Speaker 1: Hey, everyone, welcome to another episode of the Market Disruptors Show. Today,
Speaker 1: I'm sitting down with Danielle di Martino Booth. She is
Speaker 1: the CEO and founder of quil Intelligence, former Federal Reserve insider,
Speaker 1: and the author of the book Fed Up Now. Of course,
Speaker 1: if you're watching this channel, you know I talked about
Speaker 1: the FED policy a lot and what it's doing. Of course,
Speaker 1: I'm not an insider. I make a lot of assumptions accusations.
Speaker 1: Of course, we try to look at the facts and data.
Speaker 1: But today we get to sit down with an insider.
Speaker 1: And I'm so excited for this interview. So Danielle, welcome
Speaker 1: and thank you for joining us. All Right, so I've
Speaker 1: watched you and countless interviews and have a good idea
Speaker 1: of questions I want to ask, but just for the
Speaker 1: people that are watching, just give us a quick background
Speaker 1: on on maybe kind of who you are and what
Speaker 1: you're doing. So I graduated from business school and being
Speaker 1: finance bright Light Big Cities, started off on Wall Street
Speaker 1: in New York. Uh, never thought i'd leave. Nine eleven
Speaker 1: came and went and the firm that I worked for
Speaker 1: got about out by a Swiss investment bank which was
Speaker 1: very quiet and boring. Uh So, after eleven I met
Speaker 1: the man of my dreams, moved down to Texas. I
Speaker 1: had gotten my second masters in journalism at Columbia when
Speaker 1: I was working on Wall Street. I retired, sold my
Speaker 1: book of business back to the firm, signed a noncompete
Speaker 1: and um, and just decided to write for a living
Speaker 1: and thought that my career was going to be over
Speaker 1: at that point. And at some point Warren Buffett called,
Speaker 1: and off I went to Omaha, and you're writing really
Speaker 1: crazy things and controversial and blah blah blah. And Richard
Speaker 1: Fisher called from the Federal Reserve. I ended up working
Speaker 1: for him for nine years of the Dallas Fed as
Speaker 1: an advisor. And I'm anything but a FED bureaucrats. It
Speaker 1: was an interesting fit and I enjoyed myself so much.
Speaker 1: I came out of the Fed and wrote a book
Speaker 1: for two and a half years called fed Up, An
Speaker 1: Insider Stake on why the Federal Reserve is Act for America.
Speaker 1: So I suppose you could call that my exit interview.
Speaker 1: And since then I have started a research firm, Quill Intelligence.
Speaker 1: We published daily, we published weekly. We've got retail and
Speaker 1: institutional subscribers. And I talk a lot. You do talk
Speaker 1: a lot, and we love hearing it. The public, the
Speaker 1: market has decided they like, they like what you have
Speaker 1: to say. Now I'm curious, um, the dig into the FED. Now,
Speaker 1: I saw in another interview, I think it was with
Speaker 1: Patrick that David and you said that you're fiscally conservative, um,
Speaker 1: and you believe in bringing down the debt in America. UM.
Speaker 1: And maybe I'm just curious, is that maybe what happened
Speaker 1: at the FED. Right you're fiscally conservative. You weren't a
Speaker 1: green with their just inflate away till no infinity or
Speaker 1: into infinity. I I was. I was never a fan
Speaker 1: of the Fed enabling Congress to borrow as much as
Speaker 1: it wants. I've yeah, I listened to the conventional wisdom
Speaker 1: as always, well, you can afford it as long as
Speaker 1: you can service the debt. I don't. I don't buy
Speaker 1: that for a minute. But that is what's happened in
Speaker 1: the extreme with Uncle Sam. And that is, if the
Speaker 1: FED brings interest rates down to the lowest level in
Speaker 1: five thousand years, will low and behold, the government's going
Speaker 1: to start running up deficits and debts that it cannot
Speaker 1: in the end afford and look at where we are today. Yeah, exactly,
Speaker 1: great point. And uh, for everybody that's listening right now,
Speaker 1: make sure you stick around to the end because I
Speaker 1: am going to ask Daniel what that end game looks
Speaker 1: like and we're gonna try and just make some stabs
Speaker 1: in the dark edits. So make sure you stick around
Speaker 1: for that. But back to that point, So, being physically
Speaker 1: conservative and seeing them spend to infinity, I could understand
Speaker 1: that stress. I'm curious just what's your viewpoint is, just
Speaker 1: maybe generally on the FED itself. I mean, from my viewpoint,
Speaker 1: it seems that, um, they're they're kind of responsible for
Speaker 1: a lot of the problems that we have. UM through
Speaker 1: this endless money, inflation, debasement, etcetera. Right, purchasing power has
Speaker 1: gone down, that levels of quality. The list goes on. Yeah,
Speaker 1: so back so so specifically about income inequality. I believe
Speaker 1: that the FED policy has been a major factor in
Speaker 1: the income inequality. UM do you would you see that? Yeah?
Speaker 1: I do. And it's not, Um, it's not only about
Speaker 1: quantitative easing and injecting liquidity into the system. It's also
Speaker 1: about indexing and the whole idea of the FED putting
Speaker 1: a floor under markets, which started with Alan Greenspan in seven.
Speaker 1: In the weeks and months that followed the Black Monday,
Speaker 1: the Crash of seven, he went so far as to
Speaker 1: allow the New York Fed Markets Desk to inform Wall
Speaker 1: Street bond traders ahead of FED moves to inject liquidating
Speaker 1: the system. So that was kind of when moral hazard
Speaker 1: was born, when the FED put was born, and it's
Speaker 1: just gotten to be bigger and bigger and bigger over
Speaker 1: the years. But what's come out of this is this
Speaker 1: idea of don't fight the FED. And what don't fin
Speaker 1: the FED has done is it's fed this huge indexing
Speaker 1: industry because you don't need to pay for active managements.
Speaker 1: When a monkey or port Dave Portnoy, take your choice,
Speaker 1: can simply the row darts at a wall and make
Speaker 1: tons of money because they own anything and everything, and
Speaker 1: it all goes up. But what's actually happened in the background.
Speaker 1: You know, the SMP five hundred recently hit an all
Speaker 1: time high and we exited from the bear market, and
Speaker 1: there were fireworks going off. If you took out the
Speaker 1: SMP five then the stock market was down about three
Speaker 1: So but to the point of the Fed and income
Speaker 1: inequality and don't fight the FED and indexing. If you
Speaker 1: don't fight the FED and you put your money in
Speaker 1: the Vanguard SMP index fund, then you're just going to
Speaker 1: make sure that the biggest companies get bigger. And when
Speaker 1: big companies get bigger, what they do in competition comes
Speaker 1: along is they eat it. And anytime there's an innovator,
Speaker 1: you can to the people who sold um I think
Speaker 1: it's Instagram. Uh, and they they they thought they were
Speaker 1: really wealthy when they sold it to one of the
Speaker 1: big five, but they realized a few years later that
Speaker 1: instead of multi millionaires, they could have been millionaires. But
Speaker 1: they didn't. But but what's happened Because the FED makes
Speaker 1: the biggest companies bigger, and because the FED foster's monopolization
Speaker 1: of the US economy, it ends up stifling innovation. It
Speaker 1: ends up killing the ability to be an entrepreneur. And
Speaker 1: you you take the wind out of the American dream
Speaker 1: of anybody being able to to start a business and
Speaker 1: become successful because it's much harder to do if you
Speaker 1: live in a monopolized economy, which is something that the
Speaker 1: FED has fed. Yeah, that's such a great point. And
Speaker 1: to be honest, it's something that's it's a little bit
Speaker 1: of a different twist than I've actually looked at. Obviously,
Speaker 1: I see government policy going into a lot of the monopolization,
Speaker 1: but I haven't really thought and of course the easy
Speaker 1: flowing money go is into that as well. Letting these
Speaker 1: big companies running running massive losses, right Like, Uh, that's
Speaker 1: one reason why I think like Warren Buffetts maybe kind
Speaker 1: of lost it because he's still looking for that value investor.
