WEBVTT - Ray Dalio on the Five Forces That Make This a Historical Moment 0:00:02.720 --> 0:00:17.720 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.040 --> 0:00:21.520 Hello and welcome to another episode of the Odd Lots podcast. 0:00:21.600 --> 0:00:23.880 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:24.200 --> 0:00:27.360 So Tracy, since we've been doing the podcast for ten years, 0:00:27.480 --> 0:00:31.120 you know, trying to talk to some of the big thinkers, right, 0:00:31.200 --> 0:00:33.239 some of the people who have a little bit of 0:00:33.240 --> 0:00:36.279 a perspective on how the world's changed. We say, how 0:00:36.280 --> 0:00:38.400 the world's changed in ten years, but it's a little 0:00:38.400 --> 0:00:41.080 bit arbitrary how the world's changed and what the next 0:00:41.120 --> 0:00:43.600 ten years or fifty years are going to be. 0:00:43.800 --> 0:00:46.640 Like big thinkers, thinking big thoughts. 0:00:46.360 --> 0:00:48.760 Zooming out a little bit. And I think everyone sort 0:00:48.760 --> 0:00:50.640 of is these days. I mean, it happens to be 0:00:50.800 --> 0:00:53.960 that we're sort of celebrating our anniversary or birthday or 0:00:54.040 --> 0:00:57.960 whatever it is. But I think it's just in the air, 0:00:58.080 --> 0:01:01.000 you know, like everyone. I guess people are always trying 0:01:01.000 --> 0:01:02.600 to think big. But there's something in the air right 0:01:02.600 --> 0:01:06.120 now where everyone is trying to grapple with pretty evident 0:01:06.600 --> 0:01:07.880 change that is afoot. 0:01:08.000 --> 0:01:12.640 Well, here's the thing. The big story in markets is AI, sure, right, 0:01:12.680 --> 0:01:14.679 and whether or not it's in a bubble, and AI 0:01:15.000 --> 0:01:18.600 is a story that is not just about finance and markets. 0:01:18.680 --> 0:01:21.600 Is a story that touches multiple things. So you have 0:01:21.959 --> 0:01:25.920 it's a cultural, social, and political story. So you have 0:01:26.000 --> 0:01:29.120 people talking literally about how AI is going to change 0:01:29.120 --> 0:01:31.480 the world. It's going to change art, it's going to 0:01:31.520 --> 0:01:36.399 change music, movies, people as well. Right, so some people 0:01:36.440 --> 0:01:38.160 are going to lose their jobs, some people are going 0:01:38.200 --> 0:01:41.800 to get rich. People talk about it in this existential way, 0:01:42.200 --> 0:01:45.880 both for countries and companies. To your point, and if 0:01:45.880 --> 0:01:48.120 you don't win in the AI race, then you are 0:01:48.200 --> 0:01:50.120 literally dead right. 0:01:50.120 --> 0:01:52.560 Part of the permanent underclass or whatever people say. And 0:01:52.560 --> 0:01:55.320 then I think beyond AI, even if we didn't have 0:01:55.360 --> 0:01:58.680 this boom that really started in late twenty twenty two, 0:01:58.960 --> 0:02:01.080 even if that weren't going on, there'd be all these 0:02:01.120 --> 0:02:04.880 other big questions related to technological competition, because we already 0:02:04.880 --> 0:02:06.480 talked about that particularly. 0:02:06.080 --> 0:02:07.000 Yeah we were Shauna. 0:02:07.320 --> 0:02:10.000 There would be all the concerns about the size of 0:02:10.040 --> 0:02:13.080 the debt. There'd be all the concerns about demographics and 0:02:13.120 --> 0:02:16.519 so forth, and the perhaps strain that changes in demographics 0:02:16.560 --> 0:02:18.959 are going to put on the existing labor force. So yes, 0:02:19.080 --> 0:02:21.240 you have all of these things going on, big picture 0:02:21.320 --> 0:02:24.120 questions then layer into the AI question. And I just 0:02:24.160 --> 0:02:26.560 feel like people right now is we all feel it. 0:02:26.600 --> 0:02:30.240 We're consumed by these like sort of forward uncertainty questions 0:02:30.240 --> 0:02:32.720 about the integrity of elections and democracy and all of 0:02:32.760 --> 0:02:36.160 these things. Is sort of we're at this clearing of 0:02:36.160 --> 0:02:37.440 the woods where we don't know which. 