WEBVTT - HOW TO INVEST with the Feds Balance Sheets Exploding | with George Gammon 0:00:14.480 --> 0:00:17.560 Hey, everyone, welcome to another episode of the Market Disruptors Show. 0:00:17.640 --> 0:00:20.959 I am sitting here today with George Gammon. He has 0:00:21.360 --> 0:00:24.919 taken the internet, taken YouTube by storm recently with his 0:00:24.960 --> 0:00:27.200 super cool videos with the white boards. If you haven't 0:00:27.200 --> 0:00:29.240 seen him, you need to, so I'll linked to it 0:00:29.280 --> 0:00:32.559 down below. UM. Has this an amazing way to take 0:00:32.600 --> 0:00:35.159 these complex subjects and make them very easy to understand, 0:00:35.240 --> 0:00:37.640 especially with the graphics. And I'm super excited to have 0:00:37.640 --> 0:00:40.479 you George, thanks for joining. Hey, thanks for having me. 0:00:40.520 --> 0:00:44.000 I'm I'm excited to have a chat and a lot 0:00:44.080 --> 0:00:46.680 to talk about that for sure, so much to talk about. 0:00:46.760 --> 0:00:50.960 And you know, I've been I've been doing that analysis 0:00:51.000 --> 0:00:53.640 and commentary for quite a long time and sometimes you 0:00:53.760 --> 0:00:56.920 get these like boring patches, but not right now, there's 0:00:56.920 --> 0:00:59.520 more than enough to go around. UM. I've been watching 0:00:59.560 --> 0:01:02.240 your video those and the last several videos you've done. 0:01:02.640 --> 0:01:05.520 They're all, you know, talking about the topic of the moment, 0:01:05.560 --> 0:01:09.520 which is the bailouts, the stimulus, the unlimited you know, 0:01:09.600 --> 0:01:13.959 quantitative easy and etcetera. And uh, you've really been breaking 0:01:14.080 --> 0:01:17.000 down like all these like acronyms that the FED keeps 0:01:17.040 --> 0:01:19.720 coming up with. Alright, maybe tell us about some of 0:01:19.720 --> 0:01:24.479 these acronyms and kind of what that means. Ah jeez. Well, 0:01:24.600 --> 0:01:26.480 the bottom line is they're just trying to buy everything 0:01:26.480 --> 0:01:29.720 in sight. So I think if you start from there, 0:01:29.800 --> 0:01:33.000 it's much easier to understand any of the I call 0:01:33.080 --> 0:01:36.440 them four letters solutions, but that you know, the news 0:01:36.520 --> 0:01:39.920 changes so quickly. First it was all the four letter 0:01:39.959 --> 0:01:43.360 quote unquote solutions that they had back in two thousand 0:01:43.319 --> 0:01:47.840 and eight, but now they've added more and they're now 0:01:47.880 --> 0:01:51.680 coming up with these five letter solutions that even the 0:01:51.760 --> 0:01:56.200 letters are expanding, just like their balance sheet. So but 0:01:56.320 --> 0:02:00.280 really what each program, let's call it, is all about 0:02:00.520 --> 0:02:04.600 is just giving the FED an excuse to either lend 0:02:04.720 --> 0:02:10.360 money directly to corporations or to buy their equity or 0:02:10.440 --> 0:02:13.560 buy their existing debt. It's really what it's all about. 0:02:13.760 --> 0:02:19.240 So the the endgame, I think is the FED is 0:02:19.280 --> 0:02:23.640 going to have stocks, bonds that they're going to own 0:02:24.320 --> 0:02:27.160 a lot of the equity and debt of the S 0:02:27.240 --> 0:02:30.960 and P five hundred. So it's all going from the 0:02:31.000 --> 0:02:33.600 private sector onto their balance sheet, if you think about 0:02:33.600 --> 0:02:38.440 it from their standpoint, makes sense because our economy is 0:02:38.720 --> 0:02:44.320 really all about asset bubbles, debt, and confidence that's what 0:02:44.400 --> 0:02:46.679 our economy is built on. And the FED I think 0:02:46.720 --> 0:02:49.280 knows that, and they won't admit it, but I think 0:02:49.280 --> 0:02:52.959 they understand it well. So they understand they have to 0:02:53.080 --> 0:02:59.359 keep those asset bubbles inflated at all costs. So if 0:02:59.400 --> 0:03:02.000 you're just thinking this through, like what would I do, Well, 0:03:02.160 --> 0:03:04.400 I want to take all of the assets that can 0:03:04.400 --> 0:03:06.480 get a haircut, and I want to put them on 