Speaker 1: But today companies aren't about making money. They're just about
Speaker 1: growing um. And that's the thing, you know, if the
Speaker 1: FED and its current policies and people people people think
Speaker 1: that zombie corporations are something new. You know, prior to
Speaker 1: the pandemic, four of companies in America were zombie corporations.
Speaker 1: So the FED has been fostering keeping deadwood alive, keeping
Speaker 1: non productive entities in the in the economy. The fetes
Speaker 1: had a great track record of doing that for years.
Speaker 1: Post COVID, it's popped up to of companies because the
Speaker 1: Fed's been so aggressive at keeping companies that should go
Speaker 1: out of business alive by putting more debt on their
Speaker 1: balance sheet. Yet, but there's something beyond the zombie uh,
Speaker 1: the danger of creating all these zombies and the fact
Speaker 1: that it's going to suck productivity out of future growth
Speaker 1: and hold back the ability to create jobs because you're
Speaker 1: keeping companies in the industry when if they came out,
Speaker 1: innovators could enter. But there's there there's something that even
Speaker 1: goes um beyond that when when it comes to zombie corporations,
Speaker 1: and that's that if you pile on so much more
Speaker 1: debt onto these companies, pay attention when you read Chapter
Speaker 1: eleven headlines. Pay attention when you see bankruptcy filings. Today,
Speaker 1: more often than not, you're seeing companies go straight from
Speaker 1: filing to liquidation. And that's the difference that having way
Speaker 1: too much debt sets that you need to file Chapter
Speaker 1: eleven and having so much debt that there's no value
Speaker 1: that you can carve out in the end that saves jobs.
Speaker 1: And that is what this current generation, this last iteration
Speaker 1: of the Feds hurah is doing. Yeah, So just to
Speaker 1: dig into that just for a second. So typically you
Speaker 1: would file see a company file for Chapter eleven, which
Speaker 1: would give them protection to reorganize. But you're saying they're
Speaker 1: not bothering, they're just going straight to liquidation because there's
Speaker 1: just no hope. There's no hope, and because there's so
Speaker 1: much more debt than there would have been otherwise had
Speaker 1: the junk bond market not been kept wide open by
Speaker 1: the FED to keep them alive when they otherwise would
Speaker 1: have had to restructure. The more pot the more debt
Speaker 1: you pile on, the less value you can extract in
Speaker 1: the end. Yeah, and that's been my argument creditors. Yeah,
Speaker 1: that's been my argument, you know, with with this whole
Speaker 1: you know, just picking out Airlines for example, which I
Speaker 1: know you have used on the airlines, but you know,
Speaker 1: everyone's like, oh, we can't let them go bankrupt. And
Speaker 1: it's like, well, we you know, we need to protect
Speaker 1: the jobs and this and that, and it's like, well,
Speaker 1: just because they go bankrupt doesn't mean the jobs go away.
Speaker 1: They just get re orged, right, and they get rid
Speaker 1: of the debt and now they're a lean, mean company
Speaker 1: that can grow again. But instead you're saddling them with
Speaker 1: more debt. That's not like a good thing. But like
Speaker 1: I mean, American Airlines had in one press release that
Speaker 1: they were going to be issuing one to trillion dollars
Speaker 1: of debt and oh, By the way, on September thirty,
Speaker 1: when the bailout expiration ends, they're gonna be upping their
Speaker 1: layoffs from twenty five thousand people. Who puts that in
Speaker 1: the same press release. Yeah, the nerve of these people
Speaker 1: so um. It seems like, you know, I'm not the
Speaker 1: brightest guy. I didn't. I don't have your pedigree, but
Speaker 1: it just seems like so obvious to me. And I
Speaker 1: see comments. I mean I see five ten comments a
Speaker 1: week on my videos, and it seems like people get this. Um.
Speaker 1: Would you say that the FED policy to do this
Speaker 1: is they're completely just missing the picture, or they know
Speaker 1: what they're doing, but they're doing it anyway. I think
Speaker 1: it's the ladder. I think that I think that that J.
Speaker 1: Powell has seen the whites of the eyes of how
Speaker 1: big of a monster this credit is, and he's scared. Um.
Speaker 1: You know, I tell this story all the time. General
Speaker 1: Electric debt was downgraded Halloween two thousand and eighteen, fourteen
Speaker 1: days later junk bond issue and shut down in the
Speaker 1: United States for forty one days. The collateral backing exchange
Speaker 1: traded bond funds was trading by appointment only, and there
Speaker 1: was a huge liquidity issue, and there was the risk
Speaker 1: that that systemic risk was going to be unleashed. And
Speaker 1: that was what brought out the Powell pivot, when he
Speaker 1: realized that so much debt has been created that this
Speaker 1: this is possibly worse than the subprime crisis would be.
Speaker 1: Because in the aftermath of the subprime crisis, everybody decided
Speaker 1: that quantitative easing was the way to go. Everybody was
Speaker 1: lower for longer, whether it became a global phenomena, and
Speaker 1: now you have pushing three trillion dollars of debt worldwide
Speaker 1: and a beast that central bankers simply don't feel like
Speaker 1: they contain. Yeah, I really want to dig into that
Speaker 1: three hundred trillion dollar debt balloon that constantly has this
Speaker 1: big hole in it. But before we do, I just
Speaker 1: want to jump back into the FED policy a little bit.
Speaker 1: So recently UM FED FED chair Jerome Powell came out
Speaker 1: and said that he he did not believe the FED
Speaker 1: policy created inequality, and my right, I mean he said that,
Speaker 1: And then and then we have Senator Elizabeth Warren introduced
Speaker 1: a bill with a few other people UM, a bill
Speaker 1: to specifically have the FED fight inequality. So currently, a
Speaker 1: FED policy should be to maintain stable inflation and maximize employment.
Speaker 1: But apparently it's not good enough. Now. Now the Fed's
Speaker 1: going to fight the inequality that they create. Um, the
Speaker 1: deference to Senator Warren, I couldn't think of a worst
Speaker 1: way of trying to approach the issue of incomm inequality.
Speaker 1: If you want to stop the FED from from widening
Speaker 1: the income inequality divide, then just tell them to quit
Speaker 1: supporting Wall Street in you know, with Main with Main
Speaker 1: Street as the loser curio. Yeah, okay, yeah, I just
Speaker 1: hand again Like I said, it's like, it's just seems
Speaker 1: so obvious to me. And in the comments that I see,
Speaker 1: UM to see Senators Maxine Waters and whatever going behind this.
Speaker 1: I I guess it goes back to that previous question
Speaker 1: do they not know? And maybe Acine Waters and Elizabeth
Speaker 1: Warren don't. I would venture to say that Elizabeth Warren
Speaker 1: completely understands what the FETE is doing, and that in
Speaker 1: a post COVID world, you know, because of the programs
Speaker 1: that that the FETE is laid out, that that and
Speaker 1: and this is her thing. She didn't like the big banks,
Speaker 1: and yet when the FED prize opened the credit markets
Speaker 1: and all these companies are rushing to do record levels
Speaker 1: of bond issuance. Sorry, but that is a great pop
Speaker 1: to the revenue line of these biggest banks. And that
Speaker 1: is what this policy, this post pandemic policy, has done,
Speaker 1: along with quantitative easing. I mean, somebody's got to sell
Speaker 1: the bond, sell the bonds to the fet somebody's gonna
Speaker 1: make money on that. Somebody's gonna help these these companies
Speaker 1: issue record levels of debt. They're gonna make big fat
Speaker 1: investment banking fees on that. We wonder with all these
Speaker 1: credit lost provisions, why the banks aren't doing worse. Well,
Speaker 1: it's because the ft is effectively subsidizing them with policy.