0:02:37.360 --> 0:02:38.200 Direction we're going to go. 0:02:38.440 --> 0:02:42.160 You know who's very good at synthesizing major forces going 0:02:42.160 --> 0:02:42.880 on in the world. 0:02:43.560 --> 0:02:47.040 Well, we do, indeed have the perfect guest, someone who 0:02:47.120 --> 0:02:50.200 many people turn to and who obviously is an incredible 0:02:50.240 --> 0:02:52.320 track record of talking about things both in the big 0:02:52.360 --> 0:02:55.720 picture and shorter cycles. We are going to be speaking 0:02:55.760 --> 0:02:58.600 with Ray Dalio, the founder of Bridgewater. He ran it 0:02:58.639 --> 0:03:01.160 for fifty years. That's kind of unbelievable. 0:03:01.320 --> 0:03:03.320 You know, we've seen many market cycles. 0:03:03.560 --> 0:03:06.880 Proud of ten years of doing a podcast, fifty years 0:03:06.919 --> 0:03:10.560 of running what became the world's biggest hedge fund is 0:03:10.560 --> 0:03:15.239 an orders of magnitude more impressive accomplishment. So Ray, thrilled 0:03:15.280 --> 0:03:18.240 that you're in here in studio with us, Thrilled that 0:03:18.280 --> 0:03:20.200 you're taking the time to chat with us once again, 0:03:20.440 --> 0:03:22.280 appreciate you coming back on odd lots. 0:03:22.680 --> 0:03:28.119 Thank you, Yeah, congratulations on ten years ago starting this thing. 0:03:28.320 --> 0:03:31.400 I think of how the world has changed in those 0:03:31.600 --> 0:03:36.160 ten years. And you want to talk macro. Listen, I 0:03:36.200 --> 0:03:36.920 think you're. 0:03:36.840 --> 0:03:38.560 You've heard, you've heard a thing or two about it. 0:03:38.640 --> 0:03:45.240 Yeah, I am Global mac grobal mac and AI is 0:03:45.480 --> 0:03:48.680 just a part of that. It's a small thing in 0:03:48.800 --> 0:03:51.200 relationship to the whole global Macro. 0:03:51.720 --> 0:03:53.560 I know we'll get into all this thing, but again, 0:03:53.640 --> 0:03:55.800 like it feels like something we're patting ourselves on the 0:03:55.800 --> 0:03:59.080 back of ten years podcast, fifty years of running a 0:03:59.080 --> 0:04:02.040 hedge fund. Like I say, it doesn't even seem real 0:04:02.120 --> 0:04:04.480 that that could even be possible. I mean, I know 0:04:04.520 --> 0:04:07.280 it sounds crazy, but yeah, what a joy. 0:04:07.560 --> 0:04:10.880 Oh it's fantastic. Yeah, you know I do. 0:04:10.880 --> 0:04:13.480 You have any tips on longevity because we're like, well, 0:04:13.520 --> 0:04:15.040 we want to be doing this again in ten years 0:04:15.040 --> 0:04:15.640 and maybe again. 0:04:15.800 --> 0:04:17.720 No one's asking us about in forty years. 0:04:17.839 --> 0:04:18.520 Yeahh So. 0:04:20.560 --> 0:04:24.200 Meaningful work and meaningful relationships, in other words, do you 0:04:24.320 --> 0:04:27.600 have is it your passion to make it as great 0:04:27.640 --> 0:04:30.280 as it can be and a shared passion? And are 0:04:30.279 --> 0:04:32.520 you doing it with people that you care about? And 0:04:32.560 --> 0:04:36.359 you have meaningful relationships? And if you've got that, you 0:04:36.400 --> 0:04:39.680 know you've got the energy to keep evolving and you 0:04:39.680 --> 0:04:42.120 know that's what it's about. I think that's for me 0:04:42.160 --> 0:04:42.799 what it's about. 0:04:43.320 --> 0:04:46.560 How would you characterize this moment, not just in markets, 0:04:46.640 --> 0:04:49.799 but in global macro as you point out, in terms 0:04:49.880 --> 0:04:53.440 of your experience, your career, how does it stack up 0:04:53.480 --> 0:04:54.480 to previous decades. 0:04:54.720 --> 0:04:59.080 It's part of a long term evolution that I'd like 0:04:59.200 --> 0:05:03.560 to take you through. I love a brief macro perspective 0:05:03.680 --> 0:05:06.279 of that evolution, and I'd like to start, if I could, 0:05:06.279 --> 0:05:09.800 with a little story of what change me. Okay, when 0:05:09.800 --> 0:05:13.240 I was twelve, I caddied and I earned a little 0:05:13.279 --> 0:05:15.680 bit of money, and I put my money in the 0:05:15.680 --> 0:05:18.160 stock market because everybody was in the stock market at 0:05:18.200 --> 0:05:20.800 the time, and the people I caddied for would tell 0:05:20.839 --> 0:05:24.200 me about the stock market, and I bought a company. 