WEBVTT - Ray Dalio Talks Fed, US Manufacturing, Tariffs and more 0:00:02.520 --> 0:00:08.640 Bloomberg Audio Studios, podcasts, radio News. Thank you so much 0:00:08.680 --> 0:00:10.959 for being here. I want to start with these five 0:00:11.080 --> 0:00:14.280 forces that you see right now that are affecting markets 0:00:14.280 --> 0:00:17.320 that are important to understand in order to understand where 0:00:17.320 --> 0:00:18.680 we are where we are, could you just talk a 0:00:18.720 --> 0:00:20.160 little bit about what those forces are. 0:00:20.520 --> 0:00:26.000 Sure through history and now, there are five big forces 0:00:26.040 --> 0:00:30.760 that are interrelated and generally transpiring cycles as I described, 0:00:31.400 --> 0:00:34.360 and we know they exist because everything that we are 0:00:34.400 --> 0:00:37.120 going to talk about will fall into one of those categories. 0:00:38.080 --> 0:00:42.360 That is the. 0:00:40.760 --> 0:00:47.800 Debt money economy cycle. Meaning credit is buying power. You 0:00:47.960 --> 0:00:54.320 give buying power to entities like it's like the circulatory system. 0:00:54.520 --> 0:00:58.600 You give credit and if that credit produces, it will 0:00:58.600 --> 0:01:01.880 produce debt. But if it produce uses an income that 0:01:02.160 --> 0:01:06.399 is good enough to pay the debt, it's a healthy system. 0:01:06.880 --> 0:01:11.760 But when it produces more debt and more debt service payments, 0:01:12.240 --> 0:01:16.200 that squeezes out the spending and that produces a problem, 0:01:16.240 --> 0:01:19.160 and then there's a supply demand problem that has to 0:01:19.360 --> 0:01:21.600 and then there are economic problems. 0:01:21.959 --> 0:01:23.240 Okay, that's one cycle. 0:01:23.720 --> 0:01:27.600 The second cycle related to that, because money and wealth 0:01:28.400 --> 0:01:33.440 have political and social effects, is that there becomes big 0:01:33.680 --> 0:01:38.520 differences in wealth and values. And so when there are 0:01:38.520 --> 0:01:42.959 big differences in wealth and values and the people feel 0:01:43.000 --> 0:01:46.520 that the system isn't working for them, you see greater 0:01:46.800 --> 0:01:50.920 political polarity between the left and the right. It becomes 0:01:50.960 --> 0:01:54.240 more the hard left and the hard right, and those 0:01:54.360 --> 0:01:59.680 become irreconcilable differences that are not easily solved through the 0:01:59.760 --> 0:02:04.520 US means of operating that way, such as democracies. During 0:02:04.560 --> 0:02:08.600 the thirties, for example, four major democracies chose to be 0:02:08.800 --> 0:02:15.960 autocracies during those periods. The third is the international geopolitical cycle, 0:02:16.480 --> 0:02:20.200 in other words, of arising power challenging existing powers, and 0:02:20.560 --> 0:02:26.680 the same dominance of the dominant power fades relative to 0:02:26.919 --> 0:02:30.400 other powers, and also the order then gets challenged, and 0:02:30.440 --> 0:02:35.000 we're certainly going through that. The fourth factor throughout history 0:02:35.120 --> 0:02:39.720 has been acts of nature. Droughts, floods, in pandemics have 0:02:39.880 --> 0:02:43.720 actually killed more people than wars and actually led to 0:02:43.800 --> 0:02:48.480 more ends of the previously mentioned cycles than anything else. 0:02:48.960 --> 0:02:52.320 So nature and certainly nature, climate change and the like 0:02:52.440 --> 0:02:56.840 is a big force. And then fifth through history are 0:02:57.080 --> 0:03:01.919 man's learnings of particularly developments of new techechnologies. The developments 0:03:01.919 --> 0:03:06.280 of new technologies is what has raised living standards over time, 0:03:06.320 --> 0:03:09.799 which you can see in terms of life expectancies per 0:03:09.840 --> 0:03:14.240 capita GDP, and of course the development of new technologies 0:03:14.280 --> 0:03:18.800 now is a very important influence. So those five factors 0:03:18.840 --> 0:03:23.680 have gone evolve those of main five factors. Anything we'll 0:03:23.720 --> 0:03:26.440 talk about will be under one of those, and of 0:03:26.480 --> 0:03:30.639 course the inter relationships between them as are important. 