Speaker 1: That's what Elizabeth Warren should be concerned with, right, Yeah,
Speaker 1: So yeah, it just seems so obvious that they're missing it.
Speaker 1: So it seems like they have to know and and
Speaker 1: intentionally be doing that. I know you've talked to quite
Speaker 1: a bit of good, good politics, good optics, all that
Speaker 1: good b s. Yeah. Um, yeah, I mean it's apparent, well,
Speaker 1: it seems apparent that they're really trying to help out
Speaker 1: the buddies, right and not not main street Joe. But um,
Speaker 1: I've seen you know, you've talked quite a bit about
Speaker 1: the pandemic, and you just mentioned it as well. I
Speaker 1: don't want to dig into, uh, the pandemic per se,
Speaker 1: but but the economy post pandemic or or during pandemic
Speaker 1: or post pandemic, and um, what's your view. I know
Speaker 1: we seem to have a V shaped recovery in the markets,
Speaker 1: but the economy ain't have a no vcaped recovery, right, Uh.
Speaker 1: I've seen you recently say maybe a W maybe it's
Speaker 1: an L. I don't know. But what do you see
Speaker 1: about the economy kind of moving forward in this post
Speaker 1: pandemic world? Well, I think that uh, And and I
Speaker 1: don't mind being a little bit controversial about this. I
Speaker 1: think had we had a uniform national mask policy, that
Speaker 1: we the economy will be in a lot better place.
Speaker 1: It was finally forced on the state of Texas where
Speaker 1: I live, and lo and behold, we've got the hospitalization
Speaker 1: right down. Smaller businesses or reopening, people feel safe for
Speaker 1: going out. It makes a huge difference. And the fact
Speaker 1: that we had a patchwork approach meant that the biggest
Speaker 1: spenders in the economy were too frightened to come out
Speaker 1: of their house. And that's just flat out gallop polling,
Speaker 1: non biased polling. So well, they weren't just scared to
Speaker 1: come out of their house. I live in California and
Speaker 1: we were mandated. I mean the businesses were forced to
Speaker 1: shut down. It wasn't a matter of being scared business well, no,
Speaker 1: I'm talking about states that reopened and when businesses were
Speaker 1: wide open and come on in. There was there was
Speaker 1: there was two little follow through economically speaking. Something was missing.
Speaker 1: And the something that was missing was that the people
Speaker 1: who have the most money to spend still weren't coming
Speaker 1: out of their houses because there was no policy mandating
Speaker 1: that that you wear a mask. I just the thing
Speaker 1: that gets me about masks the most is that it
Speaker 1: has nothing to do with science. It has to do
Speaker 1: with economics and the top of earners in America, the
Speaker 1: top two quintiles of earners account for sixty one of consumption.
Speaker 1: If you're not going to convince them to come out,
Speaker 1: you're dead in the water with trying to reopen an economy.
Speaker 1: It's just not gonna happen. And lo and behold, it
Speaker 1: didn't happen. And when you look at spending by zip codes,
Speaker 1: the highest income zip codes have had the highest degree
Speaker 1: of small businesses closing, and that's a shame because again,
Speaker 1: had they felt safe going out, maybe their dry cleaner
Speaker 1: wouldn't be out of business, maybe the restaurant down at
Speaker 1: the corner wouldn't be out of business. But nobody had
Speaker 1: any continuity. I mean, Angela Merkel don't. I don't agree
Speaker 1: with all of her policies, but she was like, fine, fine,
Speaker 1: literally you you were fined and Germany opened back up.
Speaker 1: So I think that the to answer your question, the
Speaker 1: long term damage to the economy because so many small
Speaker 1: businesses have been sacrificed because we haven't had strong leadership.
Speaker 1: It's going to stay with us for a generation. You
Speaker 1: can't bring back small businesses overnight. So this is actually
Speaker 1: going to increase the divide between the oligopolies and the
Speaker 1: monopolies and the biggest companies and the smallest companies. And
Speaker 1: it was a policy error that occurred in Washington, d C.
Speaker 1: And it's a shame. Yeah, you know, I know, as
Speaker 1: you said, it's controversial, and a lot of times talking
Speaker 1: about politics is because there's opinion in there. But you
Speaker 1: can't understand finance without talking about politics because they're so intertwined. Right,
Speaker 1: So I get that I'm curious though, because it seems like, um,
Speaker 1: we've seen the middle class be hollowed out in the
Speaker 1: United States and and and through policy after policy after policy,
Speaker 1: whatever you wanna call it. That a combination of as
Speaker 1: we've as you've already said, right, indexing and giving free
Speaker 1: money away and uh, you know, chrony capitalism, regulations, outsourcing,
Speaker 1: all those things. But it almost seems to me, again
Speaker 1: if you would look at it from politically, like there
Speaker 1: is a reason why they want the middle class hollowed out,
Speaker 1: and this almost seemed like a continuation of that, because
Speaker 1: it's it's the mom and pops. I can't go to
Speaker 1: my local store, but I can go to Walmart. I
Speaker 1: can't go to my local hardware store, but I can
Speaker 1: go to home depot. Like it's like purposely targeting the
Speaker 1: middle class. Almost it is. And and again, had there
Speaker 1: been a cohesive leadership structure that said we're going to
Speaker 1: open up all businesses and we're gonna open up all
Speaker 1: businesses safely, then you wouldn't have seen such destruction in
Speaker 1: the small business sector. Had the paycheck Protection program not
Speaker 1: just been for W two employees, had there been ten
Speaker 1: that were able to be included. Had they accounted for
Speaker 1: the fact that if you're a restaurant and you're being
Speaker 1: told that you can only reopen with twenty five or
Speaker 1: fifty percent capacity, you might want to bend the rules
Speaker 1: someway somehow to allow the small business to stay both
Speaker 1: in compliance with regulations in terms of social distancing and
Speaker 1: not have them lose the loan ability because they're not
Speaker 1: covering seventy of the loan proceeds with employment when you're
Speaker 1: not allowing them to employ their employees. So Washington, in
Speaker 1: my opinion, has completely failed the middle class yet again.
Speaker 1: And at the same time, they've you know, they've effectively
Speaker 1: introduced socialism into the U. S. Economy with the stimulus Bill,
Speaker 1: and now that now that workers in the economy have
Speaker 1: gotten a flavor for what twenty four extra hundred dollars
Speaker 1: a month, feels like they're like, I like this universal
Speaker 1: basic income, Let's get some more of it. So it's
Speaker 1: a dangerous path we've gone down to have signed in
Speaker 1: legislation without really thinking about it, legislation that helped people
Speaker 1: not work, and legislation that put hard working small businesses
Speaker 1: out of business. Yeah, So, um, I agree with what
Speaker 1: you're saying, I mean you're talking about multigenerations or a
Speaker 1: decade to come back. I think maybe multigenerations because we've
Speaker 1: seen like restaurant chains that have been passed down through
Speaker 1: multigenerations are gone now. Um, and so a lot of
Speaker 1: that that's not coming back at all. And also like, uh,
Speaker 1: you know, um, I I grew up racing dirt bikes,
Speaker 1: super dangerous. I've metal in every limb of my body. Uh,
Speaker 1: it's one of the three boys. I'm happy they didn't
Speaker 1: take that up, even though one of them flies planes. Anyways, Yeah,
Speaker 1: I mean it's one That's one thing that's helped me
Speaker 1: with investing because I'm not afraid of the risk. But
Speaker 1: it's also I've made a lot of money, I've lost
Speaker 1: a lot of money. But my point is is my
Speaker 1: doctor would always tell me stay off of it. So
Speaker 1: I go there, I'm like, hey, doc, you know my
Speaker 1: ankle gun herds all stay off of it. But like, hey,
Speaker 1: I gotta go to work. I can't just stay off
Speaker 1: of it. So I thank thank you for your opinion.
