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Speaker 1: When the world was teeter on the brink of collapse.

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Speaker 1: The general consensus on Wall Street and talking heads on

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Speaker 1: YouTube and everywhere else all thought the world was going

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Speaker 1: to melt down. And Joseph you said that there is

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Speaker 1: no market crash coming. And here is why people thought

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Speaker 1: you were an idiot, and you were right.

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Speaker 2: You know. I think people oftentimes think that the future

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Speaker 2: looks like the past. They traded through two thousand and eight,

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Speaker 2: tremendous crash that was bad. In twenty twenty, tremendous crash

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Speaker 2: that was bad. And one of the big changes, the

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Speaker 2: big fundamental changes that is happening in the world is

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Speaker 2: what's happening with fiscal spending, and that changes all the

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Speaker 2: relationships going forward.

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Speaker 1: I believe everything changed since two thousand and eight, So

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Speaker 1: what is different.

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Speaker 2: So we had a regime shift in two thousand and eight.

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Speaker 2: I think post COVID is also another regime shift. Less

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Speaker 2: about the FED, more about the fiscal fiscal policy.

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Speaker 1: If we identify a crash as something happens to my

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Speaker 1: standard of living, it's got crashed down. You would say

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Speaker 1: I lost my job, I took a lower paying job,

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Speaker 1: or my business doesn't make as much income. But that

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Speaker 1: can also happen on a crash up because prices go

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Speaker 1: up so fast, I can't afford the vacations and go out.

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Speaker 2: And I think that's happening right now, Mark, Right, so

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Speaker 2: they're all saying that things are getting worse, they're unhappy.

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Speaker 2: What could be the reason for that. No, if you

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Speaker 2: have assets, if you own a home, if you own stocks,

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Speaker 2: those have gone up a lot. But the crazy thing

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Speaker 2: is that if you look at FED data, about half

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Speaker 2: the population barely has any assets at all. They're basically

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Speaker 2: all being left behind.

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Speaker 1: Which is a bigger risk. It is because you don't

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Speaker 1: get a reset, you don't get a chance to get

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Speaker 1: back in all right, Joseph Wang, the FED gag, the

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Speaker 1: the guy that knows the inner workings of the FED,

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Speaker 1: a FED trader working on the FED trading desk. I'm

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Speaker 1: trading treasuries and the reverse repo and so forth, and

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Speaker 1: now you help educate people on what's going on with

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Speaker 1: the FED window exactly.

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Speaker 2: Thanks so much for having me, Mark. It's a pleasure

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Speaker 2: to be back here, and it's great to meet in person.

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Speaker 2: We're doing this in Personel.

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Speaker 1: Yeah, So the last time we talked, you said something

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Speaker 1: and you said that this was in I believe, October

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Speaker 1: of twenty twenty two, when the world was teeter on

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Speaker 1: the brink of collapse. The general consensus on Wall Street

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Speaker 1: and talking heads on YouTube and everywhere else all thought

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Speaker 1: the world was going to melt down. Harry Dent was

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Speaker 1: calling for a ninety percent market crash, if you can

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Speaker 1: remember back in October twenty twenty two, and Joseph you

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Speaker 1: said that there is no market crash coming and here

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Speaker 1: is why, right, and people thought you were an idiot.

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Speaker 1: The comments on that YouTube video that I put up,

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Speaker 1: people were just like, this guy has no idea, this

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Speaker 1: guy's an idiot, this guy isn't what he's talking about,

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Speaker 1: and you were right. Now, I learned those saying. I think,

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Speaker 1: as Mark twenty said that it's not what you don't

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Speaker 1: know that gets you in trouble, is that which you

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Speaker 1: know absolute for certain. And I could tell by those

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Speaker 1: comments that everybody was absolutely certain the market had to

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Speaker 1: melt down, but yet it didn't. So what I want

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Speaker 1: to do is let's just recap that a little bit,

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Speaker 1: what you were thinking then and how things played out,

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Speaker 1: and then let's talk. Let's see what your crystal ball

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Speaker 1: has to say about the future.

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Speaker 2: Yeah, So you know, I think people oftentimes think that

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Speaker 2: the future looks like the past. And so when you're

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Speaker 2: talking about people always looking at the crash, it's because

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Speaker 2: they're thinking that the future will look like the past.

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Speaker 2: So a lot of people today who've been in the markets,

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Speaker 2: they traded through two thousand and eight, tremendous crash that

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Speaker 2: was bad. In twenty twenty tremendous crash that was bad.

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Speaker 2: And so when you fast forward to it to twenty

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Speaker 2: twenty two or when the FED was hiking rates aggressively,

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Speaker 2: people were often thinking that as well. But sometimes, you know,

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Speaker 2: the future does not look like the past. And one

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Speaker 2: of the big changes, big fundamental changes that are happening

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Speaker 2: in the world is what's happening with fiscal spending, and

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Speaker 2: that changes all the relationships going forward. Now, when you

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Speaker 2: think about the markets just the past couple of years,

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Speaker 2: you'll notice, well, rates multi decade highs, fed as hike

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Speaker 2: to five and a half percent, and yet the SNP

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Speaker 2: of high four hundred isn't making all time highs all

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Speaker 2: the time. If you look at housing, you'd think that

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Speaker 2: having seven percent mortgage rates, well, that's going to kill

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Speaker 2: the housing market, right, no housing prices continuing to make

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Speaker 2: all time highs. Look at prices of gold. You think

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Speaker 2: higher interest rates, stronger dollar would hurt gold. That's not

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Speaker 2: happening at all. So something is different. And I feel

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Speaker 2: like a lot of people are still fighting the last

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Speaker 2: war and not fully understanding just what has changed in

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Speaker 2: the world such that these relationships going forward will not

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Speaker 2: be the same as the past.

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Speaker 1: Yeah. Albert Einstein was a professor and every year he

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Speaker 1: would give out the same test to his students, and

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Speaker 1: he had his assistant or whatever. One time came up

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Speaker 1: to him. He said, Einstein, you know, kind of scared

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Speaker 1: to confront him, but I'm not sure if you're aware,

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Speaker 1: but you just gave out the same test that you

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Speaker 1: gave out the year before. And he said, yeah, so,

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Speaker 1: and the assistant said sheepishly, but don't they have the

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Speaker 1: answers from last year, like they could cheat? And they said,

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Speaker 1: the answers have changed because we've discovered new things. Yes,

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Speaker 1: we've discovered new things. We made the best decision we

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Speaker 1: could at that time with the information we have, but

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Speaker 1: now we've discovered information, so the answers changed. And I

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Speaker 1: think that's what you're saying. Yes, exactly.