0:05:24.720 --> 0:05:26.440 It's the only company I ever heard of that was 0:05:26.480 --> 0:05:28.400 selling for less than five dollars a share. 0:05:29.320 --> 0:05:30.799 Did you just choose it randomly? 0:05:31.080 --> 0:05:33.080 It was the only company that was less than five 0:05:33.120 --> 0:05:35.799 dollars a share that I heard of, and I figured 0:05:35.960 --> 0:05:38.000 if I could buy more share, so if it went up, 0:05:38.040 --> 0:05:40.719 I'd make more money. That was my logic. Okay, you 0:05:40.760 --> 0:05:41.120 know there. 0:05:41.000 --> 0:05:44.400 Are many people today in the market anyway, keep going. 0:05:44.440 --> 0:05:47.600 But the silliest lot. The number of people. 0:05:47.360 --> 0:05:50.680 Out there who I believe like have come to think 0:05:50.720 --> 0:05:52.800 similar logic, particularly in other areas like crypto. 0:05:52.880 --> 0:05:55.520 Anyway, I didn't know anything about what I was doing 0:05:55.520 --> 0:05:59.839 on It was obviously stupid. But what happened was it 0:05:59.880 --> 0:06:02.560 was company that was about to go bro another company 0:06:02.600 --> 0:06:06.039 acquired it, and when tripled in value, I thought I 0:06:06.120 --> 0:06:08.280 was smart and it is an easy game, and I 0:06:08.320 --> 0:06:13.000 got hooked on the game. Okay, fast forward. Graduated college 0:06:13.400 --> 0:06:17.080 in nineteen seventy one, clerking on the floor of the 0:06:17.120 --> 0:06:20.760 New York Stock Exchange before I went to graduate school. 0:06:20.760 --> 0:06:25.160 In the summer August fifteenth, nineteen seventy one, President Nixon 0:06:25.200 --> 0:06:28.680 gets on the television and says, you're not going to 0:06:28.760 --> 0:06:31.640 get the gold. Gold was money then, and you had 0:06:31.680 --> 0:06:36.520 paper money and it depreciated in value, so you're not 0:06:36.560 --> 0:06:38.760 going to get the gold. And I walked on the 0:06:38.760 --> 0:06:41.440 floor of the stock Exchange the next morning, and I thought, 0:06:41.520 --> 0:06:44.159 this is a big crisis. Money as we know it is ending. 0:06:44.360 --> 0:06:47.000 We're going to have a problem. And it went up 0:06:47.360 --> 0:06:50.760 more than it had gone up in decades. And I 0:06:50.800 --> 0:06:54.400 didn't that's because I didn't know what a devaluation was. 0:06:54.720 --> 0:06:57.520 So I studied history, and I found the exact same 0:06:57.560 --> 0:07:01.320 thing happened in March of nineteen thirty three with Roosevelt 0:07:01.400 --> 0:07:04.520 getting on the radio and making the exact same move. 0:07:04.600 --> 0:07:07.840 Because they didn't have enough real money back then it 0:07:07.880 --> 0:07:10.440 was gold was real money. They didn't have it. And 0:07:10.480 --> 0:07:14.360 that led me to realize for the first time that 0:07:14.480 --> 0:07:18.040 I needed to understand things that happened before my lifetime, 0:07:18.320 --> 0:07:22.720 not just my experiences. So I studied the thirties, and 0:07:22.800 --> 0:07:25.720 because I studied the thirties, I was able to anticipate 0:07:25.720 --> 0:07:28.360 the two thousand and eight financial crisis because it was 0:07:28.400 --> 0:07:30.680 the thing that was playing over and over again. And 0:07:30.720 --> 0:07:33.840 there are those things that are going on now. Okay, 0:07:34.160 --> 0:07:37.960 we'll get into those. But it led me study history. 