0:03:06.560 --> 0:03:09.679 my balance sheet because I never have to sell. Yeah, 0:03:10.080 --> 0:03:13.359 the FET doesn't have a profit and loss, so if 0:03:13.360 --> 0:03:16.480 they get let's let's not give away the punch line 0:03:16.520 --> 0:03:19.679 before we build it up a little bit here. Well, 0:03:19.680 --> 0:03:21.600 I could go on for hours about that. But as 0:03:21.600 --> 0:03:24.480 far as the specific programs that achieve this objective, you 0:03:24.480 --> 0:03:26.520 want me to touch on that, No, we don't. I mean, 0:03:26.520 --> 0:03:28.120 we don't need to dig into each one. But it's 0:03:28.160 --> 0:03:31.320 interesting because you're kind of showing how they've been adding 0:03:31.360 --> 0:03:34.079 more and more and more. As you said, they're actually 0:03:34.120 --> 0:03:39.000 getting the acronyms are getting longer. Yeah, it seems like 0:03:39.120 --> 0:03:43.480 basically each one gives them more power, more leeway. Correct, 0:03:43.840 --> 0:03:47.560 At first, they were um allowing the primary dealers to 0:03:47.680 --> 0:03:50.760 buy assets and they were kind of loaning them. Now 0:03:50.960 --> 0:03:53.920 they're like, shoot, why go through them, Let's just buy 0:03:53.920 --> 0:03:57.480 it ourselves. Exactly. That's a great point. That's a great point. 0:03:57.640 --> 0:04:00.720 That's the biggest difference from what I've seen between what 0:04:00.800 --> 0:04:03.680 they first came out with and what they've come out 0:04:03.720 --> 0:04:06.680 with more recently. The first thing was just the primary 0:04:06.680 --> 0:04:10.840 dealer credit facility, and that's just saying, okay, primary dealer, 0:04:11.040 --> 0:04:14.119 whatever is on your balance sheet, will take it from 0:04:14.160 --> 0:04:15.920 you and we'll give you a quote unquote loan. But 0:04:15.960 --> 0:04:19.719 if you look at the the fine print, it's yeah, 0:04:19.720 --> 0:04:23.000 it's alone, but it's at zero percent interest and most 0:04:23.040 --> 0:04:26.400 likely they can roll it over indefinitely. So is that 0:04:26.440 --> 0:04:30.680 really alone? And then excuse me, so they say that's 0:04:30.720 --> 0:04:35.320 to support the primary dealers, but why couldn't the primary dealers? 0:04:35.360 --> 0:04:38.680 Was one point five trillion and access reserves actually be 0:04:38.760 --> 0:04:42.800 proactive and go into the market by the stocks for 0:04:43.160 --> 0:04:45.760 the Federal reserve, and then the Fed gives them this 0:04:45.920 --> 0:04:49.920 loan at zero percent interests that they can roll over, uh, indefinitely. 0:04:50.080 --> 0:04:53.240 So that kind of gets them around the laws that 0:04:53.279 --> 0:04:57.039 were set up. But to your point, the new abbreviations 0:04:57.120 --> 0:04:59.960 or acronyms they've come up with, these five letter duties. 0:05:00.360 --> 0:05:02.919 They just allow the FED to go straight into the 0:05:02.960 --> 0:05:08.839 market and give credit, extend credit to a lot of entities, 0:05:08.880 --> 0:05:13.360 not just corporations. But it gives them, uh like they 0:05:13.400 --> 0:05:16.080 just call them investors, and I don't know who these 0:05:16.520 --> 0:05:21.440 people are, but it gives financing to investors. And keep 0:05:21.480 --> 0:05:26.200 in mind, this is a nonrecourse loan. So again, is 0:05:26.240 --> 0:05:29.599 this really alone here, So they're giving this financing to 0:05:29.720 --> 0:05:35.640 investors for them to continue to buy asset and securities. Well, 0:05:35.760 --> 0:05:40.000 these asset back securities have student loan debt, credit card debt, 0:05:40.120 --> 0:05:44.440 they have subprime auto loans, they have SBA loans. So 0:05:44.520 --> 0:05:48.200 in essence, although that's not technically going onto the FED 0:05:49.680 --> 0:05:52.400 balance sheet, it's going onto a balance sheet of an 0:05:52.520 --> 0:05:55.839 entity that really doesn't have to sell and prior and 0:05:56.120 --> 0:05:59.080 things change so quickly. If you would have said last 0:05:59.160 --> 0:06:03.400 week the FED would go directly and buy the corporate 0:06:03.400 --> 0:06:07.040 bond market or something like that, people would have said, no, no, no, 0:06:07.080 --> 0:06:09.840 they can't do that because of this stipulation or this 0:06:09.960 --> 0:06:12.560 law or this regulation and have to be an act 0:06:12.600 --> 0:06:16.240 of Congress or the government would have to change something. Well, 0:06:16.240 --> 0:06:19.960 they pretty much just ignored that and said, yeah, it's 0:06:20.000 --> 0:06:23.800 it's the law, but whatever, we don't care. And then 0:06:23.839 --> 0:06:28.039 just no one calls him out on it because the 0:06:28.320 --> 0:06:32.479 talking heads at CNBC or the quote unquote market, they 0:06:32.560 --> 0:06:35.400 want the FED to come in and prop things up 0:06:35.480 --> 0:06:40.359 because they're taking a fifty haircut in their portfolio in 0:06:40.400 --> 0:06:45.200 the last thirty days. And you got Acmin coming out 0:06:45.240 --> 0:06:48.800 on CNBC and basically crying, trying to beg people to 0:06:48.920 --> 0:06:51.480 buy stocks. And I have nothing against him. I think 0:06:51.480 --> 0:06:53.839 he's a brilliant guy and I'd love to interview him. 0:06:53.920 --> 0:06:56.320 But well, I'll just say that he is emotional and 0:06:56.360 --> 0:06:59.400 really pleading with people to get out there and not 0:06:59.440 --> 0:07:02.640 only stay home, but also to kind of buy stocks, 0:07:02.680 --> 0:07:04.760 Like Okay, well, why why is he doing this? He's 0:07:04.800 --> 0:07:07.040 got to be talking his book. And I'd be pretty 0:07:07.080 --> 0:07:11.040 emotional too if I ran ten billion dollars and I 0:07:11.120 --> 0:07:15.080 just lost five billion of it in the last thirty days. 0:07:15.160 --> 0:07:20.280 But anyway, the bottom line is every week, every day 0:07:20.320 --> 0:07:25.400 that we move forward into this crisis, we're seeing the 0:07:25.480 --> 0:07:29.400 FED take end the government for that matter, taking more 0:07:29.440 --> 0:07:33.800 and more measures that really just ignore the law, and 0:07:33.840 --> 0:07:36.040 the bottom lines, are just gonna do whatever they think 0:07:36.080 --> 0:07:41.720 they need to do in order to keep the bubbles inflated. Now, Um, 0:07:41.760 --> 0:07:44.000 we kind of jumped right into thick of it because 0:07:44.040 --> 0:07:46.560 that's kind of where we are. Um. But if we 0:07:46.600 --> 0:07:49.360 want to just rewind the clock a little bit, this 0:07:49.480 --> 0:07:52.600 is not new. This is not because of the virus. 0:07:52.720 --> 0:07:55.520 This is been going on for a long period of time. 0:07:55.560 --> 0:07:58.120 I mean, you've been talking about this well before. So 0:08:00.040 --> 0:08:02.520 this is um, this isn't something like, oh, we have 0:08:02.680 --> 0:08:06.080 this crisis, let's do this. They've been doing this right 0:08:06.080 --> 0:08:10.320 that this is only accelerating it or is this completely new. Well, 0:08:10.360 --> 0:08:12.680 there's a couple of programs that are completely new, but 0:08:13.760 --> 0:08:16.040 it's still the same. It's a continuation, right, it's in 0:08:16.080 --> 0:08:19.680 the continuation and acceleration. Uh yeah, with it, with this 0:08:19.840 --> 0:08:22.200 with some of them. Right, with some of these programs, 0:08:22.200 --> 0:08:25.040 I believe, if I'm not mistaken, that they are new 0:08:25.080 --> 0:08:27.320 and they are to get around having to go through 0:08:27.360 --> 0:08:30.800 the primary dealers, and the primary dealers make decisions or 0:08:30.840 --> 0:08:34.040 take action in order for those reserves that the FED 0:08:34.160 --> 0:08:37.360 has to get out into the system. But as far 0:08:37.559 --> 0:08:41.480 as UM, the majority of the acronyms, they used them 0:08:41.840 --> 0:08:45.120 in two thousand and eight. But you know, to be clear, 0:08:46.320 --> 0:08:50.480 quantitative easing started off in the end of two thousand 0:08:50.600 --> 0:08:54.160 eight and was supposed to be a quote unquote temporary measure. 