Hi, can you hear me? I can't hear you. I can hear you. Yeah. Okay. Good. How are you? I'm not not the best. Not the best. Why? I have all good. No, but I did not know why, but I started having really bad stomach hahe since like last night at nine. And I just start like, you know, I do not, I do not know why when my stomach hurt a lot. And I thought this morning I would I would feel better but no, when I when I woke up I couldn't of move a little bit. So I told my moliterally saw my dad to get me the laptop on my bed and stuff. I couldn't move a little bit bit. Okay, fair enough. Fair enough. That was that is insane. But Yeah, we have to get over this. Okay, so last time we started speaking about supply side policies, right? Yeah. Can you remind me what a supply side policy was like? We'll give me some examples. Supply side policy. Hokay is that surprilies I this. Ich recool? Hey, but but can you hear me properly though? Because right now I can hear you. Perfect. Yeah. So Oh, Yeah, that's good. Is it like. Makes like the capmakes, like it makes him more productive. They're like few different supply site policies and so makes one. More productive. Makes the makes the. Products, thanks. I think there's an issue right here because I can after what I say, I can hear everything like, you know, it's like it's it's like it's like because like I can hear what I say after. Okay, you're saying we'll like it. You can't hear me too. Sorry, no. So you're saying you hear yourself speak, so you're hearing yourself back? Yeah and I suppose exit the room and come back in. Okay, let's try that. Yeah I'm not I'm not hearing my voice now. Good. We was talking about supply side policies, right? Just talking about like productive productivity. Can you elaborate on that a little bit really, if possible? Like for example. Increase the productivity and the economic efficiency of the economy and. It also like supply side policy also includes like reducing unemployment and control the inflation rates to the to 2.1% and make sight basically making people to invest in some made sand. Wait, it's not so much about inflation, but it's about productivity. And just if supply side readthe supply side, so it's not through, let's say you nine, consuming more bumore stuff, which is more than demand side. If we think of monetary policy and fiscal policy, supply side is and we make the economy more productive, can we increase also the fastest of production? So it's not just making the factors of production more productive, but it's also increasing the factors of production rate. Well, think of it almost like a ppf, right? A production possibility frontier, right? Brewery that we probably have done. We've brought to the start of a level start of gcse as well, right? You know what a ppf is, right? So a ppf think of an economy ability on sale. Yeah, it just makes cars, right? And books. Okay. So think of it, think of as of a supply policy isn't it's it's it's something that shifts a ppf out, right? More that's I think that's a good way of thinking about it, right? So not just making you and I more productive for better education, but actually think of it in terms of I want to say like more well, I guess it is like pumping out more graduates, pumping out more infrastructure. I think that's a good example actually, the infrastructure where it's not just better quality stuff, it's more infrastructure, right? So there's no road now there's a road. There's no high speed rail in China. Now there's high speed rail in China, right? And that's I think that's one of the good ways of putting it right. And we said raring yesterday that there are two types of supply side policy ring. There's interventions, Oh, sorry, interventionist. And remember things to mention it and I remember the next it's a maryeah Yeah market something here Yeah Yeah Yeah market based economy. Well good morning you're free market right? Free markets supply side policy or market base I mean sorry this scientific names right? But more or less it's to do with what interventionist intervene intervene is more like an interventionist poit says it's in the name or or just spending money. Think of it as a supply side policy that's very intense, okay? In spending money, okay? So interventionist supply. So policy is spending money, okay? So think of it as building infrastructure, okay? Think of it as. Building a school, hiring more teachers, right? These are the things that we should think about, right? When we think of intervenvergensupply type policies, roads, trains, everything. Again, does that make sense? Or I just I just want to kind castick with the name of like intervention, intervene, money, money policy, interventionist, free market, market side policy. Yeah, Yeah, Yeah. So the interventionist is that spending the dollars, right? Spending the hard cash, right? Then we have the free market, okay, the free market supply side policies are a bit different. We meant we we said it was some stuff to do with incentives, right? So we talked about labor, our sorry trade uniseother day and private. Do you remember any other examples of free market