Speaker 1: But I understand there's a bigger picture that I have
Speaker 1: to look at. I can't just look at the medical
Speaker 1: and we it kind of look at the medical but
Speaker 1: we didn't take in all the other ramifications of that, right,
Speaker 1: And so like you're talking about business shutdown, Well that
Speaker 1: changes the trajectory of of of multigenerations. And even today,
Speaker 1: right kids can't go back to school, parents are quitting
Speaker 1: their job. You take two or three years off in
Speaker 1: the middle of your career, you're not getting back onto
Speaker 1: that same trajectory you're on, and then your kids aren't
Speaker 1: going to be on the same trajectory. Right right, It
Speaker 1: trickles down and it's a real crying, dying shame. It truly,
Speaker 1: truly is. Again, I there was a way to safely
Speaker 1: reopen the economy. If you look at certain countries in
Speaker 1: Asia that have been scarred by prior pandemics, they never
Speaker 1: shut down the restaurants just said, oh god, look at
Speaker 1: another pandemic. They got rid of half the restaurants. Excuse
Speaker 1: that they go at a half the tables inside the restaurant,
Speaker 1: they just put them in the back. They socially distanced,
Speaker 1: they put their masks on. They did not close their
Speaker 1: economies down, and they haven't had this massive loss to
Speaker 1: their small business economies that we have. But yet nobody
Speaker 1: in in a leadership position. And I'm not talking about
Speaker 1: I'm talking about both sides of the aisle. Nobody was
Speaker 1: strong enough to say, you know what, let's be humble
Speaker 1: about this. We're not a country that's accustomed to pandemics.
Speaker 1: But let's look at countries whose economies are not being
Speaker 1: devastated by a pandemic and maybe emulate what they're doing.
Speaker 1: It wasn't there wasn't any logic to it. Sure, Yeah,
Speaker 1: well no, no doubt, no doubt that it could have
Speaker 1: been done better. And and the sad thing is is
Speaker 1: continuing to be done bad. Um, So we'll see, we'll
Speaker 1: see how that that goes on. But um, jumping back
Speaker 1: into the FED stuff, because I got my FED insiders,
Speaker 1: I want to ask you questions there. Um. So you know,
Speaker 1: they're constantly saying they have this target of two percent
Speaker 1: inflation and I and I and I heard you mentioned
Speaker 1: I think it was on David's podcast. You know the CPI,
Speaker 1: which is the consumer price index what they measure, and
Speaker 1: it seems to me that you know, over time they
Speaker 1: continually change what they're looking at to get the c
Speaker 1: p I. Um, and supposedly they can't get any inflation
Speaker 1: but yet main street knows that. I mean, for sure,
Speaker 1: healthcare education have gone up big time. For sure, we
Speaker 1: know that home prices have gone up, and even my
Speaker 1: milk and my steak have gone up and like big time.
Speaker 1: So what the heck are they looking at for CPU?
Speaker 1: They're they're not looking at. What part of the Fed's
Speaker 1: problem is is very basic. They try and smooth everything out. Well,
Speaker 1: we don't live in a smooth world. But they try
Speaker 1: and smooth inflation out by removing inflated by removing food
Speaker 1: and energy costs. Sorry, but those are pretty important to
Speaker 1: most families. I mean, when I've got all four kids
Speaker 1: in the house, we drink a gallon of milk a day,
Speaker 1: I can tell you exactly fifty nine down at the
Speaker 1: store for the gallon period, and it was three a
Speaker 1: few months ago. So I mean, but the FED excludes
Speaker 1: things so that they can keep things that they can
Speaker 1: smooth out their models. In addition to that, the FED
Speaker 1: does not use the CPI. The FED uses pc which
Speaker 1: is an alternative measure of inflation, which uses my biggest
Speaker 1: pet PEEVE, which uses Medicare and Medicaid reimbursement rates for
Speaker 1: the input for health care inflation. I can tell you
Speaker 1: that that's not what I pay for healthcare at all,
Speaker 1: that my premiums have gone up, that my codepas have
Speaker 1: gone up, and that's the largest The second are just
Speaker 1: input to inflation. The largest input to inflation is housing,
Speaker 1: and they impute inflation some way, somehow that has again
Speaker 1: zipped to do with what you're actually spending in the
Speaker 1: real market. So by understating inflation, which is infuriating, they
Speaker 1: can hide behind that target and say, as long as
Speaker 1: it's below two percent, we can keep the printing press going.
Speaker 1: I've seen them say recently. Uh it was one of
Speaker 1: the smaller FED Bank chairs. I forget which one, but
Speaker 1: he said they're gonna, quote let it run hot, right,
Speaker 1: so like they're gonna go instead of like tapering down
Speaker 1: as they're getting close to target. He says, they're gonna
Speaker 1: run out hot to two percent, which means they're gonna
Speaker 1: wagh overshoot their goal, which if they're looking at over
Speaker 1: shooting two percent, what the heck does that mean for us? Right? Well, look,
Speaker 1: they haven't been able to hit their target in the
Speaker 1: first place. They haven't been able to hit the two
Speaker 1: percent target in the first place, because they know that
Speaker 1: they have a manipulated metrics. So for them to say
Speaker 1: that they're gonna let inflation run hot is simply code
Speaker 1: word for saying we're never going to stop printing money,
Speaker 1: that if it does creep above two percent by some
Speaker 1: miracle with oh, I don't know, all these people losing
Speaker 1: their jobs, companies losing pricing power, disinflationary pressures building up
Speaker 1: in the background, but somehow they're gonna let inflation run hot.
Speaker 1: I mean, it's it's if these people live in a
Speaker 1: different planet, right, But they need the inflation. They want
Speaker 1: the inflation, right, I mean, I mean they, I mean
Speaker 1: they not not we, but they need the inflation, uh,
Speaker 1: in order to keep alive. It almost seems like the
Speaker 1: minute they stop printing, the whole system collapses, right, And
Speaker 1: they have now so much debt they have to continue
Speaker 1: to inflate it away. Is that correct? They want inflation
Speaker 1: to inflate away the debt. But at the same time,
Speaker 1: if they truly had higher interest rates, this whole house
Speaker 1: of debt cards would come just it would implode under
Speaker 1: the weight of whether you're talking about households debt service
Speaker 1: or corporation's debt services. Inability to refinanceer. For God's sake, uncle,
Speaker 1: say what the interest expense of the country would be
Speaker 1: if we truly had normalized interest rates? As you think
Speaker 1: about it, inflations is actually the fed's worst damn nightmare.
Speaker 1: But again, when you purposely understate it, then you can
Speaker 1: hide behind it and ignore asset price inflation and ignore
Speaker 1: food price inflation and just keep the game going. Right.
Speaker 1: But I saw you mentioned before to that you know
Speaker 1: by doing this, the FED has basically destroyed price discovery.
Speaker 1: Now do you see that as only destroying price discovery
Speaker 1: in the financial sector or like money or price price
Speaker 1: discovery across everything. No, I was really referring more to
Speaker 1: stocks and bonds, and but but those are those are
Speaker 1: critical cogs in the system. I mean there was before
Speaker 1: the FED stepped in and intervened in the investment grade
Speaker 1: bond market and even in the junk bond market. As
Speaker 1: as a trader, you know, you knew that you the
Speaker 1: value that you were getting, you could assess what an
Speaker 1: investment should be. Every time a price agnostic buyer enters
Speaker 1: a market, your price discovery shot to hell. Yeah, I mean,
Speaker 1: if you want to extrapolate that to the real world,
Speaker 1: private equity backed investors swarmed into certain inland Empire Phoenix
Speaker 1: that they went into certain markets in America and bought
Speaker 1: up prices without even without even inspecting the homes and
Speaker 1: lo and behold today we have home prices that are
Speaker 1: too high. And they started this cult of investing in homes.