0:08:54.440 --> 0:08:57.600 Remember Ben Bernanke came out promised everyone that wasn't monetizing 0:08:57.640 --> 0:09:00.440 the debt, because the definition of monetizing the debt would 0:09:00.480 --> 0:09:03.160 be if they kept it on the Fed's balance sheet. No, no, no, 0:09:03.440 --> 0:09:06.640 just bringing these treasuries onto the balance sheet temporarily. We're 0:09:06.640 --> 0:09:09.359 gonna unwind as soon as we're out of the crisis. 0:09:09.840 --> 0:09:12.840 And who yelling said it's just gonna be just like uh, 0:09:13.160 --> 0:09:16.800 watching paint dry. Yeah, I think we're her words or someone. 0:09:17.280 --> 0:09:19.320 And so we found that it's not going to be 0:09:19.360 --> 0:09:22.120 like watching paint dry because they try to unwind the 0:09:22.160 --> 0:09:24.960 balance sheet. And by the way, after q E one, 0:09:25.280 --> 0:09:27.320 now I have q E two, have q E three, 0:09:27.440 --> 0:09:30.079 we try to unwind. That doesn't work. We have the 0:09:30.480 --> 0:09:34.360 not que, which was them bailing out the repo market 0:09:34.440 --> 0:09:38.160 back in September sevent And so my point is we've 0:09:38.200 --> 0:09:42.880 had this quote unquote temporary stimulus from QE that's now 0:09:43.240 --> 0:09:48.040 not only permanent but growing exponentially. And then you combine 0:09:48.120 --> 0:09:51.360 that everything that they do has the same type of effect. 0:09:51.400 --> 0:09:53.760 Why because it goes back to what I was saying earlier, 0:09:54.080 --> 0:09:58.480 with the entire economy being built on asset bubbles, you 0:09:58.520 --> 0:10:02.320 continually have to more and more and more money. You 0:10:02.400 --> 0:10:07.080 have to be more interventionist to make sure that those 0:10:07.120 --> 0:10:11.480 bubbles aren't collapsing. So let's look at the stimulus. They 0:10:11.480 --> 0:10:14.120 just came out with two trillion dollars. Okay, but we 0:10:14.160 --> 0:10:16.800 had a stimulus package back into nine but that was 0:10:16.840 --> 0:10:21.000 only roughly eight billion. So you see the amount of 0:10:21.120 --> 0:10:23.520 queue that they're having to do, the amount of stimulus, 0:10:23.559 --> 0:10:26.360 the amount of the deficits that the government has to 0:10:26.480 --> 0:10:30.320 run in order to profit these bubbles just gets more, more, 0:10:30.360 --> 0:10:34.320 more and more. So the point is any temporary program 0:10:34.360 --> 0:10:36.840 they come up with, whether it's in RIPO, whether it's 0:10:36.960 --> 0:10:41.480 in I think now with these four letter acronyms, I 0:10:41.480 --> 0:10:45.080 don't think these are gonna go away anytime soon. I 0:10:45.120 --> 0:10:47.960 think they'll be more permanent. And it just gets to 0:10:48.000 --> 0:10:52.439 a point where you're almost like Japan, where the Fed 0:10:52.520 --> 0:10:58.760 owns the bond market and they own whatever E T s. 0:10:59.000 --> 0:11:00.920 If it gets bad enough off, I think they just 0:11:01.000 --> 0:11:05.560 ignore that and buy stocks directly or bonds directly. But 0:11:05.920 --> 0:11:09.400 it's it's not temporary, it just it keeps growing and 0:11:09.440 --> 0:11:12.600 growing and growing. And right now, let's remember too, the 0:11:12.640 --> 0:11:15.920 FED did this originally to give confidence to the market, 0:11:16.480 --> 0:11:19.560 so they had kind of this Fed put and so 0:11:19.880 --> 0:11:22.320 that means the Fed is kind of back stopping the market. 0:11:22.559 --> 0:11:26.080 What we know right now that's gone, that's expired, because 0:11:26.120 --> 0:11:29.000 every time the Fed came out with a bigger bazuka 0:11:29.080 --> 0:11:32.320 over the last couple of weeks, the markets just shaking 0:11:32.400 --> 0:11:34.480 it off. It goes up for the next hour and 0:11:34.480 --> 0:11:39.280 then just tanks. The only thing that's um kind of 0:11:39.520 --> 0:11:44.200 propelled this market higher is this stimulus package that the 0:11:44.240 --> 0:11:47.160 government has come out with. But what happens when the 0:11:47.240 --> 0:11:51.440 sugar high from the stimulut from the stimulus package wears 0:11:51.520 --> 0:11:53.680 off and all of a sudden people go back to 0:11:53.760 --> 0:11:58.120 reality and say, oh