supply side policies? I think. Let's give it a thing. So one is trade unions, right? Making trade union power less important, for example. Another one would be, I'm going to give you another clue. Another one is decreasing the minimum wage. Increasing why is it decreasing the minimum wage? So okay, these are different examples, right? That I will I don't know if we can say that more loosely connected okay, but for example, interventionists we said is spending dollars, right? Spending hard der cash more hospitals, more schools and more trains, right? Free market supply side policies are all about all about incentives, increasing incentives. And making the economy run more efficiently. Primore increasing incentive, making the economy run more efficiently. Yeah. Okay. So if we think of, for example. Trade unions again, trade unions organize strikes, okay? They organize also higher wages. I mean, trade unions are there to protect the worker, Rory. And this is a good thing sometimes, but sometimes it's a bad thing. All these strikes can cause issues. Again, the min wage causes unemployment, okay. It's not. I don't know if you've discussed a lot about the minimum wage in school, Roy. No, but what is the minimum wage? What do you know about it? Like the minimum wage is literally a minimum wage, like the lowest wages can get in the country. Okay. But but what is it like? You can you go beyond that a little bit if possible? Who sets the minimum wage? The government sets the minimum wage now. Okay. And what's the purpose of setting the minimum wage? To. To make sure that all the workers rights are guaranteed and protecand stuff like that. Okay, you earn more money, you earsuch an amount of money, you wouldn't be like you know you wouldn't be like just the company saying I go, you earn this much and you just earn this month. Now the government would give you the you know the standard, right? So it's when it is to you kind of said you kind of alluded to and I agree to just protect the worker, right? I mean protect if if there's no minimum wage or in you go offered a certain wage of new acceptors, that means you're inherently accepting that that's your worth rate, whether it's very high, very look. So I don't I don't think it's like for me, the minimum wage look, it's it's important. At the same time, sometimes it can cause a bit of an issue. Sometimes it may be higher Rory, than let's say the wage that you are willing to do the work at. And that's a good thing in the bad thing at the same time, ruby, right. Why do you think this is a good thing and a bad thing? The. Good thing is people will live like better, because I you know miniwamore equal. But the bad thing is a lot of people lose is the motivation of working, because you can get this much minimum wage anyways now and a lot. So the living standards thing, I mean, look, the minimum wage in the uk is not a lot. In in Europe it's not very high. I mean, some countries a bit a bit higher, right? But I mean, in the uk is about nine, ten pounds now it's not a lot. So not I don't think it's like. I don't think it's like overlike inflated. It's not too high, but it's that maybe some workers are willing to earseven pounds, eight pounds an hour rather than nine pounds. Maybe the employer is not as willing to offer these people hours of willing to employ as many people at nine pounds an hour. Maybe it's seven yes and nine no. So basically the main wait is there to kind of ensure a decent living standard, which is not that high. It's a very basic living standard. However, on the other side, Rory, we have the idea of unemployment rate. We can call this something like or think of this as a bit of a like Whowell. We call this real wage unemployment again. Again, and real weight unemployment is caused by the wage being too high, in this case, to the minimum wage. So you're unemployed so that there is unemployment as a whole in the economy. Biggest wages are too high, in this case, legally binding minimum wages, right? You can't pay someone below the minimum wage legally. Okay. So what do you think about the minimum wage as a whole be beyond supply side policies? What's your opinion on the minimum wage rate and it's role lling in our society, in our economy? Sir. How basically we're able to like reduce like poverty I think okay, improve I've already said improving liver standard. Okay. Yeah. And I do not know like said I said reduced in quality as well. Maybe not the case, but it can encourage like you know higher like something like put yourself like consumer spenings. Okay. Yeah, I mean I yes, it's definitely like this kind of equity kind of living standards point at your but maybe increases consumption but it's like it's we can think of, okay, people that are minimum wage, they make money, they make a little bit more, they will spend all of it. So the marginal propensity to coner is very high. So this is good for consumption. I think it's not so simple as just consumption goes up. It depends on how the money is spent. And that I agree that those omminimum wage are more likely to have a higher npc. I don't know if you've talked about