1 00:00:00,680 --> 00:00:05,440 Speaker 1: Why the Federal Reserve has no control over the markets. Now, 2 00:00:05,559 --> 00:00:07,640 Speaker 1: I know that's a big statement. We're all waiting on 3 00:00:07,680 --> 00:00:09,880 Speaker 1: every word from the Federal Reserve. Are they going to 4 00:00:09,960 --> 00:00:12,200 Speaker 1: lower rates, are they going to increase rates, will they 5 00:00:12,280 --> 00:00:15,560 Speaker 1: stimulate the markets, or where they continue to hike and 6 00:00:15,640 --> 00:00:19,560 Speaker 1: cause the markets to crash. But today's guest says that 7 00:00:19,600 --> 00:00:22,840 Speaker 1: the Federal Reserve has actually no control over the markets. 8 00:00:23,040 --> 00:00:25,919 Speaker 1: It's completely out of their control. And he's not just nobody, 9 00:00:26,000 --> 00:00:29,000 Speaker 1: he's one of the most respected voices when it comes 10 00:00:29,040 --> 00:00:32,159 Speaker 1: to the US dollar and the bigger problem, which is 11 00:00:32,200 --> 00:00:35,520 Speaker 1: the euro dollar. I'm talking about Jeff Snyder from Your 12 00:00:35,600 --> 00:00:39,120 Speaker 1: Euro Dollar University podcast. He's also with Markets Insider pro 13 00:00:39,240 --> 00:00:43,000 Speaker 1: and Portfolio shield dot net. And we talked about why 14 00:00:43,120 --> 00:00:46,559 Speaker 1: he says the Federal Reserve has no control over the markets, 15 00:00:46,960 --> 00:00:51,720 Speaker 1: why the story of Paul Volker under Reagan hiking interest 16 00:00:51,760 --> 00:00:55,720 Speaker 1: rates to tame inflation is a complete myth, how it 17 00:00:55,760 --> 00:00:57,880 Speaker 1: had nothing to do with that. We're gonna talk about 18 00:00:58,200 --> 00:01:01,800 Speaker 1: the reality of inflation and the FED having no control 19 00:01:01,840 --> 00:01:04,880 Speaker 1: to affect that. We're gonna talk about what the end 20 00:01:04,959 --> 00:01:08,760 Speaker 1: game of all this is what he thinks happens. In 21 00:01:08,880 --> 00:01:12,039 Speaker 1: his best guests. Of course, we're gonna talk about sound money, 22 00:01:12,080 --> 00:01:16,039 Speaker 1: We're gonna talk about bitcoin, We're gonna talk about uh 23 00:01:16,240 --> 00:01:19,880 Speaker 1: reasons why it may or may not work, what happened 24 00:01:19,880 --> 00:01:23,440 Speaker 1: throughout history, so many more topics with the absolute legend. 25 00:01:23,480 --> 00:01:26,280 Speaker 1: Jeff Snyder was an amazing interview. Let's go ahead, just 26 00:01:26,319 --> 00:01:30,480 Speaker 1: jump right into it. Jeff, thank you so much for 27 00:01:30,760 --> 00:01:33,480 Speaker 1: your patients, and I appreciate you showing up today. Big 28 00:01:33,520 --> 00:01:37,840 Speaker 1: fan of work. I'm I'm excited again here Mark, thanks 29 00:01:37,880 --> 00:01:40,440 Speaker 1: for having me on. I love the set. It looks 30 00:01:41,040 --> 00:01:44,520 Speaker 1: absolutely terrific. Thanks. Thanks. Yeah, it's my first year, my 31 00:01:44,560 --> 00:01:47,480 Speaker 1: first guest with the new set here. So um uh 32 00:01:47,920 --> 00:01:50,480 Speaker 1: our guess about a month ago we were both speaking 33 00:01:50,520 --> 00:01:54,360 Speaker 1: at a mutual friends conference, George Gammon's conference, Rebel Capitalist Live, 34 00:01:55,000 --> 00:01:57,080 Speaker 1: and you gave a great presentation. I took a lot 35 00:01:57,080 --> 00:01:59,160 Speaker 1: of notes, um, and so I've been excited to talk 36 00:01:59,160 --> 00:02:01,880 Speaker 1: to you ever since. And Um, the thing that you 37 00:02:01,960 --> 00:02:04,480 Speaker 1: were talking about, and I think that you're a little 38 00:02:04,520 --> 00:02:07,640 Speaker 1: bit mad about and they want to scream to the 39 00:02:07,680 --> 00:02:11,960 Speaker 1: whole world about, is that the Federal Reserve has no control. 40 00:02:13,400 --> 00:02:16,320 Speaker 1: Is that right? Yeah? If you want to boil it 41 00:02:16,360 --> 00:02:20,119 Speaker 1: down into a single idea. That's probably the best way 42 00:02:20,160 --> 00:02:24,000 Speaker 1: to describe it. So the Federal Reserve is UH, I 43 00:02:24,040 --> 00:02:27,080 Speaker 1: think at the time of this recording, which by the way, 44 00:02:27,480 --> 00:02:31,920 Speaker 1: is UH July. I think the tomorrow they're expected to 45 00:02:31,919 --> 00:02:34,720 Speaker 1: come up with another rate hike. The markets are betting 46 00:02:34,760 --> 00:02:37,000 Speaker 1: it's going to be point seven five. Some people think 47 00:02:37,000 --> 00:02:40,280 Speaker 1: it would be be one point Probably doesn't really matter 48 00:02:40,360 --> 00:02:43,960 Speaker 1: either way. It seems that since they've announced their rate 49 00:02:44,040 --> 00:02:47,040 Speaker 1: hikes in November of last year, the risk on assets 50 00:02:47,040 --> 00:02:49,640 Speaker 1: sold off first. We saw the NASDAC and bitcoin kind 51 00:02:49,639 --> 00:02:54,720 Speaker 1: of sold off the same day, SMP lagged. Um. It 52 00:02:54,880 --> 00:02:57,320 Speaker 1: seems like their rate hikes have caused a lot of 53 00:02:57,360 --> 00:02:59,800 Speaker 1: problems in the markets, but yet they have no control. 54 00:02:59,840 --> 00:03:01,360 Speaker 1: So maybe he kind of frame that up for us 55 00:03:01,360 --> 00:03:03,960 Speaker 1: a little bit. Yeah, And I think that's the issue, 56 00:03:04,000 --> 00:03:07,440 Speaker 1: is what control do they have? Control is probably not 57 00:03:07,480 --> 00:03:10,000 Speaker 1: the right word. It's more of like more like along 58 00:03:10,040 --> 00:03:13,280 Speaker 1: the lines of influence. And so if you look at 59 00:03:13,280 --> 00:03:16,280 Speaker 1: what the FET actually does, let's just let's just get 60 00:03:16,280 --> 00:03:18,480 Speaker 1: it all the way from the beginning. They don't print money. 61 00:03:18,560 --> 00:03:21,720 Speaker 1: There is no money printing. They create balance sheet space, 62 00:03:21,760 --> 00:03:25,040 Speaker 1: they create bank reserves, but many people believe they print 63 00:03:25,040 --> 00:03:27,280 Speaker 1: money and as long as people believe they print money, 64 00:03:27,320 --> 00:03:29,760 Speaker 1: they act as if they have. And one of the 65 00:03:29,760 --> 00:03:33,679 Speaker 1: ways that that manifests is in the financial services industry 66 00:03:33,720 --> 00:03:37,920 Speaker 1: in certain asset markets. For example, in when J. Powell 67 00:03:37,920 --> 00:03:40,480 Speaker 1: got on TV and told you he lied to your 68 00:03:40,560 --> 00:03:43,160 Speaker 1: damn face and said that he printed digital dollars and 69 00:03:43,160 --> 00:03:45,400 Speaker 1: flooded the world with him, that was a message he 70 00:03:45,440 --> 00:03:48,920 Speaker 1: intended to send to asset managers to say, I've got 71 00:03:48,960 --> 00:03:51,960 Speaker 1: your back, don't worry about it, no matter what's going 72 00:03:52,040 --> 00:03:54,920 Speaker 1: on in these dark, dark times of COVID, the Federal 73 00:03:54,960 --> 00:03:57,280 Speaker 1: Reserve has got your back. If it doesn't have your back, 74 00:03:57,560 --> 00:04:00,080 Speaker 1: but if enough people actually believe it, it becomes a 75 00:04:00,120 --> 00:04:04,360 Speaker 1: self fulfilling prophecy. And so risk managers by risky assets 76 00:04:04,400 --> 00:04:08,200 Speaker 1: because they think, well, hell, J. Powell is doing something. 77 00:04:08,240 --> 00:04:10,240 Speaker 1: I don't know what he's doing, but he's doing something. 78 00:04:10,400 --> 00:04:13,040 Speaker 1: So therefore I have I can call my clients and 79 00:04:13,040 --> 00:04:16,120 Speaker 1: tell them we're buying stocks and we're buying risky assets 80 00:04:16,160 --> 00:04:18,880 Speaker 1: because the FED is doing some stuff. And so that's 81 00:04:18,880 --> 00:04:21,839 Speaker 1: what happens the FED. The FED has it a sentimental 82 00:04:21,839 --> 00:04:25,960 Speaker 1: effect or a psychological effect, primarily through the financial services industry, 83 00:04:26,000 --> 00:04:28,560 Speaker 1: but also in other places, and then you get to 84 00:04:28,800 --> 00:04:32,520 Speaker 1: November of one where the FED says we're not going 85 00:04:32,560 --> 00:04:35,560 Speaker 1: to do the same stuff we've been doing before. Suddenly 86 00:04:35,640 --> 00:04:39,200 Speaker 1: financial services managers they don't have that protection, they don't 87 00:04:39,200 --> 00:04:42,080 Speaker 1: believe they have the same protection from J. Paul. So 88 00:04:42,160 --> 00:04:45,240 Speaker 1: you have that sentimental effects start to reverse and it 89 00:04:45,320 --> 00:04:49,200 Speaker 1: becomes self fulfilling and self realizing in the the opposite 90 00:04:49,200 --> 00:04:51,800 Speaker 1: direction and the from the way that it had had 91 00:04:51,880 --> 00:04:57,600 Speaker 1: gone in one. So without the ability to feel like J. 92 00:04:57,800 --> 00:05:01,200 Speaker 1: Powell has got your back because are gonna be hiking 93 00:05:01,240 --> 00:05:03,880 Speaker 1: interest rates and they're gonna be cutting back and scale 94 00:05:03,920 --> 00:05:05,800 Speaker 1: it and running off their balance sheet. There the FED 95 00:05:05,920 --> 00:05:10,680 Speaker 1: isn't isn't my buddy anymore. Suddenly asking assets look a lot, 96 00:05:10,720 --> 00:05:15,520 Speaker 1: a lot more risky than they had before. So this 97 00:05:15,640 --> 00:05:18,760 Speaker 1: is one area where UM, I have a little bit 98 00:05:18,800 --> 00:05:24,520 Speaker 1: of disagreement with UM a lot of economists, UM, because 99 00:05:24,560 --> 00:05:28,719 Speaker 1: I think they can be factually correct, but maybe a 100 00:05:28,760 --> 00:05:31,200 Speaker 1: little intellectually dishonest. I don't know if that's the right 101 00:05:31,240 --> 00:05:34,960 Speaker 1: way to say it. So, UM, you talk about they 102 00:05:34,960 --> 00:05:38,200 Speaker 1: didn't really do anything, but they had a psychological effect, 103 00:05:38,240 --> 00:05:41,320 Speaker 1: Well that is something, all right. So then then it's 104 00:05:41,320 --> 00:05:44,719 Speaker 1: like you're starting to split hairs. Um. At George's last event, 105 00:05:44,800 --> 00:05:51,120 Speaker 1: he had a professor. Uh uh, I'm drawn up like 106 00:05:51,320 --> 00:05:56,200 Speaker 1: now the German uh economist who does all the talks 107 00:05:56,240 --> 00:05:59,960 Speaker 1: all the central bank stuff. Uh is it Wolf anyway, 108 00:06:00,000 --> 00:06:01,800 Speaker 1: I'm dronna blank. Sorry. But he gave this great talk 109 00:06:01,800 --> 00:06:04,920 Speaker 1: about how all this central bank printing through two thousand 110 00:06:05,000 --> 00:06:08,600 Speaker 1: eight and wasn't inflationary. But I said, but stock indexes 111 00:06:08,600 --> 00:06:11,080 Speaker 1: are up at all time highs and and house prices 112 00:06:11,120 --> 00:06:15,040 Speaker 1: are altimized. Well, that's assets, that's assets, that's not consumer prices. 113 00:06:15,080 --> 00:06:16,720 Speaker 1: And so it's like it's kind of like splitting hairs 114 00:06:16,720 --> 00:06:19,240 Speaker 1: a little bit to me. No, but there is a 115 00:06:19,279 --> 00:06:22,200 Speaker 1: real monetary issue there, and the real monetary issues that 116 00:06:22,279 --> 00:06:25,960 Speaker 1: the credit creation that underpinned or supported the previous housing 117 00:06:25,960 --> 00:06:28,600 Speaker 1: bubble and the credit bubbles of the pre crisis era 118 00:06:28,880 --> 00:06:33,120 Speaker 1: just disappeared. So what happened in asset prices post crisis 119 00:06:33,480 --> 00:06:35,200 Speaker 1: was I mean, you can call it inflation if you want, 120 00:06:35,200 --> 00:06:37,720 Speaker 1: I don't really care. There was definitely an effect there, 121 00:06:37,720 --> 00:06:40,960 Speaker 1: but it was non monetary. Was something else entirely. So 122 00:06:41,000 --> 00:06:43,560 Speaker 1: the real economy has been deprived of credit and money, 123 00:06:43,880 --> 00:06:47,320 Speaker 1: even if asset prices have done really well, certain asset 124 00:06:47,320 --> 00:06:50,680 Speaker 1: classes obviously done better than others, which has only led 125 00:06:50,720 --> 00:06:53,840 Speaker 1: to more problems because you have stocks, for example, at 126 00:06:53,839 --> 00:06:56,440 Speaker 1: all time highs, or they were at all time highs 127 00:06:56,480 --> 00:06:59,359 Speaker 1: not that long ago, while the economy is in the toilet, 128 00:06:59,360 --> 00:07:01,440 Speaker 1: and not just in the US, all across the world, 129 00:07:01,480 --> 00:07:06,360 Speaker 1: the economic growth has fallen off substantially, not coincidentally, ever 130 00:07:06,480 --> 00:07:09,560 Speaker 1: since this credit credit machine broke down more than a 131 00:07:09,560 --> 00:07:13,000 Speaker 1: dozen years ago. So you have the psychological impact where 132 00:07:13,040 --> 00:07:16,360 Speaker 1: there is less friction for psychology to work in certain 133 00:07:16,400 --> 00:07:20,320 Speaker 1: asset classes and asset prices all based on a misconception 134 00:07:20,360 --> 00:07:22,280 Speaker 1: of what it what it is the Federal Reserve does, 135 00:07:22,360 --> 00:07:26,280 Speaker 1: so it's not really spitting splitting hairs. It's a categorical 136 00:07:26,360 --> 00:07:29,720 Speaker 1: difference that explains a lot about explains everything about the 137 00:07:29,800 --> 00:07:32,040 Speaker 1: world that we're actually living at why everybody is so 138 00:07:32,160 --> 00:07:36,320 Speaker 1: damned piste off about everything because you have the rich 139 00:07:36,400 --> 00:07:39,120 Speaker 1: people getting richer and the poor people can't find a job. 140 00:07:39,680 --> 00:07:43,120 Speaker 1: And that's really the issue here, is that without monetary growth, 141 00:07:43,160 --> 00:07:46,280 Speaker 1: without credit growth, the economy stuck. And no matter what 142 00:07:46,320 --> 00:07:48,560 Speaker 1: the Federal Reserve has done over the last twelve years, 143 00:07:48,600 --> 00:07:50,560 Speaker 1: it's not just a fed the ECB, the Bank of 144 00:07:50,640 --> 00:07:53,000 Speaker 1: Japan has been doing it has been failing even longer 145 00:07:53,040 --> 00:07:56,720 Speaker 1: with their psychological manipulation tactics. It hasn't worked there either, 146 00:07:57,200 --> 00:07:59,960 Speaker 1: So you have a divergence between what the real econo 147 00:08:00,000 --> 00:08:03,640 Speaker 1: of he's doing because psychology doesn't work in any any 148 00:08:03,640 --> 00:08:06,880 Speaker 1: real sense. It does work in asset markets like stocks, 149 00:08:06,920 --> 00:08:10,480 Speaker 1: because there's no real fundamental tie to any tangible asset 150 00:08:10,560 --> 00:08:14,040 Speaker 1: or in tangible outcome. So again you have this major 151 00:08:14,080 --> 00:08:17,320 Speaker 1: divergence between where assets went where the real economy went, 152 00:08:17,360 --> 00:08:21,200 Speaker 1: which is nowhere. Good. Well, let's let's and let me 153 00:08:21,280 --> 00:08:23,000 Speaker 1: talk about one other things. You said that they don't 154 00:08:23,000 --> 00:08:26,640 Speaker 1: actually print money, which is true. So the Federal Reserve 155 00:08:26,920 --> 00:08:30,160 Speaker 1: gives banks reserves and they set the interest rate, but 156 00:08:30,240 --> 00:08:32,280 Speaker 1: the bank charges their interest rate on top of that 157 00:08:32,360 --> 00:08:33,920 Speaker 1: whatever they want, and they can decide whether they want 158 00:08:33,920 --> 00:08:35,760 Speaker 1: to loan money on or not. Right, So I think 159 00:08:35,760 --> 00:08:39,320 Speaker 1: that's kind of your point. Right. However, um, through the 160 00:08:39,360 --> 00:08:42,920 Speaker 1: bank's reserves and through their MBS policies and stuff, they 161 00:08:43,000 --> 00:08:47,319 Speaker 1: take toxic debt off the books and then replaced No. No, 162 00:08:47,559 --> 00:08:51,439 Speaker 1: see that's the thing. That's another misconception. That was not buying. 