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Speaker 2: I think that's part of the reason why this whole

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Speaker 2: People get confused all the time, and the entire school

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Speaker 2: of macroeconomics is often wrong. When you're looking at things

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Speaker 2: social things, markets or economics, relationships change over time. It's

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Speaker 2: not so much. Sometimes it's because we have new information.

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Speaker 2: Sometimes it's just behavioral different cultures. So that's what makes

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Speaker 2: this so different from something like physics. Now, if I

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Speaker 2: am dropping a ball today, it's going to fall at

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Speaker 2: nine point eight meters per second square no matter where

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Speaker 2: I drop it here or London here, or a thousand

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Speaker 2: years ago. But when you're looking at things in the

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Speaker 2: social sciences, in markets, in macroeconomics, relationships change all the time.

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Speaker 2: And so you're exactly right. I think things are different

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Speaker 2: going forward.

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Speaker 1: So what is different? So I've been saying that I

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Speaker 1: believe everything changed since two thousand and eight, and I

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Speaker 1: think that's sort of like this where it's split time

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Speaker 1: AD and BC or something like that, right, And I

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Speaker 1: look at it more from maybe the social science, maybe

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Speaker 1: the psychological side of things, where I think that the

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Speaker 1: way central banks interact in the markets changed in two

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Speaker 1: thousand and eight. Their willingness to interact willingness to intervene,

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Speaker 1: and it's only gotten faster and faster and faster since

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Speaker 1: as well as the introduction of QE added so much

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Speaker 1: leverage to the system that that also changed things.

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Speaker 2: Mark, you're spot on, So two thousand and eight really

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Speaker 2: is like you said, it marks a watershed event in

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Speaker 2: how the world works. Now, just for some history. Traditionally

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Speaker 2: you think of a central bank as being a lender

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Speaker 2: of last resort. So let's say you're a bank. You

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Speaker 2: know a lot of people asking for money at the

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Speaker 2: same time, and your short a little bit on cash

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Speaker 2: you can borrow from the central bank, lender of last resort.

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Speaker 2: There's no panic, everything goes on. But that role of

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Speaker 2: the central bank has expanded enormously since two thousand and eight.

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Speaker 2: Now they're not just in lender of last resort to

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Speaker 2: commercial banks, their lender of last resort to foreign banks

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Speaker 2: through the epics swop line, lender of last resort to

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Speaker 2: primary dealers, lender of last resort to money market funds.

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Speaker 2: So the FED has been expanding their footprint over the

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Speaker 2: past decade. Now more recently in twenty twenty, we saw

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Speaker 2: them make further advancements. So they have this interesting facility

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Speaker 2: corporate credit facility, where the FED was basically lender of

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Speaker 2: last resort to US corporations. They also had another facility,

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Speaker 2: the mainstream lending facility, where the FED was trying to

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Speaker 2: be lender of last resort to mom and pops. So

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Speaker 2: you can see the FED continually expanding their role and

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Speaker 2: that has big implications for the economy and asset prices

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Speaker 2: because you're, in a sense you're cutting off left tail

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Speaker 2: risk because you know the FED is going to jump

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Speaker 2: in there and do whatever it takes to make things stable.

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Speaker 2: So that's one thing. But I also think the other

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Speaker 2: watershed event was twenty twenty, so we had a regime

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Speaker 2: shift in two thousand and eight. I think post COVID

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Speaker 2: is also another regime shift. Less about the FED, more

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Speaker 2: about the fiscal fiscal policy.

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Speaker 1: I want to get to the fiscal but if we

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Speaker 1: stick on the FED for a second, So a couple

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Speaker 1: of things that I just observed, right, So for example,

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Speaker 1: you look at the size and the speed of their impact.

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Speaker 1: So in two thousand and eight, in two thousand and six,

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Speaker 1: home building starts were down twenty six percent. They did nothing.

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Speaker 1: Thirty months later, when the whole world came crashing down.

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Speaker 1: They finally acted. So today we would probably never see

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Speaker 1: twenty six percent crash in one of the most important

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Speaker 1: sectors without some sort of intervention. But that's what we

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Speaker 1: saw back then. Then most people would probably agree, I'm

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Speaker 1: sure you might as well that bear Stearn's going bankrupt

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Speaker 1: sort of was the trigger that caused like the banking

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Speaker 1: cascade to come down. It took seven months to get

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Speaker 1: one hundred billion dollars bell Out put together, but in

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Speaker 1: March of twenty twenty three when the bank's collapse took

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Speaker 1: six days exactly. So we're seeing the speed at which

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Speaker 1: they're interacting has changed, but also the size. So for example,

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Speaker 1: we had you know, seven hundred million dollar tart bell out,

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Speaker 1: plus the additional was a little bit over a trillion dollars,

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Speaker 1: let's say, of stimulus. But in twenty twenty it was

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Speaker 1: you know, between Fed and Fiscal, which will come back

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Speaker 1: to Fiscal was about eleven trillion issues.

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Speaker 2: Yeah, so this is a long process that started since

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Speaker 2: the Great Depression. So the Great Repression, widespread bank failures,

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Speaker 2: hundreds of banks failed, and the FED was you know,

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Speaker 2: you know, oh gosh, that's a shame. Wish someone could

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Speaker 2: do something about that, and that lesson. Okay, so not

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Speaker 2: doing anything back then led made the Great Depression much worse.

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Speaker 2: The FED realized that was an error, and so fast

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Speaker 2: forward to two thousand and eight, they became much more aggressive,

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Speaker 2: putting together these know, more more emergency lending, more let's say,

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Speaker 2: balance sheet operations there, and so they became more comfortable

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Speaker 2: with the process. And so what at that time was

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Speaker 2: unconventional monetary policy, after doing it for you know, ten years,

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Speaker 2: became conventional. So to your point, now twenty twenty comes along,

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Speaker 2: we have another event in the markets. We just roll

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Speaker 2: it out like that without even thinking. We have the

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Speaker 2: muscle memory and it's something that they've learned over the

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Speaker 2: past basically one hundred years.

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Speaker 1: Yeah, so not only the size was faster in twenty twenty,

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Speaker 1: the speed was faster. But then to your point, I

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Speaker 1: believe there was like thirteen different SPVs that were set

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Speaker 1: up during that time, including buying equities through proxies in

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Speaker 1: the market.