0:07:38.400 --> 0:07:42.680 So about six or seven years ago, I studied last 0:07:42.680 --> 0:07:46.080 five hundred years of history to think what causes the 0:07:46.200 --> 0:07:49.120 rise and decline of reserve currencies in the empires? And 0:07:49.200 --> 0:07:51.840 I said, the last five hundred years, and that brings 0:07:51.880 --> 0:07:55.840 me to the five big forces. Okay, the five big 0:07:55.880 --> 0:08:00.440 forces are and they each have a mechanic to them, 0:08:00.440 --> 0:08:07.480 a dynamic. The first is how money, debt, markets, and 0:08:07.560 --> 0:08:12.240 economics works. Okay, and we'll get into that the second. 0:08:13.840 --> 0:08:16.440 By the way, there's a big cycle there is, and 0:08:16.480 --> 0:08:19.600 we can call it a monetary order, and there's a 0:08:19.640 --> 0:08:23.960 monetary order that always happens and breaks down, and it's 0:08:24.000 --> 0:08:27.160 part of an arc that has to do with limitations 0:08:27.200 --> 0:08:29.720 on debt and money. And we'll get into that. 0:08:29.760 --> 0:08:30.760 Like a leverage cycle. 0:08:30.880 --> 0:08:34.760 Right, how much debt can you take on? And what 0:08:34.920 --> 0:08:37.840 is the value of money? Money's supposed to have a 0:08:37.880 --> 0:08:41.559 storehold of wealth? Is debt a storehold of wealth? And 0:08:41.559 --> 0:08:44.199 what is our money? That's a question that we have 0:08:44.280 --> 0:08:47.480 to deal with today. Right, what is the money that 0:08:47.559 --> 0:08:50.360 you can be an effective storehold of wealth? Okay? And 0:08:50.400 --> 0:08:52.559 are we at the end of our debt cycle? Okay? 0:08:52.760 --> 0:08:57.800 That's number one. Number two related to this money and 0:08:57.880 --> 0:09:02.160 who has money and wealth differences and so on. A 0:09:02.200 --> 0:09:06.200 part of the cycle is that capitalism creates great opportunities 0:09:06.200 --> 0:09:09.719 for inventiveness, to be productive and so on, and it 0:09:09.800 --> 0:09:13.480 raises living standards and it raises wealth, but it raises 0:09:13.520 --> 0:09:16.640 wealth in an unequal way, and there are big wealth 0:09:16.720 --> 0:09:19.640 differences that naturally come as a part of the cycle, 0:09:20.040 --> 0:09:23.880 and those wealth and then values differences get to a 0:09:23.960 --> 0:09:28.440 point where there are irreconcilable differences So throughout history there's 0:09:28.480 --> 0:09:31.000 the left and there's the right. There's the rich and 0:09:31.080 --> 0:09:34.080 there's the poor, and there are those who are liberals 0:09:34.120 --> 0:09:37.760 and those who are conservatives, and throughout history they have 0:09:37.840 --> 0:09:41.520 a conflict, particularly if you have an economic problem. So 0:09:41.600 --> 0:09:45.360 that's the second force, right. The third force is the 0:09:45.760 --> 0:09:51.280 changing world order, the international geopolitical order, and that has 0:09:51.320 --> 0:09:54.520 a cycle to it too. You started last time, you 0:09:54.559 --> 0:09:57.960 start in nineteen forty five, the end of the war. 0:09:58.200 --> 0:10:01.800 The war determines who has power. The powerful determine what 0:10:01.840 --> 0:10:04.480 the new world order is like. And then you have 0:10:04.600 --> 0:10:08.600 the rising power challenging the existing power, and then you 0:10:08.800 --> 0:10:11.720 change the dynamic of the world order. The world order 0:10:11.760 --> 0:10:16.640 always changes. The monetary order changes, the domestic political order changes, 0:10:16.960 --> 0:10:20.320 the world order changes, and there is that arc. Number 0:10:20.360 --> 0:10:25.120 fourth force is acts of nature. Throughout history, drought, floods, 0:10:25.120 --> 0:10:28.760 and pandemics have killed more people and toppled more orders 0:10:28.800 --> 0:10:31.520 than the first three that I mentioned. And number five 0:10:31.679 --> 0:10:37.880 throughout history is man's inventiveness, particularly of new technologies. Okay, 0:10:38.040 --> 0:10:41.760 and here we are with AI, and all of those 0:10:41.800 --> 0:10:46.840 are connected. There each relate. What happens with AI affects productivity, 0:10:47.040 --> 0:10:50.800 effects who gets the money oh, what happens in geopolitical 0:10:50.880 --> 0:10:54.000 You have to spend money to have a military and 0:10:54.040 --> 0:10:57.120 the conflicts and then there are trade wars, and it 0:10:57.280 --> 0:11:01.120 all transpires pretty much in the same way. Over those 0:11:01.160 --> 0:11:05.200 five hundred years. You can see these cycles in that pattern. 