163 00:08:51,440 --> 00:08:53,960 Speaker 1: I mean, the FED buys us treasuries and nbs, and 164 00:08:53,960 --> 00:08:57,320 Speaker 1: then they're not buying subprime mortgages. They're not buying subprime 165 00:08:57,320 --> 00:09:00,000 Speaker 1: mortgage bonds or leverage loans or some other financial products, 166 00:09:00,000 --> 00:09:02,720 Speaker 1: certainly not buying clos like they've made people believed either 167 00:09:03,040 --> 00:09:07,040 Speaker 1: in March, the FED is buying assets the market already wants. 168 00:09:07,080 --> 00:09:08,839 Speaker 1: In fact, the FED knows this. They talk about it 169 00:09:08,920 --> 00:09:12,080 Speaker 1: all the time. The fact that you know famous quote 170 00:09:12,080 --> 00:09:13,840 Speaker 1: from Richard Fisher in two thousand eleven, and why are 171 00:09:13,880 --> 00:09:16,520 Speaker 1: we buying assets that the market is fleeing toward? Central 172 00:09:16,520 --> 00:09:19,320 Speaker 1: banks are supposed to be buying, like you said, they're 173 00:09:19,360 --> 00:09:21,920 Speaker 1: supposed to be buying toxic assets that people don't want. 174 00:09:21,920 --> 00:09:24,560 Speaker 1: But that's not what quantitative easing has been. It's not 175 00:09:24,600 --> 00:09:27,640 Speaker 1: what quantitative easing has ever been, which is one reason 176 00:09:27,679 --> 00:09:30,320 Speaker 1: why it doesn't ever work. And really, you know, we 177 00:09:30,360 --> 00:09:32,680 Speaker 1: stop and think about what QUEWI is supposed to bes 178 00:09:32,800 --> 00:09:36,440 Speaker 1: and as opposed to what it actually is. Everybody looks 179 00:09:36,480 --> 00:09:38,560 Speaker 1: at it from the perspective of the federal reserve. What 180 00:09:38,679 --> 00:09:40,800 Speaker 1: is the FED doing when you need to look at it, 181 00:09:40,840 --> 00:09:43,000 Speaker 1: as you just said, Mark, from the perspective of the 182 00:09:43,040 --> 00:09:46,000 Speaker 1: commercial bank. You can create all the reserves in the 183 00:09:46,040 --> 00:09:48,040 Speaker 1: world that you want. But if banks aren't going to 184 00:09:48,080 --> 00:09:51,400 Speaker 1: be lending, it doesn't matter. That's just an accounting fiction 185 00:09:51,480 --> 00:09:55,280 Speaker 1: that's created by monetary policy. Think about it this way. Before, 186 00:09:55,640 --> 00:09:58,320 Speaker 1: before Lehman Brothers in two thousand and eight, there were 187 00:09:58,320 --> 00:10:00,960 Speaker 1: hardly any bank reserves in the in the entire global 188 00:10:01,000 --> 00:10:04,000 Speaker 1: system that spans trillions upon trillions of dollars, there were 189 00:10:04,000 --> 00:10:07,200 Speaker 1: no bank reserves. Yet credit was created. We had asset 190 00:10:07,240 --> 00:10:09,760 Speaker 1: bubbles through the roof. You had all sorts of money 191 00:10:09,800 --> 00:10:13,080 Speaker 1: everywhere around the world with no bank reserves. Suddenly we 192 00:10:13,120 --> 00:10:15,240 Speaker 1: get to the other side of the crisis. There are 193 00:10:15,320 --> 00:10:18,800 Speaker 1: trillions and bank reserves, but no credit girls, no expansion, 194 00:10:18,920 --> 00:10:22,400 Speaker 1: no money. How is that possible? Because the FED isn't 195 00:10:22,440 --> 00:10:26,800 Speaker 1: creating usable money. It's responding to breakdowns in the actual 196 00:10:26,840 --> 00:10:30,600 Speaker 1: monetary system through this psychological tactics, through the through the 197 00:10:30,640 --> 00:10:34,600 Speaker 1: act of buying bonds that the market already wants anyway. 198 00:10:34,640 --> 00:10:36,920 Speaker 1: So the way that you were explained to me, though, 199 00:10:36,960 --> 00:10:40,839 Speaker 1: it sounds like there's direct and indirect influence the FED 200 00:10:40,960 --> 00:10:43,160 Speaker 1: has so a lot of times I think maybe you're 201 00:10:43,200 --> 00:10:45,960 Speaker 1: saying that. So, look, they didn't do anything. They said 202 00:10:45,960 --> 00:10:47,520 Speaker 1: they're gonna do something but they didn't do anything, so 203 00:10:47,559 --> 00:10:50,040 Speaker 1: there was no result. But at the same time, just 204 00:10:50,120 --> 00:10:52,080 Speaker 1: them saying it, or sometimes we might call it job 205 00:10:52,080 --> 00:10:54,719 Speaker 1: owning actually does do something. Would we agree on that 206 00:10:56,080 --> 00:10:59,160 Speaker 1: they kent? Yes, And most of those psychological impacts are 207 00:10:59,160 --> 00:11:02,000 Speaker 1: sentimental impact acts are short term in nature. They don't 208 00:11:02,000 --> 00:11:05,320 Speaker 1: have a lasting impact certainly in any real sense. Asset 209 00:11:05,320 --> 00:11:09,000 Speaker 1: prices a different thing. Uh, certain asset markets is a 210 00:11:09,040 --> 00:11:11,960 Speaker 1: different story. But in terms of the real economy, there's 211 00:11:12,000 --> 00:11:17,480 Speaker 1: really not much impact whatsoever. Okay, Now, Um, another thing 212 00:11:17,520 --> 00:11:19,520 Speaker 1: that you had talked about at this at this event 213 00:11:19,559 --> 00:11:22,440 Speaker 1: to the Rebel Capitalist Live, you talked about the Vulcan myth, 214 00:11:22,640 --> 00:11:26,760 Speaker 1: and so everyone is wondering, now if the Fed can, 215 00:11:27,040 --> 00:11:29,920 Speaker 1: if they'll have the stomach to tame inflation, will they 216 00:11:30,000 --> 00:11:33,080 Speaker 1: raise rates high enough to stomach, you know, to to 217 00:11:33,080 --> 00:11:35,480 Speaker 1: to finally put an end to this high inflation that 218 00:11:35,520 --> 00:11:38,120 Speaker 1: we have. Um, like Vulker did in the eighties where 219 00:11:38,160 --> 00:11:41,560 Speaker 1: he went from ten um and you had a whole 220 00:11:41,800 --> 00:11:44,240 Speaker 1: piece saying that that was a complete myth, which continues 221 00:11:44,280 --> 00:11:46,000 Speaker 1: to back up what you're saying and why the Federal 222 00:11:46,120 --> 00:11:48,280 Speaker 1: Reserve really has no controls. So let's talk about that 223 00:11:48,400 --> 00:11:50,920 Speaker 1: Vulcan myth and why you think that actually isn't true. 224 00:11:51,320 --> 00:11:54,199 Speaker 1: He isn't the one that stopped inflation. If if I'm 225 00:11:54,240 --> 00:11:56,920 Speaker 1: saying that right, if I'm not putting words in your mouth. Yeah, 226 00:11:57,080 --> 00:11:59,720 Speaker 1: that's where the Volker myth actually comes from, the idea 227 00:11:59,760 --> 00:12:03,400 Speaker 1: that it was Paul Wolker who skyrocketed interest rates in 228 00:12:03,520 --> 00:12:06,480 Speaker 1: seventeen starting in nineteen seventy nine, and that's the reason 229 00:12:06,480 --> 00:12:09,719 Speaker 1: why the great inflation suddenly stopped. And the funny thing is, 230 00:12:09,760 --> 00:12:11,800 Speaker 1: if you had if your time travel back to nineteen 231 00:12:11,800 --> 00:12:13,920 Speaker 1: seventy nine, he would be shocked. And by he, I 232 00:12:13,960 --> 00:12:16,000 Speaker 1: mean Paul Woker. They had no idea what they were 233 00:12:16,040 --> 00:12:18,120 Speaker 1: doing in seventy nine. And this is not something you 234 00:12:18,160 --> 00:12:19,480 Speaker 1: have to take my word for it. I gotta do 235 00:12:19,520 --> 00:12:22,000 Speaker 1: is read the transcript from the FOMC meetings at the time. 236 00:12:22,400 --> 00:12:24,880 Speaker 1: These people had no clue what they were doing. And 237 00:12:24,920 --> 00:12:27,280 Speaker 1: the idea that Faull Volker raising rates, that's not what 238 00:12:27,320 --> 00:12:29,800 Speaker 1: he did either. But the idea, the idea of the 239 00:12:29,840 --> 00:12:33,640 Speaker 1: myth that he raised rates and tame Great inflation UHS 240 00:12:34,000 --> 00:12:37,160 Speaker 1: was something that was invented afterwards to try and explain 241 00:12:37,760 --> 00:12:40,280 Speaker 1: what happened in late from the late seventies into the 242 00:12:40,280 --> 00:12:42,640 Speaker 1: middle nineteen eighties, it was sort of like, we have 243 00:12:42,720 --> 00:12:45,800 Speaker 1: no idea what really happened. So maybe it was this 244 00:12:45,840 --> 00:12:48,520 Speaker 1: thing that Vocer did that created this the end of 245 00:12:48,520 --> 00:12:50,839 Speaker 1: the Great Inflation, And that's been the myth that we've 246 00:12:50,880 --> 00:12:54,160 Speaker 1: been told that was reinforced through the quote unquote great 247 00:12:54,200 --> 00:12:57,280 Speaker 1: moderation by Alan Greenspan, the Maestro, all that stuff in 248 00:12:57,280 --> 00:13:00,240 Speaker 1: the nineties and into the two thousand's. But if you 249 00:13:00,240 --> 00:13:01,880 Speaker 1: actually go back and look at what happened in the 250 00:13:01,960 --> 00:13:05,280 Speaker 1: late seventies and early nineteen eighties, it was a whole 251 00:13:05,360 --> 00:13:08,080 Speaker 1: bunch of clueless bureaucrats just throwing ship at the wall 252 00:13:08,160 --> 00:13:13,360 Speaker 1: hoping something stuck. So why did he raise rates so high? 253 00:13:13,400 --> 00:13:16,200 Speaker 1: Because I didn't know what else to do. Paul Voker, 254 00:13:16,240 --> 00:13:18,559 Speaker 1: you gotta give the guy at least some credit. Unlike 255 00:13:18,559 --> 00:13:22,080 Speaker 1: his predecessor, Arthur Burns, Voker at least knew that the 256 00:13:22,080 --> 00:13:24,920 Speaker 1: Great Inflation was tied to the money supply. Burns with 257 00:13:24,960 --> 00:13:28,319 Speaker 1: thought it was fiscal deficits. He convinced governments. He went 258 00:13:28,360 --> 00:13:31,240 Speaker 1: off into a neo Kenzie and Funk, And so you know, 259 00:13:31,280 --> 00:13:33,400 Speaker 1: the Federal Reserve was looking in the wrong place. For 260 00:13:33,440 --> 00:13:36,439 Speaker 1: the reason why inflation was so out of control, as 261 00:13:36,440 --> 00:13:40,920 Speaker 1: Milton Friedman said, As Milton Friedman showed conclusively inflation is always, 262 00:13:40,960 --> 00:13:44,120 Speaker 1: at everywhere a monetary phenomenon, so at least Volker Volker 263 00:13:44,240 --> 00:13:47,480 Speaker 1: at least knew that much. However, his plan to stop 264 00:13:47,520 --> 00:13:50,240 Speaker 1: inflation was sort of a we don't know what else 265 00:13:50,280 --> 00:13:52,680 Speaker 1: to do because the federal reserve. All we have in 266 00:13:52,679 --> 00:13:56,560 Speaker 1: our toolkit are these bank reserves, and bank reserves have 267 00:13:56,600 --> 00:13:59,600 Speaker 1: a very narrow limited use, which is you have a 268 00:13:59,640 --> 00:14:04,200 Speaker 1: reserve requirement that's imposed upon the banking system by governments. 269 00:14:04,280 --> 00:14:07,280 Speaker 1: And so what happened. What the theory was was that 270 00:14:07,320 --> 00:14:10,520 Speaker 1: if the Federal Reserve undervoc or made bank reserves scarce, 271 00:14:10,920 --> 00:14:14,000 Speaker 1: he would make bank reserves expensive and the bank the 272 00:14:14,040 --> 00:14:18,240 Speaker 1: bank reserves became expensive. That would make depository money expensive. 273 00:14:18,559 --> 00:14:21,240 Speaker 1: Because if you're a commercial bank and you create a 274 00:14:21,240 --> 00:14:25,400 Speaker 1: loan in a a corresponding deposit money liability against it, 275 00:14:25,800 --> 00:14:28,680 Speaker 1: that creates a reserve requirement that you must meet, and 276 00:14:28,720 --> 00:14:30,520 Speaker 1: you have to you can meet it through vault cash, 277 00:14:30,600 --> 00:14:32,680 Speaker 1: or you can meet it through bank reserves held it 278 00:14:32,760 --> 00:14:35,560 Speaker 1: the Fed. So the idea was, if we make bank 279 00:14:35,600 --> 00:14:37,920 Speaker 1: reserves scarce, that will make that will increase the cost. 280 00:14:37,960 --> 00:14:40,040 Speaker 1: The rate will go up, as it did, the federal 281 00:14:40,040 --> 00:14:42,280 Speaker 1: funds rate will go up, and that will that will 282 00:14:42,320 --> 00:14:46,400 Speaker 1: then make banks reconsider their creation of loans and depository money, 283 00:14:46,640 --> 00:14:50,680 Speaker 1: therefore restrict economic activity, and that's the end of the inflation. 284 00:14:51,360 --> 00:14:53,440 Speaker 1: That's not how it worked. First of all, the Federal 285 00:14:53,520 --> 00:14:57,440 Speaker 1: Reserve panicked as soon as they started this, this restricting 286 00:14:57,520 --> 00:15:01,720 Speaker 1: reserve regime in nineteen seventy nine. Immediately the federal funds 287 00:15:01,760 --> 00:15:05,840 Speaker 1: rate skyrocketed to more than which nowadays people think, well, yeah, 288 00:15:05,880 --> 00:15:08,080 Speaker 1: that was the point, But no, at the time they panicked. 289 00:15:08,280 --> 00:15:11,600 Speaker 1: They actually did a repot programs starting in October of 290 00:15:11,680 --> 00:15:15,040 Speaker 1: nineteen nine to put reserves back into the system because 291 00:15:15,040 --> 00:15:17,760 Speaker 1: they thought they had gone too far. But either way 292 00:15:17,880 --> 00:15:20,560 Speaker 1: it didn't matter, because no matter what the Federal Reserve 293 00:15:20,640 --> 00:15:23,720 Speaker 1: did in terms of depriving the system or not depriving 294 00:15:23,720 --> 00:15:27,239 Speaker 1: the system of bank reserves, it had no impact whatsoever 295 00:15:27,320 --> 00:15:30,400 Speaker 1: on depository money, had no impact on M three, had 296 00:15:30,440 --> 00:15:33,000 Speaker 1: no impact on the real money, which is the shadow 297 00:15:33,040 --> 00:15:36,440 Speaker 1: money across the Euro dollar system. That's not what happened. 298 00:15:36,920 --> 00:15:40,400 Speaker 1: So after it became clear that restricting bank reserves was 299 00:15:40,440 --> 00:15:45,160 Speaker 1: having no effect on either monetary aggregates, or the real 300 00:15:45,200 --> 00:15:48,800 Speaker 1: economic outcomes. They sort of invented another kind of myth, 301 00:15:48,840 --> 00:15:52,760 Speaker 1: which was that, Okay, maybe restricting bank reserves didn't cause 302 00:15:52,760 --> 00:15:55,080 Speaker 1: the end of the end of the Great Reflation. Maybe 303 00:15:55,080 --> 00:15:59,000 Speaker 1: it was the collateral consequence of having interest rate rise, 304 00:15:59,080 --> 00:16:02,080 Speaker 1: the federal funds rate rise, that had some kind of 305 00:16:02,120 --> 00:16:04,160 Speaker 1: impact that we can't explain because it didn't have any 306 00:16:04,240 --> 00:16:07,520 Speaker 1: kind of monetary impact. It didn't impact the monetary system whatsoever. 307 00:16:07,920 --> 00:16:10,680 Speaker 1: So maybe the fact that interest rates short term federal 308 00:16:10,680 --> 00:16:14,160 Speaker 1: fund ray in particular one up. That's the reason why 309 00:16:14,280 --> 00:16:17,800 Speaker 1: the economic outcomes that we all wanted ended up happening. 