1 00:00:00,040 --> 00:00:03,160 Speaker 1: Peter, thanks so much for joining me today. We have 2 00:00:03,200 --> 00:00:05,440 Speaker 1: so much to jump into. I'm super excited about this. 3 00:00:05,640 --> 00:00:07,440 Speaker 1: I know, you know, we've got to catch up at 4 00:00:07,440 --> 00:00:09,160 Speaker 1: some events and stuff like that. We always have a 5 00:00:09,280 --> 00:00:11,960 Speaker 1: lot to talk about, so I want to talk about 6 00:00:12,800 --> 00:00:14,680 Speaker 1: We'll start really big. We'll talk about like what the 7 00:00:14,680 --> 00:00:19,320 Speaker 1: heck is going on with the de globalization or decentralization, 8 00:00:19,400 --> 00:00:21,000 Speaker 1: the rise of the global South, the bricks. I want 9 00:00:21,000 --> 00:00:23,360 Speaker 1: to talk about, what's going on with the global homogeny 10 00:00:23,360 --> 00:00:26,040 Speaker 1: of the US treasury market. We talked about US deficits, 11 00:00:26,800 --> 00:00:29,520 Speaker 1: the debt ticking time in a lot of areas, what 12 00:00:29,560 --> 00:00:32,959 Speaker 1: the heck is going on with China, recession fears here 13 00:00:33,000 --> 00:00:36,920 Speaker 1: in the US, even the real estate and potentially Airbnb 14 00:00:37,080 --> 00:00:40,800 Speaker 1: bus that's coming. We got a lot to cover, but Peter, yeah, thanks, 15 00:00:40,840 --> 00:00:41,879 Speaker 1: thanks so much for joining. 16 00:00:41,640 --> 00:00:43,360 Speaker 2: Me, cours thanks for having me all Mark. 17 00:00:44,880 --> 00:00:47,440 Speaker 1: So, man, we got a lot to discuss. We probably 18 00:00:47,440 --> 00:00:49,040 Speaker 1: won't cover all that, so that's what we can do. 19 00:00:49,640 --> 00:00:51,880 Speaker 1: But you know, I wanted to start, you know, high level, 20 00:00:51,920 --> 00:00:53,320 Speaker 1: then kind of drill down. It's kind of what I 21 00:00:53,360 --> 00:00:55,520 Speaker 1: was thinking. And so you know, one thing that that 22 00:00:55,680 --> 00:00:58,120 Speaker 1: kind of the main theme that I follow on this 23 00:00:58,400 --> 00:01:03,560 Speaker 1: show is really this decentralization agenda, this deglobalization, and I 24 00:01:03,600 --> 00:01:05,559 Speaker 1: talk about the cycles, a twohundred and fift year cycle 25 00:01:05,600 --> 00:01:08,800 Speaker 1: of this pendulum swinging back from globalization to deglobalization, and 26 00:01:09,120 --> 00:01:11,399 Speaker 1: you can really see it everywhere where. We reached peak 27 00:01:11,480 --> 00:01:14,840 Speaker 1: globalization with the f and the UN and the IMF 28 00:01:14,880 --> 00:01:17,960 Speaker 1: and the BIS and et cetera, NATO, but now all 29 00:01:18,040 --> 00:01:20,000 Speaker 1: that's breaking apart. We have the Rise of the Bricks. 30 00:01:20,480 --> 00:01:24,120 Speaker 1: They met about two weeks ago, and to me it 31 00:01:24,200 --> 00:01:27,560 Speaker 1: seemed like it was sort of a nothing burger. But 32 00:01:27,760 --> 00:01:30,480 Speaker 1: at the same time, it was massive, and the difference 33 00:01:30,600 --> 00:01:33,840 Speaker 1: was the time frames that you're looking at it. But 34 00:01:34,000 --> 00:01:35,680 Speaker 1: what's your what was your take on that? 35 00:01:37,400 --> 00:01:40,360 Speaker 3: I think the Bricks meeting was not as exciting as 36 00:01:40,360 --> 00:01:44,319 Speaker 3: some people hoped. There was no movement really on dollarization. 37 00:01:45,720 --> 00:01:48,320 Speaker 3: I think, you know, sort of the key there. The 38 00:01:48,400 --> 00:01:52,360 Speaker 3: thing that people were looking out for was the possibility 39 00:01:52,440 --> 00:01:57,080 Speaker 3: of bricks doing some sort of goldbacked rail that would 40 00:01:57,160 --> 00:01:59,880 Speaker 3: replace the US dollar, that would not be their national current, 41 00:02:00,360 --> 00:02:03,200 Speaker 3: right because you know, China does not want a strong 42 00:02:03,240 --> 00:02:06,560 Speaker 3: currency in the first place. Most of the countries in 43 00:02:06,680 --> 00:02:10,320 Speaker 3: bricks are I mean, they're just garbage in terms of currencies. 44 00:02:10,639 --> 00:02:13,000 Speaker 3: You got Brazilian there, which has a heck of a history. 45 00:02:13,040 --> 00:02:15,960 Speaker 3: You got Russia, which has had you know, over one 46 00:02:16,000 --> 00:02:19,880 Speaker 3: hundred percent inflation in the past decades. None of these 47 00:02:19,880 --> 00:02:23,600 Speaker 3: countries want each other currencies, So India and Russia keep 48 00:02:23,600 --> 00:02:27,280 Speaker 3: bickering because neither of them want to accept each other's trash. 49 00:02:27,800 --> 00:02:29,920 Speaker 3: So the question on bricks is not going to be 50 00:02:29,960 --> 00:02:33,359 Speaker 3: their crappy currencies replacing the dollars. The question is going 51 00:02:33,400 --> 00:02:38,440 Speaker 3: to be some kind of gold backed rail, presumably you know, 52 00:02:38,520 --> 00:02:41,240 Speaker 3: mostly managed by China because they got the money. And 53 00:02:41,320 --> 00:02:43,440 Speaker 3: the idea would be that you know, today, none of 54 00:02:43,440 --> 00:02:46,360 Speaker 3: those countries use the dollar at home, right, They use 55 00:02:46,440 --> 00:02:50,880 Speaker 3: the dollar as kind of this outside, separate rail that 56 00:02:50,919 --> 00:02:52,960 Speaker 3: they can do trade on. And so the idea would 57 00:02:52,960 --> 00:02:57,760 Speaker 3: be that, say China would back some kind of dollar replacement, 58 00:02:58,400 --> 00:03:00,600 Speaker 3: and then they would do that so that they could 59 00:03:00,720 --> 00:03:06,160 Speaker 3: suck power away from the US, right, because if there's 60 00:03:06,240 --> 00:03:09,560 Speaker 3: some cleanest dirty shirt in the world, right, if there's 61 00:03:09,560 --> 00:03:13,360 Speaker 3: some option that's better than the US dollar, then a 62 00:03:13,400 --> 00:03:18,040 Speaker 3: lot of the US dollars sort of extra demand, okay, which. 63 00:03:17,520 --> 00:03:18,520 Speaker 2: Holds its price up. 64 00:03:18,880 --> 00:03:22,480 Speaker 3: A lot of that can sort of drain away, and 65 00:03:22,600 --> 00:03:24,080 Speaker 3: you know, if we kind of zoom out. The thing 66 00:03:24,080 --> 00:03:26,120 Speaker 3: about the US dollar is that it's really been the 67 00:03:26,160 --> 00:03:30,359 Speaker 3: reserve currency for about eighty years now, meaning that other 68 00:03:30,440 --> 00:03:34,560 Speaker 3: countries they use it for trade, they use it for investment. 69 00:03:35,160 --> 00:03:37,840 Speaker 3: If you talk to a rich person in Mexico, he 70 00:03:38,120 --> 00:03:41,400 Speaker 3: is not saving his millions in pesos, that would be insane. 71 00:03:41,520 --> 00:03:43,560 Speaker 3: He's got a little bit of paysos for his month 72 00:03:43,600 --> 00:03:45,880 Speaker 3: to month needs, and most of his assets are saved 73 00:03:45,880 --> 00:03:49,320 Speaker 3: in dollars. That is true all over the world, and 74 00:03:49,400 --> 00:03:52,200 Speaker 3: the end result is that there's about two to three 75 00:03:52,280 --> 00:03:57,720 Speaker 3: times more dollars in existence than Americans actually need. Okay, 76 00:03:57,720 --> 00:03:59,760 Speaker 3: all those extra dollars are floating around out there in 77 00:03:59,760 --> 00:04:03,720 Speaker 3: the world. So if some kind of dollar replacement comes along, 78 00:04:04,520 --> 00:04:07,120 Speaker 3: then people don't need those dollars. They sell them out 79 00:04:07,120 --> 00:04:11,760 Speaker 3: on the market. Dollar starts getting weaker. That weakness scares 80 00:04:12,320 --> 00:04:15,120 Speaker 3: let's say, Japanese banks who are holding you know, tens 81 00:04:15,120 --> 00:04:18,280 Speaker 3: of billions of dollars, they sell those. All that stuff 82 00:04:18,360 --> 00:04:19,599 Speaker 3: comes rushing back. 83 00:04:19,520 --> 00:04:20,279 Speaker 2: Into the US. 84 00:04:20,720 --> 00:04:24,280 Speaker 3: The only people in the world who are actually obligated 85 00:04:24,320 --> 00:04:27,600 Speaker 3: to use the US dollar literally by law is Americans. 86 00:04:28,040 --> 00:04:30,640 Speaker 3: So if nobody in the world wants dollars they all 87 00:04:30,640 --> 00:04:33,600 Speaker 3: come flooding home. There are way too many as it is, 88 00:04:33,760 --> 00:04:36,760 Speaker 3: because we were the reserve currency for too long. That 89 00:04:36,839 --> 00:04:39,480 Speaker 3: could lead to double digit inflation here in the US. 90 00:04:39,720 --> 00:04:42,400 Speaker 3: From China's perspective, they would love that because that would 91 00:04:42,520 --> 00:04:45,040 Speaker 3: knock us out. 92 00:04:46,440 --> 00:04:51,360 Speaker 1: Okay, let's let's unpack that a little bit. So there's 93 00:04:51,400 --> 00:04:53,720 Speaker 1: two things at play. First of all, yeah, there was 94 00:04:53,760 --> 00:04:56,039 Speaker 1: all this talk of going to launch this goldback currency 95 00:04:56,560 --> 00:04:59,000 Speaker 1: that that got kind of a you know, knocked off 96 00:04:59,000 --> 00:05:01,240 Speaker 1: the table even before the event happens. I wasn't really 97 00:05:01,279 --> 00:05:04,479 Speaker 1: expecting that, but there was a couple of things that 98 00:05:04,520 --> 00:05:06,880 Speaker 1: I thought were important. So one, during the event, they 99 00:05:06,960 --> 00:05:11,280 Speaker 1: talked about they urge the importance of each of these 100 00:05:11,320 --> 00:05:14,400 Speaker 1: member stage trading in their own currencies and outside of 101 00:05:14,440 --> 00:05:17,479 Speaker 1: the dollar. That was one. So talking about that. So 102 00:05:17,520 --> 00:05:19,120 Speaker 1: you said that they all have these different currencies and 103 00:05:19,120 --> 00:05:21,919 Speaker 1: none of them really want each other's currencies. But we 104 00:05:22,040 --> 00:05:24,720 Speaker 1: see that they're trading in their own currencies. They're paying 105 00:05:24,720 --> 00:05:27,320 Speaker 1: for oil and rupees for example. They're paying for oil 106 00:05:27,320 --> 00:05:30,279 Speaker 1: and ywan, et cetera. And I think about it, like, 107 00:05:32,000 --> 00:05:34,600 Speaker 1: to your point, nobody's obligated to pay with anything other 108 00:05:34,640 --> 00:05:36,760 Speaker 1: than US as taxpayers. With dollars. But if I want 109 00:05:36,760 --> 00:05:38,000 Speaker 1: to go to Chuck E Cheese and I want to 110 00:05:38,000 --> 00:05:39,800 Speaker 1: play games at Chuck e Cheese, I have to get 111 00:05:39,800 --> 00:05:42,800 Speaker 1: the Chuck e Cheese token exactly right. I don't want 112 00:05:42,839 --> 00:05:44,480 Speaker 1: the Chuck e Cheese. I'm certainly not going to store 113 00:05:44,480 --> 00:05:46,120 Speaker 1: my wealth in Chuck e Cheese tokens. But if I 114 00:05:46,160 --> 00:05:47,640 Speaker 1: want to go there and play the games, I have 115 00:05:47,680 --> 00:05:50,240 Speaker 1: to have their token. And so if I want to 116 00:05:50,279 --> 00:05:52,800 Speaker 1: do business with China, or if I want to get 117 00:05:52,839 --> 00:05:57,039 Speaker 1: commodities from Argentina or xyz fill in the blank, they 118 00:05:57,040 --> 00:05:59,039 Speaker 1: could say, hey, you need my currency to get my 119 00:05:59,360 --> 00:06:03,279 Speaker 1: Chuck e Cheese games. Right now, the problem is is 120 00:06:03,320 --> 00:06:06,279 Speaker 1: then what happens with so you have you have currencies, 121 00:06:06,320 --> 00:06:08,320 Speaker 1: and then you have reserve assets. And so we might 122 00:06:08,360 --> 00:06:10,400 Speaker 1: break the dollar down into boats. So the dollar as 123 00:06:10,440 --> 00:06:12,400 Speaker 1: the currency and the dollar like the treasury market as 124 00:06:12,400 --> 00:06:17,840 Speaker 1: the reserve asset. So I mean to to if we 125 00:06:17,920 --> 00:06:20,440 Speaker 1: break those two apart, you have the reserve asset. Now 126 00:06:21,120 --> 00:06:23,400 Speaker 1: I want to talk about both separately, But let's talk 127 00:06:23,400 --> 00:06:26,400 Speaker 1: about the currencies for a minute. So couldn't they trade 128 00:06:26,560 --> 00:06:30,440 Speaker 1: in their currencies? I guess they would just need a 129 00:06:30,520 --> 00:06:33,320 Speaker 1: market then to take those trade imbalances and then stick 130 00:06:33,360 --> 00:06:34,000 Speaker 1: them somewhere. 131 00:06:34,720 --> 00:06:37,359 Speaker 2: Yeah, that's exactly what yep. 132 00:06:37,560 --> 00:06:42,760 Speaker 3: And the chucky cheese example is actually really good for understanding, 133 00:06:43,640 --> 00:06:45,680 Speaker 3: you know, how currencies work in general. So the United 134 00:06:45,760 --> 00:06:48,680 Speaker 3: States is a giant Chucky cheese and if you want 135 00:06:48,680 --> 00:06:50,479 Speaker 3: to do stuff in the United States, you have to 136 00:06:50,600 --> 00:06:53,359 Speaker 3: use chuck e cheese tokens in the United States, you 137 00:06:53,400 --> 00:06:55,680 Speaker 3: have to use US dollar. And that's true everyone in 138 00:06:55,720 --> 00:07:00,400 Speaker 3: the world. Now, the thing is that most money, most 139 00:07:00,440 --> 00:07:03,000 Speaker 3: money demand. Right, most of the reason that people are 140 00:07:03,000 --> 00:07:05,880 Speaker 3: buying money, it's not to transact in it, it's to 141 00:07:06,040 --> 00:07:08,760 Speaker 3: save in it, right, So savings are probably six or 142 00:07:08,800 --> 00:07:14,320 Speaker 3: seven times more than the transactions themselves. And so when India, 143 00:07:15,040 --> 00:07:18,520 Speaker 3: you know, is buying oil and rupees or something like that, yes, 144 00:07:18,880 --> 00:07:21,520 Speaker 3: it takes some of the demand away from the dollar. 145 00:07:22,120 --> 00:07:24,800 Speaker 3: But the thing is that both sides of that transaction. 146 00:07:25,360 --> 00:07:27,720 Speaker 3: So in the moment, if you take a snapshot when 147 00:07:27,720 --> 00:07:30,880 Speaker 3: they're handing the rupees over for the you know, Saudi 148 00:07:30,920 --> 00:07:34,080 Speaker 3: rials or whatever, in that moment, the dollar is not 149 00:07:34,160 --> 00:07:36,920 Speaker 3: part of the you know party. But as soon as 150 00:07:36,920 --> 00:07:40,920 Speaker 3: that transaction settles, they're probably gonna park most of that 151 00:07:41,040 --> 00:07:43,880 Speaker 3: in US dollars. Right, So the end result is that 152 00:07:44,440 --> 00:07:46,400 Speaker 3: even though there's more and more trade. 153 00:07:46,680 --> 00:07:49,960 Speaker 1: But they are they but are they parking in US treasuries? Right? 154 00:07:50,080 --> 00:07:52,680 Speaker 1: That's their reserve, that's their savings. 155 00:07:52,920 --> 00:07:56,840 Speaker 3: Yep, exactly right, So that from from their perspective, a 156 00:07:56,880 --> 00:07:58,520 Speaker 3: treasury is the same as a dollar. It's just got 157 00:07:58,560 --> 00:08:00,840 Speaker 3: an interest rate on it. So yeah, most of them 158 00:08:00,880 --> 00:08:02,280 Speaker 3: are parked in US treasures. 