1
00:00:00,080 --> 00:00:03,200
Speaker 1: Peter, thanks so much for joining me today. We have

2
00:00:03,240 --> 00:00:05,480
Speaker 1: so much to jump into. I'm super excited about this.

3
00:00:05,680 --> 00:00:07,480
Speaker 1: I know, you know, we've got to catch up at

4
00:00:07,480 --> 00:00:09,200
Speaker 1: some events and stuff like that. We always have a

5
00:00:09,320 --> 00:00:12,000
Speaker 1: lot to talk about, so I want to talk about

6
00:00:12,840 --> 00:00:14,720
Speaker 1: We'll start really big. We'll talk about like what the

7
00:00:14,720 --> 00:00:19,360
Speaker 1: heck is going on with the de globalization or decentralization,

8
00:00:19,440 --> 00:00:21,040
Speaker 1: the rise of the global South, the bricks. I want

9
00:00:21,040 --> 00:00:23,400
Speaker 1: to talk about, what's going on with the global homogeny

10
00:00:23,400 --> 00:00:26,080
Speaker 1: of the US treasury market. We talked about US deficits,

11
00:00:26,840 --> 00:00:29,560
Speaker 1: the debt ticking time in a lot of areas, what

12
00:00:29,600 --> 00:00:33,040
Speaker 1: the heck is going on with China, recession fears here

13
00:00:33,040 --> 00:00:36,960
Speaker 1: in the US, even the real estate and potentially Airbnb

14
00:00:37,120 --> 00:00:40,840
Speaker 1: bus that's coming. We got a lot to cover, but Peter, yeah, thanks,

15
00:00:40,880 --> 00:00:41,919
Speaker 1: thanks so much for joining.

16
00:00:41,680 --> 00:00:43,440
Speaker 2: Me, cours thanks for having me all Mark.

17
00:00:44,920 --> 00:00:47,480
Speaker 1: So, man, we got a lot to discuss. We probably

18
00:00:47,479 --> 00:00:49,080
Speaker 1: won't cover all that, so that's what we can do.

19
00:00:49,680 --> 00:00:51,920
Speaker 1: But you know, I wanted to start, you know, high level,

20
00:00:51,960 --> 00:00:53,320
Speaker 1: then kind of drill down. It's kind of what I

21
00:00:53,400 --> 00:00:55,560
Speaker 1: was thinking. And so you know, one thing that that

22
00:00:55,720 --> 00:00:58,160
Speaker 1: kind of the main theme that I follow on this

23
00:00:58,440 --> 00:01:03,640
Speaker 1: show is really this decentralization agenda, this deglobalization, and I

24
00:01:03,640 --> 00:01:05,600
Speaker 1: talk about the cycles, a twohundred and fift year cycle

25
00:01:05,640 --> 00:01:08,880
Speaker 1: of this pendulum swinging back from globalization to deglobalization, and

26
00:01:09,160 --> 00:01:11,440
Speaker 1: you can really see it everywhere where. We reached peak

27
00:01:11,520 --> 00:01:14,400
Speaker 1: globalization with the we F and the UN and the

28
00:01:14,440 --> 00:01:17,720
Speaker 1: IMF and the BIS and et cetera, NATO, but now

29
00:01:17,840 --> 00:01:20,040
Speaker 1: all that's breaking apart. We have the Rise of the Bricks.

30
00:01:20,520 --> 00:01:24,160
Speaker 1: They met about two weeks ago, and to me it

31
00:01:24,240 --> 00:01:27,600
Speaker 1: seemed like it was sort of a nothing burger. But

32
00:01:27,800 --> 00:01:30,520
Speaker 1: at the same time, it was massive, and the difference

33
00:01:30,640 --> 00:01:33,880
Speaker 1: was the time frames that you're looking at it. But

34
00:01:34,040 --> 00:01:35,720
Speaker 1: what's your what was your take on that?

35
00:01:37,440 --> 00:01:40,399
Speaker 3: I think the Bricks meeting was not as exciting as

36
00:01:40,400 --> 00:01:44,360
Speaker 3: some people hoped. There was no movement really on dollarization.

37
00:01:45,760 --> 00:01:48,360
Speaker 3: I think, you know, sort of the key there. The

38
00:01:48,440 --> 00:01:52,400
Speaker 3: thing that people were looking out for was the possibility

39
00:01:52,480 --> 00:01:57,160
Speaker 3: of bricks doing some sort of goldbacked rail that would

40
00:01:57,200 --> 00:01:59,960
Speaker 3: replace the US dollar, that would not be their national current,

41
00:02:00,400 --> 00:02:03,240
Speaker 3: right because you know, China does not want a strong

42
00:02:03,280 --> 00:02:06,600
Speaker 3: currency in the first place. Most of the countries in

43
00:02:06,720 --> 00:02:10,360
Speaker 3: bricks are I mean, they're just garbage in terms of currencies.

44
00:02:10,680 --> 00:02:13,040
Speaker 3: You got Brazilian there, which has a heck of a history.

45
00:02:13,080 --> 00:02:16,000
Speaker 3: You got Russia, which has had you know, over one

46
00:02:16,040 --> 00:02:19,919
Speaker 3: hundred percent inflation in the past decades. None of these

47
00:02:19,919 --> 00:02:23,639
Speaker 3: countries want each other currencies. So India and Russia keep

48
00:02:23,639 --> 00:02:27,320
Speaker 3: bickering because neither of them want to accept each other's trash.

49
00:02:27,840 --> 00:02:29,960
Speaker 3: So the question on bricks is not going to be

50
00:02:30,000 --> 00:02:33,400
Speaker 3: their crappy currencies replacing the dollars. The question is going

51
00:02:33,440 --> 00:02:38,480
Speaker 3: to be some kind of gold backed rail, presumably you know,

52
00:02:38,560 --> 00:02:41,280
Speaker 3: mostly managed by China because they got the money. And

53
00:02:41,360 --> 00:02:43,480
Speaker 3: the idea would be that you know, today, none of

54
00:02:43,480 --> 00:02:46,400
Speaker 3: those countries use the dollar at home, right, They use

55
00:02:46,480 --> 00:02:50,920
Speaker 3: the dollar as kind of this outside, separate rail that

56
00:02:50,960 --> 00:02:53,000
Speaker 3: they can do trade on. And so the idea would

57
00:02:53,000 --> 00:02:57,800
Speaker 3: be that, say China would back some kind of dollar replacement,

58
00:02:58,440 --> 00:03:00,640
Speaker 3: and then they would do that so that they could

59
00:03:00,760 --> 00:03:06,200
Speaker 3: suck power away from the US, right, because if there's

60
00:03:06,280 --> 00:03:09,600
Speaker 3: some cleanest dirty shirt in the world, right, if there's

61
00:03:09,600 --> 00:03:13,400
Speaker 3: some option that's better than the US dollar, then a

62
00:03:13,440 --> 00:03:17,720
Speaker 3: lot of the US dollars sort of extra demand, okay, which.

63
00:03:17,560 --> 00:03:18,560
Speaker 2: Holds its price up.

64
00:03:18,919 --> 00:03:22,520
Speaker 3: A lot of that can sort of drain away and

65
00:03:22,639 --> 00:03:24,120
Speaker 3: you know, if we kind of zoom out. The thing

66
00:03:24,160 --> 00:03:26,160
Speaker 3: about the US dollar is that it's really been the

67
00:03:26,200 --> 00:03:30,399
Speaker 3: reserve currency for about eighty years now, meaning that other

68
00:03:30,480 --> 00:03:34,600
Speaker 3: countries they use it for trade, they use it for investment.

69
00:03:35,200 --> 00:03:37,880
Speaker 3: If you talk to a rich person in Mexico, he

70
00:03:38,160 --> 00:03:41,320
Speaker 3: is not saving his millions in pesos, that would be insane.

71
00:03:41,560 --> 00:03:43,600
Speaker 3: He's got a little bit of paysos for his month

72
00:03:43,640 --> 00:03:45,920
Speaker 3: to month needs, and most of his assets are saved

73
00:03:45,960 --> 00:03:49,400
Speaker 3: in dollars. That is true all over the world, and

74
00:03:49,440 --> 00:03:52,240
Speaker 3: the end result is that there's about two to three

75
00:03:52,320 --> 00:03:57,760
Speaker 3: times more dollars in existence than Americans actually need. Okay,

76
00:03:57,760 --> 00:04:00,720
Speaker 3: all those extra dollars are floating around out there, So

77
00:04:00,920 --> 00:04:05,240
Speaker 3: if some kind of dollar replacement comes along, then people

78
00:04:05,280 --> 00:04:07,680
Speaker 3: don't need those dollars. They sell them out on the market.

79
00:04:07,880 --> 00:04:13,280
Speaker 3: Dollar starts getting weaker. That weakness scares let's say, Japanese

80
00:04:13,360 --> 00:04:16,040
Speaker 3: banks who are holding you know, tens of billions of dollars,

81
00:04:16,400 --> 00:04:19,760
Speaker 3: they sell those. All that stuff comes rushing back into

82
00:04:19,760 --> 00:04:22,640
Speaker 3: the US. The only people in the world who are

83
00:04:22,800 --> 00:04:26,719
Speaker 3: actually obligated to use the US dollar literally by law

84
00:04:26,960 --> 00:04:29,880
Speaker 3: is Americans. So if nobody in the world wants dollars,

85
00:04:30,279 --> 00:04:33,080
Speaker 3: they all come flooding home. There are way too many

86
00:04:33,120 --> 00:04:35,640
Speaker 3: as it is, because we were the reserve currency for

87
00:04:35,680 --> 00:04:38,920
Speaker 3: too long. That could lead to double digit inflation here

88
00:04:38,960 --> 00:04:41,599
Speaker 3: in the US. From China's perspective, they would love that

89
00:04:41,680 --> 00:04:45,120
Speaker 3: because that would knock us out.

90
00:04:46,480 --> 00:04:50,440
Speaker 1: Okay, let's let's let's unpack that a little bit. So

91
00:04:51,160 --> 00:04:53,720
Speaker 1: there's two things at play. First of all, yeah, there

92
00:04:53,720 --> 00:04:55,640
Speaker 1: was all this talk of going to launch this goldback

93
00:04:55,680 --> 00:04:58,880
Speaker 1: currency that that got kind of a you know, knocked

94
00:04:58,880 --> 00:05:00,720
Speaker 1: off the table even before the event. It happens like

95
00:05:00,760 --> 00:05:04,120
Speaker 1: I wasn't really expecting that, But there was a couple

96
00:05:04,160 --> 00:05:06,320
Speaker 1: of things that I thought were important. So one, during

97
00:05:06,320 --> 00:05:10,760
Speaker 1: the event, they talked about they urge the importance of

98
00:05:10,839 --> 00:05:13,840
Speaker 1: each of these member stage trading in their own currencies

99
00:05:13,880 --> 00:05:16,960
Speaker 1: and outside of the dollar. That was one. So talking

100
00:05:17,000 --> 00:05:18,440
Speaker 1: about that. So you said that they all have these

101
00:05:18,440 --> 00:05:20,760
Speaker 1: different currencies and none of them really want each other's currencies.

102
00:05:21,640 --> 00:05:24,320
Speaker 1: But we see that they're trading in their own currencies.

103
00:05:24,320 --> 00:05:27,000
Speaker 1: They're paying for oil and rupees for example. They're paying

104
00:05:27,000 --> 00:05:30,320
Speaker 1: for oil and ywan, et cetera. And I think about it, like,

105
00:05:32,040 --> 00:05:34,640
Speaker 1: to your point, nobody's obligated to pay with anything other

106
00:05:34,680 --> 00:05:36,800
Speaker 1: than US, as taxpayers with dollars. But if I want

107
00:05:36,800 --> 00:05:38,040
Speaker 1: to go to Chuck E Cheese and I want to

108
00:05:38,040 --> 00:05:39,840
Speaker 1: play games at Chuck E Cheese, I have to get

109
00:05:39,839 --> 00:05:42,840
Speaker 1: the Chuck E Cheese token exactly right. I don't want

110
00:05:42,880 --> 00:05:44,520
Speaker 1: the Chuck e Cheese. I'm certainly not going to store

111
00:05:44,520 --> 00:05:46,159
Speaker 1: my wealth in Chuck e Cheese tokens. But if I

112
00:05:46,200 --> 00:05:47,680
Speaker 1: want to go there and play the games, I have

113
00:05:47,720 --> 00:05:50,279
Speaker 1: to have their token. And so if I want to

114
00:05:50,320 --> 00:05:52,839
Speaker 1: do business with China, or if I want to get

115
00:05:52,880 --> 00:05:57,080
Speaker 1: commodities from Argentina or xyz fill in the blank, they

116
00:05:57,080 --> 00:05:59,080
Speaker 1: could say, hey, you need my currency to get my

117
00:05:59,400 --> 00:06:03,320
Speaker 1: Chuck e Cheese games. Right now, the problem is is

118
00:06:03,360 --> 00:06:06,320
Speaker 1: then what happens with so you have you have currencies,

119
00:06:06,360 --> 00:06:08,360
Speaker 1: and then you have reserve assets. And so we might

120
00:06:08,400 --> 00:06:10,440
Speaker 1: break the dollar down into boats. So the dollar as

121
00:06:10,480 --> 00:06:12,440
Speaker 1: the currency and the dollar like the treasury market as

122
00:06:12,440 --> 00:06:17,880
Speaker 1: the reserve asset. So I mean to to if we

123
00:06:17,960 --> 00:06:20,479
Speaker 1: break those two apart, you have the reserve asset. Now

124
00:06:21,160 --> 00:06:23,440
Speaker 1: I want to talk about both separately, But let's talk

125
00:06:23,440 --> 00:06:26,440
Speaker 1: about the currencies for a minute. So couldn't they trade

126
00:06:26,600 --> 00:06:30,479
Speaker 1: in their currencies? I guess they would just need a

127
00:06:30,560 --> 00:06:33,360
Speaker 1: market then to take those trade imbalances and then stick

128
00:06:33,400 --> 00:06:34,040
Speaker 1: them somewhere.

129
00:06:34,760 --> 00:06:37,400
Speaker 2: Yeah, that's exactly what yep.

130
00:06:37,640 --> 00:06:42,800
Speaker 3: And the chucky cheese example is actually really good for understanding,

131
00:06:43,680 --> 00:06:45,799
Speaker 3: you know, how currencies work in general. So the United

132
00:06:45,800 --> 00:06:48,720
Speaker 3: States is a giant Chucky cheese and if you want

133
00:06:48,760 --> 00:06:50,520
Speaker 3: to do stuff in the United States, you have to

134
00:06:50,640 --> 00:06:53,400
Speaker 3: use chuck e cheese tokens in the United States, you

135
00:06:53,440 --> 00:06:54,360
Speaker 3: have to use US dollar.

136
00:06:54,760 --> 00:06:56,640
Speaker 2: And that's te everyone in the world. Now.

137
00:06:56,640 --> 00:07:01,600
Speaker 3: The thing is that most money, like most money demand, right,

138
00:07:01,760 --> 00:07:04,400
Speaker 3: most of the reason that people are buying money, it's

139
00:07:04,400 --> 00:07:07,120
Speaker 3: not to transact in it, it's to save in it, right,

140
00:07:07,160 --> 00:07:10,600
Speaker 3: So savings are probably six or seven times more than

141
00:07:10,640 --> 00:07:15,440
Speaker 3: the transactions themselves. And so when India, you know, is

142
00:07:15,480 --> 00:07:19,000
Speaker 3: buying oil and rupees or something like that, yes, it

143
00:07:19,160 --> 00:07:22,280
Speaker 3: takes some of the demand away from the dollar. But

144
00:07:22,320 --> 00:07:25,520
Speaker 3: the thing is that both sides of that transaction. So

145
00:07:25,720 --> 00:07:27,960
Speaker 3: in the moment, if you take a snapshot when they're

146
00:07:28,000 --> 00:07:31,320
Speaker 3: handing the rupees over for the you know, Saudi rials

147
00:07:31,400 --> 00:07:34,400
Speaker 3: or whatever, in that moment, the dollar is not part

148
00:07:34,440 --> 00:07:37,120
Speaker 3: of the you know party. But as soon as that

149
00:07:37,160 --> 00:07:41,160
Speaker 3: transaction settles, they're probably gonna park most of that in

150
00:07:41,320 --> 00:07:44,680
Speaker 3: US dollars, right, So the end result is that even

151
00:07:44,760 --> 00:07:46,440
Speaker 3: though there's more and more trade.

152
00:07:46,720 --> 00:07:50,000
Speaker 1: But they are they but are they parking in US treasuries? Right?

153
00:07:50,120 --> 00:07:52,720
Speaker 1: That's their reserve, that's their savings.

154
00:07:52,960 --> 00:07:56,880
Speaker 3: Yep, exactly right, So that from from their perspective, a

155
00:07:56,920 --> 00:07:58,560
Speaker 3: treasury is the same as a dollar. It's just got

156
00:07:58,600 --> 00:08:00,920
Speaker 3: an interest rate on it. So yeah, most of them

157
00:08:00,920 --> 00:08:02,320
Speaker 3: are parked in US treasures.