310 00:16:18,200 --> 00:16:23,000 Speaker 1: It's simply looking at correlation and implying causation that isn't 311 00:16:23,040 --> 00:16:26,680 Speaker 1: actually there. Because again, the FED at the time realized 312 00:16:27,120 --> 00:16:30,120 Speaker 1: they couldn't even define, let alone measure, let alone control 313 00:16:30,160 --> 00:16:37,520 Speaker 1: the monetary system. Now, uh, let's jump I want to 314 00:16:37,560 --> 00:16:39,800 Speaker 1: talk about where we're at today. But before we jump 315 00:16:39,880 --> 00:16:42,920 Speaker 1: to there, um and I guess the part of the 316 00:16:42,920 --> 00:16:45,080 Speaker 1: reason why you say they can't really control the monetary 317 00:16:45,080 --> 00:16:48,080 Speaker 1: system is that the FED only can control basically the 318 00:16:48,160 --> 00:16:52,360 Speaker 1: dollars bank reserves. That's it. That's that's the one tool 319 00:16:52,440 --> 00:16:55,440 Speaker 1: that they have. And in the nineteen seventeen. Before the 320 00:16:55,520 --> 00:17:00,320 Speaker 1: nineteen seventies, banks invented ways to circumvent the reserver fronments 321 00:17:00,440 --> 00:17:04,359 Speaker 1: invented new ways of doing monetary transactions, things like repo, 322 00:17:04,560 --> 00:17:07,960 Speaker 1: things like eurodollars, things like currency swaps, that they could 323 00:17:08,000 --> 00:17:11,040 Speaker 1: just manipulate both the asset and liabilities side, regardless of 324 00:17:11,040 --> 00:17:13,359 Speaker 1: whatever constraints that FED tried to impose on them. And 325 00:17:13,359 --> 00:17:15,040 Speaker 1: in fact, that's one of the things that happened in 326 00:17:15,119 --> 00:17:20,080 Speaker 1: ninety The FED tried to make these reserves expensive, therefore 327 00:17:20,119 --> 00:17:23,920 Speaker 1: making depository money expensive, and so banks just encourage their 328 00:17:23,920 --> 00:17:27,440 Speaker 1: customers to shift their assets from their deposit accounts into 329 00:17:27,480 --> 00:17:31,040 Speaker 1: money market funds. Money market funds don't have a reserve requirements, 330 00:17:31,040 --> 00:17:33,760 Speaker 1: and so they went into so as the customer deposits 331 00:17:33,800 --> 00:17:37,200 Speaker 1: moved from the commercial bank that created this reserve requirement, 332 00:17:37,440 --> 00:17:39,440 Speaker 1: they moved to a money market fund. The bank was 333 00:17:39,560 --> 00:17:42,040 Speaker 1: done just borrow the funds back from the money market fund. 334 00:17:42,400 --> 00:17:46,080 Speaker 1: In wholesale markets. Banks had created all sorts of ways 335 00:17:46,160 --> 00:17:48,880 Speaker 1: to be able to manipulate their assets and liability these 336 00:17:48,920 --> 00:17:55,760 Speaker 1: monetary forms that just rendered the federal reserves tools completely obsolete, 337 00:17:56,920 --> 00:17:59,520 Speaker 1: except for if they don't believe the Fed's going to 338 00:17:59,600 --> 00:18:02,680 Speaker 1: be find them supporting them, then they'll get into they'll 339 00:18:02,720 --> 00:18:04,840 Speaker 1: get out of those risky assets, which is where we're 340 00:18:04,840 --> 00:18:08,240 Speaker 1: at today, which is a completely different animal. It's a 341 00:18:08,240 --> 00:18:11,399 Speaker 1: different animal. So the tools that they're FED is using 342 00:18:11,480 --> 00:18:15,480 Speaker 1: don't really do much. But the support that the psychological 343 00:18:15,480 --> 00:18:18,200 Speaker 1: effect of the support, either having it or not having it, 344 00:18:18,280 --> 00:18:22,480 Speaker 1: does have an effect in yeah, in certain markets. It 345 00:18:22,480 --> 00:18:25,199 Speaker 1: certainly doesn't have any impact in anything that has a 346 00:18:25,320 --> 00:18:28,600 Speaker 1: fundamental link to the real economy. So fixed income you 347 00:18:28,600 --> 00:18:31,520 Speaker 1: don't see any real psychological impact from the FED whatsoever. 348 00:18:31,920 --> 00:18:34,080 Speaker 1: It's really about manipulating the short end of the yield 349 00:18:34,080 --> 00:18:36,639 Speaker 1: curve and hoping the rest of the curve goes along. 350 00:18:36,680 --> 00:18:39,120 Speaker 1: So we've seen the FED hike rates over the last 351 00:18:39,160 --> 00:18:41,200 Speaker 1: few months. The short end of the yield curve goes out, 352 00:18:41,240 --> 00:18:43,320 Speaker 1: because of course it would if you're owning a two 353 00:18:43,400 --> 00:18:46,200 Speaker 1: year US tragedy for example, if the FED is hiking 354 00:18:46,600 --> 00:18:49,560 Speaker 1: you know these reverse repo rate, you have an alternative 355 00:18:49,640 --> 00:18:51,639 Speaker 1: rate that you can get a return on. So the 356 00:18:51,720 --> 00:18:53,560 Speaker 1: FED is able to influence the short end of the 357 00:18:53,600 --> 00:18:56,960 Speaker 1: yeel curve, but even that is somewhat illusory because over 358 00:18:57,040 --> 00:19:00,840 Speaker 1: time they lose control. Really really quickly too. And that's 359 00:19:00,880 --> 00:19:02,880 Speaker 1: that's assuming that the long end of the Yolk curve 360 00:19:02,960 --> 00:19:05,880 Speaker 1: actually falls in line, which as we see now that's 361 00:19:05,920 --> 00:19:08,280 Speaker 1: not the case either. That's why the curves are inverted 362 00:19:08,640 --> 00:19:10,679 Speaker 1: because the long end of the yeld curve is fighting 363 00:19:10,720 --> 00:19:16,960 Speaker 1: against the Feds, right heikes at the short end. H Yeah, Now, um, 364 00:19:17,080 --> 00:19:19,920 Speaker 1: the the yield curve is gotten pretty screwed up. I mean, 365 00:19:19,920 --> 00:19:21,720 Speaker 1: a lot of this, I would imagine has to do 366 00:19:21,800 --> 00:19:25,240 Speaker 1: with the continued manipulation they have with printing more currency 367 00:19:25,280 --> 00:19:28,240 Speaker 1: and manipulating the their FED funds rate. At some point, 368 00:19:28,320 --> 00:19:33,560 Speaker 1: because it's been accurate predicting recessions, which I guess for 369 00:19:33,720 --> 00:19:35,760 Speaker 1: the for the White House, we're not in a recession 370 00:19:35,800 --> 00:19:42,600 Speaker 1: anymore technically they've changed, true, but the recession is still coming. Okay, 371 00:19:43,320 --> 00:19:46,320 Speaker 1: So the yield curve is predicting that there's a recession coming, 372 00:19:46,640 --> 00:19:48,199 Speaker 1: and it's been predicting that for a while. Right there. 373 00:19:48,280 --> 00:19:51,680 Speaker 1: Yield curve was predicting that since two thousand nineteen. Well, 374 00:19:51,720 --> 00:19:54,199 Speaker 1: the yo curve predicted the recession that probably would have 375 00:19:54,240 --> 00:19:56,800 Speaker 1: happened in two thousand twenty had it not been for COVID. 376 00:19:57,160 --> 00:19:59,720 Speaker 1: So the yel curve had inverted in twenty nineteen. In fact, 377 00:19:59,720 --> 00:20:02,680 Speaker 1: parts of it inverted as early as eighteen. Your Dollar 378 00:20:02,720 --> 00:20:05,960 Speaker 1: futures curve inverted in June, which was a bet that 379 00:20:06,040 --> 00:20:08,159 Speaker 1: the Fed was going to end up cutting rates before 380 00:20:08,200 --> 00:20:11,399 Speaker 1: they continued hiking rates, which is actually proven to be true. 381 00:20:11,880 --> 00:20:15,840 Speaker 1: These markets have been have proven in general terms, incredibly 382 00:20:15,880 --> 00:20:19,359 Speaker 1: accurate over each of these particular cycles. And so the 383 00:20:19,400 --> 00:20:22,560 Speaker 1: your Dollar futures curve inverted back in December of last year, 384 00:20:22,920 --> 00:20:25,359 Speaker 1: which was a bet despite the feds ultra hawk is 385 00:20:25,480 --> 00:20:28,600 Speaker 1: stance and growing ultra hal care stance that eventually the 386 00:20:28,640 --> 00:20:30,720 Speaker 1: FED was going to have to stop hiking rates and 387 00:20:30,800 --> 00:20:34,000 Speaker 1: maybe start is turn around and start cutting them before 388 00:20:34,040 --> 00:20:37,520 Speaker 1: the FED realized it it. Ever, since December, the inversion 389 00:20:37,520 --> 00:20:39,960 Speaker 1: of your at All the futures has grown to two 390 00:20:40,000 --> 00:20:44,720 Speaker 1: thousand eight proportions. Uh. It is comcredibly inverted at the 391 00:20:44,880 --> 00:20:47,760 Speaker 1: as we speak right now, which is the market betting 392 00:20:47,760 --> 00:20:50,080 Speaker 1: that the FED only has a couple maybe more rate 393 00:20:50,160 --> 00:20:53,840 Speaker 1: hikes left this year before something happens. We don't know 394 00:20:53,920 --> 00:20:57,120 Speaker 1: what we can guess before something happens, and the FED 395 00:20:57,200 --> 00:20:59,560 Speaker 1: has to turn around, stop hiking rates, and turn around 396 00:20:59,600 --> 00:21:03,680 Speaker 1: and start cutting them aggressively. Maybe as soon as this year, 397 00:21:04,200 --> 00:21:07,120 Speaker 1: probably next early next year at the latest, and then 398 00:21:07,119 --> 00:21:11,000 Speaker 1: the Yeal curve is essentially agreeing with the premise behind 399 00:21:11,000 --> 00:21:14,280 Speaker 1: the rod dollar futures inversion, which is that there's probably 400 00:21:14,359 --> 00:21:18,359 Speaker 1: something like like recession, if not nasty recession, still in 401 00:21:18,440 --> 00:21:20,800 Speaker 1: front of us. So think about it that way. We've 402 00:21:20,840 --> 00:21:23,760 Speaker 1: already had two straight quarters, likely we'll find out Thursday, 403 00:21:24,000 --> 00:21:26,959 Speaker 1: but we'll likely have had two straight quarters of negative 404 00:21:27,000 --> 00:21:30,640 Speaker 1: GDP to start the year, and the markets are all 405 00:21:30,800 --> 00:21:34,200 Speaker 1: uniformly saying, that's not the thing we're worried about. We're 406 00:21:34,200 --> 00:21:38,040 Speaker 1: worried about what comes after. We've already had a technical recession, 407 00:21:38,040 --> 00:21:40,520 Speaker 1: as so many you believe that that's the definition. So 408 00:21:40,560 --> 00:21:46,000 Speaker 1: the markets are all positioned for a deflationary monetary condition 409 00:21:46,080 --> 00:21:49,400 Speaker 1: on top of what might be a pretty nasty recession too. 410 00:21:50,560 --> 00:21:52,800 Speaker 1: When you go back and and look through history, which 411 00:21:52,840 --> 00:21:55,199 Speaker 1: I know you have many times, um, it seems like 412 00:21:55,240 --> 00:21:58,960 Speaker 1: it's not the it's not the reversal. So when they've 413 00:21:59,000 --> 00:22:00,760 Speaker 1: been lowering lower and lower and then they go back 414 00:22:00,760 --> 00:22:02,919 Speaker 1: to raising, which they're on right now, it's when they 415 00:22:03,000 --> 00:22:06,080 Speaker 1: reverse back off of that which seems to be kind 416 00:22:06,080 --> 00:22:08,120 Speaker 1: of the trigger. Is that kind of what you're saying, 417 00:22:08,160 --> 00:22:09,679 Speaker 1: the markets are kind of seeing that in the in 418 00:22:09,720 --> 00:22:12,360 Speaker 1: the in the forefront, and that's the trigger that they're 419 00:22:12,640 --> 00:22:15,840 Speaker 1: aways the longer, longer to these curves are simply ignoring 420 00:22:15,880 --> 00:22:20,040 Speaker 1: the Fed entirely. What the you know, Irving Fisher decomposition 421 00:22:20,040 --> 00:22:23,200 Speaker 1: of yields into growth and inflation expectations. A longer long 422 00:22:23,280 --> 00:22:26,560 Speaker 1: end treasury yield is essentially building upon the short end 423 00:22:26,600 --> 00:22:30,200 Speaker 1: interest rates, so the money alternatives, but then implying growth 424 00:22:30,240 --> 00:22:32,919 Speaker 1: and inflation expectations on top of them. And so what 425 00:22:33,000 --> 00:22:34,919 Speaker 1: the what the curves are telling us, and they have 426 00:22:34,960 --> 00:22:38,360 Speaker 1: been telling us all years. They disagree with the very 427 00:22:38,400 --> 00:22:41,199 Speaker 1: premise behind the FEDS rate hikes to begin with, that 428 00:22:41,280 --> 00:22:43,879 Speaker 1: the economy is not overheating, the labor market is not 429 00:22:43,960 --> 00:22:47,639 Speaker 1: in any great situation, and that the rate hikes to 430 00:22:47,960 --> 00:22:52,320 Speaker 1: quote unquote end inflation aren't necessary because the recession that 431 00:22:52,400 --> 00:22:55,560 Speaker 1: the market is afraid of is the instrument that will 432 00:22:55,680 --> 00:22:59,240 Speaker 1: end inflation, that will end consumer prices. It will likely 433 00:22:59,320 --> 00:23:04,080 Speaker 1: result in renewed disinflation, if not deflation, at least in 434 00:23:04,119 --> 00:23:07,520 Speaker 1: the intermediate term. So the markets, and especially along into 435 00:23:07,560 --> 00:23:10,240 Speaker 1: the curves, outside of the Fed's window, out of the 436 00:23:10,280 --> 00:23:12,679 Speaker 1: same thing with your or dollar futures that the markets 437 00:23:12,680 --> 00:23:15,120 Speaker 1: have been betting against rate hikes from the very beginning. 438 00:23:15,480 --> 00:23:19,040 Speaker 1: M Now, I want to get into this end game, 439 00:23:19,080 --> 00:23:21,200 Speaker 1: the few hikes before it breaks. You said, we can 440 00:23:21,240 --> 00:23:23,400 Speaker 1: guess at what breaks and what we'll get back to that. 441 00:23:23,440 --> 00:23:26,120 Speaker 1: But um, you had also talked about how really what 442 00:23:26,160 --> 00:23:29,560 Speaker 1: we have is a problem. Um that that signals these uh, 443 00:23:29,960 --> 00:23:33,320 Speaker 1: these crashes, these recessions, is these dollar shortages that happen 444 00:23:33,359 --> 00:23:37,600 Speaker 1: all over the world. And I think that's probably we're at. 445 00:23:38,040 --> 00:23:39,600 Speaker 1: We'll have a dollar shortage right now, which is why 446 00:23:39,600 --> 00:23:42,240 Speaker 1: the Dixie is shooting so high. So explain this dollar 447 00:23:42,320 --> 00:23:46,760 Speaker 1: shortage over the world to us. That's the hardest part 448 00:23:46,760 --> 00:23:49,440 Speaker 1: for people to come to terms with because, as you said, Mark, 449 00:23:49,520 --> 00:23:51,919 Speaker 1: I mean, you see the Fed's balance sheet go up. 450 00:23:52,000 --> 00:23:54,480 Speaker 1: You see there's trillions upon trillions of bank reserves, and 451 00:23:54,520 --> 00:23:57,760 Speaker 1: you assume the bank reserves are useful money. In fact, 452 00:23:57,800 --> 00:24:00,440 Speaker 1: some people call them base money. And if you see 453 00:24:00,440 --> 00:24:03,240 Speaker 1: the Fed's balance sheets skyrocket, you see all these trillions 454 00:24:03,280 --> 00:24:06,000 Speaker 1: of reserves suddenly appear out of thin air. You think 455 00:24:06,040 --> 00:24:08,520 Speaker 1: a lot of money has been printed. So how in 456 00:24:08,560 --> 00:24:11,399 Speaker 1: the world can we possibly have a dollar shortage when 457 00:24:11,400 --> 00:24:13,960 Speaker 1: the FET has created all these dollars. And the answer 458 00:24:14,040 --> 00:24:16,480 Speaker 1: is simply when you realize that bankerserves are not useful 459 00:24:16,520 --> 00:24:18,840 Speaker 1: money and the FET is simply created there just a 460 00:24:18,840 --> 00:24:22,840 Speaker 1: byproduct of quantitative easing, UM, then you can okay, the 461 00:24:22,880 --> 00:24:25,840 Speaker 1: FETE isn't part of the monetary system. Bank reserves are 462 00:24:25,840 --> 00:24:29,439 Speaker 1: not really useful money. What actually is useful money is 463 00:24:29,520 --> 00:24:32,480 Speaker 1: telling you that there is nothing. There's a dollar shortage, 464 00:24:32,480 --> 00:24:34,359 Speaker 1: and it's getting worse and worse all the time. And 465 00:24:34,359 --> 00:24:37,359 Speaker 1: we see this in any number of ways. UM. We 466 00:24:37,400 --> 00:24:40,680 Speaker 1: don't have any direct insight into the uh Euro dollar 467 00:24:40,760 --> 00:24:44,000 Speaker 1: system as a whole, but these markets, these curves, you know, 468 00:24:44,080 --> 00:24:48,000 Speaker 1: the tarasury market, German global bond markets, UM. The dollars 469 00:24:48,000 --> 00:24:50,920 Speaker 1: exchange it's a good one too. When the dollars exchange 470 00:24:50,960 --> 00:24:54,639 Speaker 1: values goes up, that's a bell weather for global financial conditions. 471 00:24:54,640 --> 00:24:58,080 Speaker 1: In US dollars, it's telling you there are not enough dollars. 472 00:24:58,119 --> 00:25:01,439 Speaker 1: The price of participating in the global monetary system has 473 00:25:01,480 --> 00:25:04,119 Speaker 1: gone way up because there aren't enough of them available 474 00:25:04,400 --> 00:25:06,360 Speaker 1: to be used around the world. So we see all 475 00:25:06,359 --> 00:25:10,320 Speaker 1: of these signals from the monetary system itself telling us 476 00:25:10,359 --> 00:25:13,879 Speaker 1: there must be a not a dollar shortage, but not 477 00:25:13,920 --> 00:25:16,520 Speaker 1: just a dollar shortage, but growing in a more severe 478 00:25:16,600 --> 00:25:19,480 Speaker 1: one as we go through this year. That's why these 479 00:25:19,520 --> 00:25:23,359 Speaker 1: curves are so distorted, so inverted, because the markets aren't 480 00:25:23,400 --> 00:25:26,479 Speaker 1: just thinking about recession. They're thinking about what happens when 481 00:25:26,520 --> 00:25:30,359 Speaker 1: you have a recession plus a possible deflationary breakdown in 482 00:25:30,440 --> 00:25:35,600 Speaker 1: terms of another monetary event like maybe March of maybe 483 00:25:35,640 --> 00:25:38,119 Speaker 1: something on the lines, not in the same way, but 484 00:25:38,480 --> 00:25:41,200 Speaker 1: something similar to the two thousand eight crisis. We want. 485 00:25:41,240 --> 00:25:43,400 Speaker 1: We're not gonna see banks failure. We're not gonna see 486 00:25:43,400 --> 00:25:45,159 Speaker 1: bank failures and banks failure like they did in two 487 00:25:45,200 --> 00:25:47,239 Speaker 1: thousand and eight. But that doesn't mean we can't have 488 00:25:47,359 --> 00:25:51,400 Speaker 1: a liquidity squeeze or a deflationary monetary event of similar 489 00:25:51,440 --> 00:25:54,960 Speaker 1: type of proportions. So the markets are worried about this already. 