PPP or not? Because that was the discussion that took over X over the weekend.

Andreas Steno Larsen (2:28)

Yeah, so I guess it kind of depends on the framing of the discussion to be honest, right? Because of course, if you look at the GDP number, it kind of tells you whether you're able to buy stuff globally. I think that's the ultimate measure of that, right? Your gross domestic product is basically what you can, quote-unquote, exchange for goods and services outside of your own borders.

In that case, I would have to agree with Jacob Rees-Mogg that the UK is better equipped to buy, for example, technology from the US and so on and so forth. They have a higher GDP. But in terms of war economy, I think Tucker is on to something that Russia's ability to stay alive in a war economy is substantially better than that of the UK. First of all, because they're self-sufficient in terms of energy, but also in terms of many minerals and to a large extent also food, right?

As I typically said, I mean, they have vodka, oil, and wheat. Not this wheat, but you know what I mean. You get pretty far with that, right? In times of crisis.

I think it kind of depends, because who cares about GDP in a situation where you have a global conflict, where you have fragmented supply chains and all that, you cannot really use it for anything in such cases. You can, so as long as you have somewhere to buy your necessities. And that remains the issue for the UK, right? By the way, an issue for many other countries, that's not solely an issue for the UK, but the UK is probably, I have to be careful here, is probably the developed economy with the worst self-sufficiency. Let me put it like that.

Mikkel Rosenvold (4:33)

Yeah, especially in energy and raw materials. Absolutely. So I have to agree with you here. I have to side with Tucker, even though it pains me because I think Jacob Rees-Mogg was by far the winner, if you could say that, of this debate.

I'm not sure Tucker Carlson was talking about PPP adjusted, GDP here maybe just compared the supermarket he visited in Moscow to one he visited in the UK. I don't know, but it's a fascinating discussion. Speaking of wheat, we know that Russia is buying artillery shells in North Korea and paying in wheat. How do you purchase power adjust that? It's very, very tricky when you talk about military supplies, military salaries and all that.