nc at school, but the have to go into too much. But I agree that this is good for living standards, maybe for consumption as well. That's kind of the main point. Okay, fine. So another one. So decreasing trade union power. So weakening trade unions as a whole is actually a good thing for the economy overall, really. Okay. Decreasing the minimum wage or making sure the minimum wage is not too high as something that one would consider as a free market supply side policy. Okay. We then mentioned bureaucracy red tape yesterday, right, Rory? Yeah yesterday yesterday well Friday we mentioned bureaucracy. Or read a tape, same thing. Well, some concept. What do you understand? This bureaucracy? An. Very good question. What's bureaucracy? You've heard of the word before. No Okay red tape. So I haven't had these. Now, wait. Let me share my screen for seconds, okay, changing. Suppose. So I'm going to give you a little clue. I want to give it away, but I just want you to kind of think about it a tiny bit again. Can you see my screen? Yeah, I'm doing now. Okay. So this is, I mean, I pluthis out offline, okay. But bureaucracy well, Bureau is like means office, okay. He's probably heard the Bureau of something or burea's even like desk in French. Just kind of like from a Latin origins, right? And here you got a here on the left hand side but bureaucracy means a complex structure with multiple layers and procedures. Okay. So bureaucracy I'll probably imagine even has like Roman or backing where basically means government a lot of people, a lot of layers. Okay, does that make sense? Yeah, a lot of layers are working a very complicated system to prefer right, right, right. Okay. Hence knowing that bureaucracy and government bureaucracy right, coming as a lot of layers out of procedures, a lot of stamps, right, a lot of permits you've had to obtain to do something, right? What can we do about that to make it these this kind of bureaucracy more efficient and make government more efficient? What why is this a supply side policy like bureaucracy? What do I want? What am I referring to here? It's referring to. Like interventionis, I guess no. So I don't want to give it away, but the bureaucracy, right? I you yourself said this, what I say when government is too big, too much, too many procedures, right? Right right. Yeah can a lot of bureaucracy affect the economy, Rory? I think it can it can reduce like it can decrease the efficiency. Yeah, okay. And can you give me some examples? Maybe we'll take a quick example. For example, like you're getting something done, but you go to like the office and they give you like lots of paperwork. You do. You only have to like fill, you have to fill in all things. And that's like a waste of times in some extent just to be bureaubureaucrative very good. Yeah, exactly. You want to sell a business and it takes three months to open in the business, right? You might not want to open the business by at the end of the process, right? So things might change already even but fefantastic, exactly, exactly. Satthat, that's the issue, right? If you have to get permits to to do all kinds of stuff, licenses also, you have to do a lot of paperwork even to employ a person, pay a person. This is not good for the economy. This is not good for the economy. So free market supply side policy would basically be all about reducing bureaucracy, maybe making it, doing it through an app, facilitating a lot of this adamant work through applications or online applications or literally there's no there's less Adam in in the or less bureaucracy or somehow the process takes less time. Maybe they try to speed it up. There's also a question of delays, there being a lot of delays, right? So okay. And redtape is the same. Red tape is kind of within the same thing. That's I don't know if you understand what I mean by retape. Have you heard of the top? Yeah, yes. Your red tape is the way I see it. I don't know if it's exactly from this, but he's ethink of a finishing line, right? The race got like red tip up. We've got like some kind of, you know, people crossed in the crossed the tape, right? The finishing line, right? You've seen this before like a marathon, right? It's not exactly that. The red tape is the idea that, okay, this is terrible kind of images for what I'm trying to say, but. This is a really good one, right? Okay, cool. This is kind of what I'm referring to. It's red tape is basically shutting off the system. Okay? So the the idea that I would kind of want to portray is it's shutting off certain things that we want, but it's just it's protecting things like certain the establishment through this red table. That makes no sense. Basically, you can't open up up a business. So you want the business, you want to do business, but it's red tapes kind of closing it off. It's closing off the the gates, opening your business in here. So it's holding like this businessman back, right? The same kind of concept, right? Bureaucracy has deeper meaning as it has a meaning in itself, right? It's not necessarily bad, but it is a negative kind of word, okay? But hasn't had some negative