Speaker 1: And that is something that I also leave at the
Speaker 1: foot of the Fed because if money is so cheap
Speaker 1: for so long, investors are going to find new and
Speaker 1: exciting in different ways to come in and destroy price
Speaker 1: discovery in real markets that affect households as well. Yeah,
Speaker 1: you know, I've definitely been influenced big time in the
Speaker 1: Austrian school of thought, right, a lot of the mesas
Speaker 1: stuff and whatnot, and a lot of f high I can.
Speaker 1: You know they talk about like money is communication and
Speaker 1: I kind of believe that, you know, central planning fails,
Speaker 1: and so how do you organize million people? And so
Speaker 1: through money? Money is communication is price discovery. So how
Speaker 1: do I know I need to order new supplies? How
Speaker 1: do I know I need to raise the price of
Speaker 1: my my thing? Right? Well, the market can organize all
Speaker 1: those people when there's prices, when there's price in there.
Speaker 1: But when money is distorted, then nobody knows what the
Speaker 1: heck to do? Do you see that? And and that
Speaker 1: is that that is also the case when it comes
Speaker 1: to uh companies, the ease with which companies can can
Speaker 1: access borrowing as well, and so they end up taking
Speaker 1: on more death than they should because they think that
Speaker 1: there and then all of a sudden, when you have
Speaker 1: a recession, come along, poof, they're gone. So uh No,
Speaker 1: the ability to run businesses at the most at the
Speaker 1: most fundamental level, to your point, uh is, depends critically
Speaker 1: on true price discovery, which is why when when you
Speaker 1: look at socialism UH and you look at the problems
Speaker 1: it has when they have everything controlled by the government,
Speaker 1: you lose all of that and then you end up
Speaker 1: with massive shortages. They don't have enough parts to fix
Speaker 1: their car, they don't have enough food to eat, right,
Speaker 1: And it's all because it's been completely captured and controlled.
Speaker 1: Ye I lived in Venezuela. I live in Venezuela before
Speaker 1: socialism came about. So i'm i'm I'm a big study
Speaker 1: of that. And I nothing scares me anymore than the
Speaker 1: armies of modern monetary theorists to think that that we
Speaker 1: can just print away as much as we want to
Speaker 1: give everybody everything they need in a pony and no,
Speaker 1: it's it's it's a very slippery slope. But again, I
Speaker 1: don't think there's enough of a recognition of the fact
Speaker 1: that we've taken a step in that direction with the
Speaker 1: magnitude of the stimulus bill. If you look at the
Speaker 1: past um six recessions, Yes, if you look at the
Speaker 1: past six recessions going back to disposable personal income adjusted
Speaker 1: for inflation and declined by o point five percent during
Speaker 1: those recessions, real disposable income inflation adjusted disposable income in
Speaker 1: this country has risen by in the current procession on
Speaker 1: an annualized rate because we've given away so much. But again,
Speaker 1: we've taken we've taken socialism for a test drive. And
Speaker 1: my greatest concern is that they're going to be there's
Speaker 1: gonna be enough critical mass to keep it going, because
Speaker 1: we have to remember this was signed into law with
Speaker 1: a Republican in office. See what they wanted? One tint
Speaker 1: inswer three. But yeah, um, but but I'm you know,
Speaker 1: the one thing that I kind of look at and
Speaker 1: of course, I mean I see the same thing and
Speaker 1: like Bernie Sanders, the first guy running on an open
Speaker 1: socialist platform. But I don't look at it as like
Speaker 1: a defining moment. We were capitalism and now we're socialist. Right,
Speaker 1: It's always like a blend and so it's like we're
Speaker 1: part socialist, we're part capitalist. And and people point to
Speaker 1: you know, uh, the you know, some of the Nordic
Speaker 1: countries and say this is the same thing. But everyone's
Speaker 1: kind of like a blend um and it seems like maybe,
Speaker 1: and you can speak to this because you've been there,
Speaker 1: but maybe Venezuela was way more socialist. China had started
Speaker 1: to become a little more capitalist, right that we've seen that.
Speaker 1: But like you talk about like the money going out,
Speaker 1: the stimulus whatnot. But we already have welfare in California.
Speaker 1: If you were to before pre pandemic a year ago,
Speaker 1: if you were to collect all the unemployed, all the
Speaker 1: welfare benefits that are available to you, I think it's
Speaker 1: like almost forty thousand a year. Why it was the
Speaker 1: highest state in the nation. I think it was like
Speaker 1: sixty thousand a year, and that's no taxes. So like
Speaker 1: we're already kind of had a socialist nation. I would say, right,
Speaker 1: we uh, you know, I like to say that the
Speaker 1: past ten fifteen years, because of FED policy, because of
Speaker 1: interest rates at or close to the zero bound, that
Speaker 1: we've had the stealthiest expansion of the social safety nets
Speaker 1: since f DR was in office. People just haven't paid
Speaker 1: attention to it. And again, borrowing costs at artificially low
Speaker 1: levels bring about all manner of sins and we've seen them.
Speaker 1: We're more aware of them today. But this has been
Speaker 1: going on for a very long time. Yeah, now, UM,
Speaker 1: I know we're I want to start wrapping it up here,
Speaker 1: but for everyone who's still listening, I am going to
Speaker 1: We're gonna dig into the inflation versus deflation debate or
Speaker 1: not debate with the conversation, But before we get into
Speaker 1: that and where this endgame is. But before we get
Speaker 1: into that, UM, talking about deflation, you had mentioned how, um,
Speaker 1: you know, how technology has improved things and now with
Speaker 1: post pandemic people working from home streamlining things like that, UM,
Speaker 1: technology has it is and should be deflationary, right, Uh,
Speaker 1: we make things easier and it's deflationary. And for me
Speaker 1: it seems like deflation is a really good thing, Like
Speaker 1: do I want my dollars to buy more things in
Speaker 1: the future? Or less. Right. Uh, the Kenzian system has
Speaker 1: taught people that we need inflation. What do you where
Speaker 1: do you sit on that? Do we need inflation or
Speaker 1: is deflation good? H Well, we don't need deflation in
Speaker 1: our earnings, that's for sure and that. But but if
Speaker 1: if they purchased more, it's always purchasing power, right, purchasing power. Yes.
Speaker 1: But but but you're talking about utopia. You're talking about
Speaker 1: people with no debt. So that's the always the argument, right, Well,
Speaker 1: we need inflation because of debt. Well what if we didn't,
Speaker 1: What if we weren't a debt addicted world, if we
Speaker 1: weren't a debt addicted world, then we wouldn't care about
Speaker 1: deflation at all. I mean, that's that is utopia. I mean,
Speaker 1: you know, I personally, I had a mortgage for a
Speaker 1: while and I you know, I lost sleep every single
Speaker 1: night until the mortgage finally went away. Uh. But not
Speaker 1: a lot of people think like me. And we are
Speaker 1: a debt our nation and we have ingrained into society
Speaker 1: the idea of borrowing and living beyond your meat. This
Speaker 1: is one of the things that has to be expunged.
