On May 9th 2016, Christine McDougall interviewed Dr David Martin on the coming Global Financial Turbulence and what local communities can do to build resilience and parallel economies.

You can watch the video of Part 1. It is 1 hour 14 minutes in total.The show notes below show how you can fast forward to certain areas of the video that may be of interest.

Listen to the audio on Soundcloud

Or go to the 223AM Podcast on itunes.

Show Notes

The Comedy really starts in 1776 to 1815, when the framework for global trade and tax policy was put in place (3.27)

The Human laborer is a finite time period (4.09)

The US economy was never independent (4.48)

The Treaty of Ghent and the tax haven policy – tax shelters in every British domiciled Island (5.12)

When a Chinese company goes public it lists through a tax haven. (6.55)

Who has the balance sheet controls the fate of the world. What nation has that? (7.21)

The biggest nominal winner has been life insurance companies and the interest holders of life insurance companies (8.18)

Mortgages and Real Estate are subservient to the life insurance markets (9.49)

The GFC should have taken out the balance sheets of insurance companies but they have 400% more CASH today than in the history of the industry (10.34)

Where do most of the life insurance beneficiaries have their assets held? British domiciled tax havens. (11.53)

The headline that will be discussed in 2017 is the failure of the Pension system (12.31)

The Pension system put together by Roosevelt has an overweight exposure to Real Estate assets (13.50)

In the first quarter of 2017 the Social Security system (medicare, pensions etc) in the USA will have a 21% degradation in cash value (14.46)

Discretionary income falls by 21% in the USA (15.50)

Innovation went from being product in technology oriented to process oriented (17.11)

Deutschmark until mid 70’s was a productivity linked currency (22.04)

The Bretton Woods music box will keep playing as long as the Petro dollars keep playing (23.06)

As Crude fell the relevance of Bretton Woods went with it (23.41)

The Special Drawing Right (SDR), inside the World Bank. A hedge in the form of currency. You can get money from the Wold Bank and elect to pay it back in a future undefined currency (24.19)

Publicly disclosed large infrastructure deals started being denominated in SDR (24.43)

The three legs of the broken system are (1) the pension system (2) the collapse of the dollar/Bretton Woods (3) the innovation shift that made Deming a hero and prevented a Tesla or Edison from happening (25.51)

Separate innovation from incrementalism (26.29)

30 year assets called Real Estate and pool it with consumer credit, which is what happened in the GFC – a fixed asset turned into a variable asset (27.29)

Name a true invention that has happened since WW2. (28.55)

We haven’t done ‘questioned underlying assumptions’ invention, for a long time (29.39)

What is our resilience plan if we have pension failure, if we have banking failure, if we have currency failure? (30.50)

Has 88 million patents on his servers and the algorithm to access this (the google of innovation)

To prove his theory on innovation/incrementalism, take the top of the market, publicly traded around the world, run M-cam analysis on the distinction between invention, innovation and incrementalism, and invest in equities that are invention heavy and incrementalism light, and if his thesis is right he should get a good result. Since he launched Purple Bridge Fund they have a typical 108% out performed the industrial’s index (34.40)

Who loses? The self manages super funds, ETF buyers (70% of the market) (34.40)

Lets be 40-50% overweight in Australia to Real Estate (36.48)

The people who are winning are selling product, they are not selling risk, guidance, wisdom, insight, they are selling products (37.47)

In your investment portfolio you have your Real Estate at 30%plus, and you have your equities over here at 30-40%, but the problem is your equities is 50% Real Estate, so how much Real Estate do you really have? (39.30)

The way the USA solves problems is (1) sell its debt (2) declare war on people (42.45)

With the US dollar and the Petro dollar falling apart, selling debt has become dodgy, so we (USA) have to buy our own (42.52)

Australia is saving trillions of dollars, and these assets are trying to find markets. We have an excess supply of currency. The Australian currency has been subjected to a number of speculators based on resources and its trade relationship with China, so there is this notion that Australian currency is worth buying. (44.02)

The problem is we don’t know how many Australian dollars are supported by the Australian economy and how many are supported by speculators who are using the Aussie dollar as a means of hedging other currencies. (44.18)

David speculates that we have between 13 and 17% conservatively of the Aussie dollar doesn’t really exist, meaning not supported by any economic engine. (44.56)

With international interest in the Aussie financial institutions and Real Estate this number could go as high as 25% to 30%. (45.10)

So what is the real value of the Aussie dollar? (45.15)

When the pension system fails in the USA in 2017, what is the domino effect that happens around the world? (given the US generally either sells its debt or starts a war) (45.40)

USA allies have been asked recently to spend a lot of its money to ramp up its defense spending, including Australia. (46.47)

Lets examine the operating system that we think we are using. David is often criticised by those who think we are operating on the best system we have got. (50.55)

We are operating on a horrible system that was created on a debt based illusion. (51.05)

What if we didn’t have a model that says lets prostitute our time and our efforts for the thing that makes us miserable so one day we can escape that misery. (52.00)

Most of the time we do not need a central reserve based currency to make the model of co-operation and flow work. (53.42)

Capitalism works, but not extortion base, not productivity decoupled capitalism (54.48)

Anti-thermodynamic – created more value than it consumed (56.36)

Using the Gold Coast Commonwealth Games as an example (57.00)

What does a system level process look like? A system level process doesn’t start with stadiums (57.18)

Are we productivity linked or are we trapped in an artifact based model? (59.03)

An artifact based model, as we know from large scale events, loses money. (59.08)

We think the system is so big that we can’t effect change. But this is not true. (1:00:33)

100% of this system is built on the discretionary dollar in your wallet. (1:00:44)

If we had an audit of the latent capacity of the Gold Coast region you would be surprised at how little of the $3B put aside for the Commonwealth Games, we would need to spend. (1:03:43)

If we have just in time credit solutions for things that are productive (creating a local credit based banking system) (1:07:10)

Futures markets are productivity linked markets (1:07:51)

Don’t let capital be parked in things that you don’t care about, or you don’t see adding value, and use your capital to increase the liquidity and the currency flows in the things you do value. (1:12:00)

You are buying the forward value of the thing you are using, you are not buying the thing (1:12:21)