connotations. Red tabout say it's only negative, okay? And it's purely used to describe this kind of situation, okay? Okay. Another free market supply side policy. Brewer is actually a decreased tax. Okay, Yeah, that's actually fiscal policy, but it's also free market supply side policy. So it's actually that confuses a lot of students to care roin. So but it is think of taxas fical policy, principally it's fiscal policy, right? But it is a type of free ing market supply. So policy rate because we mentioned it's about incentives ring here you can see this ring. So if we decrease tax, let's say income tax, people are incentivised to work more. So in theory about theory and practice, decreasing tax, it's an instance of free market supply side policy. So you've got decreasing tax, decreasing trading in power, decreasing the minimum wage, theup like retibubureaucracy, how we can streamline processes and make things easier. A lot of countries are measured how efficient they are, how much bureaucracy they have. Rory, this is measured by the number of days it takes to open up a business on average. This is a good measure of how much bureaucracy a country has, okay? How long do you think it takes to up open up a business in the uk? I have no idea. But how much do you think how long? Like I don't know. Like so seven, eight months. It's a long time. It's a long time. 70 months. I mean, I actually don't know if I would say depends, but from if we just if it's just to get a business license, I would say in the uk, two, three weeks, let me check, maybe a month or two, you get business. Yeah batwenty 24 hours to 48 hours that depends on if you posted eight to ten days. I mean, in theory, I think the year would pride itself as a country is quite efficient at least than this because it's this statistics looked at a little bit but in person takes a bit long as processes, some of them more human based in it rely on Postal Service, but quite shoras with days, right? It's pretty good. In some countries it's weeks or months and that's too much. Okay. So this is a statistic that's looked like quite a lot fine. Another one, another type of free market supply site policy. Is a labor market making the labor our market more flexible? Okay. So I don't know if you've heard when you get fires in the western country, your employer has to pay, okay? The success and protocol, they must pay you for the number of years you've worked at the company. So typically, at least in Spain, it's about every year that you've worked at the company, right? If you've been five on no like legitimate grounds, like it's just we have to fight, you've been a good employee. They have to pay approximately one month salary for every year you've worked at the company. Okay. Yeah Yeah if you've worked at the company for ten years, you basically get to pay ten months salary at the end when you get fied, okay? And then you can obviously claim unemployment benefits et cec okay, the employer must pay ten months in Spain. In the uk, it depends on number of days per year of work. And for the company, it depends on on the country. But in the uk, like say it's pretty similar, okay, I imagine it's very similar about a month, maybe it's a bit less, I would imagine maybe 20 days of salary per year. But you've been at the company, okay. Why do you think these policies exist in western Europe? 嗯。Because it's more. About putting yourself in the position of someone that's being fired again. Yeah, okay. So why do you think it makes sense to offer people to get fired or make the company pay people that are fired according to the number of years they've worked to the company? What's the purpose of that? This kind of policy to make sure that the social, to make sure the equality reduce the inequality, right? Sure. But maybe more specific. Yes, it's about equality. We can think of the employer as very rich and the employee is very poor. Like is that an extreme right? I agree. Like this is idea balancing, you know, the it's kind of asymmetry and power and money, I agree. But people have in the position of someone that's getting fired, okay? What's characteristic of someone that might be facing the situation? Usually the. Lower income people, right? Well, it depends. Okay fine okay. And. Sorry, I don't know what you're saying now, like what else you're saying. Why why should we force the employer to pay the employee if they fire the employee? Think of someone who's working as a company for a long time now, gets fired and he's 5055 years old, doesn't have a lot savings. Think of this situation, 55 year old man been working at the company for 20 years. Yeah it's it's. Surely it's not good because I've been fired at the, been working in company for that long. It's not that great, right? But think of the situation of the worker. He's been working at a factory for 20 years, 25 years. Look, it's been able to do okay, but like it doesn't have a lot of savings, and he's close to the age of retirement, but not quite there yet. Gogets fifrom, one day to the next to know his fault, to get fied, right? Maybe the Comey's are doing well, but why