158
00:08:03,480 --> 00:08:06,120
Speaker 1: But I think about like my wife, she's sort of

159
00:08:06,160 --> 00:08:09,760
Speaker 1: ridiculous in this way where she loves her like Starbucks

160
00:08:10,200 --> 00:08:12,880
Speaker 1: card and she loves to put money onto her Starbucks app.

161
00:08:12,920 --> 00:08:14,640
Speaker 1: So when she goes to Starbucks, she just shows her

162
00:08:14,680 --> 00:08:18,920
Speaker 1: app and they credit. Starbucks has two billion dollars of

163
00:08:19,080 --> 00:08:24,080
Speaker 1: float sitting in their gift cards, right, So people do

164
00:08:24,160 --> 00:08:27,320
Speaker 1: store wealth in Starbucks apparently two billion dollars of it, right,

165
00:08:28,120 --> 00:08:30,160
Speaker 1: and sort of like a float because they know they're

166
00:08:30,200 --> 00:08:32,720
Speaker 1: going to go to Starbucks and use that at some point.

167
00:08:32,880 --> 00:08:35,199
Speaker 1: And it's not even a Starbucks token, it's just the dollar.

168
00:08:35,440 --> 00:08:38,280
Speaker 1: But yeah, they'll still park it there. So it could

169
00:08:38,360 --> 00:08:40,560
Speaker 1: be possible where I, hey, I'm going to do two

170
00:08:40,559 --> 00:08:43,000
Speaker 1: billion dollars with trade with India, I might as well

171
00:08:43,040 --> 00:08:43,840
Speaker 1: just keep some rupees.

172
00:08:45,520 --> 00:08:47,280
Speaker 2: Yeah, without a doubt. I mean there's going to be

173
00:08:47,320 --> 00:08:47,720
Speaker 2: some of that.

174
00:08:47,880 --> 00:08:51,480
Speaker 3: So the reason that you save sort of zooming out

175
00:08:51,480 --> 00:08:53,560
Speaker 3: in the big picture is so that you can eventually

176
00:08:53,600 --> 00:08:57,439
Speaker 3: engage in transactions. Right, So if a significant amount of

177
00:08:57,480 --> 00:08:59,599
Speaker 3: the trade going on between let's say Saudi Arabia and

178
00:08:59,679 --> 00:09:02,600
Speaker 3: China is going on in their own currencies, then yes,

179
00:09:02,640 --> 00:09:06,800
Speaker 3: there will be some deterioration of US dollar demand. But

180
00:09:07,080 --> 00:09:10,880
Speaker 3: I don't think it's massive. So it's it's not like

181
00:09:10,960 --> 00:09:12,959
Speaker 3: one to one. In other words, if ten percent of

182
00:09:13,000 --> 00:09:16,680
Speaker 3: their trade shifts out into each other's currencies, that doesn't

183
00:09:16,720 --> 00:09:19,440
Speaker 3: I think imply a ten percent drop and how many

184
00:09:19,440 --> 00:09:22,319
Speaker 3: dollars they want, because most of the dollars they want

185
00:09:22,760 --> 00:09:26,360
Speaker 3: are kind of saved for we don't know what yet, Okay,

186
00:09:26,440 --> 00:09:28,640
Speaker 3: So it's it's just a store of value. It's not

187
00:09:28,679 --> 00:09:32,640
Speaker 3: necessarily dedicated to any purpose. So yes, those a week

188
00:09:32,640 --> 00:09:35,800
Speaker 3: in the dollar, and you know, I think everybody pretty

189
00:09:35,840 --> 00:09:38,760
Speaker 3: much expected that out of the summit. Here all of

190
00:09:38,800 --> 00:09:42,160
Speaker 3: the countries in bricks are trying to extend how much

191
00:09:42,160 --> 00:09:44,559
Speaker 3: trade they do. They're also trying to bring in new members.

192
00:09:44,559 --> 00:09:47,440
Speaker 3: They've got something like forty that are knocking on the door,

193
00:09:48,000 --> 00:09:51,880
Speaker 3: and yes, that will drain some demand away from the dollar.

194
00:09:52,280 --> 00:09:54,559
Speaker 3: I don't think it's an absolute game changer like gold

195
00:09:54,640 --> 00:09:57,640
Speaker 3: might be, but you know, it looks like gold is

196
00:09:57,640 --> 00:09:59,960
Speaker 3: a ways away now. The thing to keep in mind

197
00:10:00,400 --> 00:10:05,320
Speaker 3: because the dollar is a funny creature because it's the

198
00:10:05,360 --> 00:10:09,760
Speaker 3: reserve currency. So in two thousand and eight, the global

199
00:10:09,760 --> 00:10:13,000
Speaker 3: financial crisis that started in the US, right, it started

200
00:10:13,040 --> 00:10:16,280
Speaker 3: with you know, risky mortgages and with banks that took

201
00:10:16,320 --> 00:10:19,280
Speaker 3: too many gambles. And even though it started in the US,

202
00:10:19,360 --> 00:10:22,240
Speaker 3: that spread all over the world, Europe and Asia. The

203
00:10:22,320 --> 00:10:26,040
Speaker 3: US dollar actually got stronger during the global financial crisis.

204
00:10:26,080 --> 00:10:28,920
Speaker 3: And the reason is because if you are the reserve currency,

205
00:10:28,960 --> 00:10:34,240
Speaker 3: you're seen as the safe haven, even if the problem

206
00:10:34,440 --> 00:10:37,400
Speaker 3: is coming from your own country, from the perspective of

207
00:10:37,400 --> 00:10:39,839
Speaker 3: the whole world, the US dollar is still seen as

208
00:10:39,840 --> 00:10:42,720
Speaker 3: a safe haven. So on the one hand, bricks could

209
00:10:43,280 --> 00:10:45,600
Speaker 3: drag demand out of the dollar, which would weaken it.

210
00:10:46,120 --> 00:10:48,000
Speaker 3: On the other hand, you know, if we look at

211
00:10:48,000 --> 00:10:51,760
Speaker 3: the world largely speaking, we've got near recession in the US,

212
00:10:51,840 --> 00:10:55,000
Speaker 3: we've got outright recession in Europe, China has gone through

213
00:10:55,080 --> 00:10:57,720
Speaker 3: rough patch. There's so many problems in the world that

214
00:10:57,800 --> 00:11:00,320
Speaker 3: it would not at all be surprising to actually see

215
00:11:00,320 --> 00:11:05,760
Speaker 3: the dollar get stronger even as that sort of structural

216
00:11:05,840 --> 00:11:08,840
Speaker 3: demand is fading away because it's being replaced. So you

217
00:11:08,880 --> 00:11:11,560
Speaker 3: have basically tempered because people are scared.

218
00:11:12,760 --> 00:11:15,080
Speaker 1: Yeah, which it is. The dollar has been raging too,

219
00:11:15,440 --> 00:11:17,680
Speaker 1: rampaging its way up right now. But if we go

220
00:11:17,760 --> 00:11:19,800
Speaker 1: back to this sort of Chuck E Cheese analogy, so

221
00:11:20,760 --> 00:11:22,760
Speaker 1: we don't want money. What we want is the things

222
00:11:22,800 --> 00:11:25,760
Speaker 1: that money buys us, the goods and services. We wait

223
00:11:25,920 --> 00:11:28,000
Speaker 1: in money until we're ready to get those goods and

224
00:11:28,040 --> 00:11:31,680
Speaker 1: services that we want. So back to the CHUCKI cheese analogy,

225
00:11:31,760 --> 00:11:35,960
Speaker 1: what we want is goods and services. Now the US

226
00:11:36,200 --> 00:11:39,079
Speaker 1: is main exports of we have goods and services. Most

227
00:11:39,080 --> 00:11:42,520
Speaker 1: of what we export as services, financial services, social media services.

228
00:11:42,760 --> 00:11:44,000
Speaker 1: Putin said, what are you going to do eat your

229
00:11:44,040 --> 00:11:44,840
Speaker 1: social media stocks?

230
00:11:45,800 --> 00:11:46,040
Speaker 2: Now?

231
00:11:46,120 --> 00:11:49,080
Speaker 1: As far as goods, the top three exports and goods

232
00:11:49,080 --> 00:11:54,320
Speaker 1: are energy. But if with the addition of staud Arabia, Iran,

233
00:11:55,360 --> 00:11:57,440
Speaker 1: I think it's they're up to about eighty percent of

234
00:11:57,480 --> 00:12:00,960
Speaker 1: the global energy market, well market, I should say.

235
00:12:01,280 --> 00:12:01,400
Speaker 2: So.

236
00:12:01,600 --> 00:12:06,520
Speaker 1: If these if these bricks nations, the Brazil, the Russia,

237
00:12:06,920 --> 00:12:10,679
Speaker 1: the Saudi Arabia, et cetera. If they're the producers of goods,

238
00:12:12,000 --> 00:12:16,000
Speaker 1: then the world needs what they're producing, versus what is

239
00:12:16,040 --> 00:12:17,400
Speaker 1: the US producing that anybody needs?

240
00:12:18,280 --> 00:12:21,960
Speaker 3: Really nice, Yeah, and that's the fundamental problem, you know,

241
00:12:22,280 --> 00:12:27,600
Speaker 3: our really across the West, they're chasing out manufacturing, they're

242
00:12:27,640 --> 00:12:30,439
Speaker 3: chasing out energy. They're generally doing it in the name

243
00:12:30,440 --> 00:12:32,839
Speaker 3: of the climate. And of course they're just sending these

244
00:12:32,840 --> 00:12:36,679
Speaker 3: overseas where they're often produced even dirtier. So none of

245
00:12:36,720 --> 00:12:39,640
Speaker 3: it makes any sense. But it's crony. There's a lot

246
00:12:39,640 --> 00:12:43,120
Speaker 3: of money at issue. So we're chasing out all of

247
00:12:43,160 --> 00:12:47,120
Speaker 3: these sort of real industries, and you know, we're essentially

248
00:12:47,160 --> 00:12:50,640
Speaker 3: handing them to these other countries. Germany is just deindustrializing

249
00:12:50,679 --> 00:12:54,560
Speaker 3: at at a you know, at a ridiculous pace all

250
00:12:54,600 --> 00:12:58,640
Speaker 3: across the exped Yeah, they're they're buying out farmers and

251
00:12:58,679 --> 00:13:02,280
Speaker 3: slaughtering cows, and so you are, you are essentially handing

252
00:13:02,360 --> 00:13:05,559
Speaker 3: the keys to your future to these other countries. Now,

253
00:13:05,559 --> 00:13:08,040
Speaker 3: the thing is that the countries who it's being handed

254
00:13:08,160 --> 00:13:11,040
Speaker 3: to are the countries who are not part of the

255
00:13:11,040 --> 00:13:13,960
Speaker 3: Western gang, right, They're the kind of countries who don't

256
00:13:14,080 --> 00:13:17,400
Speaker 3: listen to environmentalists or the rest of the activists. So

257
00:13:17,559 --> 00:13:21,679
Speaker 3: almost by definition, you're taking all of the real industries,

258
00:13:21,920 --> 00:13:26,040
Speaker 3: basic materials, minerals, even food, and you are handing those

259
00:13:26,080 --> 00:13:28,760
Speaker 3: two countries that sort of by definition don't like you.

260
00:13:29,200 --> 00:13:32,560
Speaker 3: They're not part of your gang. And so this, you know,

261
00:13:32,600 --> 00:13:36,440
Speaker 3: this kind of sets up a nineteen seventies oil crisis

262
00:13:36,440 --> 00:13:40,800
Speaker 3: type situation, but completely across the board right where every

263
00:13:40,920 --> 00:13:43,040
Speaker 3: you know, we're not there yet, we're going gradually, we're

264
00:13:43,040 --> 00:13:45,240
Speaker 3: going as fast as the activists can push it. But

265
00:13:45,280 --> 00:13:48,400
Speaker 3: where gradually all of these things are coming from countries

266
00:13:48,440 --> 00:13:51,679
Speaker 3: that are actually hostile to you. If those countries are

267
00:13:51,679 --> 00:13:54,760
Speaker 3: talking to each other, then you could conceivably have an

268
00:13:54,800 --> 00:13:59,800
Speaker 3: OPAQ style coordination where they start squeezing the West, and

269
00:14:00,080 --> 00:14:02,520
Speaker 3: you know, the West does have things they want, like money,

270
00:14:02,880 --> 00:14:07,040
Speaker 3: so you know, they could essentially make the West dance.

271
00:14:07,720 --> 00:14:10,520
Speaker 3: Even if the Western economies are much bigger on paper,

272
00:14:10,840 --> 00:14:13,600
Speaker 3: they don't have those leverage points. A lot of countries

273
00:14:13,600 --> 00:14:17,560
Speaker 3: in the world would dearly love for say, Facebook to

274
00:14:17,640 --> 00:14:20,320
Speaker 3: pull out, either so they can promote a national champion,

275
00:14:20,840 --> 00:14:23,640
Speaker 3: or they don't frankly need it very much. They might

276
00:14:23,680 --> 00:14:26,680
Speaker 3: see a company like Facebook as a problem that it

277
00:14:26,760 --> 00:14:30,440
Speaker 3: encourages activists or color revolutions and things like this. So

278
00:14:30,480 --> 00:14:33,680
Speaker 3: from those countries' perspective, there's there's very little leverage that

279
00:14:33,760 --> 00:14:36,960
Speaker 3: you can throw back at them if they do decide

280
00:14:37,000 --> 00:14:39,720
Speaker 3: to use their control of basic materials and energy to

281
00:14:39,760 --> 00:14:40,360
Speaker 3: squeeze us.

282
00:14:41,240 --> 00:14:43,440
Speaker 1: So going back to we don't want money, We just

283
00:14:43,480 --> 00:14:46,080
Speaker 1: want the things that money buys us. But we have

284
00:14:46,160 --> 00:14:49,240
Speaker 1: to store that weight. We have to store our value

285
00:14:49,240 --> 00:14:51,040
Speaker 1: in something where we can wait. And so the dollar,

286
00:14:51,160 --> 00:14:54,840
Speaker 1: the treasury market has been that, and I think you know,

287
00:14:54,880 --> 00:14:58,360
Speaker 1: we'd both agree, most most everybody agrees that there's really

288
00:14:58,360 --> 00:15:00,440
Speaker 1: no replacement for the US treasury market. We don't have

289
00:15:00,520 --> 00:15:03,360
Speaker 1: the bond markets, the deep liquidity markets, we don't really

290
00:15:03,360 --> 00:15:06,400
Speaker 1: have even as much trust has been lost into a system,

291
00:15:06,440 --> 00:15:09,000
Speaker 1: there's less trust in other places, et cetera. But it

292
00:15:09,040 --> 00:15:11,080
Speaker 1: seems like what a lot of these bricks nations have

293
00:15:11,120 --> 00:15:16,080
Speaker 1: been doing is moving their treasury buying into gold buying, right,

294
00:15:17,120 --> 00:15:19,080
Speaker 1: And so that has been a trend that we've been

295
00:15:19,080 --> 00:15:21,280
Speaker 1: seeing over the last couple of years. And so they

296
00:15:21,480 --> 00:15:25,960
Speaker 1: if they need to park their trade balances, their reserves

297
00:15:26,360 --> 00:15:29,240
Speaker 1: in something, then well they have all these their assets.

298
00:15:29,320 --> 00:15:32,240
Speaker 1: The dollars the best, but maybe gold is also good

299
00:15:32,280 --> 00:15:35,280
Speaker 1: as well, and it seems that's that's the trend.

300
00:15:35,520 --> 00:15:38,320
Speaker 2: Right, gold is good as well also hard materials.

301
00:15:38,920 --> 00:15:41,000
Speaker 3: So you know what China's been doing is plowing a

302
00:15:41,040 --> 00:15:44,720
Speaker 3: lot of money into Africa and it will you know,

303
00:15:44,800 --> 00:15:47,240
Speaker 3: what it gets on on incend is that it might

304
00:15:47,360 --> 00:15:52,280
Speaker 3: own a you know, oil, an oil field, or a

305
00:15:52,320 --> 00:15:55,760
Speaker 3: mine or something in these various countries. And so that's

306
00:15:55,840 --> 00:15:57,960
Speaker 3: essentially a hard asset. It's not quite gold, but you

307
00:15:58,000 --> 00:16:01,040
Speaker 3: put a bunch of those together and serves the same purpose.

308
00:16:01,680 --> 00:16:04,840
Speaker 2: And probably the biggest sort of own.

309
00:16:04,760 --> 00:16:11,160
Speaker 3: Goal there is that when Putin invaded Ukraine, the US

310
00:16:11,280 --> 00:16:16,280
Speaker 3: actually seized Russia the sovereign dollars of the Russian Central Bank,

311
00:16:16,680 --> 00:16:18,280
Speaker 3: and they did that to try to set off a

312
00:16:18,440 --> 00:16:23,000
Speaker 3: bank crash. Now, ironically our banks crashed instead for separate reasons.