159 00:08:03,440 --> 00:08:06,080 Speaker 1: But I think about like my wife, she's sort of 160 00:08:06,120 --> 00:08:09,720 Speaker 1: ridiculous in this way where she loves her like Starbucks 161 00:08:10,160 --> 00:08:12,840 Speaker 1: card and she loves to put money onto her Starbucks app. 162 00:08:12,880 --> 00:08:14,600 Speaker 1: So when she goes to Starbucks, she just shows her 163 00:08:14,640 --> 00:08:18,880 Speaker 1: app and they credit. Starbucks has two billion dollars of 164 00:08:19,040 --> 00:08:24,040 Speaker 1: float sitting in their gift cards, right, So people do 165 00:08:24,120 --> 00:08:27,280 Speaker 1: store wealth in Starbucks apparently two billion dollars of it, right, 166 00:08:28,080 --> 00:08:29,840 Speaker 1: And this sort of like a float because they know 167 00:08:29,920 --> 00:08:32,199 Speaker 1: they're going to go to Starbucks and use that at 168 00:08:32,200 --> 00:08:34,600 Speaker 1: some point. And it's not even a Starbucks token, it's 169 00:08:34,640 --> 00:08:36,920 Speaker 1: just the dollar. But yeah, they'll still park it there. 170 00:08:37,400 --> 00:08:39,760 Speaker 1: So it could be possible where I, hey, I'm going 171 00:08:39,840 --> 00:08:42,439 Speaker 1: to do two billion dollars with trade with India, I 172 00:08:42,520 --> 00:08:43,800 Speaker 1: might as well just keep some rupees. 173 00:08:45,480 --> 00:08:47,240 Speaker 2: Yeah, without a doubt. I mean there's going to be 174 00:08:47,280 --> 00:08:47,679 Speaker 2: some of that. 175 00:08:47,840 --> 00:08:51,439 Speaker 3: So the reason that you save sort of zooming out 176 00:08:51,440 --> 00:08:53,520 Speaker 3: in the big picture is so that you can eventually 177 00:08:53,559 --> 00:08:57,400 Speaker 3: engage in transactions. Right, So if a significant amount of 178 00:08:57,400 --> 00:08:59,559 Speaker 3: the trade going on between let's say Saudi Arabia and 179 00:08:59,640 --> 00:09:02,560 Speaker 3: China is going on in their own currencies, then yes, 180 00:09:02,600 --> 00:09:06,760 Speaker 3: there will be some deterioration of US dollar demand. But 181 00:09:07,040 --> 00:09:10,840 Speaker 3: I don't think it's massive. So it's it's not like 182 00:09:10,920 --> 00:09:12,920 Speaker 3: one to one. In other words, if ten percent of 183 00:09:12,960 --> 00:09:16,640 Speaker 3: their trade shifts out into each other's currencies, that doesn't 184 00:09:16,679 --> 00:09:19,400 Speaker 3: I think imply a ten percent drop and how many 185 00:09:19,400 --> 00:09:22,280 Speaker 3: dollars they want, because most of the dollars they want 186 00:09:22,720 --> 00:09:26,320 Speaker 3: are kind of saved for we don't know what yet, Okay, 187 00:09:26,400 --> 00:09:28,600 Speaker 3: So it's it's just a store of value. It's not 188 00:09:28,640 --> 00:09:32,600 Speaker 3: necessarily dedicated to any purpose. So yes, those a week 189 00:09:32,600 --> 00:09:35,760 Speaker 3: in the dollar, and you know, I think everybody pretty 190 00:09:35,800 --> 00:09:38,720 Speaker 3: much expected that out of the summit. Here all of 191 00:09:38,760 --> 00:09:42,120 Speaker 3: the countries in bricks are trying to extend how much 192 00:09:42,120 --> 00:09:44,520 Speaker 3: trade they do. They're also trying to bring in new members. 193 00:09:44,520 --> 00:09:47,360 Speaker 3: They've got something like forty that are knocking on the door, 194 00:09:47,960 --> 00:09:51,839 Speaker 3: and yes, that will drain some demand away from the dollar. 195 00:09:52,240 --> 00:09:54,520 Speaker 3: I don't think it's an absolute game changer like gold 196 00:09:54,600 --> 00:09:57,559 Speaker 3: might be, but you know, it looks like gold is 197 00:09:57,600 --> 00:09:59,960 Speaker 3: a ways away now. The thing to keep in mind 198 00:10:00,360 --> 00:10:05,280 Speaker 3: because the dollar is a funny creature because it's the 199 00:10:05,320 --> 00:10:09,720 Speaker 3: reserve currency. So in two thousand and eight, the global 200 00:10:09,720 --> 00:10:12,960 Speaker 3: financial crisis that started in the US, right, it started 201 00:10:13,000 --> 00:10:16,240 Speaker 3: with you know, risky mortgages and with banks that took 202 00:10:16,280 --> 00:10:19,240 Speaker 3: too many gambles. And even though it started in the US, 203 00:10:19,320 --> 00:10:22,200 Speaker 3: that spread all over the world, Europe and Asia. The 204 00:10:22,280 --> 00:10:25,960 Speaker 3: US dollar actually got stronger during the global financial crisis. 205 00:10:26,040 --> 00:10:28,880 Speaker 3: And the reason is because if you are the reserve currency, 206 00:10:28,920 --> 00:10:34,200 Speaker 3: you're seen as the safe haven, even if the problem 207 00:10:34,400 --> 00:10:37,360 Speaker 3: is coming from your own country, from the perspective of 208 00:10:37,360 --> 00:10:39,800 Speaker 3: the whole world, the US dollar is still seen as 209 00:10:39,800 --> 00:10:42,679 Speaker 3: a safe haven. So on the one hand, bricks could 210 00:10:43,240 --> 00:10:45,560 Speaker 3: drag demand out of the dollar, which would weaken it. 211 00:10:46,080 --> 00:10:47,920 Speaker 3: On the other hand, you know, if we look at 212 00:10:47,960 --> 00:10:51,720 Speaker 3: the world largely speaking, we've got near recession in the US, 213 00:10:51,800 --> 00:10:54,960 Speaker 3: we've got outright recession in Europe, China has gone through 214 00:10:55,040 --> 00:10:57,679 Speaker 3: rough patch. There's so many problems in the world that 215 00:10:57,760 --> 00:11:00,280 Speaker 3: it would not at all be surprising to actually see 216 00:11:00,320 --> 00:11:05,720 Speaker 3: the dollar get stronger even as that sort of structural 217 00:11:05,800 --> 00:11:08,800 Speaker 3: demand is fading away because it's being replaced. So you 218 00:11:08,840 --> 00:11:11,520 Speaker 3: have basically tempered because people are scared. 219 00:11:12,720 --> 00:11:15,040 Speaker 1: Yeah, which it is. The dollar has been raging too, 220 00:11:15,400 --> 00:11:17,640 Speaker 1: rampaging its way up right now. But if we go 221 00:11:17,720 --> 00:11:19,760 Speaker 1: back to this sort of Chuck E Cheese analogy, so 222 00:11:20,720 --> 00:11:22,719 Speaker 1: we don't want money. What we want is the things 223 00:11:22,760 --> 00:11:25,720 Speaker 1: that money buys us, the goods and services. We wait 224 00:11:25,880 --> 00:11:27,959 Speaker 1: in money until we're ready to get those goods and 225 00:11:28,000 --> 00:11:31,640 Speaker 1: services that we want. So back to the CHUCKI cheese analogy, 226 00:11:31,720 --> 00:11:35,920 Speaker 1: what we want is goods and services. Now the US 227 00:11:36,160 --> 00:11:39,000 Speaker 1: is main exports of we have goods and services. Most 228 00:11:39,040 --> 00:11:42,480 Speaker 1: of what we export as services, financial services, social media services. 229 00:11:42,720 --> 00:11:43,960 Speaker 1: Putin said, what are you going to do eat your 230 00:11:43,960 --> 00:11:47,920 Speaker 1: social media stocks? Now? As far as goods, the top 231 00:11:47,920 --> 00:11:52,520 Speaker 1: three exports and goods are energy. But if with the 232 00:11:52,520 --> 00:11:56,120 Speaker 1: addition of staud Arabia, Iran, I think it's they're up 233 00:11:56,160 --> 00:12:00,400 Speaker 1: to about eighty percent of the global energy market market. 234 00:12:00,400 --> 00:12:04,520 Speaker 1: I should say so if these if these bricks nations, 235 00:12:05,080 --> 00:12:08,920 Speaker 1: the Brazil, the Russia, the Saudi Arabia, et cetera. If 236 00:12:08,920 --> 00:12:13,880 Speaker 1: they're the producers of goods, then the world needs what 237 00:12:13,920 --> 00:12:17,360 Speaker 1: they're producing, versus what is the US producing that anybody needs? 238 00:12:18,240 --> 00:12:21,920 Speaker 3: Really nice, Yeah, and that's the fundamental problem, you know, 239 00:12:22,240 --> 00:12:27,560 Speaker 3: our really across the West, they're chasing out manufacturing, they're 240 00:12:27,600 --> 00:12:30,400 Speaker 3: chasing out energy. They're generally doing it in the name 241 00:12:30,400 --> 00:12:32,760 Speaker 3: of the climate. And of course they're just sending these 242 00:12:32,800 --> 00:12:35,760 Speaker 3: overseas where they're often produced even dirtier. 243 00:12:35,880 --> 00:12:39,160 Speaker 2: So none of it makes any sense. But it's crony. 244 00:12:39,200 --> 00:12:40,959 Speaker 2: There's a lot of money at issue. 245 00:12:41,440 --> 00:12:44,679 Speaker 3: So we're chasing out all of these sort of real industries, 246 00:12:45,120 --> 00:12:48,480 Speaker 3: and you know, we're essentially handing them to these other countries. 247 00:12:48,679 --> 00:12:53,319 Speaker 3: Germany is just deindustrializing at at a you know, at 248 00:12:53,320 --> 00:12:55,640 Speaker 3: a ridiculous pace all across the Europe. 249 00:12:56,480 --> 00:12:57,560 Speaker 2: Yeah, they're they're. 250 00:12:57,360 --> 00:13:00,800 Speaker 3: Buying out farmers and slaughtering cows, and so you are, 251 00:13:00,920 --> 00:13:04,400 Speaker 3: you are essentially handing the keys to your future to 252 00:13:04,520 --> 00:13:06,880 Speaker 3: these other countries. Now, the thing is that the countries 253 00:13:06,920 --> 00:13:10,320 Speaker 3: who it's being handed to are the countries who are 254 00:13:10,360 --> 00:13:12,800 Speaker 3: not part of the Western gang, right, They're the kind 255 00:13:12,840 --> 00:13:16,080 Speaker 3: of countries who don't listen to environmentalists or the rest 256 00:13:16,080 --> 00:13:20,319 Speaker 3: of the activists. So almost by definition, you're taking all 257 00:13:20,320 --> 00:13:24,880 Speaker 3: of the real industries, basic materials, minerals, even food, and 258 00:13:24,920 --> 00:13:27,600 Speaker 3: you are handing those two countries that sort of by 259 00:13:27,640 --> 00:13:28,720 Speaker 3: definition don't like you. 260 00:13:29,160 --> 00:13:30,319 Speaker 2: They're not part of your gang. 261 00:13:30,960 --> 00:13:33,480 Speaker 3: And so this, you know, this kind of sets up 262 00:13:33,480 --> 00:13:38,720 Speaker 3: a nineteen seventies oil crisis type situation, but completely across 263 00:13:38,800 --> 00:13:41,839 Speaker 3: the board right where every you know, we're not there yet, 264 00:13:41,880 --> 00:13:44,280 Speaker 3: we're going gradually, we're going as fast as the activists 265 00:13:44,280 --> 00:13:47,240 Speaker 3: can push it. But where gradually all of these things 266 00:13:47,280 --> 00:13:49,959 Speaker 3: are coming from countries that are actually hostile to you. 267 00:13:50,679 --> 00:13:53,360 Speaker 3: If those countries are talking to each other, then you 268 00:13:53,360 --> 00:13:57,959 Speaker 3: could conceivably have an OPAQ style coordination where they start 269 00:13:58,000 --> 00:14:00,880 Speaker 3: squeezing the West, and you know, the West does have 270 00:14:00,960 --> 00:14:05,120 Speaker 3: things they want, like money, so you know, they could 271 00:14:05,200 --> 00:14:09,280 Speaker 3: essentially make the West dance. Even if the Western economies 272 00:14:09,280 --> 00:14:12,360 Speaker 3: are much bigger on paper, they don't have those leverage points. 273 00:14:12,720 --> 00:14:15,320 Speaker 3: A lot of countries in the world would dearly love 274 00:14:16,040 --> 00:14:18,920 Speaker 3: for say, Facebook to pull out, either so they can 275 00:14:18,960 --> 00:14:22,240 Speaker 3: promote a national champion, or they don't frankly need it 276 00:14:22,320 --> 00:14:25,200 Speaker 3: very much. They might see a company like Facebook as 277 00:14:25,240 --> 00:14:29,080 Speaker 3: a problem that it encourages activists or color revolutions and 278 00:14:29,120 --> 00:14:29,640 Speaker 3: things like this. 279 00:14:30,240 --> 00:14:32,560 Speaker 2: So from those countries' perspective, there's there's. 280 00:14:32,520 --> 00:14:35,400 Speaker 3: Very little leverage that you can throw back at them 281 00:14:35,960 --> 00:14:38,480 Speaker 3: if they do decide to use their control of basic 282 00:14:38,520 --> 00:14:40,320 Speaker 3: materials and energy to squeeze us. 283 00:14:41,200 --> 00:14:43,400 Speaker 1: So going back to we don't want money, We just 284 00:14:43,440 --> 00:14:46,040 Speaker 1: want the things that money buys us. But we have 285 00:14:46,120 --> 00:14:49,200 Speaker 1: to store that weight. We have to store our value 286 00:14:49,200 --> 00:14:51,000 Speaker 1: in something where we can wait. And so the dollar, 287 00:14:51,120 --> 00:14:54,800 Speaker 1: the treasury market has been that, and I think you know, 288 00:14:54,840 --> 00:14:58,320 Speaker 1: we'd both agree most most everybody agrees that there's really 289 00:14:58,320 --> 00:15:00,560 Speaker 1: no replacement for the US treasury market. Don't have the 290 00:15:00,600 --> 00:15:03,400 Speaker 1: bond markets, the deep liquidity markets, we don't really have. 291 00:15:03,680 --> 00:15:06,360 Speaker 1: Even as much trust has been lost intu a system, 292 00:15:06,360 --> 00:15:08,960 Speaker 1: there's less trust in other places, et cetera. But it 293 00:15:09,000 --> 00:15:11,040 Speaker 1: seems like what a lot of these bricks nations have 294 00:15:11,080 --> 00:15:16,040 Speaker 1: been doing is moving their treasury buying into gold buying, right, 295 00:15:17,080 --> 00:15:19,040 Speaker 1: And so that has been a trend that we've been 296 00:15:19,040 --> 00:15:21,240 Speaker 1: seeing over the last couple of years. And so they 297 00:15:21,440 --> 00:15:25,920 Speaker 1: if they need to park their trade balances, their reserves 298 00:15:26,320 --> 00:15:29,240 Speaker 1: in something, then well they have all these their assets. 299 00:15:29,280 --> 00:15:32,200 Speaker 1: The dollars the best, but maybe gold is also good 300 00:15:32,240 --> 00:15:35,240 Speaker 1: as well, and it seems that that's that's the trend. 301 00:15:35,480 --> 00:15:38,280 Speaker 2: Right, Gold is good as well also hard materials. 302 00:15:38,880 --> 00:15:40,960 Speaker 3: So you know, what China's been doing is plowing a 303 00:15:41,000 --> 00:15:44,680 Speaker 3: lot of money into Africa, and it will you know, 304 00:15:44,760 --> 00:15:47,200 Speaker 3: what it gets on on incend is that it might 305 00:15:47,320 --> 00:15:52,240 Speaker 3: own a you know, oil, an oil field, or a 306 00:15:52,280 --> 00:15:55,720 Speaker 3: mine or something in these various countries. And so that's 307 00:15:55,800 --> 00:15:57,920 Speaker 3: essentially a hard asset. It's not quite gold, but you 308 00:15:57,960 --> 00:16:01,000 Speaker 3: put a bunch of those together and serves the same purpose. 