490 00:25:55,000 --> 00:25:58,480 Speaker 1: They're telling you from inside the monetary system that there 491 00:25:58,520 --> 00:26:00,680 Speaker 1: are not enough dollars around the world and has nothing 492 00:26:00,720 --> 00:26:02,600 Speaker 1: to do with the Fed. It's all about the monetary 493 00:26:02,600 --> 00:26:05,600 Speaker 1: system itself. Now, when you say the bank, the FED 494 00:26:05,680 --> 00:26:09,440 Speaker 1: gave bank reserves, which is not useful money, Um, does 495 00:26:09,520 --> 00:26:13,119 Speaker 1: it give them confidence? Is that an indirect benefit to 496 00:26:13,119 --> 00:26:15,720 Speaker 1: the market. Does it give the banks confidence to loan 497 00:26:15,720 --> 00:26:19,720 Speaker 1: more money out. It doesn't. I mean it does for 498 00:26:19,800 --> 00:26:22,560 Speaker 1: portfolio managers looking to buy stocks. That has absolutely no 499 00:26:22,600 --> 00:26:25,960 Speaker 1: effect whatsoever on the actual banking system and credit creation. 500 00:26:26,520 --> 00:26:29,440 Speaker 1: And this is, you know, quantitative easing is the most 501 00:26:29,480 --> 00:26:33,080 Speaker 1: empirically tested program maybe in human history. It's been used 502 00:26:33,200 --> 00:26:35,960 Speaker 1: over and over and over again, and the the results 503 00:26:36,000 --> 00:26:38,600 Speaker 1: are uniformly the same. They're just not what you hear 504 00:26:38,640 --> 00:26:40,840 Speaker 1: on on mainstream media. And again you don't have to 505 00:26:40,840 --> 00:26:43,280 Speaker 1: take my word for it. Just read the academic scholarship 506 00:26:43,320 --> 00:26:47,000 Speaker 1: that's been written by the QWI people themselves UM Bank 507 00:26:47,040 --> 00:26:49,640 Speaker 1: of Japan. A number of studies that have shown quantitative 508 00:26:49,680 --> 00:26:52,080 Speaker 1: easing has no effect in any of the three proposed 509 00:26:52,119 --> 00:26:54,840 Speaker 1: channels that it's opposed to. The Federal Reserve studies the 510 00:26:54,880 --> 00:26:56,680 Speaker 1: same thing. The last study I think from the FED 511 00:26:57,320 --> 00:27:00,280 Speaker 1: UM or maybe it was a researcher associated of the FED, 512 00:27:00,320 --> 00:27:02,280 Speaker 1: I forget, just going off the top of my head, 513 00:27:02,840 --> 00:27:05,520 Speaker 1: they said that a six hundred billion dollar QUEI program 514 00:27:05,560 --> 00:27:09,080 Speaker 1: that targeted specifically U S Treasury buying would we maybe 515 00:27:09,119 --> 00:27:12,320 Speaker 1: should expect about fifteen basis points of effect on the 516 00:27:12,359 --> 00:27:15,359 Speaker 1: ten year U S treasury. Think about that six hundred 517 00:27:15,400 --> 00:27:19,040 Speaker 1: billion in treasury buying lowers the tenure treasury by fifteen 518 00:27:19,080 --> 00:27:23,440 Speaker 1: basis points. That's basically a rounding error if it's statistically 519 00:27:23,480 --> 00:27:26,800 Speaker 1: significant at all. So what I'm saying is that quantitative 520 00:27:26,840 --> 00:27:30,119 Speaker 1: easing has no effect on the real economy because it 521 00:27:30,160 --> 00:27:34,240 Speaker 1: has no effect on banks. The banking system is constrained 522 00:27:34,280 --> 00:27:38,280 Speaker 1: by its own internal as well as external parameters that 523 00:27:38,359 --> 00:27:41,560 Speaker 1: have been doesn't matter what the FED does. There's no 524 00:27:41,560 --> 00:27:44,720 Speaker 1: no amount of jab booning or psychological manipulation or you know, 525 00:27:44,880 --> 00:27:47,200 Speaker 1: the FED being your best friend because it's buying bonds 526 00:27:47,520 --> 00:27:50,560 Speaker 1: has been able to get banks in the US, in Europe, 527 00:27:50,640 --> 00:27:53,640 Speaker 1: in Japan for thirty years out of the same rut. 528 00:27:53,920 --> 00:27:57,679 Speaker 1: Credit creation does not correspond to bank reserves or federal 529 00:27:57,720 --> 00:28:01,760 Speaker 1: reserve policies, which is the very lesson that Paul Voker 530 00:28:01,920 --> 00:28:05,159 Speaker 1: learned forty years ago. Bank reserves just don't care. If 531 00:28:05,240 --> 00:28:07,879 Speaker 1: banks want to do something, it doesn't matter if they 532 00:28:07,880 --> 00:28:10,840 Speaker 1: have reserves or not. They'll create the liquidity to do it. 533 00:28:10,840 --> 00:28:15,480 Speaker 1: It's really about the commercial banking system. So, um, so 534 00:28:15,560 --> 00:28:18,760 Speaker 1: if if quantitative easing isn't inflationary, and what I'm trying 535 00:28:18,760 --> 00:28:21,240 Speaker 1: to do is I'm trying to um I understand the 536 00:28:21,280 --> 00:28:25,239 Speaker 1: academic and factually correct argument. But then like what does 537 00:28:25,240 --> 00:28:27,880 Speaker 1: it mean to the average person? And so like, how 538 00:28:27,920 --> 00:28:31,520 Speaker 1: do we see this? So since two we've had massive 539 00:28:31,640 --> 00:28:34,480 Speaker 1: QUEI for the last decade or a dozen years, and 540 00:28:34,520 --> 00:28:36,720 Speaker 1: we've seen stock markets and and real estate go to 541 00:28:36,760 --> 00:28:40,080 Speaker 1: all time highs. And so even if that hasn't affected 542 00:28:40,080 --> 00:28:43,000 Speaker 1: the commercial banks to create more money, um, has it 543 00:28:43,120 --> 00:28:45,680 Speaker 1: led into a wealth effect Where my stock account, my 544 00:28:45,680 --> 00:28:48,040 Speaker 1: retirement accounts higher, my house is higher, I spend more money. 545 00:28:48,080 --> 00:28:50,440 Speaker 1: That's inflationary. Today we're seeing the opposite of that, even 546 00:28:50,480 --> 00:28:53,720 Speaker 1: though they haven't really done anything. People feel less wealthy today, 547 00:28:53,720 --> 00:28:56,320 Speaker 1: they're spending less money. So if we if we if 548 00:28:56,600 --> 00:28:59,240 Speaker 1: we don't look at just the purely you know, like 549 00:28:59,280 --> 00:29:03,040 Speaker 1: I said, um effects, or if we take the total 550 00:29:03,080 --> 00:29:06,480 Speaker 1: effects together, I mean, is there some causation or correlation there? 551 00:29:08,080 --> 00:29:10,000 Speaker 1: There should be, And that's one of the theoretical channels 552 00:29:10,000 --> 00:29:12,040 Speaker 1: for quantitative easing. And that's one of the reasons why 553 00:29:12,080 --> 00:29:14,560 Speaker 1: the Federal Reserve and all central banks pay attention to 554 00:29:14,600 --> 00:29:17,880 Speaker 1: the stock markets because they believe they can manipulate stocks 555 00:29:17,880 --> 00:29:20,760 Speaker 1: and they're correct about that into creating, as you said, 556 00:29:20,760 --> 00:29:24,120 Speaker 1: mark the wealth effect. But there's no correlation between the 557 00:29:24,160 --> 00:29:27,160 Speaker 1: stock prices and actual spending in any in any economy. 558 00:29:27,600 --> 00:29:31,680 Speaker 1: It's simply a theoretical idea you talk about academics. The 559 00:29:31,760 --> 00:29:34,320 Speaker 1: wealth effect is is more of an economic idea than 560 00:29:34,360 --> 00:29:37,320 Speaker 1: any real phenomenon. There's no evidence for it whatsoever, And 561 00:29:37,320 --> 00:29:40,160 Speaker 1: of course why would there be, just because that's your 562 00:29:40,320 --> 00:29:42,240 Speaker 1: your four oh one K goes up. You can't spend 563 00:29:42,240 --> 00:29:44,160 Speaker 1: a four oh one k until you actually retire. But 564 00:29:44,560 --> 00:29:46,600 Speaker 1: now you might think, well, my four oh one K 565 00:29:46,720 --> 00:29:48,320 Speaker 1: is up, so I can spend other money because I 566 00:29:48,360 --> 00:29:51,080 Speaker 1: don't have to save it. But that doesn't happen. There's 567 00:29:51,080 --> 00:29:53,760 Speaker 1: no evidence, there's no data the shows. And first, and 568 00:29:53,800 --> 00:29:57,000 Speaker 1: more than that, the economic growth since two thousand eight, 569 00:29:57,080 --> 00:30:01,200 Speaker 1: since the FEDS started on quantitative easing, has been materially 570 00:30:01,360 --> 00:30:05,040 Speaker 1: different than it had been before the precrdy. Materially different, 571 00:30:05,360 --> 00:30:09,239 Speaker 1: I mean much much worse. So if there is a 572 00:30:09,280 --> 00:30:13,000 Speaker 1: wealth effect, then it is is not only undetectable, it's 573 00:30:13,040 --> 00:30:15,920 Speaker 1: led us into worse situations than we would have been 574 00:30:16,040 --> 00:30:18,920 Speaker 1: had nothing happened in two thousand and eight. I I 575 00:30:18,920 --> 00:30:20,560 Speaker 1: don't know if I agree with that, and some of 576 00:30:20,560 --> 00:30:23,080 Speaker 1: it is just gut right. So like myself included like 577 00:30:23,080 --> 00:30:24,840 Speaker 1: I'm not going to retire for a long time, but 578 00:30:25,000 --> 00:30:27,040 Speaker 1: right now, the way the markets are right now, like 579 00:30:27,080 --> 00:30:29,680 Speaker 1: I'm second guessing vacations, I'm second guessing added onto my 580 00:30:29,720 --> 00:30:31,920 Speaker 1: house like I was going to because like, oh we, 581 00:30:32,160 --> 00:30:33,760 Speaker 1: like you said, the Yolk curve showing there could be 582 00:30:33,760 --> 00:30:36,160 Speaker 1: something there, I'm spending less money. So how do we 583 00:30:36,200 --> 00:30:37,840 Speaker 1: measure that? I don't know, but I do know there 584 00:30:37,920 --> 00:30:40,800 Speaker 1: is some measurement. So for example, we saw last year, 585 00:30:41,160 --> 00:30:44,640 Speaker 1: we saw record amounts of job quits, record amounts, and 586 00:30:44,640 --> 00:30:46,200 Speaker 1: we broke it month after month. And why were those 587 00:30:46,200 --> 00:30:47,800 Speaker 1: people quitting jobs? Well, a lot of polls should they 588 00:30:47,840 --> 00:30:50,480 Speaker 1: were going to trade options on robin hood and trade 589 00:30:50,480 --> 00:30:54,400 Speaker 1: cryptocurrencies and so that, Yeah, that did cause a wealth effect, 590 00:30:54,400 --> 00:30:58,440 Speaker 1: and that wasn't measurable, right, And that's an anecdote. It's 591 00:30:58,480 --> 00:31:01,480 Speaker 1: not acttionally that Okay, Um, yes there were you know. 592 00:31:01,600 --> 00:31:03,920 Speaker 1: The sad fact of the matter is the labor market 593 00:31:04,120 --> 00:31:06,239 Speaker 1: is not as robust as it would seem from that 594 00:31:06,280 --> 00:31:09,320 Speaker 1: metric because according to the Establishment Survey or any of 595 00:31:09,320 --> 00:31:13,240 Speaker 1: the survey the labor market that data, we have fewer 596 00:31:13,360 --> 00:31:17,360 Speaker 1: jobs today than we did in February. Um, so you 597 00:31:17,360 --> 00:31:19,440 Speaker 1: can blame that on the Great resignation and so called 598 00:31:19,440 --> 00:31:21,800 Speaker 1: Great resignation, but it also could be and I think 599 00:31:21,840 --> 00:31:24,920 Speaker 1: it is consistent with what markets are telling us. Not 600 00:31:25,000 --> 00:31:27,200 Speaker 1: stock markets, but other markets are telling us that there 601 00:31:27,280 --> 00:31:30,160 Speaker 1: was no wealth effect and that we're picking and choosing 602 00:31:30,200 --> 00:31:33,600 Speaker 1: anecdotes that fit preconceived narratives, the idea that the FED 603 00:31:33,640 --> 00:31:35,840 Speaker 1: created this bubble, when the FED really didn't do much 604 00:31:35,840 --> 00:31:40,640 Speaker 1: of anything. The real economy suffered for the breakdown. I mean, 605 00:31:40,720 --> 00:31:43,560 Speaker 1: of course it did. We put how many small businesses 606 00:31:43,600 --> 00:31:46,480 Speaker 1: out of work are out of business in Do we 607 00:31:46,480 --> 00:31:48,560 Speaker 1: really think that we're going to have a robust recovery 608 00:31:48,600 --> 00:31:52,440 Speaker 1: from that just on that alone, um, And so that's 609 00:31:52,440 --> 00:31:54,160 Speaker 1: what the markets are telling us, and that's what the 610 00:31:54,240 --> 00:31:56,440 Speaker 1: data tells us. With the fact that we have fewer jobs, 611 00:31:56,440 --> 00:32:00,960 Speaker 1: the participation rate took another leg down. These are similar 612 00:32:01,120 --> 00:32:04,360 Speaker 1: types of results that we saw in the aftermath of 613 00:32:04,400 --> 00:32:06,600 Speaker 1: the first financial crisis in two thousand nine and two 614 00:32:06,640 --> 00:32:10,160 Speaker 1: thousand ten. So what we're seeing is that that process 615 00:32:10,200 --> 00:32:13,120 Speaker 1: is being repeated for the second time. And so some 616 00:32:13,160 --> 00:32:17,120 Speaker 1: of these other ancillary anecdotes are just inconsistent or seemingly 617 00:32:17,160 --> 00:32:19,960 Speaker 1: inconsistent with the data, which tells US. There was no 618 00:32:20,040 --> 00:32:23,000 Speaker 1: wealth effect. There's no widespread wealth effect. It certainly had 619 00:32:23,040 --> 00:32:28,000 Speaker 1: an effect on certain certain proportions of the population, but 620 00:32:28,080 --> 00:32:31,320 Speaker 1: that wasn't enough to create an overall environment that was 621 00:32:31,400 --> 00:32:34,960 Speaker 1: actually consistent with a booming economy. Yeah. I know, with 622 00:32:35,080 --> 00:32:38,600 Speaker 1: these complex systems, it's it's hard to like pull things out. 623 00:32:38,640 --> 00:32:41,240 Speaker 1: But like say, let's say, for example, supply chains have 624 00:32:41,320 --> 00:32:43,880 Speaker 1: been overtaxed and we've had massive supply chain problems. Everybody 625 00:32:43,920 --> 00:32:45,920 Speaker 1: knows that. Now why, Well, there's a there's a trillion 626 00:32:45,960 --> 00:32:49,280 Speaker 1: reasons why. But one of the reasons why is excess demand, 627 00:32:49,320 --> 00:32:51,400 Speaker 1: and one of them is not enough product. Right, So 628 00:32:51,440 --> 00:32:54,720 Speaker 1: supply chains broke down, COVID shut them down, turn back on, etcetera. 