313
00:16:24,080 --> 00:16:27,080
Speaker 3: But what that did was warned the entire world, right,

314
00:16:27,080 --> 00:16:29,120
Speaker 3: It warned the other two hundred countries in the world

315
00:16:29,520 --> 00:16:32,600
Speaker 3: that the dollar is a very risky thing to own now,

316
00:16:32,680 --> 00:16:36,160
Speaker 3: because if the US government decides that it doesn't like

317
00:16:36,200 --> 00:16:39,560
Speaker 3: your policy, then they will crash your economy. Now, if

318
00:16:39,560 --> 00:16:42,360
Speaker 3: you're a country in Africa, let's say that you're kind

319
00:16:42,360 --> 00:16:45,440
Speaker 3: of dodgy on the democracy front the prospect that the

320
00:16:45,560 --> 00:16:49,280
Speaker 3: US could crash your banking system. That does not mean

321
00:16:49,320 --> 00:16:51,760
Speaker 3: that you're going to have embarrassing press conferences. Okay, that

322
00:16:51,800 --> 00:16:53,560
Speaker 3: could mean that you're hanging from a poll.

323
00:16:53,480 --> 00:16:53,760
Speaker 2: All right.

324
00:16:53,800 --> 00:16:57,320
Speaker 3: That's a very very serious threat in some of these countries,

325
00:16:57,720 --> 00:17:01,200
Speaker 3: and the US just jumped right in. During the Cold War,

326
00:17:02,000 --> 00:17:04,520
Speaker 3: you know, we had multiple hot wars going on, proxy

327
00:17:04,520 --> 00:17:06,360
Speaker 3: wars going on with the Soviet Union all over the world.

328
00:17:06,400 --> 00:17:08,199
Speaker 3: We never ever did that because we were run by

329
00:17:08,280 --> 00:17:12,560
Speaker 3: grown ups who understand that you want to let or

330
00:17:12,720 --> 00:17:16,159
Speaker 3: keep the entire earth dependent on you, yes, even your enemies.

331
00:17:16,640 --> 00:17:17,080
Speaker 2: So in this.

332
00:17:17,119 --> 00:17:21,520
Speaker 3: Case it's you know, not only was it just blindingly stupid,

333
00:17:21,920 --> 00:17:24,800
Speaker 3: but for me, it's an interesting input into the whole

334
00:17:24,800 --> 00:17:27,040
Speaker 3: debate about the petro dollar. And you know, whether the

335
00:17:27,119 --> 00:17:32,320
Speaker 3: US is gonna run around doing in world leaders who

336
00:17:32,520 --> 00:17:35,800
Speaker 3: who reject the dollar, they have been so incompetent at

337
00:17:35,840 --> 00:17:39,199
Speaker 3: managing it. I don't know if they're too stupid or

338
00:17:39,240 --> 00:17:42,639
Speaker 3: if they are so beholden to the activists that, you know,

339
00:17:42,760 --> 00:17:45,840
Speaker 3: the sort of Kissinger type, real politic grown ups in

340
00:17:45,840 --> 00:17:47,879
Speaker 3: the room get ignored and they just do whatever the

341
00:17:47,880 --> 00:17:51,400
Speaker 3: activists want. You know, they've been throwing weight around. Recently,

342
00:17:51,440 --> 00:17:55,400
Speaker 3: Japan had a big debate about LGBT policy. Uh Uganda

343
00:17:55,480 --> 00:18:00,840
Speaker 3: had a law that's very harsh on LGBT community, and

344
00:18:00,960 --> 00:18:03,120
Speaker 3: the US has been pushing on that. They actually put

345
00:18:03,160 --> 00:18:06,159
Speaker 3: sanctions on Uganda. They said, we're going to review your

346
00:18:06,240 --> 00:18:09,720
Speaker 3: duty free access because of this law. Right, and so

347
00:18:09,800 --> 00:18:13,280
Speaker 3: that's an escalation here, because it's one thing if your

348
00:18:13,320 --> 00:18:15,560
Speaker 3: country's afraid to invade your neighbor because you think the

349
00:18:15,640 --> 00:18:17,760
Speaker 3: US will crash you. It's another thing if now that's

350
00:18:17,760 --> 00:18:23,080
Speaker 3: starting to get into environmental union family. Right, the typical

351
00:18:23,440 --> 00:18:28,480
Speaker 3: African is not woke. They very much not woke. They're

352
00:18:28,480 --> 00:18:31,439
Speaker 3: not into this kind of thing. Uganda cannot do that

353
00:18:31,520 --> 00:18:33,600
Speaker 3: kind of policy. So at that point, for a lot

354
00:18:33,600 --> 00:18:36,960
Speaker 3: of these or Saudi Arabia or Indonesia which is Muslim,

355
00:18:37,160 --> 00:18:40,520
Speaker 3: So those countries are basically backed into a corner where

356
00:18:40,720 --> 00:18:43,199
Speaker 3: you know, they saw what the US did to Russia.

357
00:18:43,440 --> 00:18:45,680
Speaker 3: They who knows if they're coming from them, They don't

358
00:18:45,760 --> 00:18:47,320
Speaker 3: know what the rules are. It's a lot like us

359
00:18:47,400 --> 00:18:49,199
Speaker 3: on social media, you know, like day to day, you

360
00:18:49,200 --> 00:18:50,920
Speaker 3: have no idea what you're going to be censored for.

361
00:18:51,240 --> 00:18:54,480
Speaker 3: These countries have no idea what transgression is going to

362
00:18:54,480 --> 00:18:57,119
Speaker 3: get the active is excited about them. Meanwhile, you have

363
00:18:57,280 --> 00:19:00,359
Speaker 3: China over here. You know, in China's deal when it

364
00:19:00,400 --> 00:19:03,760
Speaker 3: comes to developing countries is they.

365
00:19:03,560 --> 00:19:05,480
Speaker 2: Say, we don't care what you do politically.

366
00:19:06,119 --> 00:19:08,760
Speaker 3: We want you to be rich because we want to

367
00:19:08,760 --> 00:19:10,600
Speaker 3: buy stuff from you, like oil. We want you to

368
00:19:10,640 --> 00:19:15,800
Speaker 3: have functioning oil fields and ports, and we also want

369
00:19:15,840 --> 00:19:17,680
Speaker 3: you to buy Chinese things, all right, so we want

370
00:19:17,680 --> 00:19:18,600
Speaker 3: you to be prosperous.

371
00:19:18,640 --> 00:19:20,560
Speaker 2: And aside from that, I don't care what you do.

372
00:19:20,720 --> 00:19:23,280
Speaker 2: Doesn't matter to me. What you do with the environment, LGBT, etc.

373
00:19:24,200 --> 00:19:28,280
Speaker 3: That package looks a heck of a lot more attractive

374
00:19:28,840 --> 00:19:31,159
Speaker 3: to a lot of countries, and those countries collectively make

375
00:19:31,240 --> 00:19:32,600
Speaker 3: up a huge amount of dollar demand.

376
00:19:33,119 --> 00:19:35,240
Speaker 2: There was a Larry Summers.

377
00:19:35,960 --> 00:19:39,440
Speaker 3: He gave a talk and he was former Clinton executive.

378
00:19:39,440 --> 00:19:40,800
Speaker 2: I think it was a Secretary of Treasury.

379
00:19:41,080 --> 00:19:42,919
Speaker 3: Anyway, he was running around Africa and he said that

380
00:19:43,000 --> 00:19:45,040
Speaker 3: he talks to diplomats over there and what they tell

381
00:19:45,080 --> 00:19:48,320
Speaker 3: him is that when China comes, they come bringing a

382
00:19:48,320 --> 00:19:51,080
Speaker 3: big checkbook and they ask, what do you guys need,

383
00:19:51,520 --> 00:19:53,400
Speaker 3: and here's what we want, and let's make a deal.

384
00:19:53,840 --> 00:19:56,560
Speaker 2: When the US comes, they come with a lecture.

385
00:19:59,160 --> 00:20:03,600
Speaker 1: Yeah. Yeah, it's something that I've been observing, and I

386
00:20:03,640 --> 00:20:07,040
Speaker 1: am certainly no China champion at all. Sometimes I get

387
00:20:07,040 --> 00:20:10,000
Speaker 1: accused of that it's crazy, but I'm certainly not a

388
00:20:10,000 --> 00:20:11,960
Speaker 1: fan of communism, nor am I a fan of China.

389
00:20:12,080 --> 00:20:14,440
Speaker 1: But if you do look at it through the lens

390
00:20:14,440 --> 00:20:18,960
Speaker 1: that you're talking about, it's like China is cooperative and

391
00:20:19,160 --> 00:20:23,119
Speaker 1: the US is coercive. And it bothers me because you know,

392
00:20:23,160 --> 00:20:25,080
Speaker 1: when you look back through you know, World War One,

393
00:20:25,119 --> 00:20:26,440
Speaker 1: world War two, and you see the rise of the

394
00:20:26,520 --> 00:20:30,680
Speaker 1: United States and really coming to this point of American exceptionalism,

395
00:20:30,680 --> 00:20:33,160
Speaker 1: and it really led through this industrialization and being able

396
00:20:33,160 --> 00:20:36,520
Speaker 1: to supply the world, and we led by example. And

397
00:20:36,560 --> 00:20:39,080
Speaker 1: today it's it's coersion to the point that you've had

398
00:20:39,320 --> 00:20:41,639
Speaker 1: where China seems to be cooperating. Now do they have

399
00:20:41,720 --> 00:20:43,640
Speaker 1: ulterior motives? And there's a whole bunch of other stuff

400
00:20:43,640 --> 00:20:45,520
Speaker 1: to unpack there, but on the surface you sort of

401
00:20:45,520 --> 00:20:47,560
Speaker 1: see that. I want to just wind it back one

402
00:20:47,880 --> 00:20:49,400
Speaker 1: if we can just a little bit, because you talked

403
00:20:49,440 --> 00:20:53,359
Speaker 1: about the petro dollar. So after the whole world for

404
00:20:53,400 --> 00:20:56,520
Speaker 1: the Bretonwoods Agreement was tied to the dollar, Nixon into

405
00:20:56,560 --> 00:20:59,240
Speaker 1: that seventy one seventy four went into this Petro Dollar agreement,

406
00:20:59,440 --> 00:21:02,080
Speaker 1: which basicly ensured the Chuck E Cheese token would have

407
00:21:02,160 --> 00:21:04,600
Speaker 1: value because the whole world needed energy, and so we

408
00:21:04,640 --> 00:21:07,200
Speaker 1: priced the whole world energy in dollars.

409
00:21:07,119 --> 00:21:11,520
Speaker 3: Right, Yeah, we provided and so and so, yeah, and so.

410
00:21:11,560 --> 00:21:15,480
Speaker 1: Then if if oil is no longer in in dollars,

411
00:21:15,520 --> 00:21:18,240
Speaker 1: then what does anybody need the dollars for? Because there's

412
00:21:18,240 --> 00:21:20,720
Speaker 1: nothing in the Chuck E Cheese store anymore. Now, there's

413
00:21:20,720 --> 00:21:22,720
Speaker 1: lots of debt as de nominated dollars that has to

414
00:21:22,720 --> 00:21:24,440
Speaker 1: be paid back. And this is something Brent Johnson and

415
00:21:24,440 --> 00:21:26,480
Speaker 1: I have gone kind of round and round on where

416
00:21:26,480 --> 00:21:28,200
Speaker 1: he's like, but you got to pay back the dollar

417
00:21:28,240 --> 00:21:32,160
Speaker 1: to nominated debt, right, that has to be extinguished. Well,

418
00:21:32,680 --> 00:21:35,160
Speaker 1: unless they don't want to pay it back anymore.

419
00:21:35,600 --> 00:21:39,280
Speaker 3: Yeah, Yeah, it's it's the old joke. You know, if

420
00:21:39,280 --> 00:21:40,960
Speaker 3: you owe the bank a million dollars, you have a

421
00:21:40,960 --> 00:21:43,960
Speaker 3: problem if you owed them, right, And there's some point

422
00:21:44,000 --> 00:21:46,080
Speaker 3: where there's so much debt out there that if countries

423
00:21:46,119 --> 00:21:48,480
Speaker 3: socide that they would like to collectively stiff the US,

424
00:21:48,560 --> 00:21:52,040
Speaker 3: there's honestly not much you can do about that, you know,

425
00:21:52,160 --> 00:21:55,280
Speaker 3: I think so you you got you.

426
00:21:54,400 --> 00:21:58,600
Speaker 1: You got, you got in an Austrian potentially you know,

427
00:21:58,880 --> 00:22:03,040
Speaker 1: rising to power in Argentina. Yeah, and he's pushing back

428
00:22:03,119 --> 00:22:05,320
Speaker 1: big against the debt. Wanted to restructure what they have

429
00:22:05,440 --> 00:22:08,920
Speaker 1: is debt, change that whole system. Then you got Ukraine,

430
00:22:08,960 --> 00:22:11,240
Speaker 1: which seems like there's no way they could win that war.

431
00:22:12,280 --> 00:22:16,880
Speaker 1: And the three largest debtors to the IMF are Ukraine,

432
00:22:17,080 --> 00:22:20,640
Speaker 1: Argentina and Egypt. Right, So what happens if that debt

433
00:22:20,760 --> 00:22:24,320
Speaker 1: just goes bad? Yeah, well, which could happen? Which could happen?

434
00:22:24,680 --> 00:22:26,240
Speaker 2: Oh yeah, I could for sure happen.

435
00:22:26,359 --> 00:22:29,440
Speaker 3: And you know, the the IMF has this baroque siphon

436
00:22:29,520 --> 00:22:32,919
Speaker 3: that it's plugged into the taxpayer wallets, and so the

437
00:22:32,960 --> 00:22:34,919
Speaker 3: IMF will do just find it just comes straight out

438
00:22:34,960 --> 00:22:35,199
Speaker 3: of US.

439
00:22:35,200 --> 00:22:37,359
Speaker 2: They call it a it's called a requisition.

440
00:22:37,960 --> 00:22:40,440
Speaker 3: They basically send out notice that everybody has to give

441
00:22:40,440 --> 00:22:42,240
Speaker 3: a certain amount of money and you, the taxpayer, have

442
00:22:42,320 --> 00:22:45,080
Speaker 3: to do that. It's unclear to me why exactly we

443
00:22:45,200 --> 00:22:46,160
Speaker 3: have to obey that, but.

444
00:22:46,160 --> 00:22:47,400
Speaker 2: Anyway we do.

445
00:22:48,800 --> 00:22:52,840
Speaker 3: But yeah, the you know, I think that the petrol

446
00:22:52,880 --> 00:22:55,400
Speaker 3: dollar thing. So my understanding of it, just in summary,

447
00:22:55,600 --> 00:22:58,520
Speaker 3: is that the US provided free mercenary services to Saudi

448
00:22:58,520 --> 00:23:02,280
Speaker 3: and a number of other countries, protecting them against Iran

449
00:23:02,440 --> 00:23:07,320
Speaker 3: or whatever other interlopers, presumably actually protecting the Saudi family

450
00:23:07,320 --> 00:23:09,480
Speaker 3: against its people, because it was deeply unpopular for a

451
00:23:09,520 --> 00:23:13,520
Speaker 3: long time. And in return, the deal was that they would,

452
00:23:13,640 --> 00:23:15,639
Speaker 3: you know, when they sold oil, they would park the

453
00:23:15,680 --> 00:23:18,280
Speaker 3: proceeds in dollars, and then that would boost dollar demand.

454
00:23:18,800 --> 00:23:21,159
Speaker 3: I don't think that's a huge amount of dollar demand.

455
00:23:22,080 --> 00:23:24,520
Speaker 3: I mean, just to grab a number at random, like

456
00:23:24,640 --> 00:23:27,960
Speaker 3: five percent, it's it's a relatively small amount of dollar deman.

457
00:23:28,680 --> 00:23:31,280
Speaker 3: I think mostly the reason why people in the world

458
00:23:31,359 --> 00:23:34,040
Speaker 3: US dollars for various things is because, first of all,

459
00:23:34,080 --> 00:23:36,240
Speaker 3: the Federal Reserve is actually not that bad compared to

460
00:23:36,320 --> 00:23:40,199
Speaker 3: other central banks. It's horrible compared to our ideal world,

461
00:23:40,760 --> 00:23:43,720
Speaker 3: but in the grand universe of central banks, it's not

462
00:23:43,840 --> 00:23:46,080
Speaker 3: that bad. It's about the same level as the EU,

463
00:23:46,320 --> 00:23:50,280
Speaker 3: arguably Japan. So for most of the world that's attractive.