309 00:16:01,640 --> 00:16:06,840 Speaker 3: And probably the biggest sort of own goal there is 310 00:16:07,120 --> 00:16:13,040 Speaker 3: that when Putin invaded Ukraine, the US actually seized Russia 311 00:16:13,240 --> 00:16:16,960 Speaker 3: the sovereign dollars of the Russian Central Bank, and they 312 00:16:17,000 --> 00:16:19,600 Speaker 3: did that to try to set off a bank crash. Now, 313 00:16:19,640 --> 00:16:24,360 Speaker 3: ironically our banks crashed instead for separate reasons. But what 314 00:16:24,400 --> 00:16:27,400 Speaker 3: that did was warned the entire world, right, It warned 315 00:16:27,440 --> 00:16:29,760 Speaker 3: the other two hundred countries in the world that the 316 00:16:29,880 --> 00:16:33,000 Speaker 3: dollar is a very risky thing to own now, because 317 00:16:33,080 --> 00:16:36,800 Speaker 3: if the US government decides that it doesn't like your policy, 318 00:16:37,400 --> 00:16:39,960 Speaker 3: then they will crash your economy. Now, if you're a 319 00:16:40,000 --> 00:16:42,840 Speaker 3: country in Africa, let's say that you're kind of dodgy 320 00:16:42,880 --> 00:16:46,080 Speaker 3: on the democracy front, the prospect that the US could 321 00:16:46,120 --> 00:16:49,520 Speaker 3: crash your banking system. That does not mean that you're 322 00:16:49,520 --> 00:16:52,120 Speaker 3: going to have embarrassing press conferences. Okay, that could mean 323 00:16:52,120 --> 00:16:53,520 Speaker 3: that you're hanging from a poll. 324 00:16:53,440 --> 00:16:53,720 Speaker 2: All right. 325 00:16:53,760 --> 00:16:57,280 Speaker 3: That's a very very serious threat in some of these countries, 326 00:16:57,680 --> 00:17:01,160 Speaker 3: and the US just jumped right in. During the Cold War, 327 00:17:01,960 --> 00:17:04,479 Speaker 3: you know, we had multiple hot wars going on, proxy 328 00:17:04,480 --> 00:17:06,320 Speaker 3: wars going on with the Soviet Union all over the world. 329 00:17:06,359 --> 00:17:08,199 Speaker 3: We never ever did that because we were run by 330 00:17:08,240 --> 00:17:12,520 Speaker 3: grown ups who understand that you want to let or 331 00:17:12,680 --> 00:17:16,119 Speaker 3: keep the entire earth dependent on you, yes, even your enemies. 332 00:17:16,600 --> 00:17:17,040 Speaker 2: So in this. 333 00:17:17,080 --> 00:17:21,480 Speaker 3: Case it's you know, not only was it just blindingly stupid, 334 00:17:21,880 --> 00:17:24,760 Speaker 3: but for me, it's an interesting input into the whole 335 00:17:24,760 --> 00:17:27,000 Speaker 3: debate about the petro dollar. And you know, whether the 336 00:17:27,080 --> 00:17:32,280 Speaker 3: US is gonna run around doing in world leaders who 337 00:17:32,480 --> 00:17:35,760 Speaker 3: who reject the dollar, they have been so incompetent at 338 00:17:35,800 --> 00:17:39,159 Speaker 3: managing it. I don't know if they're too stupid or 339 00:17:39,160 --> 00:17:42,600 Speaker 3: if they are so beholden to the activists that, you know, 340 00:17:42,720 --> 00:17:45,800 Speaker 3: the sort of Kissinger type, real politic grown ups in 341 00:17:45,800 --> 00:17:47,840 Speaker 3: the room get ignored and they just do whatever the 342 00:17:47,840 --> 00:17:48,600 Speaker 3: activists want. 343 00:17:49,560 --> 00:17:50,960 Speaker 2: You know, they've been throwing weight around. 344 00:17:50,960 --> 00:17:54,720 Speaker 3: Recently, Japan had a big debate about LGBT policy. Uh 345 00:17:54,840 --> 00:18:00,159 Speaker 3: Uganda had a law that's very harsh on LGBT community, 346 00:18:00,680 --> 00:18:02,840 Speaker 3: and the US has been pushing on that. They actually 347 00:18:02,840 --> 00:18:05,960 Speaker 3: put sanctions on Uganda. They said, we're going to review 348 00:18:06,000 --> 00:18:07,000 Speaker 3: your duty free. 349 00:18:06,800 --> 00:18:08,040 Speaker 2: Access because of this law. 350 00:18:08,840 --> 00:18:11,800 Speaker 3: Right, and so that's an escalation here, because it's one 351 00:18:11,880 --> 00:18:15,160 Speaker 3: thing if your country's afraid to invade your neighbor because 352 00:18:15,200 --> 00:18:17,080 Speaker 3: you think the US will crash you. It's another thing 353 00:18:17,160 --> 00:18:21,520 Speaker 3: if now that's starting to get into environmental union family. Right, 354 00:18:21,640 --> 00:18:27,600 Speaker 3: the typical African is not woke. They very much not woke. 355 00:18:28,240 --> 00:18:31,240 Speaker 3: They're not into this kind of thing. Uganda cannot do 356 00:18:31,320 --> 00:18:33,359 Speaker 3: that kind of policy. So at that point, for a 357 00:18:33,400 --> 00:18:36,919 Speaker 3: lot of these or Saudi Arabia or Indonesia which is Muslim, 358 00:18:37,119 --> 00:18:40,480 Speaker 3: So those countries are basically backed into a corner where 359 00:18:40,640 --> 00:18:41,000 Speaker 3: you know. 360 00:18:40,920 --> 00:18:43,159 Speaker 2: They saw what the US did to Russia. 361 00:18:43,400 --> 00:18:45,680 Speaker 3: They who knows if they're coming from them, They don't 362 00:18:45,720 --> 00:18:47,280 Speaker 3: know what the rules are. It's a lot like us 363 00:18:47,359 --> 00:18:49,159 Speaker 3: on social media, you know, like day to day, you 364 00:18:49,160 --> 00:18:50,880 Speaker 3: have no idea what you're going to be censored for. 365 00:18:51,200 --> 00:18:54,439 Speaker 3: These countries have no idea what transgression is going to 366 00:18:54,440 --> 00:18:57,080 Speaker 3: get the active is excited about them. Meanwhile, you have 367 00:18:57,240 --> 00:19:00,320 Speaker 3: China over here. You know, in China's deal when it 368 00:19:00,359 --> 00:19:04,440 Speaker 3: comes to developing countries is they say, we don't care 369 00:19:04,480 --> 00:19:07,160 Speaker 3: what you do politically. We want you to be rich 370 00:19:07,600 --> 00:19:10,000 Speaker 3: because we want to buy stuff from you, like oil. 371 00:19:10,119 --> 00:19:14,440 Speaker 3: We want you to have functioning oil fields and ports, 372 00:19:15,040 --> 00:19:17,159 Speaker 3: and we also want you to buy Chinese things, all right, 373 00:19:17,200 --> 00:19:18,560 Speaker 3: so we want you to be prosperous. 374 00:19:18,600 --> 00:19:20,520 Speaker 2: And aside from that, I don't care what you do. 375 00:19:20,680 --> 00:19:23,240 Speaker 2: Doesn't matter to me. What you do with the environment, LGBT, etc. 376 00:19:24,160 --> 00:19:28,240 Speaker 3: That package looks a heck of a lot more attractive 377 00:19:28,800 --> 00:19:31,119 Speaker 3: to a lot of countries, and those countries collectively make 378 00:19:31,200 --> 00:19:33,719 Speaker 3: up a huge amount of dollar demand. There was a 379 00:19:34,359 --> 00:19:38,399 Speaker 3: Larry Summers. He gave a talk and he was former 380 00:19:38,600 --> 00:19:39,400 Speaker 3: Clinton executive. 381 00:19:39,400 --> 00:19:40,760 Speaker 2: I think it was a Secretary of Treasury. 382 00:19:41,040 --> 00:19:42,879 Speaker 3: Anyway, he was running around Africa and he said that 383 00:19:42,960 --> 00:19:45,000 Speaker 3: he talks to diplomats over there and what they tell 384 00:19:45,040 --> 00:19:48,280 Speaker 3: him is that when China comes, they come bringing a 385 00:19:48,280 --> 00:19:51,040 Speaker 3: big checkbook and they ask, what do you guys need, 386 00:19:51,480 --> 00:19:53,359 Speaker 3: and here's what we want, and let's make a deal. 387 00:19:53,800 --> 00:19:56,520 Speaker 2: When the US comes, they come with a lecture. 388 00:19:59,080 --> 00:20:03,560 Speaker 1: Yeah. Yeah, it's something that I've been observing, and I 389 00:20:03,600 --> 00:20:07,000 Speaker 1: am certainly no China champion at all. Sometimes I get 390 00:20:07,000 --> 00:20:09,960 Speaker 1: accused of that it's crazy, but I'm certainly not a 391 00:20:09,960 --> 00:20:11,920 Speaker 1: fan of communism, nor am I a fan of China. 392 00:20:12,040 --> 00:20:14,400 Speaker 1: But if you do look out it through the lens 393 00:20:14,400 --> 00:20:18,919 Speaker 1: that you're talking about, it's like China is cooperative and 394 00:20:19,119 --> 00:20:23,080 Speaker 1: the US is coercive. And it bothers me because you know, 395 00:20:23,119 --> 00:20:25,040 Speaker 1: when you look back through you know, World War One, 396 00:20:25,080 --> 00:20:26,399 Speaker 1: world War two, and you see the rise of the 397 00:20:26,480 --> 00:20:30,640 Speaker 1: United States and really coming to this point of American exceptionalism, 398 00:20:30,640 --> 00:20:33,120 Speaker 1: and it really led through this industrialization and being able 399 00:20:33,119 --> 00:20:36,479 Speaker 1: to supply the world, and we led by example. And 400 00:20:36,520 --> 00:20:39,040 Speaker 1: today it's it's coersion to the point that you've had 401 00:20:39,040 --> 00:20:41,600 Speaker 1: where China seems to be cooperating. Now do they have 402 00:20:41,680 --> 00:20:43,600 Speaker 1: ulterior motives? And there's a whole bunch of other stuff 403 00:20:43,600 --> 00:20:45,480 Speaker 1: to unpack there, but on the surface you sort of 404 00:20:45,480 --> 00:20:47,520 Speaker 1: see that. I want to just wind it back one 405 00:20:47,840 --> 00:20:49,360 Speaker 1: if we can just a little bit, because you talked 406 00:20:49,400 --> 00:20:53,320 Speaker 1: about the petro dollar. So after the whole world for 407 00:20:53,359 --> 00:20:56,480 Speaker 1: the Bretonwoods Agreement was tied to the dollar, Nixon into 408 00:20:56,520 --> 00:20:59,200 Speaker 1: that seventy one seventy four went into this Petro dollar agreement, 409 00:20:59,400 --> 00:21:02,040 Speaker 1: which based ensured the Chuck E Cheese token would have 410 00:21:02,119 --> 00:21:04,560 Speaker 1: value because the whole world needed energy, and so we 411 00:21:04,600 --> 00:21:08,760 Speaker 1: priced the whole world energy in dollars, right, Yeah, we 412 00:21:08,880 --> 00:21:12,160 Speaker 1: provided and so and so, yeah, and so then if 413 00:21:11,960 --> 00:21:15,720 Speaker 1: if oil is no longer in in dollars, then what 414 00:21:15,760 --> 00:21:18,520 Speaker 1: does anybody need the dollars for? Because there's nothing in 415 00:21:18,560 --> 00:21:21,000 Speaker 1: the Chuck E Cheese store anymore. Now, there's lots of 416 00:21:21,040 --> 00:21:23,200 Speaker 1: debt that's denminated dollars that has to be paid back. 417 00:21:23,240 --> 00:21:24,800 Speaker 1: And this is something Brent Johnson and I have gone 418 00:21:24,880 --> 00:21:26,840 Speaker 1: kind of round and round on where he's like, but 419 00:21:26,920 --> 00:21:29,879 Speaker 1: you got to pay back the dollar to nominated debt, right, 420 00:21:30,000 --> 00:21:33,800 Speaker 1: that has to be extinguished. Well, unless they don't want 421 00:21:33,840 --> 00:21:35,080 Speaker 1: to pay it back anymore. 422 00:21:35,560 --> 00:21:39,240 Speaker 3: Yeah, Yeah, it's it's the old joke. You know, if 423 00:21:39,240 --> 00:21:40,919 Speaker 3: you owe the bank a million dollars, you have a 424 00:21:40,920 --> 00:21:43,920 Speaker 3: problem if you owed them, right, And there's some point 425 00:21:43,960 --> 00:21:46,040 Speaker 3: where there's so much debt out there that if countries 426 00:21:46,080 --> 00:21:48,440 Speaker 3: socide that they would like to collectively stiff the US, 427 00:21:48,480 --> 00:21:52,000 Speaker 3: there's honestly not much you can do about that, you know, 428 00:21:52,119 --> 00:21:53,040 Speaker 3: I think so you. 429 00:21:53,119 --> 00:21:57,520 Speaker 1: You got you, you got, you got in an Austrian 430 00:21:57,760 --> 00:22:01,960 Speaker 1: potentially you know, rising to power in argent Yeah, and 431 00:22:02,000 --> 00:22:04,840 Speaker 1: he's pushing back big against the debt. Wanted to restructure 432 00:22:04,920 --> 00:22:07,879 Speaker 1: what they have is debt, change that whole system. Then 433 00:22:07,960 --> 00:22:10,320 Speaker 1: you got Ukraine, which seems like there's no way they 434 00:22:10,320 --> 00:22:14,800 Speaker 1: could win that war. And the three largest debtors to 435 00:22:14,960 --> 00:22:19,720 Speaker 1: the IMF are Ukraine, Argentina and Egypt. Right, So what 436 00:22:19,760 --> 00:22:21,320 Speaker 1: happens if that debt just goes bad? 437 00:22:22,320 --> 00:22:22,600 Speaker 2: Yeah? 438 00:22:22,680 --> 00:22:24,280 Speaker 1: Well, which could happen? Which could happen? 439 00:22:24,640 --> 00:22:26,200 Speaker 2: Oh yeah, I could for sure happen. 440 00:22:26,320 --> 00:22:29,400 Speaker 3: And you know, the the IMF has this baroque siphon 441 00:22:29,480 --> 00:22:32,879 Speaker 3: that it's plugged into the taxpayer wallets, and so the 442 00:22:32,920 --> 00:22:34,920 Speaker 3: IMF will do just find it just comes straight out 443 00:22:34,920 --> 00:22:35,159 Speaker 3: of US. 444 00:22:35,160 --> 00:22:37,320 Speaker 2: They call it a it's called a requisition. 