Speaker 1: Or are you our fate is a nation is is
Speaker 1: at risk. Yeah. So having lived in Venezuela and and
Speaker 1: seeing that kind of firsthand, Um, where do you see
Speaker 1: us on that scale? Do you think there's hope? Well, now,
Speaker 1: I was in Venezuela the summer before Chaves came on
Speaker 1: and really socialism started to get going. And I will
Speaker 1: tell you that, Um, and again capitalist total conservative right
Speaker 1: here completely, But I will tell you that the level
Speaker 1: of poverty that I witnessed and the level of homelessness,
Speaker 1: and you know, but the time I I spent a
Speaker 1: few months living there, I left. You know, this is
Speaker 1: prior to all of the knowledge that I have today
Speaker 1: about economics. But just as somebody observing what was going on,
Speaker 1: I knew that the environment was right for somebody to
Speaker 1: come up and try and help the people. And if
Speaker 1: you if there's enough suppression that goes on, then you
Speaker 1: end up with a big enough ground swell to bring
Speaker 1: about a change in an economy where it's not the
Speaker 1: balance that you describe, but something that swings too far
Speaker 1: to left. You certainly don't want that. But and again
Speaker 1: that is why I think it's so critical that education
Speaker 1: reform and reforming the FED be pursued, because ultimately the
Speaker 1: country pays the price if you allow the income inequality
Speaker 1: divide to get completely out of hand, and there is
Speaker 1: concern for that right now. There is talk of mass
Speaker 1: homelessness in our future. There already is mass homeless in California. Man,
Speaker 1: you live in California. Last time I was in Los Angeles,
Speaker 1: I was, I was. I mean, it's my children were,
Speaker 1: They've never seen anything like that. But when when you're
Speaker 1: talking about a world a decade in which FED policy
Speaker 1: made it for every real estate developer. The only way
Speaker 1: that they could make the math work in a zero
Speaker 1: interest rate environment was to build luxury units. So now
Speaker 1: we've got a bunch of high rises and beautiful condos
Speaker 1: that nobody can afford. And the only the only thing
Speaker 1: that home builders built for a decade where luxury homes.
Speaker 1: So there's there's a there's an argument to be made
Speaker 1: for the FED having made housing out of reach. You
Speaker 1: don't want to be working in a in a hospital
Speaker 1: downtown or in a hotel downtown and have a two
Speaker 1: hour commute and you know you can't find an apartment
Speaker 1: that's a reasonable rent. So again, this is not how
Speaker 1: economies should work. But when you artificially repress interest rates.
Speaker 1: It's exactly what's happening. Yeah, And I've I've made the argument.
Speaker 1: I think it's maybe a pen tweet on my on
Speaker 1: my Twitter threat is uh, you know, real economies make
Speaker 1: real things, and we've financialized the economy. So that's hard.
Speaker 1: That's hard. Big thing is like finance, and everything's gotten
Speaker 1: during the real estate boom, what were we doing? I mean,
Speaker 1: what was productive about building all those homes and all
Speaker 1: those mansions. I mean, we we we came out on
Speaker 1: the other end of it. There was those homes because
Speaker 1: because the price signal was wrong the first the price
Speaker 1: signal was wrong because because Alan Greenspan interest rates too
Speaker 1: low for too long, and subprime mortgage went through the
Speaker 1: roof right in your backyard, New Century country wide, and
Speaker 1: all those names probably ring about oh yeah, oh yeah.
Speaker 1: I I got caught up in that, and unfortunately it
Speaker 1: didn't end good for me as well. And that's that's
Speaker 1: part of the reason why I really dug into gold
Speaker 1: and learned about hard sound money and found Mike Maloney
Speaker 1: and Ron Paul and I started chanting in the Fed
Speaker 1: with him, and uh, here I am a dozen years later. Um.
Speaker 1: But getting back into that, UM, I would just say
Speaker 1: one comment. I didn't have this on my list of things,
Speaker 1: but you know, I'm I'm forty five, so I'm like
Speaker 1: old enough to have kind of grown up to like
Speaker 1: be fearful of the USSR. And I remember thinking like
Speaker 1: communist Russia, like they tell you what you can do
Speaker 1: for work and what you can't do. And I remember
Speaker 1: as a kid, like people like coming from Cuba and
Speaker 1: like risking their life, and I was thinking, like, oh,
Speaker 1: they're swimming in shark infested water to like escape, you know.
Speaker 1: And I remember the Berlin Wall, and I remember these
Speaker 1: thoughts as a kid, like what if I was like
Speaker 1: at my friend's house and then I woke up in
Speaker 1: the morning and the fence was up and I couldn't
Speaker 1: get back, And like, um, we have all these examples,
Speaker 1: and we have real life examples in Venezuela. Right, Um,
Speaker 1: why do people still think it's a good idea? Uh? Well,
Speaker 1: it's it's an easy way of thinking. It is. It's
Speaker 1: it's the easy way out. And on top of that,
Speaker 1: you've had a lot of corruption in public education in
Speaker 1: America such that you have generations of people who feel
Speaker 1: like they're stuck in this loop and they can't escape poverty,
Speaker 1: and in many cases you can't. I mean, I've I've
Speaker 1: actually written uh some ideas down I've published some papers
Speaker 1: about education reform. And you know, if you want to
Speaker 1: spend taxpayer dollars on something, then make sure a working
Speaker 1: mom has has childcare coverage in the first few months
Speaker 1: of a child's life so that she can rejoin the workforce.
Speaker 1: Don't make it so prohiberitly expensive that she has to
Speaker 1: drop out and go on welfare, because then she's going
Speaker 1: to be stuck in a loop and her kid's going
Speaker 1: to be stuck in the same loop. And there there's
Speaker 1: make it to where people can work, and that is
Speaker 1: what you need to do, I think, to ensure that
Speaker 1: because working parents teach their kids to get educated. Parents
Speaker 1: who don't work don't and that is part of the problem.
Speaker 1: Is it comes down to the parents, and that is
Speaker 1: part of where financial illiteracy is so rife in this
Speaker 1: in this country. Yeah, that so that we can have
Speaker 1: a whole show on that, and I don't I don't
Speaker 1: really want to jump into that, but but you're absolutely right.
Speaker 1: It's always about education. Our food that we eat, our
Speaker 1: medicine that we take, everything always boils down to education.
Speaker 1: And I think the system has uh intentionally we know this, right,
Speaker 1: we know it's been taken over, and it's intentionally created
Speaker 1: a bunch of victims, like, Hey, you can't get ahead
Speaker 1: because you're poor, you can't get head because you're black,
Speaker 1: you can't get ahold head because you're a woman. And
Speaker 1: now when when you when you become a victim, then
Speaker 1: you're looking for a savior instead of empowering people. Right,
Speaker 1: And so I mean just that little minor shift, and
Speaker 1: I and I just had this thought that's like analogy,
Speaker 1: and it's like, uh, right, if the state is going
Speaker 1: to keep us safe from every virus and every sickness
Speaker 1: and every poorness and every all these things, were like, shoot,
Speaker 1: just put me in a cage and give me a
Speaker 1: steak once a day, and like I'm good, right, like
Speaker 1: a lion. I guess, like I won't roam the planes
Speaker 1: because that's a hard life on the planes. Sometimes I
Speaker 1: don't eat. I have other animals and hunters that try
Speaker 1: to kill me. So put me in a cage and
Speaker 1: give me a steak every day and keep me safe.
Speaker 1: Like and that's kind of like where people are at right, Uh, Anyway,
Speaker 1: that's a whole another conversation. But let's jump back into this.
Speaker 1: So I know we're gonna wrap it up here. So UM,
Speaker 1: I know that you're really bullish on gold. You've talked
Speaker 1: about that, UM and right now, right now, we've got
Speaker 1: one too many speculators in the house in my opinion.
Speaker 1: But anyways, Yes, it is a long term hold, one term.