629 00:32:54,760 --> 00:32:57,320 Speaker 1: People quit. There's all that. But I look at some 630 00:32:57,400 --> 00:33:00,240 Speaker 1: data that showed that our imports had were twenty sent 631 00:33:00,360 --> 00:33:03,040 Speaker 1: more than they were previously on average, So we were 632 00:33:03,080 --> 00:33:05,520 Speaker 1: buying more stuff. We were ordering more stuff. I know 633 00:33:05,600 --> 00:33:09,360 Speaker 1: people with in industries, Um, how are there There's record 634 00:33:09,440 --> 00:33:13,360 Speaker 1: sales in outdoor equipment and products and things like that, So, um, 635 00:33:13,400 --> 00:33:17,440 Speaker 1: there were record amounts of buying. We did order more stuff, 636 00:33:17,440 --> 00:33:21,240 Speaker 1: which overtaxed the supply demand equation of the equilibrium of 637 00:33:21,240 --> 00:33:23,400 Speaker 1: the supply chain. So there was some of that. We 638 00:33:23,440 --> 00:33:26,920 Speaker 1: can't quantify that, no, we can, but that's a that 639 00:33:27,080 --> 00:33:29,840 Speaker 1: was a reallocation of resources. Because Americans were locked in 640 00:33:29,880 --> 00:33:32,520 Speaker 1: their homes, they went not spending money on Amazon, which 641 00:33:32,560 --> 00:33:35,120 Speaker 1: meant we were buying goods from overseas producers. That only 642 00:33:35,160 --> 00:33:38,000 Speaker 1: made things worse because we couldn't move goods around. As 643 00:33:38,000 --> 00:33:40,480 Speaker 1: you said, Mark, there was supply bottlenecks and things like that. 644 00:33:40,800 --> 00:33:44,240 Speaker 1: But what people don't realize is that as Americans were 645 00:33:44,240 --> 00:33:47,840 Speaker 1: spending goods and record amounts, that's absolutely true, in record 646 00:33:47,880 --> 00:33:51,760 Speaker 1: amounts on goods, they were not spending on services. So 647 00:33:51,840 --> 00:33:54,800 Speaker 1: the goods economy made it seem like everything was terrific, 648 00:33:54,880 --> 00:33:58,120 Speaker 1: if not overheating. But then you look at services that 649 00:33:58,240 --> 00:34:00,840 Speaker 1: forgotten as the forgotten part of the whole thing because 650 00:34:00,840 --> 00:34:04,520 Speaker 1: it's not sexy, because it wasn't exciting. We've spent less 651 00:34:04,520 --> 00:34:06,760 Speaker 1: on services over the last couple of years than than 652 00:34:06,920 --> 00:34:09,840 Speaker 1: and and before we're in real terms, the spending on 653 00:34:09,920 --> 00:34:13,279 Speaker 1: services is still not back where it was before the 654 00:34:13,320 --> 00:34:17,399 Speaker 1: COVID crisis. Let me say that again, we're two years later, 655 00:34:17,480 --> 00:34:20,000 Speaker 1: we're spending less on services than we did before the 656 00:34:20,400 --> 00:34:24,000 Speaker 1: before the recession. In so if you look only at goods, 657 00:34:24,360 --> 00:34:26,600 Speaker 1: you look only at the prices of goods, it looks 658 00:34:26,640 --> 00:34:29,719 Speaker 1: like the economy went completely crazy. Because it did. It 659 00:34:29,760 --> 00:34:32,200 Speaker 1: was insane in that one part of the economy, but 660 00:34:32,239 --> 00:34:35,719 Speaker 1: the rest of the economy, which explains why job creation 661 00:34:35,840 --> 00:34:38,319 Speaker 1: hasn't been as robust as some of the numbers make 662 00:34:38,360 --> 00:34:41,920 Speaker 1: it seems because the whole economy, the entire system as 663 00:34:41,920 --> 00:34:46,560 Speaker 1: a whole, didn't really recover. So what happened in one 664 00:34:46,880 --> 00:34:49,560 Speaker 1: as the demand curve was artificially shifted to the right, 665 00:34:49,880 --> 00:34:52,399 Speaker 1: it was only artificially shifted to the right for part 666 00:34:52,520 --> 00:34:55,840 Speaker 1: of the economy, and so that created the imbalance, a 667 00:34:55,920 --> 00:34:59,320 Speaker 1: reallocation imbalance that led to consumer prices going up, in 668 00:34:59,440 --> 00:35:02,280 Speaker 1: oil price and gasoline, everything else that you just mentioned. 669 00:35:02,640 --> 00:35:07,560 Speaker 1: That exacerbated supply problems from the pandemic and everything else, shipments, 670 00:35:07,560 --> 00:35:11,000 Speaker 1: logistical issues all over the economy. But it didn't address 671 00:35:11,200 --> 00:35:15,480 Speaker 1: the lack of spending, the really seriously serious and alarming 672 00:35:15,560 --> 00:35:17,640 Speaker 1: lack of spending on the services. So if you look 673 00:35:17,680 --> 00:35:21,120 Speaker 1: at those combined and aggregate, we didn't actually increase that much. 674 00:35:21,480 --> 00:35:24,399 Speaker 1: That would just shifted from you if you actually draw mark, 675 00:35:24,480 --> 00:35:27,799 Speaker 1: if you draw a line from you know, where services 676 00:35:27,920 --> 00:35:31,480 Speaker 1: or where personal consumption expenditures as a whole, goods and 677 00:35:31,560 --> 00:35:34,920 Speaker 1: services together would have been had there been no great 678 00:35:34,920 --> 00:35:37,919 Speaker 1: no COVID recession. That's right where we are right now. 679 00:35:38,480 --> 00:35:41,360 Speaker 1: So essentially all the money that was spent on goods 680 00:35:41,640 --> 00:35:43,239 Speaker 1: that would have been or all the money that would 681 00:35:43,239 --> 00:35:45,320 Speaker 1: have been spent on services was just spent on goods 682 00:35:45,320 --> 00:35:48,160 Speaker 1: for a while. Okay, I was going to ask you 683 00:35:48,200 --> 00:35:52,120 Speaker 1: about the endgame, which you had alluded to. You think 684 00:35:52,160 --> 00:35:55,040 Speaker 1: there's potentially a few more hikes coming before something breaks. 685 00:35:55,040 --> 00:35:56,960 Speaker 1: We don't know what it is, we'll guess, and then 686 00:35:56,960 --> 00:35:59,080 Speaker 1: the reverse course. I'm gonna come back to that in 687 00:35:59,120 --> 00:36:01,600 Speaker 1: a minute, but before we jump into that, I want 688 00:36:01,640 --> 00:36:05,960 Speaker 1: to talk about this inelasticity of the money supply. So 689 00:36:06,000 --> 00:36:09,960 Speaker 1: you talked about one of the failures of gold, specifically 690 00:36:09,960 --> 00:36:13,040 Speaker 1: going into the Great Depression, was that the inelasticity of 691 00:36:13,080 --> 00:36:15,000 Speaker 1: the money supply and then the need to kind of 692 00:36:15,000 --> 00:36:18,120 Speaker 1: put the credit on top of that. Um Am, I 693 00:36:18,200 --> 00:36:21,840 Speaker 1: framing that up correctly. Yeah, what you've seen throughout history 694 00:36:22,080 --> 00:36:25,480 Speaker 1: was that in elastic money supplies always led to periods 695 00:36:25,480 --> 00:36:28,840 Speaker 1: of hoarding. Well, first you got risk taking, bubble type behavior, 696 00:36:28,920 --> 00:36:33,040 Speaker 1: that eventually leads to hoarding with no ability to have 697 00:36:33,160 --> 00:36:38,200 Speaker 1: elastic money supply. That causes bank panics, destruction, economic destruction, 698 00:36:38,200 --> 00:36:43,000 Speaker 1: demand destruction, deflation, and then depression. That happened repeatedly throughout 699 00:36:43,080 --> 00:36:47,200 Speaker 1: history when whenever we got into these uh, these deflationary periods, 700 00:36:47,239 --> 00:36:51,120 Speaker 1: and that's the reason why many countries turned to central banks, 701 00:36:51,120 --> 00:36:55,319 Speaker 1: hoping that a public utility could provide an element of elasticity. 702 00:36:55,360 --> 00:36:57,399 Speaker 1: Of course, that that didn't prove to work very well, 703 00:36:57,800 --> 00:37:01,000 Speaker 1: certainly in the Great Depression with the the brand new 704 00:37:01,040 --> 00:37:04,279 Speaker 1: Federal Reserve only fifteen years into its history and it 705 00:37:04,360 --> 00:37:07,640 Speaker 1: leads to the worst economic calamity in history. So that 706 00:37:07,719 --> 00:37:11,480 Speaker 1: didn't really settle the elasticity question either. But that's still 707 00:37:12,160 --> 00:37:15,160 Speaker 1: in a fixed money or hard money system, we always 708 00:37:15,200 --> 00:37:18,560 Speaker 1: have this defect where it leads to pooling and hoarding 709 00:37:18,920 --> 00:37:22,400 Speaker 1: that produces some of the worst economic consequences. Well, it 710 00:37:22,520 --> 00:37:26,600 Speaker 1: seems though to me, is that it's one I would say, 711 00:37:26,640 --> 00:37:29,359 Speaker 1: booms and bus are natural part of the world, right, 712 00:37:29,360 --> 00:37:32,520 Speaker 1: we have seasons in life, and we were we're humans 713 00:37:32,560 --> 00:37:35,759 Speaker 1: and so um we like neon colors and none. Next 714 00:37:35,800 --> 00:37:37,120 Speaker 1: thing you know, they're out of fashion and we just 715 00:37:37,200 --> 00:37:39,799 Speaker 1: want white and black for example, right, and people made 716 00:37:39,800 --> 00:37:42,560 Speaker 1: too many of the neon clothes, and then fidget spinners 717 00:37:42,600 --> 00:37:44,840 Speaker 1: are popular, and then people bought too many fidget spinners, 718 00:37:44,920 --> 00:37:47,800 Speaker 1: and like it just happens. Right. So there's like natural cycles, 719 00:37:47,920 --> 00:37:50,640 Speaker 1: and it seems like it's the creation of the money 720 00:37:50,640 --> 00:37:53,960 Speaker 1: supply that creates this this artificial boom, and then it's 721 00:37:54,000 --> 00:37:57,239 Speaker 1: the restriction of the supply and not continuing to grow 722 00:37:57,280 --> 00:37:59,440 Speaker 1: at the same pace, almost like a Ponzi scheme, that 723 00:37:59,480 --> 00:38:01,719 Speaker 1: then seem to crash it. And so maybe on a 724 00:38:01,760 --> 00:38:04,360 Speaker 1: hard money system we would still have booms and bus 725 00:38:04,640 --> 00:38:07,080 Speaker 1: which we've seen throughout hundreds of years of history, but 726 00:38:07,160 --> 00:38:09,880 Speaker 1: those booms and bus are small in comparison to the 727 00:38:10,200 --> 00:38:13,280 Speaker 1: ever growing booms and bus that we have now under 728 00:38:13,360 --> 00:38:17,760 Speaker 1: these artificially stimulated bubbles. Yeah, I don't that's a tough question. 729 00:38:17,840 --> 00:38:19,800 Speaker 1: It's in some In some ways it's a counter factual 730 00:38:19,800 --> 00:38:23,279 Speaker 1: because you can't go back and redo historical depressions and 731 00:38:23,320 --> 00:38:26,640 Speaker 1: see how it will worked out under different circumstances. But 732 00:38:26,680 --> 00:38:29,880 Speaker 1: as you said, Mark, that there is a in eight 733 00:38:30,480 --> 00:38:32,880 Speaker 1: human boom and bus cycle built within us, and I 734 00:38:32,920 --> 00:38:35,520 Speaker 1: don't think we'll ever ever solve that problem because there 735 00:38:35,600 --> 00:38:38,040 Speaker 1: is no way to solve that problem unless humans can 736 00:38:38,080 --> 00:38:41,239 Speaker 1: start working from perfect future information. Unless we do get 737 00:38:41,480 --> 00:38:44,200 Speaker 1: crystal balls where we can tell the future. There's always 738 00:38:44,200 --> 00:38:46,000 Speaker 1: gonna be as you said, there's always gonna be six 739 00:38:46,040 --> 00:38:49,000 Speaker 1: cycles and fashions. There's gonna be cycles and building. Uh, 740 00:38:49,040 --> 00:38:51,680 Speaker 1: there's gonna be too much risk taking whatever. And I 741 00:38:51,719 --> 00:38:55,480 Speaker 1: think and I fear most people nowadays have confused and 742 00:38:55,480 --> 00:38:59,359 Speaker 1: conflated an elasticity or elasticity with something like too big 743 00:38:59,400 --> 00:39:02,520 Speaker 1: to fail, which is, you know, sort of the quasi 744 00:39:02,840 --> 00:39:06,560 Speaker 1: haphazard program that Ben Bernanke's fed tried to put together 745 00:39:06,600 --> 00:39:09,600 Speaker 1: in the wake of the first financial crisis. That's not elasticity. 746 00:39:09,680 --> 00:39:13,080 Speaker 1: That was something else. Entirely elasticity is that when we 747 00:39:13,160 --> 00:39:16,359 Speaker 1: go into a bust cycle, that we don't end up 748 00:39:16,360 --> 00:39:20,080 Speaker 1: with a monetary shortage that then produces deflation. You can 749 00:39:20,120 --> 00:39:23,280 Speaker 1: still have a bus cycle without the deflation that leads 750 00:39:23,320 --> 00:39:28,120 Speaker 1: to the necessary um a creative destruction a Shompeter called it. 751 00:39:28,480 --> 00:39:31,000 Speaker 1: We still want that to happen. We still want bad 752 00:39:31,000 --> 00:39:34,400 Speaker 1: banks that have bad ideas to give out bad loans 753 00:39:34,400 --> 00:39:36,880 Speaker 1: to bad people. We want them to go out of business. 754 00:39:36,880 --> 00:39:39,399 Speaker 1: But we don't want to have happened, and what does 755 00:39:39,560 --> 00:39:43,200 Speaker 1: happen during these deflationary depressions is that when bad banks 756 00:39:43,200 --> 00:39:45,719 Speaker 1: go out of business, it leads to good banks going 757 00:39:45,719 --> 00:39:48,640 Speaker 1: out of business and good businesses going out of business 758 00:39:48,680 --> 00:39:52,880 Speaker 1: at the same time. Because money becomes too dear, everybody 759 00:39:52,960 --> 00:39:55,239 Speaker 1: holds onto money and there's not enough liquidity in the 760 00:39:55,280 --> 00:39:59,040 Speaker 1: economy that bad banks and good banks alike end up 761 00:39:59,080 --> 00:40:01,920 Speaker 1: going out of business, which harms the economy not just 762 00:40:01,960 --> 00:40:04,400 Speaker 1: in the short run but the long run. So the 763 00:40:04,440 --> 00:40:08,200 Speaker 1: idea behind elasticity, the real idea behind elasticity not too 764 00:40:08,239 --> 00:40:11,040 Speaker 1: big to fail, is that we sort the good from 765 00:40:11,040 --> 00:40:12,680 Speaker 1: the bad. And the only way to do that is 766 00:40:12,719 --> 00:40:15,400 Speaker 1: to make sure the good, good firms and good banks 767 00:40:15,480 --> 00:40:18,759 Speaker 1: have enough money, have enough liquidity available that they can 768 00:40:18,800 --> 00:40:22,399 Speaker 1: survive any bust cycle. That's what Walter Badgett was talking 769 00:40:22,400 --> 00:40:24,840 Speaker 1: about in the nineteenth century from the Bank of England. 770 00:40:25,200 --> 00:40:28,480 Speaker 1: You know, you lend freely at high rates on good collateral. 771 00:40:29,000 --> 00:40:31,640 Speaker 1: That was that was that was the central bank dictum 772 00:40:31,760 --> 00:40:35,799 Speaker 1: of elasticity and currency. Now central banks nowadays don't do 773 00:40:35,840 --> 00:40:38,960 Speaker 1: that because they can't They can't even define elasticity, or 774 00:40:39,040 --> 00:40:42,360 Speaker 1: they can't even define liquidity, let alone create elasticity. But 775 00:40:42,480 --> 00:40:44,799 Speaker 1: still that's the idea that I think that we need 776 00:40:44,880 --> 00:40:48,000 Speaker 1: to be come to terms with is that elasticity doesn't 777 00:40:48,000 --> 00:40:51,120 Speaker 1: mean too big to fail. It means limiting the downside 778 00:40:51,160 --> 00:40:55,200 Speaker 1: to only those who made big mistakes. Where would you 779 00:40:55,239 --> 00:41:00,000 Speaker 1: put yourself? Um, from an economist viewpoint like on Austria 780 00:41:00,040 --> 00:41:02,480 Speaker 1: an economist view and then maybe the opposite, being a 781 00:41:02,560 --> 00:41:05,439 Speaker 1: Kinsian kind of view. Where do you? Where would you say? 782 00:41:05,520 --> 00:41:07,319 Speaker 1: Are you somewhere in the middle? Are you would you 783 00:41:07,320 --> 00:41:10,120 Speaker 1: consider yourself Austrian Kinsian? Or how how do you think 784 00:41:10,160 --> 00:41:14,520 Speaker 1: about that? I've first of all, I'm not an economist. 785 00:41:14,719 --> 00:41:16,200 Speaker 1: I'm just talking about your view. I'm talking about your 786 00:41:16,239 --> 00:41:19,840 Speaker 1: view that. Yeah, I'm not economist either, but I aligned 787 00:41:19,880 --> 00:41:22,799 Speaker 1: with the Austrians, but I'm not ECONOMI No, that's I 788 00:41:22,840 --> 00:41:25,680 Speaker 1: think being not being an economist is actually helpful because 789 00:41:25,719 --> 00:41:27,719 Speaker 1: part of the problem is that you find yourself in 790 00:41:27,760 --> 00:41:31,480 Speaker 1: a box. I've been accused of being a Kinsian, a Monitorist, 791 00:41:31,520 --> 00:41:36,000 Speaker 1: and Austrian, a Marxist, pretty much anything around around the spectrum. 792 00:41:36,120 --> 00:41:38,000 Speaker 1: I would I would like to think of myself as 793 00:41:38,120 --> 00:41:42,080 Speaker 1: just a realist. UM. I started out with Austrian sympathies, 794 00:41:42,160 --> 00:41:45,000 Speaker 1: hard money, gold standard free market capital. Is it mean 795 00:41:45,360 --> 00:41:48,280 Speaker 1: you just can't get over the history of what happens 796 00:41:48,760 --> 00:41:51,799 Speaker 1: when you get into these deflationary depressions, which is the 797 00:41:51,840 --> 00:41:54,759 Speaker 1: worst of the worst case. So for I, you know, 798 00:41:54,840 --> 00:41:57,279 Speaker 1: I disagree with most of what Keene said about some 799 00:41:57,360 --> 00:42:00,319 Speaker 1: of the implications and what what government should do in 800 00:42:00,360 --> 00:42:03,200 Speaker 1: the wake of deflationary crisis. But yet you can't argue 801 00:42:03,200 --> 00:42:07,400 Speaker 1: with how Keens framed at least the deflationary disease you 802 00:42:07,440 --> 00:42:10,040 Speaker 1: call what the worst evil there is because in a 803 00:42:10,200 --> 00:42:15,160 Speaker 1: deflationary depression, the deflation, the consequences of that deflationary depression 804 00:42:15,239 --> 00:42:19,719 Speaker 1: depression fall mostly on workers. So the poorest members of 805 00:42:20,080 --> 00:42:23,120 Speaker 1: society are the ones who suffer in these worst cases. 