445 00:22:37,920 --> 00:22:40,400 Speaker 3: They basically send out notice that everybody has to give 446 00:22:40,400 --> 00:22:42,199 Speaker 3: a certain amount of money and you, the taxpayer, have 447 00:22:42,280 --> 00:22:45,040 Speaker 3: to do that. It's unclear to me why exactly we 448 00:22:45,160 --> 00:22:46,120 Speaker 3: have to obey that, but. 449 00:22:46,119 --> 00:22:47,360 Speaker 2: Anyway we do. 450 00:22:48,760 --> 00:22:52,800 Speaker 3: But yeah, the you know, I think that the petrol 451 00:22:52,840 --> 00:22:55,360 Speaker 3: dollar thing. So my understanding of it, just in summary, 452 00:22:55,560 --> 00:22:58,479 Speaker 3: is that the US provided free mercenary services to Saudi 453 00:22:58,480 --> 00:23:02,240 Speaker 3: and a number of other countries, protecting them against Iran 454 00:23:02,400 --> 00:23:07,280 Speaker 3: or whatever other interlopers, presumably actually protecting the Saudi family 455 00:23:07,280 --> 00:23:09,440 Speaker 3: against its people, because it was deeply unpopular for a 456 00:23:09,480 --> 00:23:09,920 Speaker 3: long time. 457 00:23:10,960 --> 00:23:12,120 Speaker 2: And in return, the. 458 00:23:12,080 --> 00:23:14,800 Speaker 3: Deal was that they would, you know, when they sold oil, 459 00:23:14,920 --> 00:23:17,040 Speaker 3: they would park the proceeds in dollars, and then that 460 00:23:17,040 --> 00:23:20,000 Speaker 3: would boost dollar demand. I don't think that's a huge 461 00:23:20,000 --> 00:23:23,000 Speaker 3: amount of dollar demand. I mean, just to grab a 462 00:23:23,040 --> 00:23:26,760 Speaker 3: number at random, like five percent, it's it's a relatively 463 00:23:26,840 --> 00:23:30,280 Speaker 3: small amount of dollar deman. I think mostly the reason 464 00:23:30,320 --> 00:23:32,760 Speaker 3: why people in the world US dollars for various things 465 00:23:32,960 --> 00:23:35,159 Speaker 3: is because, first of all, the Federal Reserve is actually 466 00:23:35,160 --> 00:23:38,520 Speaker 3: not that bad compared to other central banks. It's horrible 467 00:23:38,560 --> 00:23:42,119 Speaker 3: compared to our ideal world, but in the grand universe 468 00:23:42,160 --> 00:23:44,639 Speaker 3: of central banks, it's not that bad. It's about the 469 00:23:44,640 --> 00:23:49,160 Speaker 3: same level as the EU, arguably Japan. So for most 470 00:23:49,200 --> 00:23:51,040 Speaker 3: of the world that's attractive. It's certainly better than the 471 00:23:51,160 --> 00:23:55,760 Speaker 3: Argentinean central bank, and so and you know, so that's 472 00:23:55,800 --> 00:23:57,080 Speaker 3: part of it, and the other part is just that 473 00:23:57,119 --> 00:23:59,480 Speaker 3: there's kind of this installed base of the US dollar 474 00:23:59,640 --> 00:24:01,960 Speaker 3: from you know, for a long time, the US dollar 475 00:24:02,080 --> 00:24:05,240 Speaker 3: was the only goal back currency up until Nixon and 476 00:24:05,320 --> 00:24:08,160 Speaker 3: everybody else kind of piggybacked on that, and so that 477 00:24:08,280 --> 00:24:10,800 Speaker 3: gave the US a really dominant position where everybody's using 478 00:24:10,800 --> 00:24:12,879 Speaker 3: the dollar because the dollar was effectively gold, but it 479 00:24:12,920 --> 00:24:14,960 Speaker 3: was a form of gold that was very, very cheap 480 00:24:14,960 --> 00:24:18,040 Speaker 3: to transact. Okay, so when it comes to currencies, those 481 00:24:18,080 --> 00:24:20,720 Speaker 3: transaction fees are a really big deal. You know, like 482 00:24:20,800 --> 00:24:24,920 Speaker 3: why can't world trade happen in Samoan whatever the currency 483 00:24:25,040 --> 00:24:27,560 Speaker 3: is of Samoan because it's not enough, Like it would 484 00:24:27,560 --> 00:24:30,960 Speaker 3: be enormously expensive to try to winning Yeah, yeah, yeah, 485 00:24:31,000 --> 00:24:33,800 Speaker 3: exactly right. If you try to move a billion dollars 486 00:24:33,800 --> 00:24:37,200 Speaker 3: in you know, Samoan dollars, then you know you're gonna 487 00:24:37,200 --> 00:24:40,760 Speaker 3: pay thirty percent transaction. I don't know. And so the 488 00:24:41,640 --> 00:24:44,000 Speaker 3: right the transaction fees are so low in the dollar 489 00:24:44,480 --> 00:24:47,200 Speaker 3: that at this point it's sort of running on fumes, 490 00:24:47,440 --> 00:24:49,960 Speaker 3: like it's got that installed base, and that means it's. 491 00:24:49,800 --> 00:24:51,240 Speaker 2: A relatively liquid market. 492 00:24:51,560 --> 00:24:55,160 Speaker 3: Now, eventually that flips something like you know, gold rail 493 00:24:55,200 --> 00:24:57,920 Speaker 3: would probably flip that a lot quicker. China is trying 494 00:24:57,920 --> 00:25:02,880 Speaker 3: to essentially bribe countries off the dollar. Biden is really doing. 495 00:25:02,960 --> 00:25:05,200 Speaker 3: China's job for it by doing this, you know, this 496 00:25:05,320 --> 00:25:08,360 Speaker 3: funny business with the Russian Central Bank and then pushing 497 00:25:08,600 --> 00:25:13,840 Speaker 3: Uganda around again. You Ganda economically is an inconsequential country. 498 00:25:13,880 --> 00:25:15,560 Speaker 3: It doesn't account for much dollar demand. But there's a 499 00:25:15,600 --> 00:25:17,400 Speaker 3: lot of countries in the world who look at Uganda. 500 00:25:17,440 --> 00:25:21,240 Speaker 3: So countries like Brazil or Egypt or India who do 501 00:25:21,359 --> 00:25:23,800 Speaker 3: hold a lot of dollars and they look at what happens. 502 00:25:25,160 --> 00:25:28,440 Speaker 1: Yeah, so let's jump over to now. I think something 503 00:25:28,480 --> 00:25:33,000 Speaker 1: you had talked about was Japan and China dumping dollars. 504 00:25:34,200 --> 00:25:36,280 Speaker 1: You said, I think at a at a record pace. 505 00:25:36,920 --> 00:25:40,520 Speaker 1: So it looks like we have Japan, China, but not 506 00:25:40,600 --> 00:25:43,520 Speaker 1: just them, I mean potentially other countries, even Germany dumping 507 00:25:43,560 --> 00:25:47,919 Speaker 1: treasuries for any number of reasons, presumably to either one 508 00:25:47,960 --> 00:25:51,760 Speaker 1: pop up their currency or two to buy energy. So 509 00:25:52,760 --> 00:25:54,119 Speaker 1: what's your what's your take on that? 510 00:25:54,960 --> 00:25:57,800 Speaker 3: Yeah, so it's it's happening all over the world, but 511 00:25:57,840 --> 00:26:01,680 Speaker 3: it's really most dramatic in hand in China. And what's 512 00:26:01,720 --> 00:26:05,640 Speaker 3: happening is that the gap between their interest rates and 513 00:26:05,720 --> 00:26:08,840 Speaker 3: our interest rates. Right so we have pretty high interest 514 00:26:08,920 --> 00:26:11,560 Speaker 3: rates right now, it's about five and a quarter. China's 515 00:26:11,560 --> 00:26:14,240 Speaker 3: at three and a quarter. Japan actually still has negative 516 00:26:14,280 --> 00:26:17,240 Speaker 3: interest rates minus zero point one percent, so that creates 517 00:26:17,240 --> 00:26:21,000 Speaker 3: a big profit opportunity to move your money into the US. 518 00:26:21,600 --> 00:26:25,040 Speaker 3: So you've got all of this money flowing into US 519 00:26:25,119 --> 00:26:29,040 Speaker 3: assets that is causing those currencies to plunge in value. 520 00:26:29,119 --> 00:26:30,880 Speaker 2: So the Japanese yen is down. 521 00:26:31,040 --> 00:26:34,480 Speaker 3: It's not about seven percent in two months, which is 522 00:26:34,520 --> 00:26:37,160 Speaker 3: a really big move for the en. It's actually down 523 00:26:37,240 --> 00:26:41,359 Speaker 3: forty percent since the pandemic began. China is hitting I 524 00:26:41,359 --> 00:26:45,360 Speaker 3: think it's fifteen or sixteen year lows that just hit there. 525 00:26:45,560 --> 00:26:47,160 Speaker 2: They're really losing a massive amount. 526 00:26:47,320 --> 00:26:49,960 Speaker 3: So this is a big problem politically in those countries 527 00:26:50,520 --> 00:26:55,960 Speaker 3: because especially Japan, it imports essentially all raw materials, most 528 00:26:56,000 --> 00:26:59,040 Speaker 3: notably it's gasoline, like one hundred percent of the gasoline 529 00:26:59,080 --> 00:27:01,440 Speaker 3: in Japan is important, and so if the currency is 530 00:27:01,440 --> 00:27:04,760 Speaker 3: getting too weak, then those prices jump and then households 531 00:27:04,800 --> 00:27:07,239 Speaker 3: get upset and they put pressure on politicians to fix it. 532 00:27:07,680 --> 00:27:10,960 Speaker 3: What happens at that point is the simplest way for 533 00:27:11,040 --> 00:27:13,040 Speaker 3: a Japan or a China to try to fix the 534 00:27:13,080 --> 00:27:18,719 Speaker 3: currency is to sell their US dollar assets, which are 535 00:27:18,760 --> 00:27:22,520 Speaker 3: overwhelmingly in US treasuries. Okay, so they sell those, they 536 00:27:22,560 --> 00:27:25,000 Speaker 3: floot out the dollars, and they use those to buy 537 00:27:25,000 --> 00:27:26,000 Speaker 3: back their own currency. 538 00:27:26,480 --> 00:27:28,880 Speaker 2: Okay, so if they do that, then that. 539 00:27:28,880 --> 00:27:31,120 Speaker 3: Can reverse the slide, or at least it can hold 540 00:27:31,119 --> 00:27:33,960 Speaker 3: the currency stable enough that they don't get political problems. 541 00:27:34,440 --> 00:27:37,600 Speaker 3: But what that means is that Japan and China have 542 00:27:37,680 --> 00:27:42,680 Speaker 3: been two of the biggest buyers of American federal debt, 543 00:27:43,480 --> 00:27:46,159 Speaker 3: and the FED right now is saying that it's going 544 00:27:46,200 --> 00:27:49,840 Speaker 3: to be selling sixty billion dollars or it is actually 545 00:27:49,880 --> 00:27:53,840 Speaker 3: selling sixty billion dollars a month in US treasuries. And 546 00:27:53,880 --> 00:27:57,439 Speaker 3: so if the US is selling, China is selling, Japan 547 00:27:57,560 --> 00:28:02,960 Speaker 3: is selling, who the heck is buying? Then meanwhile, yeah, 548 00:28:03,000 --> 00:28:05,639 Speaker 3: exactly right, bricks are buying gold. Countries all over the 549 00:28:05,640 --> 00:28:09,639 Speaker 3: world are gradually diversifying out of the dollar. So you know, 550 00:28:09,680 --> 00:28:12,159 Speaker 3: the yen and the euro have about double their market 551 00:28:12,200 --> 00:28:16,560 Speaker 3: share for official reserves because of that Russia thing. So 552 00:28:16,720 --> 00:28:20,239 Speaker 3: everybody in the world is essentially selling treasuries. And then 553 00:28:20,280 --> 00:28:22,919 Speaker 3: you've got Joe Biden on the other side here ramping 554 00:28:22,960 --> 00:28:24,680 Speaker 3: up the deficits. So we're looking at I think it's 555 00:28:24,680 --> 00:28:26,840 Speaker 3: one point six at this point, one point six trillion 556 00:28:26,840 --> 00:28:29,520 Speaker 3: a year and it's looking to get towards two trillion. 557 00:28:29,560 --> 00:28:32,919 Speaker 3: The CBO, the Congressional Budget Office, which like the in 558 00:28:33,040 --> 00:28:37,719 Speaker 3: house accountants for Congress, the AD and it's bipartisan, so 559 00:28:37,760 --> 00:28:40,080 Speaker 3: they estimate that we're going to be looking at deficits 560 00:28:40,120 --> 00:28:43,240 Speaker 3: of two trillion dollars per year up until twenty fifty. 561 00:28:43,400 --> 00:28:45,400 Speaker 2: So who on earth is going to buy all that? 562 00:28:48,240 --> 00:28:50,880 Speaker 1: Yeah? I just saw the last Treasury auction had record 563 00:28:50,920 --> 00:28:54,680 Speaker 1: amount of oversubscribed. I mean, had for sure there was available. 564 00:28:55,080 --> 00:28:56,880 Speaker 1: I didn't get a chance to dig into the data 565 00:28:56,920 --> 00:28:59,520 Speaker 1: to see to answer that question. Who is buying? It's 566 00:28:59,520 --> 00:29:01,600 Speaker 1: not Russia. If it's not Russia, it's not China, it's 567 00:29:01,600 --> 00:29:03,840 Speaker 1: not Japan, it's not the bricks. Who is it? I'm 568 00:29:03,840 --> 00:29:07,840 Speaker 1: guessing it's Switzerland, It's Europe, and it's the banks. 569 00:29:08,280 --> 00:29:11,840 Speaker 3: Yeah, yeah, Switzerland, Europe, the banks. Partly is that flight 570 00:29:11,880 --> 00:29:14,320 Speaker 3: to safety, you know, so enough things are going wrong 571 00:29:14,360 --> 00:29:16,600 Speaker 3: in the world, especially with China now going down. You've 572 00:29:16,640 --> 00:29:19,320 Speaker 3: got instability essentially in every major region of the world. 573 00:29:19,680 --> 00:29:21,240 Speaker 3: So some of that is going to be kind of 574 00:29:21,480 --> 00:29:25,840 Speaker 3: transitory demand for dollars, which translates for the most part 575 00:29:25,840 --> 00:29:28,560 Speaker 3: into US treasuries. So I think in the near term 576 00:29:28,840 --> 00:29:31,920 Speaker 3: where we're we're certainly not looking at any kind of collapse. 577 00:29:32,000 --> 00:29:34,560 Speaker 3: But I think going down the line now, you know, 578 00:29:34,640 --> 00:29:37,800 Speaker 3: as China Japan drain out, as the FED drains out, 579 00:29:37,840 --> 00:29:40,160 Speaker 3: you've got this big overhang and you may not see 580 00:29:40,160 --> 00:29:43,440 Speaker 3: it immediately if there's enough fear in the world that 581 00:29:43,520 --> 00:29:45,840 Speaker 3: people are going to that cleanest dirty shirt. But I 582 00:29:45,840 --> 00:29:47,680 Speaker 3: think that's setting up a lot of trouble for us 583 00:29:47,680 --> 00:29:51,000 Speaker 3: down the line, especially since there appears to be absolutely 584 00:29:51,040 --> 00:29:55,720 Speaker 3: no constraint on how much debt both parties are united 585 00:29:55,760 --> 00:29:58,240 Speaker 3: and pushing out. So I think we are looking at 586 00:29:58,520 --> 00:30:00,640 Speaker 3: you know, we all know it's unsustainable, and the question 587 00:30:00,760 --> 00:30:01,840 Speaker 3: is is that accelerating. 588 00:30:03,080 --> 00:30:05,080 Speaker 1: Yeah, well, I think that certainly is accelerating. We saw 589 00:30:05,400 --> 00:30:09,920 Speaker 1: a pre pandemic the you know, the budget was four 590 00:30:09,960 --> 00:30:13,280 Speaker 1: point eight trillion and now it's up to six point 591 00:30:13,280 --> 00:30:15,280 Speaker 1: four trillion or something like that. And that's that new 592 00:30:15,560 --> 00:30:18,720 Speaker 1: level has been baked in at the desaloybit. They did 593 00:30:18,720 --> 00:30:20,600 Speaker 1: not want to knock that down at all. And as 594 00:30:20,600 --> 00:30:22,120 Speaker 1: a matter of fact, to your point, the CBO has 595 00:30:22,200 --> 00:30:24,600 Speaker 1: just projected to get higher. I saw that the US 596 00:30:24,640 --> 00:30:28,360 Speaker 1: government spending is now greater than twenty five percent of 597 00:30:28,560 --> 00:30:33,080 Speaker 1: US GDP, so that fiscal spending makes up more than 598 00:30:33,080 --> 00:30:35,000 Speaker 1: a quarter, which is past where we were in the 599 00:30:35,000 --> 00:30:37,880 Speaker 1: two thousand and eight Great financial crash, and we're not 600 00:30:38,200 --> 00:30:41,400 Speaker 1: even in any type of economic downturn like this is 601 00:30:41,480 --> 00:30:44,600 Speaker 1: like wartime deficits. We haven't even we haven't even seen 602 00:30:44,640 --> 00:30:45,560 Speaker 1: the recession. 603 00:30:45,240 --> 00:30:49,080 Speaker 3: Yet, right, And remember there's state and local and county 604 00:30:49,120 --> 00:30:50,320 Speaker 3: and all the rest of it. You put all that 605 00:30:50,320 --> 00:30:54,000 Speaker 3: together and it's about ten trillion, so it's over forty percent. 606 00:30:54,080 --> 00:30:55,440 Speaker 2: It almost half. 607 00:30:55,320 --> 00:30:57,840 Speaker 3: Of what we produce gets taken by the government. And 608 00:30:57,880 --> 00:31:00,840 Speaker 3: you're exactly right, that's that's story peace time. And we 609 00:31:00,880 --> 00:31:06,200 Speaker 3: are absolutely running wartime style deficits. Our deficit numbers look 610 00:31:06,280 --> 00:31:08,440 Speaker 3: like what they were at the absolute worst of two 611 00:31:08,480 --> 00:31:12,400 Speaker 3: thousand and eight. So the concern there is that if 612 00:31:12,440 --> 00:31:14,360 Speaker 3: we get a recession coming on the pike here. 613 00:31:14,960 --> 00:31:16,600 Speaker 2: You know, last time around. 614 00:31:16,200 --> 00:31:18,400 Speaker 3: We had what it was, I think it was two 615 00:31:18,560 --> 00:31:22,760 Speaker 3: or three trillion in two thousand and eight. That the Yeah, 616 00:31:22,760 --> 00:31:24,360 Speaker 3: it was two trillion in two thousand and eight, and 617 00:31:24,440 --> 00:31:26,800 Speaker 3: it was three trillion and twenty twenty. Every time you 618 00:31:26,840 --> 00:31:29,960 Speaker 3: have a recession, the deficit absolutely explodes because, on the 619 00:31:29,960 --> 00:31:31,520 Speaker 3: one hand, you have a lot of people who need help, 620 00:31:32,800 --> 00:31:35,000 Speaker 3: they lost their jobs or you know, they're having some 621 00:31:35,040 --> 00:31:37,880 Speaker 3: other distress, so social spending sores. But then on the 622 00:31:37,920 --> 00:31:41,240 Speaker 3: other hand, tax revenue drives up because nobody's making any money. 