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Speaker 2: So I think there was a facility to buy corporate credit.

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Speaker 2: So that was I think the bridge that was a

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Speaker 2: little bit too far for a lot of people, because

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Speaker 2: when you're lending directly to the private corporations. You know,

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Speaker 2: you get some there's credit risk if it doesn't like

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Speaker 2: to have that. The way they get around that is

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Speaker 2: this process of setting up an SPV. So the FED

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Speaker 2: is not supposed to be buying corporate bonds. But what

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Speaker 2: they would do is they would set up this special

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Speaker 2: purpose facility and they would have the U. S. S. Turgury

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Speaker 2: put down equity in that facility, and then they would

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Speaker 2: lend that facility billions of dollars. So it's the Fed's money.

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Speaker 2: But hey, they're like, you know, it's it's not the

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Speaker 2: FED that's learning directly. It's a special purpose of vehicle.

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Speaker 2: And in case there are losses, the FED is not

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Speaker 2: going to take the loss. The Treasury put down the equity,

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Speaker 2: They're going to take the loss. So that's how they

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Speaker 2: get around this letter up of the law. Now, if

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Speaker 2: there is a really serious emergency, I have no doubt

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Speaker 2: that they would do something like that for equities as well.

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Speaker 2: I think that's something in the future though, But other

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Speaker 2: central banks have definitely experimented with that. The Bank of Japan,

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Speaker 2: well known for buying tons of equities, buying a whole

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Speaker 2: bunch of ETFs and reads there and it's been helpful

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Speaker 2: for their market.

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Speaker 1: Yeah, and what I'm what I'm laying down is the

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Speaker 1: trend and we'll come We're going to come back to

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Speaker 1: this in a minute. But so then now moving forwards,

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Speaker 1: and then we had the bank collapse of twenty twenty three,

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Speaker 1: we had that bel out. The BTFP put together another

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Speaker 1: card up your sleeve, so to speak, right, Like, yeah,

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Speaker 1: every time you know, a lot of these analysts, like

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Speaker 1: I hate to pick on Harry Dent. I've read a

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Speaker 1: bunch of his books. I think his research is amazing,

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Speaker 1: but they just failed to think about how many more

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Speaker 1: tricks they have up their sleeve. And every time they

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Speaker 1: think it seems like they're cornered, they just seem to

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Speaker 1: find another way. So they pulled that out and now

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Speaker 1: they've gone around. I think you just talked about setting

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Speaker 1: these FX swap lines. So now we have swap lines

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Speaker 1: set up, not just with like our main country partners,

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Speaker 1: but most of the countries now today I sort of

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Speaker 1: think of that almost like Hey, if my kid's in trouble,

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Speaker 1: they can call me. I'll get him some money. But like, hey,

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Speaker 1: why don't you just take my credit card with you?

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Speaker 1: Now we don't have to call me, you just have

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Speaker 1: the credit card. Now, is that the right way to

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Speaker 1: look at that?

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Speaker 2: So I think the way the FED FX swap lines

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Speaker 2: are meant, it's largely for the self interest of the US. So,

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Speaker 2: as you know, Mark, we have the US dollar, which

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Speaker 2: is kind of a global system where it's a currency,

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Speaker 2: but it's used all over the world. And that's fine usually,

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Speaker 2: But the thing is if someone abroad gets into trouble,

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Speaker 2: that actually impacts us. So let's say, for the sake

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Speaker 2: of argument, there's some bank in France who is in trouble.

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Speaker 2: What usually happens is and then they will go to

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Speaker 2: the market and try to borrow money and bid up

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Speaker 2: interest rates. That means interest rates go up in the

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Speaker 2: US as well, and so that makes the Fed's job

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Speaker 2: of controlling interest rates a bit more difficult. So, in

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Speaker 2: a sense, to try to make sure that they have

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Speaker 2: more control over our financial system so that it doesn't

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Speaker 2: spill over, they go and they make these loans to

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Speaker 2: foreign banks, foreign central banks in dollars. In those foreign

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Speaker 2: central banks then parcelol those loans to other banks. So innocence,

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Speaker 2: it strengthens the US dollar system by making it less

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Speaker 2: likely to break.

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Speaker 1: I get that yeah, but it's also so that the

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Speaker 1: country has it on tap when they need it. They

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Speaker 1: don't need to go through some long process and fill

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Speaker 1: out some forms and wait for the government of Roxuity

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Speaker 1: to approve.

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Speaker 2: It's just it's there, yes, exactly. It's well, you know,

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Speaker 2: things happen quickly in the markets. If you don't, if

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Speaker 2: you're not ready to have on this on standby, then

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Speaker 2: when you get through this process, big bureaucratic process, it

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Speaker 2: could be too late.

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Speaker 1: Which I understand. So we're building the case or exploring

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Speaker 1: the case with you that the way that they're intervening

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Speaker 1: and preparing has been accelerating.

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Speaker 2: And now I like that you mentioned the BTFP facility

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Speaker 2: last year. That was also kind of a new frontier

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Speaker 2: that they crossed that they haven't done before. Now, we

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Speaker 2: talked about the FED indirectly basically buying corporate bonds, but

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Speaker 2: what the Bank Emergency Lending Facility did was it actually

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Speaker 2: allowed the FED to lend unsecured to a commercial bank.

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Speaker 2: Now that's not something the FED is supposed to do.

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Speaker 2: So usually if you are getting an emergency loan from

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Speaker 2: the FED, you put up collateral. The FED wants to

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Speaker 2: be secured, right, they don't want to have any credit risk.

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Speaker 2: But what the facility did was they were lending against

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Speaker 2: power value rather than market value. So what does that mean?

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Speaker 2: So if you had a three to your Chowter security,

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Speaker 2: that's one hundred dollars par value, So you're going to

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Speaker 2: get one hundred dollars back at the end of thirty years. Well,

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Speaker 2: interest rates have gone up so much the market value

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Speaker 2: of that is probably sixty cents hundred dollar. But if

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Speaker 2: you use that and you borrowed against it at the

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Speaker 2: BTFP facility, you could actually borrow one hundred dollars against

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Speaker 2: par value rather than the market value. And so what

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Speaker 2: happened to that extra forty dollars without secure that's unsecured

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Speaker 2: lending to your point mark. That's not something that FED

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Speaker 2: in the past would have done. They've been expanding their

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Speaker 2: toolkit and pushing the boundaries.