wait, the job report or the 0:11:58.400 --> 0:12:02.240 unemployment numbers went up by three point three million. Right 0:12:02.320 --> 0:12:06.880 then what happens next week when the there's another three 0:12:06.920 --> 0:12:10.680 million jobs that are lost And and generally, if you 0:12:10.720 --> 0:12:14.000 look through history, you'll find that the tipping point for 0:12:14.200 --> 0:12:18.239 the United States going into a recession is always about 0:12:18.280 --> 0:12:22.120 the unemployment rate. Right, so when the unemployment rate starts 0:12:22.160 --> 0:12:27.080 to spike, that's when things get bad. And not only 0:12:27.120 --> 0:12:30.959 are we spiking now from an all time low. But 0:12:31.040 --> 0:12:35.280 we're just I mean, it's a it's a a parabolic 0:12:35.440 --> 0:12:37.680 move when you look at a chart. And I'd also 0:12:37.760 --> 0:12:40.520 like to remind people that are comparing this to two thousand, 0:12:40.559 --> 0:12:44.719 eight thousand nine that back then the jobless claims the 0:12:44.800 --> 0:12:48.840 number we receive today at its height was maybe six 0:12:48.920 --> 0:12:53.760 hundred thousand, SI, there you go, and then today it's 0:12:53.800 --> 0:12:56.200 it's three point two or three point three millions. So 0:12:56.400 --> 0:12:59.360 the previous high was I think and it was seven 0:12:59.440 --> 0:13:03.400 hundred and two thousand, six and fifty thousand, and now 0:13:03.559 --> 0:13:09.199 now millions. Yeah, So this this seems like um to me. 0:13:09.360 --> 0:13:12.720 You know, if we trace this back to the break 0:13:12.760 --> 0:13:15.760 from the gold standard, if that's nine, nine seventy one, 0:13:15.760 --> 0:13:18.439 wherever number you want to start looking at. We've started 0:13:18.640 --> 0:13:23.080 building up the debt and it seems like two eight seven, 0:13:23.120 --> 0:13:25.320 two thousand, two thousand and eight, two thousand and eleven. 0:13:25.400 --> 0:13:28.840 It keeps trying to de leverage that debt, right, and 0:13:28.880 --> 0:13:31.400 the Fed just keeps, no, don't, let's just pump more 0:13:31.440 --> 0:13:34.120 debt in. But there's so much bad debt out there, 0:13:34.120 --> 0:13:36.080 as you say, all this junk that's out there, and 0:13:36.120 --> 0:13:38.280 it's just it just it just goes away in the 0:13:38.320 --> 0:13:40.160 blink of an eye. And and and that's what they're doing. 0:13:40.200 --> 0:13:42.280 They just keep trying to like reinflate it with more 0:13:42.360 --> 0:13:44.360 debt and then each time it just takes more and 0:13:44.400 --> 0:13:49.840 more and more. Yeah, that's exactly what happens. And it's 0:13:49.880 --> 0:13:53.360 just like taking a drug or uh, you know, drinking 0:13:53.440 --> 0:13:55.600 or anything that the more of the drug that you take, 0:13:55.679 --> 0:13:58.040 the more you need to get high, the lot of 0:13:58.520 --> 0:14:03.880 diminishing returns. Yeah, exactly. So I think that's what's going 0:14:03.960 --> 0:14:06.840 on right now. We know that the FED is now 0:14:07.040 --> 0:14:10.440 pushing on a string, and at what point do we 0:14:10.480 --> 0:14:14.840 get where the government stimulus package has the same type 0:14:14.880 --> 0:14:17.880 of effect. And that's when you've really got problems because 0:14:17.920 --> 0:14:21.600 if you can't inflate a bubble through monetary policy, and 0:14:21.640 --> 0:14:25.360 if you can't do it through fiscal policy, then what's 0:14:25.480 --> 0:14:29.040 left other than the FED doing what I think they've 0:14:29.120 --> 0:14:32.120 set themselves up to do now, and that's just to 0:14:32.280 --> 0:14:36.160 buy and take the private sector balance sheet onto the 0:14:36.200 --> 0:14:40.520 balance sheet of the Fed. You know, it's a it's 0:14:40.520 --> 0:14:43.240 a scary thought thinking about that. And before we dive 0:14:43.240 --> 0:14:45.120 into that, I'm just curious. You know, we talked about 0:14:45.120 --> 0:14:47.600 the law of diminishing returns, and so we can see that, right, 0:14:47.600 --> 0:14:50.880 it was fifteen trillion, thirty trillion, I mean, what's it 0:14:50.920 --> 0:14:52.440 going to be this time? Right? Each time it gets 0:14:52.440 --> 0:14:55.080 more and more, and it almost seems like more money 0:14:55.160 --> 0:14:58.000 is being put out than the economic growth that we're 0:14:58.000 --> 0:15:01.160 getting back in return. Or we're almost at that point? 