623 00:31:41,560 --> 00:31:44,360 Speaker 3: So every single time, you know, it gets bigger and bigger. 624 00:31:44,400 --> 00:31:46,719 Speaker 3: So we're looking at probably, I mean, if I had 625 00:31:46,720 --> 00:31:51,160 Speaker 3: to guess another two trillion plus on the deficit when 626 00:31:51,200 --> 00:31:54,640 Speaker 3: the recession finally hits. And you know, the other issue 627 00:31:54,680 --> 00:31:59,120 Speaker 3: I think is one of the most exciting things about 628 00:31:59,200 --> 00:32:01,800 Speaker 3: recessions is that every single time the Left comes up 629 00:32:01,840 --> 00:32:05,440 Speaker 3: with some new innovation that's going to permanently grow the government. 630 00:32:06,040 --> 00:32:09,280 Speaker 3: And I think the one they sort of ran it 631 00:32:09,640 --> 00:32:13,840 Speaker 3: on a trial basis during COVID, they are I think 632 00:32:14,120 --> 00:32:17,480 Speaker 3: hell bent on installing a UBI, a universal basic income, 633 00:32:18,080 --> 00:32:21,040 Speaker 3: and I think it's very possible because of that that 634 00:32:21,160 --> 00:32:23,760 Speaker 3: this next recession could blow two thousand and eight out 635 00:32:23,800 --> 00:32:25,480 Speaker 3: of the water, can even blow twenty twenty out of 636 00:32:25,520 --> 00:32:28,360 Speaker 3: the water in terms of how much spending is ramped up, 637 00:32:28,480 --> 00:32:30,400 Speaker 3: because I think they're going to go all in on 638 00:32:30,440 --> 00:32:33,920 Speaker 3: a UBI that will give them the bread to go 639 00:32:34,000 --> 00:32:36,800 Speaker 3: with the circus where they can, you know, essentially pay 640 00:32:36,840 --> 00:32:39,960 Speaker 3: millions of voters to sit on the couch and give 641 00:32:40,000 --> 00:32:43,080 Speaker 3: all the rest to them. 642 00:32:43,400 --> 00:32:46,920 Speaker 1: Well, I think there's no question. I mean, there always is, 643 00:32:46,960 --> 00:32:50,600 Speaker 1: But I think it's in my view overwhelming probability that 644 00:32:50,640 --> 00:32:53,200 Speaker 1: they're This next recession is going to blow way past 645 00:32:53,200 --> 00:32:56,520 Speaker 1: what we saw on the pandemic was it fiscal and 646 00:32:56,840 --> 00:32:59,520 Speaker 1: fiscal monetary was about eleven trillion dollars. Will probably be 647 00:32:59,600 --> 00:33:01,720 Speaker 1: fifteen twenty, you know, in the next one, because because 648 00:33:01,760 --> 00:33:03,160 Speaker 1: the holes get bigger, they have to fill them up. 649 00:33:03,200 --> 00:33:05,040 Speaker 1: But back to the point that you said talking about 650 00:33:05,040 --> 00:33:09,560 Speaker 1: the UBI universal Basic income, don't we already have that? 651 00:33:10,200 --> 00:33:13,440 Speaker 1: I mean, we already have housing, we already have food, 652 00:33:13,760 --> 00:33:17,200 Speaker 1: we already have Well, don't we already have UBI? In 653 00:33:17,440 --> 00:33:19,440 Speaker 1: a sense it's not it's not called that, but we 654 00:33:19,520 --> 00:33:20,320 Speaker 1: certainly have it. 655 00:33:21,120 --> 00:33:23,000 Speaker 3: Yeah, for sure, certainly in terms of how much money 656 00:33:23,000 --> 00:33:27,520 Speaker 3: it costs, probably in terms of how much it disincentivizes 657 00:33:27,800 --> 00:33:29,800 Speaker 3: work and and just sort of you know, making the 658 00:33:29,800 --> 00:33:33,320 Speaker 3: correct choices in life, you know, like designing a welfare 659 00:33:33,400 --> 00:33:37,560 Speaker 3: program that only gives single mothers money if they kicked 660 00:33:37,560 --> 00:33:38,200 Speaker 3: the man out of. 661 00:33:38,120 --> 00:33:40,040 Speaker 2: The house, what could possibly go wrong? 662 00:33:40,120 --> 00:33:43,640 Speaker 3: What could possibly happen to a community subjected to such 663 00:33:43,680 --> 00:33:46,560 Speaker 3: a rule. So they're really wrongheaded. And you know, in 664 00:33:46,640 --> 00:33:50,760 Speaker 3: terms of money, absolutely we already have a UBI. And 665 00:33:50,760 --> 00:33:53,200 Speaker 3: and this you know, if we look at at COVID 666 00:33:53,240 --> 00:33:55,520 Speaker 3: for example, I mean they just laid it right on top. 667 00:33:55,560 --> 00:33:57,200 Speaker 3: They didn't repeal anything whatsoever. 668 00:33:57,960 --> 00:33:58,080 Speaker 1: Uh. 669 00:33:58,360 --> 00:34:00,560 Speaker 2: The pitch that you often here out. 670 00:34:00,400 --> 00:34:03,000 Speaker 3: Of Washington from sort of the mint Romney types, the 671 00:34:03,160 --> 00:34:08,120 Speaker 3: quote unquote centrists is they'll actually push UBIS because they say, no, no, no, 672 00:34:08,160 --> 00:34:11,279 Speaker 3: We're going to take the current inefficient welfare system and 673 00:34:11,320 --> 00:34:13,399 Speaker 3: we're going to replace that with this real simple one 674 00:34:13,440 --> 00:34:16,000 Speaker 3: that's just no questions asked, and you know, we can 675 00:34:16,000 --> 00:34:18,080 Speaker 3: cut the paperwork and you know, it's a lot more 676 00:34:18,160 --> 00:34:21,520 Speaker 3: rational and all this. And we've actually been there. We 677 00:34:21,560 --> 00:34:23,759 Speaker 3: already got baited and switched on that one. That was 678 00:34:23,800 --> 00:34:25,960 Speaker 3: the e t C back and I want to say 679 00:34:26,000 --> 00:34:29,000 Speaker 3: the seventies or the eighties, the i t C, the 680 00:34:29,120 --> 00:34:31,280 Speaker 3: earned income tax credit that was sold as a negative 681 00:34:31,280 --> 00:34:34,359 Speaker 3: income tax, and that was precisely the pitch, so I gain, 682 00:34:34,480 --> 00:34:37,000 Speaker 3: we're going to replace this ridiculous welfare system that breaks 683 00:34:37,080 --> 00:34:39,760 Speaker 3: up families and you know, puts people in poverty traps. 684 00:34:39,960 --> 00:34:42,040 Speaker 3: We're going to replace that with this system now where 685 00:34:42,160 --> 00:34:44,640 Speaker 3: you got to go get a job, if you make, 686 00:34:44,760 --> 00:34:46,799 Speaker 3: you know, one thousand dollars, then you get another four 687 00:34:46,880 --> 00:34:49,480 Speaker 3: hundred and fifty in taxes. It's a clever idea, it 688 00:34:49,520 --> 00:34:51,359 Speaker 3: was it was Milton Freeman came up with it. From 689 00:34:51,440 --> 00:34:54,480 Speaker 3: economics perspective, it's very clever idea. From a political perspective, 690 00:34:54,600 --> 00:34:57,640 Speaker 3: is absolutely idiotic because they didn't They didn't repeal a 691 00:34:57,719 --> 00:35:01,480 Speaker 3: darn thing. So right, that's the pit that the centrist 692 00:35:01,680 --> 00:35:04,200 Speaker 3: Republicans are gonna come up, are going to come in with. 693 00:35:04,640 --> 00:35:06,560 Speaker 3: The Democrats are going to try to bring them on board. 694 00:35:06,560 --> 00:35:07,600 Speaker 3: The Democrats just want. 695 00:35:07,440 --> 00:35:08,000 Speaker 2: To buy votes. 696 00:35:08,000 --> 00:35:10,680 Speaker 3: The centrist Republicans, I guess want to get cushy jobs 697 00:35:10,680 --> 00:35:13,440 Speaker 3: when they leave Congress courtesy of their friends on the left. 698 00:35:13,760 --> 00:35:16,440 Speaker 3: Either way, that's I mean that that's kind of the 699 00:35:16,480 --> 00:35:19,879 Speaker 3: unholy coalition that is forever victimizing us. But anyway they're 700 00:35:19,920 --> 00:35:22,600 Speaker 3: going to be at it. You know, the Democrats don't 701 00:35:22,600 --> 00:35:25,200 Speaker 3: listen to me. Some of the Centrists I can sort 702 00:35:25,200 --> 00:35:27,920 Speaker 3: of intimidate. So I'm definitely gonna be going after for 703 00:35:27,960 --> 00:35:30,960 Speaker 3: them because I'm certain that's exactly the game that they're 704 00:35:30,960 --> 00:35:31,479 Speaker 3: gonna pull. 705 00:35:32,480 --> 00:35:35,040 Speaker 1: Yeah, now, when you when you look at you know 706 00:35:35,280 --> 00:35:38,960 Speaker 1: the need for this ubi et cetera. I mean, we 707 00:35:39,080 --> 00:35:40,680 Speaker 1: kind of have, like I was talking about earlier on 708 00:35:40,680 --> 00:35:43,080 Speaker 1: an earlier segment of my show, just like the tale 709 00:35:43,120 --> 00:35:45,960 Speaker 1: of two Markets, almost to two economies and two markets. 710 00:35:46,000 --> 00:35:49,759 Speaker 1: Really where you have in the economy specifically, we have 711 00:35:50,320 --> 00:35:53,240 Speaker 1: really really good signs, so strong earnings and the strong 712 00:35:53,320 --> 00:35:58,320 Speaker 1: revenues and strong consumer spending, but then we see dwindling 713 00:35:58,360 --> 00:36:01,480 Speaker 1: savings in massive amounts of debt. Right We're starting to 714 00:36:01,480 --> 00:36:03,879 Speaker 1: see delinquencies piling up and credit cards, auto loans, et cetera. 715 00:36:03,960 --> 00:36:06,760 Speaker 1: And the markets are the same where the equity markets 716 00:36:07,000 --> 00:36:10,520 Speaker 1: look really really good, but the treasury markets, the bond 717 00:36:10,560 --> 00:36:12,839 Speaker 1: markets are telling us troubles comings. We see these tell 718 00:36:13,280 --> 00:36:15,640 Speaker 1: two things. But I'm curious, you know, we see that 719 00:36:15,719 --> 00:36:19,080 Speaker 1: we have this massive amount of rising debt, both on 720 00:36:19,120 --> 00:36:21,120 Speaker 1: the federal level they've added to what a trillion dollars 721 00:36:21,160 --> 00:36:23,680 Speaker 1: in the last month or so, but also on the 722 00:36:23,719 --> 00:36:26,560 Speaker 1: consumer level, and not just consumer level, but also you know, 723 00:36:26,600 --> 00:36:30,400 Speaker 1: corporate level as well. And while it seems like most 724 00:36:30,440 --> 00:36:33,399 Speaker 1: eyes are on the federal debt, the government debt, which 725 00:36:33,440 --> 00:36:36,080 Speaker 1: is obviously exploding, right instead of the trillion dollars last month, 726 00:36:37,239 --> 00:36:39,319 Speaker 1: the reality is is that they don't default because they 727 00:36:39,320 --> 00:36:42,239 Speaker 1: have the money printer. It seems to me that the 728 00:36:42,280 --> 00:36:45,600 Speaker 1: bigger problem is really in the private debt, and that's 729 00:36:45,680 --> 00:36:47,520 Speaker 1: the sector that's probably going to blow up first, and 730 00:36:47,560 --> 00:36:49,600 Speaker 1: they don't have a money printer to back that up. 731 00:36:50,120 --> 00:36:51,560 Speaker 1: I'm curious some of your thoughts on that. 732 00:36:52,400 --> 00:36:54,680 Speaker 2: They rent their money printer to lobbyists. 733 00:36:54,719 --> 00:36:58,160 Speaker 3: So, yeah, depending on the industry, they do have a 734 00:36:58,200 --> 00:37:01,640 Speaker 3: money printer, but we pleads definitely do not have a 735 00:37:01,680 --> 00:37:03,120 Speaker 3: money print there, so we are on our own. 736 00:37:03,120 --> 00:37:05,960 Speaker 2: We have to beg for our scraps and our ubis. 737 00:37:07,120 --> 00:37:11,880 Speaker 3: Yeah, I think definitely the private debt is an issue currently. 738 00:37:12,040 --> 00:37:15,719 Speaker 3: It's not biting as hard as you'd expect, really. 739 00:37:15,520 --> 00:37:16,120 Speaker 2: For two reasons. 740 00:37:16,160 --> 00:37:20,279 Speaker 3: One of them is at during the pandemic, you know, 741 00:37:20,320 --> 00:37:22,759 Speaker 3: there was a huge amount about three trillion dollars of 742 00:37:22,800 --> 00:37:25,479 Speaker 3: excess savings, so they handed out all this money and 743 00:37:25,680 --> 00:37:28,680 Speaker 3: people people who were poor kind of used it up 744 00:37:28,719 --> 00:37:31,000 Speaker 3: real fast, but a lot of the middle class saved 745 00:37:31,000 --> 00:37:34,239 Speaker 3: it up. I suspect your stimmy checks were saved. Mine 746 00:37:34,280 --> 00:37:37,440 Speaker 3: certainly were. And so that's been running down and so 747 00:37:37,480 --> 00:37:41,359 Speaker 3: the Fed now estimates that that is going to run 748 00:37:41,360 --> 00:37:45,080 Speaker 3: out in another month or two. And then the other 749 00:37:45,120 --> 00:37:48,280 Speaker 3: reason why it hasn't bitten quite as hard as you'd expect. 750 00:37:48,800 --> 00:37:52,319 Speaker 3: Is that a lot of those debts were incurred in 751 00:37:52,440 --> 00:37:56,200 Speaker 3: absolutely historic loans and interest rates. Right, So a lot 752 00:37:56,239 --> 00:37:58,960 Speaker 3: of people are still driving cars they've got zero percent 753 00:37:59,040 --> 00:38:02,440 Speaker 3: loans on them, or mortgages where you know they. 754 00:38:02,280 --> 00:38:03,120 Speaker 2: Cost three percent. 755 00:38:03,440 --> 00:38:06,399 Speaker 3: So just because the rates come up, you don't that 756 00:38:06,400 --> 00:38:08,759 Speaker 3: doesn't hit all at once, right, you know, you sort 757 00:38:08,760 --> 00:38:12,920 Speaker 3: of have this gradual person by person. Their old debt 758 00:38:13,280 --> 00:38:16,319 Speaker 3: is done, maybe it's paid off or and now now 759 00:38:16,320 --> 00:38:19,640 Speaker 3: they're coming for new debt. So the problem guilt builds gradually, 760 00:38:19,680 --> 00:38:21,680 Speaker 3: and that's part of the reason why there's typically about 761 00:38:21,680 --> 00:38:25,680 Speaker 3: an eighteen month delay between when the Fed hikes rates 762 00:38:25,719 --> 00:38:29,440 Speaker 3: and when the economy actually hits. Companies have old cheap debt, 763 00:38:30,120 --> 00:38:32,080 Speaker 3: households have old cheap debt, and so that's going to 764 00:38:32,160 --> 00:38:35,919 Speaker 3: get run through gradually. And where we are on that timeline, 765 00:38:36,440 --> 00:38:38,759 Speaker 3: you know, the Fed started raising i think a little 766 00:38:38,800 --> 00:38:43,920 Speaker 3: over a year ago from roughly zero, but they rates 767 00:38:43,920 --> 00:38:48,520 Speaker 3: didn't really hit a restrictive level, meaning you know the 768 00:38:48,600 --> 00:38:51,239 Speaker 3: rates that we saw before two thousand and eight or 769 00:38:51,239 --> 00:38:54,080 Speaker 3: before two thousand and one, pretty much before every recession, 770 00:38:54,440 --> 00:38:56,920 Speaker 3: you get higher rates in fact, that's what causes the recession. 