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Speaker 1: Yeah, so this shows that they're psychologically where their mind

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Speaker 1: is at, where they realize that there's all these types

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Speaker 1: of land mines and triggers that could collapse system, and

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Speaker 1: they're preemptively trying to plug holes before the holes are

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Speaker 1: even coming up.

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Speaker 2: They're very conservative that way. They saw two thousand and eight,

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Speaker 2: So you know, like you just mentioned, in twenty twenty,

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Speaker 2: in a matter of days, you had the Bozukas come out,

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Speaker 2: the unbelievable amounts of cash pumped into the system.

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Speaker 1: Now, because we're in a debt based monetary system, the

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Speaker 1: dollars become the liability and the debt becomes the asset. Right,

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Speaker 1: So the debt, the sovereign debt, is now the asset

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Speaker 1: that then is used as collateral for even more debt,

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Speaker 1: is that right, So then the more debt that becomes

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Speaker 1: in the system, the more levered up the system is.

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Speaker 1: So then now with the introduction of QI in two

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Speaker 1: thousand and eight, and then of course now what we've

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Speaker 1: seen through twenty nineteen and twenty twenty and now twenty

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Speaker 1: twenty three, the system has gotten much more levered than

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Speaker 1: it was two thousand and six.

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Speaker 2: Yes, but private, So I would make a difference between

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Speaker 2: private debt and public debt. Now, private debt there's a

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Speaker 2: chance of default. You could lose your money, and you

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Speaker 2: know that could cascade into something that's very unpleasant. But

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Speaker 2: if it's public debt, if it's treasuries, there's no default

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Speaker 2: risk there. You fed has the money printer, there's no

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Speaker 2: default risk there, So I'm not as concerned about the

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Speaker 2: rise of public leverage when it comes to financial stability.

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Speaker 2: There are a lot of other bad.

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Speaker 1: Things about it, but when people by public debt and

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Speaker 1: it loses its par value as per the banks, that

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Speaker 1: causes a big problem.

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Speaker 2: Yeah, you're right, there's that interest rate risk clear that

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Speaker 2: I think a lot of people who shouldn't know better

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Speaker 2: it did not account for, right.

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Speaker 1: So I mean, what I'm just trying to get at

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Speaker 1: or try to understand I should just say, is that again,

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Speaker 1: seeing as this introduction of Q in two thousand and

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Speaker 1: eight showed that they want to work differently in the market,

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Speaker 1: preemptively in the market rather than reactively, but preemptively. But

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Speaker 1: also it seems like the system has gotten levered up

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Speaker 1: additional as well. And so then I think that back

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Speaker 1: to the answers have changed a lot of times. Drawing

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Speaker 1: conclusions from what happened in two thousand or in the

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Speaker 1: nineteen seventies or in the nineteen forties doesn't really give

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Speaker 1: us an accurate picture, because sure inflation was high, and

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Speaker 1: sure the GDP growth was slow, but we didn't have

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Speaker 1: this leverage in the system. So one, we didn't have

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Speaker 1: the attitude of the Fed. But more importantly, we didn't

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Speaker 1: have this debt system that we have. Would that be.

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Speaker 2: Accurate again, the distinction between public debt and private debt.

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Speaker 2: Public debt it's an asset to the private sector, like

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Speaker 2: you mentioned before, and it's not something the government ever

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Speaker 2: has to pay back. They can roll it over forever.

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Speaker 2: So I would think the increase in public debt actually

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Speaker 2: increases the net worth of the private sector. It has

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Speaker 2: a deleveraging impact by adding more net worth more assets.

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Speaker 2: Now private debt, though, that's a problem because unlike the government,

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Speaker 2: we don't have money printers, and it's possible that a

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Speaker 2: private bower could have trouble servicing their debt that could

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Speaker 2: force them to sell their assets deleverage. That could be disorderly.

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Speaker 2: So I think the private on the private dead side,

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Speaker 2: it actually seems okay. Most importantly, the banking system after

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Speaker 2: two thousand and eight, tremendous amounts of regulation made it

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Speaker 2: a lot less levered. So that's a lot less concerning.

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Speaker 2: You have other pockets, maybe private credit, that become more levered.

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Speaker 2: But let's say looking at households, for example, a lot

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Speaker 2: less leverage net worth is actually at all time highs.

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Speaker 2: And on top of that, a lot of people have

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Speaker 2: mortgage rates where their cash flows are really so an

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Speaker 2: interesting expense is low, so that really helps their cash flows.

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Speaker 2: So I'm looking at the private side, I'm not really worried,

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Speaker 2: and the public's in part because there's so much public

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Speaker 2: that actually adds to the net worth of the private side.

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Speaker 1: Okay, so on the FED side, you see that they

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Speaker 1: have certainly shifted their psychology around the willingness to intervene

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Speaker 1: in markets and bail out. The response time and the

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Speaker 1: size of the responses have definitely gone up. Would you

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Speaker 1: say psychologically that why would they just pump in ten

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Speaker 1: or twenty trillion in the market to save it, to

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Speaker 1: just let it go away? Now? No, I mean sunk

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Speaker 1: can cost fallacy. And what I'm saying is, if there

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Speaker 1: was hypothetically another big crash of fifty sixty percent next year,

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Speaker 1: do you think they just go out, well, okay, well

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Speaker 1: we tried ten trolling last time. It didn't work. Or

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Speaker 1: is it sunkn cost fallacy where they're like, well, shoot,

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Speaker 1: we can't let it go now, let's keep going.

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Speaker 2: Yeah, we'll keep going. You know. One of the striking

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Speaker 2: things that I've seen the FED is that they've just

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Speaker 2: become so eager to intervene even when it doesn't really

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Speaker 2: make sense. A good example is in twenty twenty one,

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Speaker 2: no house prices we're going up twenty percent a year,

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Speaker 2: but you have the FED buying hundreds of billions of

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Speaker 2: dollars and mortgages. How does that even make sense? I mean,

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Speaker 2: it is twenty percent a year appreciation not high enough.

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Speaker 2: So again I think the bias is always for them

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Speaker 2: to do more, do bigger. That's kind of what they know.

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Speaker 1: Yeah, yeah, okay, Now back to the what we started

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Speaker 1: out with, and you talked about houses making new all

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Speaker 1: time high s and P five hundred making new all

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Speaker 1: time high, gold making new all time high, which doesn't

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Speaker 1: make any sense in this market invite exactly. But yet

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Speaker 1: here we are, and what you were saying is it's

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Speaker 1: probably not about all this FED stuff we were talking about.