should we make the emplowhy in western Europe? Do the employment laws force the employer to pay the employee quite a lot of money? Because the western Europe, usually they protect the human rights the most. So that's why they do it. And Yeah but this goes this goes beyond the human rights. Think of it as a thing of this person, what's characteristic of the situation. So bit older, has been in work for 25 years with the same company. Why does it make sense to make the employer pay this employee quite a good amount of money? It's not just charity, like why why does it make sense as well? Almost like also economic sense kind of it just kind of goes beyond just helping someone that's poor, right? It's not it's not this exactly right. Yeah, what is it? I think. The alternative is look, I can find you, I don't pay tomorrow, you're not working at the company or I don't pay you a single euro or pound more right? That's the alternative, right? Yeah. Are we talking about western Europe? Western Europe or like any in there's doof countries that have this I mean it's not just western Europe. Again, most countries will have some kind of law here even in the us where the labor our market is we can just call very flexible, right? Even the us Yeah so you're half Canadian, right? So right I mean in Canada I'm pretty sure I'm pretty sure they have this as well. In Canada, Australia mean also I don't know about China, but I imagine China has this, I'm pretty sure has some kind of these are basically, these are just part like employment law and the designed to protect the worker, right? But can you add a look? Can you put yourself in the shoes roaring of this 55 year old man who lost his job after 20 years with the same company? Why should we make the employer pay this employee. Compensate like I do not know why, but like you have it. Like what's the idea? It's not just being poor or being rich. Like what's a bit more, what's the idea behind this, Rory? To make people more, more, I don't know, maybe more motivation to find another job, all to reduce the unemployment rate. No, actually it doesn't reduce the unemployment rate, but it gives you like enough consumption power. Like it gives you people the consumer spending will be increasing because of each person got more money. I don't think it's like thing someabout, like boosting the economy, but it is, you kind of said it a little bit, like give people a more consumer power, purchasing power. You say like it is to protect a worker in a bad situation. Like this guy y's 55 years old, okay? Roory, he will struggle to find another job. Okay? It's known. Be immediate. If we force the employer to pay the man, the employee, let's say, one month's wages per year of a work experience at the company, that's 25 months, at least two years of salary. If you get made redundant, again, this seems like a lot. Suddenly the companies forced to pay two years salary, yes. But it is. It's a way of protecting this vulnerable workokay. It's a question of equality, yes, but it's more about when people are made redundant, they can be very vulnerable. Okay, Rory, Yeah from one day to next, they have no income. Maybe they can claim unemployment benefits for a period of time, but this is not forever, okay? So from a lot of people, like ideologically, it makes sense for the employer to have to pay the employee. It's kind of the alternative is employees are used like machines, in and come, in and out. No payment, no friction. It's very quick, it's very flexible. This vision is the employees on all like machines isn't it's you if you want to fire a worker, you have to pay them a little bit right beyond what you pay them by month, right? So it's basically making the living market a bit less flexible on purpose, right? What do you think is best for the economy? Ic case. So we've mentioned this idea of protecting the work rate. This 55 year old man will be unemployed with for three years and might never find a good job again. And we'll find jobs on much lower wage rates. So this these two years salaries are quite good again. You know, if he gets paid only two years salary at the end of the are made redundant, it's going to help him a lot. So beyond this kind of more like I agree, more equity kind of consideration, Buris consideration, do you think not having any kind of employment loss or even minimum wage is good for the economy? So for example, or if you're willing to work at five pounds an hour, you should be able to work at five pounds an hour legally. And the employer, if you're badly, can fire you on the spot and give you no compensation. Okay? This is the alternative world, the grworry ory, completely flexible. Everything is flexible. No minimum wage, and you come in and out can go fight on the spot, even if you've been working, coming for 30 years, you get no compensation. Okay. What do you think about this world in terms of efficiency, in terms of fairness? But in terms of think of it in terms of the economy and GDP, we'll do have any opinions. Employment. It increases obviously it decreases. It would decrease the unemployment and increase the GDP. Like