1 00:00:00,040 --> 00:00:03,560 Speaker 1: All right, Joseph, thanks for joining me today. Uh, the 2 00:00:03,600 --> 00:00:06,360 Speaker 1: Fed guy. We certainly have a lot to talk about 3 00:00:06,440 --> 00:00:09,639 Speaker 1: in the world of central bank policy. So I'm excited 4 00:00:09,680 --> 00:00:12,400 Speaker 1: for this. Well, thanks so much for you invite me. Mark. 5 00:00:12,440 --> 00:00:14,880 Speaker 1: I'm excited to be here. And also I see that 6 00:00:14,960 --> 00:00:17,439 Speaker 1: you've published in a new book. Very excited to see 7 00:00:17,520 --> 00:00:19,640 Speaker 1: that's well reviewed, and I I've ordered it and I 8 00:00:19,680 --> 00:00:21,640 Speaker 1: can't wait to read it myself. Oh. Thanks, thank you. 9 00:00:21,640 --> 00:00:23,239 Speaker 1: I appreciate that. Yeah, you saw it when I was 10 00:00:23,280 --> 00:00:25,320 Speaker 1: just kind of thrown around the copies. Yeah, yeah, I 11 00:00:25,560 --> 00:00:28,880 Speaker 1: saw it on Amazon now too, writing We're very well reviewed, 12 00:00:28,920 --> 00:00:31,440 Speaker 1: five stars, so I can't wait. Yeah, thank you, So 13 00:00:31,840 --> 00:00:34,240 Speaker 1: thanks for bringing that up. Shameless plug. He's talking about 14 00:00:34,280 --> 00:00:37,040 Speaker 1: the book, The Uncommunist Manifesto. If you haven't got your copy, 15 00:00:37,280 --> 00:00:40,400 Speaker 1: go to Amazon The Uncommunist Manifesto. It's a short read. 16 00:00:40,400 --> 00:00:42,400 Speaker 1: It's about an hour read. Everybody should read it. In 17 00:00:42,440 --> 00:00:45,040 Speaker 1: my opinion, communism seems like an old word, but it's 18 00:00:45,080 --> 00:00:49,080 Speaker 1: just rebranded today. Um. Instead of abolition of private property, 19 00:00:49,080 --> 00:00:53,520 Speaker 1: it's you'll own nothing to be happy exactly. So let's 20 00:00:53,600 --> 00:00:56,200 Speaker 1: dive right in, Joseph, because I got a lot to cover, uh, 21 00:00:56,280 --> 00:00:57,920 Speaker 1: and we'll see how much we can get through. Sometimes 22 00:00:57,920 --> 00:01:01,360 Speaker 1: I get a little too ambusious here, but um, look 23 00:01:01,480 --> 00:01:04,840 Speaker 1: the markets are crashing, real estates getting marked down, stocks 24 00:01:04,840 --> 00:01:08,400 Speaker 1: are going down, currency wars are erupting all around the world. 25 00:01:09,080 --> 00:01:12,440 Speaker 1: The Bank of England just broke again. Um, you know, 26 00:01:12,720 --> 00:01:15,520 Speaker 1: I mean, stuff's going haywire. So I want to dig 27 00:01:15,560 --> 00:01:20,040 Speaker 1: through all this. Um, but let's start with myth or fact. 28 00:01:21,800 --> 00:01:24,119 Speaker 1: Last night on Twitter, you were and I were kind 29 00:01:24,120 --> 00:01:30,199 Speaker 1: of engaged in this thing, and myth or fact does um, 30 00:01:30,360 --> 00:01:35,840 Speaker 1: does the liquidity drying up caused the markets to crash? 31 00:01:36,040 --> 00:01:38,080 Speaker 1: Now I know there's a lot of nuance here. Um. 32 00:01:38,160 --> 00:01:40,520 Speaker 1: Jeff Snyder, I had him on a month two months ago, 33 00:01:40,560 --> 00:01:43,120 Speaker 1: made month or two ago, and he said that, and 34 00:01:43,160 --> 00:01:44,959 Speaker 1: I think, actually you were at the same event at 35 00:01:44,959 --> 00:01:46,800 Speaker 1: George Gammons event where he was at and he says, 36 00:01:46,959 --> 00:01:49,400 Speaker 1: the ft has no control. Uh, the euro dark your 37 00:01:49,480 --> 00:01:52,920 Speaker 1: market so big. The reason why the markets crashes there's 38 00:01:52,960 --> 00:01:56,320 Speaker 1: a dollar shortage. So is the shortage of dollars myth 39 00:01:56,400 --> 00:02:01,560 Speaker 1: or fact? Yeah, so that's a really interesting question. So 40 00:02:01,640 --> 00:02:04,680 Speaker 1: how do you measure a shortage of dollars? So I'll 41 00:02:04,720 --> 00:02:08,200 Speaker 1: tell you how I look at this and now I 42 00:02:08,280 --> 00:02:10,560 Speaker 1: address how I think some other people might be looking 43 00:02:10,600 --> 00:02:14,440 Speaker 1: at this. So shortage of dollars, we usually think of 44 00:02:14,480 --> 00:02:17,320 Speaker 1: that as someone wanting to borrow dollars but not able 45 00:02:17,360 --> 00:02:20,560 Speaker 1: to access it. And the way this is measured is 46 00:02:20,560 --> 00:02:23,639 Speaker 1: something called the f X swap basis, which is the 47 00:02:23,680 --> 00:02:26,400 Speaker 1: premium that a foreigner has to pay when they borrow 48 00:02:26,480 --> 00:02:30,640 Speaker 1: dollars in the market. So when we have major market disruptions, 49 00:02:30,840 --> 00:02:34,359 Speaker 1: for example Lehman going down or what we saw during 50 00:02:34,440 --> 00:02:40,320 Speaker 1: the March uh pandemic panic we saw the epics, swot 51 00:02:40,320 --> 00:02:44,480 Speaker 1: basis widened significantly. What that means is that a lot 52 00:02:44,520 --> 00:02:47,800 Speaker 1: of people who are trying to borrow dollars just can't 53 00:02:47,840 --> 00:02:50,680 Speaker 1: get their dollars at market prices, and so they're having 54 00:02:50,720 --> 00:02:55,480 Speaker 1: to borrow at extremely high premiums. That, in my view, 55 00:02:55,760 --> 00:02:58,040 Speaker 1: is what a shortage looks like when you have money 56 00:02:58,080 --> 00:03:01,160 Speaker 1: to pay and you just can't get it now. The 57 00:03:01,160 --> 00:03:03,800 Speaker 1: way that you can't get it meaning, um, it's it 58 00:03:04,000 --> 00:03:08,000 Speaker 1: costs more than you're able to pay for it. So 59 00:03:08,080 --> 00:03:11,480 Speaker 1: there's a market price for dollars, and there's also how 60 00:03:11,560 --> 00:03:14,200 Speaker 1: much extra premium you have to get you have to 61 00:03:14,240 --> 00:03:16,920 Speaker 1: pay for to to get those dollars. So that's that's 62 00:03:17,000 --> 00:03:19,359 Speaker 1: kind of helps measured. And the market price is usually 63 00:03:19,400 --> 00:03:22,120 Speaker 1: set by the FED because the FED controls short term 64 00:03:22,160 --> 00:03:24,919 Speaker 1: interest rates. So if you have to pay a whole 65 00:03:24,960 --> 00:03:27,400 Speaker 1: lot more than the market rate that's roughly set by 66 00:03:27,400 --> 00:03:30,680 Speaker 1: the FED. I think of that as there's a problem 67 00:03:30,720 --> 00:03:33,640 Speaker 1: with the supply of dollars. There could be, as people say, 68 00:03:33,760 --> 00:03:37,080 Speaker 1: a shortage. And the way that this is fixed is 69 00:03:37,120 --> 00:03:40,680 Speaker 1: the FED steps in and there with a tool called 70 00:03:40,680 --> 00:03:45,320 Speaker 1: the Ethics Swap Facility, where they're basically lending a limited 71 00:03:45,360 --> 00:03:48,840 Speaker 1: dollars for in central banks, who then take those dollars 72 00:03:48,880 --> 00:03:51,400 Speaker 1: and lend it to their own banks, who then take 73 00:03:51,440 --> 00:03:53,880 Speaker 1: those dollars and lend it to let's say a corporation 74 00:03:53,960 --> 00:03:57,640 Speaker 1: or something like that. And so when the FED opens 75 00:03:57,720 --> 00:04:01,720 Speaker 1: up this ethics swap facility, uh, what we see is 76 00:04:01,760 --> 00:04:04,880 Speaker 1: that immediately the premium to borrow dollars in the offshore 77 00:04:04,920 --> 00:04:08,480 Speaker 1: markets disappears or it becomes very small. We see that 78 00:04:08,560 --> 00:04:13,560 Speaker 1: consistently when the ethics facility opened up in UM during 79 00:04:13,680 --> 00:04:16,920 Speaker 1: Lehman's collapse, in U during the Great Financial Crisis, and 80 00:04:17,120 --> 00:04:20,880 Speaker 1: in March. And the thing is the f fex Soft 81 00:04:20,880 --> 00:04:24,880 Speaker 1: Facility UM is actually still open. The FED never took 82 00:04:24,920 --> 00:04:28,400 Speaker 1: it away, so it's operating on full force and there's 83 00:04:28,560 --> 00:04:31,880 Speaker 1: very very little participation in it. And the reason being 84 00:04:32,240 --> 00:04:35,640 Speaker 1: is that the premium premium costs to borrow dollars right 85 00:04:35,720 --> 00:04:41,440 Speaker 1: now is you know, not particularly elevated. So that's me 86 00:04:41,560 --> 00:04:44,640 Speaker 1: suggest that there's no shortage of dollars. Everyone who wants 87 00:04:44,640 --> 00:04:49,279 Speaker 1: to borrow dollars at the market price can get dollars. Now. 88 00:04:50,080 --> 00:04:52,640 Speaker 1: That's the price to borrow dollars now. I think a 89 00:04:52,640 --> 00:04:55,160 Speaker 1: lot of people also point to the U S dollars strengthening, 90 00:04:55,240 --> 00:04:58,320 Speaker 1: and we see what's happening right dollar to euro euros 91 00:04:58,360 --> 00:05:03,960 Speaker 1: below parity. We see the Japanese currency basically imploding, and 92 00:05:04,000 --> 00:05:06,960 Speaker 1: so that's making the dollar very strong. Now. I don't 93 00:05:06,960 --> 00:05:10,640 Speaker 1: think of a strong appreciating dollar as a dollar shortage 94 00:05:10,880 --> 00:05:13,599 Speaker 1: because there are actually very good fundamental reasons for that. 95 00:05:14,080 --> 00:05:17,200 Speaker 1: The first, of course, is that the fits hiking rates aggressively. 96 00:05:17,839 --> 00:05:21,719 Speaker 1: If um, if you're investing dollars in a money market fund, 97 00:05:21,760 --> 00:05:23,840 Speaker 1: you're getting you know, three percent and maybe you'll get 98 00:05:23,839 --> 00:05:26,160 Speaker 1: four percent soon. That's much higher than you can get 99 00:05:26,200 --> 00:05:29,200 Speaker 1: in Japan or Europe. And also there's a lot of 100 00:05:29,279 --> 00:05:34,240 Speaker 1: geo political factors that are encouraging investors to move their 101 00:05:34,240 --> 00:05:36,839 Speaker 1: money from let's say, away from the war zone in 102 00:05:36,880 --> 00:05:39,600 Speaker 1: Europe because Europe is in is in a war zone 103 00:05:39,680 --> 00:05:44,520 Speaker 1: right now, to the US. So dollars appreciating because it's 104 00:05:44,600 --> 00:05:47,440 Speaker 1: becoming more valuable. I think of it as you know, 105 00:05:47,520 --> 00:05:49,200 Speaker 1: Let's say I have a house and I add a 106 00:05:49,200 --> 00:05:51,800 Speaker 1: pool to it. The price of my house goes higher, 107 00:05:51,839 --> 00:05:54,159 Speaker 1: not because it's a shortage, but because I've made it 108 00:05:54,200 --> 00:06:00,360 Speaker 1: more valuable at higher rates. Make a currency more valuable. Um. Honestly, 109 00:06:00,680 --> 00:06:03,000 Speaker 1: that's actually kind of part of the plan of what 110 00:06:03,040 --> 00:06:05,880 Speaker 1: the Fed is trying to do. If you listen to 111 00:06:05,880 --> 00:06:09,560 Speaker 1: trapa discuss his strategy to get inflation down, one of 112 00:06:09,560 --> 00:06:13,080 Speaker 1: the pillars is to have a strong dollar. UM. So 113 00:06:14,279 --> 00:06:19,240 Speaker 1: it's proceeding as he wishes it to be. Now. UM. 114 00:06:19,279 --> 00:06:22,400 Speaker 1: You know, when I look back through through the long 115 00:06:22,600 --> 00:06:26,039 Speaker 1: lens of history, UM, we can see times where we, 116 00:06:26,279 --> 00:06:29,640 Speaker 1: you know, used barley for money, then we used metals, 117 00:06:29,680 --> 00:06:33,200 Speaker 1: and then um in hundred Spain found a huge silver 118 00:06:33,320 --> 00:06:36,640 Speaker 1: mine in U in Peru, and then that increased the 119 00:06:36,680 --> 00:06:39,719 Speaker 1: liquidity of money supply in the world, which caused uh 120 00:06:39,839 --> 00:06:43,160 Speaker 1: inflation and massive acceleration. And then the silver mine ran 121 00:06:43,200 --> 00:06:45,520 Speaker 1: out and then things start contracting. And so we can 122 00:06:45,600 --> 00:06:48,159 Speaker 1: kind of see throughout history. Every time you increase the 123 00:06:48,160 --> 00:06:50,599 Speaker 1: money supply, you get booms and you get inflation, and 124 00:06:50,640 --> 00:06:53,840 Speaker 1: then when the money supply starts running out, um, then 125 00:06:53,880 --> 00:06:57,719 Speaker 1: you get contraction. Now the Fed has obviously said that, 126 00:06:57,800 --> 00:07:01,480 Speaker 1: so they did. Uh, you know, there was a long 127 00:07:01,880 --> 00:07:04,600 Speaker 1: list of que that was happening, right, So they're easing 128 00:07:04,800 --> 00:07:07,960 Speaker 1: the money supply. Now they're going through tightening. And if 129 00:07:07,960 --> 00:07:10,960 Speaker 1: I think about it, just um in super basic terms, 130 00:07:11,000 --> 00:07:14,320 Speaker 1: and maybe that throws me off. But if I because 131 00:07:14,320 --> 00:07:16,440 Speaker 1: we're in a debt based system, money is created through debt. 132 00:07:16,680 --> 00:07:20,160 Speaker 1: So if I lower the cost of borrowing, more people borrow, 133 00:07:20,240 --> 00:07:22,720 Speaker 1: more money is created than you were talking about that, right, 134 00:07:22,760 --> 00:07:25,480 Speaker 1: the cost of the dollars to borrow. If I increase 135 00:07:25,560 --> 00:07:28,680 Speaker 1: the interest rate, then less money is created, less people 136 00:07:28,720 --> 00:07:32,520 Speaker 1: are borrowing. So doesn't that I guess it's it's not 137 00:07:32,680 --> 00:07:35,600 Speaker 1: a shortage of dollars, but it's a shortage of ability 138 00:07:35,640 --> 00:07:37,640 Speaker 1: to access the dollars because now the cost of those 139 00:07:37,680 --> 00:07:42,520 Speaker 1: dollars is prohibitive to what I could spend on it. Well, 140 00:07:43,080 --> 00:07:45,680 Speaker 1: that that's true, but there are other factors as well. 141 00:07:45,720 --> 00:07:48,960 Speaker 1: So if I if I raise an interest rate. You're 142 00:07:49,000 --> 00:07:52,040 Speaker 1: exactly right, there's less of a demand for dollars. But 143 00:07:52,320 --> 00:07:55,360 Speaker 1: what if I'm willing to pay the market price for interest, 144 00:07:55,440 --> 00:07:58,240 Speaker 1: but I still can't get any dollars. That becomes more 145 00:07:58,280 --> 00:08:01,720 Speaker 1: of an accessibility functioning problem of the market. Right. So 146 00:08:01,760 --> 00:08:04,240 Speaker 1: you're saying it's a shortage. I'm not able to get 147 00:08:04,280 --> 00:08:07,280 Speaker 1: them when I want them. I'm thinking even when you're 148 00:08:07,320 --> 00:08:10,679 Speaker 1: paying market prices. I'm thinking a shortage of just there's 149 00:08:10,720 --> 00:08:13,320 Speaker 1: not as much money in the system because less people 150 00:08:13,360 --> 00:08:15,600 Speaker 1: are creating it through debt. So it's not that I 151 00:08:15,680 --> 00:08:17,920 Speaker 1: can't get it, is that I can't get it at 152 00:08:17,920 --> 00:08:20,000 Speaker 1: the price I need it, and so we just don't 153 00:08:20,120 --> 00:08:25,920 Speaker 1: have the new creation amount of money has decreased well, 154 00:08:26,480 --> 00:08:29,880 Speaker 1: because the FED is willing to lend infinite amounts of 155 00:08:29,920 --> 00:08:32,600 Speaker 1: money at the market price. If you're willing to pay 156 00:08:32,640 --> 00:08:34,880 Speaker 1: the market price, you can get all the dollars you need. 157 00:08:35,040 --> 00:08:37,320 Speaker 1: The shortage, in my view how I look at it, 158 00:08:37,400 --> 00:08:40,679 Speaker 1: occurs when even if you're willing to pay the market price, 159 00:08:40,840 --> 00:08:43,880 Speaker 1: as said roughly by the FED, you can't get it. 160 00:08:44,520 --> 00:08:48,240 Speaker 1: That's that's what Yeah. So um, you're definitely right, though, 161 00:08:48,280 --> 00:08:51,920 Speaker 1: So the whole point of raising interest rates in acense 162 00:08:52,080 --> 00:08:56,040 Speaker 1: is to decrease, uh, the credit creation and thus the 163 00:08:56,040 --> 00:08:58,760 Speaker 1: supply of money. But there's something really interesting happening with 164 00:08:58,800 --> 00:09:02,000 Speaker 1: the world now. You know, when we have a world 165 00:09:02,080 --> 00:09:06,960 Speaker 1: where's largely based on private actors, this works because, for example, 166 00:09:07,480 --> 00:09:10,000 Speaker 1: if the interest rate is higher and let's say I 167 00:09:10,040 --> 00:09:12,920 Speaker 1: want to buy a house get a mortgage, I'm less 168 00:09:12,960 --> 00:09:15,400 Speaker 1: likely this willing to do that because I'm sensitive to 169 00:09:15,440 --> 00:09:19,000 Speaker 1: interest rates. So using interest rates as a tool to 170 00:09:19,080 --> 00:09:23,559 Speaker 1: control inflation works when most of the economy is based 171 00:09:23,559 --> 00:09:26,200 Speaker 1: on the private sector. But what if you have a 172 00:09:26,240 --> 00:09:29,760 Speaker 1: world where most of the economy is actually the public sector. 