0:11:05.360 --> 0:11:10.520 It is pretty incredible listening to this and thinking, you 0:11:10.559 --> 0:11:13.400 know what, it's not just our imagination. We are in 0:11:13.480 --> 0:11:17.080 a time of extraordinary change. We had a global pandemic 0:11:17.400 --> 0:11:20.920 that disrupted life for everyone on Earth in varying ways, 0:11:20.960 --> 0:11:24.959 at least to some extent. We do have this unbelievable 0:11:25.120 --> 0:11:27.600 technology that everyone is trying to wrap their heads around 0:11:27.600 --> 0:11:31.600 with AI. We did have, even starting you know, arguably 0:11:31.600 --> 0:11:35.160 ten years ago, the emergence of serious trade tensions with China. 0:11:35.240 --> 0:11:39.600 We do see the emergence of their military clearly getting 0:11:39.720 --> 0:11:41.600 much more strong. Like, you know, you see all these 0:11:41.600 --> 0:11:44.120 things like, it's not we're I guess we're not hallucinating. 0:11:44.440 --> 0:11:45.960 Some big stuff is going on these days. 0:11:46.040 --> 0:11:48.040 Well, yes, And the thing that I would like to 0:11:49.160 --> 0:11:53.560 focus on is the mechanics of how that happens, the 0:11:53.800 --> 0:11:59.320 interdep relationships between where are we in the debt cycle, 0:12:00.480 --> 0:12:04.080 where are we in wealth. We'll talk about these things. 0:12:04.080 --> 0:12:09.600 I hope, what does that mean geopolitical and so on? 0:12:09.960 --> 0:12:13.160 And if for me it's like watching the movie over 0:12:13.200 --> 0:12:17.160 and over again. There is connections and there's a cyclicality 0:12:17.240 --> 0:12:20.679 to this, a big cycle dynamic, so that we can 0:12:20.800 --> 0:12:24.520 step back. I think there's too much intent. Everybody looks 0:12:24.559 --> 0:12:27.200 at the news item of the day and they don't 0:12:27.200 --> 0:12:30.000 step back and see the big arc and the cause 0:12:30.000 --> 0:12:32.520 effect relationships. So that's why I'm hoping we can get 0:12:32.559 --> 0:12:33.000 into that. 0:12:33.160 --> 0:12:35.720 Okay, well, let me try to thread the needle between 0:12:35.720 --> 0:12:37.600 the news item of the day and the big arc. 0:12:37.679 --> 0:12:40.600 But when you look at something like AI, how does 0:12:40.679 --> 0:12:44.280 that fit into your five forces framework? Draw the lines 0:12:44.320 --> 0:12:45.040 for us as we well. 0:12:45.040 --> 0:12:50.200 Next, I mean, first of all, it has tremendous effect 0:12:50.440 --> 0:12:53.360 on the economics of it. Right, it looks to me 0:12:53.760 --> 0:12:57.960 very very similar to all the times in history that 0:12:58.040 --> 0:13:02.000 there was great inventions and great changes, such as the 0:13:02.040 --> 0:13:03.800 twenties late twenties. 0:13:03.520 --> 0:13:04.800 So a real productive show. 0:13:05.559 --> 0:13:09.000 It's a change and maybe the greatest ever. But right 0:13:09.080 --> 0:13:12.600 up there, but imagine, let me take you into the twenties. 0:13:13.160 --> 0:13:16.359 Imagine we need to get like a time warp soundtrack 0:13:16.440 --> 0:13:17.640 on it, back in time. 0:13:18.200 --> 0:13:22.680 But first time electricity is going into houses and you 0:13:22.760 --> 0:13:27.040 can have washing machines and refrigerators. First time we have 0:13:27.120 --> 0:13:31.400 the car. Okay, first time that we have airplanes, First 0:13:31.400 --> 0:13:34.680 time we have movies that you can go at ten, 0:13:35.000 --> 0:13:37.640 First time you have radio. You used to have silence 0:13:37.679 --> 0:13:41.040 in your house, and so on. The first invention of 0:13:41.160 --> 0:13:44.760 television and so on. Can you imagine it would be 0:13:44.960 --> 