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Speaker 1: You think it's really coming from the fiscal side, which

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Speaker 1: is the government spending exact So we have a government

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Speaker 1: that just cannot stop spending, I believe. I mean Biden's

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Speaker 1: new budget for next year starting in October is like

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Speaker 1: seven point three trillion, which is what is that forty

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Speaker 1: five percent more than it was in twenty twenty. It

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Speaker 1: only goes out, right, I mean, it's like fifty percent

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Speaker 1: more spending than we were just a couple of years ago,

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Speaker 1: and they can't reduce that, and so that's like a

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Speaker 1: new baseline. But yet the CBO projects that it even

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Speaker 1: keeps going up from there. So that is the main driver.

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Speaker 1: This is the fiscal dominance.

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Speaker 2: It could be moving towards that direction. I think what's

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Speaker 2: important to understand is what it means when the government

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Speaker 2: is spending more than it takes it in taxes. So

434
00:21:34,080 --> 00:21:37,320
Speaker 2: for you and I, we can't really well. So when

435
00:21:37,320 --> 00:21:39,480
Speaker 2: the government spends more than it takes it in taxes,

436
00:21:39,880 --> 00:21:44,360
Speaker 2: it basically issues debt, right, so it's prince treasury securities. Now,

437
00:21:44,400 --> 00:21:46,959
Speaker 2: if you or I were spending something more than we

438
00:21:47,000 --> 00:21:49,640
Speaker 2: take in, we can also take on debt. The difference

439
00:21:49,680 --> 00:21:52,399
Speaker 2: between our debt and the government's debt is that the

440
00:21:52,440 --> 00:21:55,560
Speaker 2: government that in a sense, it's very much like a

441
00:21:55,600 --> 00:21:58,359
Speaker 2: form of money in the financial system. So if I

442
00:21:58,400 --> 00:22:02,159
Speaker 2: were to give you a billion dollar insursury securities, you

443
00:22:02,200 --> 00:22:04,640
Speaker 2: know that's credit risk free, it's from the government. It's

444
00:22:04,760 --> 00:22:07,440
Speaker 2: very liquid. You can easily pawn it off. It's kind

445
00:22:07,440 --> 00:22:09,879
Speaker 2: of like a billion dollar bill that pays interest. So

446
00:22:09,960 --> 00:22:14,360
Speaker 2: that's what's special about government borrowing compared to US. Now,

447
00:22:14,400 --> 00:22:17,639
Speaker 2: if I give you a billion dollars, iou from Joseph Wang,

448
00:22:17,720 --> 00:22:19,080
Speaker 2: I'm telling you, it's not going to be worth a

449
00:22:19,119 --> 00:22:23,639
Speaker 2: billion dollars. So when the government is deficit spending in

450
00:22:23,720 --> 00:22:27,320
Speaker 2: this way, it's basically printing dollars in printing dollars like

451
00:22:27,400 --> 00:22:31,199
Speaker 2: you mentioned, and an astronomical rate one point five to

452
00:22:31,240 --> 00:22:34,439
Speaker 2: two trillion dollars a year going forward. And like you

453
00:22:34,560 --> 00:22:38,920
Speaker 2: rightly mentioned, the CBO very conservative organization. They can only

454
00:22:39,000 --> 00:22:43,000
Speaker 2: do projections based on current law. So they're looking at

455
00:22:43,000 --> 00:22:46,119
Speaker 2: the law, what's written on the books, and it doesn't

456
00:22:46,160 --> 00:22:49,000
Speaker 2: get better. It actually gets a lot worse, so much

457
00:22:49,040 --> 00:22:52,360
Speaker 2: worse that the IMF actually has a special section devoted

458
00:22:52,440 --> 00:22:55,400
Speaker 2: to the fiscal situation in the US that it's going

459
00:22:55,440 --> 00:22:57,240
Speaker 2: to be a disaster, and we can talk about why

460
00:22:57,720 --> 00:23:00,560
Speaker 2: it can't be fixed, but basically it can be fixed.

461
00:23:00,960 --> 00:23:02,920
Speaker 1: Yeah, So I think you made a comment that we're

462
00:23:02,920 --> 00:23:05,960
Speaker 1: in a runaway situation. Yes, right, that's what you call

463
00:23:06,040 --> 00:23:09,480
Speaker 1: that runaway A runaway train decides on a runaway.

464
00:23:09,080 --> 00:23:13,280
Speaker 2: Train, runaway train. Yeah, yeah, there's a I think Lynn

465
00:23:13,280 --> 00:23:15,080
Speaker 2: Alden has a really good meme on this, but yeah,

466
00:23:15,080 --> 00:23:19,560
Speaker 2: it's it's basically a runaway train. So the fiscal deficit,

467
00:23:20,000 --> 00:23:23,000
Speaker 2: based on current law, is expected to be six percent

468
00:23:23,040 --> 00:23:26,119
Speaker 2: a year basically forever. Now, it's helpful to break that

469
00:23:26,280 --> 00:23:29,480
Speaker 2: down into three components when you're looking at government spending.

470
00:23:29,760 --> 00:23:33,960
Speaker 2: One part is mandatory spending. The second part is interest

471
00:23:34,320 --> 00:23:37,320
Speaker 2: net interest. The third part is what they call discretionary.

472
00:23:37,800 --> 00:23:42,200
Speaker 2: Now mandatory that stuff is social security, medicure, medicaid. There's

473
00:23:42,240 --> 00:23:44,640
Speaker 2: no way anyone can touch that, and that's only going

474
00:23:44,760 --> 00:23:48,760
Speaker 2: up because our population is aging, more boomers are taking

475
00:23:48,800 --> 00:23:52,480
Speaker 2: in more social Security, and of course medical costs go

476
00:23:52,600 --> 00:23:54,679
Speaker 2: up as well, so that's going up. Nothing you can

477
00:23:54,720 --> 00:23:57,560
Speaker 2: do about interest cost The United States is not going

478
00:23:57,600 --> 00:24:00,439
Speaker 2: to reneg on their interest payments. That's going up with

479
00:24:00,680 --> 00:24:03,960
Speaker 2: higher interest rates all the FED and also higher stock

480
00:24:04,040 --> 00:24:06,199
Speaker 2: of debt, so that can't be changed. The last thing

481
00:24:06,240 --> 00:24:09,520
Speaker 2: that could kind of be changed is discretionary spending, and

482
00:24:09,600 --> 00:24:13,199
Speaker 2: what that is is military spending, and that's probably going

483
00:24:13,280 --> 00:24:15,479
Speaker 2: up too. I think that's going up. To look across

484
00:24:15,520 --> 00:24:18,520
Speaker 2: the world, do you know there are there are a

485
00:24:18,560 --> 00:24:21,359
Speaker 2: lot of people in Washington, who seem to me like

486
00:24:21,400 --> 00:24:24,119
Speaker 2: they like to fight wars. They're always looking to fight wars.