173 00:09:30,720 --> 00:09:33,840 Speaker 1: Now we all know that Congress is never going to 174 00:09:33,880 --> 00:09:36,360 Speaker 1: go into a spending plan and say how we're going 175 00:09:36,400 --> 00:09:38,480 Speaker 1: to pay for it? Interest rates too high? That's never 176 00:09:38,520 --> 00:09:42,520 Speaker 1: a question. So interest rates don't matter to public spending. 177 00:09:42,720 --> 00:09:45,680 Speaker 1: So if you have an economy that's becoming more dominated 178 00:09:45,720 --> 00:09:50,440 Speaker 1: by the public sector, that tool of slowing down credit 179 00:09:50,480 --> 00:09:54,720 Speaker 1: creation through interest rates becomes less effective. Mm hm. That's 180 00:09:54,720 --> 00:09:56,280 Speaker 1: a that's a good point because they don't have the 181 00:09:56,280 --> 00:09:59,520 Speaker 1: same constraints at the private sector exactly exactly. That's a 182 00:09:59,720 --> 00:10:02,480 Speaker 1: kind but that's something that I think is becoming more 183 00:10:02,520 --> 00:10:05,839 Speaker 1: obvious now when when the one hand, the FETE is 184 00:10:05,920 --> 00:10:08,280 Speaker 1: trying to slow down the economy about raising rates. On 185 00:10:08,320 --> 00:10:11,800 Speaker 1: the other hand, Joe Biden just announces he'll forgive you know, 186 00:10:12,040 --> 00:10:15,000 Speaker 1: hundreds of billions of dollars in student loans. So they're 187 00:10:15,000 --> 00:10:19,320 Speaker 1: pushing against each other in a way. Yeah. And now 188 00:10:19,360 --> 00:10:21,880 Speaker 1: with the with the central banks needing to buy money 189 00:10:21,920 --> 00:10:23,360 Speaker 1: to prop up their bonds, which we'll get to that 190 00:10:23,360 --> 00:10:26,160 Speaker 1: in a little bit. Um, that's a really good topic. 191 00:10:26,160 --> 00:10:28,320 Speaker 1: We'll talk about it. Yeah. So I but I want 192 00:10:28,320 --> 00:10:30,840 Speaker 1: to stick on this, so increasing the money supply and 193 00:10:30,880 --> 00:10:33,199 Speaker 1: decreasing the money supply. So you recently had this article 194 00:10:33,280 --> 00:10:35,400 Speaker 1: that came out on barrens Um. We'll put a link 195 00:10:35,440 --> 00:10:37,800 Speaker 1: to it down in the description below. And you were saying, 196 00:10:37,840 --> 00:10:41,280 Speaker 1: how you know, for two years because of quantite of easing, Um, 197 00:10:41,320 --> 00:10:43,679 Speaker 1: it doubled the central banks balance sheet to nine trillion 198 00:10:44,200 --> 00:10:48,160 Speaker 1: UM of the nation's gross domestic product, which helped fuel 199 00:10:48,240 --> 00:10:52,080 Speaker 1: significant gains. That's what you said, Um, and the que 200 00:10:52,360 --> 00:10:54,840 Speaker 1: the easy the increase of the money supply, I put 201 00:10:54,880 --> 00:10:59,000 Speaker 1: downward pressure on interest rates. So the converse of what 202 00:10:59,080 --> 00:11:02,319 Speaker 1: you're saying, so, um, it pushed the borrowing costs down 203 00:11:02,400 --> 00:11:05,160 Speaker 1: because there was so much liquidity, right, which increased liquid 204 00:11:05,200 --> 00:11:08,280 Speaker 1: in the system. Um, so there's that, and now the 205 00:11:08,360 --> 00:11:11,560 Speaker 1: opposite of that is happening. So now they're tightening, and 206 00:11:11,640 --> 00:11:16,120 Speaker 1: so now they're reducing the security holdings by what nine 207 00:11:16,360 --> 00:11:19,480 Speaker 1: five billion per months. It's the opposite of QWI, which 208 00:11:19,480 --> 00:11:23,160 Speaker 1: would then put um upward pressure on interest rates and 209 00:11:23,400 --> 00:11:25,640 Speaker 1: decreased liquid in the finance system, which which is what 210 00:11:25,640 --> 00:11:29,800 Speaker 1: we're seeing exactly exactly right, and we see you see 211 00:11:29,800 --> 00:11:32,840 Speaker 1: the effects kind of obviously right. QWI makes the stock 212 00:11:32,920 --> 00:11:36,400 Speaker 1: market go higher. You reverse QWI, stock market seems to 213 00:11:36,400 --> 00:11:40,320 Speaker 1: be going lower. So there's a lot of factors at play, 214 00:11:40,360 --> 00:11:43,920 Speaker 1: but I think that's one of them. Um. One way 215 00:11:43,960 --> 00:11:46,320 Speaker 1: I think that I look at the money supply since 216 00:11:46,360 --> 00:11:49,080 Speaker 1: I think, uh, it seems like you focus on this 217 00:11:49,160 --> 00:11:51,720 Speaker 1: as well, is that I would also note that when 218 00:11:51,760 --> 00:11:55,360 Speaker 1: you're looking on at money supply, you could broaden your 219 00:11:55,360 --> 00:11:59,560 Speaker 1: definition of money to include not just let's say M two, 220 00:11:59,600 --> 00:12:03,319 Speaker 1: but you could also look at trudury securities. For example, 221 00:12:03,960 --> 00:12:08,160 Speaker 1: if let's say I'm someone working at a company, Um, 222 00:12:08,200 --> 00:12:11,559 Speaker 1: every week I get let's say a wire transfer from 223 00:12:11,559 --> 00:12:15,120 Speaker 1: my company into my bank account, I'd say a thousand 224 00:12:15,200 --> 00:12:19,360 Speaker 1: dollars If instead of receiving a hundred thousand dollars in 225 00:12:19,440 --> 00:12:22,240 Speaker 1: my bank account, I got a hundred thousand a thousand 226 00:12:22,320 --> 00:12:25,319 Speaker 1: in tugury securities instead, will that really make a difference 227 00:12:25,320 --> 00:12:27,760 Speaker 1: to me? And I don't think so. I mean, in 228 00:12:27,800 --> 00:12:31,880 Speaker 1: many ways, just like a hundred dollar bill is money, 229 00:12:32,000 --> 00:12:34,520 Speaker 1: so a hundred dollars in trudury securities is also a 230 00:12:34,559 --> 00:12:37,160 Speaker 1: form of money. So when you're when the FED is 231 00:12:37,200 --> 00:12:41,280 Speaker 1: going out and doing QWI by buying trudury securities a 232 00:12:41,320 --> 00:12:44,280 Speaker 1: lot of times, rather than say it's increasing the money supply, 233 00:12:44,880 --> 00:12:47,160 Speaker 1: I find it useful to think that it's just changing 234 00:12:47,200 --> 00:12:49,800 Speaker 1: the type of money people have. So, going back to 235 00:12:49,840 --> 00:12:53,040 Speaker 1: the example that we just mentioned, instead of being paid 236 00:12:53,480 --> 00:12:56,640 Speaker 1: maybe a thousand dollars in deposits in a bank, maybe 237 00:12:56,640 --> 00:12:59,800 Speaker 1: I'm getting a sorry instead of being paid a thousand 238 00:12:59,800 --> 00:13:02,599 Speaker 1: dollars and tredury securities, I'm getting a thousand dollars in 239 00:13:02,640 --> 00:13:05,920 Speaker 1: a bank. The difference being that ted securities have a 240 00:13:06,000 --> 00:13:09,079 Speaker 1: yield pay interest, but what I have in the bank doesn't. 241 00:13:09,559 --> 00:13:12,920 Speaker 1: So when the FED is doing KIWI on a large basis, 242 00:13:13,200 --> 00:13:17,160 Speaker 1: it's taking away risk free assets that offer interest to 243 00:13:17,240 --> 00:13:21,000 Speaker 1: people and replacing them with um deposits at a bank 244 00:13:21,160 --> 00:13:24,319 Speaker 1: or basically money that doesn't pay interest, and that forces 245 00:13:24,360 --> 00:13:26,880 Speaker 1: a lot of people to go and look for more 246 00:13:27,320 --> 00:13:30,880 Speaker 1: risk or higher interest returns. And that's what kind of 247 00:13:30,920 --> 00:13:34,480 Speaker 1: forces the whole keywi risk on in my view. So 248 00:13:35,360 --> 00:13:37,719 Speaker 1: one day I had a tudury paying let's say a 249 00:13:37,720 --> 00:13:40,520 Speaker 1: two percent. Today I have a bank uptosit paying nothing. 250 00:13:40,559 --> 00:13:42,640 Speaker 1: So maybe I go buy Apple bonds or Apple stock 251 00:13:42,720 --> 00:13:45,920 Speaker 1: or something like that. Now QT does the opposite of that. 252 00:13:46,400 --> 00:13:49,720 Speaker 1: Now interest rates go higher, there are more treasury securities 253 00:13:49,800 --> 00:13:55,040 Speaker 1: for me to purchase, and so maybe instead of buying Apple, 254 00:13:55,280 --> 00:13:57,120 Speaker 1: I go and I buy a two year treasury that's 255 00:13:57,200 --> 00:14:01,000 Speaker 1: yielding four So that's that's out of how it works. 256 00:14:01,000 --> 00:14:03,600 Speaker 1: In my view. You have this huge reshuffling of people 257 00:14:03,920 --> 00:14:06,720 Speaker 1: going out of risk assets to just you know, parking 258 00:14:06,760 --> 00:14:09,800 Speaker 1: it and uh and that showed security or the money 259 00:14:09,800 --> 00:14:12,520 Speaker 1: market fund for for higher return. There's lesson need to 260 00:14:12,559 --> 00:14:16,840 Speaker 1: take risk. The risk free rate right, yes, it's it's 261 00:14:16,840 --> 00:14:18,920 Speaker 1: getting higher. It's going to be four percent by the 262 00:14:19,000 --> 00:14:20,600 Speaker 1: end of the year. A lot of people are going 263 00:14:20,680 --> 00:14:22,800 Speaker 1: to have to look at that and say should I 264 00:14:23,000 --> 00:14:25,080 Speaker 1: that's the stock market where maybe I lose a lot 265 00:14:25,080 --> 00:14:27,960 Speaker 1: of money. Or maybe I can just put this at 266 00:14:27,960 --> 00:14:30,920 Speaker 1: the risk free rate and earn four percent with no 267 00:14:31,080 --> 00:14:33,400 Speaker 1: risk at all. And even though the four percent is 268 00:14:33,440 --> 00:14:37,600 Speaker 1: still um are still in negative real return exactly. At 269 00:14:37,680 --> 00:14:40,920 Speaker 1: least it's at least it's known. At least it's known 270 00:14:41,000 --> 00:14:44,040 Speaker 1: what my risk is as opposed to unknown. You know, 271 00:14:44,120 --> 00:14:46,560 Speaker 1: could could the stock market dropping, you know, we don't 272 00:14:46,560 --> 00:14:50,000 Speaker 1: know exactly exactly. So that's a big headwine two two 273 00:14:50,080 --> 00:14:54,720 Speaker 1: risk assets and we see that already. Yeah, as you suggest. Yeah, 274 00:14:54,960 --> 00:14:57,520 Speaker 1: now it sounds like so just kind of just to 275 00:14:57,560 --> 00:15:00,000 Speaker 1: finish nail this point home on the on the shore 276 00:15:00,000 --> 00:15:02,800 Speaker 1: stage of dollars. You you call that your definition of 277 00:15:02,840 --> 00:15:04,760 Speaker 1: shortage of dollars when people want them but can't really 278 00:15:04,800 --> 00:15:07,880 Speaker 1: get them. Um, I'm looking at it just a total 279 00:15:07,920 --> 00:15:10,440 Speaker 1: amount of dollars being created going up or down. So 280 00:15:10,480 --> 00:15:12,840 Speaker 1: when the total amount of dollars being created goes up, 281 00:15:12,920 --> 00:15:15,720 Speaker 1: we have more liquidity. We see assets go up. When 282 00:15:15,760 --> 00:15:17,920 Speaker 1: the total amount of dollars goes down, then we see 283 00:15:17,960 --> 00:15:20,800 Speaker 1: us go down. Not that people can't get them, but 284 00:15:20,840 --> 00:15:22,920 Speaker 1: there's just less of them because they're not as cheap 285 00:15:22,960 --> 00:15:28,560 Speaker 1: as they were before. Right, Um, yeah, so there you 286 00:15:28,600 --> 00:15:31,920 Speaker 1: have more alternatives when when you do QT you have 287 00:15:32,000 --> 00:15:35,120 Speaker 1: higher interest rates, right, there's less than that for assets 288 00:15:35,160 --> 00:15:38,120 Speaker 1: in general, when you have safer alternatives, like like we 289 00:15:38,240 --> 00:15:39,840 Speaker 1: just talked about, well, and if I was going to 290 00:15:39,960 --> 00:15:43,760 Speaker 1: borrow short at you know, zero point five percent and 291 00:15:43,760 --> 00:15:46,680 Speaker 1: then go along at two or three percent, right, I 292 00:15:46,720 --> 00:15:48,560 Speaker 1: may take those dollars because I can make that to 293 00:15:48,720 --> 00:15:51,920 Speaker 1: three spread. But when those numbers change, I'm not gonna 294 00:15:51,960 --> 00:15:53,680 Speaker 1: I'm not gonna borrow the dollars because now that deal 295 00:15:53,760 --> 00:15:57,120 Speaker 1: is not available to me anymore. Right, Yes, the cost 296 00:15:57,200 --> 00:15:59,520 Speaker 1: of carry goes higher, so there's going to be less leverage, 297 00:15:59,600 --> 00:16:03,480 Speaker 1: less ring, and let's barring obviously decreased this amount of 298 00:16:03,600 --> 00:16:08,200 Speaker 1: money in the system now, So if we keep moving 299 00:16:08,320 --> 00:16:13,400 Speaker 1: on to that. You know, Chairman Pal he's been pretty 300 00:16:13,440 --> 00:16:15,840 Speaker 1: strong with his wording. I think he got hammered a 301 00:16:15,840 --> 00:16:18,160 Speaker 1: little bit a couple of months ago. He at the 302 00:16:18,280 --> 00:16:20,680 Speaker 1: end of the meeting he got a little devish, and uh, 303 00:16:20,920 --> 00:16:22,440 Speaker 1: they had to kind of backtrack that. In the last 304 00:16:22,440 --> 00:16:26,400 Speaker 1: two meetings, he's been more harsh, more hawkish. I guess. Uh. 305 00:16:26,520 --> 00:16:30,720 Speaker 1: He says that you know, they'll stay at it until 306 00:16:30,960 --> 00:16:33,600 Speaker 1: it is done right, So like, stay at what right? 