0:13:49.800 much more immediate and exciting. You see the revolutions in 0:13:49.840 --> 0:13:53.840 those things. And so there's a mechanic to a mechanism 0:13:54.200 --> 0:13:57.360 of which how does wealth get created? And what's the 0:13:57.480 --> 0:14:01.240 difference of wealth, and how does a bu come and 0:14:01.280 --> 0:14:04.520 how does a bubble go? In other words, to distinguish it. 0:14:04.720 --> 0:14:07.199 And that's, by the way, many of those bubbles. So 0:14:07.559 --> 0:14:09.720 I can go back in history and give you many examples, 0:14:09.760 --> 0:14:12.720 but that would be a good example. So what makes 0:14:12.760 --> 0:14:15.920 it go up? And what is the difference between wealth 0:14:15.960 --> 0:14:18.640 and money? So you get into the mechanics. Wealth is 0:14:18.679 --> 0:14:23.520 not money, okay. So and this becomes very relevant to 0:14:24.160 --> 0:14:29.960 us now because what you do, what say, okay, but 0:14:30.080 --> 0:14:32.720 let me give you an example. Yeah, okay, you come 0:14:32.800 --> 0:14:35.760 up with a great idea, you want to create a unicorn. 0:14:35.960 --> 0:14:39.080 You sell fifty million dollars of the sock and you 0:14:39.160 --> 0:14:43.000 value it a billion dollars. Okay, now you're a billionaire, 0:14:43.320 --> 0:14:45.800 and now that company is worth a billion dollars. 0:14:45.480 --> 0:14:48.800 But what happens is it really worth a billion? 0:14:49.680 --> 0:14:53.720 Child or teenagers at some point had this idea, Right, 0:14:53.840 --> 0:14:56.400 I'm going to start a company and then Tracy, I'm 0:14:56.400 --> 0:14:58.600 going to sell her a dollar's worth of share. 0:14:58.680 --> 0:15:00.480 But it's just this friend and suddenly, oh, I'm. 0:15:00.360 --> 0:15:03.000 A billionaires and wealth is being created. 0:15:02.640 --> 0:15:05.680 Suddenly, Like I think everyone has this scheme at some 0:15:05.760 --> 0:15:06.480 point in their life. 0:15:06.520 --> 0:15:10.280 Okay, But the importance thing to realize is wealth is 0:15:10.360 --> 0:15:15.520 different from money. Okay, wealth you can't you can't spend wealth. 0:15:15.840 --> 0:15:19.200 You have to sell wealth in order to get money 0:15:19.520 --> 0:15:22.520 to go buy things. Okay. And so how do the 0:15:22.560 --> 0:15:25.960 bubbles happen? Okay, The bubbles happen in the way that 0:15:26.040 --> 0:15:30.040 you create these needs for money, and then the wealth 0:15:30.160 --> 0:15:33.600 rises and then there's a need to sell it. For example, 0:15:33.880 --> 0:15:39.360 let's imagine that we put in wealth taxes. Okay, Okay, 0:15:39.680 --> 0:15:42.280 what's going to happen? Those are going to need to 0:15:42.280 --> 0:15:45.520 sell some of that stock to be able to get 0:15:45.600 --> 0:15:48.560 up the cash to be able to pay taxes. Right, 0:15:49.080 --> 0:15:53.880 whether for whatever reason, the need for cash happens, and 0:15:53.920 --> 0:15:57.560 you want to make a conversion from wealth to money 0:15:57.760 --> 0:15:59.720 to be able to come up with the money, and 0:15:59.800 --> 0:16:04.360 all the bubbles it's worked this way. There's not enough cash, 0:16:04.720 --> 0:16:07.360 and there's the desire for that cash, and then you 0:16:07.480 --> 0:16:10.560 sell it and the dynamic begins to work in reverse. 0:16:10.920 --> 0:16:14.080 So that's all I'm talking about is mechanics. So when 0:16:14.080 --> 0:16:18.160 you ask me the question, and I look at today today, 0:16:18.400 --> 0:16:21.640 it looks like another one of those Okay, who's got 0:16:21.640 --> 0:16:25.360 the wealth? And then where is the vulnerability that can 0:16:25.960 --> 0:16:29.400 Is this real wealth or is it accounting wealth? And 0:16:29.480 --> 0:16:34.240 then and people make the mistake of thinking will it 0:16:35.320 --> 0:16:39.800 produce an income over its time in order to justify 0:16:39.920 --> 0:16:43.800 that valuation. That's not what make bubbles okay, because the 0:16:43.920 --> 0:16:47.800 answer to