464
00:23:50,280 --> 00:23:53,959
Speaker 3: It's certainly better than the Argentinean central bank, and so

465
00:23:54,960 --> 00:23:56,399
Speaker 3: and you know, so that's part of it, and the

466
00:23:56,400 --> 00:23:58,240
Speaker 3: other part is just that there's kind of this installed

467
00:23:58,240 --> 00:24:00,879
Speaker 3: base of the US dollar from you know, for a

468
00:24:00,880 --> 00:24:03,160
Speaker 3: long time, the US dollar was the only goal back

469
00:24:03,200 --> 00:24:06,639
Speaker 3: currency up until Nixon, and everybody else kind of piggybacked

470
00:24:06,680 --> 00:24:09,240
Speaker 3: on that, and so that gave the US a really

471
00:24:09,240 --> 00:24:11,840
Speaker 3: dominant position where everybody's using the dollar because the dollar

472
00:24:11,880 --> 00:24:13,840
Speaker 3: was effectively gold, but it was a form of gold

473
00:24:13,840 --> 00:24:16,960
Speaker 3: that was very, very cheap to transact. Okay, so when

474
00:24:17,000 --> 00:24:19,400
Speaker 3: it comes to currencies, those transaction fees are a really

475
00:24:19,440 --> 00:24:22,639
Speaker 3: big deal. You know, like why can't world trade happen

476
00:24:22,680 --> 00:24:26,560
Speaker 3: in Samoan whatever the currency is of Samoan because it's

477
00:24:26,600 --> 00:24:29,159
Speaker 3: not enough, Like it would be enormously expensive to try

478
00:24:29,240 --> 00:24:32,360
Speaker 3: to winning Yeah, yeah, yeah, exactly right. If you try

479
00:24:32,400 --> 00:24:35,680
Speaker 3: to move a billion dollars in you know, Samoan dollars,

480
00:24:35,760 --> 00:24:38,560
Speaker 3: then you know you're gonna pay thirty percent transaction.

481
00:24:38,640 --> 00:24:39,000
Speaker 2: I don't know.

482
00:24:40,000 --> 00:24:43,480
Speaker 3: And so the right the transaction fees are so low

483
00:24:43,480 --> 00:24:46,119
Speaker 3: in the dollar that at this point it's sort of

484
00:24:46,240 --> 00:24:49,240
Speaker 3: running on fumes, like it's got that installed base, and

485
00:24:49,280 --> 00:24:52,399
Speaker 3: that means it's a relatively liquid market. Now, eventually that

486
00:24:52,480 --> 00:24:55,960
Speaker 3: flips something like you know, gold rail would probably flip

487
00:24:55,960 --> 00:24:58,840
Speaker 3: that a lot quicker. China is trying to essentially bribe

488
00:24:58,840 --> 00:25:03,600
Speaker 3: countries off the dollar. Biden is really doing China's job

489
00:25:03,680 --> 00:25:06,040
Speaker 3: for it by doing this, you know, this funny business

490
00:25:06,080 --> 00:25:10,080
Speaker 3: with the Russian Central Bank and then pushing Uganda around again.

491
00:25:10,160 --> 00:25:14,520
Speaker 3: You Ganda economically is an inconsequential country. It doesn't account

492
00:25:14,520 --> 00:25:16,080
Speaker 3: for much dollar demand. But there's a lot of countries

493
00:25:16,119 --> 00:25:18,159
Speaker 3: in the world who look at Uganda. So countries like

494
00:25:18,200 --> 00:25:21,880
Speaker 3: Brazil or Egypt or India who do hold a lot

495
00:25:21,920 --> 00:25:23,840
Speaker 3: of dollars and they look at what happens.

496
00:25:25,200 --> 00:25:28,480
Speaker 1: Yeah, so let's jump over to now. I think something

497
00:25:28,520 --> 00:25:33,040
Speaker 1: you had talked about was Japan and China dumping dollars.

498
00:25:34,240 --> 00:25:36,320
Speaker 1: You said, I think at a at a record pace.

499
00:25:36,960 --> 00:25:40,560
Speaker 1: So it looks like we have Japan China, but not

500
00:25:40,640 --> 00:25:43,560
Speaker 1: just them, I mean potentially other countries, even Germany dumping

501
00:25:43,600 --> 00:25:47,959
Speaker 1: treasuries for any number of reasons, presumably to either one

502
00:25:48,000 --> 00:25:51,800
Speaker 1: pop up their currency or two to buy energy. So

503
00:25:52,800 --> 00:25:54,159
Speaker 1: what's your what's your take on that?

504
00:25:55,000 --> 00:25:57,840
Speaker 3: Yeah, so it's it's happening all over the world, but

505
00:25:57,880 --> 00:26:02,200
Speaker 3: it's really most dramatic in in China. And what's happening

506
00:26:02,240 --> 00:26:06,000
Speaker 3: is that the gap between their interest rates and our

507
00:26:06,080 --> 00:26:09,120
Speaker 3: interest rates. Right, so we have pretty high interest rates

508
00:26:09,200 --> 00:26:11,719
Speaker 3: right now, it's about five and a quarter. China's at

509
00:26:11,720 --> 00:26:14,560
Speaker 3: three and a quarter. Japan actually still has negative interest

510
00:26:14,640 --> 00:26:17,359
Speaker 3: rates minus zero point one percent, so that creates a

511
00:26:17,359 --> 00:26:21,040
Speaker 3: big profit opportunity to move your money into the US.

512
00:26:21,640 --> 00:26:25,080
Speaker 3: So you've got all of this money flowing into US

513
00:26:25,200 --> 00:26:29,080
Speaker 3: assets that is causing those currencies to plunge in value.

514
00:26:29,160 --> 00:26:32,000
Speaker 3: So the Japanese yen is down. It's not about seven

515
00:26:32,080 --> 00:26:35,320
Speaker 3: percent in two months, which is a really big move

516
00:26:35,359 --> 00:26:38,520
Speaker 3: for the en. It's actually down forty percent since the

517
00:26:38,560 --> 00:26:42,199
Speaker 3: pandemic began. China is hitting I think it's fifteen or

518
00:26:42,240 --> 00:26:46,439
Speaker 3: sixteen year lows that just hit. They're they're really losing

519
00:26:46,480 --> 00:26:48,960
Speaker 3: a massive amount. So this is a big problem politically

520
00:26:49,000 --> 00:26:54,160
Speaker 3: in those countries because especially Japan, it imports essentially all

521
00:26:54,280 --> 00:26:58,520
Speaker 3: raw materials, most notably it's gasoline, Like one hundred percent

522
00:26:58,560 --> 00:27:00,920
Speaker 3: of the gasoline in Japan is important, and so if

523
00:27:00,920 --> 00:27:03,840
Speaker 3: the currency is getting too weak, then those prices jump,

524
00:27:04,000 --> 00:27:06,159
Speaker 3: and then households get upset and they put pressure on

525
00:27:06,200 --> 00:27:09,399
Speaker 3: politicians to fix it. What happens at that point is

526
00:27:09,480 --> 00:27:12,399
Speaker 3: the simplest way for a Japan or a China to

527
00:27:12,440 --> 00:27:17,359
Speaker 3: try to fix the currency is to sell their US

528
00:27:17,440 --> 00:27:21,560
Speaker 3: dollar assets, which are overwhelmingly in US treasuries. Okay, So

529
00:27:21,600 --> 00:27:24,320
Speaker 3: they sell those, they floot out the dollars, and they

530
00:27:24,400 --> 00:27:26,040
Speaker 3: use those to buy back their own currency.

531
00:27:26,520 --> 00:27:28,920
Speaker 2: Okay. So if they do that, then that.

532
00:27:28,920 --> 00:27:31,160
Speaker 3: Can reverse the slide, or at least it can hold

533
00:27:31,160 --> 00:27:34,000
Speaker 3: the currency stable enough that they don't get political problems.

534
00:27:34,480 --> 00:27:37,639
Speaker 3: But what that means is that Japan and China have

535
00:27:37,720 --> 00:27:42,720
Speaker 3: been two of the biggest buyers of American federal debt,

536
00:27:43,520 --> 00:27:46,239
Speaker 3: and the FED right now is saying that it's going

537
00:27:46,240 --> 00:27:49,880
Speaker 3: to be selling sixty billion dollars or it is actually

538
00:27:49,920 --> 00:27:53,879
Speaker 3: selling sixty billion dollars a month in US treasuries. And

539
00:27:53,920 --> 00:27:57,479
Speaker 3: so if the US is selling, China is selling, Japan

540
00:27:57,600 --> 00:27:58,440
Speaker 3: is selling.

541
00:27:58,359 --> 00:27:59,520
Speaker 2: Who the heck is buying?

542
00:28:00,280 --> 00:28:04,199
Speaker 3: Then meanwhile, you got here, yeah, exactly right, bricks are

543
00:28:04,200 --> 00:28:08,160
Speaker 3: buying gold. Countries all over the world are gradually diversifying

544
00:28:08,200 --> 00:28:08,960
Speaker 3: out of the dollar.

545
00:28:09,119 --> 00:28:11,240
Speaker 2: So you know, the yen and the euro have about

546
00:28:11,240 --> 00:28:12,040
Speaker 2: double their.

547
00:28:11,880 --> 00:28:16,119
Speaker 3: Market share for official reserves because of that Russia thing.

548
00:28:16,440 --> 00:28:20,119
Speaker 3: So everybody in the world is essentially selling treasuries. And

549
00:28:20,160 --> 00:28:22,200
Speaker 3: then you've got Joe Biden on the other side here

550
00:28:22,600 --> 00:28:24,560
Speaker 3: ramping up the deficits. So we're looking at I think

551
00:28:24,560 --> 00:28:26,479
Speaker 3: it's one point six at this point, one point six

552
00:28:26,600 --> 00:28:29,560
Speaker 3: trillion a year and it's looking to get towards two trillion.

553
00:28:29,600 --> 00:28:32,960
Speaker 3: The CBO, the Congressional Budget Office, which like the in

554
00:28:33,080 --> 00:28:38,440
Speaker 3: house accountants for Congress, and it's bipartisan, so they estimate

555
00:28:38,480 --> 00:28:40,440
Speaker 3: that we're going to be looking at deficits of two

556
00:28:40,520 --> 00:28:43,280
Speaker 3: trillion dollars per year up until twenty fifty.

557
00:28:43,440 --> 00:28:45,440
Speaker 2: So who on earth is going to buy all that?

558
00:28:48,280 --> 00:28:50,920
Speaker 1: Yeah? I just saw the last Treasury auction had record

559
00:28:50,960 --> 00:28:54,720
Speaker 1: amount of oversubscribed. I mean, had for sure there was available.

560
00:28:55,120 --> 00:28:56,920
Speaker 1: I didn't get a chance to dig into the data

561
00:28:56,960 --> 00:28:59,560
Speaker 1: to see to answer that question. Who is buying? It's

562
00:28:59,560 --> 00:29:01,640
Speaker 1: not Russia. If it's not Russia, it's not China, it's

563
00:29:01,640 --> 00:29:03,880
Speaker 1: not Japan, it's not the bricks. Who is it? I'm

564
00:29:03,880 --> 00:29:07,840
Speaker 1: guessing it's Switzerland, It's Europe, and it's the banks.

565
00:29:08,320 --> 00:29:10,640
Speaker 2: Yeah, yeah, Switzerland, Europe. The banks.

566
00:29:11,040 --> 00:29:13,600
Speaker 3: Partly is that flight to safety, you know, so enough

567
00:29:13,640 --> 00:29:15,680
Speaker 3: things are going wrong in the world, especially with China

568
00:29:15,760 --> 00:29:18,640
Speaker 3: now going down. You've got instability essentially in every major

569
00:29:18,680 --> 00:29:20,719
Speaker 3: region of the world. So some of that is going

570
00:29:20,800 --> 00:29:25,200
Speaker 3: to be kind of transitory demand for dollars, which translates

571
00:29:25,320 --> 00:29:27,720
Speaker 3: for the most part into US treasuries. So I think

572
00:29:27,800 --> 00:29:30,440
Speaker 3: in the near term where we're we're certainly not looking

573
00:29:30,480 --> 00:29:33,320
Speaker 3: at any kind of collapse. But I think going down

574
00:29:33,320 --> 00:29:36,440
Speaker 3: the line, now, you know, as China Japan drain out,

575
00:29:36,680 --> 00:29:39,160
Speaker 3: as the FED drains out, you've got this big overhang

576
00:29:39,280 --> 00:29:42,280
Speaker 3: and you may not see it immediately if there's enough

577
00:29:42,320 --> 00:29:44,280
Speaker 3: fear in the world that people are going to that

578
00:29:44,360 --> 00:29:46,720
Speaker 3: cleanest dirty shirt. But I think that's setting up a

579
00:29:46,720 --> 00:29:49,200
Speaker 3: lot of trouble for us down the line, especially since

580
00:29:49,280 --> 00:29:53,040
Speaker 3: there appears to be absolutely no constraint on how much

581
00:29:53,120 --> 00:29:57,200
Speaker 3: debt both parties are united and pushing out. So I

582
00:29:57,240 --> 00:29:59,160
Speaker 3: think we are looking at you know, we all know

583
00:29:59,200 --> 00:30:01,880
Speaker 3: it's unsustainable, and the question is is that accelerating.

584
00:30:03,120 --> 00:30:05,120
Speaker 1: Yeah, well, I think that certainly is accelerating. We saw

585
00:30:05,440 --> 00:30:09,960
Speaker 1: a pre pandemic the you know, the budget was four

586
00:30:10,040 --> 00:30:13,320
Speaker 1: point eight trillion, and now it's up to six point

587
00:30:13,320 --> 00:30:15,320
Speaker 1: four trillion or something like that, and that's that new

588
00:30:15,600 --> 00:30:18,480
Speaker 1: level has been baked in at the Desalo debit. They

589
00:30:18,560 --> 00:30:20,520
Speaker 1: did not want to knock that down at all. And

590
00:30:20,520 --> 00:30:22,000
Speaker 1: as a matter of fact, to your point, the CBO

591
00:30:22,080 --> 00:30:24,360
Speaker 1: has just projected to get higher. I saw that the

592
00:30:24,480 --> 00:30:28,040
Speaker 1: US government spending is now greater than twenty five percent

593
00:30:28,320 --> 00:30:33,000
Speaker 1: of US GDP, so that fiscal spending makes up more

594
00:30:33,000 --> 00:30:34,920
Speaker 1: than a quarter, which is past where we were in

595
00:30:34,960 --> 00:30:37,800
Speaker 1: the two thousand and eight Great Financial crash, and we're

596
00:30:37,840 --> 00:30:41,320
Speaker 1: not even in any type of economic downturn like this

597
00:30:41,360 --> 00:30:44,400
Speaker 1: is like wartime deficits. We haven't even we haven't even

598
00:30:44,440 --> 00:30:45,600
Speaker 1: seen the recession.

599
00:30:45,280 --> 00:30:49,120
Speaker 3: Yet, right, And remember there's state in local and county

600
00:30:49,160 --> 00:30:50,320
Speaker 3: and all the rest of it. You put all that

601
00:30:50,360 --> 00:30:54,040
Speaker 3: together and it's about ten trillion, so it's over forty percent.

602
00:30:54,120 --> 00:30:56,760
Speaker 3: It almost half of what we produce gets taken by

603
00:30:56,760 --> 00:31:00,640
Speaker 3: the government. And you're exactly right, that's that's their peace time.

604
00:31:00,680 --> 00:31:05,640
Speaker 3: And we are absolutely running wartime style deficits. Our deficit

605
00:31:05,720 --> 00:31:08,040
Speaker 3: numbers look like what they were at the absolute worst

606
00:31:08,160 --> 00:31:11,200
Speaker 3: of two thousand and eight. So the concern there is

607
00:31:11,240 --> 00:31:14,400
Speaker 3: that if we get a recession coming on the pike here.

608
00:31:15,000 --> 00:31:16,640
Speaker 2: You know, last time around.

609
00:31:16,240 --> 00:31:18,440
Speaker 3: We had what it was, I think it was two

610
00:31:18,600 --> 00:31:22,800
Speaker 3: or three trillion in two thousand and eight. That the Yeah,

611
00:31:22,800 --> 00:31:24,400
Speaker 3: it was two trillion in two thousand and eight, and

612
00:31:24,480 --> 00:31:26,040
Speaker 3: it was three trillion and twenty twenty.

613
00:31:26,320 --> 00:31:28,960
Speaker 2: Every time you have a recession, the deficit.

614
00:31:28,560 --> 00:31:30,560
Speaker 3: Absolutely explodes because on the one hand, you have a

615
00:31:30,600 --> 00:31:33,920
Speaker 3: lot of people who need help they lost their jobs

616
00:31:34,120 --> 00:31:36,600
Speaker 3: or you know, they're having some other distress, so social

617
00:31:36,640 --> 00:31:39,600
Speaker 3: spending sores. But then on the other hand, tax revenue

618
00:31:39,640 --> 00:31:42,880
Speaker 3: drives up because nobody's making any money. So every single time,

619
00:31:43,280 --> 00:31:44,920
Speaker 3: you know, it gets bigger and bigger. So we're looking

620
00:31:44,960 --> 00:31:47,360
Speaker 3: at probably, I mean, if I had to guess another

621
00:31:47,360 --> 00:31:52,640
Speaker 3: two trillion plus on the deficit when the recession finally hits.