307 00:16:33,640 --> 00:16:37,680 Speaker 1: I guess, continue tightening and tell what until inflation comes down. Um. 308 00:16:37,720 --> 00:16:40,120 Speaker 1: He doesn't seem to be concerned about the stock markets 309 00:16:40,240 --> 00:16:46,000 Speaker 1: at all. Um really just focused on um inflation. It 310 00:16:46,040 --> 00:16:49,760 Speaker 1: seems like, Um, you hear a lot of talk about 311 00:16:50,440 --> 00:16:52,600 Speaker 1: you know, a pivot, a pivot, a pivot, a pivot. 312 00:16:52,600 --> 00:16:54,720 Speaker 1: But again he doesn't care about the stock market. And 313 00:16:54,720 --> 00:16:56,520 Speaker 1: and and ultimately, if you look at it, maybe the 314 00:16:56,520 --> 00:16:59,360 Speaker 1: stock market hasn't even been hammered that bad as of now. 315 00:17:00,040 --> 00:17:02,720 Speaker 1: But what we are seeing is the bond market, right, 316 00:17:02,760 --> 00:17:05,320 Speaker 1: so there's a lot of volatility coming there. The vixus 317 00:17:05,400 --> 00:17:10,439 Speaker 1: spiking credit default swaps. Is that where you think the 318 00:17:10,480 --> 00:17:14,480 Speaker 1: focus is, like the liquidity in the bond market exactly, 319 00:17:14,640 --> 00:17:18,120 Speaker 1: that's where I think the big risk is. So when 320 00:17:18,160 --> 00:17:21,639 Speaker 1: you're doing so so I imagine many of the viewers 321 00:17:21,680 --> 00:17:25,240 Speaker 1: here are familiar with how bitcoin trades. Right, So if 322 00:17:25,240 --> 00:17:27,879 Speaker 1: you have, for example, in bitcoin, when you look at 323 00:17:27,920 --> 00:17:29,919 Speaker 1: the market, if you have a whale come in and 324 00:17:30,119 --> 00:17:32,440 Speaker 1: unload a whole bunch of bitcoin, prices are going to 325 00:17:32,520 --> 00:17:34,920 Speaker 1: drop a lot. Right, that's a liquidity issue. Right, if 326 00:17:34,960 --> 00:17:36,760 Speaker 1: you go and you sell a whole bunch of bitcoin, 327 00:17:37,119 --> 00:17:41,920 Speaker 1: supplyingmand supplying exactly it's not just now. The trugury market 328 00:17:42,160 --> 00:17:44,600 Speaker 1: is just like bitcoin in that sense, there's just supply 329 00:17:44,640 --> 00:17:47,600 Speaker 1: and demand. You can you sell a lot of trudguries, 330 00:17:47,800 --> 00:17:52,000 Speaker 1: you're going to get unstable prices, and that's exactly what's 331 00:17:52,040 --> 00:17:56,520 Speaker 1: going on right now. So QT at a high level 332 00:17:57,080 --> 00:17:59,600 Speaker 1: means that the public is going to the market is 333 00:17:59,600 --> 00:18:02,240 Speaker 1: going to have to absorb a lot more trosury securities. 334 00:18:02,760 --> 00:18:06,800 Speaker 1: Now how much more? A lot more um? This sierra 335 00:18:06,880 --> 00:18:12,040 Speaker 1: looks like the total issuance that it's okay, So issuance 336 00:18:12,080 --> 00:18:14,639 Speaker 1: including QT that the market will have to absorb is 337 00:18:14,680 --> 00:18:18,320 Speaker 1: about one point five trillion. Now, before the pandemic, the 338 00:18:18,359 --> 00:18:22,520 Speaker 1: market absorbing about five billion UM a year, So it's 339 00:18:22,520 --> 00:18:24,359 Speaker 1: going to have to absorb one point five trillion this 340 00:18:24,440 --> 00:18:28,680 Speaker 1: year and the next and going forward because of our deficit, 341 00:18:28,920 --> 00:18:31,160 Speaker 1: it's going to be at least a trillion a year 342 00:18:31,200 --> 00:18:34,959 Speaker 1: or forever. So that's a lot of supply into the market, 343 00:18:35,800 --> 00:18:38,840 Speaker 1: and at the same time, the demand in the market 344 00:18:39,160 --> 00:18:44,199 Speaker 1: it's not that strong. So during after the pandemic, the 345 00:18:44,240 --> 00:18:47,040 Speaker 1: FED was basically the major buyer of troedery securities, and 346 00:18:47,119 --> 00:18:49,440 Speaker 1: the FED is going away right now, so you're gonna 347 00:18:49,440 --> 00:18:52,040 Speaker 1: have this huge supply and demand mismatch, which we kind 348 00:18:52,040 --> 00:18:55,120 Speaker 1: of see manifesting in the troasury market. You see, sometimes 349 00:18:55,119 --> 00:18:58,360 Speaker 1: the tenure goes up twenty point pony basis points a day. 350 00:18:58,600 --> 00:19:02,159 Speaker 1: That's pretty unstable. And we've trended steadily higher over the 351 00:19:02,200 --> 00:19:05,840 Speaker 1: past few months because we have to find these new 352 00:19:05,880 --> 00:19:10,080 Speaker 1: marshal buyers to absorb all that supply. And I don't 353 00:19:10,119 --> 00:19:13,280 Speaker 1: know who that is. Like you mentioned, inflation is high, 354 00:19:13,400 --> 00:19:16,960 Speaker 1: and who wants to buy a tenure treasure security yet 355 00:19:17,240 --> 00:19:19,680 Speaker 1: four percent? You can get the same thing and money 356 00:19:19,720 --> 00:19:24,720 Speaker 1: market account. Yeah so, and that's what happened on the 357 00:19:24,720 --> 00:19:30,040 Speaker 1: Bank of England as well, which I'm sure we'll get into. Yeah. So, um, 358 00:19:30,119 --> 00:19:31,840 Speaker 1: if we if we stick with what you're saying, so 359 00:19:32,000 --> 00:19:34,600 Speaker 1: just supplying demand, it's it's it's the most simple thing. 360 00:19:34,720 --> 00:19:36,960 Speaker 1: You can take these super complex subjects and just break 361 00:19:36,960 --> 00:19:39,439 Speaker 1: them down to just the equilibrium of supply and demand. 362 00:19:39,480 --> 00:19:42,000 Speaker 1: And so back to just where we started with the 363 00:19:42,000 --> 00:19:45,920 Speaker 1: money supply. When money is cheap, there's more demand for it, right, 364 00:19:46,400 --> 00:19:50,159 Speaker 1: and so back to the supply of treasuries. Um, so, 365 00:19:50,200 --> 00:19:51,919 Speaker 1: if the government is going to mean to need to 366 00:19:52,040 --> 00:19:54,040 Speaker 1: issue more trade they already are you said, it's gone 367 00:19:54,080 --> 00:19:56,800 Speaker 1: up from there, having absorbed five million owns up to 368 00:19:56,840 --> 00:20:00,560 Speaker 1: one point five trillion yea probably billion to If we 369 00:20:00,600 --> 00:20:04,639 Speaker 1: look at the FED, seems to be focused on crushing demand, right, 370 00:20:04,680 --> 00:20:06,639 Speaker 1: that's what they've said. They believe that if they can 371 00:20:06,680 --> 00:20:09,040 Speaker 1: crush the demand side, then people will spend less money 372 00:20:09,119 --> 00:20:12,679 Speaker 1: and maybe they'll bring inflation down. Um. The problem to 373 00:20:12,720 --> 00:20:17,760 Speaker 1: me seems that it's asset prices that are getting hammered. First. Um, 374 00:20:17,800 --> 00:20:21,000 Speaker 1: if asset prices come down, then there's no cap gains, 375 00:20:21,000 --> 00:20:26,439 Speaker 1: there's no iary distributions. We already have a huge balance problem, right, 376 00:20:26,440 --> 00:20:28,560 Speaker 1: We're already running a deficit to the point that you're making. 377 00:20:28,960 --> 00:20:32,840 Speaker 1: And so if we see asset prices come down, Um, 378 00:20:33,000 --> 00:20:35,000 Speaker 1: then we don't see, like I said, the cap gains. 379 00:20:35,000 --> 00:20:36,840 Speaker 1: We don't see that. We also see the reverse wealth 380 00:20:36,840 --> 00:20:39,719 Speaker 1: effects of people spend less. So total tax receipts are 381 00:20:39,800 --> 00:20:44,200 Speaker 1: just going to plummet. Most likely seventy percent of the 382 00:20:44,240 --> 00:20:47,840 Speaker 1: taxes come from the top ten percent of earners, which 383 00:20:47,880 --> 00:20:50,560 Speaker 1: most likely make the majority of their income from cap 384 00:20:50,600 --> 00:20:54,520 Speaker 1: gains distributions and things like that. That's seventy access eats 385 00:20:54,560 --> 00:20:56,879 Speaker 1: come from that. Uh, And so we could see a 386 00:20:56,960 --> 00:21:00,240 Speaker 1: massive it. We could see this, uh this f five 387 00:21:00,480 --> 00:21:02,439 Speaker 1: million to one point five trillion or even more. We 388 00:21:02,440 --> 00:21:05,640 Speaker 1: can see this deficit grow by levels that maybe they're 389 00:21:05,640 --> 00:21:09,640 Speaker 1: not even anticipating or do you think that's too apocalyptic? 390 00:21:11,280 --> 00:21:14,240 Speaker 1: I think you're exactly right. That is the big picture. 391 00:21:14,320 --> 00:21:16,080 Speaker 1: How are we going to pay for all these things? 392 00:21:16,200 --> 00:21:20,720 Speaker 1: Or deficit? Is there's a forecast put out by the 393 00:21:20,760 --> 00:21:24,879 Speaker 1: government based on law on the books. It's forecasts to 394 00:21:24,920 --> 00:21:27,560 Speaker 1: basically be at least a trillion dollars a year forever. 395 00:21:28,000 --> 00:21:30,640 Speaker 1: And that's just what it's on the books. Eventually, I'm 396 00:21:30,680 --> 00:21:33,880 Speaker 1: sure they're going to give more free stuff. So, um, 397 00:21:33,920 --> 00:21:36,800 Speaker 1: so that that that is the problem. It does seem apocalyptic, 398 00:21:36,960 --> 00:21:39,760 Speaker 1: and um it seems like I think Stanley Drunken Miller 399 00:21:39,800 --> 00:21:42,720 Speaker 1: recently made a similar point just just last week. I think. 400 00:21:42,760 --> 00:21:46,320 Speaker 1: So it's a big problem. So the way that I 401 00:21:46,359 --> 00:21:49,760 Speaker 1: look at it is that it's never a financing problem 402 00:21:49,800 --> 00:21:53,159 Speaker 1: because if you are the US government, you have a 403 00:21:53,200 --> 00:21:57,000 Speaker 1: printing press, you can always always pay for everything interest 404 00:21:57,119 --> 00:22:00,800 Speaker 1: rate that everything, just print it, have the fit printed, 405 00:22:00,800 --> 00:22:04,760 Speaker 1: and pay for it super super easy. Um, but that 406 00:22:04,840 --> 00:22:08,080 Speaker 1: has consequences as well. The consequences are not that I 407 00:22:08,119 --> 00:22:10,720 Speaker 1: can't make my interest rate payments. I always will be, 408 00:22:11,240 --> 00:22:13,800 Speaker 1: but that if I print all this money, then I'll 409 00:22:13,800 --> 00:22:17,840 Speaker 1: have inflation. So that is ultimately the constraint that the 410 00:22:17,880 --> 00:22:21,119 Speaker 1: government has and we're seeing that right now. So in 411 00:22:21,960 --> 00:22:25,600 Speaker 1: government just you know, created a couple of trillion dollars, 412 00:22:25,800 --> 00:22:27,639 Speaker 1: gave it away and steamy checks and p P P 413 00:22:27,800 --> 00:22:31,000 Speaker 1: loans and we had massive inflation. And not just us, 414 00:22:31,040 --> 00:22:33,439 Speaker 1: but people all around the Western world did something similar, 415 00:22:33,760 --> 00:22:39,119 Speaker 1: even worse, even worse. So, um, yeah, that that that 416 00:22:39,240 --> 00:22:41,560 Speaker 1: is the problem that we face right now. We're going 417 00:22:41,600 --> 00:22:43,760 Speaker 1: to have it seems like we're on a very big 418 00:22:43,800 --> 00:22:46,479 Speaker 1: inflationary trajectory. We're going to be able to afford all 419 00:22:46,520 --> 00:22:49,520 Speaker 1: these payments. It's just that it will be inflationary. And 420 00:22:49,600 --> 00:22:52,399 Speaker 1: it's the only way to stop this would be to 421 00:22:52,520 --> 00:22:55,600 Speaker 1: convince Congress to not spend so much. And now that's 422 00:22:55,720 --> 00:22:57,560 Speaker 1: that's just not going to happen. Now, we're spending to 423 00:22:57,680 --> 00:23:03,640 Speaker 1: reduce inflation the Inflation Reduction Act, Right, that's how it works, right, Yeah, 424 00:23:03,640 --> 00:23:05,439 Speaker 1: if we spend all this money, we'll actually have it. 425 00:23:05,720 --> 00:23:08,400 Speaker 1: I think it's I think it's pretty easy. You don't 426 00:23:08,440 --> 00:23:10,520 Speaker 1: have to be the FED guy or a FED insider 427 00:23:10,680 --> 00:23:13,240 Speaker 1: or economist. I mean, you could just ask the average 428 00:23:13,280 --> 00:23:15,520 Speaker 1: person on the street, like do you think the government's 429 00:23:15,560 --> 00:23:18,560 Speaker 1: going to spend less money or more money in the future? Right, 430 00:23:18,640 --> 00:23:23,359 Speaker 1: And unfortunately, as these things continue to uh evolve, I 431 00:23:23,359 --> 00:23:25,840 Speaker 1: mean we're already seeing it. Uh specifically, we're seeing it 432 00:23:25,880 --> 00:23:28,200 Speaker 1: more in other countries. But you know, with u b 433 00:23:28,359 --> 00:23:31,520 Speaker 1: I things like that assistance in California, they want to 434 00:23:31,600 --> 00:23:34,159 Speaker 1: give tax rebates to help offset the rising cost of fuel. 435 00:23:34,520 --> 00:23:36,439 Speaker 1: Obviously in the UK they have a big deal with 436 00:23:36,480 --> 00:23:38,719 Speaker 1: that where they're trying to offset energy prices. And so 437 00:23:39,320 --> 00:23:42,560 Speaker 1: it looks like more social spending is coming. Obviously there's 438 00:23:42,600 --> 00:23:47,479 Speaker 1: this green transition that they're that they're pushing um and so, uh, 439 00:23:47,560 --> 00:23:49,520 Speaker 1: it looks like spending is gonna go up. It looks 440 00:23:49,520 --> 00:23:51,800 Speaker 1: like tax receipts are going to come down. And I 441 00:23:51,800 --> 00:23:54,359 Speaker 1: think both of those are gonna happen at the same time. Now, 442 00:23:55,040 --> 00:23:57,240 Speaker 1: you know, with inflation, maybe it kind of looks like 443 00:23:57,280 --> 00:24:00,080 Speaker 1: GDPs going up inflation, but in real economic out but 444 00:24:00,200 --> 00:24:03,840 Speaker 1: there's there's nothing there. And then at the same time, 445 00:24:05,160 --> 00:24:07,639 Speaker 1: if that's not already bad enough, at the same time, 446 00:24:07,640 --> 00:24:10,560 Speaker 1: we have because of the currency wars that are going on, 447 00:24:10,640 --> 00:24:13,439 Speaker 1: So we're pushing inflation to these other countries. Now we're 448 00:24:13,480 --> 00:24:15,960 Speaker 1: getting to these currency wars, and it looks like we're 449 00:24:16,000 --> 00:24:19,720 Speaker 1: seeing Japan, we're seeing China. In order to shore up 450 00:24:19,800 --> 00:24:24,480 Speaker 1: their currencies, they're dumping dollars to buy their currencies in 451 00:24:24,480 --> 00:24:27,520 Speaker 1: the open market to keep them somewhat propped up, which 452 00:24:27,560 --> 00:24:32,320 Speaker 1: is even more selling on the treasuries. Right, exactly, exactly. 