okay. Yeah. Can you explain that a little bit? Yeah, I think I could I think. Reducing unemployment is because like people are motivated to find a job and there's like more money so you people can learn and do training to get another job. So it's easier. And the second reason will probably be because obviously the GDP will increase because people have more money in hand, so they will spend more money. Like that's just normal. That's just what people were doing there. So I agree. Like if there's no minimum well, if there's no. You'll talk about incentives to find work at the start. Okay. In the case of, for example, this worker that gets paid at the end, right, money guests meet redundant after 25 years service in a company. If we then think again, we do not offer this is going, this is another part of what we can call like employment law, employment kind of stuff, which we are to mention, but it's kind of related. Let's say this person has no unemployment benefits. Again, there's no one about the benefits in the country at all looking Yeah this person will have a massive urge to find work, right? So I agree they making it more flexible and not giving any unemployment benefits, for example, can be can increase the incentive to find work. Yeah Yeah if the minimum wage is removed, if we do not, we allow hiring and firing of workers to be very easy. And look at my opinion of roaring. If you make things easy, the economy will do better again. So if it's easy to hire heroaring than to fire you if you're better or if I have no need for you anymore, this is good for the economy rate. I believe if people, if employers worry a lot about having to fire you eventually, and that will be very cost stly in very long process, that can stop you even being hired in the first place. Right? Does that make sense? Made sense. I wouldn't have want to hiyou because it's too costly to fight you in case you're bad or in case the economy does worse, right? Yes. Do you see that? I do Yeah employers want flexibility, right? And if there's no flexibility and it's a very rigid and expensive system, I'm not gonna to hire workers, I'm not gonna to take that risk. And our capalist society is all about taking risk, right? Our economy is based on risk taking again. Yeah, that's that's so okay, cool. So there's a few things here to put free market supply side policies, right? Then we mentioned the intervention of supply side policies like building roads, so making transportation bit faster, more efficient, lower cost to export high speed rail, right? Think of airports, bridges, dams, dam, like for electricity, for example, as well. Okay, cool. So we talked a little bit about supply style policies. We talked about fiscal policy prior as well. We haven't talked so much lately about monitor or at all about monetary policy, right? It was monetary policy. Modestry policy is. Okay. Thank monetary policy is. Well, essentially, monetary policy is affecting like inflation and price, basically how stable the price is. Up prices. Yeah how stbel it is. Yeah. Okay, can you can you elaborate on that a little bit? So stable is it what do you mean by stable? So what and what prices are we referring to? Like price price stability, you know? Okay, siinflation Yeah. To monetary policies, is inflation. It is inflation and it's controlled its whole central bank. Basically every country has a central bank. How they control the inflation rate. Okay. So okay. So monetary policy is like designed to combat inflation. Yeah, essentially okay. And what is it about monetary policy that can potentially hopefully control inflation? Governinterventionist. What do you mean by that? Actually wait, let me say governright basically governintervention okay, but but what is it about government intervention to my question is more, you're saying monetary policy basically its main function is to combat inflation and I agree with that. Okay, I agree with you there, but how does it do this? Basically, that's my my question. So this question, how it is. So here's saying it goes what it tries to solve, but you're not really mentioning what monarchtary policy is, okay. Actually, Yeah, I don't know the search on bats. Can you give me any more detail with regards to monetary policy? Any any key buzzwords, anything you've heard of like central bank mentioned central bank, that's the one thing. Okay, so what does a central banker do? For example? Rory, central bank, essentially central bank control the price and print to money. It will print a lot of money, print money and control price. How does it control the prices? It will control the price too because. I don't know, because printing money obviously a fact site, how how much money printing money essentially decides like what's the. If there's a lot of money beam printer, that means like there are lots of. The price will be more expensive, okay. And what do we call that? Prices being more expensive, okay? So if we print a lot therebe a lot of inflation, okay? So I agree that when you mention money supply, it's basically one of the functions. So the central bank decides money supply or decicontrols