Speaker 1: What do you mean by that, Warren Buffett jumping in. No,
Speaker 1: I don't think he's I don't think he's a speculator.
Speaker 1: I think Warren Bufett jumping in is a reflection on
Speaker 1: the fact that there's nothing of value to buy out
Speaker 1: there right now because prices are so distorted. No, I
Speaker 1: just mean that it feels like there's been a lot
Speaker 1: of hedge funds, a lot of fast money has moved
Speaker 1: into precious metals of late UM. But you're always going
Speaker 1: to have that at certain times in UH in economic cycles. Sure,
Speaker 1: but I would say, you know, you said long it's
Speaker 1: it's a long term hold. Right, So we see, UH
Speaker 1: FED can continue print money. Interest rates are probably going
Speaker 1: to be continue to be held low for a really
Speaker 1: long time. Why hold UH bonds that are going negative
Speaker 1: when I could just go to gold. Right. Um, so
Speaker 1: there's like this, my my long maturity bonds have treated
Speaker 1: me very well. I still have those two, so you're lucky.
Speaker 1: I'm talking about like treasuries, you know what I mean,
Speaker 1: Like treasuries only one percent or half a percent, but
Speaker 1: you know, justin for real inflation or whatever, it's like
Speaker 1: it's it's a negative. Um. What are your thoughts on bitcoin?
Speaker 1: I think bitcoin is is kind of the young hip
Speaker 1: crowd hit hip crowd's gold. I think that it is
Speaker 1: a reflection of the disgust with fiat money and and
Speaker 1: the Fed monetizing the dead. I think bitcoin is I
Speaker 1: literally think it's a modern day equivalent to gold or
Speaker 1: I think that that's how it's perceived. Um. You know,
Speaker 1: from from what little I understand about it, the economics
Speaker 1: of mining for bitcoin or not ideal. And once quantum
Speaker 1: comes about, I think that that could revolutionize how the
Speaker 1: world views cryptos. But at the same time, we already
Speaker 1: know that all major central banks in the world are
Speaker 1: looking at sovereign cryptocurrencies, such that you have to wonder
Speaker 1: if there are crypto sovereign currencies, what the fate would
Speaker 1: be then of something that was not sovereign well, um,
Speaker 1: you know, bitcoin is not cryptos. So bitcoin is a
Speaker 1: decentralized system that's built on proof of work on a
Speaker 1: minor system. Um, so all the other cryptos are centrally controlled,
Speaker 1: and sovereign cryptos will be the same thing, centrally controlled.
Speaker 1: And we know where essentially controlled things go. They become
Speaker 1: manipulated and distorted. A decentralized technology that is not able
Speaker 1: to be manipulated, inflated, distorted, whatever is different. And I
Speaker 1: always think about fa hiak. He said that there will
Speaker 1: never be a sound money again until we take the
Speaker 1: thing out of the hands of the government, and it
Speaker 1: can be done in a forceful way, has to be
Speaker 1: done in a slide round about way. He said that
Speaker 1: like in the eighties and so forth, telling because that's
Speaker 1: kind of where we're at. Um. So, as a bitcoin person,
Speaker 1: we believe that, Um, we want to opt out. We're
Speaker 1: opting out of the system, right, getting our money out
Speaker 1: of the financial system. All right, forget the Fed, forget this, uh,
Speaker 1: this whole thing. We're just gonna take our money. We're
Speaker 1: gonna vote with our money, right, Uh, and we're opting out.
Speaker 1: Gold is a way is opting out as well. Um,
Speaker 1: do you think if enough people opt out with their money,
Speaker 1: it makes a big difference to the fed. Are we
Speaker 1: gonna win that war opting out? Oh? I think if you,
Speaker 1: I mean, if you have enough adoption of anything, then
Speaker 1: it will win. I mean, that's that's a rhetorical question.
Speaker 1: It works as long as everybody agrees to it working. Um. Yeah,
Speaker 1: that's a bigger battle to fight. Yeah. I don't see
Speaker 1: you know, I don't see a government ever saying hey,
Speaker 1: let's just forget the dollar and move to bitcoin. Like.
Speaker 1: Of course not, they're gonna want to control it, manipulate it.
Speaker 1: But it's like the people's money, you know, and and
Speaker 1: again in Venezuela, like and they say, well, you know,
Speaker 1: they have the army, they can force you to use
Speaker 1: their currency. Will know they can't. Like, if people don't
Speaker 1: trust the money, they're not going to use it. I'd
Speaker 1: rather just trade you water for bread. Right. Uh. So
Speaker 1: it's like, hey, you can have the government money over here,
Speaker 1: and we'll have our our own money over here. Maybe,
Speaker 1: but you're talking about kind of the ultimate endgame, right,
Speaker 1: because people in Venezuela who had money, they got it
Speaker 1: out of Venezuela and put it in dollars. Uh. And
Speaker 1: and that's kind of what capital flight has always looked like.
Speaker 1: If you're talking about the end of the dollar, I
Speaker 1: mean these are it's a much bigger discussion. Yeah. Um,
Speaker 1: so we'll we'll tease into that just a little bit.
Speaker 1: And I know we won't. We don't have time. We're
Speaker 1: gonna wrap it up here in a couple minutes. But
Speaker 1: so talk about the endgame. So we're in a situation
Speaker 1: now where we have this massive debt bubble. I don't know,
Speaker 1: three trillion whatever it is, one point to quadrillion derivatives.
Speaker 1: Who knows how big that is? Um, And it's constantly
Speaker 1: trying to deflate, and the FED keeps trying to inflate it. Right,
Speaker 1: and it seems like, uh, each each correction that we've
Speaker 1: had is uh is the market trying to correct and
Speaker 1: the FED just keeps trying to pump it up. Um.
Speaker 1: We're at a point now where I think you said
Speaker 1: earlier like the Fed's kind of between a rock and
Speaker 1: a hard place. They have to continue to print. If
Speaker 1: they quit, it's over. So what does the endgame looks like?
Speaker 1: I'm thinking that they go until they blow, meaning uh,
Speaker 1: it's having diminishing returns. Right, it's already having less and
Speaker 1: less effect. But they have no choice, and they're gonna
Speaker 1: just go and tell it doesn't work anymore. Is that
Speaker 1: what you see? Or what do you think they're gonna
Speaker 1: wake up and be They're gonna wake up and pass
Speaker 1: austerity tomorrow, Like, how does that work? Look? J Powell's
Speaker 1: first eleven months in office, he tried desperately and he
Speaker 1: was serious about it, about shrinking the balance sheet, about
Speaker 1: quantitative tightening, about normalizing interest rates, getting interest rates up
Speaker 1: to higher levels. I mean, he he was our last
Speaker 1: great hope because he had the stones to actually try
Speaker 1: and do it. And he failed and so well he tried, right,
Speaker 1: he tried, but I don't know. He tried his again
Speaker 1: before the credit market instructed him that if he kept
Speaker 1: about the business of tightening it was going to blow
Speaker 1: up to Kingdom come and that he better back off.