0:03:30.760 --> 0:03:32.840 It seems like we're at the cross section of a 0:03:32.840 --> 0:03:36.160 pretty transformative moment then, because it's this cross section of 0:03:36.200 --> 0:03:39.280 all of these things, whether it's the AI aspect, the 0:03:39.280 --> 0:03:43.320 technological overlay, the monetary debt aspect of it. 0:03:43.360 --> 0:03:45.000 With respect to the debt and deficit. 0:03:45.080 --> 0:03:48.080 Can you put into perspective the fact that this has 0:03:48.120 --> 0:03:51.440 been building up over time? Where do the tariffs and 0:03:51.480 --> 0:03:54.800 some of the trade disputes of today fit into that? 0:03:54.840 --> 0:03:58.040 Do they help sort of alleviate some of these imbalances, 0:03:58.120 --> 0:03:59.280 do they exacerbate them? 0:03:59.360 --> 0:04:02.400 Are they a simple of them? How do you understand. 0:04:01.960 --> 0:04:05.200 Sort of that aspect of policy right now? 0:04:05.560 --> 0:04:10.840 Well, first of all, there are great imbalances that have 0:04:10.880 --> 0:04:16.360 to be rectified given this set of circumstances. So three 0:04:16.400 --> 0:04:19.880 major types which relate to trade, but they also relate 0:04:19.920 --> 0:04:27.000 to capital. The first is that The dynamic by which 0:04:28.120 --> 0:04:34.040 Chinese export to the United States items that are cost effective, 0:04:34.080 --> 0:04:37.200 and the Americans buy them and then they sell send 0:04:37.200 --> 0:04:40.159 the money back and the Chinese earn the money and 0:04:40.520 --> 0:04:44.599 take that money and invest in bonds has created a 0:04:45.680 --> 0:04:51.040 unsustainable dynamic because as we're living in this environment related 0:04:51.480 --> 0:04:55.839 to the next two items, where those two countries can 0:04:55.880 --> 0:05:02.359 be in conflict military comf lit, there necessarily has to 0:05:02.400 --> 0:05:08.440 be insecurities on both parties, Chinese having an insecurity of 0:05:08.480 --> 0:05:11.799 whether they're actually going to be able to turn their 0:05:11.839 --> 0:05:14.960 credit into goods and services. In other words, there's no 0:05:15.040 --> 0:05:18.680 purpose of holding a bond or an asset unless you 0:05:18.720 --> 0:05:21.599 can then sell it and get money and buy things. 0:05:21.880 --> 0:05:24.839 And when that dynamic works the other way, it's quite 0:05:24.839 --> 0:05:27.840 painful for the debtor to have to pay back in 0:05:27.960 --> 0:05:32.359 real stuff. And then in a geopolitical conflict, that's a problem. 0:05:33.200 --> 0:05:36.000 And then of course so and then in this environment 0:05:36.040 --> 0:05:42.360 of conflict, that's also the problem of it's worsened because 0:05:42.400 --> 0:05:45.400 in wars and prior times or even with Russia, then 0:05:45.480 --> 0:05:48.520 there were freezing of assets and there could always be 0:05:48.600 --> 0:05:53.160 that kind of issue, So that's a consideration. And then 0:05:53.200 --> 0:05:58.320 of course there's the loss of manufacturing and the loss 0:05:58.360 --> 0:06:02.479 of manufacturing in the United States, you know, has two problems, 0:06:02.520 --> 0:06:08.840 which are that it's connected to self sustaining. You have 0:06:08.960 --> 0:06:11.719 to be able to be in a risky world. You 0:06:11.800 --> 0:06:13.760 have to be able to produce what you need, so 0:06:13.839 --> 0:06:16.640 you need to be capable. 0:06:16.160 --> 0:06:17.880 Of manufacturing certain items. 0:06:18.120 --> 0:06:21.479 And then also the wealth, the loss of the middle 0:06:21.520 --> 0:06:25.240 class has a lot to do with the loss of manufacturing. 