453 00:24:32,880 --> 00:24:35,639 Speaker 1: That's a special thing about the dollar. Everyone kind of 454 00:24:35,680 --> 00:24:38,600 Speaker 1: has to manage their currency with respect to it because 455 00:24:38,640 --> 00:24:41,080 Speaker 1: it is the world's reserve currency. And the way they 456 00:24:41,119 --> 00:24:43,840 Speaker 1: do that is they keep a rainy day fund of 457 00:24:43,880 --> 00:24:47,080 Speaker 1: dollars in case their own currency gets too weak. Then 458 00:24:47,119 --> 00:24:50,080 Speaker 1: they use the rainy day hunt to basically show up 459 00:24:50,080 --> 00:24:52,320 Speaker 1: their own their own currencies. So they would sell dollars 460 00:24:52,320 --> 00:24:55,399 Speaker 1: and buy their own currency. And but they're really that 461 00:24:55,520 --> 00:24:59,400 Speaker 1: rainy day fund, which is usually held in the form 462 00:24:59,400 --> 00:25:02,359 Speaker 1: of treasuries. So those sell trujuries like you suggested, and 463 00:25:02,560 --> 00:25:05,479 Speaker 1: that's even worse for the trojury market. Um, so you've 464 00:25:05,480 --> 00:25:07,479 Speaker 1: got a lot of selling, but I'm not sure who 465 00:25:07,560 --> 00:25:10,720 Speaker 1: the buyers are going to be, mm hmm, which just 466 00:25:10,800 --> 00:25:15,920 Speaker 1: exaggerates the problem absolutely. So there is some tail risk 467 00:25:15,960 --> 00:25:18,240 Speaker 1: here for it that you could have a very uncontrollable 468 00:25:18,280 --> 00:25:21,639 Speaker 1: sell off in the trojury market. Um, but it's a 469 00:25:21,680 --> 00:25:25,280 Speaker 1: tail RISKKET doesn't necessarily mean it will happen. It seems 470 00:25:25,320 --> 00:25:27,919 Speaker 1: like the FED and you know better, you tell me, 471 00:25:27,960 --> 00:25:30,440 Speaker 1: but it seems like the FED one and I think 472 00:25:30,480 --> 00:25:32,920 Speaker 1: you and I have had this discussion before, where um, 473 00:25:32,960 --> 00:25:36,480 Speaker 1: the FED doesn't want to surprise anybody, so they try 474 00:25:36,560 --> 00:25:40,080 Speaker 1: to really broadcast far in advance what they're gonna do. 475 00:25:40,640 --> 00:25:43,080 Speaker 1: They announced in November that they were gonna start raising rates. 476 00:25:43,119 --> 00:25:45,879 Speaker 1: We didn't see them raise rates until January. Um. And 477 00:25:45,920 --> 00:25:47,919 Speaker 1: so they tell us this that they're going to do 478 00:25:48,000 --> 00:25:50,840 Speaker 1: these things, but it also seems like they get really 479 00:25:50,960 --> 00:25:53,719 Speaker 1: dug into their position and feel like maybe they have 480 00:25:53,840 --> 00:25:56,480 Speaker 1: to hold with this. So like Jerome Power was saying, 481 00:25:56,480 --> 00:25:59,560 Speaker 1: we can't get inflation, we're not thinking about thinking about 482 00:25:59,640 --> 00:26:02,080 Speaker 1: raising rates. Um. Then he said we're gonna let it 483 00:26:02,160 --> 00:26:05,520 Speaker 1: run hot. Um and then we got it right, and 484 00:26:05,600 --> 00:26:08,600 Speaker 1: then it was like, well, it's transitory, and it seems 485 00:26:08,600 --> 00:26:11,000 Speaker 1: to be. You know, pretty much every pundent and economist 486 00:26:11,080 --> 00:26:13,159 Speaker 1: out there says that they waited way too long. They 487 00:26:13,160 --> 00:26:16,000 Speaker 1: should have started raising sooner, but maybe they were dug 488 00:26:16,040 --> 00:26:18,199 Speaker 1: into that position of not thinking about thinking about they 489 00:26:18,200 --> 00:26:21,040 Speaker 1: were't going to raise rates until I think it was, 490 00:26:21,720 --> 00:26:23,920 Speaker 1: and so maybe they were dug in and finally said, okay, fine, 491 00:26:23,960 --> 00:26:26,240 Speaker 1: we have to pivot. And what I'm afraid so one 492 00:26:26,359 --> 00:26:28,800 Speaker 1: comment on that, But then too, if that's the case, 493 00:26:28,880 --> 00:26:31,520 Speaker 1: if that, if there's some truth to that, then maybe 494 00:26:31,520 --> 00:26:33,760 Speaker 1: I'm also worried that they're also dug in. They're gonna 495 00:26:33,960 --> 00:26:36,240 Speaker 1: raise rates through the end of next year. Uh. And 496 00:26:36,520 --> 00:26:40,359 Speaker 1: like even if these treasury starts spiking there's no bids whatever, 497 00:26:40,560 --> 00:26:42,840 Speaker 1: are they dug into that? And uh, and they have 498 00:26:42,880 --> 00:26:45,320 Speaker 1: to kind of hold the kind of keep that confidence 499 00:26:45,359 --> 00:26:47,320 Speaker 1: and then they're not going to pivot when they need to. 500 00:26:49,240 --> 00:26:52,879 Speaker 1: So I think the FED was definitely slow to raise rates, 501 00:26:53,400 --> 00:26:56,680 Speaker 1: and exactly as you mentioned, they were probably to dug 502 00:26:56,680 --> 00:27:00,960 Speaker 1: into their view that they would inflish will be transitory. 503 00:27:01,080 --> 00:27:07,120 Speaker 1: And we see officials echoing that, um, you know, and 504 00:27:07,520 --> 00:27:09,760 Speaker 1: that might have been political in some sense. So we 505 00:27:09,760 --> 00:27:12,080 Speaker 1: saw the Trogary Secretary Janet yell And last year also 506 00:27:12,200 --> 00:27:17,600 Speaker 1: say something similar and maybe those were the talking points. Um. 507 00:27:17,600 --> 00:27:19,320 Speaker 1: But I want to be fair to them that it 508 00:27:19,400 --> 00:27:21,479 Speaker 1: was a hard thing to do back then. It's it's 509 00:27:21,520 --> 00:27:23,879 Speaker 1: hard to know how the colony would have involved. The 510 00:27:23,960 --> 00:27:26,600 Speaker 1: clear policy here, I think was to keep buying mortgage 511 00:27:26,600 --> 00:27:30,399 Speaker 1: backed securities housing, you know, more backed securities when the 512 00:27:30,400 --> 00:27:34,080 Speaker 1: housing market was going up a year. That was clearly crazy. 513 00:27:34,240 --> 00:27:37,320 Speaker 1: But whether not the race rates that that that was 514 00:27:37,920 --> 00:27:40,200 Speaker 1: not the correct call. They should have raised rates earlier. 515 00:27:40,359 --> 00:27:43,120 Speaker 1: But I think it's understandable if they if they are 516 00:27:43,119 --> 00:27:45,280 Speaker 1: a little bit late on that, whether or not they're 517 00:27:45,280 --> 00:27:49,199 Speaker 1: making another policy air that that, I don't know that 518 00:27:49,560 --> 00:27:51,240 Speaker 1: it's going to be an error, but I'm pretty sure 519 00:27:51,240 --> 00:27:54,399 Speaker 1: they're going to try to keep rates high um throughout 520 00:27:54,440 --> 00:27:58,320 Speaker 1: next year. I think it's useful to think to understand 521 00:27:58,359 --> 00:28:01,600 Speaker 1: how they're approaching this so um, a little bit of 522 00:28:01,680 --> 00:28:04,919 Speaker 1: history is helpful. So in the seventies and eighties, uh, 523 00:28:05,400 --> 00:28:07,359 Speaker 1: as we all know in the US, there was very 524 00:28:07,480 --> 00:28:11,600 Speaker 1: high inflation, you know, over ten percent. And what the 525 00:28:11,640 --> 00:28:14,679 Speaker 1: FED did back then in the seventies under Arthur Burns 526 00:28:14,880 --> 00:28:17,760 Speaker 1: was they would hike rates, and then when inflation looked 527 00:28:17,760 --> 00:28:20,280 Speaker 1: like he was getting under control, they would start cutting rates. 528 00:28:20,760 --> 00:28:23,440 Speaker 1: And then what would happen and then the rates inflation 529 00:28:23,480 --> 00:28:26,120 Speaker 1: will come growing back again, and then they would hike again. 530 00:28:27,080 --> 00:28:29,560 Speaker 1: Inflash would come down, they'd cut again, and inflish and 531 00:28:29,720 --> 00:28:32,640 Speaker 1: go back up. So that kind of stopped go thing 532 00:28:32,680 --> 00:28:37,320 Speaker 1: that they did back then proved to be not very useful. 533 00:28:37,720 --> 00:28:41,040 Speaker 1: So they are very keen to avoid that mistake. And 534 00:28:41,120 --> 00:28:45,160 Speaker 1: Pauwell mentioned this specifically at his last pressor. So he 535 00:28:45,240 --> 00:28:48,360 Speaker 1: doesn't want to remake the mistake of the seventies. So 536 00:28:48,440 --> 00:28:51,760 Speaker 1: instead of just hiking rates and then cutting it at 537 00:28:51,800 --> 00:28:54,200 Speaker 1: the first sign that inflation is coming down or maybe 538 00:28:54,280 --> 00:28:56,880 Speaker 1: unemployment is taking up, he's going to hike it till 539 00:28:56,960 --> 00:28:58,920 Speaker 1: let's say four and a half percent, and he's going 540 00:28:59,000 --> 00:29:01,560 Speaker 1: to hold it there for the entire year. That's the 541 00:29:01,600 --> 00:29:04,000 Speaker 1: game plan that he's trying to tell the market, and 542 00:29:04,120 --> 00:29:05,920 Speaker 1: I don't know if he'll be able to carry it out, 543 00:29:06,080 --> 00:29:09,800 Speaker 1: but that's what he's very resolute to to tell everyone. 544 00:29:10,840 --> 00:29:13,080 Speaker 1: Some other something else that I think it's helpful to 545 00:29:13,160 --> 00:29:17,160 Speaker 1: understand what Paul was doing. Well. To understand Paul is 546 00:29:17,200 --> 00:29:23,240 Speaker 1: to think about what happened in December. In December, Powell 547 00:29:23,360 --> 00:29:26,080 Speaker 1: was also resolute. He told the market that I'm going 548 00:29:26,120 --> 00:29:31,240 Speaker 1: to be hiking rates in except that the Stockholm market crumbled, 549 00:29:31,280 --> 00:29:35,400 Speaker 1: and I think maybe February or March they were indicating 550 00:29:35,400 --> 00:29:37,600 Speaker 1: to the market that they weren't going to high grate 551 00:29:37,600 --> 00:29:39,680 Speaker 1: it anymore. In fact, they were going to cut them 552 00:29:39,680 --> 00:29:42,120 Speaker 1: in the coming months. So he did a complete one 553 00:29:42,240 --> 00:29:46,640 Speaker 1: eight a pivot. And because he did that in many 554 00:29:46,680 --> 00:29:49,719 Speaker 1: people in the markets don't believe that Paul was actually 555 00:29:49,840 --> 00:29:53,520 Speaker 1: be able to carry out his plan to uh be 556 00:29:53,680 --> 00:29:56,840 Speaker 1: vulker like. So that's why in the markets you see 557 00:29:57,600 --> 00:30:00,720 Speaker 1: the market pricing and some probability of a bit next year, 558 00:30:01,680 --> 00:30:04,320 Speaker 1: and that I think is what the market and to 559 00:30:04,400 --> 00:30:07,120 Speaker 1: Fit are going to try to have to resolve in 560 00:30:07,160 --> 00:30:10,040 Speaker 1: the coming months. Is the market right the Powell is 561 00:30:10,040 --> 00:30:12,680 Speaker 1: a pivoter, he will eventually cave and then risk ass 562 00:30:12,760 --> 00:30:15,280 Speaker 1: let's go to the moon. Or is Powell right that 563 00:30:15,360 --> 00:30:19,320 Speaker 1: he is resolute, he is ah some spirit of vulcar 564 00:30:19,440 --> 00:30:22,880 Speaker 1: and he is going to keep brids high throughout next year. Um, 565 00:30:23,120 --> 00:30:24,720 Speaker 1: I guess we'll find out in the coming months. I 566 00:30:24,720 --> 00:30:27,000 Speaker 1: think both of those things can be true. He can 567 00:30:27,040 --> 00:30:30,160 Speaker 1: be resolute longer than most people think he will, and 568 00:30:30,200 --> 00:30:33,520 Speaker 1: cause more damage and pain than most people expect. But eventually, 569 00:30:34,480 --> 00:30:37,160 Speaker 1: as you've already kind of made the case, they'll never 570 00:30:37,240 --> 00:30:39,680 Speaker 1: run out as long as they have the printer. So like, UM, 571 00:30:40,840 --> 00:30:44,680 Speaker 1: I don't understand I don't believe any nation, any sovereign, 572 00:30:44,720 --> 00:30:47,320 Speaker 1: would go with default when they have the ability to 573 00:30:47,320 --> 00:30:50,280 Speaker 1: print money. You've already kind of makes so both of 574 00:30:50,280 --> 00:30:52,280 Speaker 1: those can be true. It's the timing of when those 575 00:30:52,320 --> 00:30:55,840 Speaker 1: things happen. Yeah, But but back to that just for 576 00:30:55,880 --> 00:30:58,720 Speaker 1: a second. So Powell came in, you know, he was 577 00:30:58,760 --> 00:31:01,000 Speaker 1: fired up. He was gonna make some change. He was 578 00:31:01,000 --> 00:31:04,640 Speaker 1: gonna he was gonna normalize the system again, right, he 579 00:31:04,680 --> 00:31:07,000 Speaker 1: started hiking rates and to your point that the market 580 00:31:07,080 --> 00:31:09,959 Speaker 1: dropped and he was forced to pivot, and it seemed 581 00:31:10,000 --> 00:31:13,400 Speaker 1: like he pivoted and again correct to me, but it 582 00:31:13,440 --> 00:31:15,760 Speaker 1: seemed like and maybe even hinted to the fact that 583 00:31:15,880 --> 00:31:19,680 Speaker 1: it was the stock market crashing that caused him to pivot, 584 00:31:20,320 --> 00:31:22,920 Speaker 1: whereas this time it doesn't seem like he cares about 585 00:31:22,920 --> 00:31:24,760 Speaker 1: the stock market crashing. Is as a matter of fact, 586 00:31:24,840 --> 00:31:27,680 Speaker 1: he almost wants the stock market to crash because of 587 00:31:27,720 --> 00:31:32,400 Speaker 1: crushing demand. You're exactly right. So the difference is that 588 00:31:32,440 --> 00:31:36,040 Speaker 1: we have inflation, and inflation is very high. So back then, 589 00:31:36,600 --> 00:31:39,400 Speaker 1: you know that the FEDS goal was full employment and 590 00:31:39,440 --> 00:31:43,640 Speaker 1: price stability. Back then, inflation was low. That's okay, So 591 00:31:43,840 --> 00:31:46,800 Speaker 1: what they were more concerned about was getting um the 592 00:31:46,840 --> 00:31:51,520 Speaker 1: unemployment rates down, So it made sense. Well, you know, 593 00:31:51,680 --> 00:31:53,920 Speaker 1: if I can cut rates and that will help unemployment 594 00:31:54,000 --> 00:31:56,040 Speaker 1: and inflation is fine, why don't I just do that? 595 00:31:56,520 --> 00:32:00,320 Speaker 1: Now today it's completely different. Inflation is very high and 596 00:32:00,680 --> 00:32:04,160 Speaker 1: unemployment is very low, so we're gonna have to get 597 00:32:04,200 --> 00:32:08,760 Speaker 1: inflation down. So inflation is basically the Fed's primary mandate 598 00:32:08,840 --> 00:32:12,560 Speaker 1: for the moment. And how do you get inflation down? Well, 599 00:32:12,840 --> 00:32:15,280 Speaker 1: the way that I think about it is inflation comes 600 00:32:15,280 --> 00:32:19,080 Speaker 1: down when people can no longer afford higher prices. How 601 00:32:19,120 --> 00:32:21,120 Speaker 1: do they no longer afford higher prices when they have 602 00:32:21,200 --> 00:32:24,080 Speaker 1: less money? Okay, So there's a couple of ways you 603 00:32:24,080 --> 00:32:26,400 Speaker 1: can get people to be poor, so to speak. The 604 00:32:26,440 --> 00:32:29,840 Speaker 1: one is to make asset prices go lower, like you mentioned, 605 00:32:29,880 --> 00:32:32,720 Speaker 1: making the stock market go lower. That means people have 606 00:32:32,840 --> 00:32:34,840 Speaker 1: less money in their stock account to go spend and 607 00:32:34,880 --> 00:32:37,680 Speaker 1: buy stuff if they can't afford higher prices, and inflation 608 00:32:37,680 --> 00:32:40,320 Speaker 1: will come down. Now, the other part, which is what 609 00:32:40,400 --> 00:32:43,360 Speaker 1: I think the FED is emphasizing more now, is if 610 00:32:43,400 --> 00:32:47,040 Speaker 1: you have lower wages, if you have more wages, then 611 00:32:47,080 --> 00:32:49,520 Speaker 1: you can't afford stuff less, So so wage gains. According 612 00:32:49,560 --> 00:32:52,920 Speaker 1: to the FED data, it's growing about about six seven 613 00:32:53,600 --> 00:32:57,320 Speaker 1: annual rate. Now, if you're in if you're salaries going 614 00:32:57,400 --> 00:33:00,480 Speaker 1: up six seven percent a year, obviously you can afford 615 00:33:00,680 --> 00:33:03,480 Speaker 1: a six seven percent inflation. So in order to get 616 00:33:03,480 --> 00:33:06,680 Speaker 1: inflation backed down towards two pc, you're gonna need wage 617 00:33:06,720 --> 00:33:09,880 Speaker 1: gains of about you know, two or three and the 618 00:33:09,880 --> 00:33:12,440 Speaker 1: only way to get that is to have higher unemployment. 