0:15:01.320 --> 0:15:04.440 Is that so like we're spending more than we're getting 0:15:04.840 --> 0:15:08.080 are we? I mean there yet? Yeah, There's been several 0:15:08.120 --> 0:15:12.200 studies done that show once the debt to GDP gets 0:15:12.280 --> 0:15:15.160 up to a certain level in a country, that every 0:15:15.160 --> 0:15:20.040 single dollar or every single um uh yeah, I guess 0:15:20.040 --> 0:15:23.520 every dollar or the government spends, they get back less 0:15:23.560 --> 0:15:27.640 in return. So there's an opposite money multiplier in fact, 0:15:28.320 --> 0:15:31.760 and I think we're there. I think the number that 0:15:31.800 --> 0:15:34.080 they came out with, I wish I could remember the 0:15:34.120 --> 0:15:37.240 specific study. It's very famous, but they said about a 0:15:37.320 --> 0:15:40.520 hundred to a hundred and ten percent of g d P. 0:15:41.320 --> 0:15:44.920 And I want to make sure that people are are 0:15:45.080 --> 0:15:49.000 clear that because a lot of people in the market 0:15:49.120 --> 0:15:51.080 or on Twitter, they say, well, yeah, we could be 0:15:51.120 --> 0:15:54.840 like Japan where they're buying all of these e t 0:15:55.040 --> 0:15:57.080 f s and the bonds, like we talked about earlier, 0:15:57.240 --> 0:15:59.800 and they're printing all of this money and it really 0:15:59.840 --> 0:16:03.600 hasn't created inflation. It's more created kind of a zombie 0:16:03.840 --> 0:16:07.920 economy where they just have very low deflation for for 0:16:08.000 --> 0:16:12.040 decades on end. And although that is a possibility, I 0:16:12.080 --> 0:16:15.680 think in the United States, it's not a probability. The 0:16:15.720 --> 0:16:19.080 probability is very low that we see that because of 0:16:19.120 --> 0:16:23.240 the dynamics with the reserve currency, the dollar, and how 0:16:24.360 --> 0:16:26.440 much the FED will have to print, and the fact 0:16:26.480 --> 0:16:29.640 that we're that we're seeing the supply chains being disrupted 0:16:30.040 --> 0:16:33.120 within the United States. And I think with what's going 0:16:33.160 --> 0:16:37.080 on with the the the illness will call it. I 0:16:37.080 --> 0:16:38.560 don't know if you're gonna put this on YouTube, but 0:16:38.840 --> 0:16:41.320 we'll say will say the illness. Everyone knows what I'm 0:16:41.320 --> 0:16:45.280 talking about. There you go, There you go. I think 0:16:45.280 --> 0:16:48.560 you could see a situation where there's a lot less 0:16:48.600 --> 0:16:51.640 goods and services that are imported, and if there are 0:16:51.640 --> 0:16:54.800 fewer goods and services being imported, there's more dollars or 0:16:54.880 --> 0:16:58.800 there's fewer dollars being exported, so more dollars are staying 0:16:58.840 --> 0:17:02.040 within the demand stick economy. And if you combine that 0:17:02.080 --> 0:17:05.440 with mm T, which is a part of the stimulus package, 0:17:05.960 --> 0:17:08.199 and you combine that with the FED creating all of 0:17:08.240 --> 0:17:11.720 these additional deposits, because as I'm sure you know, what, 0:17:11.720 --> 0:17:14.160 what most people don't understand is when the FED creates 0:17:14.200 --> 0:17:16.720 money and they just we call it print money, they're 0:17:16.760 --> 0:17:21.160 they're not really printing the money that you that most 0:17:21.160 --> 0:17:24.160 people think of. It's it's not it is kind of dollars, 0:17:24.160 --> 0:17:27.760 but it's more it's it's it's bank money. It's just 0:17:28.040 --> 0:17:30.920 reserves for the for the banks and the primary dealers 0:17:31.119 --> 0:17:34.399 that are under the Fed's umbrella. So in order for 0:17:34.480 --> 0:17:37.120 the money that the FED prints to get out into 0:17:37.160 --> 0:17:41.760 the real economy, well before it took uh an action 0:17:42.280 --> 0:17:44.879 of the primary deal they would have to do something. 