0:06:25.560 --> 0:06:29.800 So for those reasons that imbalance that, let's call it 0:06:29.880 --> 0:06:34.520 trade and capital count imbalance. It's both the trade issue 0:06:34.720 --> 0:06:39.720 and a capital issue, and raising tariffs is a way 0:06:39.839 --> 0:06:43.840 of dealing with that. Through history, tariffs really have been 0:06:43.880 --> 0:06:47.160 more of a tax than other tet forms of taxes 0:06:47.360 --> 0:06:51.480 going way back, and they bring in tax revenue, so 0:06:51.880 --> 0:06:54.839 you know, they'll probably bring in somewhere between three hundred 0:06:54.920 --> 0:06:58.279 million and five hundred million a year something like that, 0:06:58.680 --> 0:07:02.039 and so that's a considerate So that's the mechanics about 0:07:02.040 --> 0:07:02.679 what's happening. 0:07:03.080 --> 0:07:05.080 I just wonder if you think that that goes toward 0:07:05.400 --> 0:07:09.679 alleviating concerns about debt and sustainability, certainly in the United States, 0:07:09.960 --> 0:07:12.240 given that there will be those revenues. 0:07:12.880 --> 0:07:16.800 Yeah, right, it is a source of revenue and it 0:07:16.880 --> 0:07:22.680 will diminish that. However, the economics it's small by comparison 0:07:22.720 --> 0:07:26.280 to the gap. So as I said, the mechanics of 0:07:26.360 --> 0:07:28.840 the debt situation are really. 0:07:30.160 --> 0:07:31.360 Have a few components. 0:07:31.680 --> 0:07:35.040 The first is that when debt service payments add up, 0:07:35.400 --> 0:07:39.920 they squeeze out other spending, and so that can create 0:07:39.960 --> 0:07:43.360 the equivalent of an economic heart attack. The second is 0:07:43.440 --> 0:07:47.320 there is a supply demand issue. In other words, a 0:07:47.400 --> 0:07:53.720 deficit requires debt sale, and so there we have a 0:07:53.760 --> 0:07:57.040 lot of debt sales and we and that's and there's 0:07:57.720 --> 0:08:02.240 a lessing demand for that. And then there are the 0:08:02.280 --> 0:08:05.560 central bank playing a role. So what we have now 0:08:05.720 --> 0:08:11.040 is think of it as a big company or an individual, 0:08:11.800 --> 0:08:16.600 except the main difference between a company a country and 0:08:16.680 --> 0:08:23.000 an individual, or a company and a government is that 0:08:23.120 --> 0:08:25.960 the government can print money. So it's the basics. But 0:08:26.200 --> 0:08:28.880 figure it this way. The United States. Here are the 0:08:28.960 --> 0:08:33.320 numbers the United States spends will this year spend about 0:08:33.360 --> 0:08:37.360 seven trillion dollars and it'll take in about five trillion dollars. 0:08:37.800 --> 0:08:41.480 So that means it's spending forty percent more than it 0:08:41.520 --> 0:08:45.559 is taking in. Because it has run deficits and sold 0:08:45.600 --> 0:08:48.440 a lot of debt. The total debt is about six 0:08:48.559 --> 0:08:51.400 times the total amount of money coming in, and we're 0:08:51.440 --> 0:08:59.000 seeing those debt service payments squeeze that out. And as 0:08:59.000 --> 0:09:06.040 a result of what the projections are, it's likely that 0:09:06.800 --> 0:09:10.000 those deficits will then produce lots of bond sales, which 0:09:10.040 --> 0:09:12.640 will compound it. When you get into the point in 0:09:12.679 --> 0:09:17.840 the cycle where debt is needed to pay debt and compounds, 0:09:18.160 --> 0:09:21.440 it becomes a problem. It becomes a problem also for 0:09:21.520 --> 0:09:24.600 the central banks, because the central banks, by the way, 0:09:24.640 --> 0:09:26.640 this is not just an American problem, this is a 0:09:26.679 --> 0:09:32.000 world problem. The central banks themselves own own the debt 0:09:32.520 --> 0:09:36.959 and so, and they lose money on the debt. And 0:09:37.040 --> 0:09:40.040 so when they're losing money on the debt and they 0:09:40.080 --> 0:09:44.960 have asset liability problems, then they also not only have 0:09:45.040 --> 0:09:50.960 to monetize essentially the other the government's debt, but they 0:09:50.960 --> 0:09:54.600 also have to monetize theirs. And those are the characteristics 0:09:54.640 --> 0:09:57.200 that produce a deterioration. 