619 00:33:13,720 --> 00:33:15,880 Speaker 1: So that's what they're trying to do right now, basically 620 00:33:15,960 --> 00:33:18,520 Speaker 1: raise the unemployment. It's not a pretty thing to say, 621 00:33:18,560 --> 00:33:21,600 Speaker 1: but that that is very much the goal, and it's 622 00:33:21,600 --> 00:33:24,000 Speaker 1: a hard goal to Actually, the labor market is very 623 00:33:24,040 --> 00:33:26,600 Speaker 1: strong and it seems to be have a shortage of workers, 624 00:33:26,640 --> 00:33:29,320 Speaker 1: so the Fed is going to have to keep interest 625 00:33:29,400 --> 00:33:32,920 Speaker 1: rates high until they see the labor market crack. Yeah, 626 00:33:33,120 --> 00:33:36,600 Speaker 1: so supply and demand. If there's more open jobs, people 627 00:33:36,600 --> 00:33:38,520 Speaker 1: who have to work for lower. If there's no if 628 00:33:38,560 --> 00:33:40,400 Speaker 1: there's no available workers, they're going to have to pay 629 00:33:40,440 --> 00:33:46,080 Speaker 1: them higher. It's um it's now um I. I tweeted 630 00:33:46,080 --> 00:33:48,600 Speaker 1: out something similar to that in the past, where it's like, hey, 631 00:33:48,760 --> 00:33:52,920 Speaker 1: hopefully the people understand the Fed is actively trying to 632 00:33:52,960 --> 00:33:56,280 Speaker 1: bring their pay down, like that's against the what the 633 00:33:56,320 --> 00:33:58,440 Speaker 1: will of the people want. Wages have not kept up 634 00:33:58,440 --> 00:34:01,520 Speaker 1: with inflation over the last thirty four of the years. UM, 635 00:34:01,640 --> 00:34:04,840 Speaker 1: inflation is raging at whatever you know, whatever you want 636 00:34:04,840 --> 00:34:06,720 Speaker 1: to believe eight or nine percent of the CPI tells 637 00:34:06,800 --> 00:34:10,480 Speaker 1: us or more likely. UM. And of course wages aren't 638 00:34:10,560 --> 00:34:12,799 Speaker 1: keeping up with that. And to your point, they need 639 00:34:12,800 --> 00:34:15,279 Speaker 1: to bring wages down. That's a problem. The fact that 640 00:34:15,320 --> 00:34:17,520 Speaker 1: you're getting paid more is a problem for the FED, 641 00:34:17,520 --> 00:34:19,440 Speaker 1: and they want to bring that down, which is Uh. 642 00:34:19,480 --> 00:34:21,200 Speaker 1: I think if most people understand that, and they're not 643 00:34:21,239 --> 00:34:24,520 Speaker 1: going to be happy with that. But but you're absolutely right. 644 00:34:24,520 --> 00:34:26,799 Speaker 1: And then the fact of bringing asset prices down the 645 00:34:26,800 --> 00:34:29,640 Speaker 1: wealth effect. So, UM, I may not be retiring for 646 00:34:29,680 --> 00:34:31,880 Speaker 1: twenty or thirty years, I don't plan on selling my 647 00:34:31,920 --> 00:34:34,120 Speaker 1: house for twenty or thirty years if ever. UM. But 648 00:34:34,239 --> 00:34:35,719 Speaker 1: the fact that I see the value of my home 649 00:34:35,760 --> 00:34:38,359 Speaker 1: and my retirement accounts come down, I just feel more poor. 650 00:34:38,640 --> 00:34:40,759 Speaker 1: I'm gonna not take vacations, I'm not gonna go out 651 00:34:40,800 --> 00:34:43,920 Speaker 1: to dinner as much, etcetera. Um. But I want to 652 00:34:44,000 --> 00:34:46,719 Speaker 1: jump back to the unemployment part for a minute. So, uh, 653 00:34:46,800 --> 00:34:51,000 Speaker 1: the official unemployment number is low, more historically low. If 654 00:34:51,000 --> 00:34:54,800 Speaker 1: you dig into that data, it doesn't look that good 655 00:34:54,840 --> 00:34:59,760 Speaker 1: to me because let's say, for one, UM, the amount 656 00:34:59,760 --> 00:35:02,840 Speaker 1: of hours has come down, so people are working less hours. Obviously, 657 00:35:02,880 --> 00:35:06,480 Speaker 1: the job force participation rate is very low, so that's 658 00:35:06,520 --> 00:35:09,640 Speaker 1: historically low. Um, the amount of hours people are working, 659 00:35:09,640 --> 00:35:13,600 Speaker 1: the amount of two to three jobs that people are working. Uh. There, 660 00:35:13,600 --> 00:35:15,759 Speaker 1: the rate that they're getting paid has come down, which 661 00:35:15,800 --> 00:35:18,520 Speaker 1: they want that um. And then UM, they had this 662 00:35:18,560 --> 00:35:22,440 Speaker 1: big adjustment in the employment data based off of jobs 663 00:35:22,480 --> 00:35:25,600 Speaker 1: created and destroyed from last year's data, which was this 664 00:35:25,680 --> 00:35:28,879 Speaker 1: crazy anomaly, so they added I forget now three thousand 665 00:35:28,960 --> 00:35:32,320 Speaker 1: jobs or whatever they added, So the data actually doesn't 666 00:35:32,320 --> 00:35:36,640 Speaker 1: look good to me. Um. Obviously they have hundreds or 667 00:35:36,760 --> 00:35:39,640 Speaker 1: thousands of PhDs and analysts looking through this data. I 668 00:35:39,640 --> 00:35:42,400 Speaker 1: mean I'm just some guy on YouTube here. UM, so 669 00:35:42,640 --> 00:35:46,040 Speaker 1: they have to see that, right. But UM, do they 670 00:35:46,080 --> 00:35:47,759 Speaker 1: just want to run with that headline number because that 671 00:35:47,800 --> 00:35:50,120 Speaker 1: gives them the cover to run or do they see 672 00:35:50,160 --> 00:35:52,440 Speaker 1: this and they go, well, actually, we're going to use 673 00:35:52,440 --> 00:35:54,239 Speaker 1: this number, but we see that it's actually not that 674 00:35:54,280 --> 00:35:57,759 Speaker 1: good beneath and so our long term planning is taking 675 00:35:57,800 --> 00:36:02,960 Speaker 1: that into consideration. I think they actually do believe the number. 676 00:36:03,480 --> 00:36:06,640 Speaker 1: So so these people who work at the FED, their 677 00:36:06,719 --> 00:36:09,759 Speaker 1: establishment types there. They're from the system. They spent the 678 00:36:09,880 --> 00:36:12,120 Speaker 1: entire life in the system, so they have confidence in 679 00:36:12,160 --> 00:36:15,800 Speaker 1: the things that the system produces. Inflation numbers, unemployment numbers. 680 00:36:16,600 --> 00:36:19,000 Speaker 1: You know, to doubt those is to doubt themselves. They're 681 00:36:19,040 --> 00:36:21,640 Speaker 1: part of systems. So I don't I don't think that 682 00:36:22,239 --> 00:36:26,080 Speaker 1: UM they view that as suspect. Okay, well, and I 683 00:36:26,080 --> 00:36:27,919 Speaker 1: think that that. So there's that, there's that, But there's 684 00:36:27,960 --> 00:36:31,480 Speaker 1: also another aspect as well. The way the FED UM 685 00:36:31,640 --> 00:36:35,239 Speaker 1: gets information. It's not just numbers, but it's also a 686 00:36:35,280 --> 00:36:37,759 Speaker 1: lot of discussions that they have with other people. So 687 00:36:38,320 --> 00:36:41,000 Speaker 1: if you are if you are at the FED, you 688 00:36:41,080 --> 00:36:45,680 Speaker 1: have connections throughout the business community. So FED officials will 689 00:36:45,680 --> 00:36:49,440 Speaker 1: talk to ceo s, talk to managers, talk to everyone really, 690 00:36:49,800 --> 00:36:53,160 Speaker 1: and they'll have this formal surveys but also in formal conversations, 691 00:36:53,440 --> 00:36:55,440 Speaker 1: and they want to try to get to get a 692 00:36:55,480 --> 00:36:59,680 Speaker 1: sense of what's happening on the street. And what they 693 00:36:59,760 --> 00:37:03,200 Speaker 1: hear is that all they're having trouble hiring people. So 694 00:37:03,560 --> 00:37:07,080 Speaker 1: when they have that qualitative information that seems to confirm 695 00:37:07,400 --> 00:37:10,279 Speaker 1: what they see in the data, then I don't think 696 00:37:10,320 --> 00:37:13,239 Speaker 1: they have any reason to doubt it. Yeah, that's that's 697 00:37:13,560 --> 00:37:17,040 Speaker 1: that's that's good to know. UM. Now let's jump to 698 00:37:17,120 --> 00:37:19,200 Speaker 1: the topic we've been pushing, pushing, pushing, So let's talk 699 00:37:19,200 --> 00:37:22,680 Speaker 1: about the Bank of England. So the Bank of England 700 00:37:22,880 --> 00:37:27,680 Speaker 1: broke UM. George Soros famously broke the Bank of England before. UM. 701 00:37:27,719 --> 00:37:32,239 Speaker 1: Now they broke again. Basically, Uh, they couldn't cover the 702 00:37:32,280 --> 00:37:35,759 Speaker 1: pensions and they've had to panic and just go all 703 00:37:35,800 --> 00:37:39,000 Speaker 1: in on the poker table, right, all in unlimited frame 704 00:37:39,040 --> 00:37:43,879 Speaker 1: frame that up for us a little bit. So at 705 00:37:43,880 --> 00:37:47,320 Speaker 1: a very high level, it's just supply and demand. You said, 706 00:37:48,960 --> 00:37:53,120 Speaker 1: it's best framework, much better than any big econometric model. 707 00:37:53,840 --> 00:37:57,080 Speaker 1: It's just makes everything back to basics. So what's the 708 00:37:57,120 --> 00:38:01,200 Speaker 1: supply Okay, So two things are happening in the past 709 00:38:01,239 --> 00:38:04,520 Speaker 1: couple of weeks. One Bank of England is gauging a QT, 710 00:38:04,840 --> 00:38:08,040 Speaker 1: but not just simple QUTI like the FED where they'll 711 00:38:08,120 --> 00:38:11,560 Speaker 1: let something let's say the FED holds the shared Security 712 00:38:11,800 --> 00:38:15,040 Speaker 1: gets repaid and just let's that money disappear. The UK, 713 00:38:15,239 --> 00:38:18,200 Speaker 1: the Bank of England wanted to actually sell their portfolio, 714 00:38:18,440 --> 00:38:22,600 Speaker 1: so that's increasing supply into the market. You're actually selling. UM. 715 00:38:22,719 --> 00:38:25,480 Speaker 1: The second thing on the supply side is that they 716 00:38:25,480 --> 00:38:30,160 Speaker 1: have this very aggressive fiscal budget. So I think we've 717 00:38:30,160 --> 00:38:33,800 Speaker 1: read in the news that uh, the UK government wants 718 00:38:33,800 --> 00:38:37,760 Speaker 1: to put a ceiling on power on electricity prices. Well, 719 00:38:37,800 --> 00:38:40,239 Speaker 1: that money has to come from somewhere, right, so they're 720 00:38:40,239 --> 00:38:42,160 Speaker 1: going to have to borrow more. And at the same 721 00:38:42,200 --> 00:38:44,680 Speaker 1: time they're cutting taxes, so they got to borrow even more. 722 00:38:45,080 --> 00:38:48,120 Speaker 1: So the supply of sovereign debt, which is called a 723 00:38:48,160 --> 00:38:52,479 Speaker 1: guilt UK sovereign UK. I think it's a two billion 724 00:38:52,480 --> 00:38:54,719 Speaker 1: dollar swing. So it's like a fifty billion dollar tax 725 00:38:54,800 --> 00:38:57,160 Speaker 1: hit by cutting and then it's a hundred fifty billion 726 00:38:57,600 --> 00:39:02,920 Speaker 1: increase in spending to cover the energy bills. That that 727 00:39:03,080 --> 00:39:05,680 Speaker 1: sounds like not a lot too to us, to people 728 00:39:05,680 --> 00:39:07,480 Speaker 1: in the US, but the UK is a smaller country, 729 00:39:07,520 --> 00:39:10,160 Speaker 1: so that that's a huge amount for them. Um. And 730 00:39:10,239 --> 00:39:13,440 Speaker 1: that's enormous amount of supply. Okay, So everyone sees that 731 00:39:13,440 --> 00:39:15,839 Speaker 1: ship there's a lot of supply coming online. Better get 732 00:39:15,880 --> 00:39:19,319 Speaker 1: out of the way, and so the prices plummet and 733 00:39:19,360 --> 00:39:23,080 Speaker 1: that means yields go up significantly. Now, the thing is 734 00:39:23,239 --> 00:39:27,640 Speaker 1: a lot of people who own those uh guilts. They 735 00:39:27,640 --> 00:39:31,759 Speaker 1: owned them, uh perhaps on a levered basis, or or 736 00:39:31,800 --> 00:39:35,120 Speaker 1: at least they have let's say levered instruments that are 737 00:39:35,160 --> 00:39:38,080 Speaker 1: tied to the interest rates, so they basically got a 738 00:39:38,160 --> 00:39:43,360 Speaker 1: huge margin call. Now it's like any other speculator. You 739 00:39:43,400 --> 00:39:46,000 Speaker 1: buy something on leverage or you have leverage exposure to 740 00:39:46,040 --> 00:39:50,239 Speaker 1: something that's something you know price changes a lot, then 741 00:39:50,400 --> 00:39:52,520 Speaker 1: you could be in trouble. If you look at the 742 00:39:52,520 --> 00:39:54,799 Speaker 1: interest rates in the UK, well those interest rates they 743 00:39:54,800 --> 00:39:57,720 Speaker 1: shot up a lot rapidly, so they were margin calls. 744 00:39:58,080 --> 00:39:59,879 Speaker 1: What happens when you have a margin call, you get 745 00:40:00,000 --> 00:40:03,719 Speaker 1: equid dated by your broker. Okay, so a lot of 746 00:40:03,760 --> 00:40:07,080 Speaker 1: these investors got liquidated. That means the price goes even lower. 