622
00:31:53,280 --> 00:31:55,720
Speaker 3: And you know, the other issue I think is one

623
00:31:55,720 --> 00:32:00,480
Speaker 3: of the most exciting things about recessions is that every

624
00:32:00,520 --> 00:32:03,360
Speaker 3: single time the Left comes up with some new innovation

625
00:32:03,720 --> 00:32:06,960
Speaker 3: that's going to permanently grow the government. And I think

626
00:32:07,120 --> 00:32:10,320
Speaker 3: the one they sort of ran it on a trial

627
00:32:10,440 --> 00:32:14,920
Speaker 3: basis during COVID, they are I think, hell bent on

628
00:32:15,040 --> 00:32:19,440
Speaker 3: installing a UBI, a universal basic income, and I think

629
00:32:19,480 --> 00:32:22,200
Speaker 3: it's very possible because of that that this next recession

630
00:32:22,280 --> 00:32:24,120
Speaker 3: could blow two thousand and eight out of the water,

631
00:32:24,240 --> 00:32:26,840
Speaker 3: even blow twenty twenty out of the water in terms

632
00:32:26,840 --> 00:32:29,200
Speaker 3: of how much spending is ramped up, because I think

633
00:32:29,200 --> 00:32:32,000
Speaker 3: they're going to go all in on a UBI that

634
00:32:32,080 --> 00:32:34,840
Speaker 3: will give them the bread to go with the circus

635
00:32:34,920 --> 00:32:37,760
Speaker 3: where they can, you know, essentially pay millions of voters

636
00:32:37,760 --> 00:32:40,440
Speaker 3: to sit on the couch and give all the rest

637
00:32:40,520 --> 00:32:43,120
Speaker 3: to them.

638
00:32:43,440 --> 00:32:46,959
Speaker 1: Well, I think there's no question. I mean, there always is,

639
00:32:47,000 --> 00:32:50,640
Speaker 1: But I think it's in my view, overwhelming probability that

640
00:32:50,680 --> 00:32:53,240
Speaker 1: they're This next recession is going to blow way past

641
00:32:53,240 --> 00:32:56,560
Speaker 1: what we saw on the pandemic. Was it fiscal and

642
00:32:56,880 --> 00:32:59,560
Speaker 1: fiscal monetary was about eleven trillion dollars. Will probably be

643
00:32:59,640 --> 00:33:01,760
Speaker 1: fifteen twenty, you know, in the next one, because because

644
00:33:01,800 --> 00:33:03,200
Speaker 1: the holes get bigger, they have to fill them up.

645
00:33:03,240 --> 00:33:05,080
Speaker 1: But back to the point that you said talking about

646
00:33:05,080 --> 00:33:09,600
Speaker 1: the UBI universal Basic income, don't we already have that?

647
00:33:10,240 --> 00:33:13,479
Speaker 1: I mean, we already have housing, we already have food,

648
00:33:13,800 --> 00:33:17,240
Speaker 1: we already have Well, don't we already have UBI? In

649
00:33:17,480 --> 00:33:19,480
Speaker 1: a sense it's not it's not called that, but we

650
00:33:19,560 --> 00:33:20,360
Speaker 1: certainly have it.

651
00:33:21,160 --> 00:33:23,040
Speaker 3: Yeah, for sure, certainly in terms of how much money

652
00:33:23,080 --> 00:33:28,160
Speaker 3: it costs, probably in terms of how much it disincentivizes work,

653
00:33:28,240 --> 00:33:30,120
Speaker 3: and and just sort of you know, making the correct

654
00:33:30,200 --> 00:33:33,920
Speaker 3: choices in life, you know, like designing a welfare program

655
00:33:33,920 --> 00:33:37,680
Speaker 3: that only gives single mothers money if they kicked the

656
00:33:37,720 --> 00:33:38,240
Speaker 3: man out of.

657
00:33:38,160 --> 00:33:40,080
Speaker 2: The house, what could possibly go wrong?

658
00:33:40,160 --> 00:33:43,680
Speaker 3: What could possibly happen to a community subjected to such

659
00:33:43,720 --> 00:33:46,600
Speaker 3: a rule. So they're really wrongheaded. And you know, in

660
00:33:46,680 --> 00:33:50,800
Speaker 3: terms of money, absolutely we already have a UBI and

661
00:33:50,800 --> 00:33:53,920
Speaker 3: and this you know, if we look at COVID for example,

662
00:33:54,160 --> 00:33:55,719
Speaker 3: I mean they just laid it right on top. They

663
00:33:55,720 --> 00:34:00,240
Speaker 3: didn't repeal anything whatsoever. The pitch that you'll often here

664
00:34:00,240 --> 00:34:02,880
Speaker 3: out of Washington from sort of the Mitt Romney types,

665
00:34:02,960 --> 00:34:07,320
Speaker 3: the quote unquote centrists is they'll actually push UBIS because

666
00:34:07,360 --> 00:34:09,279
Speaker 3: they say, no, no, no, we're going to take the

667
00:34:09,320 --> 00:34:12,279
Speaker 3: current inefficient welfare system and we're going to replace that

668
00:34:12,360 --> 00:34:14,840
Speaker 3: with this real simple one that's just no questions asked,

669
00:34:15,320 --> 00:34:17,560
Speaker 3: and you know, we can cut the paperwork and you know,

670
00:34:17,640 --> 00:34:20,200
Speaker 3: it's a lot more rational and all this. And we've

671
00:34:20,200 --> 00:34:23,160
Speaker 3: actually been there. We already got baited and switched on

672
00:34:23,200 --> 00:34:25,360
Speaker 3: that one. That was the e t C back and

673
00:34:25,520 --> 00:34:27,920
Speaker 3: I want to say the seventies or the eighties, the

674
00:34:28,000 --> 00:34:30,440
Speaker 3: i t C, the earned income tax credit that was

675
00:34:30,440 --> 00:34:32,920
Speaker 3: sold as a negative income tax, and that was precisely

676
00:34:33,000 --> 00:34:35,319
Speaker 3: the pitch, so I gain, we're going to replace this

677
00:34:35,440 --> 00:34:38,480
Speaker 3: ridiculous welfare system that breaks up families and you know,

678
00:34:38,520 --> 00:34:40,840
Speaker 3: puts people in poverty traps. We're going to replace that

679
00:34:40,920 --> 00:34:42,839
Speaker 3: with this system now where you got to go get

680
00:34:42,840 --> 00:34:45,880
Speaker 3: a job, if you make, you know, one thousand dollars,

681
00:34:45,960 --> 00:34:48,240
Speaker 3: then you get another four hundred and fifty in taxes.

682
00:34:48,400 --> 00:34:50,560
Speaker 3: It's a clever idea, it was it was Milton Freeman

683
00:34:50,600 --> 00:34:53,319
Speaker 3: came up with it. From economics perspective, it's very clever idea.

684
00:34:53,360 --> 00:34:56,760
Speaker 3: From a political perspective, is absolutely idiotic because they didn't

685
00:34:56,840 --> 00:34:59,719
Speaker 3: They didn't repeal a darn thing. So right, that's the

686
00:34:59,760 --> 00:35:03,200
Speaker 3: pi that the centrist Republicans are gonna come up, are

687
00:35:03,480 --> 00:35:05,560
Speaker 3: going to come in with the Democrats are going to

688
00:35:05,640 --> 00:35:06,600
Speaker 3: try to bring them on board.

689
00:35:06,600 --> 00:35:08,040
Speaker 2: The Democrats just want to buy votes.

690
00:35:08,040 --> 00:35:10,720
Speaker 3: The centrist Republicans, I guess want to get cushy jobs

691
00:35:10,719 --> 00:35:13,480
Speaker 3: when they leave Congress courtesy of their friends on the left.

692
00:35:13,800 --> 00:35:16,440
Speaker 3: Either way, that's I mean that that's kind of the

693
00:35:16,520 --> 00:35:19,919
Speaker 3: unholy coalition that is forever victimizing us. But anyway they're

694
00:35:19,960 --> 00:35:22,640
Speaker 3: going to be at it. You know, the Democrats don't

695
00:35:22,640 --> 00:35:25,239
Speaker 3: listen to me. Some of the Centrists I can sort

696
00:35:25,239 --> 00:35:27,960
Speaker 3: of intimidate. So I'm definitely gonna be going after for

697
00:35:28,000 --> 00:35:31,000
Speaker 3: them because I'm certain that's exactly the game that they're

698
00:35:31,000 --> 00:35:31,520
Speaker 3: gonna pull.

699
00:35:32,520 --> 00:35:35,080
Speaker 1: Yeah, now, when you when you look at you know

700
00:35:35,320 --> 00:35:39,000
Speaker 1: the need for this ubi et cetera. I mean, we

701
00:35:39,120 --> 00:35:40,719
Speaker 1: kind of have, like I was talking about earlier on

702
00:35:40,719 --> 00:35:43,120
Speaker 1: an earlier segment of my show, just like the tale

703
00:35:43,160 --> 00:35:46,000
Speaker 1: of two markets almost or two economies and two markets.

704
00:35:46,040 --> 00:35:49,799
Speaker 1: Really where you have in the economy specifically, we have

705
00:35:50,360 --> 00:35:53,280
Speaker 1: really really good signs, so strong earnings and the strong

706
00:35:53,360 --> 00:35:58,360
Speaker 1: revenues and strong consumer spending, but then we see dwindling

707
00:35:58,400 --> 00:36:01,520
Speaker 1: savings in massive amounts of debt. Right We're starting to

708
00:36:01,520 --> 00:36:03,919
Speaker 1: see delinquencies piling up and credit cards, auto loans, et cetera.

709
00:36:04,000 --> 00:36:06,800
Speaker 1: And the markets are the same where the equity markets

710
00:36:07,040 --> 00:36:10,560
Speaker 1: look really really good, but the treasury markets, the bond

711
00:36:10,600 --> 00:36:12,880
Speaker 1: markets are telling us troubles comings. We see these tell

712
00:36:13,320 --> 00:36:15,680
Speaker 1: two things. But I'm curious, you know, we see that

713
00:36:15,760 --> 00:36:19,120
Speaker 1: we have this massive amount of rising debt, both on

714
00:36:19,160 --> 00:36:21,160
Speaker 1: the federal level they've added to what a trillion dollars

715
00:36:21,200 --> 00:36:23,719
Speaker 1: in the last month or so, but also on the

716
00:36:23,760 --> 00:36:26,600
Speaker 1: consumer level, and not just consumer level, but also you know,

717
00:36:26,640 --> 00:36:30,440
Speaker 1: corporate level as well. And while it seems like most

718
00:36:30,480 --> 00:36:33,439
Speaker 1: eyes are on the federal debt, the government debt, which

719
00:36:33,480 --> 00:36:36,120
Speaker 1: is obviously exploding right instead the trillion dollars last month,

720
00:36:37,280 --> 00:36:39,360
Speaker 1: the reality is is that they don't default because they

721
00:36:39,400 --> 00:36:42,239
Speaker 1: have the money printer. It seems to me that the

722
00:36:42,320 --> 00:36:45,640
Speaker 1: bigger problem is really in the private debt, and that's

723
00:36:45,719 --> 00:36:47,560
Speaker 1: the sector that's probably going to blow up first, and

724
00:36:47,600 --> 00:36:49,640
Speaker 1: they don't have a money printer to back that up.

725
00:36:50,160 --> 00:36:51,600
Speaker 1: I'm curious some of your thoughts on that.

726
00:36:52,440 --> 00:36:54,719
Speaker 2: They rent their money printer to lobbyists.

727
00:36:54,760 --> 00:36:58,200
Speaker 3: So yeah, depending on the industry, they do have a

728
00:36:58,239 --> 00:37:01,680
Speaker 3: money printer, but we pleads definitely do not have a

729
00:37:01,719 --> 00:37:03,160
Speaker 3: money print there, so we are on our own.

730
00:37:03,160 --> 00:37:06,000
Speaker 2: We have to beg for our scraps and our ubis.

731
00:37:07,160 --> 00:37:11,920
Speaker 3: Yeah, I think definitely the private debt is an issue currently.

732
00:37:12,080 --> 00:37:15,760
Speaker 3: It's not biting as hard as you'd expect, really.

733
00:37:15,560 --> 00:37:16,160
Speaker 2: For two reasons.

734
00:37:16,200 --> 00:37:20,319
Speaker 3: One of them is at during the pandemic, you know,

735
00:37:20,360 --> 00:37:22,839
Speaker 3: there was a huge amount about three trillion dollars of

736
00:37:22,840 --> 00:37:25,480
Speaker 3: excess savings, so they handed out all this money and

737
00:37:25,719 --> 00:37:28,719
Speaker 3: people people who were poor kind of used it up

738
00:37:28,760 --> 00:37:31,040
Speaker 3: real fast, but a lot of the middle class saved

739
00:37:31,040 --> 00:37:34,279
Speaker 3: it up. I suspect your stimmy checks were saved. Mine

740
00:37:34,320 --> 00:37:37,480
Speaker 3: certainly were. And so that's been running down and so

741
00:37:37,520 --> 00:37:41,399
Speaker 3: the Fed now estimates that that is going to run

742
00:37:41,440 --> 00:37:45,120
Speaker 3: out in another month or two. And then the other

743
00:37:45,160 --> 00:37:48,360
Speaker 3: reason why it hasn't bitten quite as hard as you'd expect,

744
00:37:48,840 --> 00:37:52,359
Speaker 3: is that a lot of those debts were incurred in

745
00:37:52,480 --> 00:37:56,239
Speaker 3: absolutely historic loans and interest rates. Right, So a lot

746
00:37:56,280 --> 00:37:59,000
Speaker 3: of people are still driving cars they've got zero percent

747
00:37:59,080 --> 00:38:02,480
Speaker 3: loans on them, or mortgages where you know they.

748
00:38:02,320 --> 00:38:03,160
Speaker 2: Cost three percent.

749
00:38:03,480 --> 00:38:06,440
Speaker 3: So just because the rates come up, you don't that

750
00:38:06,440 --> 00:38:08,799
Speaker 3: doesn't hit all at once, right, you know, you sort

751
00:38:08,800 --> 00:38:12,960
Speaker 3: of have this gradual person by person. Their old debt

752
00:38:13,320 --> 00:38:16,359
Speaker 3: is done, maybe it's paid off or and now now

753
00:38:16,360 --> 00:38:19,680
Speaker 3: they're coming for new debt. So the problem guilt builds gradually,

754
00:38:19,719 --> 00:38:21,719
Speaker 3: and that's part of the reason why there's typically about

755
00:38:21,719 --> 00:38:25,760
Speaker 3: an eighteen month delay between when the Fed hikes rates

756
00:38:25,760 --> 00:38:29,480
Speaker 3: and when the economy actually hits. Companies have old cheap debt,

757
00:38:30,160 --> 00:38:32,120
Speaker 3: households have old cheap debt, and so that's going to

758
00:38:32,200 --> 00:38:35,959
Speaker 3: get run through gradually. And where we are on that timeline,

759
00:38:36,480 --> 00:38:38,799
Speaker 3: you know, the Fed started raising i think a little

760
00:38:38,840 --> 00:38:43,960
Speaker 3: over a year ago from roughly zero, but they rates

761
00:38:43,960 --> 00:38:48,560
Speaker 3: didn't really hit a restrictive level, meaning you know the

762
00:38:48,640 --> 00:38:51,279
Speaker 3: rates that we saw before two thousand and eight or

763
00:38:51,280 --> 00:38:54,120
Speaker 3: before two thousand and one, pretty much before every recession

764
00:38:54,480 --> 00:38:55,439
Speaker 3: you get higher rates.

765
00:38:55,440 --> 00:38:56,960
Speaker 2: In fact, that's what causes the recession.

766
00:38:57,000 --> 00:38:59,800
Speaker 3: But anyway, we didn't hit those restrictive rates until like

767
00:39:00,160 --> 00:39:03,280
Speaker 3: or four months ago, so we're still very far away

768
00:39:03,600 --> 00:39:06,719
Speaker 3: from when you would expect the recession to hit in

769
00:39:06,760 --> 00:39:09,400
Speaker 3: full force. And you know, that's why a lot of

770
00:39:09,400 --> 00:39:13,400
Speaker 3: the debate right now is you've got the cheerleaders saying, now, no,

771
00:39:13,560 --> 00:39:16,400
Speaker 3: this is Goldilocks. My god, you know, Sully landed the

772
00:39:16,400 --> 00:39:19,439
Speaker 3: plane on the Hudson. Jay Powell is amazing, We're gonna

773
00:39:19,440 --> 00:39:22,080
Speaker 3: have this off line. It is way too early to

774
00:39:22,200 --> 00:39:26,600
Speaker 3: take victory labs. And in fact, given that it's so early,

775
00:39:27,280 --> 00:39:29,200
Speaker 3: right that we've only really had restrictive rates for a

776
00:39:29,200 --> 00:39:33,120
Speaker 3: couple of months, the fact that we're seeing bank collapses

777
00:39:33,440 --> 00:39:37,480
Speaker 3: and you know, we're seeing a lot of statistics like bankruptcies, layoffs,

778
00:39:37,520 --> 00:39:40,120
Speaker 3: mass layoffs, We're seeing a lot of statistics that are

779
00:39:40,120 --> 00:39:43,360
Speaker 3: two thousand and eight level, and we are way early

780
00:39:43,400 --> 00:39:45,879
Speaker 3: in the raid hikes to be seeing that. So that's

781
00:39:45,880 --> 00:39:49,319
Speaker 3: why I think when the recession comes, I think it's

782
00:39:49,320 --> 00:39:50,200
Speaker 3: gonna be pretty brutal.