0:09:56.800 --> 0:09:58.320 In the monetary order. 0:09:58.720 --> 0:10:01.040 And that's you know, that's why what you're seeing, you're 0:10:01.080 --> 0:10:07.440 seeing a dynamic of why countries, for example, are letting 0:10:07.679 --> 0:10:12.640 the reserves or their assets in bonds and so on, 0:10:12.720 --> 0:10:16.320 go down, and they're acquiring and have been acquiring gold, 0:10:16.440 --> 0:10:17.080 for example. 0:10:17.360 --> 0:10:18.920 So gold is a currency. 0:10:19.000 --> 0:10:22.560 You know, we think of currencies as being the major 0:10:22.600 --> 0:10:25.360 fea currency, but gold is a currency. It's the second 0:10:25.440 --> 0:10:28.800 largest reserve currency. And so you're seeing changes in the 0:10:28.840 --> 0:10:33.160 monetary order that are reflecting those things somewhat like happened 0:10:33.880 --> 0:10:35.439 in the early seventies. 0:10:35.679 --> 0:10:38.800 Ken Griffin yesterday of Citadel said that he sees gold 0:10:38.800 --> 0:10:40.920 as more of a safe haven right now than the dollar. 0:10:41.480 --> 0:10:46.400 Do you agree, Oh, certainly, I mean, you know, I 0:10:46.440 --> 0:10:51.240 think tell you a story. 0:10:54.160 --> 0:10:56.680 I've been trading market since I was a kid, and 0:10:57.000 --> 0:11:01.800 between my college year and going to a graduate school, 0:11:01.840 --> 0:11:06.640 in the summer of August nineteenth seventy one, I was 0:11:06.679 --> 0:11:09.560 clerking on the floor of a New York Stock exchange 0:11:09.559 --> 0:11:16.720 and I I filed markets and on Sunday night, Paul 0:11:16.800 --> 0:11:22.719 Voger and then President Nixon really was President Nixon delivered 0:11:22.720 --> 0:11:25.800 the message that you're not going to get your money. 0:11:26.240 --> 0:11:30.360 Gold was money then, so we viewed things differently, you know, 0:11:30.640 --> 0:11:33.320 like money fee up. Money as we think about it today, 0:11:33.920 --> 0:11:36.000 was like checks in a checkbook so that you can 0:11:36.040 --> 0:11:38.640 go get your gold. And we looked at things through 0:11:38.880 --> 0:11:44.800 a gold lens, and I walked on the floor of 0:11:44.840 --> 0:11:47.400 the stock exchange. I thought, this is a big crisis, 0:11:47.440 --> 0:11:50.200 because you're not going to get your money. People not 0:11:50.400 --> 0:11:53.160 and the stock market. I thought it was going to 0:11:53.160 --> 0:11:55.080 go down a lot. Stock market went up a lot, 0:11:55.800 --> 0:11:58.320 and I went and I studied history. 0:11:58.520 --> 0:12:00.480 That's, by the way, why I studied history. 0:12:01.240 --> 0:12:04.120 So I studied history, and I found out the exact 0:12:04.200 --> 0:12:08.439 same thing happened in March nineteen thirty three with Roosevelt 0:12:08.480 --> 0:12:11.480 getting on the radio and doing the exact same thing, 0:12:11.760 --> 0:12:13.720 in other words, devaluing money. 0:12:14.040 --> 0:12:15.600 Okay, in other words. 0:12:15.640 --> 0:12:18.840 So when we're looking at the world now, we look 0:12:18.880 --> 0:12:23.200 at it through our currency lens. You know, we think 0:12:23.280 --> 0:12:27.480 things go up or down in when we're measuring it 0:12:27.520 --> 0:12:31.960 in our currency, but in reality, the currency goes up 0:12:31.960 --> 0:12:36.240 and down. And so as we start to think about that, okay, 0:12:36.600 --> 0:12:39.440 think about what's happening. Yes, it's a currency, it's an 0:12:39.480 --> 0:12:42.200 alternative currency, it's not a fiat currency. 