747 00:40:07,400 --> 00:40:09,920 Speaker 1: That means even more people need to get liquidated. So 748 00:40:10,000 --> 00:40:13,320 Speaker 1: you had this fire run like, fire cell like dynamic, 749 00:40:13,480 --> 00:40:17,200 Speaker 1: similar to what you see in any financial crisis. So 750 00:40:17,680 --> 00:40:20,600 Speaker 1: what happens now I have a whole bunch of people 751 00:40:20,640 --> 00:40:22,920 Speaker 1: who are getting liquidated and a lot of people losing money. 752 00:40:23,000 --> 00:40:25,440 Speaker 1: We have looks like a fire cell going on. The 753 00:40:25,480 --> 00:40:28,520 Speaker 1: Bank of England then steps in and offers to be 754 00:40:29,360 --> 00:40:31,719 Speaker 1: basically the buyer of last resort, similar to what the 755 00:40:31,800 --> 00:40:34,400 Speaker 1: FED did and during the pandemic. It goes in and 756 00:40:34,400 --> 00:40:36,279 Speaker 1: it's like we're going to buy as many of these 757 00:40:36,280 --> 00:40:38,879 Speaker 1: guilts as we need to do, as we need to buy, 758 00:40:39,320 --> 00:40:41,359 Speaker 1: and once the Bank of England steps in and it's 759 00:40:41,400 --> 00:40:43,879 Speaker 1: ruling to buy as much as needed, and the Bank 760 00:40:43,880 --> 00:40:48,120 Speaker 1: of England has unlimited, uh, unlimited amount of money than 761 00:40:48,200 --> 00:40:51,120 Speaker 1: the market stabilized. And we can see this not just 762 00:40:51,239 --> 00:40:53,640 Speaker 1: what happening in the guilt market, but in the treasury 763 00:40:53,640 --> 00:40:56,239 Speaker 1: market as well. When the Bank of England stepped in 764 00:40:56,680 --> 00:41:00,799 Speaker 1: those long dated UK guilts, they based the yields just 765 00:41:00,880 --> 00:41:05,840 Speaker 1: kind of plummeted enormously, like the biggest drop in the 766 00:41:05,920 --> 00:41:09,520 Speaker 1: history of guilts, and that pulled all the other sovereign 767 00:41:09,560 --> 00:41:11,239 Speaker 1: bond yields in the world down as well. So you 768 00:41:11,239 --> 00:41:14,640 Speaker 1: saw the treasury yields I think go down thirty basis points. So, um, 769 00:41:14,800 --> 00:41:18,280 Speaker 1: it had a global effect of calming the sovereign debt market. 770 00:41:18,560 --> 00:41:20,880 Speaker 1: And is that because um they're like, well, shoot, if 771 00:41:20,880 --> 00:41:23,600 Speaker 1: the Bank of England decided to bail out their market, 772 00:41:23,640 --> 00:41:25,600 Speaker 1: then everybody else will as well. So that was kind 773 00:41:25,600 --> 00:41:29,239 Speaker 1: of like that reassurance. I think that that's definitely some 774 00:41:29,320 --> 00:41:31,759 Speaker 1: aspect to it. If you have, uh, if you have 775 00:41:31,960 --> 00:41:34,720 Speaker 1: one sovereign So the global bal market is tightly connected 776 00:41:34,760 --> 00:41:37,839 Speaker 1: because it's all credit risk free. So that means that 777 00:41:38,120 --> 00:41:40,000 Speaker 1: so if I'm an investor, now i can get let's 778 00:41:40,040 --> 00:41:43,360 Speaker 1: say three percent in the UK or four percent in 779 00:41:43,400 --> 00:41:46,000 Speaker 1: the US, and after hedging currency, I'm gonna go with 780 00:41:46,040 --> 00:41:48,839 Speaker 1: whatever is higher because they're both credit risk free, and 781 00:41:48,880 --> 00:41:51,520 Speaker 1: so that that's fine. So they're all connected together. If 782 00:41:51,520 --> 00:41:54,960 Speaker 1: we see the UK guilts come down, then mechanically everything 783 00:41:55,000 --> 00:41:58,319 Speaker 1: has to be priced with some um, you know, some 784 00:41:58,440 --> 00:42:03,160 Speaker 1: relative value value relative to to the guilts. So that side, 785 00:42:03,280 --> 00:42:05,799 Speaker 1: and also of course having a central bank come out 786 00:42:05,840 --> 00:42:09,920 Speaker 1: and being being willing to do quei or put money 787 00:42:09,960 --> 00:42:13,279 Speaker 1: that always makes the market happy. So and that does 788 00:42:13,600 --> 00:42:16,319 Speaker 1: increase the probability that maybe the FED or someone else 789 00:42:16,480 --> 00:42:18,720 Speaker 1: will be doing the same thing in case something became 790 00:42:18,800 --> 00:42:22,160 Speaker 1: too disorderly. And you know, if you look at the commentary, 791 00:42:22,280 --> 00:42:24,200 Speaker 1: a lot of people are looking at this and as 792 00:42:24,200 --> 00:42:28,440 Speaker 1: a potential pivot point, which it definitely is not, but 793 00:42:29,920 --> 00:42:34,040 Speaker 1: the market is always hopeful for things like that. Yeah. So, um, 794 00:42:34,120 --> 00:42:36,799 Speaker 1: now they've pledged I think they pledge unlimited qui to 795 00:42:36,800 --> 00:42:41,640 Speaker 1: support the bonds up until October, just for like this period. 796 00:42:42,000 --> 00:42:45,839 Speaker 1: So then we'll wait and see, right if if they've 797 00:42:45,880 --> 00:42:48,600 Speaker 1: restored enough trust and then they can stabilize the yields 798 00:42:48,600 --> 00:42:50,160 Speaker 1: and more people want to buy them, they can bring 799 00:42:50,200 --> 00:42:54,120 Speaker 1: buyers back in, then maybe they stop. But if no 800 00:42:54,280 --> 00:42:56,439 Speaker 1: buyers come back in and the yields starts spiking again, 801 00:42:56,440 --> 00:42:59,760 Speaker 1: they're gonna have to probably jump back in again, exactly exactly. 802 00:42:59,800 --> 00:43:02,359 Speaker 1: And that's the problem just not with not just the UK, 803 00:43:02,520 --> 00:43:05,799 Speaker 1: but all the governments in the Western world. Um, they've 804 00:43:05,840 --> 00:43:08,480 Speaker 1: borrowed so much that the amount of debt is so 805 00:43:08,600 --> 00:43:11,520 Speaker 1: huge that the market can function anymore. You know, the 806 00:43:11,560 --> 00:43:16,160 Speaker 1: supply is just enormous. So in the past the problem 807 00:43:16,200 --> 00:43:18,959 Speaker 1: was hidden because you had people being the central banks 808 00:43:18,960 --> 00:43:20,800 Speaker 1: buying it, FED buying it, Bank of England buying it, 809 00:43:20,880 --> 00:43:25,239 Speaker 1: ECB buying it UM. So you don't really know what 810 00:43:25,440 --> 00:43:29,799 Speaker 1: the real appetite is for for sovereign debt. And apparently 811 00:43:30,080 --> 00:43:34,160 Speaker 1: it's not a long at least at these prices. Yeah, 812 00:43:34,160 --> 00:43:36,719 Speaker 1: we can see that for sure. Now you said, you 813 00:43:36,719 --> 00:43:40,040 Speaker 1: said the word credit risk free, and we we mentioned 814 00:43:40,040 --> 00:43:43,399 Speaker 1: that earlier at risk free returns and so credit risk free. 815 00:43:43,440 --> 00:43:48,839 Speaker 1: So government bonds specifically, sovereign bonds specifically UM probably Tier 816 00:43:48,960 --> 00:43:52,279 Speaker 1: one nation sovereign bonds are considered risk free. I don't 817 00:43:52,280 --> 00:43:54,360 Speaker 1: know if you would consider, you know, the all Salvador 818 00:43:54,400 --> 00:43:59,359 Speaker 1: bond or the Turkish bond risk free necessarily right, and 819 00:43:59,360 --> 00:44:01,800 Speaker 1: and and and well, before you answer that, they're considered 820 00:44:01,920 --> 00:44:05,360 Speaker 1: risk free because to the point that we're both agreeing, 821 00:44:05,440 --> 00:44:09,000 Speaker 1: um um no nation would default on their bonds when 822 00:44:09,040 --> 00:44:11,520 Speaker 1: they can print the money, and so they're considered risk 823 00:44:11,520 --> 00:44:15,160 Speaker 1: free because they're always going to be able to pay that. 824 00:44:15,160 --> 00:44:17,719 Speaker 1: That's exactly right. If you have a printer, you can 825 00:44:17,760 --> 00:44:20,920 Speaker 1: always have the ability to repay your debt, but you 826 00:44:20,960 --> 00:44:25,040 Speaker 1: could voluntarily default. And that's the reason why that the 827 00:44:25,160 --> 00:44:27,560 Speaker 1: US actually does not have a triple A. Reading from 828 00:44:27,600 --> 00:44:32,799 Speaker 1: the SMP, the SMP saw that the US, during we 829 00:44:32,840 --> 00:44:36,080 Speaker 1: have a you know, periodic death ceiling episodes where one 830 00:44:36,120 --> 00:44:39,160 Speaker 1: party doesn't want to raise the death sailing. Uh. The SMP, 831 00:44:39,440 --> 00:44:43,200 Speaker 1: SMP Senator Poorts, the reading agencies saw that the US 832 00:44:43,320 --> 00:44:48,120 Speaker 1: maybe would voluntarily default during a death ceiling episode, and 833 00:44:48,239 --> 00:44:52,279 Speaker 1: because of that they cannot be triple A. But they 834 00:44:52,280 --> 00:44:54,840 Speaker 1: have the capacity because they have the printer, but sometimes 835 00:44:54,920 --> 00:44:58,319 Speaker 1: may they may not have the political willingness as you suggested. Well, 836 00:44:58,360 --> 00:45:00,680 Speaker 1: and then they run into limitations, and so it's the 837 00:45:00,680 --> 00:45:02,880 Speaker 1: proverbial rock and a hard place. They can print as 838 00:45:02,960 --> 00:45:04,920 Speaker 1: much as they want, just like Zimbabwe. But then you 839 00:45:04,960 --> 00:45:08,160 Speaker 1: have runaway inflation. If you don't print your default. If 840 00:45:08,160 --> 00:45:10,359 Speaker 1: you do print, you you have inflation. And so which 841 00:45:10,360 --> 00:45:12,000 Speaker 1: one is worse? Right? Which one do you have the 842 00:45:12,040 --> 00:45:15,560 Speaker 1: political will to deal with? Are you okay seeing everybody's 843 00:45:15,640 --> 00:45:18,360 Speaker 1: pensions wiped out and everybody broke on the street or 844 00:45:18,400 --> 00:45:19,920 Speaker 1: would you rather people just pay a little bit more 845 00:45:19,960 --> 00:45:23,919 Speaker 1: money for the things they buy? Yeah? Yeah, yeah, So 846 00:45:24,480 --> 00:45:27,279 Speaker 1: it's a political it's always it's an inflation in my view, 847 00:45:27,480 --> 00:45:29,719 Speaker 1: is always political. So how do you create an inflation? 848 00:45:29,840 --> 00:45:32,880 Speaker 1: Just give everyone a million dollars everyone. If you everyone 849 00:45:32,880 --> 00:45:34,880 Speaker 1: has a million dollars on their bank account, you have 850 00:45:34,920 --> 00:45:38,279 Speaker 1: a lot of inflation. How do you create deflation? Let's say, 851 00:45:38,480 --> 00:45:42,480 Speaker 1: race taxes to ninety percent, take everyone's money away, hiken 852 00:45:42,480 --> 00:45:45,239 Speaker 1: interest rate scent, make the soft market go to zero. 853 00:45:45,440 --> 00:45:48,880 Speaker 1: So it's inflation is ultimately in my view of a 854 00:45:48,920 --> 00:45:52,200 Speaker 1: political choice. Now I would imagine other pension funds are 855 00:45:52,239 --> 00:45:54,000 Speaker 1: doing the same thing that they were doing in the UK. 856 00:45:54,719 --> 00:45:58,640 Speaker 1: And as we see, so I guess there's three three. 857 00:45:58,719 --> 00:46:00,520 Speaker 1: I guess maybe the top three cent t banks in 858 00:46:00,520 --> 00:46:02,520 Speaker 1: the world, the FED, the b o E, and the 859 00:46:02,560 --> 00:46:07,000 Speaker 1: b o J when looking at you know, currency, you know, 860 00:46:07,160 --> 00:46:09,920 Speaker 1: liquidity around the world, or amount of payments or whatever. 861 00:46:10,640 --> 00:46:13,080 Speaker 1: I would imagine all three of them are probably doing 862 00:46:13,080 --> 00:46:15,560 Speaker 1: the same thing. Uh, the b o J and the 863 00:46:15,560 --> 00:46:18,879 Speaker 1: BOE coming under massive pressure in their markets. And so 864 00:46:19,680 --> 00:46:22,600 Speaker 1: could we see a similar situation arise in the b 865 00:46:22,840 --> 00:46:27,319 Speaker 1: in in Japan. In Japan, so or they don't want 866 00:46:27,400 --> 00:46:30,080 Speaker 1: in the pension situation like we do. You're you're you're 867 00:46:30,080 --> 00:46:32,759 Speaker 1: flattering the Bank of England to the hundred years ago 868 00:46:32,920 --> 00:46:35,000 Speaker 1: during the British Empire and now it's the e CPS 869 00:46:35,320 --> 00:46:38,520 Speaker 1: is the second large in the bank thing? Um yeah, 870 00:46:38,640 --> 00:46:40,040 Speaker 1: b O E, b O E. You' right? I think 871 00:46:40,120 --> 00:46:44,640 Speaker 1: is the fifth right, Yeah, they used to be important. 872 00:46:45,000 --> 00:46:47,600 Speaker 1: They probably wish they still were. Um. So the Japan 873 00:46:47,680 --> 00:46:50,600 Speaker 1: is different because the chap Japan is doing something called 874 00:46:50,680 --> 00:46:54,880 Speaker 1: you would curve control, which is basically fixing the price 875 00:46:54,920 --> 00:46:57,680 Speaker 1: of their sovereign debt. So because the price is fixed, 876 00:46:58,000 --> 00:47:01,080 Speaker 1: they cannot the pensions are fine, they can't have any 877 00:47:02,040 --> 00:47:05,560 Speaker 1: suffer the same problem. But in Europe they definitely can, 878 00:47:05,680 --> 00:47:10,520 Speaker 1: and I think that's the next point of weakness. So 879 00:47:10,520 --> 00:47:13,239 Speaker 1: so Robin Brooks on on Twitter has a very very 880 00:47:13,239 --> 00:47:17,040 Speaker 1: good graph of who has been buying Spanish and Italian 881 00:47:17,120 --> 00:47:20,359 Speaker 1: sovereign debt over the past few years. It's the CV. 882 00:47:20,560 --> 00:47:23,319 Speaker 1: The CB has been buying it all. Now, if the 883 00:47:23,400 --> 00:47:26,720 Speaker 1: ECB steps back, you can have the exact same thing happen, 884 00:47:27,160 --> 00:47:31,960 Speaker 1: where the yields shoot up very high, and that that 885 00:47:32,120 --> 00:47:34,440 Speaker 1: creates losses for the people who are invested in those 886 00:47:34,920 --> 00:47:37,680 Speaker 1: and the people who invest in Spanish and Italian debt 887 00:47:37,960 --> 00:47:40,799 Speaker 1: that the bank's pension funds and so forth. So you 888 00:47:40,800 --> 00:47:44,399 Speaker 1: could have something similar happen, which is which is which 889 00:47:44,440 --> 00:47:47,640 Speaker 1: is concerning, but likely could also be fixed. The ECB 890 00:47:47,760 --> 00:47:49,719 Speaker 1: will just go and buy more and that will be 891 00:47:49,719 --> 00:47:54,520 Speaker 1: negative for the Euro. So that's probably the next weakness 892 00:47:54,640 --> 00:48:00,320 Speaker 1: weak point as as we see QT unfolded globally. Now 893 00:48:00,640 --> 00:48:03,439 Speaker 1: we've set up a big problem that seems the only 894 00:48:03,480 --> 00:48:06,040 Speaker 1: beginning worse. Governments are going to spend more money um 895 00:48:06,120 --> 00:48:09,960 Speaker 1: than they have deficits. Tax receipts might go down, deficits 896 00:48:09,960 --> 00:48:12,439 Speaker 1: will probably go up. They'll have to continue to print 897 00:48:12,480 --> 00:48:15,120 Speaker 1: more money UM. At some point this kind of comes 898 00:48:15,120 --> 00:48:17,040 Speaker 1: to a head. We're starting to see some big crack 899 00:48:17,120 --> 00:48:20,880 Speaker 1: showing up, obviously in Japan and now in in Europe 900 00:48:20,920 --> 00:48:23,240 Speaker 1: has bigger cracks that we haven't really talked about Europe. 