771 00:38:56,960 --> 00:38:59,759 Speaker 3: But anyway, we didn't hit those restrictive rates until like 772 00:38:59,800 --> 00:39:02,759 Speaker 3: three or four months ago, so we're still very far 773 00:39:02,840 --> 00:39:06,560 Speaker 3: away from when you would expect the recession to hit 774 00:39:06,600 --> 00:39:09,279 Speaker 3: in full force. And you know, that's why a lot 775 00:39:09,280 --> 00:39:13,360 Speaker 3: of the debate right now is you've got the cheerleaders saying, now, no, 776 00:39:13,520 --> 00:39:16,360 Speaker 3: this is goldilocks. My god, you know, Sully landed the 777 00:39:16,360 --> 00:39:19,399 Speaker 3: plane on the Hudson. Jay Powell is amazing, We're gonna 778 00:39:19,400 --> 00:39:22,040 Speaker 3: have this off line. It is way too early to 779 00:39:22,160 --> 00:39:26,560 Speaker 3: take victory labs. And in fact, given that it's so early, 780 00:39:27,239 --> 00:39:29,160 Speaker 3: right that we've only really had restrictive rates for a 781 00:39:29,160 --> 00:39:33,080 Speaker 3: couple of months, the fact that we're seeing bank collapses 782 00:39:33,400 --> 00:39:37,440 Speaker 3: and you know, we're seeing a lot of statistics like bankruptcies, layoffs, 783 00:39:37,480 --> 00:39:40,040 Speaker 3: mass layoffs, We're seeing a lot of statistics that are 784 00:39:40,080 --> 00:39:43,320 Speaker 3: two thousand and eight level, and we are way early 785 00:39:43,360 --> 00:39:44,480 Speaker 3: in the raid hikes. 786 00:39:44,200 --> 00:39:44,920 Speaker 2: To be seeing that. 787 00:39:45,120 --> 00:39:49,000 Speaker 3: So that's why I think when the recession comes, I 788 00:39:49,000 --> 00:39:50,160 Speaker 3: think it's gonna be pretty brutal. 789 00:39:51,400 --> 00:39:54,400 Speaker 1: Yeah, the question is when, right, and that's always happening. 790 00:39:54,520 --> 00:39:57,600 Speaker 1: And one thing, the one thing that I just have 791 00:39:57,680 --> 00:40:00,759 Speaker 1: to get, I have to constantly check myself on is 792 00:40:00,840 --> 00:40:04,640 Speaker 1: you know, through the Austrian lens, through a rational lens, 793 00:40:04,840 --> 00:40:07,759 Speaker 1: you can see this is unsustainable. I got caught. I 794 00:40:07,800 --> 00:40:09,359 Speaker 1: got caught really hard in the two thousand and eight 795 00:40:09,400 --> 00:40:12,080 Speaker 1: Great financial crash, and that's what really got me interested 796 00:40:12,120 --> 00:40:14,560 Speaker 1: in macroeconomics and kind of drove me down that rabbit hole. 797 00:40:15,440 --> 00:40:18,360 Speaker 1: And you know, I lashed onto Mike Maloney and I 798 00:40:18,360 --> 00:40:20,520 Speaker 1: became a gold bug. And I'm watching Peter Schiff and 799 00:40:20,560 --> 00:40:24,359 Speaker 1: Harry Dent and you know, then, you know, twenty twelve, 800 00:40:24,400 --> 00:40:26,719 Speaker 1: thirteen fourteen comes and like, I'm just waiting for another 801 00:40:26,760 --> 00:40:29,040 Speaker 1: bank collapse. No, no, it's gonna crash. It's worse. They didn't 802 00:40:29,040 --> 00:40:31,520 Speaker 1: fix it. It's only worse. Oh my gosh, it's horrible. 803 00:40:31,560 --> 00:40:33,280 Speaker 1: Oh now we have Obama and now I was more spending, 804 00:40:33,360 --> 00:40:35,720 Speaker 1: like I was gonna getting worse, And you know, fifteen 805 00:40:35,760 --> 00:40:39,040 Speaker 1: sixteen seven, it's going to be another crash. And you know, 806 00:40:39,120 --> 00:40:41,040 Speaker 1: the Harry Dents and the Peter Shifts, they're the broken 807 00:40:41,040 --> 00:40:43,400 Speaker 1: clock that will be eventually right. That's the thing that 808 00:40:43,440 --> 00:40:45,480 Speaker 1: I've said, That's the thing that I've said to Harry Dent. 809 00:40:45,560 --> 00:40:46,840 Speaker 1: You know, I've had him on a couple times he 810 00:40:46,880 --> 00:40:49,240 Speaker 1: spoke at my conference. I've read five of his books. 811 00:40:49,480 --> 00:40:53,440 Speaker 1: I believe he's right, His research is right, his assumption 812 00:40:53,520 --> 00:40:55,720 Speaker 1: of thinking he can choose the time is what's been wrong, 813 00:40:56,239 --> 00:40:59,920 Speaker 1: and we fail to see how many more potential tricks 814 00:41:00,120 --> 00:41:02,120 Speaker 1: have up their sleeve. So you mentioned the banking crisis 815 00:41:02,160 --> 00:41:06,960 Speaker 1: for example, and they they raised until they broke something. Now, 816 00:41:07,200 --> 00:41:09,440 Speaker 1: Jerme Powell told us in a meeting that he would 817 00:41:09,920 --> 00:41:12,360 Speaker 1: the fear, He said, the fear is not doing enough. 818 00:41:12,440 --> 00:41:14,640 Speaker 1: He would rather go too far and break something because 819 00:41:14,640 --> 00:41:16,640 Speaker 1: they have the tools to rebuild, right, And so they did. 820 00:41:16,680 --> 00:41:18,920 Speaker 1: So they broke the banks. But the reality was they 821 00:41:18,960 --> 00:41:22,200 Speaker 1: opened up some new three four letter agency BTFP and 822 00:41:22,719 --> 00:41:25,200 Speaker 1: save the banks. Now, whatever a bank or two went down, 823 00:41:25,280 --> 00:41:28,719 Speaker 1: consumers didn't really get affected, didn't miss a beat. And 824 00:41:28,800 --> 00:41:31,920 Speaker 1: so what we saw during the pandemic is they opened 825 00:41:31,960 --> 00:41:34,680 Speaker 1: up dozens of these three and four letter agencies and 826 00:41:34,719 --> 00:41:37,400 Speaker 1: they were buying I mean, you know, buying corporate bonds 827 00:41:37,400 --> 00:41:39,840 Speaker 1: all the way through buying equities, you know, indirectly. And 828 00:41:39,920 --> 00:41:42,400 Speaker 1: so the question is then, like how many more of 829 00:41:42,440 --> 00:41:45,960 Speaker 1: these are they willing to open and how many they've 830 00:41:45,960 --> 00:41:49,040 Speaker 1: already opened up? You know, unlimited swap lines with you know, 831 00:41:49,080 --> 00:41:53,040 Speaker 1: European countries. They've already set up these facilities, so I 832 00:41:53,080 --> 00:41:55,160 Speaker 1: guess they could just keep pushing this out way further 833 00:41:55,160 --> 00:41:57,960 Speaker 1: than any of us think. Is kind of the realization 834 00:41:58,000 --> 00:41:58,960 Speaker 1: that I was sort of coming to. 835 00:41:59,440 --> 00:42:00,680 Speaker 2: Yeah, I think, absolutely right. 836 00:42:01,360 --> 00:42:04,799 Speaker 3: We know how the book ends from history, but we 837 00:42:04,880 --> 00:42:07,799 Speaker 3: have no idea how each chapter ends. And I do 838 00:42:07,840 --> 00:42:11,640 Speaker 3: think that there's a lot of chapters between here the end. 839 00:42:12,239 --> 00:42:15,160 Speaker 3: I think they can keep it going for a long time. 840 00:42:15,480 --> 00:42:21,080 Speaker 3: And you know, so usually I am all in equities. 841 00:42:21,320 --> 00:42:25,440 Speaker 3: In fact, usually I am in options, and I'm overexposed 842 00:42:25,440 --> 00:42:30,719 Speaker 3: to equities because because I because I like risk, equities 843 00:42:30,719 --> 00:42:33,360 Speaker 3: are usually the way to go. I mean almost always, 844 00:42:33,440 --> 00:42:37,520 Speaker 3: equity will beat everything else. It'll be treasuries, it'll be gold. 845 00:42:38,120 --> 00:42:40,840 Speaker 3: And the reason is because people forget and equity is 846 00:42:40,840 --> 00:42:43,799 Speaker 3: a hard thing. Okay, like Apple, If you buy a 847 00:42:43,800 --> 00:42:47,200 Speaker 3: share of Apple, you know, you know, you're not buying 848 00:42:48,280 --> 00:42:49,200 Speaker 3: a alt coin. 849 00:42:49,640 --> 00:42:52,080 Speaker 2: I'll use the polite term. 850 00:42:52,760 --> 00:42:54,920 Speaker 3: You are buying a company that has a brand, that 851 00:42:54,960 --> 00:42:58,000 Speaker 3: has engineers, that has you know, factories that it has 852 00:42:58,040 --> 00:43:01,239 Speaker 3: contracts with. I mean, equity are actually real. You can 853 00:43:01,320 --> 00:43:03,839 Speaker 3: drop them on your foot. So no, I mean in 854 00:43:03,880 --> 00:43:06,000 Speaker 3: normal times, I'm a huge fan of equity. 855 00:43:06,120 --> 00:43:07,520 Speaker 2: I think you know by like. 856 00:43:07,560 --> 00:43:11,239 Speaker 3: Spy, spy the ETF it's got low fees. Just fire 857 00:43:11,320 --> 00:43:13,040 Speaker 3: and forget, don't even look at it for ten years 858 00:43:13,040 --> 00:43:16,440 Speaker 3: at a time. You'll be absolutely fine. Now in the moment, 859 00:43:16,640 --> 00:43:19,919 Speaker 3: I am in gold just because when you know, they've 860 00:43:20,000 --> 00:43:23,920 Speaker 3: hiked rates about well the fastest rate in fifty years. 861 00:43:25,440 --> 00:43:28,920 Speaker 3: Every school of economics, it's not just Austrian at Chicago, 862 00:43:28,960 --> 00:43:32,120 Speaker 3: it's even the Keynesian freaks, they all know that hiking 863 00:43:32,200 --> 00:43:34,040 Speaker 3: rates have fast is going to crash the economy. So 864 00:43:34,120 --> 00:43:37,200 Speaker 3: at the moment I'm nervous, but normally I am an 865 00:43:37,320 --> 00:43:38,960 Speaker 3: absolute I'm like an equity bro. 866 00:43:40,400 --> 00:43:42,239 Speaker 1: I love it. And you know, when we look at 867 00:43:42,280 --> 00:43:44,640 Speaker 1: you know a lot of the indicators showing these recession fears. 868 00:43:44,840 --> 00:43:46,360 Speaker 1: The one that people point to all the time is 869 00:43:46,360 --> 00:43:49,400 Speaker 1: this yield curve inversion, which has been right. It's accurate. 870 00:43:49,480 --> 00:43:52,200 Speaker 1: It predicts every single recession, but it doesn't tell you when. 871 00:43:52,280 --> 00:43:54,440 Speaker 1: And so like the yield curve could even get more 872 00:43:54,480 --> 00:43:56,920 Speaker 1: inverted than it is here. Yes, it could stay inverted 873 00:43:56,960 --> 00:43:59,360 Speaker 1: for a really long time, and it's typically when it 874 00:43:59,440 --> 00:44:02,319 Speaker 1: res steeps, which is when really it comes and so like, 875 00:44:02,920 --> 00:44:05,600 Speaker 1: could it stay inverted for another year? I mean, I 876 00:44:05,600 --> 00:44:06,520 Speaker 1: guess it could, right. 877 00:44:07,719 --> 00:44:09,400 Speaker 2: Yeah, I think without a doubt. 878 00:44:09,600 --> 00:44:14,400 Speaker 3: You know, a lot of Wall Street operates on statistics, 879 00:44:14,520 --> 00:44:15,920 Speaker 3: like they don't have much theory. 880 00:44:16,080 --> 00:44:17,680 Speaker 2: So they got a bunch of you. 881 00:44:17,640 --> 00:44:20,759 Speaker 3: Know, the Harvard useless Harvard grads who sit around and 882 00:44:20,760 --> 00:44:23,440 Speaker 3: just correlate crap. And so, I mean they will correlate 883 00:44:23,480 --> 00:44:25,759 Speaker 3: everything under the sun. There will be like milk prices 884 00:44:26,120 --> 00:44:29,400 Speaker 3: and you know, dividends at Aerospace com I mean, they 885 00:44:29,480 --> 00:44:32,440 Speaker 3: just correlate everything and then something jumps out. They're like, snap, 886 00:44:32,520 --> 00:44:34,640 Speaker 3: I got a correlation. They back test it, they do 887 00:44:34,680 --> 00:44:38,160 Speaker 3: the statistical whatnot. That's really how they operate. They have 888 00:44:38,239 --> 00:44:41,120 Speaker 3: no idea why anything is working the way it is. 889 00:44:41,680 --> 00:44:44,319 Speaker 3: And you know, in the case of an inverted yield curve, 890 00:44:44,320 --> 00:44:47,120 Speaker 3: what it's really telling you. All the inverted yield curve 891 00:44:47,160 --> 00:44:48,520 Speaker 3: is telling you is that the FED is going to 892 00:44:48,600 --> 00:44:52,239 Speaker 3: cut rates. That's it. Okay, now in the future, in 893 00:44:52,280 --> 00:44:55,080 Speaker 3: the future exactly who knows how long in the future. 894 00:44:55,120 --> 00:44:57,480 Speaker 3: I mean generally, you know, the the yield curve has 895 00:44:57,520 --> 00:44:59,919 Speaker 3: a built in estimate of when it thinks that will occur. 896 00:45:00,600 --> 00:45:01,360 Speaker 2: Okay, So it. 897 00:45:01,400 --> 00:45:03,920 Speaker 1: Would be thirty, the thirty, the twenty to ten five. 898 00:45:03,760 --> 00:45:06,880 Speaker 3: Bing go exactly. And so then at that point you 899 00:45:06,920 --> 00:45:10,279 Speaker 3: have to use theory or at least understanding the world. 900 00:45:10,360 --> 00:45:12,600 Speaker 3: You have to say, Okay, what kinds of scenarios does 901 00:45:12,640 --> 00:45:16,040 Speaker 3: the FED suddenly cut rates? And usually the answer to 902 00:45:16,080 --> 00:45:18,799 Speaker 3: that is when a recession comes, and so then the 903 00:45:18,840 --> 00:45:22,720 Speaker 3: Fed panic cuts because it. 904 00:45:22,360 --> 00:45:23,640 Speaker 2: You know, raised rates too much. 905 00:45:23,800 --> 00:45:25,799 Speaker 3: It toppled the economy over the edge, and so now 906 00:45:25,800 --> 00:45:28,040 Speaker 3: the Fed's trying to clean up its mess before anybody notices. 907 00:45:28,520 --> 00:45:31,840 Speaker 3: So usually that's when they panic cut. In this case, 908 00:45:32,040 --> 00:45:37,360 Speaker 3: it is weird because you know, rates or because inflation 909 00:45:37,640 --> 00:45:41,080 Speaker 3: is so dominating what the FED does at almost everything 910 00:45:41,239 --> 00:45:43,160 Speaker 3: it does, whether it's going to have high rates or 911 00:45:43,200 --> 00:45:44,840 Speaker 3: low rates, and actually not that much to do with 912 00:45:44,880 --> 00:45:47,279 Speaker 3: the economy. J. Powell has been very open about that. 913 00:45:47,360 --> 00:45:51,200 Speaker 3: He's basically been saying, you know, let whoever dies die, 914 00:45:51,280 --> 00:45:54,400 Speaker 3: this is not my problem. My job is inflation. And 915 00:45:54,600 --> 00:45:57,759 Speaker 3: the reason for that is because the FED knows that 916 00:45:57,840 --> 00:45:59,600 Speaker 3: inflation is how it gets fired. 917 00:46:00,360 --> 00:46:00,560 Speaker 2: Right. 918 00:46:00,640 --> 00:46:03,920 Speaker 3: Inflation is the fundamental thing that the voters are going 919 00:46:04,000 --> 00:46:06,560 Speaker 3: to sort of grade it on, and that means that's 920 00:46:06,600 --> 00:46:10,600 Speaker 3: the fundamental thing Congress is going to consider when people 921 00:46:10,680 --> 00:46:14,080 Speaker 3: like Ron Paul try to agitate for more control over 922 00:46:14,120 --> 00:46:16,920 Speaker 3: the FED. So the FED knows that, you know, it 923 00:46:17,440 --> 00:46:20,439 Speaker 3: lives by the mercy of Congress, and the one thing 924 00:46:20,520 --> 00:46:23,520 Speaker 3: that could really make it lose its independence, this has 925 00:46:23,520 --> 00:46:26,160 Speaker 3: been true through centuries of central banking, is that they 926 00:46:26,160 --> 00:46:26,960 Speaker 3: screw up inflation. 927 00:46:27,120 --> 00:46:28,920 Speaker 2: So that's why Powell. 928 00:46:28,600 --> 00:46:30,839 Speaker 3: Cares about inflations, not because he cares about us, but 929 00:46:30,960 --> 00:46:32,920 Speaker 3: his job is But inflation. 930 00:46:33,480 --> 00:46:36,000 Speaker 1: Isn't that the dual mandate though, So it's it's inflation, 931 00:46:36,080 --> 00:46:40,399 Speaker 1: stable prices and full employment. So I mean theory, which 932 00:46:40,440 --> 00:46:43,760 Speaker 1: is hard for them. But in theory, would you rather 933 00:46:44,760 --> 00:46:48,239 Speaker 1: have a job and income and more expensive prices or 934 00:46:48,320 --> 00:46:51,319 Speaker 1: have no job or income and lower prices. I rather 935 00:46:51,400 --> 00:46:52,600 Speaker 1: have income and higher prices. 