487
00:24:24,600 --> 00:24:26,680
Speaker 1: Eisen Higher warnedus about the military.

488
00:24:26,720 --> 00:24:30,359
Speaker 2: And I wish more people took heed of that. But

489
00:24:30,680 --> 00:24:31,880
Speaker 2: it looks like the G.

490
00:24:31,920 --> 00:24:35,240
Speaker 1: Seven said that it was gonna they needed ten trillion

491
00:24:35,320 --> 00:24:39,520
Speaker 1: dollars to replenish the military. Ten trillion.

492
00:24:40,320 --> 00:24:42,400
Speaker 2: Gosh, why don't you say one hundred trillion? I will

493
00:24:42,440 --> 00:24:45,560
Speaker 2: meet halfway, right, So it's just an enormous amount of money.

494
00:24:45,560 --> 00:24:48,679
Speaker 2: There's there's no way that this military spending is going

495
00:24:48,760 --> 00:24:50,399
Speaker 2: to go down, so I think that's going to go

496
00:24:50,480 --> 00:24:53,960
Speaker 2: up as well. So that's six percent physical spending deficit.

497
00:24:54,320 --> 00:24:56,320
Speaker 2: I think that's an under underestimation.

498
00:24:57,280 --> 00:25:00,480
Speaker 1: And then there's a reflexive or doom loop that baked

499
00:25:00,480 --> 00:25:03,040
Speaker 1: into this, right, So then they borrow more, which then

500
00:25:03,119 --> 00:25:05,080
Speaker 1: means more interest on the debt, which means that there's

501
00:25:05,080 --> 00:25:07,240
Speaker 1: a bigger deficit, which means they borrow more, which means

502
00:25:07,240 --> 00:25:09,120
Speaker 1: there's more interest on the debt, which means they borrow more.

503
00:25:09,200 --> 00:25:12,280
Speaker 2: So that is the crazy doom move like you mentioned. Now,

504
00:25:12,840 --> 00:25:15,360
Speaker 2: this is actually something that economists have thought about over

505
00:25:15,400 --> 00:25:18,240
Speaker 2: the past decade. There's a really famous paper by Sargent

506
00:25:18,359 --> 00:25:22,280
Speaker 2: Wallace who talks about this. It's titled Unpleasant Monetary Arithmetic,

507
00:25:22,800 --> 00:25:25,040
Speaker 2: and he's saying that, you know, if you have this

508
00:25:25,280 --> 00:25:28,160
Speaker 2: ount of control fiscal spending in you are central bank

509
00:25:28,160 --> 00:25:31,000
Speaker 2: that wants to control inflation, what you would do actually

510
00:25:31,119 --> 00:25:33,840
Speaker 2: is you would cut rates simply because it saves on

511
00:25:33,920 --> 00:25:38,160
Speaker 2: the interest expense. Actually, President Truman in the nineteen fifties

512
00:25:38,960 --> 00:25:42,120
Speaker 2: was making this argument that, hey, that you can't raise

513
00:25:42,200 --> 00:25:45,720
Speaker 2: rates because if you do, our interest expense would go up. So,

514
00:25:46,080 --> 00:25:48,200
Speaker 2: like you write, like you note, there is this do

515
00:25:48,359 --> 00:25:50,840
Speaker 2: move aspect. Maybe in the future we would have to

516
00:25:50,880 --> 00:25:54,800
Speaker 2: cut rates to decrease government spending. That'd be pretty crazy,

517
00:25:54,840 --> 00:25:56,400
Speaker 2: but it looks like we're heading there.

518
00:25:56,320 --> 00:25:58,679
Speaker 1: So we'll have to cut rates. But there's a lot

519
00:25:58,720 --> 00:26:00,440
Speaker 1: of other tricks they have up their sleeve. Talked about

520
00:26:00,480 --> 00:26:05,119
Speaker 1: this yesterday. They can get the banks to buy more treasuries.

521
00:26:05,320 --> 00:26:08,280
Speaker 1: I believe they were just talking about changing the reserve

522
00:26:08,320 --> 00:26:09,720
Speaker 1: requirements of banks. Again.

523
00:26:09,840 --> 00:26:12,760
Speaker 2: Oh, there's so many tricks. So when you're talking about

524
00:26:12,800 --> 00:26:16,240
Speaker 2: huge stuffs and spending, who's going to buy our debt?

525
00:26:16,280 --> 00:26:18,480
Speaker 2: That's the least if your words. There's so many tricks

526
00:26:18,520 --> 00:26:19,919
Speaker 2: up their sleeve to make that happen.

527
00:26:20,400 --> 00:26:23,040
Speaker 1: So does that mean real quick? So all the talk

528
00:26:23,080 --> 00:26:24,920
Speaker 1: of the rise of the bricks and they're going to

529
00:26:25,000 --> 00:26:27,960
Speaker 1: start their own currency, and that's a little bit of nonsense,

530
00:26:27,960 --> 00:26:29,520
Speaker 1: I would say, And you probably agree with that, but

531
00:26:29,640 --> 00:26:31,679
Speaker 1: you can create me if I'm wrong. But really, it

532
00:26:31,720 --> 00:26:34,359
Speaker 1: does seem that there's potentially a threat, specifically with the

533
00:26:34,359 --> 00:26:37,000
Speaker 1: sanctions going on with Russia and China. And now let's

534
00:26:37,000 --> 00:26:40,800
Speaker 1: say China trading for oil and yuan, and then those

535
00:26:41,400 --> 00:26:45,560
Speaker 1: the the excess being instead of being recycled back in

536
00:26:45,560 --> 00:26:48,720
Speaker 1: the US treasuries, now being recycled into gold. So let's

537
00:26:48,720 --> 00:26:51,680
Speaker 1: say that these nations, the bricks nations, the Russia, the China's, etc.