806 00:42:23,160 --> 00:42:26,320 Speaker 1: So we have a very vested interest as a society 807 00:42:26,320 --> 00:42:28,600 Speaker 1: in the system to make sure that we don't have 808 00:42:28,680 --> 00:42:32,560 Speaker 1: deflationary depression. So if that makes me a monitorist, I 809 00:42:32,600 --> 00:42:35,480 Speaker 1: don't care if that makes me, uh, certainly not an Austrian. 810 00:42:35,480 --> 00:42:38,840 Speaker 1: But you know, sympathies for some of these other schools 811 00:42:38,840 --> 00:42:42,400 Speaker 1: and doctrines. I think most of them have have at 812 00:42:42,480 --> 00:42:45,400 Speaker 1: least some good ideas that you should listen to. But 813 00:42:45,480 --> 00:42:47,640 Speaker 1: I really think part of the problem here is that 814 00:42:47,680 --> 00:42:52,560 Speaker 1: everybody gets very rigidly doctrinaire and ideological and stops thinking 815 00:42:52,600 --> 00:42:55,040 Speaker 1: about and thinking about things in terms of evidence and 816 00:42:55,080 --> 00:42:58,279 Speaker 1: actual history. Yeah. Just you had said that in you know, 817 00:42:58,360 --> 00:43:00,279 Speaker 1: you do believe banks should be able to fail and 818 00:43:00,320 --> 00:43:02,520 Speaker 1: wash out the bad ones and creative destruction. I agree 819 00:43:02,560 --> 00:43:04,480 Speaker 1: with that. But then you talked about the in a 820 00:43:04,560 --> 00:43:06,560 Speaker 1: in a deflationary event, that the good banks go out 821 00:43:06,600 --> 00:43:10,320 Speaker 1: of business with the bad banks. And we just recently 822 00:43:10,360 --> 00:43:12,880 Speaker 1: saw this in the crypto markets right where well we 823 00:43:12,920 --> 00:43:14,600 Speaker 1: saw in two thousand and eight obviously when with the 824 00:43:14,640 --> 00:43:17,560 Speaker 1: investment banks, and recently in the crypto markets, and a 825 00:43:17,560 --> 00:43:19,839 Speaker 1: lot of that is because the contagion that's taken so 826 00:43:19,920 --> 00:43:23,000 Speaker 1: too much leverage built up in the system, the contagion 827 00:43:23,080 --> 00:43:26,279 Speaker 1: because they're all um, you know, doing loans with each other, 828 00:43:26,320 --> 00:43:28,319 Speaker 1: and so when one goes down, then they lose that 829 00:43:28,800 --> 00:43:31,880 Speaker 1: those assets and dominoes the whole thing and so um. 830 00:43:31,920 --> 00:43:34,320 Speaker 1: In a it's the leverage that seems to be the problem. 831 00:43:34,320 --> 00:43:36,480 Speaker 1: And so in a system where we didn't have all 832 00:43:36,520 --> 00:43:40,120 Speaker 1: this in uh in monetary inflation, um, and we didn't 833 00:43:40,160 --> 00:43:42,799 Speaker 1: have all this leverage that built up, and we had 834 00:43:43,160 --> 00:43:46,759 Speaker 1: banks that were on full reserve for example, then those 835 00:43:46,800 --> 00:43:49,360 Speaker 1: banks wouldn't go out of business, they wouldn't be subject 836 00:43:49,360 --> 00:43:51,080 Speaker 1: to the mistakes at those and you would never have 837 00:43:51,160 --> 00:43:56,839 Speaker 1: economic growth because of the inelasticity of the money. Yeah, 838 00:43:56,880 --> 00:43:59,439 Speaker 1: because they're That's the thing I think that's the other 839 00:43:59,480 --> 00:44:01,279 Speaker 1: part of this that we're forgetting is that, you know, 840 00:44:01,400 --> 00:44:03,880 Speaker 1: we live in a dynamic world where demand for money 841 00:44:03,960 --> 00:44:07,120 Speaker 1: is not static. Demand for money changes, and I'm talking 842 00:44:07,120 --> 00:44:11,440 Speaker 1: about legitimate demand, not just speculative demand. Legitimate demand rises 843 00:44:11,480 --> 00:44:14,600 Speaker 1: and falls, and we're supposed to be able to to 844 00:44:13,920 --> 00:44:16,840 Speaker 1: u to get a sense of that by the you know, 845 00:44:16,880 --> 00:44:20,560 Speaker 1: interest rates. For example, if there's a legitimate demand for money. 846 00:44:20,560 --> 00:44:22,919 Speaker 1: I know, legitimate is a sort of a weasel work here, 847 00:44:22,920 --> 00:44:25,360 Speaker 1: and it's doing a lot of work, but legitimate demand 848 00:44:25,400 --> 00:44:28,080 Speaker 1: for money goes up. You know, do we really want 849 00:44:28,080 --> 00:44:30,719 Speaker 1: the price of money to skyrocket because it's fixed. If 850 00:44:30,760 --> 00:44:34,800 Speaker 1: there's legitimate demand for money for legitimately productive and sustainable purposes, 851 00:44:35,160 --> 00:44:37,600 Speaker 1: why wouldn't we want the dynamic money supply on the 852 00:44:37,600 --> 00:44:40,200 Speaker 1: supply side to be able to meet that demand for 853 00:44:40,280 --> 00:44:44,520 Speaker 1: money without causing frictions and harms and inefficiencies. So if 854 00:44:44,600 --> 00:44:48,080 Speaker 1: you have a fixed money system where you don't dynamically 855 00:44:48,080 --> 00:44:51,440 Speaker 1: meet demand. Two things happen. One thing is you'll get 856 00:44:51,520 --> 00:44:54,080 Speaker 1: lack of economic growth, and the second thing is the 857 00:44:54,080 --> 00:44:56,960 Speaker 1: commercial system will invent new ways of new forms of 858 00:44:57,000 --> 00:45:00,000 Speaker 1: money to circumvent the hard money, uh, the hard money 859 00:45:00,280 --> 00:45:02,960 Speaker 1: cap so to speak. Let's this happened throughout I mean 860 00:45:03,000 --> 00:45:06,840 Speaker 1: the Euro dollar system itself was an answer to Triffin's paradox, 861 00:45:06,840 --> 00:45:10,000 Speaker 1: because Triffin's paradox wasn't really a paradox. It was simply 862 00:45:10,040 --> 00:45:14,000 Speaker 1: the the international reserve system under Breton Woods was incapable 863 00:45:14,080 --> 00:45:17,440 Speaker 1: of re of meeting rising global demand for money in 864 00:45:17,480 --> 00:45:20,480 Speaker 1: a dynamic setting. So I don't you know, I don't 865 00:45:20,520 --> 00:45:24,040 Speaker 1: agree that demand for money or the supply of money 866 00:45:24,040 --> 00:45:26,440 Speaker 1: needs to be fixed in order to make sure that 867 00:45:26,440 --> 00:45:28,600 Speaker 1: we don't ever have an asset bubble, because, like I said, 868 00:45:28,920 --> 00:45:32,759 Speaker 1: I think business cycles happen anyway. They're gonna happen regardless 869 00:45:32,840 --> 00:45:34,400 Speaker 1: of whether or not there's fixed money or not. You 870 00:45:34,480 --> 00:45:37,280 Speaker 1: saw that, I'll throughout the nineteenth century, on the best 871 00:45:37,320 --> 00:45:40,280 Speaker 1: of the best, the classical gold standard, there were bubbles everywhere. 872 00:45:40,680 --> 00:45:43,280 Speaker 1: It happens. It's it's it's a flaw and human nature 873 00:45:43,320 --> 00:45:45,160 Speaker 1: not in the monitor. And I would agree with that 874 00:45:45,239 --> 00:45:47,279 Speaker 1: they happen. And that's the problem that we see all 875 00:45:47,280 --> 00:45:50,279 Speaker 1: throughout the world today. Um. For example, with a look 876 00:45:50,280 --> 00:45:53,160 Speaker 1: at the rise of antidepressants US, especially in the United 877 00:45:53,160 --> 00:45:56,239 Speaker 1: States for example. Well like, uh, you need you know, 878 00:45:56,280 --> 00:45:58,360 Speaker 1: without we we can't always just be happy humbers at 879 00:45:58,360 --> 00:46:00,359 Speaker 1: the time, like we have to have pain in order 880 00:46:00,400 --> 00:46:03,200 Speaker 1: to know joy for example, right, And how how do 881 00:46:03,239 --> 00:46:04,680 Speaker 1: we know the happiest time of our life if we 882 00:46:04,680 --> 00:46:06,520 Speaker 1: don't have sad times and things like that, and so 883 00:46:07,640 --> 00:46:10,560 Speaker 1: a lot of that. But but jumping back, stay staying 884 00:46:10,560 --> 00:46:13,040 Speaker 1: on track here with the money supply, so um, like 885 00:46:13,160 --> 00:46:15,640 Speaker 1: with bitcoin you've mentioned many times and I've seen your 886 00:46:15,680 --> 00:46:18,600 Speaker 1: interviews with one of my good buddies, Robert Breedlove Um, 887 00:46:18,640 --> 00:46:22,440 Speaker 1: and you mentioned, now bitcoin has some superior attributes transparency, 888 00:46:22,640 --> 00:46:26,240 Speaker 1: lack of asymmetric things like that, but it's the inelasticity 889 00:46:26,360 --> 00:46:28,240 Speaker 1: with that because of bitcoin of course has a fixed 890 00:46:28,239 --> 00:46:30,280 Speaker 1: mon terary supply and over more than twenty one million, 891 00:46:30,680 --> 00:46:33,720 Speaker 1: then you think that leads us back into the Triffan's 892 00:46:33,760 --> 00:46:37,359 Speaker 1: dilemma paradox kind of thing, um, and then back into 893 00:46:37,480 --> 00:46:39,160 Speaker 1: some sort of a euro dollar or some sort of 894 00:46:39,200 --> 00:46:43,880 Speaker 1: a new emergence of a credit based system. Yeah, I 895 00:46:43,960 --> 00:46:46,040 Speaker 1: think that's the primary drawback. You're right, because I think 896 00:46:46,040 --> 00:46:49,799 Speaker 1: bitcoin is an elegant idea, an elegant step in the 897 00:46:49,880 --> 00:46:52,719 Speaker 1: right direction, because one of the problems with the Euro 898 00:46:52,760 --> 00:46:55,840 Speaker 1: dollar system is that it is a distributed ledger, virtual currency, 899 00:46:55,880 --> 00:46:59,680 Speaker 1: digital currency technology, but it's maintained by just the banking 900 00:46:59,680 --> 00:47:02,840 Speaker 1: system them and it's completely opaque. We don't really know 901 00:47:02,880 --> 00:47:04,840 Speaker 1: what goes on inside of it, which has privileged the 902 00:47:04,880 --> 00:47:08,960 Speaker 1: banks even that much more. An Austrian concept called cantilling effects, 903 00:47:08,960 --> 00:47:12,000 Speaker 1: which if you're able to create money more than if 904 00:47:12,040 --> 00:47:14,680 Speaker 1: you're able to create money and nobody else's you get 905 00:47:14,719 --> 00:47:18,200 Speaker 1: the benefits first, which of course then leads to over financialization, 906 00:47:18,560 --> 00:47:20,920 Speaker 1: if not hyper financialization, which we saw in the pre 907 00:47:21,000 --> 00:47:23,799 Speaker 1: crisis era. So Bitcoin, in a lot of ways was 908 00:47:23,840 --> 00:47:27,120 Speaker 1: a step in the right direction, certainly in terms of transparency, 909 00:47:27,160 --> 00:47:30,279 Speaker 1: but also in terms of just simplicity. Um, we don't 910 00:47:30,320 --> 00:47:32,960 Speaker 1: need an overly complicated monetary system. In fact, we don't 911 00:47:32,960 --> 00:47:36,440 Speaker 1: want an over overly complicated monetary system because money is 912 00:47:36,440 --> 00:47:39,480 Speaker 1: supposed to be a commercial tool. It's not wealth, it's 913 00:47:39,480 --> 00:47:42,839 Speaker 1: not anything else. It's supposed to allow a modern capitalist, 914 00:47:42,920 --> 00:47:46,719 Speaker 1: free market economy to do what it does best, and 915 00:47:46,760 --> 00:47:50,080 Speaker 1: that's that's we focus on productive uses of our time. 916 00:47:50,400 --> 00:47:53,080 Speaker 1: We're not hiring all sorts of accountants and lawyers and 917 00:47:53,080 --> 00:47:56,120 Speaker 1: attorneys and banks to hedge our financial risk. We should 918 00:47:56,120 --> 00:47:58,520 Speaker 1: not think about money whatsoever. It's one of those things 919 00:47:58,800 --> 00:48:00,359 Speaker 1: you should just be in the back of your mind 920 00:48:00,360 --> 00:48:01,960 Speaker 1: and you never really have to deal much, you know, 921 00:48:01,920 --> 00:48:04,040 Speaker 1: I never have to think much about it. And that's 922 00:48:04,040 --> 00:48:05,759 Speaker 1: one of the problems with the system that we have 923 00:48:05,880 --> 00:48:08,080 Speaker 1: is we spend so much time talking about this stuff 924 00:48:08,239 --> 00:48:11,200 Speaker 1: and worrying about this stuff and watching it go crazy, 925 00:48:11,200 --> 00:48:14,000 Speaker 1: that we've kind of lost focus here on the real economy, 926 00:48:14,040 --> 00:48:18,040 Speaker 1: which is what's supposed to so Bitcoin I think represented 927 00:48:18,400 --> 00:48:20,800 Speaker 1: at least a couple of good steps in the right direction. 928 00:48:21,280 --> 00:48:23,200 Speaker 1: I worried though, that it didn't take enough of them 929 00:48:23,200 --> 00:48:24,920 Speaker 1: in the right direction, and it leaves us in the 930 00:48:24,960 --> 00:48:28,640 Speaker 1: same sort of inherent flaws that we had before. And again, 931 00:48:29,160 --> 00:48:33,880 Speaker 1: the an elasticity problem is that yes, we're gonna have pain, 932 00:48:33,920 --> 00:48:36,200 Speaker 1: we're gonna have business cycles. They're gonna be good times 933 00:48:36,200 --> 00:48:38,960 Speaker 1: and bad times, but there really is no reason for 934 00:48:39,000 --> 00:48:42,440 Speaker 1: the bad times to be so bad that it endangers 935 00:48:42,480 --> 00:48:44,840 Speaker 1: the long run future, which is what we saw in 936 00:48:44,840 --> 00:48:48,319 Speaker 1: the nineteen thirties or in three but we didn't see 937 00:48:48,320 --> 00:48:50,800 Speaker 1: it in nineteen o seven because there was elasticity in 938 00:48:50,840 --> 00:48:55,200 Speaker 1: the banking system created by the banking system itself. So, yes, 939 00:48:55,280 --> 00:48:58,239 Speaker 1: boom bus cycles will happen, but we don't need to 940 00:48:58,280 --> 00:49:00,920 Speaker 1: have the worst of the worst case present to be 941 00:49:00,960 --> 00:49:02,920 Speaker 1: presented with the worst of the worst case when we 942 00:49:02,960 --> 00:49:05,160 Speaker 1: do get into the bud But if we hadn't, if 943 00:49:05,160 --> 00:49:08,399 Speaker 1: we hadn't built the money supply up so big, Um, 944 00:49:08,440 --> 00:49:10,799 Speaker 1: the boom wouldn't have gotten so big, wouldn't, And then 945 00:49:10,800 --> 00:49:13,080 Speaker 1: it would have made the bus so fall so bad. 946 00:49:13,160 --> 00:49:15,440 Speaker 1: So if I'm walking on a one foot wall and 947 00:49:15,480 --> 00:49:16,960 Speaker 1: I fall off, it's not that bad. If I'm walking 948 00:49:16,960 --> 00:49:19,040 Speaker 1: on a hunter football and I fall off, it's really bad. 949 00:49:19,120 --> 00:49:20,880 Speaker 1: And so if we look at if we look at 950 00:49:20,920 --> 00:49:26,240 Speaker 1: it from that perspective. So for example, um, the problem 951 00:49:26,280 --> 00:49:28,399 Speaker 1: that we're in today, right, So they the last couple 952 00:49:28,440 --> 00:49:30,600 Speaker 1: of years, and to the point you're saying, I mean 953 00:49:30,640 --> 00:49:32,799 Speaker 1: the creation of the money supply. This increased the money supply, 954 00:49:32,920 --> 00:49:35,359 Speaker 1: the Fed Fed Treasury stimulus of the last two years. 955 00:49:35,440 --> 00:49:37,200 Speaker 1: I'm not going to dig into the intricacies of that, 956 00:49:37,480 --> 00:49:39,839 Speaker 1: but we saw a rise in stock market at home, 957 00:49:39,880 --> 00:49:44,120 Speaker 1: prices have doubled, etcetera, etcetera, and so the average person, um, 958 00:49:44,160 --> 00:49:47,280 Speaker 1: if they don't participate in that, they get left behind. 