0:17:44.880 --> 0:17:48.119 They'd have to buy a financial asset, or they would 0:17:48.119 --> 0:17:52.399 have to create a loan, and that creates an additional deposit, 0:17:52.840 --> 0:17:56.080 which makes the money supply grow. So if you have 0:17:56.160 --> 0:17:59.600 the FED now going directly to the real economy to 0:17:59.720 --> 0:18:02.719 create deposits, the government is doing it as well with 0:18:02.920 --> 0:18:05.879 MMT and all these other programs. And you have the 0:18:05.920 --> 0:18:12.040 fact that there's fewer dollars escaping the United States, then 0:18:12.160 --> 0:18:15.639 you have just simple more dollars chasing the same amount 0:18:15.640 --> 0:18:18.840 of goods or services, or I would argue actually fewer 0:18:19.200 --> 0:18:21.840 goods and services because if we start not only the 0:18:21.880 --> 0:18:25.520 supply chains being broken down right now because of this illness, 0:18:25.760 --> 0:18:28.560 but also in the future, if you have Trump or 0:18:28.800 --> 0:18:31.560 Biden or whomever come out and say, listen, we need 0:18:31.640 --> 0:18:36.240 to stop producing face masks in China. We can't be 0:18:36.440 --> 0:18:40.480 reliant on uh India for our pharmaceuticals. We can't be 0:18:40.560 --> 0:18:43.600 reliant on Taiwan for our ventilators. So we've got to 0:18:43.600 --> 0:18:46.920 do all these things in the United States. Well, that 0:18:46.960 --> 0:18:49.159 takes time first and all. You can't just wave a 0:18:49.200 --> 0:18:52.240 magic wand and have all these supply chains appear. So 0:18:52.320 --> 0:18:55.600 in the interim you have a reduced amount of supply, 0:18:55.760 --> 0:18:58.320 and even when that supply comes online, it's at a 0:18:58.640 --> 0:19:02.520 much much higher ice because you're producing that in a 0:19:02.640 --> 0:19:06.760 developed economy as opposed to a Vietnam something like that. 0:19:06.840 --> 0:19:10.879 So the bottom line is you have less goods and services, 0:19:11.200 --> 0:19:14.800 you have more dollars chasing them and fewer dollars escaping. 0:19:15.000 --> 0:19:17.520 So if you have fewer dollars escaping, you can have 0:19:17.840 --> 0:19:23.240 a quote unquote strong dollar. And I talked about this 0:19:23.280 --> 0:19:25.119 in a video this morning, but you can have a 0:19:25.160 --> 0:19:27.960 strong dollar. So every single time the average Joe turns 0:19:28.000 --> 0:19:31.960 on CNBC, it's the dollars strong, Holy cow, the dollars strong. 0:19:32.040 --> 0:19:34.040 The d X y is at one ten, it's at 0:19:34.080 --> 0:19:38.560 one dollars, uh, you know, crushing the euro, it's crushing 0:19:38.600 --> 0:19:41.879 the Aussie dollar or the yen, anything like this. While 0:19:42.160 --> 0:19:45.000 at the same time, the average Joe is going down 0:19:45.040 --> 0:19:48.960 to whole Foods and the price of his apples are 0:19:49.000 --> 0:19:52.880 going from a dollar to two dollars, to three dollars, 0:19:53.000 --> 0:19:56.239 to four dollars to five dollars. And so there's this 0:19:56.480 --> 0:19:59.480 disconnect I think with people, and that's something that I'm 0:19:59.520 --> 0:20:03.640 trying to preach as much as I can that hey, 0:20:03.760 --> 0:20:07.840 let's not let's understand that you have to compartmentalize your 0:20:08.320 --> 0:20:12.679 personal cp I with the strength or weakness of the 0:20:12.720 --> 0:20:16.160 dollar that you hear on TV. And and this is why. 0:20:16.280 --> 0:20:18.520 It's because of what's going on with the FED, the 0:20:18.560 --> 0:20:23.119 government and the the illness. And but I also I 0:20:23.119 --> 0:20:28.920 want to be clear too that the economy was extremely, 0:20:29.160 --> 0:20:32.960 extremely weak, and it was built on a house of cards. 