0:12:42.440 --> 0:12:44.600 So do you think that it actually makes perfect sense 0:12:44.720 --> 0:12:47.079 the stock market is hitting record high after record high 0:12:47.080 --> 0:12:49.000 at the same time that gold is hitting record high 0:12:49.000 --> 0:12:49.800 after record high. 0:12:50.080 --> 0:12:53.800 Yes, yes, it's very much like the early seventies. And 0:12:53.800 --> 0:12:58.400 then the question, because what do you put your money in. Okay, 0:12:58.880 --> 0:13:02.520 of course the stock market it has We can't speak 0:13:02.520 --> 0:13:05.400 about the stock market as a whole, of course, because 0:13:05.440 --> 0:13:09.680 the stock market is so bifurcated, you know, and the 0:13:09.720 --> 0:13:11.920 world stock markets are so bifurcated. 0:13:12.160 --> 0:13:14.360 But yes, that is the dynamic. 0:13:14.679 --> 0:13:18.080 It depreciates the value of money and then it costs, 0:13:18.440 --> 0:13:22.200 because everybody, it's all about a storehold of wealth. What 0:13:22.320 --> 0:13:24.720 is your storehold of wealth? What's it going to be? 0:13:25.120 --> 0:13:28.800 A currency should be a medium of exchange and a 0:13:28.840 --> 0:13:32.520 storehold of wealth. But when you have so much debt, 0:13:33.360 --> 0:13:36.200 you know, debt is money and money is debt. I 0:13:36.200 --> 0:13:40.320 mean debt is money, meaning when you hold debt, you're 0:13:40.320 --> 0:13:43.600 holding a promise to receive money. And when I say 0:13:43.640 --> 0:13:46.320 money is debt, when you're holding money, you're putting it 0:13:46.320 --> 0:13:50.079 in a debt instrument. And so for those reasons, when 0:13:50.120 --> 0:13:53.720 you have such a supply of debt and debt instruments 0:13:53.880 --> 0:13:57.880 and it's not an effective storehold of wealth, it's natural 0:13:57.960 --> 0:14:00.960 to go to an alternative storehold of wealth, which is 0:14:01.000 --> 0:14:04.880 why we're going to harder currencies, you know. And of 0:14:04.920 --> 0:14:08.240 course gold is the most fundamental of those, not only 0:14:08.320 --> 0:14:12.480 because of the many years but even there, it's you know, 0:14:12.720 --> 0:14:15.120 as they say, it's the only asset that somebody can 0:14:15.160 --> 0:14:17.520 hold that doesn't that you don't have to depend on 0:14:17.559 --> 0:14:19.840 somebody else to paying you money for it at a. 0:14:19.760 --> 0:14:23.680 Time of incredible uncertainty bid also potentially incredible opportunity. You're 0:14:23.680 --> 0:14:27.040 talking about the technological advancements. Can you give a sense 0:14:27.040 --> 0:14:31.320 of how you're thinking about allocations with gold versus bonds, 0:14:31.560 --> 0:14:36.080 versus us versus international versus some sort of leveraging to 0:14:36.160 --> 0:14:38.360 this story of technological development. 0:14:39.320 --> 0:14:43.680 Well, I think, first of all, in an asset allocation mix, 0:14:44.120 --> 0:14:46.920 the first thing you have to do is create your 0:14:47.200 --> 0:14:51.160 neutral portfolio. What's your balance, you know, what's your beta mix, 0:14:51.880 --> 0:14:54.800 your strategic I said allocation if you don't have a 0:14:54.880 --> 0:14:57.720 view of the markets to make tactical mods, and then 0:14:57.760 --> 0:15:00.200 you have to think, how do you make tactical moves? 0:15:00.000 --> 0:15:00.880 Who's going to make those? 0:15:01.120 --> 0:15:03.560 Because tactical moves or a zero sum game, you have 0:15:03.600 --> 0:15:06.640 to beat the other person who's doing it on the 0:15:06.680 --> 0:15:11.080 strategic acid allocation mix. Before I get into the tactical 0:15:11.160 --> 0:15:14.120 though I've expressed my views on the tactical of gold 0:15:14.160 --> 0:15:17.600 relative to bonds. I think you have to create a 0:15:17.720 --> 0:15:24.080 very good balanced portfolio. How you do that, we can 0:15:24.160 --> 0:15:29.680 take a long session. But I think you have to 0:15:29.720 --> 0:15:32.880 think of that and not in nominal terms, but in 0:15:32.960 --> 0:15:35.840 real terms. So in other words, when you're thinking you're 0:15:35.840 --> 0:15:39.280 doing your asset allocation, what is going to protect your 0:15:39.440 --> 0:15:43.600 real after tax returns, so you create that optimal mix. 0:15:44.200 --> 0:15:48.480 Gold is a very excellent diversifier of the portfolio. So 0:15:48.560 --> 0:15:51.480 if you would look at just from the strategic acid 0:15:51.480 --> 0:15:57.320 allocation mixed perspective, you would probably have something like as 0:15:57.360 --> 0:16:00.880 the optimal mix, something like fifteen percent of your portfolio 0:16:01.120 --> 0:16:05.760 in gold because of the fact that if you didn't 0:16:05.800 --> 0:16:09.360 even have a tactical because it is the one asset 0:16:09.400 --> 0:16:11.840 that does very well when the typical parts of your 0:16:11.880 --> 0:16:16.600 portfolio go down, because the typical parts of your portfolio are. 0:16:16.480 --> 0:16:18.160 Also so credit dependent. 0:16:19.280 --> 0:16:23.400 So anyway, I think all of this means that there 0:16:23.440 --> 0:16:26.200 should be some piece in that of gold. If I'm 0:16:26.240 --> 0:16:30.840 making tactical bets. I don't like dead assets per se. 0:16:31.640 --> 0:16:33.800 And I would say I don't like dead assets per se, 0:16:34.120 --> 0:16:37.480 not just government dead assets. But also if you're looking 0:16:37.560 --> 0:16:39.640 let's say a credit or private credit, and you look 0:16:39.640 --> 0:16:42.360 at where the credit spreads are, credit spreads are very 0:16:42.480 --> 0:16:47.480 very low, and so for those various reasons, my tilts 0:16:47.480 --> 0:16:52.800 would be away from those things toward gold. But again, yes, 0:16:53.080 --> 0:16:56.320 so more than would be a normal asset allocation mix. 0:16:57.120 --> 0:17:00.240 But I think you have to also say, you know, 0:17:00.360 --> 0:17:04.119 start with what is a real dollar if you're a 0:17:04.200 --> 0:17:08.840 dollar investor, a real return asset that you're going to 0:17:08.920 --> 0:17:11.919 hold as part of that portfolio. The most of the 0:17:12.000 --> 0:17:16.439 system is dependent on credit equities, and everything is dependent 0:17:16.480 --> 0:17:19.560 on credit. You change credit, and you know, then all 0:17:19.600 --> 0:17:22.640 sorts of things happen, and so it's an effective diversifier 0:17:22.680 --> 0:17:25.440 as well as probably the timing. 0:17:25.280 --> 0:17:28.439 Seems good going to the five tenants that you're talking about. 0:17:28.640 --> 0:17:32.480 Given the imbalances in the deficit, in the debt load, 0:17:32.640 --> 0:17:34.080 and the amount that people are going to have to sell, 0:17:34.119 --> 0:17:35.719 governments are going to have to sell, do you think 0:17:35.760 --> 0:17:37.879 it's appropriate for the FED to be cutting rates right now? 0:17:39.000 --> 0:17:44.679 I think I think the picture on cutting rates is 0:17:44.760 --> 0:17:45.880 slightly mixed. 0:17:47.520 --> 0:17:49.480 So, and it has to do with the split in 0:17:49.520 --> 0:17:51.720 the economy, and it has to do with split in 0:17:51.840 --> 0:17:56.679 capital markets, which means you're trying to look at the 0:17:56.720 --> 0:18:00.240 economy as a whole, but what you have is in 0:18:00.400 --> 0:18:03.480 certain sections of the economy, you have an enormous amount 0:18:03.520 --> 0:18:06.959 of liquidity, enormous amount of wealth. Things are like if 0:18:07.000 --> 0:18:09.600 you're in the top one percent of anything you know, 0:18:10.000 --> 0:18:13.240 or which is the top one percent of the income earners, 0:18:13.280 --> 0:18:17.639 the top one percent of the stocks and AI and 0:18:17.680 --> 0:18:20.960 so on and so forth. Wow, there's a tremendous amount 0:18:21.000 --> 0:18:25.600 of liquidity and fantastic And so you would say, if anything, 0:18:25.640 --> 0:18:28.160 you'd worry more about the bubble and how you start 0:18:28.200 --> 0:18:30.719 to pull the you know, the punch bowl, that kind 0:18:30.760 --> 0:18:31.040 of thing. 0:18:32.440 --> 0:18:34.520 But we have a very diverse economy. 0:18:34.920 --> 0:18:38.520 So if you're looking at let's say, the bottom sixty 0:18:38.560 --> 0:18:41.919 percent of the population and the conditions of the bottom 0:18:42.000 --> 0:18:46.200 sixty percent of the bottom population and labor markets and 0:18:46.240 --> 0:18:50.200 so on, then you have a very very different issue. 