money supply, I agree. The money supply being how much money there is in the economy, okay? They print more, there's more supply, right? Yeah. What's the and what's the other things? Control prices, which has got to do with how much money is printers or not printed. But there's something else that the what the central bank can do that's very important to control prices. Yeah. What is the central bank most famous? What is the central bank set? The central bank is most famous for they set the the value of the money, you know what said amount, the amount of money in circulation which indirechas or directly has an impact, but they also control the interest rate rate. Yeah, right. You've heard of this, right? Yeah, okay. What is it? What is it is? Forget about the central bank. What is your idea of an interest rate? What does interest rate mean? It doesn't have to be the central bank interest rate. It means like how much money t you get from saving your money into the bank? Like how much money do you, because they give you like extra money. That's interest rates. Like you know more the money that bank essentially the bank gives you. Basically I leave money in might in my barfleys or hsc account. Over time it's going to increase, right? They pay me some little bit of interest rate. Yeah Yeah compensation for saving with a bank rent. Okay. Has it got anything to do with lending as well? We're borrowing with landing. Yeah because you borrow money and you have to pay them more the because of the interest rate so you have to give them back money more exactly. So if you deposit your money at hspc, Hong Kong or wherever a million, you get paid 2% on the million. Let's say for example, no, no, you don't always get paid by the banis and depends on the type of account. It's a regular account. Most banks or I would say don't pay you any interest anywhere around the world if it's a maybe savings account where it's a bit hard to save your money. I was more of a commitment or maybe, you know, at the end of the day, it's a lot of people can expect a lot of to make a lot of money on their savings. Look, people typically have savings and different pots, different things, right? Invest in their shares and real estate and a lot of things, and they have some money that's easy they can take out at any moment in time. And in those accounts, typically there's no interest, although sometimes you know you can find a way to certain savings accounts where you can kind of use ser to pay regular things with your credit card, for example, right? But you get paid a tiny bit of interest. Let's say it's 2% to get 1%, then you mentioned on borrowing, okay, you must pay interest if you borrow, for example, to buy a house, a mortgage ring. Yep, if the interest rate on deposits, deposit means you give the bank the money, right? You leave the money with your bank. King, that's a deposit, Yeah. But wrong is when you take the money, not your own money, but actually more money than what you have, okay? King, so if the interest rate on depoits is 2%, what do you think is likely going to be the interest rate on mortgages from the same bank, more than 2% or less than 2%? I will say less than 2%. Why? Why is borrowing cheaper? Because. I do not actually, I do not know the reason behind it though. Think of it, how does a bank make money, Rory? By. Boring out money? No, by lentting out the money. Okay. Yeah. So give me an interest rate, any interest rate to say 2%, 2% again. Yeah. Bank lends are 2% right? How about how does it make money? It needs to find the money first right? Yeah, okay. How does it find the money? How does it get the money to then lend? How does it get the money the bank does? It's not born with money, right? The business, it's not born with the money. How does it obtain the money? By boring out them, by landing out the money. Yes, that's how it makes money. That's its source of revenue, okay? But how does it find the money in the first place to then be able to lend? Take a step back, right? Yeah right. How does it get the money basically so then able to start lending out. Honestly, get the money in first place. We actually already mentioned it. I assume the government give that money. No, I no, you're giving money to the bank all the time, Lori, your parents, I'm sure as well. So do I tax? No, you just deposit your money at the bank rate. Oh Yeah Yeah that's Oh Yeah because people save money that so that you can use the people the money which Yeah it's an interesting business model right the the bank. Borrows at 1% through deposits. Look, it's not always just deposits, but look vimake someone pays me and I'd put my money into my bank. Am I going to pay 1%? I'm not going to pay anything on indimay. I start racking up the money in my account. They have a million, 2 million, 3 million, 4 million, 5 million. The bank can use this to then lend again. You can take this money and lend it out again. The and requirements again, it's if not, it can be very dangerous games. They take all the money, just lend all of it. But basically they can do this. So it makes the difference, right? What do you