that question did not change between nineteen twenty 0:16:47.840 --> 0:16:51.040 eight and nineteen thirty one. It's not like they found 0:16:51.080 --> 0:16:54.680 out the answer and then they say, Okay, that's okay. 0:16:54.880 --> 0:16:59.680 It's this dynamic between wealth and money okay. So there's 0:16:59.680 --> 0:17:03.920 a mechanics to the way this happens, right, And if 0:17:03.920 --> 0:17:07.080 you understand those, and it goes back a long time. 0:17:07.280 --> 0:17:10.040 If you go back to the Old Testament, the year 0:17:10.080 --> 0:17:12.560 of you believe. Okay, how do you deal with debt 0:17:12.760 --> 0:17:15.399 and you have to pay back the debt because debt 0:17:15.560 --> 0:17:18.040 is a need for money. I have to pay deliver 0:17:18.240 --> 0:17:36.120 money on my debt. So it's important to understand those mechanics. 0:17:37.880 --> 0:17:39.640 One of the things that you hear a lot when 0:17:39.640 --> 0:17:43.159 people characterize the economy today of twenty twenty five is 0:17:43.200 --> 0:17:45.359 that a lot of it is writing on people's wealth. 0:17:45.359 --> 0:17:48.080 People talk about, you know, the K shaped recovery. They 0:17:48.080 --> 0:17:50.879 talk about how people in the higher income or wealth 0:17:51.160 --> 0:17:54.960 quintiles are really driving consumption, et cetera. Then we look 0:17:55.280 --> 0:17:58.080 at these large obligations that we have, whether national debt 0:17:58.160 --> 0:18:00.959 or just the obligations to care for seniors, et cetera. 0:18:01.760 --> 0:18:04.160 Is this sort of where it comes together that at 0:18:04.200 --> 0:18:07.240 some point, maybe we don't call it a well text, 0:18:07.240 --> 0:18:10.919 et cetera, but where the political entity feels compelled to 0:18:10.960 --> 0:18:14.240 go after the quote wealth, the wealth that exists on paper. 0:18:14.359 --> 0:18:16.520 Yes, and it's happened over and over and over again 0:18:16.560 --> 0:18:19.920 for basically the same reasons. Okay, if you look at 0:18:19.920 --> 0:18:23.320 the thirties for example, or it's the same you need 0:18:23.400 --> 0:18:27.360 the money, Okay, so just watch what's happening right there's 0:18:27.400 --> 0:18:30.159 a small group between one and ten percent of the 0:18:30.160 --> 0:18:35.040 population that this is going unbelievably great for right, And 0:18:35.119 --> 0:18:39.240 then there's the bottom sixty percent. The bottom sixty percent 0:18:39.320 --> 0:18:42.879 are having problems being productive and being affected. Sixty percent 0:18:42.880 --> 0:18:46.560 of Americans have the lowest sixth grade reading level. Okay, 0:18:46.960 --> 0:18:50.640 the stock ownership of the top ten percent, they own 0:18:50.680 --> 0:18:54.400 about ninety percent of the stocks. The bottom sixty percent 0:18:54.520 --> 0:18:57.880 own about five percent of the stocks. So we're seeing 0:18:57.960 --> 0:19:00.760 this wealth, and who are you going to get the 0:19:00.800 --> 0:19:03.480 money from the way you used to get the money 0:19:03.720 --> 0:19:06.440 was that you would borrow the money, would the debt 0:19:06.440 --> 0:19:10.080 would continue to rise relative to d GDP or relative 0:19:10.119 --> 0:19:13.359 to your incomes, and then you'd spend. Well, we're close 0:19:13.400 --> 0:19:16.400 to not being able to have that happen for mechanical 0:19:16.520 --> 0:19:19.800 reasons that are worth understanding. One man's that's or another 0:19:19.840 --> 0:19:23.000 man's assets. And if you're holding a lot of bonds, 0:19:23.160 --> 0:19:28.399 a lot of government bonds, that's a lot of debt. 0:19:28.920 --> 0:19:31.320 Is that a good storehold of wealth? And then when 0:19:31.359 --> 0:19:35.720 you have the political or geopolitical problems that are going on, conflicts, 0:19:36.119 --> 0:19:39.080 then the foreign ownership owners of those who own about 0:19:39.080 --> 0:19:42.280 a third of the bonds may not want to hold 0:19:42.280 --> 0:19:44.439 those bonds because