Speaker 1: He was really making an effort to take us to
Speaker 1: a better place. And what he learned was that had
Speaker 1: we stopped after the housing crisis, had we not ventured
Speaker 1: off into quantitative easy, had we not gone down that
Speaker 1: rabbit hole, there might have been a way to normalize
Speaker 1: monetary policy but there's not there's not anymore. And in
Speaker 1: theory because again the three trillion dollar figure that we're
Speaker 1: throwing about, that's a global number you have to have
Speaker 1: for the endgame to work, which is a debt jubilee
Speaker 1: theoretically of all sovereign debts. You have to have all
Speaker 1: the countries agreed, and at last check, not all countries
Speaker 1: in the world are our allies. And that is really
Speaker 1: the discussion. I think that brings us to what the
Speaker 1: endgame might or might not look like. And you recall
Speaker 1: from history that every time a reserve currency status has
Speaker 1: been lost, there's been a war involved. And that is
Speaker 1: that is really my greatest fear. It's that we keep
Speaker 1: the money printing going. The genesis of every world war
Speaker 1: and history has always been economical in nature and triggered
Speaker 1: by something debt related. So again, if if the Kumbai
Speaker 1: Yah happy ending is a debt jubilee and all the
Speaker 1: countries in the world are going to agree to expunge
Speaker 1: all of their sovereign debts, wipe the slates clean, forgive everything,
Speaker 1: forget everything, in order for that to work, you have
Speaker 1: to have every single country agree with the United States,
Speaker 1: which I would agree would be almost an impossible task. However,
Speaker 1: after seeing what's happened with COVID, with every country in
Speaker 1: the world locking down all of a sudden, I think
Speaker 1: maybe it could happen. But um, I guess if we
Speaker 1: are the debt you beilie, that's that's a big thing.
Speaker 1: But also like mom and Pop's own treasuries, do they
Speaker 1: want that wiped out as well? No? No, look, there's
Speaker 1: there is nothing. Um it's a there's a good reason
Speaker 1: that debt jubilees are in the Bible. Uh, it's not
Speaker 1: really a feasible modern I mean, you would have to
Speaker 1: have a debt jubilee just for the sovereign, and that
Speaker 1: would be tricky enough given the fact that mom and
Speaker 1: Pops do own treasuries. And again the reason I bring
Speaker 1: up other countries, it's because other countries own a ton
Speaker 1: of treasuries. Again, everybody would have to agree, and you
Speaker 1: still wouldn't be able to have a debt jubilee in
Speaker 1: the private debt markets that could. It's impossible. So I'm
Speaker 1: only talking about one sliver of the pie and not
Speaker 1: talking about household debt and not talking about corporate debt,
Speaker 1: not talking about financial debt. Yeah, yeah, so the sovereigns
Speaker 1: all get off the hook, but we still have all
Speaker 1: the debt. Great, so we're saying there's no elegant out. No, no,
Speaker 1: there's not. All right, So last question, um, and we'll
Speaker 1: wrap it up. So, Um, the question is inflation or deflation.
Speaker 1: So we have this massive debt bubble and it's continually
Speaker 1: trying to deflate. Um, the Feds trying to reinflate. It
Speaker 1: seems like defaulting on a billion dollars is very easy
Speaker 1: and the and the money's gone to put a billion
Speaker 1: dollars back into a lot harder. However, we see you know,
Speaker 1: the Green New Deal, and they want to spend thirty
Speaker 1: to ninety trillion. Where is that going to come from? Whatever?
Speaker 1: So do you think the Fed is able to inflate
Speaker 1: the balloon faster than it's deflating or do we are
Speaker 1: they gonna are they gonna be able to inflate it
Speaker 1: for a while and then lose, or we're gonna go
Speaker 1: into a deflationary period, Like how do you see that
Speaker 1: playing out? Maybe over the next couple of years or whatever.
Speaker 1: So I think right now that the FED is trying
Speaker 1: really really hard to engineer inflation. In fact, the FET
Speaker 1: is trying so hard to engineer inflation that it's it's
Speaker 1: gotten into the business of buying treasury inflation protected securities
Speaker 1: to push up inflation expectations like by force. So they're
Speaker 1: they're trying as hard as they possibly can. However, a
Speaker 1: million new filers of initial claims every week dictates that
Speaker 1: you're going to have deflation eventually take cold if there's
Speaker 1: not some kind of a magnificent economic recovery in the offing,
Speaker 1: which is going to be very difficult to do given
Speaker 1: the fact that debt got us in this situation in
Speaker 1: the first place, and debt by definition is a drag
Speaker 1: on economic activity and a drag on the ability of
Speaker 1: the economy to achieve exit velocity. So I think that
Speaker 1: that deflation can, in the media term, rear its ugly head.
Speaker 1: I see the possibility of their being negative nominal rates
Speaker 1: dictated by the market, as we've seen in France, Germany, Holland, Switzerland,
Speaker 1: the UK. So and that would be very daunting for
Speaker 1: the FED because it would it would obviously reveal that
Speaker 1: they had lost the battle, the inflation deflation battle. So
Speaker 1: but again, you can only take so many people out
Speaker 1: of the workforce which kills pricing power and hold off
Speaker 1: deflation for so long. So which one is it going
Speaker 1: to be? I think we have deflation first, and I
Speaker 1: think if we try and keep printing printing, printing. It
Speaker 1: depends on who's going to be in Washington. If they
Speaker 1: ever change the FED mandate and allow the FED, instead
Speaker 1: of buying treasuries in the secondary market, to actually buy
Speaker 1: treasuries at auctions such that the FED is basically um
Speaker 1: the feds liabilities are legal tender. Then you can flip
Speaker 1: the mother of all inflation switches. Okay, you're as goodbye.
Speaker 1: So you think deflation and then inflation. It depends on
Speaker 1: what Washington does or doesn't do. If somebody draws the
Speaker 1: line and prevents the FED. I mean, opening the Federal
Speaker 1: Reserve Act is a big deal, um so, and it's
Speaker 1: a can of worms. But if if the FED it,
Speaker 1: but look at what they've done with treasury and special
Speaker 1: purpose vehicles and off balance sheet and corporate bonds and
Speaker 1: municipal bonds and junk bonds. So clearly they can expand
Speaker 1: the Fed's footprint if they want. The politicians in Washington,
Speaker 1: let's see what they do next. Yeah, and that's a
Speaker 1: great answer, and we'll wrap it up with that answer.
Speaker 1: And just for everybody listening, you know, nobody has a
Speaker 1: crystal ball. I always say it would be so much
Speaker 1: easier if we did um, and so nobody myself. I
Speaker 1: never give predictions, and obviously Danielle is trying to stay
Speaker 1: away from it as well. And what we do is
Speaker 1: we look at probabilities, right like, hey, this is probably
Speaker 1: it's not a very high probability, but if these things happen,
Speaker 1: then it could, right. And so for everybody listening, just
Speaker 1: try to always think about things in that in that framework,
Speaker 1: and and and pay attention watch for the signs. Uh,
Speaker 1: inflation and deflation are both probable, and then we'll watch
Speaker 1: the signs to know which ones are coming and we'll
Speaker 1: have to react accordingly. Right, you've got you've you've got
Speaker 1: ten of the workforce, depending on what agent, what statistical
Speaker 1: agencies is telling you what the date is out of
Speaker 1: the workforce. I'm sorry, but a monkey could tell you
Speaker 1: that that's disinflationary. Yeah, exactly. Money printing eventually is inflationary.
Speaker 1: And and you're right, you just have to assign odds. Yeah, great, Okay,
Speaker 1: we're gonna wrap it up with that, Daniel, I appreciate
Speaker 1: you so much. Now we went maybe a little bit over,
Speaker 1: so I appreciate that. Um. Now, of course you're all
Speaker 1: over all over the internet with all your interviews, but
Speaker 1: maybe do you want to direct people to where they
Speaker 1: can go follow you for more? Sure of you can
Speaker 1: always follow me at de Martino Booth. I'm the most
Speaker 1: active by far on Twitter. Um, come on over to
Speaker 1: my YouTube channel as well, and if you really want
Speaker 1: a great education in good entertainment every day, then become
Speaker 1: a subscriber at Quill Intelligence. We're happy to have you
Speaker 1: great and I'll link to all that in the show
Speaker 1: description so everybody can go find that. And with that
Speaker 1: we're going to wrap it up. Daniel, thanks so much
Speaker 1: for joining. Thank you. Take care,