783
00:39:51,440 --> 00:39:54,440
Speaker 1: Yeah, the question is when, right, and that's always happening.

784
00:39:54,560 --> 00:39:57,640
Speaker 1: And one thing, the one thing that I just have

785
00:39:57,719 --> 00:40:00,799
Speaker 1: to get, I have to constantly check myself on is

786
00:40:00,880 --> 00:40:04,680
Speaker 1: you know, through the Austrian lens, through a rational lens,

787
00:40:04,880 --> 00:40:07,799
Speaker 1: you can see this is unsustainable. I got caught. I

788
00:40:07,840 --> 00:40:09,400
Speaker 1: got caught really hard in the two thousand and eight

789
00:40:09,440 --> 00:40:12,120
Speaker 1: great financial crash, and that's what really got me interested

790
00:40:12,160 --> 00:40:14,600
Speaker 1: in macroeconomics and kind of drove me down that rabbit hole.

791
00:40:15,480 --> 00:40:18,400
Speaker 1: And you know, I lashed onto Mike Maloney and I

792
00:40:18,400 --> 00:40:20,560
Speaker 1: became a gold bug. And I'm watching Peter Schiff and

793
00:40:20,600 --> 00:40:24,399
Speaker 1: Harry Dent and you know, then, you know, twenty twelve,

794
00:40:24,480 --> 00:40:26,759
Speaker 1: thirteen fourteen comes and like, I'm just waiting for another

795
00:40:26,800 --> 00:40:29,080
Speaker 1: bank collapse. No, no, it's gonna crash. It's worse. They didn't

796
00:40:29,080 --> 00:40:31,560
Speaker 1: fix it. It's only worse. Oh my gosh, it's horrible.

797
00:40:31,600 --> 00:40:33,320
Speaker 1: Oh now we have Obama and now I was more spending,

798
00:40:33,400 --> 00:40:35,760
Speaker 1: like I was gonna getting worse, And you know, fifteen

799
00:40:35,800 --> 00:40:39,080
Speaker 1: sixteen seven, it's going to be another crash. And you know,

800
00:40:39,160 --> 00:40:41,080
Speaker 1: the Harry Dents and the Peter Shifts, they're the broken

801
00:40:41,080 --> 00:40:44,080
Speaker 1: clock that will be eventually right. The thing that I've said,

802
00:40:44,200 --> 00:40:45,719
Speaker 1: that's the thing that I've said to Harry Dent. You know,

803
00:40:45,760 --> 00:40:47,279
Speaker 1: I've had him on a couple times. He spoke at

804
00:40:47,280 --> 00:40:50,080
Speaker 1: my conference. I've read five of his books. I believe

805
00:40:50,120 --> 00:40:53,919
Speaker 1: he's right, His research is right. His assumption of thinking

806
00:40:53,960 --> 00:40:56,320
Speaker 1: he can choose the time is what's been wrong. And

807
00:40:56,640 --> 00:41:00,120
Speaker 1: we fail to see how many more potential tricks they

808
00:41:00,160 --> 00:41:02,160
Speaker 1: have up their sleeve. So you mentioned the banking crisis

809
00:41:02,200 --> 00:41:07,000
Speaker 1: for example, and they raised until they broke something. Now,

810
00:41:07,239 --> 00:41:09,480
Speaker 1: Jerme Powell told us in a meeting that he would

811
00:41:09,960 --> 00:41:12,400
Speaker 1: the fear, He said, the fear is not doing enough.

812
00:41:12,480 --> 00:41:14,680
Speaker 1: He would rather go too far and break something because

813
00:41:14,680 --> 00:41:16,680
Speaker 1: they have the tools to rebuild, right, And so they did.

814
00:41:16,719 --> 00:41:18,960
Speaker 1: So they broke the banks, But the reality was they

815
00:41:19,000 --> 00:41:22,239
Speaker 1: opened up some new three four letter agency BTFP and

816
00:41:22,760 --> 00:41:25,239
Speaker 1: save the banks. Now, whatever a bank or two went down,

817
00:41:25,320 --> 00:41:28,759
Speaker 1: consumers didn't really get affected, didn't miss a beat. And

818
00:41:28,840 --> 00:41:31,919
Speaker 1: so what we saw during the pandemic is they opened

819
00:41:32,000 --> 00:41:34,719
Speaker 1: up dozens of these three and four letter agencies and

820
00:41:34,760 --> 00:41:37,440
Speaker 1: they were buying I mean, you know, buying corporate bonds

821
00:41:37,440 --> 00:41:39,880
Speaker 1: all the way through buying equities, you know, indirectly. And

822
00:41:39,960 --> 00:41:42,440
Speaker 1: so the question is then, like how many more of

823
00:41:42,480 --> 00:41:46,000
Speaker 1: these are they willing to open and how many they've

824
00:41:46,000 --> 00:41:49,080
Speaker 1: already opened up? You know, unlimited swap lines with you know,

825
00:41:49,120 --> 00:41:53,080
Speaker 1: European countries, they've already set up these facilities, so I

826
00:41:53,120 --> 00:41:55,200
Speaker 1: guess they could just keep pushing this out way further

827
00:41:55,239 --> 00:41:58,000
Speaker 1: than any of us think. Is kind of the realization

828
00:41:58,040 --> 00:41:59,000
Speaker 1: that I was sort of coming to.

829
00:41:59,480 --> 00:42:00,719
Speaker 2: Yeah, absolutely right.

830
00:42:01,400 --> 00:42:04,840
Speaker 3: We know how the book ends from history, but we

831
00:42:04,920 --> 00:42:07,839
Speaker 3: have no idea how each chapter ends. And I do

832
00:42:07,880 --> 00:42:11,680
Speaker 3: think that there's a lot of chapters between here the end.

833
00:42:12,280 --> 00:42:15,200
Speaker 3: I think they can keep it going for a long time.

834
00:42:15,520 --> 00:42:21,120
Speaker 3: And you know so usually I am all in equities.

835
00:42:21,360 --> 00:42:25,480
Speaker 3: In fact, usually I am in options, and I'm overexposed

836
00:42:25,480 --> 00:42:30,760
Speaker 3: to equities because because I because I like risk, equities

837
00:42:30,760 --> 00:42:33,400
Speaker 3: are usually the way to go. I mean almost always,

838
00:42:33,480 --> 00:42:37,560
Speaker 3: equity will beat everything else. It'll be treasuries, it'll be gold.

839
00:42:38,160 --> 00:42:40,880
Speaker 3: And the reason is because people forget and equity is

840
00:42:40,880 --> 00:42:41,399
Speaker 3: a hard thing.

841
00:42:41,920 --> 00:42:43,000
Speaker 2: Okay, like Apple.

842
00:42:43,280 --> 00:42:46,520
Speaker 3: If you buy a share of Apple, you know, you know,

843
00:42:46,560 --> 00:42:49,240
Speaker 3: you're not buying a alt coin.

844
00:42:49,680 --> 00:42:52,120
Speaker 2: I'll use the polite term.

845
00:42:52,800 --> 00:42:54,960
Speaker 3: You are buying a company that has a brand, that

846
00:42:55,000 --> 00:42:58,040
Speaker 3: has engineers, that has you know, factories that it has

847
00:42:58,080 --> 00:42:58,839
Speaker 3: contracts with.

848
00:42:58,920 --> 00:43:00,000
Speaker 2: I mean equity.

849
00:43:00,000 --> 00:43:02,520
Speaker 3: These are actually real you can drop them on your foot.

850
00:43:02,800 --> 00:43:05,319
Speaker 3: So no, I mean, in normal times, I'm a huge

851
00:43:05,320 --> 00:43:07,880
Speaker 3: fan of equity. I think you know by like spy,

852
00:43:08,200 --> 00:43:11,800
Speaker 3: spy the ETF it's got low fees. Just fire and forget,

853
00:43:11,840 --> 00:43:13,600
Speaker 3: don't even look at it for ten years at a time.

854
00:43:14,040 --> 00:43:16,960
Speaker 3: You'll be absolutely fine. Now in the moment, I am

855
00:43:17,000 --> 00:43:20,680
Speaker 3: in gold, just because when you know, they've hiked rates

856
00:43:20,719 --> 00:43:26,120
Speaker 3: about well the fastest rate in fifty years. Every school

857
00:43:26,160 --> 00:43:29,359
Speaker 3: of economics, it's not just Austrian at Chicago, it's even

858
00:43:29,400 --> 00:43:32,520
Speaker 3: the Keynesian freaks. They all know that hiking rates have

859
00:43:32,640 --> 00:43:34,440
Speaker 3: fast is going to crash the economy. So at the

860
00:43:34,480 --> 00:43:38,160
Speaker 3: moment I'm nervous, but normally I am an absolute I'm

861
00:43:38,239 --> 00:43:39,000
Speaker 3: like an equity bro.

862
00:43:40,440 --> 00:43:42,279
Speaker 1: I love it. And you know, when we look at

863
00:43:42,320 --> 00:43:44,680
Speaker 1: you know a lot of the indicators showing these recession fears.

864
00:43:44,880 --> 00:43:46,400
Speaker 1: The one that people point to all the time is

865
00:43:46,400 --> 00:43:49,440
Speaker 1: this yield curve inversion, which has been right. It's accurate.

866
00:43:49,520 --> 00:43:52,239
Speaker 1: It predicts every single recession, but it doesn't tell you when.

867
00:43:52,320 --> 00:43:54,480
Speaker 1: And so like the yield curve could even get more

868
00:43:54,520 --> 00:43:56,960
Speaker 1: inverted than it is here. Yes, it could stay inverted

869
00:43:57,000 --> 00:43:59,400
Speaker 1: for a really long time, and it's typically when it

870
00:43:59,440 --> 00:44:02,080
Speaker 1: reached deeps, which is when really it comes. And so

871
00:44:02,280 --> 00:44:05,520
Speaker 1: like could it stay inverted for another year. I mean,

872
00:44:05,560 --> 00:44:06,560
Speaker 1: I guess it could, right.

873
00:44:07,760 --> 00:44:09,480
Speaker 2: Yeah, I think without a doubt.

874
00:44:09,640 --> 00:44:14,480
Speaker 3: You know, a lot of Wall Street operates on statistics,

875
00:44:14,560 --> 00:44:16,680
Speaker 3: like they don't have much theory. So they got a

876
00:44:16,719 --> 00:44:20,279
Speaker 3: bunch of you know, the Harvard useless Harvard grads who

877
00:44:20,320 --> 00:44:22,759
Speaker 3: sit around and just correlate crap. And so, I mean

878
00:44:22,800 --> 00:44:24,640
Speaker 3: they will correlate everything under the sun. There will be

879
00:44:24,680 --> 00:44:29,200
Speaker 3: like milk prices and you know, dividends at Aerospace com

880
00:44:29,200 --> 00:44:31,680
Speaker 3: I mean, they just correlate everything and then something jumps out.

881
00:44:31,719 --> 00:44:34,400
Speaker 3: They're like, snap, I got a correlation. They back test it,

882
00:44:34,440 --> 00:44:37,920
Speaker 3: they do the statistical whatnot. That's really how they operate.

883
00:44:37,960 --> 00:44:40,760
Speaker 3: They have no idea why anything is working the way

884
00:44:40,800 --> 00:44:43,360
Speaker 3: it is. And you know, in the case of an

885
00:44:43,440 --> 00:44:46,120
Speaker 3: inverted yield curve, what it's really telling you all the

886
00:44:46,120 --> 00:44:47,799
Speaker 3: inverted yield curve is telling you.

887
00:44:47,760 --> 00:44:51,000
Speaker 2: Is that the FED is going to cut rates. That's it. Okay,

888
00:44:51,280 --> 00:44:52,319
Speaker 2: now in the future.

889
00:44:52,200 --> 00:44:55,120
Speaker 3: In the future exactly who knows how long in the future.

890
00:44:55,160 --> 00:44:57,520
Speaker 3: I mean generally, you know, the the yield curve has

891
00:44:57,560 --> 00:44:59,959
Speaker 3: a built in estimate of when it thinks that will occur.

892
00:45:00,640 --> 00:45:03,120
Speaker 1: Okay, so it would be thirty the thirty the twenty

893
00:45:03,160 --> 00:45:03,960
Speaker 1: to ten five.

894
00:45:03,800 --> 00:45:06,920
Speaker 3: Bing go exactly, and so then at that point you

895
00:45:06,960 --> 00:45:10,319
Speaker 3: have to use theory or at least understanding the world.

896
00:45:10,400 --> 00:45:12,640
Speaker 3: You have to say, Okay, what kinds of scenarios does

897
00:45:12,680 --> 00:45:16,080
Speaker 3: the FED suddenly cut rates? And usually the answer to

898
00:45:16,120 --> 00:45:18,840
Speaker 3: that is when a recession comes, and so then the

899
00:45:18,880 --> 00:45:22,760
Speaker 3: Fed panic cuts because it.

900
00:45:22,400 --> 00:45:23,680
Speaker 2: You know, raised rates too much.

901
00:45:23,840 --> 00:45:25,839
Speaker 3: It toppled the economy over the edge, and so now

902
00:45:25,840 --> 00:45:28,080
Speaker 3: the Fed's trying to clean up its mess before anybody notices.

903
00:45:28,600 --> 00:45:31,920
Speaker 3: So usually that's when they panic cut. In this case,

904
00:45:32,080 --> 00:45:37,400
Speaker 3: it is weird because you know, rates or because inflation

905
00:45:37,680 --> 00:45:41,120
Speaker 3: is so dominating what the FED does at almost everything

906
00:45:41,280 --> 00:45:43,200
Speaker 3: it does, whether it's going to have high rates or

907
00:45:43,239 --> 00:45:44,880
Speaker 3: low rates, and actually not that much to do with

908
00:45:44,920 --> 00:45:45,920
Speaker 3: the economy. J.

909
00:45:46,080 --> 00:45:47,359
Speaker 2: Powell has been very open about that.

910
00:45:47,400 --> 00:45:51,239
Speaker 3: He's basically been saying, you know, let whoever dies die,

911
00:45:51,320 --> 00:45:52,440
Speaker 3: this is not my problem.

912
00:45:52,520 --> 00:45:53,560
Speaker 2: My job is inflation.

913
00:45:54,160 --> 00:45:57,640
Speaker 3: And the reason for that is because the FED knows

914
00:45:57,680 --> 00:46:01,600
Speaker 3: that inflation is how it gets fired. Right, Inflation is

915
00:46:01,640 --> 00:46:05,000
Speaker 3: the fundamental thing that the voters are going to sort

916
00:46:05,040 --> 00:46:07,200
Speaker 3: of grade it on, and that means that's the fundamental

917
00:46:07,239 --> 00:46:11,680
Speaker 3: thing Congress is going to consider when people like run

918
00:46:11,760 --> 00:46:14,479
Speaker 3: Paul try to agitate for more control over the FED.

919
00:46:14,560 --> 00:46:18,040
Speaker 3: So the FED knows that, you know, it lives by

920
00:46:18,080 --> 00:46:20,960
Speaker 3: the mercy of Congress, and the one thing that could

921
00:46:21,040 --> 00:46:23,959
Speaker 3: really make it lose its independence, this has been true

922
00:46:24,000 --> 00:46:27,000
Speaker 3: through centuries of central banking, is that they screw up inflation.

923
00:46:27,160 --> 00:46:28,920
Speaker 2: So that's why Powell.

924
00:46:28,640 --> 00:46:30,880
Speaker 3: Cares about inflations, not because he cares about us, but

925
00:46:31,000 --> 00:46:32,480
Speaker 3: his job is But inflation.

926
00:46:33,520 --> 00:46:36,040
Speaker 1: Isn't that the dual mandate though, So it's it's inflation,

927
00:46:36,120 --> 00:46:40,439
Speaker 1: stable prices and full employment. So I mean theory, which

928
00:46:40,480 --> 00:46:43,800
Speaker 1: is hard for them. But in theory, would you rather

929
00:46:44,800 --> 00:46:48,279
Speaker 1: have a job and income and more expensive prices or

930
00:46:48,360 --> 00:46:51,399
Speaker 1: have no job or income and lower prices. I rather

931
00:46:51,440 --> 00:46:52,640
Speaker 1: have income and higher prices.

932
00:46:52,880 --> 00:46:54,200
Speaker 2: Yeah, yeah, And so.