538
00:26:52,040 --> 00:26:53,879
Speaker 1: Say we're just not going to buy as much treasuries

539
00:26:53,920 --> 00:26:55,560
Speaker 1: because we're afraid you're going to steal them from us again,

540
00:26:55,720 --> 00:26:57,199
Speaker 1: just like you did do Russia. So we're just going

541
00:26:57,240 --> 00:26:59,080
Speaker 1: to put our accesses into well, we'll keep them in

542
00:26:59,080 --> 00:27:01,400
Speaker 1: the oil will buy it, We'll more commodities, will put

543
00:27:01,440 --> 00:27:04,679
Speaker 1: them into gold, and then those buyers for treasuries go away.

544
00:27:05,400 --> 00:27:08,120
Speaker 1: So a lot of people think that starts to put

545
00:27:08,119 --> 00:27:10,600
Speaker 1: the US into a bad situation. Are you saying not really?

546
00:27:10,640 --> 00:27:13,560
Speaker 1: Because there's people that the buyers is not a problem.

547
00:27:13,720 --> 00:27:17,280
Speaker 2: Yeah, I'm exactly right. So what you're noting is exactly right.

548
00:27:17,320 --> 00:27:20,160
Speaker 2: So there's a new study from the IMF super interesting.

549
00:27:20,440 --> 00:27:22,119
Speaker 2: They looked at a whole bunch of countries in the

550
00:27:22,160 --> 00:27:24,480
Speaker 2: world and they tried to group them together into different

551
00:27:24,480 --> 00:27:27,000
Speaker 2: blocks based on how they voted in the UN they're

552
00:27:27,040 --> 00:27:31,720
Speaker 2: seeing that the China block really is fewer dollars, more gold,

553
00:27:31,840 --> 00:27:35,800
Speaker 2: more other stuff. So that is definitely happening. It's happening slowly,

554
00:27:35,840 --> 00:27:38,000
Speaker 2: but it's clear. But I don't think it's a problem

555
00:27:38,080 --> 00:27:40,679
Speaker 2: for the treasury market because the Fed at the end

556
00:27:40,680 --> 00:27:43,040
Speaker 2: of the day can always buy at all in it.

557
00:27:43,080 --> 00:27:45,919
Speaker 2: If not, the commercial banks can be strongly encouraged you

558
00:27:46,000 --> 00:27:49,160
Speaker 2: by changing regulations. That's what happened in the nineteen forties.

559
00:27:49,480 --> 00:27:53,879
Speaker 2: You had banks basically, by nineteen forties, about fifty percent

560
00:27:53,880 --> 00:27:57,240
Speaker 2: of bank balance sheets assets, their assets were in treasuries.

561
00:27:57,320 --> 00:28:00,720
Speaker 2: Right now, it's a small fraction of that. Back then,

562
00:28:00,760 --> 00:28:04,040
Speaker 2: they even had something called yield care control, or basically

563
00:28:04,080 --> 00:28:06,520
Speaker 2: the FED would say long bounds cannot go above two

564
00:28:06,520 --> 00:28:08,840
Speaker 2: and a half percent. If they do go above, that

565
00:28:09,000 --> 00:28:11,080
Speaker 2: will buy them, and so they kind of put a

566
00:28:11,119 --> 00:28:13,840
Speaker 2: ceiling on interest rates, so they could do that too. Again,

567
00:28:13,920 --> 00:28:16,000
Speaker 2: at the end of the day, the dollar system, it's

568
00:28:16,040 --> 00:28:19,520
Speaker 2: just numbers in a computer fed controls the computer. It's

569
00:28:19,560 --> 00:28:22,280
Speaker 2: not that's That's not the part of it I would

570
00:28:22,280 --> 00:28:22,800
Speaker 2: worry about.

571
00:28:23,000 --> 00:28:24,800
Speaker 1: Okay, So what is the part of it.

572
00:28:24,800 --> 00:28:27,920
Speaker 2: It's the inflation part that you can't really the financial

573
00:28:28,000 --> 00:28:31,520
Speaker 2: economy numbers in a computer scene, you can change that easy.

574
00:28:32,680 --> 00:28:36,200
Speaker 2: But the real economy stuff higher inflation that's much difficult

575
00:28:36,400 --> 00:28:39,040
Speaker 2: to get rid of, and you usually can't get rid

576
00:28:39,040 --> 00:28:42,520
Speaker 2: of it without some significant economic pain. And that's difficult

577
00:28:42,960 --> 00:28:45,200
Speaker 2: in unless you have the political support to do that.

578
00:28:45,920 --> 00:28:49,280
Speaker 1: Do you believe in the Austrian or I guess maybe

579
00:28:49,320 --> 00:28:53,160
Speaker 1: Milton Freeman's view of inflation, which is always a monetary phenomenon.

580
00:28:53,800 --> 00:28:56,239
Speaker 2: I think there is some truth to that, But I mean,

581
00:28:56,480 --> 00:28:58,920
Speaker 2: let's think about that a little bit. Let's say that

582
00:28:59,360 --> 00:29:01,200
Speaker 2: you know, I have a whole bunch of money, but

583
00:29:01,280 --> 00:29:03,600
Speaker 2: I keep it locked in this room. I like it

584
00:29:03,640 --> 00:29:06,160
Speaker 2: in dollar bills. I swim around in it like Scrooge medoc.

585
00:29:06,600 --> 00:29:08,800
Speaker 2: That's not going to be inflationing, You're right, So it

586
00:29:09,200 --> 00:29:11,320
Speaker 2: does depend on what you do with the money, who

587
00:29:11,320 --> 00:29:14,080
Speaker 2: actually has it, How it's spent, but having just a

588
00:29:14,080 --> 00:29:16,440
Speaker 2: whole lot of money, a lot of purchasing power, all

589
00:29:16,480 --> 00:29:19,520
Speaker 2: things equal, I think does put upward pressure on inflation.

590
00:29:19,920 --> 00:29:22,840
Speaker 1: So then you're generally in agreement that increasing the money

591
00:29:22,840 --> 00:29:24,360
Speaker 1: supply increases prices.

592
00:29:24,960 --> 00:29:28,440
Speaker 2: I would say that with one caveat the money supply

593
00:29:28,480 --> 00:29:31,480
Speaker 2: also incredes things like treasury securities, which are very much

594
00:29:31,560 --> 00:29:34,160
Speaker 2: money like asseid, like I mentioned before, kind of like

595
00:29:34,240 --> 00:29:35,320
Speaker 2: money that pays interest.