0:18:50.359 --> 0:18:52.520 I don't think monetary policy it all is going to 0:18:52.520 --> 0:18:54.080 be able to do that. I think that there's a 0:18:54.200 --> 0:18:59.159 strong situation where you know that the natural instinct is 0:19:00.119 --> 0:19:04.480 if things aren't exactly like I would like and I'd 0:19:04.480 --> 0:19:08.200 like to make them better, I should use monetary policy. Okay, 0:19:08.359 --> 0:19:11.480 So I mean that's now what we've learned that, right, 0:19:11.560 --> 0:19:14.679 because every time you do that and then things go 0:19:14.840 --> 0:19:17.760 up and people are happy and so on. But there's 0:19:17.800 --> 0:19:20.800 a cost of doing that, right. The cost in doing 0:19:20.840 --> 0:19:25.960 that is that there's one man's debts or another man's assets. 0:19:26.640 --> 0:19:30.000 And so when you artificially lower the interest rates so 0:19:30.080 --> 0:19:32.640 that it is not attractive in a sense, the whole 0:19:32.800 --> 0:19:35.880 is an asset, and it's very attractive to borrow and 0:19:35.920 --> 0:19:40.320 buy things, that creates an imbalance. So I think that 0:19:41.720 --> 0:19:45.000 I think that discipline is not something that anybody seems 0:19:45.040 --> 0:19:46.000 to want, and. 0:19:46.000 --> 0:19:47.159 Yet I think it's needed. 0:19:47.480 --> 0:19:50.480 So when I think about the monetary policy and so on, 0:19:50.720 --> 0:19:53.600 I think not much, if any, But I also think 0:19:53.640 --> 0:19:56.480 it's not really dealing with the whole so well because 0:19:56.520 --> 0:19:57.919 of the disparity in the parts. 0:19:58.160 --> 0:20:00.600 Going back to the video that you showed for you're 0:20:00.640 --> 0:20:03.520 talking about these two hundred and fifty year cycles and 0:20:03.520 --> 0:20:06.000 then ten to twenty year periods where there's a transition 0:20:06.080 --> 0:20:09.439 of a power from one to another nation, And I 0:20:09.480 --> 0:20:11.800 just wonder if you see things the same way this time, 0:20:12.200 --> 0:20:16.120 because it seems like globally, they're the same issues everywhere 0:20:16.119 --> 0:20:18.640 in terms of these imbalances and in terms of the deficit, 0:20:18.680 --> 0:20:20.480 in terms of nobody really wanting to take the punch 0:20:20.520 --> 0:20:25.120 bowl away at a time of increasing distress in certain pockets. 0:20:25.560 --> 0:20:26.399 Do you think it's different? 0:20:26.840 --> 0:20:30.240 I think, and just to be clear, that's the whole 0:20:30.400 --> 0:20:31.800 cycle of the great cycle. 0:20:31.880 --> 0:20:32.240 In there. 0:20:32.320 --> 0:20:37.359 There are breakdowns of orders, right, So nineteen forty four 0:20:37.760 --> 0:20:38.639 we had the breakdown of. 0:20:38.640 --> 0:20:39.640 The monetary order. 0:20:41.440 --> 0:20:47.439 We had another breakdown in nineteen seventy one, so nineteen 0:20:47.520 --> 0:20:51.400 forty five we had the breakdown of the most countries 0:20:51.440 --> 0:20:55.760 political orders and most countries and geopolitical order. 0:20:55.840 --> 0:20:59.399 Right, so we're really we have those. 0:20:59.119 --> 0:21:02.280 Cycles which are part of then you know, the overall 0:21:02.359 --> 0:21:04.639 greater cycle are worth keeping in mind. 0:21:05.240 --> 0:21:07.680 So they look a lot alike to me. 0:21:08.080 --> 0:21:10.320 So when I look at it and I look at 0:21:10.320 --> 0:21:12.639 the thirties, I think there's a lot to be learned 0:21:13.119 --> 0:21:18.000 about that particular dynamic. I think one shouldn't just believe 0:21:18.000 --> 0:21:21.119 a cycle is going to follow. I think it's like 0:21:21.520 --> 0:21:24.600 almost like a life cycle. You know, each person's life 0:21:24.640 --> 0:21:30.040 cycle is somewhat different, and it's caused by symptoms and 0:21:30.440 --> 0:21:33.520 conditions that could be measured. So you can look at 0:21:34.040 --> 0:21:37.800 the economy, you can look at the numbers themselves and 0:21:37.840 --> 0:21:41.000 see the health indicators. And that's what I did in 0:21:41.040 --> 0:21:43.320 the books, the books I wrote and so on, so 0:21:43.359 --> 0:21:46.080 you can look at them directly, you can see how 0:21:46.160 --> 0:21:50.400 much like a doctor taking you know, a cat skin 0:21:50.560 --> 0:21:55.040 of circulatory sense system. You could see how it's squeezing out. 0:21:55.119 --> 0:21:58.040 You can see the supply demand. You can see this 0:21:58.240 --> 0:22:01.320 dynamic happening. You can see see it politically, you can 0:22:01.359 --> 0:22:03.240 see it geo. 0:22:04.880 --> 0:22:05.400 Globally. 0:22:05.800 --> 0:22:09.040 So you could see those breakdowns. Okay, you have to 0:22:09.119 --> 0:22:11.360 then put them in the context I think of what 0:22:11.440 --> 0:22:14.439 the process is. What does a country do when it 0:22:14.480 --> 0:22:17.840 doesn't have enough money? Okay, there are a limited number 0:22:17.880 --> 0:22:20.000 of things. In order to see that, you can go 0:22:20.080 --> 0:22:22.560 back in history and get some understanding and also see 0:22:22.560 --> 0:22:25.960 what's going on now. So I think it's very very 0:22:26.000 --> 0:22:29.760 similar to that. Just to me, these all look like 0:22:29.840 --> 0:22:32.480 watching the same movie over and over again, except there's 0:22:32.680 --> 0:22:36.240 people use different technologies, and they have different clothes and 0:22:36.280 --> 0:22:38.920 so on, and there are different people, but they look 0:22:39.040 --> 0:22:42.359 so much alike. So I think that this is pretty 0:22:42.440 --> 0:22:45.840 much looking like the typical process. 0:22:46.040 --> 0:22:47.600 So everyone's asking how does it end? Right? 0:22:47.640 --> 0:22:49.280 Everyone wants to know how the book is going to end, 0:22:49.320 --> 0:22:51.120 how the movie's going to end. One thing that you've 0:22:51.119 --> 0:22:53.920 been talking about is how China has been taking over 0:22:53.960 --> 0:22:56.520 in a significant way that the economy there has been 0:22:56.560 --> 0:23:00.879 growing tremendously. I just wonder whether some of the rebalancing 0:23:01.000 --> 0:23:05.520 and the rejiggering of the trade flows in the world 0:23:05.800 --> 0:23:08.960 are styming that progress or whether they're a speed bumper, 0:23:09.040 --> 0:23:12.600 or how you see that fitting into the trajectory that 0:23:12.640 --> 0:23:15.480 you've been witnessing over the past ten years. 0:23:16.280 --> 0:23:19.080 Well, China has a number of problems that he has 0:23:19.119 --> 0:23:23.399 to deal with, which i'll touch on. However, since I 0:23:23.440 --> 0:23:25.760 started to go to China, which is nineteen eighty four, 0:23:25.840 --> 0:23:28.919 and I went first for curiosity and then because it 0:23:29.040 --> 0:23:32.679 was so interesting and I like the relationship per capita 0:23:32.760 --> 0:23:37.240 incomes increased by twenty eight times, life expectancies increased by 0:23:37.240 --> 0:23:39.520 ten years, and so on. It's done and remarkable, but 0:23:39.560 --> 0:23:44.760 it now has very significant problems. There were I'll quickly 0:23:44.800 --> 0:23:47.440 take you through four or five of those. 0:23:48.880 --> 0:23:50.439 On its debt problems. 0:23:51.200 --> 0:23:54.639 Its debts are all denominated in its own currencies and 0:23:54.720 --> 0:23:57.960 among Chinese mostly speaking, but it needs a giant debt 0:23:58.040 --> 0:24:03.840 restructuringfficult One is the local governments, because the local governments 0:24:03.880 --> 0:24:07.720 in China account for more of the economy and they're 0:24:07.760 --> 0:24:08.600 broke the model. 0:24:10.080 --> 0:24:10.800 They were. 0:24:14.560 --> 0:24:18.199 Selling off land and earning money from land sales and 0:24:18.280 --> 0:24:22.640 borrowing money to produce to high produce high production. 0:24:22.920 --> 0:24:23.000