933
00:46:54,680 --> 00:46:57,040
Speaker 1: Then there's a there's a combination. So to the point

934
00:46:57,040 --> 00:46:59,080
Speaker 1: of the FED getting fired because the people are upset,

935
00:46:59,400 --> 00:47:02,200
Speaker 1: like I would think that people are probably, uh, if

936
00:47:02,320 --> 00:47:05,000
Speaker 1: unemployment goes from three percent to six percent, you put

937
00:47:05,040 --> 00:47:06,960
Speaker 1: five million people out of work, well, five million people

938
00:47:06,960 --> 00:47:08,720
Speaker 1: out of three hundred and threty million, it's not too bad.

939
00:47:09,280 --> 00:47:11,120
Speaker 1: I'd rather keep the majority of people in work with

940
00:47:11,160 --> 00:47:13,799
Speaker 1: little higher prices. And so it seems like there's a

941
00:47:13,840 --> 00:47:15,600
Speaker 1: combination of those two levers.

942
00:47:15,920 --> 00:47:16,680
Speaker 2: There should be.

943
00:47:16,800 --> 00:47:20,239
Speaker 3: I think the difference is that unemployment is I mean,

944
00:47:20,239 --> 00:47:23,359
Speaker 3: really it's not unemployment. It's loss of income right from

945
00:47:23,719 --> 00:47:26,040
Speaker 3: their perspective, and that you can fix with the stroke

946
00:47:26,120 --> 00:47:26,480
Speaker 3: of a pen.

947
00:47:26,600 --> 00:47:28,720
Speaker 2: I mean, we just got done fixing it in twenty twenty.

948
00:47:28,800 --> 00:47:31,000
Speaker 3: So what was that, I don't know, two trillion whatever

949
00:47:31,040 --> 00:47:33,680
Speaker 3: it was in Stimmi's uh, those are very very easy

950
00:47:33,680 --> 00:47:39,040
Speaker 3: to pass, Like Congress takes no damage passing a massive

951
00:47:39,080 --> 00:47:40,080
Speaker 3: stimulus check.

952
00:47:40,160 --> 00:47:42,200
Speaker 2: They fight over him, then we go back to the though.

953
00:47:42,800 --> 00:47:44,040
Speaker 2: Yeah exactly right.

954
00:47:44,280 --> 00:47:47,440
Speaker 3: Yeah, yeah, So if the fans screws up too badly

955
00:47:47,680 --> 00:47:50,000
Speaker 3: and and and that's you know, that's part of the

956
00:47:50,000 --> 00:47:54,160
Speaker 3: reason why when Jay Powell gives his press conferences he's always.

957
00:47:53,840 --> 00:47:55,600
Speaker 2: Talking about slacking the job market.

958
00:47:55,960 --> 00:47:58,600
Speaker 3: He's basically saying is that I think that there are

959
00:47:58,840 --> 00:48:01,239
Speaker 3: enough people with show that we can lose a couple

960
00:48:01,280 --> 00:48:03,480
Speaker 3: million of them and we're not going to have political

961
00:48:03,520 --> 00:48:06,520
Speaker 3: trouble with Congress. So he's using them as cannon fodder.

962
00:48:06,920 --> 00:48:08,920
Speaker 3: And you know, if that gets out of hand, then

963
00:48:08,960 --> 00:48:10,279
Speaker 3: he loses too many and we get back to a

964
00:48:10,360 --> 00:48:14,000
Speaker 3: nineteen seventy situation. That's really what he fears. On the

965
00:48:14,000 --> 00:48:17,759
Speaker 3: one hand, you know, Congress would go to town with

966
00:48:17,840 --> 00:48:21,160
Speaker 3: stimulus checks, but that is really you know, Powell is

967
00:48:21,239 --> 00:48:24,759
Speaker 3: trying to sort of do that trade off, hence kind

968
00:48:24,760 --> 00:48:27,160
Speaker 3: of the soft landing, right. His hope is that he

969
00:48:27,160 --> 00:48:30,400
Speaker 3: can get inflation down sacrificing just a couple of million workers,

970
00:48:30,440 --> 00:48:32,439
Speaker 3: but not so many that it gets out of hand

971
00:48:32,440 --> 00:48:35,920
Speaker 3: for him politically. So that's really the trade off that

972
00:48:35,920 --> 00:48:38,080
Speaker 3: he's going after, and that's why every single month he's

973
00:48:38,120 --> 00:48:41,360
Speaker 3: just absolutely obsessed how many jobs have we lost. It

974
00:48:41,480 --> 00:48:43,680
Speaker 3: sounds kind of, you know, like he's a vulture, but

975
00:48:43,920 --> 00:48:46,520
Speaker 3: I mean that's that's fundamental what he's doing. He's trading

976
00:48:46,560 --> 00:48:49,080
Speaker 3: workers to get inflation down because he perceives it from

977
00:48:49,080 --> 00:48:52,880
Speaker 3: a pr perspective, the inflation right now is more trouble

978
00:48:52,920 --> 00:48:54,160
Speaker 3: for him than the workers are.

979
00:48:55,360 --> 00:48:58,680
Speaker 1: Yeah, I want to jump to another topic and see

980
00:48:58,719 --> 00:49:01,239
Speaker 1: how much time we have left. But you know I have.

981
00:49:01,560 --> 00:49:03,560
Speaker 1: I started my career right out of high school buying

982
00:49:03,600 --> 00:49:06,120
Speaker 1: bank owned repos and fix and flipping. I've been involved

983
00:49:06,120 --> 00:49:08,520
Speaker 1: heavily in real estate my whole career at this point now,

984
00:49:09,080 --> 00:49:10,920
Speaker 1: and so it's not like I pay close attention to

985
00:49:11,840 --> 00:49:15,600
Speaker 1: a lot of people are just just forecasting absolute death

986
00:49:15,640 --> 00:49:17,880
Speaker 1: and destruction in the real estate market. But for some reason,

987
00:49:17,880 --> 00:49:21,520
Speaker 1: the market just doesn't go down well, for lots of reasons,

988
00:49:21,560 --> 00:49:23,560
Speaker 1: which we know people longed in debt, et cetera. But

989
00:49:24,120 --> 00:49:27,680
Speaker 1: people just saying it's you know, part of it, I

990
00:49:27,680 --> 00:49:29,799
Speaker 1: think is that the general is always fighting the last war.

991
00:49:29,880 --> 00:49:31,800
Speaker 1: So because two thousand and eight was a housing crisis,

992
00:49:31,800 --> 00:49:34,080
Speaker 1: they think we have to have another housing crisis. I

993
00:49:34,160 --> 00:49:35,960
Speaker 1: don't think that has to be doesn't have to be

994
00:49:36,040 --> 00:49:38,319
Speaker 1: that way, And so a lot of people have been

995
00:49:38,320 --> 00:49:40,800
Speaker 1: forecasting this. It hasn't come to pass yet. Now, sure

996
00:49:41,040 --> 00:49:44,080
Speaker 1: the sales numbers are down, et cetera, but the prices

997
00:49:44,120 --> 00:49:48,440
Speaker 1: have maintained. But now the over the last week or two,

998
00:49:48,880 --> 00:49:50,800
Speaker 1: all the war drums are out banging on the table.

999
00:49:50,840 --> 00:49:53,960
Speaker 1: The pinprick is here, and it's the airbnb market. The

1000
00:49:54,000 --> 00:49:55,960
Speaker 1: air andbnb market's going to come crash it. And I

1001
00:49:55,960 --> 00:49:58,000
Speaker 1: think you were telling me that you just recently wrote

1002
00:49:58,320 --> 00:50:00,600
Speaker 1: a paper or did a video on on that topic.

1003
00:50:00,640 --> 00:50:02,839
Speaker 1: So give me your breakdown of I guess the real

1004
00:50:02,920 --> 00:50:05,759
Speaker 1: estate market overall, and then the airbnb being a prick

1005
00:50:05,800 --> 00:50:06,040
Speaker 1: for that.

1006
00:50:06,920 --> 00:50:08,840
Speaker 3: Yeah, So I got a video coming out on the

1007
00:50:08,880 --> 00:50:11,560
Speaker 3: tenth whenever. That is, so probably a couple of days.

1008
00:50:11,360 --> 00:50:12,080
Speaker 1: From the sneak peak.

1009
00:50:12,280 --> 00:50:16,160
Speaker 2: Yes peak, Yes, it's a sneak peak. Yeah. Housing has

1010
00:50:16,200 --> 00:50:16,720
Speaker 2: been funny.

1011
00:50:16,800 --> 00:50:20,000
Speaker 3: So when rates were so low, when all you know,

1012
00:50:20,040 --> 00:50:22,640
Speaker 3: the big housing bubble was going the past couple of years,

1013
00:50:23,080 --> 00:50:25,960
Speaker 3: actually stretched and bought the maximum house that I possibly

1014
00:50:26,040 --> 00:50:29,920
Speaker 3: could because rates were obscene, right, they were sub three percent.

1015
00:50:30,000 --> 00:50:33,080
Speaker 3: That's like free money, and inflation at that point was

1016
00:50:33,120 --> 00:50:35,719
Speaker 3: going what seven percent, so you know, effectively the Fed

1017
00:50:35,840 --> 00:50:38,520
Speaker 3: was paying you four percent to own a house.

1018
00:50:38,640 --> 00:50:40,359
Speaker 2: And what I figured is that, sure, it's a.

1019
00:50:40,280 --> 00:50:44,000
Speaker 3: Bubble, okay, but the bubble, you know, go up, it'll

1020
00:50:44,040 --> 00:50:47,319
Speaker 3: start to come down, but then it meets inflation coming

1021
00:50:47,400 --> 00:50:47,960
Speaker 3: up to meet it.

1022
00:50:48,200 --> 00:50:48,480
Speaker 2: Okay.

1023
00:50:48,520 --> 00:50:51,120
Speaker 3: So I figured that was actually a pretty good hedged

1024
00:50:51,560 --> 00:50:54,640
Speaker 3: trade that inflation was essentially catch up with the prices.

1025
00:50:54,960 --> 00:50:57,840
Speaker 3: And we've seen that for over a century that house

1026
00:50:57,880 --> 00:51:01,960
Speaker 3: prices almost perfectly track inflation. You get a little bonus

1027
00:51:01,960 --> 00:51:04,000
Speaker 3: if people are moving to Orlando and they're moving out

1028
00:51:04,000 --> 00:51:07,280
Speaker 3: of Chicago or something, but you know, on on, certainly

1029
00:51:07,280 --> 00:51:10,920
Speaker 3: on a nationwide level, houses are just a proxy for inflation.

1030
00:51:11,040 --> 00:51:14,480
Speaker 3: That is, by the way, if you're considering, uh, you know,

1031
00:51:14,560 --> 00:51:15,320
Speaker 3: gold or something.

1032
00:51:15,360 --> 00:51:16,479
Speaker 2: I mean, a house is.

1033
00:51:16,520 --> 00:51:20,520
Speaker 3: A heck of a hedge, particularly since you can generally

1034
00:51:20,600 --> 00:51:23,160
Speaker 3: not at the moment, but generally you can get really

1035
00:51:23,239 --> 00:51:25,880
Speaker 3: cheat money from the Fed comes from the bank, but

1036
00:51:25,960 --> 00:51:28,600
Speaker 3: the bank, of course gets it from the Fed, so

1037
00:51:29,520 --> 00:51:32,400
Speaker 3: you know, you are getting like what I think in

1038
00:51:32,440 --> 00:51:34,640
Speaker 3: our case, we effectively got about two thirds of our

1039
00:51:34,640 --> 00:51:38,440
Speaker 3: house for free courtesy of the Federal Reserve, which I

1040
00:51:38,480 --> 00:51:41,560
Speaker 3: didn't ask for in my defense, But anyway, there we are, okay.

1041
00:51:41,600 --> 00:51:45,680
Speaker 3: So I don't think it's guaranteed that housing is gonna

1042
00:51:45,680 --> 00:51:46,000
Speaker 3: go there.

1043
00:51:46,640 --> 00:51:48,839
Speaker 1: Just that thing, just a throw out there because it's

1044
00:51:48,880 --> 00:51:51,440
Speaker 1: important I think for greater context. Is that what a

1045
00:51:51,480 --> 00:51:53,239
Speaker 1: lot of people miss about real estate, especially the big

1046
00:51:53,280 --> 00:51:56,600
Speaker 1: pointerers is that, yeah, sure the eels aren't that good,

1047
00:51:56,680 --> 00:51:58,279
Speaker 1: you know, depend on where you're at your cap right,

1048
00:51:58,320 --> 00:52:01,520
Speaker 1: six percent, eight percent, whatever, that's pretty good. But to

1049
00:52:01,560 --> 00:52:03,720
Speaker 1: the point that you made the leverage the free money.

1050
00:52:03,920 --> 00:52:06,520
Speaker 1: So I'm getting to leverage a million dollar asset for

1051
00:52:06,560 --> 00:52:09,520
Speaker 1: one hundred grand for ten percent, for example. So you

1052
00:52:09,520 --> 00:52:11,920
Speaker 1: have the leverage. But what you also have is you

1053
00:52:11,960 --> 00:52:16,440
Speaker 1: have two other things. So one, you have depreciation that

1054
00:52:16,480 --> 00:52:19,080
Speaker 1: they give you for tax write offs. Yeah, yeah, And

1055
00:52:19,560 --> 00:52:21,759
Speaker 1: like depending on where you're at with your income and

1056
00:52:21,760 --> 00:52:25,200
Speaker 1: your tax write offs, that is a big deal. And

1057
00:52:25,280 --> 00:52:28,440
Speaker 1: then you know, potentially historically you have appreciation over the

1058
00:52:28,440 --> 00:52:30,719
Speaker 1: total asset, not what you've put into it. So there's

1059
00:52:30,719 --> 00:52:32,960
Speaker 1: really four ways that you earn on real estate, and

1060
00:52:33,000 --> 00:52:36,000
Speaker 1: so that's why you know, and then there's ways to

1061
00:52:36,520 --> 00:52:38,960
Speaker 1: shield your income in real estate, so like you would

1062
00:52:38,960 --> 00:52:41,799
Speaker 1: effectively play no income tax if I have a good

1063
00:52:41,800 --> 00:52:45,080
Speaker 1: real estate strategy as well, And so I think it's

1064
00:52:45,080 --> 00:52:47,719
Speaker 1: important to understand those metrics if you want to look

1065
00:52:47,719 --> 00:52:49,480
Speaker 1: at the real estate market as to what it's doing.

1066
00:52:49,480 --> 00:52:50,600
Speaker 1: But anyway, sorry, go keep going.

1067
00:52:50,719 --> 00:52:51,520
Speaker 2: No, you're absolutely right.

1068
00:52:51,640 --> 00:52:55,200
Speaker 3: Normally the regime only rewards miscreants, but in the case

1069
00:52:55,200 --> 00:52:58,120
Speaker 3: of housing, like for once, for one time in your life,

1070
00:52:58,160 --> 00:53:01,480
Speaker 3: the regime is actually giving you freebies. So yeah, absolutely,

1071
00:53:01,520 --> 00:53:05,200
Speaker 3: I'm a massive fan of housing as an investment for

1072
00:53:05,239 --> 00:53:10,640
Speaker 3: all those reasons. Airbnb specifically, the story there is that

1073
00:53:10,960 --> 00:53:12,920
Speaker 3: the rates are coming down. You got a lot of

1074
00:53:12,960 --> 00:53:16,120
Speaker 3: people around the country who you know, stretched to get

1075
00:53:16,120 --> 00:53:18,960
Speaker 3: that second mortgage to put up there abnbing Kasimi or

1076
00:53:18,960 --> 00:53:22,320
Speaker 3: something for the Disney crowd, and nobody's shown up. And

1077
00:53:22,680 --> 00:53:25,759
Speaker 3: what happened there is really simple, which is just that

1078
00:53:25,960 --> 00:53:31,960
Speaker 3: during the pandemic, there was a temporary shortage in airbnbs

1079
00:53:33,320 --> 00:53:37,400
Speaker 3: because you know, people might have had a second home

1080
00:53:37,600 --> 00:53:40,160
Speaker 3: outside of New York that they were renting on our airbnb.

1081
00:53:40,680 --> 00:53:41,920
Speaker 2: All of a sudden, they won't.

1082
00:53:41,640 --> 00:53:44,400
Speaker 3: Be in New York anymore because of the zombie apocalypse,

1083
00:53:44,440 --> 00:53:47,080
Speaker 3: and so they went to occupy that and took it

1084
00:53:47,120 --> 00:53:49,520
Speaker 3: off the market. And then meanwhile, of course, you had

1085
00:53:49,680 --> 00:53:52,160
Speaker 3: hundreds of thousands of other New Yorkers who also wanted

1086
00:53:52,160 --> 00:53:54,200
Speaker 3: to get the heck out of Dodge. I mean, especially

1087
00:53:54,200 --> 00:53:57,000
Speaker 3: when they shut everything down. Like the only reason you

1088
00:53:57,000 --> 00:53:59,440
Speaker 3: live in New York is because there's allays stuff to do, right,

1089
00:53:59,480 --> 00:54:02,040
Speaker 3: Like if everything closed in New York, it is horrific,

1090
00:54:02,080 --> 00:54:04,760
Speaker 3: Like I would much rather be on some remote island.