notice about the two and the one it lends the two but borrows it at one, it makes the difference. It makes the 1% difference. Two minus one is one, right, Rory? So it makes the difference. The spread, we call it the spread, that's how a bank makes money. The difference between the interest rate at which they lend and the interest rate at which they borrowed. It's that's it. Okay. Yeah, banks are middlemanand king. Banks are agents. They didn't. They basically intermediate money. Okay? They take money, okay? Let's just look at the whole finance industry is all the same, again, taking money, Rory, from those that don't need it immediately or are not, let's say, putting the money to work in the most productive uses and lending it to those that really need it, entrepreneurs, for example. Okay? So entrepreneurs are cash poor, but have really good ideas to capthat needs of money. Let's say rich, like real estate billionaires that make sure they have a lot of business interestbut. Let's say their money is somethat's very wealthy, but they're interested in the bank, is kind of in shared Res. Whoa, they don't have that much that's, say, real business interest. There's definitely a thesis there, Rory, that makes sense for the rich person with a lot of money lying around to lend to the entrepreneur, right? Yeah, it makes sense, right? Yeah, makes sense. So the banks basically funnels this money from those that have a lot of money, don't maybe necessarily want it or need it today, to those that have really good ideas that need the money to execute these ideas again, that's fine ance. It's this middle step, this intermediary, right? So think of, let's say. Borrowers. Okay, so you've got the bank in the middle between borrowers and savers. Okay, so the saver gives money to the bank, deposit money, the bank rate and the borrower showing the bank returns an interest rate ticket or no interest, but pays them a little bit again, Yeah, say 1% again. The bank then lends to the borrower at 2%. And receives flows every year again or payment every month for a mortgage rate, gets payback every month plus the interest rate. So it's clearly an intermediary agent business, rate middleman business, right? Rory? Yeah, they're in the middle as you can you can see in the diagram, right? The what you mean at that top by diagram can you see my screen? What I'm drawing Yeah Yeah the drawing Yeah 2% borrower savers I can say the see that then you can see this when I'm put in a rectangle Yeah it's Yeah okay, okay. So you can see it's a middleman the bank is a middleman in the middle between savers and borrowers, right? So this illustrates what an interest rate is. Monetary policy in very simple terms, sets the reference for this interest rate in an economy. And this can go up and down. Okay, so next time we'll look at Rothe, the role of the interest rate. What is the interest rate affecting the economy? Before we finish, let me just pose you that question real quick, Rory. How does the interest rate affect agdemand? How does the interest rate affects the aggregate demand? If the interest rate is higher, people tend to save money in the bank. So people tend not to have higher consumer spending. But when it comes to like a lower interest rates, it would encourage who to spend more money because they wouldn't get a lot of top back money back. Even they sain the bank. So they they're rather invested spend the money on actual things. You're right about incentives to to save or to spend to borrow, okay? The interest rate is low. It's cheaper to borrow, right? So super, it's a borrowing. Businesses invest more. Consumers are borrowing and unconsumsume. Okay? I don't think people are consuming based on the interest rate all the time, but think of everyone as a whole in a big country, right? Some, especially businesses, will invest more, is able to borrow cheaper, right? Consumers do they care about like in terms of consumption decisions? I think a little bit I mean, your credit card interest rate will go down if the interest rate goes down. But here, it's a bit like it's always very obvious, although I don't know if the magnitude is that high, if the interest rate changes just by a little bit. But definitely with mortgages is we can argue if that's like housing is its consumption, but if the interest rate goes down, it's cheaper to buy a house, right? Yeah. So the interest rate has a massive effect on agdemand again. So monetary policy dictates inflation and also agridemand for sure has a big impact on birth. Okay, okay, okay. Oh, do you have any questions? Rory? No, I understand. Okay, good to this is the basis of macro. Okay? Really important to understand supply side policies, fiscal policy and monetary policy. Macro is extremely easy. It's the macro objectives and how these policies help obtain those macro objectives. Okay? Same thing all the time, same thing, same thing. Okay, okay, okay, cool. Okay. So see you on Friday, Rory. We can maybe roif want to see, I can maybe think of some case studies music, okay, okay, okay. Well, thanks a lot already for day. Bye. Have a good Sunday it. Thanks. Bye.