959 00:49:47,600 --> 00:49:50,320 Speaker 1: So I'm a contractor. You know, I work on homes, 960 00:49:50,640 --> 00:49:52,720 Speaker 1: and let's say that. You know, I have all these jobs, 961 00:49:52,719 --> 00:49:54,279 Speaker 1: and it's like, well, I need to take on these 962 00:49:54,280 --> 00:49:57,160 Speaker 1: additional jobs. I need to hire more employees, I need 963 00:49:57,200 --> 00:49:59,160 Speaker 1: to go finance more vehicles, I need to move into 964 00:49:59,160 --> 00:50:01,440 Speaker 1: a new office to keep up with that demand. Now 965 00:50:01,480 --> 00:50:03,200 Speaker 1: I could choose not to and I could just store 966 00:50:03,239 --> 00:50:05,000 Speaker 1: my money, to your point and not have to worry 967 00:50:05,000 --> 00:50:06,440 Speaker 1: about it, which is, I agree, is the way it 968 00:50:06,440 --> 00:50:08,520 Speaker 1: should be. But if I play that game, I'm just 969 00:50:08,520 --> 00:50:10,279 Speaker 1: gonna put my money to banking and ignore it. I'm 970 00:50:10,280 --> 00:50:12,279 Speaker 1: not going to scale my business to keep up with demand. 971 00:50:12,480 --> 00:50:15,320 Speaker 1: Then I get left behind. So I'm forced to play 972 00:50:15,360 --> 00:50:17,920 Speaker 1: that game. But then all of a sudden, let's just 973 00:50:17,920 --> 00:50:20,040 Speaker 1: suck the money out of the system, and then everything crashes, 974 00:50:20,080 --> 00:50:22,160 Speaker 1: and now I'm stuck with all these trucks and these 975 00:50:22,160 --> 00:50:25,319 Speaker 1: extra buildings because I had played in that game, and 976 00:50:25,360 --> 00:50:28,360 Speaker 1: so um, if we didn't have this boom that I 977 00:50:28,400 --> 00:50:30,440 Speaker 1: had to I was forced to play along with and 978 00:50:30,520 --> 00:50:34,640 Speaker 1: keep up and then the inevitable bus that now crushes me. Um, 979 00:50:34,719 --> 00:50:36,560 Speaker 1: it doesn't seem like the worst thing in the world. 980 00:50:36,560 --> 00:50:38,279 Speaker 1: That we'd stop booms and bus but they wouldn't be 981 00:50:38,320 --> 00:50:40,279 Speaker 1: so massive, and I could just store my wealth. But 982 00:50:42,120 --> 00:50:44,319 Speaker 1: under the terms that you've dictated. But isn't that what's 983 00:50:44,320 --> 00:50:46,440 Speaker 1: happened is true. But that's not how it That's not 984 00:50:46,480 --> 00:50:49,440 Speaker 1: what actually happened. What we actually happened was we had 985 00:50:49,600 --> 00:50:52,880 Speaker 1: a legitimate economic growth before the pre crisis, before the 986 00:50:52,880 --> 00:50:56,480 Speaker 1: crisis UH showed up. Yes, there were bubbles, there were 987 00:50:56,520 --> 00:50:59,600 Speaker 1: imbalances in certainly US real estate, but you look around 988 00:50:59,600 --> 00:51:02,840 Speaker 1: most of the rest of the world emerging markets, China, 989 00:51:02,920 --> 00:51:07,799 Speaker 1: for example, backwards communist subsistence agriculture. China turned into a 990 00:51:07,880 --> 00:51:11,440 Speaker 1: global powerhouse, which we all benefited from. By the way, 991 00:51:11,920 --> 00:51:14,560 Speaker 1: in some ways some people more than others. Obviously was 992 00:51:14,600 --> 00:51:17,000 Speaker 1: at the expense of certain parts of the US. I 993 00:51:17,000 --> 00:51:18,720 Speaker 1: grew up in the rust belt, so I knew exactly 994 00:51:18,719 --> 00:51:21,240 Speaker 1: where all those jobs went. They certainly went to China. 995 00:51:21,320 --> 00:51:25,759 Speaker 1: But by and large, the the growth cycle, certainly from 996 00:51:25,760 --> 00:51:29,319 Speaker 1: the nineteen eighties forward, was a legitimate growth cycle, and 997 00:51:29,400 --> 00:51:31,399 Speaker 1: you can make it. I would make a strong case 998 00:51:31,440 --> 00:51:33,880 Speaker 1: that that wouldn't have never that would never would have happened. 999 00:51:34,120 --> 00:51:37,080 Speaker 1: In a restrained fixed money system, we never would have 1000 00:51:37,160 --> 00:51:40,000 Speaker 1: had that growth, and so it's difficult to prove the 1001 00:51:40,080 --> 00:51:43,839 Speaker 1: counter factual that, hey, um, maybe we shouldn't have had 1002 00:51:43,840 --> 00:51:45,920 Speaker 1: that growth to begin with. I don't know. I think 1003 00:51:45,960 --> 00:51:49,000 Speaker 1: the world is a better place because of the globalization 1004 00:51:49,440 --> 00:51:52,600 Speaker 1: that certainly showed up from the nineteen fifties four as 1005 00:51:52,600 --> 00:51:55,359 Speaker 1: soon as the euro dollars started really producing, you know, 1006 00:51:55,440 --> 00:51:59,520 Speaker 1: these virtual dollars in in in excess. That's really I 1007 00:51:59,520 --> 00:52:01,960 Speaker 1: think there was a very real benefit to that, and 1008 00:52:02,080 --> 00:52:05,080 Speaker 1: had it not happened, the world would have looked very 1009 00:52:05,160 --> 00:52:07,759 Speaker 1: differently than it does today, or at least in two 1010 00:52:07,760 --> 00:52:11,280 Speaker 1: thousand eight. And the problem was not that we printed 1011 00:52:11,320 --> 00:52:14,120 Speaker 1: money after the crisis, is that we didn't that we 1012 00:52:14,160 --> 00:52:16,799 Speaker 1: didn't fix the monetary issue in two thousand eight, we 1013 00:52:16,840 --> 00:52:20,800 Speaker 1: didn't create elasticity, and that has led to a permanent change, 1014 00:52:20,920 --> 00:52:23,839 Speaker 1: at least so far permanent change in economic growth. So 1015 00:52:23,880 --> 00:52:27,359 Speaker 1: that we are over the last fifteen years, we are 1016 00:52:27,560 --> 00:52:31,040 Speaker 1: seeing what the global economy would have looked like had 1017 00:52:31,080 --> 00:52:35,000 Speaker 1: it not had enough money, and it looks increasingly ugly 1018 00:52:35,120 --> 00:52:39,680 Speaker 1: by the year. There's a reason why we were witnessing social, political, 1019 00:52:39,680 --> 00:52:42,960 Speaker 1: and economic upheaval all over the world. It's because of 1020 00:52:43,040 --> 00:52:46,719 Speaker 1: we're seeing what happens in in an economic system that 1021 00:52:46,840 --> 00:52:50,319 Speaker 1: is deprived of any monetary elastics. Well, I certainly agree 1022 00:52:50,320 --> 00:52:52,719 Speaker 1: with that. I think a lot of the upheavals that 1023 00:52:52,760 --> 00:52:54,560 Speaker 1: we're having around the world is also because of other 1024 00:52:54,600 --> 00:52:58,280 Speaker 1: bad policies such as restricting energy, whostend, restricting enough food. 1025 00:52:58,680 --> 00:53:00,399 Speaker 1: But those are different topics for it difer in time. 1026 00:53:00,680 --> 00:53:03,200 Speaker 1: But sticking back on this topic of the inelasticity of 1027 00:53:03,200 --> 00:53:06,560 Speaker 1: the money supply, um, I would agree that. I would 1028 00:53:06,560 --> 00:53:09,440 Speaker 1: think that we both agree that we don't need money. 1029 00:53:09,640 --> 00:53:12,120 Speaker 1: Nobody wants money. What we want is the things that 1030 00:53:12,160 --> 00:53:14,320 Speaker 1: money buys us, which is back to the point, we 1031 00:53:14,400 --> 00:53:16,680 Speaker 1: made goods and services, right, That's what economy makes, goods 1032 00:53:16,680 --> 00:53:17,960 Speaker 1: and services. So I don't want the money. I want 1033 00:53:17,960 --> 00:53:21,160 Speaker 1: the goods and services. Now I would ask people typically 1034 00:53:21,160 --> 00:53:23,360 Speaker 1: when they say, well, doesn't the money so I always 1035 00:53:23,360 --> 00:53:26,400 Speaker 1: need to increase or expand, I would say, um, wouldn't 1036 00:53:26,440 --> 00:53:28,120 Speaker 1: you rather? And to the point that you made, which 1037 00:53:28,120 --> 00:53:31,480 Speaker 1: I agree with Like a brain surgeon, the world, the 1038 00:53:31,520 --> 00:53:35,239 Speaker 1: world blew up into prosperity because of specialization right, and 1039 00:53:35,280 --> 00:53:37,440 Speaker 1: now I could be the best brain surgeon. I could 1040 00:53:37,440 --> 00:53:39,480 Speaker 1: focus on brain surgery, and I should just focus on 1041 00:53:39,560 --> 00:53:43,040 Speaker 1: curing cancer or whatever that is, finding perpetual energy. Focus 1042 00:53:43,080 --> 00:53:44,600 Speaker 1: on that, and then my money should just go sit 1043 00:53:44,640 --> 00:53:46,200 Speaker 1: and it should just I shouldn't have to think about 1044 00:53:46,200 --> 00:53:48,440 Speaker 1: it to the point that you made I agree, And 1045 00:53:48,480 --> 00:53:51,120 Speaker 1: so then I would just ask the average person, wouldn't 1046 00:53:51,120 --> 00:53:54,280 Speaker 1: you or would you rather your money that you've saved 1047 00:53:54,280 --> 00:53:56,520 Speaker 1: today buy you more goods and services in the future 1048 00:53:56,800 --> 00:53:59,440 Speaker 1: or less? And I think everybody agrees they would want 1049 00:53:59,480 --> 00:54:02,560 Speaker 1: their money to buy them more goods and services, not less. 1050 00:54:02,600 --> 00:54:04,960 Speaker 1: But through an inflationary system, the money continues to buy 1051 00:54:05,040 --> 00:54:08,000 Speaker 1: us less and less goods and services. And so if 1052 00:54:08,000 --> 00:54:09,840 Speaker 1: we look at what we really want is goods and services, 1053 00:54:09,880 --> 00:54:12,520 Speaker 1: the money is a proxy of that, so a minium 1054 00:54:12,560 --> 00:54:14,680 Speaker 1: exchange for that. So we have all the wealth of 1055 00:54:14,719 --> 00:54:16,399 Speaker 1: the world, all the goods and services of the world, 1056 00:54:16,680 --> 00:54:19,080 Speaker 1: divided by the money. And if we're trying to keep 1057 00:54:19,120 --> 00:54:22,920 Speaker 1: the money at one, then all the value goes to 1058 00:54:23,040 --> 00:54:25,719 Speaker 1: the goods and service, so everything gets more expensive. But 1059 00:54:25,960 --> 00:54:29,480 Speaker 1: if we had a fixed money supply, then the value 1060 00:54:29,480 --> 00:54:31,520 Speaker 1: could accrue to the money and the goods and services 1061 00:54:31,560 --> 00:54:37,759 Speaker 1: would go down? Am I seeing that right? In theory theory? Yes, 1062 00:54:38,480 --> 00:54:41,400 Speaker 1: the problem is that leads to all these similar boom busts, 1063 00:54:41,480 --> 00:54:43,279 Speaker 1: but not if we not if we don't sure it 1064 00:54:43,320 --> 00:54:46,200 Speaker 1: looks good and in terms of prices, but what happens 1065 00:54:46,200 --> 00:54:49,520 Speaker 1: when everybody's thrown out of work. That's really the issue 1066 00:54:49,560 --> 00:54:52,239 Speaker 1: here is that, Yeah, okay, so my money buys me 1067 00:54:52,280 --> 00:54:53,799 Speaker 1: more on the other side of a crisis, but I 1068 00:54:53,880 --> 00:54:57,400 Speaker 1: also don't have a job today, So that's not a 1069 00:54:57,400 --> 00:54:59,919 Speaker 1: really good trade off by any stretch of the imagination, 1070 00:55:00,400 --> 00:55:02,439 Speaker 1: particularly when those who are thrown out of the work 1071 00:55:02,440 --> 00:55:05,040 Speaker 1: are the most vulnerable in society. And you do that 1072 00:55:05,200 --> 00:55:07,200 Speaker 1: enough times and then you end up with what we're 1073 00:55:07,239 --> 00:55:12,919 Speaker 1: seeing now, which is increasing discontent, extremism, and anarchy. Okay, 1074 00:55:13,080 --> 00:55:14,840 Speaker 1: And to your point, we don't we don't know, We 1075 00:55:14,920 --> 00:55:16,719 Speaker 1: don't have a we we don't have an A B 1076 00:55:16,840 --> 00:55:19,560 Speaker 1: test to really run, although we do have five thousand 1077 00:55:19,640 --> 00:55:21,640 Speaker 1: years of history without a Fiat money system, so we 1078 00:55:21,640 --> 00:55:23,040 Speaker 1: do kind of have that. And to your point, there 1079 00:55:23,080 --> 00:55:26,600 Speaker 1: are booms and bus because cycles change, creative destruction happens, 1080 00:55:27,200 --> 00:55:29,920 Speaker 1: but we don't have the massive amount of misallocation that 1081 00:55:29,960 --> 00:55:32,640 Speaker 1: we would have today. Um, but again we don't really 1082 00:55:32,680 --> 00:55:35,759 Speaker 1: have that. I guess what I would say then, is, um, 1083 00:55:35,800 --> 00:55:39,400 Speaker 1: what problems would a bitcoin underwritten capital market need to 1084 00:55:39,600 --> 00:55:45,560 Speaker 1: solve in order to be viable in your mind? Well, 1085 00:55:45,560 --> 00:55:47,359 Speaker 1: first of all, it has to have a wide enough base, 1086 00:55:47,440 --> 00:55:49,440 Speaker 1: so it's wide enough it could be used in a wide, 1087 00:55:49,719 --> 00:55:52,520 Speaker 1: widespread Uh, it needs to be. That's really what a 1088 00:55:52,520 --> 00:55:55,319 Speaker 1: global reserve currency. And that's what we're talking about, right Mark. 1089 00:55:55,640 --> 00:55:57,719 Speaker 1: You look at it bitcoin not just for a niche use. 1090 00:55:57,880 --> 00:55:59,520 Speaker 1: You want it to be a medium of exchange, not 1091 00:55:59,640 --> 00:56:02,320 Speaker 1: just a or value, but a medium, a useful medium 1092 00:56:02,320 --> 00:56:05,160 Speaker 1: of exchange that can be used in enough places that 1093 00:56:05,200 --> 00:56:07,719 Speaker 1: it becomes a useful medium of exchange. And so it's 1094 00:56:07,760 --> 00:56:10,360 Speaker 1: sort of like a self fulfilling prophecy there. That's what 1095 00:56:10,440 --> 00:56:13,680 Speaker 1: a global reserve currency actually means. It means it's available, 1096 00:56:14,120 --> 00:56:18,439 Speaker 1: freely usable, and widely used in all in as many 1097 00:56:18,480 --> 00:56:21,279 Speaker 1: places and as many circumstances as it can possibly do. 1098 00:56:21,960 --> 00:56:25,240 Speaker 1: And a fixed monetary system makes that incredibly difficult, especially 1099 00:56:25,239 --> 00:56:28,240 Speaker 1: when it's not widely distributed. And let's face it, money, 1100 00:56:28,280 --> 00:56:30,880 Speaker 1: money is always going to pool, It's always gonna tend up, 1101 00:56:31,120 --> 00:56:33,880 Speaker 1: It's always gonna end up in fewer and fewer hands, 1102 00:56:33,920 --> 00:56:38,160 Speaker 1: because that's how free market capitalism works. Successful people are 1103 00:56:38,160 --> 00:56:39,920 Speaker 1: going to end up with more money in their hands. 1104 00:56:40,320 --> 00:56:42,560 Speaker 1: And what ends up happening in that situation is you 1105 00:56:42,640 --> 00:56:46,000 Speaker 1: need some form of financialization to get that money moving 1106 00:56:46,040 --> 00:56:49,600 Speaker 1: back into the real economy. So you can't escape financialization 1107 00:56:49,680 --> 00:56:53,360 Speaker 1: unless you're willing to go back to a completely commodity 1108 00:56:53,400 --> 00:56:57,200 Speaker 1: physically owned system or the digital equivalent of that, which 1109 00:56:57,239 --> 00:57:00,360 Speaker 1: means you're actually reducing the potential of that economics system. 1110 00:57:00,840 --> 00:57:03,800 Speaker 1: So bitcoin, I think, has a couple of problems, including 1111 00:57:03,840 --> 00:57:06,799 Speaker 1: what happens when it's hoarded, as well as is there 1112 00:57:06,960 --> 00:57:10,080 Speaker 1: enough of it to be used any widely, widely used 1113 00:57:10,080 --> 00:57:12,760 Speaker 1: across enough places in the real economy. And of course 1114 00:57:13,080 --> 00:57:16,600 Speaker 1: geography is another part of another. So a couple of things. 1115 00:57:16,600 --> 00:57:18,160 Speaker 1: So one to your point, sure, it has to be 1116 00:57:18,200 --> 00:57:20,120 Speaker 1: widely accepted, right, So money has to have a bunch 1117 00:57:20,120 --> 00:57:21,880 Speaker 1: of attributes, five of them that I really like the 1118 00:57:21,920 --> 00:57:23,800 Speaker 1: key on. But one of them of course is sailable, right, 1119 00:57:23,800 --> 00:57:25,440 Speaker 1: you know, recognizable people have to be able to day 1120 00:57:25,480 --> 00:57:27,440 Speaker 1: take it. And so to your point today, right, I 1121 00:57:27,440 --> 00:57:29,800 Speaker 1: mean it's it's very small, but we're a dozen years 1122 00:57:29,800 --> 00:57:32,200 Speaker 1: into it, So I believe money is like an evolution. 