1091
00:54:06,160 --> 00:54:09,279
Speaker 3: You know, it's a horrible place. And so you had

1092
00:54:09,320 --> 00:54:12,799
Speaker 3: this perfect storm where all these airbnbs were coming off

1093
00:54:12,800 --> 00:54:13,680
Speaker 3: the market.

1094
00:54:14,800 --> 00:54:16,640
Speaker 2: You had just this flood of people who were.

1095
00:54:16,560 --> 00:54:18,120
Speaker 3: Going out and trying to get them, and when they

1096
00:54:18,120 --> 00:54:19,959
Speaker 3: got them, they would stay there for like three months,

1097
00:54:20,040 --> 00:54:22,359
Speaker 3: six months, nine months, So all of it was off

1098
00:54:22,400 --> 00:54:25,120
Speaker 3: the market, and that meant that the airbnb prices were

1099
00:54:25,160 --> 00:54:28,719
Speaker 3: absolutely astronomical during the pandemic. We had to move from

1100
00:54:28,719 --> 00:54:31,400
Speaker 3: Canada to New Hampshire, and I mean it was insane.

1101
00:54:31,480 --> 00:54:34,160
Speaker 3: You had like little cabins in the woods hour and

1102
00:54:34,200 --> 00:54:36,799
Speaker 3: a half from anything, and they were like twenty five

1103
00:54:36,880 --> 00:54:37,399
Speaker 3: hundred a month.

1104
00:54:37,400 --> 00:54:39,280
Speaker 2: It was just it was insane.

1105
00:54:39,520 --> 00:54:42,080
Speaker 3: So people looked at that and they got excited and

1106
00:54:42,120 --> 00:54:45,920
Speaker 3: they said, holy moly, I can retire on my Airbnb.

1107
00:54:46,200 --> 00:54:48,719
Speaker 3: And so you had this flood of new supply. So

1108
00:54:48,840 --> 00:54:54,480
Speaker 3: all these people financed their airbnbs and the market was flooded.

1109
00:54:55,000 --> 00:54:57,319
Speaker 3: And so now all we're seeing I think rates are

1110
00:54:57,320 --> 00:54:59,160
Speaker 3: down thirteen percent year on year.

1111
00:54:59,480 --> 00:55:03,200
Speaker 1: That's not of traffic, but anyway, their rates of what

1112
00:55:03,320 --> 00:55:05,360
Speaker 1: rates of what the.

1113
00:55:05,120 --> 00:55:07,719
Speaker 3: Returns that people are making on their airbnb. So that's

1114
00:55:07,760 --> 00:55:11,800
Speaker 3: host revenue is down thirteen percent year on year across Airbnb.

1115
00:55:11,960 --> 00:55:15,160
Speaker 3: That brings it to about twelve hundred a month. It's

1116
00:55:15,160 --> 00:55:17,440
Speaker 3: not terrible. I think the problem is that I saw

1117
00:55:17,719 --> 00:55:20,560
Speaker 3: expect I saw, I saw, I saw they were down

1118
00:55:20,640 --> 00:55:21,840
Speaker 3: about three percent.

1119
00:55:22,200 --> 00:55:23,520
Speaker 1: So I have to go back and look at the

1120
00:55:23,600 --> 00:55:24,560
Speaker 1: data that I saw on that.

1121
00:55:25,000 --> 00:55:26,000
Speaker 2: Yeah, this is Bloomberg.

1122
00:55:26,480 --> 00:55:32,200
Speaker 3: So okay, I'm not saying that's necessarily the truth, but anyway, Yeah,

1123
00:55:32,360 --> 00:55:34,960
Speaker 3: it's also you know, of course depending on the city,

1124
00:55:35,080 --> 00:55:38,399
Speaker 3: so you know, in some places I would wow, I mean,

1125
00:55:38,400 --> 00:55:40,719
Speaker 3: I don't know, but yeah, so a lot of the

1126
00:55:40,760 --> 00:55:41,719
Speaker 3: markets are down.

1127
00:55:41,560 --> 00:55:44,319
Speaker 1: So they're saying, so they're saying, as a whole, the

1128
00:55:44,400 --> 00:55:49,759
Speaker 1: median income has dropped by thirteen percent, correct, Yeah, and

1129
00:55:49,840 --> 00:55:51,960
Speaker 1: that could be for some people, could be a make

1130
00:55:52,000 --> 00:55:52,680
Speaker 1: or break number.

1131
00:55:53,440 --> 00:55:56,240
Speaker 3: That's the issue is if people went into it thinking

1132
00:55:56,280 --> 00:55:57,919
Speaker 3: that they were going to make five grand a month

1133
00:55:57,960 --> 00:56:00,480
Speaker 3: and they're actually only making twelve hundred a month, then

1134
00:56:00,600 --> 00:56:04,439
Speaker 3: did they get too much mortgage for it? I think

1135
00:56:04,480 --> 00:56:07,400
Speaker 3: Also what's happening now it's not just the revenue's declining.

1136
00:56:07,480 --> 00:56:10,360
Speaker 3: The level of service that's expected has gone up a lot,

1137
00:56:11,040 --> 00:56:15,279
Speaker 3: which is a form of you know, the customers getting

1138
00:56:15,280 --> 00:56:17,480
Speaker 3: a cheaper price is that they can demand more. So

1139
00:56:17,680 --> 00:56:23,040
Speaker 3: you know, people expect designer appliances outdoor kitchens. They want

1140
00:56:23,080 --> 00:56:25,680
Speaker 3: the shampoo and the little soaps and you know, the

1141
00:56:25,719 --> 00:56:28,680
Speaker 3: little towel arranged like a swan. So all of this

1142
00:56:28,760 --> 00:56:30,880
Speaker 3: is costing more time for people. So people might have

1143
00:56:30,920 --> 00:56:32,680
Speaker 3: thought that they were just gonna do this little side gig.

1144
00:56:32,719 --> 00:56:34,359
Speaker 3: They were going to have the thing, they were gonna pay,

1145
00:56:34,840 --> 00:56:39,200
Speaker 3: you know whatever. Some local handyman to go square the

1146
00:56:39,200 --> 00:56:41,560
Speaker 3: place up and take the cheese down. And now it

1147
00:56:41,560 --> 00:56:42,879
Speaker 3: turns out they have to put a lot more into

1148
00:56:43,320 --> 00:56:45,480
Speaker 3: So I think a lot of people are they're going

1149
00:56:45,520 --> 00:56:47,560
Speaker 3: to give up on it. They're going to decide all

1150
00:56:47,600 --> 00:56:50,040
Speaker 3: that work was not worth twelve hundred dollars, you know,

1151
00:56:50,080 --> 00:56:52,640
Speaker 3: plus you got to carry the mortgage. So I think

1152
00:56:52,680 --> 00:56:54,000
Speaker 3: a lot of people are going to exit from it.

1153
00:56:54,000 --> 00:56:55,480
Speaker 3: We're gonna hear a lot of people talking about the

1154
00:56:55,520 --> 00:56:59,160
Speaker 3: air being bust. Fundamentally, I don't think that that's the

1155
00:56:59,239 --> 00:57:01,200
Speaker 3: kind of story that's going to take housing down. I

1156
00:57:01,200 --> 00:57:04,640
Speaker 3: think it's a very sort of specific story to Airbnb

1157
00:57:04,760 --> 00:57:09,240
Speaker 3: exactly what the process is. I think overwhelmingly for real estate,

1158
00:57:09,239 --> 00:57:11,719
Speaker 3: the question is simply going to be inflation.

1159
00:57:13,680 --> 00:57:18,280
Speaker 1: So I guess you're saying that to your point, nine

1160
00:57:18,360 --> 00:57:21,320
Speaker 1: out of ten businesses fail. These guys are starting a business, yep.

1161
00:57:21,400 --> 00:57:24,320
Speaker 1: And most people have no business starting a business, and

1162
00:57:24,400 --> 00:57:27,040
Speaker 1: so they just typically fail. And these guys chose a

1163
00:57:27,120 --> 00:57:29,920
Speaker 1: particular business that got in at the wrong cycle. Too

1164
00:57:30,000 --> 00:57:32,320
Speaker 1: much supply, not enough demand. They're going to go out

1165
00:57:32,360 --> 00:57:36,320
Speaker 1: of business. That's just the way market cycles work. But

1166
00:57:36,680 --> 00:57:38,080
Speaker 1: I guess the question that I'm trying to get to

1167
00:57:38,120 --> 00:57:41,080
Speaker 1: and see what you're deciphering here. But do you A

1168
00:57:41,120 --> 00:57:42,840
Speaker 1: lot of people are saying that this is the apocalypse,

1169
00:57:42,840 --> 00:57:45,080
Speaker 1: This will be the prick that pops the real estate bubble.

1170
00:57:45,240 --> 00:57:46,920
Speaker 1: Are you saying you don't think that's the case.

1171
00:57:47,160 --> 00:57:48,120
Speaker 2: I don't think so at all.

1172
00:57:48,920 --> 00:57:52,320
Speaker 3: I think housing just because it went up a lot

1173
00:57:52,400 --> 00:57:54,320
Speaker 3: doesn't mean it's necessarily going to go down a lot.

1174
00:57:55,160 --> 00:57:56,520
Speaker 2: This is not how the world works.

1175
00:57:58,120 --> 00:58:02,560
Speaker 3: The houses, aren't you remembering the good times and looking

1176
00:58:02,560 --> 00:58:03,120
Speaker 3: for a payback?

1177
00:58:03,160 --> 00:58:04,240
Speaker 2: Okay, the houses don't care.

1178
00:58:04,560 --> 00:58:06,600
Speaker 3: The question is what are the external dynamics that are

1179
00:58:06,640 --> 00:58:10,520
Speaker 3: driving those prices? And I think in this case a

1180
00:58:10,680 --> 00:58:13,400
Speaker 3: huge part of it has been inflation. Housing is not

1181
00:58:13,760 --> 00:58:17,040
Speaker 3: massively overvalued comparing to what inflation did the past couple

1182
00:58:17,080 --> 00:58:18,520
Speaker 3: of years. I think you might be looking about a

1183
00:58:18,560 --> 00:58:23,160
Speaker 3: five about a ten percent overhang. That's not huge. You know,

1184
00:58:23,360 --> 00:58:25,880
Speaker 3: it may lag inflation for a couple of years while

1185
00:58:25,920 --> 00:58:28,680
Speaker 3: that catches up. But at the same time, if we

1186
00:58:29,080 --> 00:58:31,840
Speaker 3: you know, if we come into a recession, then where

1187
00:58:31,880 --> 00:58:34,680
Speaker 3: else are you going to park your money? Housing becomes

1188
00:58:34,680 --> 00:58:36,680
Speaker 3: even more attractive. Once we gin to the recession. The

1189
00:58:36,720 --> 00:58:38,520
Speaker 3: FED is going to cut rates again because that's what

1190
00:58:38,560 --> 00:58:41,000
Speaker 3: they do. At that point, a lot of people might

1191
00:58:41,000 --> 00:58:42,760
Speaker 3: decide to go out and buy a house, whereas right

1192
00:58:42,800 --> 00:58:45,360
Speaker 3: now they're scared off by seven and a half percent mortgages.

1193
00:58:45,880 --> 00:58:47,600
Speaker 2: So I think there's a lot of dynamics there.

1194
00:58:47,600 --> 00:58:50,360
Speaker 3: And certainly, I mean, first off, I don't think airbnb

1195
00:58:50,440 --> 00:58:51,280
Speaker 3: can prick anything.

1196
00:58:51,880 --> 00:58:55,000
Speaker 2: It's just not substantial enough. And secondly, I think, right.

1197
00:58:54,880 --> 00:58:57,360
Speaker 1: It's not substantial enough, and it's decentralized enough. I mean

1198
00:58:57,360 --> 00:59:00,320
Speaker 1: it's kind of all over the country, right, Like you said,

1199
00:59:00,360 --> 00:59:03,120
Speaker 1: kiss kissing me or whatever. Yeah, that's kind of the

1200
00:59:03,120 --> 00:59:04,320
Speaker 1: way that I would look at as well. The other

1201
00:59:04,320 --> 00:59:06,840
Speaker 1: thing is I always like to get people to challenge

1202
00:59:06,960 --> 00:59:09,480
Speaker 1: these assumptions they have. So people like, well, with the

1203
00:59:09,560 --> 00:59:11,600
Speaker 1: rates as high as they are, then prices have to

1204
00:59:11,640 --> 00:59:16,800
Speaker 1: come down like, no, they don't. People on the contrary, yeah, well,

1205
00:59:16,840 --> 00:59:18,000
Speaker 1: and just by a smaller house.

1206
00:59:18,280 --> 00:59:18,480
Speaker 2: Well.

1207
00:59:18,520 --> 00:59:20,520
Speaker 3: And also sellers are locked in as the issue at

1208
00:59:20,520 --> 00:59:24,280
Speaker 3: the moment, right, so housing inventory, despite these high prices,

1209
00:59:24,320 --> 00:59:27,360
Speaker 3: housing inventory for sale is like half what it normally is.

1210
00:59:27,800 --> 00:59:31,120
Speaker 3: And the reason is because if the seller right, he's

1211
00:59:31,160 --> 00:59:33,080
Speaker 3: sitting on a three percent mortgage right now, and if

1212
00:59:33,080 --> 00:59:36,800
Speaker 3: he sells, he's got to live somewhere, and so you know,

1213
00:59:36,960 --> 00:59:40,920
Speaker 3: he whatever he's he wants to move to Florida or something, Well,

1214
00:59:41,000 --> 00:59:42,439
Speaker 3: he's going to have to buy a house at seven

1215
00:59:42,440 --> 00:59:45,280
Speaker 3: and a half in Florida, right, So a lot of

1216
00:59:45,320 --> 00:59:48,440
Speaker 3: people are effectively locked in. They don't necessarily like the

1217
00:59:48,480 --> 00:59:50,320
Speaker 3: house they're in for whatever reason. Maybe it's too big,

1218
00:59:50,320 --> 00:59:52,520
Speaker 3: it's too small, it's in the wrong place, whatever, But

1219
00:59:52,560 --> 00:59:54,840
Speaker 3: they're not selling right now because the rates are so high.

1220
00:59:54,880 --> 00:59:56,640
Speaker 2: They can't trade into the three percent mortgage.

1221
00:59:56,680 --> 00:59:58,120
Speaker 3: It's not like you can just take the three percent

1222
00:59:58,160 --> 01:00:00,440
Speaker 3: mortgage and say, okay, give me credit on this house

1223
01:00:00,840 --> 01:00:04,920
Speaker 3: a lastly doesn't work that way. So yeah, on the contrary,

1224
01:00:04,960 --> 01:00:07,480
Speaker 3: the high rates I think are actually holding prices up

1225
01:00:07,560 --> 01:00:09,200
Speaker 3: because they're keeping people off the market.

1226
01:00:10,400 --> 01:00:13,720
Speaker 1: Yeah. Man, I think with that we're going to break

1227
01:00:13,800 --> 01:00:16,040
Speaker 1: right there. And we have covered so much ground. There

1228
01:00:16,080 --> 01:00:17,680
Speaker 1: was obviously more we could have covered, but I think

1229
01:00:17,760 --> 01:00:20,800
Speaker 1: that's good enough for now. You're a wealth of information.

1230
01:00:21,080 --> 01:00:23,000
Speaker 1: I love it. I appreciate it. I know you make

1231
01:00:23,080 --> 01:00:27,320
Speaker 1: videos every day on Twitter or on YouTube. Why don't

1232
01:00:27,320 --> 01:00:27,960
Speaker 1: you shout that out?

1233
01:00:28,640 --> 01:00:28,840
Speaker 2: Yeah?

1234
01:00:28,880 --> 01:00:32,480
Speaker 3: I post them every day on Twitter. They're about freedom

1235
01:00:32,520 --> 01:00:34,880
Speaker 3: and economics. So basically, what's going on in the world.

1236
01:00:35,480 --> 01:00:38,200
Speaker 3: I'm an Austrian economist, so they're from that perspective. And

1237
01:00:38,240 --> 01:00:40,040
Speaker 3: then I also do them on a podcast, and I

1238
01:00:40,120 --> 01:00:43,320
Speaker 3: do a weekly newsletter like a substack, where it goes

1239
01:00:43,360 --> 01:00:44,120
Speaker 3: into more depth.

1240
01:00:45,400 --> 01:00:45,720
Speaker 2: Yeah.

1241
01:00:45,760 --> 01:00:48,400
Speaker 1: Well, I appreciate you taking the time to talk to us.

1242
01:00:48,400 --> 01:00:50,720
Speaker 1: It was a fun conversation. Looking forward to hanging out

1243
01:00:50,760 --> 01:00:52,360
Speaker 1: with you in Amsterdam here coming up.

1244
01:00:52,320 --> 01:00:53,479
Speaker 2: After the weeks. Yep.

1245
01:00:54,240 --> 01:00:55,560
Speaker 1: And with that we'll go ahead and sign it off.

1246
01:00:55,560 --> 01:00:57,400
Speaker 2: Thanks so much, all right, Mark Pleasure