901 00:48:23,280 --> 00:48:25,440 Speaker 1: But but the ECB has got their problems with the 902 00:48:25,480 --> 00:48:29,360 Speaker 1: pigs nations down below in Portugal, it ill degree Spain. Obviously, 903 00:48:29,360 --> 00:48:32,399 Speaker 1: the whole Russia situation. We're seeing it the first crack 904 00:48:32,480 --> 00:48:34,799 Speaker 1: really with the Bank of England. But it's like that 905 00:48:34,840 --> 00:48:38,080 Speaker 1: first crack they'll start coming. Um. I want to I 906 00:48:38,120 --> 00:48:40,920 Speaker 1: want to kind of talk about this in game maybe 907 00:48:40,960 --> 00:48:44,120 Speaker 1: you know, hypothetical situations. But before we do, UM, let's 908 00:48:44,160 --> 00:48:48,279 Speaker 1: jump to another topic, which is um central bank digital currencies. 909 00:48:49,719 --> 00:48:53,640 Speaker 1: So obviously China rush their central bank digital currency through. 910 00:48:53,719 --> 00:48:56,040 Speaker 1: They unveiled it at the Olympics that they had there, 911 00:48:56,080 --> 00:49:00,759 Speaker 1: and in China, the under President Biden through executive order, 912 00:49:01,120 --> 00:49:05,000 Speaker 1: they've been rushing this CBDC through the FED now released 913 00:49:05,000 --> 00:49:07,000 Speaker 1: as FED now thing. It looks like this central bank 914 00:49:07,000 --> 00:49:11,360 Speaker 1: digital currency is rushing through. What are your thoughts on that? 915 00:49:11,480 --> 00:49:14,920 Speaker 1: What are you hearing on that? So? I think a 916 00:49:15,040 --> 00:49:19,200 Speaker 1: CBDC is not not there's really no use case for 917 00:49:19,239 --> 00:49:22,799 Speaker 1: the US. So CBDC if you look at who's really 918 00:49:22,840 --> 00:49:25,239 Speaker 1: young hole about the CBDCs in the world, it's like 919 00:49:25,320 --> 00:49:28,800 Speaker 1: you mentioned, it's China it's these totalitarian states because a 920 00:49:28,920 --> 00:49:32,319 Speaker 1: CBDC is ultimately a surveillance too. It's a way to 921 00:49:32,360 --> 00:49:36,760 Speaker 1: control people if the government can see whatever you own, 922 00:49:37,040 --> 00:49:39,040 Speaker 1: and maybe they can lock your account, maybe they can 923 00:49:39,120 --> 00:49:42,160 Speaker 1: make sure that you just do what you're told. So 924 00:49:42,400 --> 00:49:47,200 Speaker 1: it's it's what totalitarian states really like now here in 925 00:49:47,239 --> 00:49:49,600 Speaker 1: the US, whether or not we have a CBDC is 926 00:49:49,680 --> 00:49:53,200 Speaker 1: ultimately a political choice, and you hear different things depending 927 00:49:53,200 --> 00:49:56,719 Speaker 1: on who you speak with. Um Powell actually seems to 928 00:49:56,760 --> 00:50:00,759 Speaker 1: be slow walking the CBDC UH reject at the FED. 929 00:50:00,840 --> 00:50:03,239 Speaker 1: He says that, you know, we need to do more 930 00:50:03,280 --> 00:50:05,919 Speaker 1: research on this, and we need regulations and so forth, 931 00:50:05,960 --> 00:50:09,279 Speaker 1: and we need Congress to pass UH legislation showing that 932 00:50:09,320 --> 00:50:13,120 Speaker 1: there's a clear intent. So I think that the FED. 933 00:50:13,600 --> 00:50:16,279 Speaker 1: So Paul Paul wasn't the only FED official who who 934 00:50:16,320 --> 00:50:19,239 Speaker 1: seems to be not too warm about the CBDC here. 935 00:50:19,520 --> 00:50:24,080 Speaker 1: Another one would be um uh. It's former governor quarrels 936 00:50:24,320 --> 00:50:26,719 Speaker 1: very clear that we don't need to CEBDC here, and 937 00:50:26,760 --> 00:50:29,120 Speaker 1: they're all right, why why, there's really no use case 938 00:50:29,120 --> 00:50:32,520 Speaker 1: in the US. It seems to be more of a 939 00:50:32,520 --> 00:50:36,360 Speaker 1: potentially dangerous political tool. So at the moment, the people 940 00:50:36,480 --> 00:50:39,560 Speaker 1: in charge of the FED don't seem to want to 941 00:50:39,600 --> 00:50:42,360 Speaker 1: go down that path. I think there are voices in 942 00:50:42,400 --> 00:50:44,360 Speaker 1: the FAT that are influential who would be happy to 943 00:50:44,400 --> 00:50:48,200 Speaker 1: see a CBDC, for example, the Brainer who is also 944 00:50:48,239 --> 00:50:51,200 Speaker 1: a member of the World Economic Form as as you 945 00:50:51,200 --> 00:50:54,520 Speaker 1: guys know, you know the countries that are under the 946 00:50:54,560 --> 00:50:58,520 Speaker 1: influence of the word economic Forum like CBDCs, like the Eurozone, 947 00:50:58,719 --> 00:51:02,319 Speaker 1: like Canada. So far, and it's a it's it's I 948 00:51:02,360 --> 00:51:06,600 Speaker 1: think it's very much a So I can't see a 949 00:51:06,680 --> 00:51:08,920 Speaker 1: real economic use case for it. So I think if 950 00:51:08,920 --> 00:51:12,960 Speaker 1: it more as a political tool to have better control 951 00:51:13,280 --> 00:51:17,120 Speaker 1: over a country's citizens, well what about as an economic tool. 952 00:51:17,200 --> 00:51:20,960 Speaker 1: So the problem in the pandemic was they sent all 953 00:51:21,000 --> 00:51:24,280 Speaker 1: the stemmy out and they were hoping to stimulate the markets, 954 00:51:24,280 --> 00:51:26,240 Speaker 1: but then people sat on the money, they didn't stimulate 955 00:51:26,239 --> 00:51:28,520 Speaker 1: the markets, or they put into robin hood as opposed 956 00:51:28,560 --> 00:51:31,120 Speaker 1: to buying goods and services, and so, um, if if 957 00:51:31,120 --> 00:51:33,720 Speaker 1: they have a CBDC, which we started seeing that language 958 00:51:33,719 --> 00:51:35,400 Speaker 1: come out in some of these STEMI bills that came 959 00:51:35,440 --> 00:51:38,040 Speaker 1: out in UM, maybe it's a tool where they could 960 00:51:38,080 --> 00:51:41,360 Speaker 1: inject liquidity directly into the market and they could affect 961 00:51:41,440 --> 00:51:43,880 Speaker 1: that you know how fast people spend it to make 962 00:51:43,880 --> 00:51:46,200 Speaker 1: sure it does get spin and even into the right places. 963 00:51:46,560 --> 00:51:48,440 Speaker 1: So it could be an economic tool. But I mean 964 00:51:49,040 --> 00:51:55,240 Speaker 1: that's obviously control, but control for economic purposes, Yes, it's control, 965 00:51:55,440 --> 00:51:58,160 Speaker 1: and it can be exercised in positive ways or in 966 00:51:58,239 --> 00:52:01,640 Speaker 1: negative ways, and the exact in way. We could say that, hey, 967 00:52:02,560 --> 00:52:05,600 Speaker 1: you're protesting where you shouldn't be, or maybe you voted 968 00:52:05,600 --> 00:52:07,880 Speaker 1: for the wrong person. You know what, maybe you shouldn't 969 00:52:07,880 --> 00:52:10,920 Speaker 1: be spending any money at all. So it's it's an 970 00:52:10,960 --> 00:52:14,040 Speaker 1: extra tool. And like any tool, it depends on how 971 00:52:14,120 --> 00:52:16,600 Speaker 1: much confidence you have in the people who make the 972 00:52:16,680 --> 00:52:19,440 Speaker 1: rules and well people who actually wild that tool. And 973 00:52:19,520 --> 00:52:23,200 Speaker 1: it can definitely be used for very positive purposes, um 974 00:52:23,239 --> 00:52:26,480 Speaker 1: like getting money directly to people, but under the wrong hands, 975 00:52:26,520 --> 00:52:30,240 Speaker 1: it could also be used to silence, dissent, or punish 976 00:52:30,280 --> 00:52:33,759 Speaker 1: your enemies. So ultimately it depends on how much confidence 977 00:52:33,760 --> 00:52:36,880 Speaker 1: you have in the system. Now in the US, we 978 00:52:36,960 --> 00:52:39,760 Speaker 1: have a tradition where we don't have confidence in the system. 979 00:52:39,920 --> 00:52:42,360 Speaker 1: That's why we want the system to be as weak 980 00:52:42,480 --> 00:52:45,600 Speaker 1: as small as possible, because we know that if you 981 00:52:45,680 --> 00:52:49,640 Speaker 1: give people, regular people a lot of power, they are 982 00:52:49,719 --> 00:52:53,120 Speaker 1: tempted to use that for their own benefit. So that's 983 00:52:53,239 --> 00:52:57,040 Speaker 1: uh so again that that seems to be what history pretends. 984 00:52:59,120 --> 00:53:03,000 Speaker 1: So in your guess, in your in your guess, you 985 00:53:03,040 --> 00:53:06,440 Speaker 1: would think that maybe if I'm if I'm reading you right, um, 986 00:53:06,520 --> 00:53:09,160 Speaker 1: that maybe we might see it in other nations first, 987 00:53:09,239 --> 00:53:11,000 Speaker 1: and maybe the US might be one of the last 988 00:53:11,040 --> 00:53:13,600 Speaker 1: to adopt it because they don't have a big economic need. 989 00:53:13,640 --> 00:53:15,759 Speaker 1: It's more of a political tool, and the people would 990 00:53:15,760 --> 00:53:18,000 Speaker 1: probably kind of push back with the checks and balances 991 00:53:18,000 --> 00:53:22,240 Speaker 1: that we have exactly. I think that's right. Completely depends 992 00:53:22,239 --> 00:53:25,400 Speaker 1: on politics. This is completely a political choice. The politics 993 00:53:25,719 --> 00:53:28,520 Speaker 1: the political leadership we have now at the FED does 994 00:53:28,560 --> 00:53:32,040 Speaker 1: not appear to be uh think that the CBDC is 995 00:53:32,280 --> 00:53:36,160 Speaker 1: very important. If maybe have a different FED chair, we 996 00:53:36,280 --> 00:53:39,440 Speaker 1: got to get a different outcome. So at the moment, 997 00:53:39,480 --> 00:53:42,000 Speaker 1: it seems like the US will be probably one of 998 00:53:42,040 --> 00:53:44,799 Speaker 1: the uh not definitely not the first country to have 999 00:53:44,880 --> 00:53:48,680 Speaker 1: something like this. Okay, so now let's uh, let's let's 1000 00:53:48,760 --> 00:53:51,200 Speaker 1: let's take the situation that we have and let's just 1001 00:53:51,440 --> 00:53:55,319 Speaker 1: hypothetically kind of game plan this out. So, um, it 1002 00:53:55,400 --> 00:53:59,000 Speaker 1: seems like you know, we're I think you know, you 1003 00:53:59,080 --> 00:54:02,800 Speaker 1: have the you know, whatever the Peter shifts or whatever 1004 00:54:02,800 --> 00:54:04,560 Speaker 1: that I've been calling for this system and the Mike 1005 00:54:04,640 --> 00:54:07,240 Speaker 1: Maloney has been calling for Denver, you know, ten twenty years, 1006 00:54:07,680 --> 00:54:10,000 Speaker 1: and I think they're they're right, I mean factually, like 1007 00:54:10,040 --> 00:54:12,520 Speaker 1: this doesn't work over the long term, but like how 1008 00:54:12,640 --> 00:54:14,600 Speaker 1: long can it go for? Like we don't know? Right, 1009 00:54:14,760 --> 00:54:17,040 Speaker 1: they seem to have more tools up their sleep than 1010 00:54:17,520 --> 00:54:20,640 Speaker 1: most people had had thought. But we're starting to see 1011 00:54:20,719 --> 00:54:22,879 Speaker 1: serious cracks with the Bank of England and to your point, 1012 00:54:22,920 --> 00:54:24,520 Speaker 1: they're not one of the top banks, they're one of 1013 00:54:24,520 --> 00:54:28,040 Speaker 1: the smaller ones. But Bank of Japan has their big problems. 1014 00:54:28,080 --> 00:54:30,720 Speaker 1: The e c B has got massive problems the dollar. 1015 00:54:31,080 --> 00:54:33,880 Speaker 1: The FED has opened up swap lines with these central 1016 00:54:33,880 --> 00:54:37,360 Speaker 1: banks to basically bring them on their back and provide 1017 00:54:37,400 --> 00:54:41,600 Speaker 1: this liquidity to them. And so kind of Brent Johnson's 1018 00:54:41,600 --> 00:54:44,680 Speaker 1: dollar milkshake theory. Maybe the dollar just continues to rise, rise, 1019 00:54:44,760 --> 00:54:47,480 Speaker 1: rise stronger as it continues to build these out. But 1020 00:54:47,880 --> 00:54:51,160 Speaker 1: eventually the same constraints are going to hit everybody at 1021 00:54:51,160 --> 00:54:54,400 Speaker 1: different times. Which is one, do we continue to just 1022 00:54:54,440 --> 00:54:57,719 Speaker 1: print this money and rage inflation or do we let 1023 00:54:57,719 --> 00:55:01,719 Speaker 1: the whole system crash? I mean, it doesn't keep going 1024 00:55:01,800 --> 00:55:04,759 Speaker 1: for a while as right now we're seeing the Lebanons 1025 00:55:04,800 --> 00:55:07,759 Speaker 1: and the and the Turkeys go down, but eventually we 1026 00:55:07,800 --> 00:55:09,600 Speaker 1: see the Bank of England and the Japan's go down, 1027 00:55:09,600 --> 00:55:11,120 Speaker 1: and then the ECB and then finally the dollars the 1028 00:55:11,160 --> 00:55:12,799 Speaker 1: last one standing. But then they're still stuck with the 1029 00:55:12,840 --> 00:55:14,680 Speaker 1: same constraints. Is that kind of how you see this 1030 00:55:14,760 --> 00:55:18,479 Speaker 1: playing out over a period of time. So I think 1031 00:55:18,560 --> 00:55:23,400 Speaker 1: that you know currency and so this is ultimately so 1032 00:55:24,280 --> 00:55:27,640 Speaker 1: a question of confidence. So what we see right now, 1033 00:55:27,680 --> 00:55:30,600 Speaker 1: what's happening is that globally, people who have the most 1034 00:55:30,640 --> 00:55:33,920 Speaker 1: confidence in the US. And if you have problems in 1035 00:55:34,000 --> 00:55:36,000 Speaker 1: the euro Zone, if you just look at you know, 1036 00:55:36,160 --> 00:55:38,480 Speaker 1: the euro is appreciating a lot. That means a lot 1037 00:55:38,480 --> 00:55:41,479 Speaker 1: of people are moving money from um Europe to here. 1038 00:55:41,560 --> 00:55:46,280 Speaker 1: And similar in Japan and similar to many other countries. 1039 00:55:46,320 --> 00:55:48,560 Speaker 1: It's it's you go to where you feel it's the safest, 1040 00:55:48,600 --> 00:55:53,080 Speaker 1: and the US here we have positive interest rates, we 1041 00:55:53,120 --> 00:55:56,400 Speaker 1: are secure, food, secure, energy, secure, there's no war and 1042 00:55:56,480 --> 00:55:59,919 Speaker 1: in your nearby so um, if there's unrest in the world, 1043 00:56:00,280 --> 00:56:03,120 Speaker 1: the US is going to be the ultimate beneficiary. I 1044 00:56:03,160 --> 00:56:06,239 Speaker 1: think we see this now, I expect this to continue. 