0:20:33.040 --> 0:20:36.320 This at some point in time, we would have had 0:20:36.400 --> 0:20:39.960 this happen, whether it was with this illness or something else, 0:20:40.000 --> 0:20:41.800 and a lot of people say, oh, we can have 0:20:41.800 --> 0:20:45.959 this v shape recovery, which we might have due to liquidity, 0:20:45.960 --> 0:20:48.920 but we won't have due to fundamentals, because they say, well, 0:20:48.920 --> 0:20:51.119 the unemployment rate was low, we had such a great 0:20:51.160 --> 0:20:54.200 economy prior to this. My rebuttal to that is always 0:20:54.280 --> 0:20:57.480 very simple. If we had such a great economy prior 0:20:57.560 --> 0:21:00.639 to going into this crisis, why do we have interest 0:21:00.720 --> 0:21:04.920 rates at zero? Right? Right? Like why did the economy 0:21:05.160 --> 0:21:08.600 need interest rates solo? Why was it when Powell took 0:21:08.680 --> 0:21:11.879 rates up to two or two point to five all 0:21:11.920 --> 0:21:14.879 of a sudden things started to implode? Right? If we 0:21:14.960 --> 0:21:18.000 had such an awesome economy, If we had such an 0:21:18.000 --> 0:21:20.760 amazing economy, don't you think we should be able to 0:21:20.800 --> 0:21:24.760 normalize interest rates? And why can't the Fed unwind their 0:21:24.760 --> 0:21:27.360 balance sheet? Why do they have to do repo? Why 0:21:27.359 --> 0:21:29.920 did they have to do que if we've got such 0:21:30.000 --> 0:21:33.359 an amazing economy? Right? Yeah, it was definitely cracking up 0:21:33.400 --> 0:21:36.600 well before the sickness. It was it was it was 0:21:36.680 --> 0:21:38.920 kind of like I called it at first, I said 0:21:38.960 --> 0:21:40.679 it was like the pin prick on a balloon, But 0:21:40.760 --> 0:21:42.680 really it was like getting a nail and a tire 0:21:42.720 --> 0:21:47.000 that was already deflating. Yeah, so uh, one of those. 0:21:47.040 --> 0:21:49.840 But you know, yeah, you're right, everybody saying the dollars 0:21:49.880 --> 0:21:51.879 too strong, the dollars too strong. I see lots of 0:21:51.880 --> 0:21:54.280 people calling, you know, to let's weaken the dollar, weaken 0:21:54.359 --> 0:21:57.400 the dollar. Um. But of course the dollar is the strongest. 0:21:57.400 --> 0:22:01.080 Everyone's flying to liquidity. Um. They're trying to do that 0:22:01.200 --> 0:22:06.280 right by printing more and lowering rates and all these programs. UM. 0:22:06.320 --> 0:22:08.840 But I guess your last video you were kind of 0:22:08.880 --> 0:22:12.560 saying that these limited, these unlimited billouts actually lead to 0:22:12.600 --> 0:22:16.200 the dollar going down. So right now it's the dollars 0:22:16.200 --> 0:22:18.000 going up. But they're doing these bells to try to 0:22:18.080 --> 0:22:21.439 weaken them. But you think they overshoot the goal and 0:22:21.480 --> 0:22:25.040 maybe they just it just ends up making it two weeks. Well, 0:22:26.560 --> 0:22:28.960 we've got to define what we're talking about by a week. 0:22:29.040 --> 0:22:31.399 Dollar first and foremost. So if you're talking about the 0:22:31.480 --> 0:22:35.399 dollar relative to foreign currencies, that would be one answer. 0:22:35.760 --> 0:22:37.800 But if we're talking about the dollar relative to the 0:22:37.840 --> 0:22:40.679 apples that you buy, the whole foods, that would be 0:22:40.680 --> 0:22:44.159 a completely different answer. Or maybe the dollar compared to 0:22:44.200 --> 0:22:48.320 the bond market, or the dollar compared to a specific 0:22:48.359 --> 0:22:51.560 stock or the SNP, so I I really want to 0:22:51.640 --> 0:22:55.600 encourage people to compartmentalize those So I could see a 0:22:55.680 --> 0:22:58.840 situation because of what I explained before that the dollar 0:22:58.880 --> 0:23:02.080 could definitely go up. Mean, I agree with Brent Johnson 0:23:02.119 --> 0:23:05.320 and well, I can totally see where he's coming from, 0:23:05.320 --> 0:23:07.879 whether it's a guy like Brent or Jeff Snyder or 0:23:07.920 --> 0:23:11.560 anyone who's in that route Paul with that dollar bowl camp. 0:23:11.880 --> 0:23:16.160 But what they're saying is isn't necessarily that the prices 0:23:16.240 --> 0:23:19.080 of goods and services, or the price of your healthcare 0:23:19.480 --> 0:23:22.280 or the price of gasoline or your rent is going 0:23:22.359 --> 0:23:24.919