1123 00:57:32,240 --> 00:57:34,320 Speaker 1: If we look through the history of money, it's evolutionary, 1124 00:57:34,320 --> 00:57:36,920 Speaker 1: it's emergent, right, So we use rocks and feathers and 1125 00:57:36,920 --> 00:57:39,640 Speaker 1: seashells and all these things, but one emerged as the 1126 00:57:39,640 --> 00:57:42,520 Speaker 1: best because I had the best money properties. Um, and 1127 00:57:42,600 --> 00:57:44,840 Speaker 1: so I think, you know, there's like a store, like 1128 00:57:44,880 --> 00:57:46,640 Speaker 1: a collectible. Oh this is kind of cool, like I'll 1129 00:57:46,680 --> 00:57:49,400 Speaker 1: hang onto this feather, this rock, and then eventually maybe 1130 00:57:49,440 --> 00:57:52,680 Speaker 1: that collectible maybe evolves into a store of value. So 1131 00:57:52,800 --> 00:57:54,640 Speaker 1: we see the wealth holding fine art and cars and 1132 00:57:54,680 --> 00:57:57,200 Speaker 1: things like that, but those don't have money attributes, and 1133 00:57:57,240 --> 00:58:00,080 Speaker 1: so maybe a store value could then evolve to need 1134 00:58:00,120 --> 00:58:03,040 Speaker 1: him of exchange. And I'm happy to admit I don't 1135 00:58:03,040 --> 00:58:05,720 Speaker 1: think bitcoin is the best medium exchange today. It's certainly 1136 00:58:05,760 --> 00:58:08,240 Speaker 1: too volatible. Were paying your bills with on a monthly basis, 1137 00:58:08,280 --> 00:58:11,200 Speaker 1: and and it hasn't reached that wide scale adoption to 1138 00:58:11,240 --> 00:58:13,800 Speaker 1: your point. So I think there's an evolutionary path, but 1139 00:58:13,840 --> 00:58:15,960 Speaker 1: it does have the attributes I think for it. The 1140 00:58:15,960 --> 00:58:18,160 Speaker 1: one thing I would just point out, and I'm sure 1141 00:58:18,200 --> 00:58:20,880 Speaker 1: you're probably aware, but uh, you know, one one of 1142 00:58:20,920 --> 00:58:24,600 Speaker 1: the many things with bitcoin is that it's the first uh, 1143 00:58:25,080 --> 00:58:29,360 Speaker 1: first asset, the first commodity that doesn't need debt to 1144 00:58:29,440 --> 00:58:33,320 Speaker 1: reach velocity. Right. So gold is very slow, right, it's 1145 00:58:33,320 --> 00:58:35,640 Speaker 1: not portable. I can't send it to England very or 1146 00:58:35,920 --> 00:58:37,840 Speaker 1: over over zoom to you right now. And so we 1147 00:58:37,880 --> 00:58:39,440 Speaker 1: had to add the debt on top of it in 1148 00:58:39,520 --> 00:58:42,920 Speaker 1: order to get the velocity. But bitcoin has velocity with 1149 00:58:43,040 --> 00:58:47,920 Speaker 1: a bare instrument, which is which is pretty interesting. But anyway, 1150 00:58:47,920 --> 00:58:50,160 Speaker 1: so back to the question. So, I guess you answered 1151 00:58:50,200 --> 00:58:52,000 Speaker 1: my question so that what it would need to solve 1152 00:58:52,080 --> 00:58:54,720 Speaker 1: was it would need to be more widely accepted. I 1153 00:58:54,720 --> 00:59:00,920 Speaker 1: guess was the point more widely US and and usual 1154 00:59:00,960 --> 00:59:02,800 Speaker 1: meaning more people are able to use it? Right, it's 1155 00:59:02,920 --> 00:59:06,960 Speaker 1: it's friendly enough and easy enough. Yeah, not just the 1156 00:59:07,200 --> 00:59:11,440 Speaker 1: more people, people in all kinds all types of use cases, 1157 00:59:11,560 --> 00:59:15,200 Speaker 1: got it? Yeah? Okay, good um. Now let's jump back 1158 00:59:15,240 --> 00:59:18,240 Speaker 1: to the final uh discussion here that you had set 1159 00:59:18,280 --> 00:59:20,280 Speaker 1: up earlier. It wasn't on my list of questions, but 1160 00:59:20,320 --> 00:59:22,760 Speaker 1: you talked about you know, maybe or I'm framing up 1161 00:59:22,800 --> 00:59:25,920 Speaker 1: as as this endgame. So you said the yield curves 1162 00:59:25,920 --> 00:59:29,120 Speaker 1: are predicting, predicting that you know, there's probably one more 1163 00:59:29,200 --> 00:59:31,960 Speaker 1: pivot in front of us. That's where they're really worried. Um, 1164 00:59:32,040 --> 00:59:34,160 Speaker 1: you had said that maybe there's a few rate hikes 1165 00:59:34,200 --> 00:59:36,960 Speaker 1: before something breaks. Um. I don't know if you had 1166 00:59:36,960 --> 00:59:38,760 Speaker 1: said or maybe this is where I think, but probably 1167 00:59:38,760 --> 00:59:41,000 Speaker 1: before the end of this year, we'll probably see that 1168 00:59:41,920 --> 00:59:44,280 Speaker 1: before something breaks and then they reverse course. We don't 1169 00:59:44,280 --> 00:59:46,520 Speaker 1: know what that is. We can only speculate. What would 1170 00:59:46,560 --> 00:59:48,840 Speaker 1: you what do you think is the base case of 1171 00:59:48,880 --> 00:59:51,040 Speaker 1: the speculation? I know we're only talking in terms of 1172 00:59:51,040 --> 00:59:54,480 Speaker 1: probabilities here, Um, credit markets dry up or what do 1173 00:59:54,520 --> 00:59:56,840 Speaker 1: you what do you see there? Yeah, there's a lot 1174 00:59:56,880 --> 01:00:00,520 Speaker 1: of potential potential sparks or potential shot that we could 1175 01:00:00,560 --> 01:00:02,640 Speaker 1: go through, and I think we already did when oil 1176 01:00:02,680 --> 01:00:05,560 Speaker 1: prices skyrocketed in early March. I think that was the 1177 01:00:05,560 --> 01:00:08,480 Speaker 1: trigger for what we're seeing in terms of a base 1178 01:00:08,600 --> 01:00:12,040 Speaker 1: case recession. So the first half of the year technical recession. 1179 01:00:12,040 --> 01:00:14,600 Speaker 1: As you said, Mark, that's that's that's completely a distraction. 1180 01:00:14,600 --> 01:00:18,320 Speaker 1: That's not really Markets are not worried about what's already happened. 1181 01:00:18,480 --> 01:00:21,320 Speaker 1: They're worried about what's coming next. And what's coming next 1182 01:00:21,400 --> 01:00:23,960 Speaker 1: looks like, okay, we start with the recession, but there 1183 01:00:23,960 --> 01:00:27,800 Speaker 1: are also any number of problems from geopolitics to money itself. 1184 01:00:28,360 --> 01:00:31,280 Speaker 1: A big part of the monetary system is repo and 1185 01:00:31,360 --> 01:00:35,480 Speaker 1: collateralized transactions and derivative things like currency swaps, and believe 1186 01:00:35,520 --> 01:00:38,400 Speaker 1: it or not, there's just not enough good quality collateral 1187 01:00:38,440 --> 01:00:41,400 Speaker 1: to go around, and so we get into these situations 1188 01:00:41,440 --> 01:00:45,640 Speaker 1: where dealers in particularly become risk averse, certain junk quality 1189 01:00:45,640 --> 01:00:49,400 Speaker 1: collateral becomes less negotiable. It acts every bit as if 1190 01:00:49,840 --> 01:00:53,760 Speaker 1: monetary system was being tightened from the inside. And so 1191 01:00:53,800 --> 01:00:56,600 Speaker 1: I think one of the things that is forcing these 1192 01:00:56,640 --> 01:00:59,720 Speaker 1: curves to be and as inverted as they are, is 1193 01:00:59,760 --> 01:01:03,439 Speaker 1: cancerns about a collateral run as we saw in March 1194 01:01:03,480 --> 01:01:06,360 Speaker 1: of and again in two thousand seven and two thousand 1195 01:01:06,360 --> 01:01:09,240 Speaker 1: and eight, because we've been stuck in this collateral shortage 1196 01:01:09,240 --> 01:01:12,280 Speaker 1: situation for the last fifteen years and it has never 1197 01:01:12,320 --> 01:01:15,200 Speaker 1: really been handled, and it is lee it leaves the 1198 01:01:15,240 --> 01:01:17,520 Speaker 1: system and I mean the global financial system as well 1199 01:01:17,560 --> 01:01:21,200 Speaker 1: as the economy, and it precarious situation when it becomes 1200 01:01:21,400 --> 01:01:23,360 Speaker 1: you know, when we get into these risk averse situations 1201 01:01:23,360 --> 01:01:27,040 Speaker 1: where collado becomes scarce. So I think collateral shortages, which 1202 01:01:27,080 --> 01:01:31,120 Speaker 1: are prominent in every marketplace that we see, especially something 1203 01:01:31,160 --> 01:01:34,640 Speaker 1: like treasury bills repot fails, and again the US dollar skyrocketing. 1204 01:01:34,640 --> 01:01:37,200 Speaker 1: Why is it going up Because there's problems in the 1205 01:01:37,280 --> 01:01:40,240 Speaker 1: in the collateral system. That's part of what's going on. 1206 01:01:40,320 --> 01:01:43,040 Speaker 1: And then, um, the other part of it is something 1207 01:01:43,080 --> 01:01:46,360 Speaker 1: like geopolitics. What if the Russians do turn off gas 1208 01:01:46,440 --> 01:01:50,600 Speaker 1: to Europe? What is that gonna look like for the world. 1209 01:01:51,320 --> 01:01:53,640 Speaker 1: I mean, that's something that I if I was, you know, 1210 01:01:53,720 --> 01:01:57,040 Speaker 1: running a massive portfolio of hundreds and hundreds of billions, 1211 01:01:57,160 --> 01:01:59,920 Speaker 1: I would probably want to hedge against something like that happening. 1212 01:02:00,240 --> 01:02:02,240 Speaker 1: Or not just gas to Europe, how about food to 1213 01:02:02,280 --> 01:02:05,120 Speaker 1: the Middle East. I mean, so there's any number of 1214 01:02:05,800 --> 01:02:10,400 Speaker 1: real potential shocks that could make a already bad situation worse. 1215 01:02:10,440 --> 01:02:12,160 Speaker 1: And I think that's really the issue here, is that 1216 01:02:12,560 --> 01:02:16,280 Speaker 1: we're heading into the second half of this year all 1217 01:02:16,320 --> 01:02:19,320 Speaker 1: sorts of potential concerns in front of us, and we're 1218 01:02:19,360 --> 01:02:21,240 Speaker 1: starting off the second half of the year on the 1219 01:02:21,240 --> 01:02:24,479 Speaker 1: wrong foot anyway. So, I mean, I can understand why 1220 01:02:24,480 --> 01:02:26,880 Speaker 1: curves are priced the way they are in ways that 1221 01:02:26,920 --> 01:02:30,000 Speaker 1: we haven't seen since two thousand eight, because the risks 1222 01:02:30,080 --> 01:02:33,400 Speaker 1: as well as the reality are that on appealing. And 1223 01:02:33,840 --> 01:02:35,720 Speaker 1: you you highlighted a number of those and we have 1224 01:02:35,840 --> 01:02:38,120 Speaker 1: even more. There's all types of land mines out there 1225 01:02:38,160 --> 01:02:41,680 Speaker 1: that could that could blow up on us. So, UM, now, 1226 01:02:41,760 --> 01:02:43,800 Speaker 1: I guess the last question we'll just kind of end 1227 01:02:43,800 --> 01:02:46,320 Speaker 1: it with. And maybe it's not a big one, but 1228 01:02:46,560 --> 01:02:49,480 Speaker 1: if the FED has no control, uh, the euro dollar 1229 01:02:49,520 --> 01:02:52,760 Speaker 1: market is much bigger. Um. Let's say that we have 1230 01:02:52,880 --> 01:02:56,000 Speaker 1: this uh you know, they end they end up with 1231 01:02:56,040 --> 01:02:59,200 Speaker 1: a few more hikes, they stop. We have any of 1232 01:02:59,200 --> 01:03:01,600 Speaker 1: these signal again events that could happen to the points 1233 01:03:01,600 --> 01:03:04,440 Speaker 1: you said with the food crisis the energy crisis, those 1234 01:03:04,440 --> 01:03:07,440 Speaker 1: are two big looming ones of another potential pandemic lockdown. 1235 01:03:07,440 --> 01:03:10,680 Speaker 1: That's it seems to be rearing its head again potentially. Um, 1236 01:03:10,720 --> 01:03:12,840 Speaker 1: then the FED would have to reverse its course and 1237 01:03:12,960 --> 01:03:15,760 Speaker 1: would try to do something, which to your point, maybe 1238 01:03:15,760 --> 01:03:18,360 Speaker 1: they can't. But if it was whatever seven billion in 1239 01:03:18,400 --> 01:03:21,720 Speaker 1: two thousand and eight, it was six seven trillion, and 1240 01:03:21,720 --> 01:03:26,240 Speaker 1: I mean, is the next one ten twenty trillion? And 1241 01:03:26,400 --> 01:03:29,160 Speaker 1: will that have any effect? Can they even keep the 1242 01:03:29,200 --> 01:03:33,080 Speaker 1: bubble from d leveraging? I think the next one is 1243 01:03:33,360 --> 01:03:35,120 Speaker 1: I think that what the FED will look at is 1244 01:03:35,160 --> 01:03:38,840 Speaker 1: not so much size, sort of take a playbook. Because 1245 01:03:38,960 --> 01:03:41,520 Speaker 1: everybody follows the Bank of Japan anyway. I think what 1246 01:03:41,560 --> 01:03:42,760 Speaker 1: they do is to take a page out of the 1247 01:03:42,960 --> 01:03:46,640 Speaker 1: Bank of Japan's book where they say, okay, we've bought treasuries. 1248 01:03:46,680 --> 01:03:49,080 Speaker 1: If nbs in the past I didn't really have much 1249 01:03:49,080 --> 01:03:51,440 Speaker 1: of an effect. Maybe this time we're going to actually 1250 01:03:51,440 --> 01:03:55,040 Speaker 1: buy corporate bonds. I know they pretended to into didn't 1251 01:03:55,040 --> 01:03:58,560 Speaker 1: actually buying many actually buy corporate bonds. They'll start buying 1252 01:03:58,600 --> 01:04:02,320 Speaker 1: et still, start buying different asset classes, because this is 1253 01:04:02,320 --> 01:04:04,840 Speaker 1: all about psychologist, is all about trying to shock the 1254 01:04:04,880 --> 01:04:07,440 Speaker 1: system in ways that the FED wants the system to 1255 01:04:07,480 --> 01:04:10,520 Speaker 1: be shocked. So I think rather than rather than seeing 1256 01:04:10,600 --> 01:04:15,000 Speaker 1: an increase in size of quantitative easing, you'll see like 1257 01:04:15,080 --> 01:04:18,200 Speaker 1: Japan where they'll they'll add to the target of the 1258 01:04:18,240 --> 01:04:21,320 Speaker 1: list of targets for asset purchasing. Okay, all right, more 1259 01:04:21,320 --> 01:04:25,800 Speaker 1: strategic or just again just like vocal throwing something against 1260 01:04:25,800 --> 01:04:28,800 Speaker 1: the wall and hoping it works. Well, man, there's so 1261 01:04:28,880 --> 01:04:30,400 Speaker 1: much more we could go on with, but we've we've 1262 01:04:30,480 --> 01:04:32,840 Speaker 1: gone super long. I appreciate you taking the time and 1263 01:04:33,240 --> 01:04:36,160 Speaker 1: to everyone listening. We had some some frustrations with my 1264 01:04:36,320 --> 01:04:38,480 Speaker 1: on my own the recordings. Appreciate your patience with that. 1265 01:04:38,600 --> 01:04:42,160 Speaker 1: Jeff UM, I know you do the euro Dollar University 1266 01:04:42,200 --> 01:04:45,160 Speaker 1: podcast which I listened to, and uh, I recommend everybody 1267 01:04:45,200 --> 01:04:47,720 Speaker 1: check that out. Will link to that below. Markets insider 1268 01:04:47,760 --> 01:04:50,760 Speaker 1: pro dot com and portfolio portfolio shield dot net I believe, 1269 01:04:50,840 --> 01:04:53,600 Speaker 1: or two other projects you're working on will link to those. Um, 1270 01:04:53,600 --> 01:04:57,080 Speaker 1: anything else that you want to call out. I writed 1271 01:04:57,160 --> 01:05:00,280 Speaker 1: a different places to real clear markets epic time times, 1272 01:05:00,280 --> 01:05:03,480 Speaker 1: so you know you can find the research anywhere around 1273 01:05:03,480 --> 01:05:07,000 Speaker 1: the research writing commentary. You are all over the internet 1274 01:05:07,120 --> 01:05:09,960 Speaker 1: right now, and it's never been been more important to 1275 01:05:10,000 --> 01:05:12,120 Speaker 1: understand how that works. So anyway, Jeff, we'll go ahead 1276 01:05:12,120 --> 01:05:13,840 Speaker 1: and in it with that. Thanks so much for for 1277 01:05:13,960 --> 01:05:16,840 Speaker 1: coming on today. My pleasure, Mark, thanks for the invitation. 1278 01:05:16,880 --> 01:05:19,880 Speaker 1: I really appreciate it. All Right, that's a wrap. Thanks 1279 01:05:19,920 --> 01:05:22,760 Speaker 1: for listening to this interview with Jeff Snyder. We've covered 1280 01:05:22,760 --> 01:05:25,000 Speaker 1: a lot of topics, a lot of topics that are 1281 01:05:25,240 --> 01:05:29,320 Speaker 1: maybe not so much conspiratorial or controversial, but definitely outside 1282 01:05:29,320 --> 01:05:32,880 Speaker 1: the mainstream view. The vulkar myth the FED has no 1283 01:05:32,960 --> 01:05:35,960 Speaker 1: control of course. Check him out Jeff Snyder at the 1284 01:05:36,000 --> 01:05:39,000 Speaker 1: euro Dollar University Podcast. We'll have all his links down below. 1285 01:05:39,440 --> 01:05:40,640 Speaker 1: And that's what I got for you today. All right 1286 01:05:40,680 --> 01:05:41,880 Speaker 1: to your success. I'm out.