936 00:46:52,840 --> 00:46:54,160 Speaker 2: Yeah, yeah, And so. 937 00:46:54,640 --> 00:46:57,000 Speaker 1: Then there's a there's a combination. So to the point 938 00:46:57,000 --> 00:46:59,040 Speaker 1: of the FED getting fired because the people are upset, 939 00:46:59,360 --> 00:47:02,160 Speaker 1: like I would think that people are probably, Uh, if 940 00:47:02,280 --> 00:47:04,960 Speaker 1: unemployment goes from three percent to six percent, you put 941 00:47:04,960 --> 00:47:06,919 Speaker 1: five million people out of work, well, five million people 942 00:47:06,920 --> 00:47:08,680 Speaker 1: out of three hundred and thirty million, it's not too bad. 943 00:47:09,239 --> 00:47:11,080 Speaker 1: I'd rather keep the majority of people in work with 944 00:47:11,120 --> 00:47:13,759 Speaker 1: little higher prices. And so it seems like there's a 945 00:47:13,800 --> 00:47:15,200 Speaker 1: combination of those two levers. 946 00:47:15,880 --> 00:47:16,640 Speaker 2: There should be. 947 00:47:16,760 --> 00:47:20,200 Speaker 3: I think the difference is that unemployment is I mean, 948 00:47:20,200 --> 00:47:23,319 Speaker 3: really it's not unemployment. It's loss of income right from 949 00:47:23,680 --> 00:47:26,000 Speaker 3: their perspective, and that you can fix with the stroke 950 00:47:26,080 --> 00:47:26,440 Speaker 3: of a pen. 951 00:47:26,560 --> 00:47:28,680 Speaker 2: I mean, we just got done fixing it in twenty twenty. 952 00:47:28,760 --> 00:47:30,959 Speaker 3: So what was that, I don't know, two trillion whatever 953 00:47:31,000 --> 00:47:33,640 Speaker 3: it was in Stimmi's uh, those are very very easy 954 00:47:33,640 --> 00:47:39,000 Speaker 3: to pass, Like Congress takes no damage passing a massive 955 00:47:39,040 --> 00:47:41,319 Speaker 3: stimulus check. They fight over him, then we go back 956 00:47:41,320 --> 00:47:45,880 Speaker 3: to the Thougheah, exactly right, yeah, yeah, So if the 957 00:47:45,920 --> 00:47:49,279 Speaker 3: fans screws up too badly and and and that's you know, 958 00:47:49,440 --> 00:47:51,640 Speaker 3: that's part of the reason why when Jay Powell gives 959 00:47:51,640 --> 00:47:54,120 Speaker 3: his press conferences he's always. 960 00:47:53,800 --> 00:47:55,560 Speaker 2: Talking about slacking the job market. 961 00:47:55,920 --> 00:47:58,560 Speaker 3: He's basically saying is that I think that there are 962 00:47:58,800 --> 00:48:01,160 Speaker 3: enough people with show that we can lose a couple 963 00:48:01,239 --> 00:48:03,440 Speaker 3: million of them and we're not going to have political 964 00:48:03,480 --> 00:48:04,400 Speaker 3: trouble with Congress. 965 00:48:04,760 --> 00:48:06,480 Speaker 2: So he's using them as cannon fodder. 966 00:48:06,880 --> 00:48:08,880 Speaker 3: And you know, if that gets out of hand, then 967 00:48:08,920 --> 00:48:10,239 Speaker 3: he loses too many and we get back to a 968 00:48:10,320 --> 00:48:11,480 Speaker 3: nineteen seventy situation. 969 00:48:12,000 --> 00:48:13,200 Speaker 2: That's really what he fears. 970 00:48:13,760 --> 00:48:16,440 Speaker 3: On the one hand, you know, Congress would go to 971 00:48:16,440 --> 00:48:20,319 Speaker 3: town with stimulus checks, but that is really you know, 972 00:48:20,480 --> 00:48:23,200 Speaker 3: Powell is trying to sort of do that trade off, 973 00:48:24,120 --> 00:48:26,480 Speaker 3: hence kind of the soft landing, right. His hope is 974 00:48:26,520 --> 00:48:29,560 Speaker 3: that he can get inflation down sacrificing just a couple 975 00:48:29,560 --> 00:48:31,919 Speaker 3: of million workers, but not so many that it gets 976 00:48:31,920 --> 00:48:35,239 Speaker 3: out of hand for him politically. So that's really the 977 00:48:35,280 --> 00:48:37,279 Speaker 3: trade off that he's going after, and that's why every 978 00:48:37,320 --> 00:48:40,200 Speaker 3: single month he's just absolutely obsessed how many jobs have 979 00:48:40,280 --> 00:48:42,799 Speaker 3: we lost? It sounds kind of, you know, like he's 980 00:48:42,840 --> 00:48:45,480 Speaker 3: a vulture, but I mean that's that's fundamental what he's doing. 981 00:48:45,600 --> 00:48:48,720 Speaker 3: He's trading workers to get inflation down because he perceives 982 00:48:48,760 --> 00:48:52,239 Speaker 3: it from a pr perspective, the inflation right now is 983 00:48:52,280 --> 00:48:54,120 Speaker 3: more trouble for him than the workers are. 984 00:48:55,280 --> 00:48:58,640 Speaker 1: Yeah, I want to jump to another topic and see 985 00:48:58,680 --> 00:49:01,200 Speaker 1: how much time we have left. But you know I have. 986 00:49:01,520 --> 00:49:03,520 Speaker 1: I started my career right out of high school buying 987 00:49:03,560 --> 00:49:06,080 Speaker 1: bank owned repos and fix and flipping. I've been involved 988 00:49:06,080 --> 00:49:08,439 Speaker 1: heavily in real estate my whole career at this point now, 989 00:49:09,040 --> 00:49:10,880 Speaker 1: and so it's not like I pay close attention to 990 00:49:11,800 --> 00:49:15,560 Speaker 1: a lot of people are just just forecasting absolute death 991 00:49:15,600 --> 00:49:17,840 Speaker 1: and destruction in the real estate market. But for some reason, 992 00:49:17,840 --> 00:49:21,480 Speaker 1: the market just doesn't go down well for lots of reasons, 993 00:49:21,480 --> 00:49:23,520 Speaker 1: which we know, people locked in debt, et cetera. But 994 00:49:24,080 --> 00:49:27,600 Speaker 1: people just saying it's you know, part of it, I 995 00:49:27,640 --> 00:49:29,759 Speaker 1: think is that the general is always fighting the last war. 996 00:49:29,840 --> 00:49:31,720 Speaker 1: So because two thousand and eight was a housing crisis, 997 00:49:31,760 --> 00:49:34,080 Speaker 1: they think we have to have another housing crisis. I 998 00:49:34,120 --> 00:49:35,920 Speaker 1: don't think that has to be doesn't have to be 999 00:49:36,000 --> 00:49:38,279 Speaker 1: that way, And so a lot of people have been 1000 00:49:38,280 --> 00:49:40,760 Speaker 1: forecasting this. It hasn't come to pass yet. Now, sure 1001 00:49:41,000 --> 00:49:44,040 Speaker 1: the sales numbers are down, et cetera, but the prices 1002 00:49:44,080 --> 00:49:48,439 Speaker 1: have maintained. But now the over the last week or two, 1003 00:49:48,840 --> 00:49:50,760 Speaker 1: all the war drums are out banging on the table. 1004 00:49:50,760 --> 00:49:53,920 Speaker 1: The pinprick is here, and it's the airbnb market. The 1005 00:49:53,960 --> 00:49:55,920 Speaker 1: air andbnb market's going to come crash it. And I 1006 00:49:55,920 --> 00:49:57,959 Speaker 1: think you were telling me that you just recently wrote 1007 00:49:58,280 --> 00:50:00,680 Speaker 1: a paper or did a video on that topic. So 1008 00:50:00,719 --> 00:50:03,080 Speaker 1: give me your breakdown of I guess the real estate 1009 00:50:03,080 --> 00:50:06,000 Speaker 1: market overall, and then the airbnb being a prick for that. 1010 00:50:06,880 --> 00:50:08,799 Speaker 3: Yeah, So I got a video coming out on the 1011 00:50:08,840 --> 00:50:11,319 Speaker 3: tenth whenever. That is, so probably a couple of days 1012 00:50:11,320 --> 00:50:12,040 Speaker 3: from the sneak peak. 1013 00:50:12,239 --> 00:50:16,120 Speaker 2: Yes peak, Yes, it's a sneak peak. Yeah. Housing has 1014 00:50:16,160 --> 00:50:16,680 Speaker 2: been funny. 1015 00:50:16,760 --> 00:50:19,960 Speaker 3: So when rates were so low, when all you know, 1016 00:50:20,000 --> 00:50:22,600 Speaker 3: the big housing bubble was going the past couple of years, 1017 00:50:23,040 --> 00:50:25,920 Speaker 3: actually stretched and bought the maximum house that I possibly 1018 00:50:26,000 --> 00:50:29,880 Speaker 3: could because rates were obscene, right, they were sub three percent. 1019 00:50:29,960 --> 00:50:33,040 Speaker 3: That's like free money, and inflation at that point was 1020 00:50:33,080 --> 00:50:35,680 Speaker 3: going what seven percent, so you know, effectively the Fed 1021 00:50:35,800 --> 00:50:38,719 Speaker 3: was paying you four percent to own a house. And 1022 00:50:38,760 --> 00:50:41,640 Speaker 3: what I figured is that, sure, it's a bubble, okay, 1023 00:50:41,640 --> 00:50:44,319 Speaker 3: but the bubble, you know, go up, it'll start to 1024 00:50:44,320 --> 00:50:47,600 Speaker 3: come down, but then it meets inflation coming up to 1025 00:50:47,600 --> 00:50:47,920 Speaker 3: meet it. 1026 00:50:48,160 --> 00:50:48,440 Speaker 2: Okay. 1027 00:50:48,480 --> 00:50:51,080 Speaker 3: So I figured that was actually a pretty good hedged 1028 00:50:51,520 --> 00:50:54,600 Speaker 3: trade that inflation was essentially catch up with the prices. 1029 00:50:54,920 --> 00:50:57,800 Speaker 3: And we've seen that for over a century that house 1030 00:50:57,840 --> 00:51:01,920 Speaker 3: prices almost perfectly track inflation. You get a little bonus 1031 00:51:01,920 --> 00:51:03,960 Speaker 3: if people are moving to Orlando and they're moving out 1032 00:51:03,960 --> 00:51:07,240 Speaker 3: of Chicago or something, but you know, on on, certainly 1033 00:51:07,239 --> 00:51:10,880 Speaker 3: on a nationwide level, houses are just a proxy for inflation. 1034 00:51:11,000 --> 00:51:14,440 Speaker 3: That is, by the way, if you're considering uh, you know, 1035 00:51:14,520 --> 00:51:17,040 Speaker 3: gold or something. I mean, a house is a heck 1036 00:51:17,080 --> 00:51:20,759 Speaker 3: of a hedge, particularly since you can generally not at 1037 00:51:20,760 --> 00:51:23,760 Speaker 3: the moment, but generally you can get really cheat money 1038 00:51:23,760 --> 00:51:26,239 Speaker 3: from the Fed comes from the bank, but the bank 1039 00:51:26,320 --> 00:51:29,719 Speaker 3: of course gets it from the Fed, so you know 1040 00:51:29,920 --> 00:51:32,839 Speaker 3: you are getting like what I think, in our case, 1041 00:51:32,880 --> 00:51:34,960 Speaker 3: we effectively got about two thirds of our house for 1042 00:51:35,040 --> 00:51:38,919 Speaker 3: free courtesy of the Federal Reserve, which I didn't ask 1043 00:51:38,960 --> 00:51:41,520 Speaker 3: for in my defense, But anyway, there we are, okay. 1044 00:51:41,560 --> 00:51:45,640 Speaker 3: So I don't think it's guaranteed that housing is gonna 1045 00:51:45,640 --> 00:51:45,960 Speaker 3: go there. 1046 00:51:46,600 --> 00:51:49,200 Speaker 1: Just then just a throw out there because it's important 1047 00:51:49,239 --> 00:51:51,560 Speaker 1: I think for greater context. Is that what a lot 1048 00:51:51,600 --> 00:51:53,600 Speaker 1: of people miss about real estate, especially the big pointerers 1049 00:51:54,400 --> 00:51:56,840 Speaker 1: is that, yeah, sure the eels aren't that good, you know, 1050 00:51:56,960 --> 00:51:58,760 Speaker 1: depending on where you're at your cap right, six percent, 1051 00:51:58,800 --> 00:52:01,839 Speaker 1: eight percent, whatever, that's pretty good. But to the point 1052 00:52:01,840 --> 00:52:04,239 Speaker 1: that you made the leverage the free money. So I'm 1053 00:52:04,280 --> 00:52:06,919 Speaker 1: getting to leverage a million dollar asset for one hundred 1054 00:52:06,960 --> 00:52:10,280 Speaker 1: grand for ten percent, for example. So you have the leverage, 1055 00:52:10,320 --> 00:52:13,040 Speaker 1: but what you also have is you have two other things. 1056 00:52:13,320 --> 00:52:17,040 Speaker 1: So one, you have depreciation that they give you for 1057 00:52:17,160 --> 00:52:20,919 Speaker 1: tax write offs. Yeah, yeah, and like depending on where 1058 00:52:20,920 --> 00:52:22,520 Speaker 1: you're at with your income and your tax write offs, 1059 00:52:22,600 --> 00:52:26,480 Speaker 1: that is a big deal. And then you know, potentially 1060 00:52:26,680 --> 00:52:29,239 Speaker 1: historically you have appreciation over the total asset, not what 1061 00:52:29,320 --> 00:52:31,680 Speaker 1: you've put into it. So there's really four ways that 1062 00:52:31,719 --> 00:52:34,680 Speaker 1: you earn on real estate and so that's why, you know, 1063 00:52:34,719 --> 00:52:38,359 Speaker 1: and then there's ways to shield your income in real estate, 1064 00:52:38,400 --> 00:52:41,120 Speaker 1: so like you would effectively play no income tax if 1065 00:52:41,200 --> 00:52:43,680 Speaker 1: I have a good real estate strategy as well. And 1066 00:52:43,760 --> 00:52:47,160 Speaker 1: so I think it's important to understand those metrics if 1067 00:52:47,200 --> 00:52:48,839 Speaker 1: you want to look at the real estate market as 1068 00:52:48,840 --> 00:52:50,560 Speaker 1: to what it's doing. But anyway, sorry, go keep going. 1069 00:52:50,680 --> 00:52:51,480 Speaker 2: No, you're absolutely right. 1070 00:52:51,600 --> 00:52:55,160 Speaker 3: Normally the regime only rewards miscreants, but in the case 1071 00:52:55,160 --> 00:52:58,080 Speaker 3: of housing, like for once, for one time in your life, 1072 00:52:58,120 --> 00:53:01,440 Speaker 3: the regime is actually giving you freebies. So yeah, absolutely, 1073 00:53:01,480 --> 00:53:05,160 Speaker 3: I'm a massive fan of housing as an investment for 1074 00:53:05,200 --> 00:53:10,600 Speaker 3: all those reasons. Airbnb specifically, the story there is that 1075 00:53:10,920 --> 00:53:12,880 Speaker 3: the rates are coming down. You got a lot of 1076 00:53:12,920 --> 00:53:16,080 Speaker 3: people around the country who you know, stretched to get 1077 00:53:16,080 --> 00:53:18,920 Speaker 3: that second mortgage to put up there abnbing Kasimi or 1078 00:53:18,920 --> 00:53:22,280 Speaker 3: something for the Disney crowd, and nobody's shown up and 1079 00:53:22,640 --> 00:53:25,719 Speaker 3: what happened there is really simple, which is just that 1080 00:53:25,920 --> 00:53:31,920 Speaker 3: during the pandemic, there was a temporary shortage in airbnbs 1081 00:53:33,280 --> 00:53:37,360 Speaker 3: because you know, people might have had a second home 1082 00:53:37,560 --> 00:53:40,120 Speaker 3: outside of New York that they were renting out our airbnb. 