they think it may not be a 0:19:44.440 --> 0:19:48.480 good store old of wealth, either because it's being depreciated 0:19:48.960 --> 0:19:52.600 or because they may have sanctions. So if you go back, 0:19:52.640 --> 0:19:56.080 like into the thirties before, there's always the economic war, 0:19:56.240 --> 0:19:59.480 including the financial war, in which entities are cut off 0:19:59.640 --> 0:20:02.560 sanction we call them now. Okay, So there is this 0:20:02.760 --> 0:20:06.240 dynamic in which and it's not just an American dynamic, 0:20:06.560 --> 0:20:10.480 it's a UK dynamic, it's a France dynamic, it's a 0:20:10.560 --> 0:20:13.920 Chinese dynamic in which we're at a point where it's 0:20:14.000 --> 0:20:16.160 not easy to keep doing it the way we were 0:20:16.160 --> 0:20:19.200 doing it, by selling more and more of those bonds 0:20:19.240 --> 0:20:22.360 in that way, and so then we'll look at it. 0:20:22.520 --> 0:20:24.959 You can't raise, you can't borrow like you used to. 0:20:25.920 --> 0:20:30.000 Number two. I went to Washington, speaking leaders on both sides. 0:20:30.160 --> 0:20:32.399 I said, we got to get the budget down to 0:20:33.080 --> 0:20:36.199 three percent of GDP, and you can do with that 0:20:36.240 --> 0:20:39.359 if you take it for this, a little bit of 0:20:39.359 --> 0:20:41.320 this and that, and you can do that. The answer 0:20:41.359 --> 0:20:43.360 I get is, and it's the same in the UK, 0:20:43.480 --> 0:20:46.520 it's the same in France, same role around the world. 0:20:47.040 --> 0:20:50.080 You have to understand that I can't I have to 0:20:50.119 --> 0:20:53.320 make one of two pledges or both. I will not 0:20:53.480 --> 0:20:58.640 raise your taxes and I will not cut your benefits. Okay, 0:20:58.960 --> 0:20:59.920 so now we talk ball. 0:21:00.320 --> 0:21:01.080 It's not that much. 0:21:01.560 --> 0:21:04.439 You can't borrow, you can't keep it up as it was. 0:21:05.080 --> 0:21:10.040 You can't raise the taxes politics, okay, you can't cut 0:21:10.080 --> 0:21:15.119 the spending. Okay. So there we are. It's different. The 0:21:15.160 --> 0:21:18.040 world is very different from I was thinking about your 0:21:18.080 --> 0:21:23.760 tenth year anniversary. Okay, twenty fifteen. Yeah, okay, so think 0:21:23.840 --> 0:21:27.080 about how different the world is as a function of 0:21:27.160 --> 0:21:30.120 these five forces. Right, that's what it looks like. 0:21:30.200 --> 0:21:34.080 Right, absolutely, So can we talk about this in a 0:21:34.200 --> 0:21:37.679 US context specifically since you brought up DC, but it 0:21:37.760 --> 0:21:41.639 feels like US especially has changed in ten years, so 0:21:41.920 --> 0:21:45.840 rising inequality, the deficit is higher than ever, and we 0:21:45.920 --> 0:21:50.760 also have an administration which seems to be redefining America's 0:21:50.800 --> 0:21:55.000 place in the world. How does that fit into again 0:21:55.080 --> 0:21:57.440 your five forces framework? And I guess I should bring 0:21:57.520 --> 0:21:59.520 up the debasement trade as well, because this was a 0:21:59.520 --> 0:22:02.919 big theme earlier in the year, that the idea that 0:22:03.040 --> 0:22:04.720 you know, people don't want to be in the dollar 0:22:04.880 --> 0:22:06.880 because they don't know what's going to happen with the debt, 0:22:07.000 --> 0:22:10.080 or because they're worried about sanctions and limits on currencies. 0:22:11.440 --> 0:22:15.040 It's all the same, isn't it. And it's all interrelated, right, 0:22:15.440 --> 0:22:19.560 I mean, okay, and it's all understandable, right, it's all. 0:22:20.320 --> 0:22:24.439 You have a financial limitation, you have large wealth gaps, 0:22:24.720 --> 0:22:28.000 You reach the point that you don't want to negotiate 0:22:28.040 --> 0:22:30.520 your sick and tired. The electorate is sick and tired 0:22:30.520 --> 0:22:35.919 of hearing these excuses. They want populism. So populism arises 0:22:36.000 --> 0:22:39.320