1045 00:56:06,920 --> 00:56:09,920 Speaker 1: So now continue strengthening of a dollar. That that sounds 1046 00:56:10,000 --> 00:56:13,440 Speaker 1: reasonable to me. Um. But as we've been discussing, the 1047 00:56:13,520 --> 00:56:16,600 Speaker 1: US is not has probably has its problems as well. 1048 00:56:17,080 --> 00:56:19,840 Speaker 1: Ultimately we will not be able to keep printing and 1049 00:56:19,920 --> 00:56:24,680 Speaker 1: spending forever um. But there's a sequence to this. First, 1050 00:56:24,960 --> 00:56:28,840 Speaker 1: the weaker countries, the periphery, UM, they have their problems. 1051 00:56:28,960 --> 00:56:32,759 Speaker 1: They fall, money comes to the US concentrates, but eventually 1052 00:56:32,760 --> 00:56:34,160 Speaker 1: you'll have the money is going to have to go 1053 00:56:34,239 --> 00:56:37,480 Speaker 1: somewhere else as well, because the US has its own problem. 1054 00:56:37,520 --> 00:56:39,480 Speaker 1: So what what it could happen is that it can 1055 00:56:39,560 --> 00:56:44,160 Speaker 1: just go into things like real estate um or you know, commodities, 1056 00:56:44,200 --> 00:56:47,760 Speaker 1: things like that, things that cannot be printed um. Because 1057 00:56:47,800 --> 00:56:51,480 Speaker 1: if the question is ultimately that the people who manage 1058 00:56:51,480 --> 00:56:53,919 Speaker 1: our currency system, the government, is not doing a good job, 1059 00:56:54,200 --> 00:56:57,720 Speaker 1: then you want to go to items or things where 1060 00:56:58,040 --> 00:57:01,640 Speaker 1: the government cannot mismanage, and that those are more tangible 1061 00:57:01,640 --> 00:57:04,520 Speaker 1: things like real estate and you know gold, maybe even 1062 00:57:05,360 --> 00:57:08,919 Speaker 1: that maybe crypto as well. Yeah. Yeah. Bloomberg Intelligence put 1063 00:57:08,920 --> 00:57:10,799 Speaker 1: out a piece of work that they said that they 1064 00:57:10,800 --> 00:57:13,279 Speaker 1: think they could see bitcoin transition from a risk onto 1065 00:57:13,280 --> 00:57:16,680 Speaker 1: a risk off asset by end of two So that 1066 00:57:16,720 --> 00:57:21,040 Speaker 1: could be interesting. Um. You know, I've often said that 1067 00:57:21,040 --> 00:57:24,160 Speaker 1: that Wall Street trades bitcoin like a risk on asset, 1068 00:57:24,320 --> 00:57:27,000 Speaker 1: but it's not a risk on asset, and so um, 1069 00:57:27,040 --> 00:57:29,760 Speaker 1: there's like this mismatching perception of reality. So it's trading 1070 00:57:29,840 --> 00:57:33,120 Speaker 1: like a risk on asset, particularly because of Wall Street, UH, 1071 00:57:33,280 --> 00:57:34,920 Speaker 1: you know, has taken such a big chunk in it 1072 00:57:34,960 --> 00:57:37,680 Speaker 1: and the market small. But we're seeing in about four 1073 00:57:37,720 --> 00:57:40,600 Speaker 1: billion people in the world living under totalitarian regimes with 1074 00:57:40,640 --> 00:57:45,000 Speaker 1: triple digit or double digit inflation. Um, they're using bitcoin 1075 00:57:45,200 --> 00:57:50,040 Speaker 1: to get out of UH, confiscation, high levels of inflation. UM. 1076 00:57:50,080 --> 00:57:53,920 Speaker 1: I covered it yesterday on the radio. Sub Saharan Africa 1077 00:57:54,120 --> 00:57:56,960 Speaker 1: is the is the largest place of adoption happening. If 1078 00:57:56,960 --> 00:57:59,400 Speaker 1: you look at transactions under a thousand dollars, like eight 1079 00:57:59,520 --> 00:58:01,880 Speaker 1: percent of a we're happening there and so you go 1080 00:58:01,920 --> 00:58:04,200 Speaker 1: where the pain is the highest. And so at some 1081 00:58:04,280 --> 00:58:07,520 Speaker 1: point that reality flip flops, right, UM, So it'll be 1082 00:58:07,520 --> 00:58:11,320 Speaker 1: interesting to see how that happens. UM. So that sequence 1083 00:58:11,360 --> 00:58:14,800 Speaker 1: that you talk about weaker countries falling first, UM, money 1084 00:58:14,800 --> 00:58:16,720 Speaker 1: moving to the stronger ones to the us D. Than 1085 00:58:16,800 --> 00:58:19,280 Speaker 1: eventually though the USD is gonna have the same problem, 1086 00:58:19,280 --> 00:58:22,320 Speaker 1: and then people will find other outlets for that um 1087 00:58:22,320 --> 00:58:24,440 Speaker 1: and so whether that's the real estate, which has been 1088 00:58:24,440 --> 00:58:31,880 Speaker 1: a traditional one, or stocks, gold, bitcoin, etcetera. Timing So, uh, 1089 00:58:32,160 --> 00:58:34,720 Speaker 1: you have the Harry dance out there, you know, and 1090 00:58:34,800 --> 00:58:38,800 Speaker 1: plenty of other people Jeremy Grantham, Um, you know we're 1091 00:58:38,840 --> 00:58:41,200 Speaker 1: in a textbook bearer market bounce, we have a fift 1092 00:58:41,600 --> 00:58:44,840 Speaker 1: drop in front of us, um, etcetera. But then there's 1093 00:58:44,880 --> 00:58:47,280 Speaker 1: other people that say, no, the market structures holding up. 1094 00:58:47,280 --> 00:58:49,040 Speaker 1: The FEDS kind of has things going. Money is coming 1095 00:58:49,040 --> 00:58:51,840 Speaker 1: to us because the markets are worse, and maybe we'll 1096 00:58:51,840 --> 00:58:54,880 Speaker 1: just kind of continue and muddle kind of along. Um, 1097 00:58:54,880 --> 00:58:57,360 Speaker 1: which camp do you find yourself in? Obviously without a 1098 00:58:57,480 --> 00:59:00,240 Speaker 1: first of ball, Yeah, I I don't really so don't 1099 00:59:00,240 --> 00:59:03,160 Speaker 1: think we have a crash in mind? So and I'll 1100 00:59:03,160 --> 00:59:05,600 Speaker 1: tell you why. So, just like the framework that we 1101 00:59:05,600 --> 00:59:08,520 Speaker 1: were discussing, the periphery falls first and money goes to 1102 00:59:08,560 --> 00:59:11,560 Speaker 1: the center. We see the UK falling, right, So they 1103 00:59:11,560 --> 00:59:14,680 Speaker 1: come out with this okay, so their bond market goes 1104 00:59:14,720 --> 00:59:17,400 Speaker 1: crazy and their and their currency depreciates. That means a 1105 00:59:17,400 --> 00:59:20,960 Speaker 1: lot of people are taking money out. They don't have confidence, well, 1106 00:59:21,000 --> 00:59:22,880 Speaker 1: they don't like the outlook in the UK, or maybe 1107 00:59:22,880 --> 00:59:26,439 Speaker 1: they find the US more attractive, and they're putting money here. Now, 1108 00:59:26,640 --> 00:59:29,000 Speaker 1: I was actually just having this conversation with a foreign 1109 00:59:29,000 --> 00:59:33,080 Speaker 1: based investor. Suppose you are a UK based investor and 1110 00:59:33,160 --> 00:59:36,919 Speaker 1: you invest in the Nazzack. Okay, you're today, you would 1111 00:59:36,920 --> 00:59:40,640 Speaker 1: have lost a lot of money, right the NAZAC went down. However, 1112 00:59:41,280 --> 00:59:44,160 Speaker 1: when you look at it pound terms, you're not really 1113 00:59:44,160 --> 00:59:46,919 Speaker 1: down that much. Maybe you're even flat because even though 1114 00:59:47,000 --> 00:59:50,240 Speaker 1: the NAZAC is going down. Uh, you you invested in 1115 00:59:50,360 --> 00:59:54,520 Speaker 1: dollars and um, so in local currency. As a dollar appreciates, 1116 00:59:55,280 --> 00:59:58,120 Speaker 1: you're earning that in pounds and the same thing. In Japan, 1117 00:59:58,200 --> 01:00:01,080 Speaker 1: for example, you can see the Japanese currency basically went 1118 01:00:01,120 --> 01:00:05,440 Speaker 1: from a hundred to add hundred forty, right, almost appreciation. 1119 01:00:06,200 --> 01:00:08,560 Speaker 1: So if you're a Japanese investor and you invest in 1120 01:00:08,520 --> 01:00:12,120 Speaker 1: the US stocks, sure the stock market went down, but 1121 01:00:12,240 --> 01:00:15,360 Speaker 1: the dollar appreciate a lot, so in end terms, your 1122 01:00:15,400 --> 01:00:19,360 Speaker 1: account looks more or less the same. Now, this is 1123 01:00:19,400 --> 01:00:21,760 Speaker 1: going to happen to a lot of foreign investors, so 1124 01:00:21,800 --> 01:00:23,680 Speaker 1: they're going to want to put money in the US 1125 01:00:23,960 --> 01:00:26,360 Speaker 1: because even if the U s stock market goes down 1126 01:00:26,480 --> 01:00:31,040 Speaker 1: more um, they're going to earn money from the fics 1127 01:00:31,080 --> 01:00:34,240 Speaker 1: appreciation and all it's going to go up, so they're 1128 01:00:34,240 --> 01:00:36,120 Speaker 1: not really going to They're going to be buffered from 1129 01:00:36,120 --> 01:00:38,560 Speaker 1: the losses in the stock market. That kind of puts 1130 01:00:39,000 --> 01:00:41,880 Speaker 1: support in the US. So much foreign money going in 1131 01:00:41,960 --> 01:00:44,600 Speaker 1: and just buying US assets. If that's the case, I 1132 01:00:44,640 --> 01:00:48,560 Speaker 1: think it's it's hard to have a crash. Um you 1133 01:00:48,640 --> 01:00:50,480 Speaker 1: just have a lot of forere money pouring in and 1134 01:00:50,520 --> 01:00:54,040 Speaker 1: making money off the currency, the dollar appreciation. It's a 1135 01:00:54,080 --> 01:00:56,280 Speaker 1: good point. It's a good point. We talked about money 1136 01:00:56,320 --> 01:00:59,720 Speaker 1: going money, money increasing, and money decreasing and the booms 1137 01:00:59,720 --> 01:01:02,280 Speaker 1: and US and so well, maybe the FED is decreasing 1138 01:01:02,320 --> 01:01:05,120 Speaker 1: the money supply now we were also increasing because we're 1139 01:01:05,120 --> 01:01:08,400 Speaker 1: attracting all this international capital at the same time, it's 1140 01:01:08,440 --> 01:01:11,080 Speaker 1: kind of instaying and then supply and demand. Are we 1141 01:01:11,120 --> 01:01:12,880 Speaker 1: going to have more capital coming in and then the 1142 01:01:13,200 --> 01:01:15,880 Speaker 1: rate that the FED is decreasing it by um It's 1143 01:01:15,880 --> 01:01:17,440 Speaker 1: it's a it's a similar thing as I was just 1144 01:01:17,480 --> 01:01:20,640 Speaker 1: talking about with bitcoin taking adoption in you know sub Sarain, 1145 01:01:20,680 --> 01:01:23,080 Speaker 1: Africa or Lebanon, where you have to break into the 1146 01:01:23,080 --> 01:01:25,720 Speaker 1: bank to even just get your own they're literally robbing 1147 01:01:25,760 --> 01:01:28,000 Speaker 1: banks to get their own money out and so, um, 1148 01:01:28,040 --> 01:01:29,800 Speaker 1: you're like, well, shoot, I guess I'll just take bitcoin. 1149 01:01:29,840 --> 01:01:32,080 Speaker 1: I mean, it's down six, but that's better than losing 1150 01:01:32,120 --> 01:01:34,200 Speaker 1: all of it. Um kind of a thing. But to 1151 01:01:34,240 --> 01:01:37,000 Speaker 1: the yeah, lose, I'm sure the bitcoin is like if 1152 01:01:37,000 --> 01:01:40,080 Speaker 1: you in local currency terms, they're not losing anything because 1153 01:01:40,080 --> 01:01:43,040 Speaker 1: they're probably gaining. Yeah. Yeah, um yeah, that's a that's 1154 01:01:43,040 --> 01:01:45,960 Speaker 1: a really good point. Um man. I think that's good. 1155 01:01:46,000 --> 01:01:48,320 Speaker 1: I think we've covered a lot of ground. I appreciate 1156 01:01:48,400 --> 01:01:51,880 Speaker 1: you giving us that last bit of insight. You don't 1157 01:01:51,880 --> 01:01:53,400 Speaker 1: think there's a crash, and you told us why, So 1158 01:01:53,440 --> 01:01:57,000 Speaker 1: I appreciate that. Um. And you've been a wealth of knowledge. 1159 01:01:57,000 --> 01:02:01,120 Speaker 1: I appreciate that. Um. So. I know you're pretty active 1160 01:02:01,120 --> 01:02:03,480 Speaker 1: on Twitter at fed Guy twelve. We're gonna make sure 1161 01:02:03,480 --> 01:02:05,440 Speaker 1: we link down that below. You also have a website 1162 01:02:05,440 --> 01:02:10,000 Speaker 1: fed guy dot com. Yea, um, anything else that you 1163 01:02:10,040 --> 01:02:14,440 Speaker 1: want to attention to. I know many, very many of 1164 01:02:14,480 --> 01:02:17,480 Speaker 1: their audiences are interested in monetary policy and the financial system. 1165 01:02:17,480 --> 01:02:19,640 Speaker 1: I also have this book it's called Central Banking one 1166 01:02:19,640 --> 01:02:22,560 Speaker 1: on one. It teaches you about how the FED works, 1167 01:02:22,560 --> 01:02:25,800 Speaker 1: what the international dollar system is like, and um, a 1168 01:02:25,800 --> 01:02:28,560 Speaker 1: lot of a lot of the mechanics of the financial system. 1169 01:02:28,640 --> 01:02:30,840 Speaker 1: So if you guys are interested, check it out. It's 1170 01:02:30,880 --> 01:02:33,320 Speaker 1: on Amazon. It's very well reviewed of Oh yeah, you 1171 01:02:33,320 --> 01:02:37,120 Speaker 1: have four ratings there. Yeah, it's almost five stars. So 1172 01:02:37,280 --> 01:02:39,760 Speaker 1: I think it's something that would be helpful to your 1173 01:02:39,760 --> 01:02:42,360 Speaker 1: audience if they're interested in the financial system. Yeah. I 1174 01:02:42,360 --> 01:02:44,360 Speaker 1: love that you have the money printer on top and 1175 01:02:44,440 --> 01:02:46,720 Speaker 1: you use the word you use the word money printing, 1176 01:02:46,760 --> 01:02:49,680 Speaker 1: which we all use. It's obviously we all know that's 1177 01:02:49,680 --> 01:02:52,960 Speaker 1: not how it works, but but but that's the common language. 1178 01:02:53,000 --> 01:02:55,600 Speaker 1: I'm gonna make sure we link to that Amazon uh 1179 01:02:55,720 --> 01:02:57,360 Speaker 1: description down below, and I'm gonna buy it as soon 1180 01:02:57,400 --> 01:02:58,920 Speaker 1: as we get off of this call as well. Leave 1181 01:02:58,960 --> 01:03:01,640 Speaker 1: your review on that. With that, Joseph, I guess the 1182 01:03:01,760 --> 01:03:04,760 Speaker 1: go ahead and ended. Yeah, thanks so much for inviting me. 1183 01:03:04,800 --> 01:03:07,600 Speaker 1: It's a pleasure. Mark, thanks Jovins. All right, that's a rap. 1184 01:03:07,640 --> 01:03:10,920 Speaker 1: Thanks for listening. Hopefully you got as much good information 1185 01:03:10,920 --> 01:03:14,000 Speaker 1: about this conversation as I did. It's always great to 1186 01:03:14,040 --> 01:03:16,720 Speaker 1: get a different viewpoint and more specifically somebody who has 1187 01:03:16,760 --> 01:03:19,560 Speaker 1: intricate knowledge of the inner workings of the financial system 1188 01:03:19,600 --> 01:03:23,040 Speaker 1: and specifically the Federal Reserve, the Central Bank, and so 1189 01:03:23,160 --> 01:03:25,320 Speaker 1: it was a great conversation. Hopefully enjoyed it. Check out 1190 01:03:25,360 --> 01:03:27,560 Speaker 1: the links in the description, follow him by his book, 1191 01:03:27,760 --> 01:03:29,560 Speaker 1: follow him on Twitter. And that's what I got to 1192 01:03:29,600 --> 01:03:31,080 Speaker 1: your success. I'm out.