1083 00:53:40,640 --> 00:53:42,600 Speaker 3: All of a sudden, they won't be in New York 1084 00:53:42,640 --> 00:53:45,399 Speaker 3: anymore because of the zombie apocalypse, and so they went 1085 00:53:45,480 --> 00:53:48,279 Speaker 3: to occupy that and took it off the market. And 1086 00:53:48,320 --> 00:53:50,440 Speaker 3: then meanwhile, of course, you had hundreds of thousands of 1087 00:53:50,480 --> 00:53:52,600 Speaker 3: other New Yorkers who also wanted to get the heck 1088 00:53:52,640 --> 00:53:55,360 Speaker 3: out of Dodge. I mean, especially when they shut everything down. 1089 00:53:55,480 --> 00:53:57,719 Speaker 3: Like the only reason you live in New York is 1090 00:53:57,719 --> 00:53:59,879 Speaker 3: because there's allays stuff to do, right, Like if everything 1091 00:54:00,120 --> 00:54:02,479 Speaker 3: closed in New York, it is horrific, Like I would 1092 00:54:02,600 --> 00:54:07,440 Speaker 3: much rather be on some remote island. You know, it's 1093 00:54:07,440 --> 00:54:10,560 Speaker 3: a horrible place. And so you had this perfect storm 1094 00:54:10,680 --> 00:54:14,840 Speaker 3: where all these airbnbs were coming off the market. You 1095 00:54:14,920 --> 00:54:16,839 Speaker 3: had just this flood of people who were going out 1096 00:54:16,840 --> 00:54:18,440 Speaker 3: and trying to get them, and when they got them, 1097 00:54:18,440 --> 00:54:20,479 Speaker 3: they would stay there for like three months, six months, 1098 00:54:20,560 --> 00:54:22,719 Speaker 3: nine months, So all of it was off the market, 1099 00:54:22,800 --> 00:54:26,480 Speaker 3: and that meant that the airbnb prices were absolutely astronomical. 1100 00:54:27,200 --> 00:54:29,239 Speaker 3: During the pandemic, we had to move from Canada to 1101 00:54:29,280 --> 00:54:31,719 Speaker 3: New Hampshire, and I mean it was insane. You had 1102 00:54:31,719 --> 00:54:34,719 Speaker 3: like little cabins in the woods hour and a half 1103 00:54:34,880 --> 00:54:37,359 Speaker 3: from anything, and they were like twenty five hundred a month. 1104 00:54:37,360 --> 00:54:39,240 Speaker 2: It was just it was insane. 1105 00:54:39,480 --> 00:54:42,000 Speaker 3: So people looked at that and they got excited and 1106 00:54:42,040 --> 00:54:45,879 Speaker 3: they said, holy moly, I can retire on my Airbnb. 1107 00:54:46,160 --> 00:54:48,680 Speaker 3: And so you had this flood of new supply. So 1108 00:54:48,800 --> 00:54:54,440 Speaker 3: all these people financed their airbnbs and the market was flooded. 1109 00:54:54,960 --> 00:54:57,279 Speaker 3: And so now all we're seeing I think rates are 1110 00:54:57,280 --> 00:54:59,120 Speaker 3: down thirteen percent year on year. 1111 00:54:59,440 --> 00:55:03,520 Speaker 1: That's not traffic, but anyway, their rates of what rates 1112 00:55:03,520 --> 00:55:03,920 Speaker 1: of what. 1113 00:55:04,760 --> 00:55:07,480 Speaker 3: The returns that people are making on their airbnb, So 1114 00:55:07,520 --> 00:55:10,200 Speaker 3: that's host revenue is down thirteen percent year on year 1115 00:55:10,719 --> 00:55:13,880 Speaker 3: across Airbnb. That brings it to about twelve hundred a month. 1116 00:55:14,960 --> 00:55:17,080 Speaker 3: It's not terrible. I think the problem is that I 1117 00:55:17,239 --> 00:55:19,319 Speaker 3: saw expect I saw rate. 1118 00:55:19,640 --> 00:55:22,600 Speaker 1: I saw they were down about three percent. So I 1119 00:55:22,640 --> 00:55:23,920 Speaker 1: have to go back and look at the data that 1120 00:55:23,960 --> 00:55:24,520 Speaker 1: I saw on that. 1121 00:55:24,960 --> 00:55:25,960 Speaker 2: Yeah, this is Bloomberg. 1122 00:55:26,440 --> 00:55:32,160 Speaker 3: So okay, I'm not saying that's necessarily the truth, but anyway, Yeah, 1123 00:55:32,320 --> 00:55:34,920 Speaker 3: it's also you know, of course depending on the city, 1124 00:55:35,040 --> 00:55:38,359 Speaker 3: so you know, in some places I would wow, I mean, 1125 00:55:38,360 --> 00:55:40,680 Speaker 3: I don't know, but yeah, so a lot of the 1126 00:55:40,719 --> 00:55:41,680 Speaker 3: markets are down. 1127 00:55:41,520 --> 00:55:44,279 Speaker 1: So they're saying, so they're saying, as a whole, the 1128 00:55:44,360 --> 00:55:49,719 Speaker 1: median income has dropped by thirteen percent, correct, Yeah, and 1129 00:55:49,760 --> 00:55:51,920 Speaker 1: that could be for some people, could be a make 1130 00:55:51,960 --> 00:55:52,640 Speaker 1: or break number. 1131 00:55:53,360 --> 00:55:56,200 Speaker 3: That's the issue is if people went into it thinking 1132 00:55:56,239 --> 00:55:57,879 Speaker 3: that they were going to make five grand a month 1133 00:55:57,920 --> 00:56:00,439 Speaker 3: and they're actually only making twelve hundred a month, then 1134 00:56:00,560 --> 00:56:04,399 Speaker 3: did they get too much mortgage for it? I think 1135 00:56:04,440 --> 00:56:07,360 Speaker 3: Also what's happening now it's not just the revenue's declining. 1136 00:56:07,440 --> 00:56:10,320 Speaker 3: The level of service that's expected has gone up a lot, 1137 00:56:11,000 --> 00:56:15,239 Speaker 3: which is a form of you know, the customers getting 1138 00:56:15,239 --> 00:56:17,440 Speaker 3: a cheaper price is that they can demand more. So 1139 00:56:17,640 --> 00:56:23,000 Speaker 3: you know, people expect designer appliances outdoor kitchens. They want 1140 00:56:23,040 --> 00:56:25,640 Speaker 3: the shampoo and the little soaps and you know, the 1141 00:56:25,680 --> 00:56:27,320 Speaker 3: little towel arranged like a swan. 1142 00:56:28,000 --> 00:56:30,160 Speaker 2: So all of this is costing more time for people. 1143 00:56:30,200 --> 00:56:31,759 Speaker 3: So people might have thought that they were just gonna 1144 00:56:31,800 --> 00:56:33,239 Speaker 3: do this little side gick, they were going to have 1145 00:56:33,280 --> 00:56:37,239 Speaker 3: the thing they were gonna pay, you know, whatever some 1146 00:56:37,560 --> 00:56:40,239 Speaker 3: local handyman to go square the place up and take 1147 00:56:40,239 --> 00:56:42,080 Speaker 3: the cheese down. And now it turns out they have 1148 00:56:42,120 --> 00:56:43,920 Speaker 3: to put a lot more into So I think a 1149 00:56:43,920 --> 00:56:46,239 Speaker 3: lot of people are they're going to give up on it. 1150 00:56:46,680 --> 00:56:48,560 Speaker 3: They're going to decide all that work was not worth 1151 00:56:48,600 --> 00:56:50,919 Speaker 3: twelve hundred dollars, you know, plus you got to carry 1152 00:56:50,920 --> 00:56:53,200 Speaker 3: the mortgage. So I think a lot of people are 1153 00:56:53,200 --> 00:56:54,600 Speaker 3: going to exit from it. We're gonna hear a lot 1154 00:56:54,600 --> 00:56:58,279 Speaker 3: of people talking about the air being bust. Fundamentally, I 1155 00:56:58,320 --> 00:57:00,120 Speaker 3: don't think that that's the kind of story that's going 1156 00:57:00,160 --> 00:57:01,040 Speaker 3: to take housing down. 1157 00:57:01,080 --> 00:57:02,440 Speaker 2: I think it's a. 1158 00:57:02,480 --> 00:57:05,360 Speaker 3: Very sort of specific story to Airbnb exactly what the 1159 00:57:05,360 --> 00:57:09,600 Speaker 3: process is. I think overwhelmingly for real estate, the question 1160 00:57:09,680 --> 00:57:11,680 Speaker 3: is simply going to be inflation. 1161 00:57:13,640 --> 00:57:18,240 Speaker 1: So I guess you're saying that to your point, nine 1162 00:57:18,320 --> 00:57:21,280 Speaker 1: out of ten businesses fail. These guys are starting a business, yep. 1163 00:57:21,360 --> 00:57:24,280 Speaker 1: And most people have no business starting a business, and 1164 00:57:24,360 --> 00:57:27,000 Speaker 1: so they just typically fail. And these guys chose a 1165 00:57:27,080 --> 00:57:29,880 Speaker 1: particular business that got in at the wrong cycle. Too 1166 00:57:29,960 --> 00:57:32,280 Speaker 1: much supply, not enough demand. They're going to go out 1167 00:57:32,320 --> 00:57:36,280 Speaker 1: of business. That's just the way market cycles work. But 1168 00:57:36,640 --> 00:57:38,040 Speaker 1: I guess the question that I'm trying to get to 1169 00:57:38,080 --> 00:57:41,040 Speaker 1: and see what you're deciphering here. But do you A 1170 00:57:41,080 --> 00:57:42,800 Speaker 1: lot of people are saying that this is the apocalypse, 1171 00:57:42,800 --> 00:57:45,040 Speaker 1: this will be the prick that pops the real estate bubble. 1172 00:57:45,200 --> 00:57:46,880 Speaker 1: Are you saying you don't think that's the case. 1173 00:57:47,120 --> 00:57:48,040 Speaker 2: I don't think so at all. 1174 00:57:48,880 --> 00:57:52,280 Speaker 3: I think housing just because it went up a lot 1175 00:57:52,360 --> 00:57:54,280 Speaker 3: doesn't mean it's necessarily going to go down a lot. 1176 00:57:55,120 --> 00:57:56,480 Speaker 2: This is not how the world works. 1177 00:57:58,080 --> 00:58:02,240 Speaker 3: The houses aren't, you know, remembering the good times and 1178 00:58:02,240 --> 00:58:03,080 Speaker 3: looking for payback. 1179 00:58:03,120 --> 00:58:04,200 Speaker 2: Okay, the houses don't care. 1180 00:58:04,520 --> 00:58:06,520 Speaker 3: The question is what are the external dynamics that are 1181 00:58:06,600 --> 00:58:10,480 Speaker 3: driving those prices? And I think in this case a 1182 00:58:10,640 --> 00:58:13,360 Speaker 3: huge part of it has been inflation. Housing is not 1183 00:58:13,720 --> 00:58:17,000 Speaker 3: massively overvalued comparing to what inflation did the past couple 1184 00:58:17,040 --> 00:58:18,440 Speaker 3: of years. I think you might be looking about a 1185 00:58:18,520 --> 00:58:23,120 Speaker 3: five about a ten percent overhang. That's not huge. You know, 1186 00:58:23,320 --> 00:58:25,840 Speaker 3: it may lag inflation for a couple of years while 1187 00:58:25,880 --> 00:58:28,640 Speaker 3: that catches up. But at the same time, if we 1188 00:58:29,040 --> 00:58:31,800 Speaker 3: you know, if we come into a recession, then where 1189 00:58:31,840 --> 00:58:34,640 Speaker 3: else are you going to park your money? Housing becomes 1190 00:58:34,640 --> 00:58:36,640 Speaker 3: even more attractive. Once we gin to the recession. The 1191 00:58:36,680 --> 00:58:38,480 Speaker 3: FED is going to cut rates again. Because that's what 1192 00:58:38,520 --> 00:58:40,960 Speaker 3: they do. At that point, a lot of people might 1193 00:58:40,960 --> 00:58:42,720 Speaker 3: decide to go out and buy a house, whereas right 1194 00:58:42,760 --> 00:58:45,320 Speaker 3: now they're scared off by seven and a half percent mortgages. 1195 00:58:45,840 --> 00:58:48,240 Speaker 3: So I think there's a lot of dynamics there, And certainly, 1196 00:58:48,720 --> 00:58:51,240 Speaker 3: I mean, first off, I don't think airbnb can prick anything. 1197 00:58:51,840 --> 00:58:55,160 Speaker 2: It's just not substantial enough. And secondly, I think, right, it's. 1198 00:58:55,040 --> 00:58:57,440 Speaker 1: Not substantial enough, and it's decentralized enough. I mean, it's 1199 00:58:57,480 --> 00:59:00,520 Speaker 1: kind of all over the country, right he said, kiss 1200 00:59:00,560 --> 00:59:03,200 Speaker 1: kissing me or whatever. Yeah, that's kind of the way 1201 00:59:03,200 --> 00:59:04,440 Speaker 1: that I would look at as well. The other thing 1202 00:59:04,560 --> 00:59:07,080 Speaker 1: is I always like to get people to challenge these 1203 00:59:07,120 --> 00:59:09,720 Speaker 1: assumptions they have. So people like, well, with the rates 1204 00:59:09,720 --> 00:59:11,800 Speaker 1: as high as they are, then prices have to come 1205 00:59:11,840 --> 00:59:13,800 Speaker 1: down like, no, they don't. 1206 00:59:14,200 --> 00:59:17,280 Speaker 3: People on the contrary, yeah, well, and just by a 1207 00:59:17,360 --> 00:59:17,959 Speaker 3: smaller house. 1208 00:59:18,240 --> 00:59:18,439 Speaker 2: Well. 1209 00:59:18,480 --> 00:59:20,480 Speaker 3: And also sellers are locked in as the issue at 1210 00:59:20,480 --> 00:59:24,240 Speaker 3: the moment. Right, so housing inventory, despite these high prices, 1211 00:59:24,280 --> 00:59:27,320 Speaker 3: housing inventory for sale is like half what it normally is. 1212 00:59:27,760 --> 00:59:31,080 Speaker 3: And the reason is because if the seller right, he's 1213 00:59:31,120 --> 00:59:33,040 Speaker 3: sitting on a three percent mortgage right now, and if 1214 00:59:33,040 --> 00:59:36,760 Speaker 3: he sells, he's got to live somewhere, and so you know, 1215 00:59:36,920 --> 00:59:40,880 Speaker 3: he whatever he's he wants to move to Florida or something, Well, 1216 00:59:40,960 --> 00:59:42,400 Speaker 3: he's going to have to buy a house at seven 1217 00:59:42,400 --> 00:59:45,240 Speaker 3: and a half in Florida, right, So a lot of 1218 00:59:45,280 --> 00:59:48,400 Speaker 3: people are effectively locked in. They don't necessarily like the 1219 00:59:48,440 --> 00:59:50,280 Speaker 3: house they're in for whatever reason. Maybe it's too big, 1220 00:59:50,280 --> 00:59:52,480 Speaker 3: it's too small, it's in the wrong place, whatever, But 1221 00:59:52,520 --> 00:59:54,800 Speaker 3: they're not selling right now because the rates are so high. 1222 00:59:54,840 --> 00:59:56,600 Speaker 2: They can't trade into three percent mortgage. 1223 00:59:56,640 --> 00:59:58,080 Speaker 3: It's not like you can just take the three percent 1224 00:59:58,120 --> 01:00:00,840 Speaker 3: mortgage and say, okay, give me credit on this a 1225 01:00:00,920 --> 01:00:04,880 Speaker 3: lastly doesn't work that way. So yeah, on the contrary, 1226 01:00:04,920 --> 01:00:07,439 Speaker 3: the high rates I think are actually holding prices up 1227 01:00:07,520 --> 01:00:09,160 Speaker 3: because they're keeping people off the market. 1228 01:00:10,360 --> 01:00:13,680 Speaker 1: Yeah. Man, I think with that we're going to break 1229 01:00:13,760 --> 01:00:16,000 Speaker 1: right there. And we have covered so much ground. There 1230 01:00:16,040 --> 01:00:17,680 Speaker 1: was obviously more we could have covered, but I think 1231 01:00:17,720 --> 01:00:20,760 Speaker 1: that's good enough for now. You're a wealth of information. 1232 01:00:21,040 --> 01:00:22,960 Speaker 1: I love it. I appreciate it. I know you make 1233 01:00:23,040 --> 01:00:27,280 Speaker 1: videos every day on Twitter or on YouTube. Why don't 1234 01:00:27,280 --> 01:00:27,919 Speaker 1: you shout that out? 1235 01:00:28,600 --> 01:00:28,800 Speaker 2: Yeah? 1236 01:00:28,840 --> 01:00:32,440 Speaker 3: I post them every day on Twitter. They're about freedom 1237 01:00:32,480 --> 01:00:34,840 Speaker 3: and economics. So basically, what's going on in the world. 1238 01:00:35,440 --> 01:00:38,160 Speaker 3: I'm an Austrian economist, so they're from that perspective. And 1239 01:00:38,200 --> 01:00:40,000 Speaker 3: then I also do them on a podcast, and I 1240 01:00:40,080 --> 01:00:43,280 Speaker 3: do a weekly newsletter like a substack, where it goes 1241 01:00:43,320 --> 01:00:44,080 Speaker 3: into more depth. 1242 01:00:45,360 --> 01:00:45,680 Speaker 2: Yeah. 1243 01:00:45,720 --> 01:00:48,360 Speaker 1: Well, I appreciate you taking the time to talk to us. 1244 01:00:48,360 --> 01:00:50,720 Speaker 1: It was a fun conversation. Looking forward to hanging out 1245 01:00:50,720 --> 01:00:52,960 Speaker 1: with you in Amsterdam here coming up after the weeks. 1246 01:00:53,200 --> 01:00:53,439 Speaker 2: Yep. 1247 01:00:54,200 --> 01:00:55,520 Speaker 1: And with that we'll go ahead and sign it off. 1248 01:00:55,520 --> 01:00:57,360 Speaker 2: Thanks so much, all right, Mark Pleasure