596
00:29:35,760 --> 00:29:41,080
Speaker 1: Yeah, I think part of what the government does, any

597
00:29:41,120 --> 00:29:44,440
Speaker 1: government through all of history has always been it's always

598
00:29:44,440 --> 00:29:47,920
Speaker 1: been about to control in the narrative. You know, we

599
00:29:48,000 --> 00:29:50,520
Speaker 1: can pull any numerous accounts out of history on this.

600
00:29:50,640 --> 00:29:52,720
Speaker 1: But it seems like one thing that the government has

601
00:29:52,720 --> 00:29:55,480
Speaker 1: done is they've sort of changed the definition of inflation.

602
00:29:56,000 --> 00:29:58,680
Speaker 1: So today they talk about a CPI consumer price inflation.

603
00:30:00,040 --> 00:30:03,760
Speaker 1: I still believe in inflation being like a balloon. Inflate

604
00:30:03,760 --> 00:30:06,680
Speaker 1: a balloon, I'm increasing the volume of air in a balloon,

605
00:30:07,160 --> 00:30:10,040
Speaker 1: inflating the money supply. I'm increasing the volume of money

606
00:30:10,040 --> 00:30:12,560
Speaker 1: and the money supply, the units of money and the supply.

607
00:30:13,160 --> 00:30:15,760
Speaker 1: The price is going up as the result of doing that.

608
00:30:16,200 --> 00:30:19,920
Speaker 1: But now we've we're calling inflation CPI consumer price inflation,

609
00:30:20,360 --> 00:30:23,160
Speaker 1: and I think part of the reason this might be

610
00:30:23,200 --> 00:30:26,280
Speaker 1: a conspiracy theory tenfold will hot but like they've obviously

611
00:30:26,360 --> 00:30:29,600
Speaker 1: done that, so now it's inflation. Inflation is CPI, gas, shelter, food,

612
00:30:29,600 --> 00:30:33,760
Speaker 1: et cetera. But consumer price inflation is not real inflation.

613
00:30:33,800 --> 00:30:35,959
Speaker 1: And the reason why is because not all prices move

614
00:30:36,040 --> 00:30:38,120
Speaker 1: up and down at the same time. And so then

615
00:30:38,160 --> 00:30:40,760
Speaker 1: what happens is they're like the government can be like

616
00:30:40,880 --> 00:30:43,720
Speaker 1: gas lighting you or whatever, and it's like, well, I mean,

617
00:30:43,760 --> 00:30:47,240
Speaker 1: look TVs went down and travel went down. Meanwhile, you

618
00:30:47,240 --> 00:30:50,239
Speaker 1: know gas and your housing went up. Well, look all

619
00:30:50,280 --> 00:30:52,000
Speaker 1: these prices are going up and down at different time.

620
00:30:52,080 --> 00:30:53,719
Speaker 1: We don't really know what's going on, which a lot

621
00:30:53,800 --> 00:30:56,360
Speaker 1: of politicians you say, you see today, we don't know

622
00:30:56,400 --> 00:30:58,920
Speaker 1: why prices are going up. So it becomes this like

623
00:30:59,440 --> 00:31:02,400
Speaker 1: ambiguous problem that's not clear, and it's not easily definable

624
00:31:02,400 --> 00:31:04,120
Speaker 1: because prices don't go up at the same time. Some

625
00:31:04,160 --> 00:31:06,400
Speaker 1: go up, some go down, and they shift you to

626
00:31:06,440 --> 00:31:10,400
Speaker 1: that and they can win that and almost nobody, I

627
00:31:10,440 --> 00:31:13,520
Speaker 1: mean most of these politicians today, they they don't look

628
00:31:13,520 --> 00:31:16,200
Speaker 1: at the money spy as being that cause.

629
00:31:16,920 --> 00:31:19,959
Speaker 2: So I definitely think that So there's definitely a lot

630
00:31:19,960 --> 00:31:22,320
Speaker 2: of gas lighting. I think we've moved from you know,

631
00:31:22,360 --> 00:31:25,760
Speaker 2: it's the economy stupid to the economy's fine, your stupid, right,

632
00:31:26,720 --> 00:31:30,840
Speaker 2: as someone else recently said, So the Biden administration, obviously

633
00:31:30,960 --> 00:31:34,120
Speaker 2: up for reelection, wants everyone to feel good, wants everyone

634
00:31:34,160 --> 00:31:36,000
Speaker 2: to think the economis get So there's there's going to

635
00:31:36,040 --> 00:31:39,080
Speaker 2: be some gas lighting. Now the CPI index you mentioned, Well,

636
00:31:39,120 --> 00:31:42,840
Speaker 2: what we put into this basket of inflation metrics changes

637
00:31:42,880 --> 00:31:46,080
Speaker 2: over time. Sometimes you know, they make it, they change it.

638
00:31:46,120 --> 00:31:49,600
Speaker 2: In inflation looks lower once upon time. They include mortgage

639
00:31:49,680 --> 00:31:52,240
Speaker 2: rates in it, but guess what, mortgagees went up when

640
00:31:52,240 --> 00:31:54,920
Speaker 2: you raise the interest rate. So that kind of so

641
00:31:55,000 --> 00:31:56,880
Speaker 2: they kind of took that out. May things look a

642
00:31:56,880 --> 00:31:57,480
Speaker 2: little bit better.

643
00:31:57,840 --> 00:31:59,880
Speaker 1: So the whole basket's a scam.

644
00:32:00,920 --> 00:32:03,040
Speaker 2: It's you know, everyone has a different basket of what

645
00:32:03,040 --> 00:32:05,840
Speaker 2: they consume. Right in California, your housing is going to

646
00:32:05,840 --> 00:32:07,920
Speaker 2: be different from someone in spring Foot.

647
00:32:07,720 --> 00:32:09,800
Speaker 1: Even the housing right, so housing is thirty percent of

648
00:32:09,800 --> 00:32:12,480
Speaker 1: the basket, right, roughly thirty And.

649
00:32:12,800 --> 00:32:14,800
Speaker 2: How do they calculate that exactly?

650
00:32:14,920 --> 00:32:18,840
Speaker 1: Well, they supposedly supposedly they call homeowners and ask them

651
00:32:18,840 --> 00:32:21,720
Speaker 1: what they think they could rent their house for I

652
00:32:21,760 --> 00:32:25,000
Speaker 1: own multiple homes. I've never been called once. Now, they

653
00:32:25,000 --> 00:32:27,720
Speaker 1: could just go to like rent dot com, who indexes

654
00:32:27,760 --> 00:32:30,160
Speaker 1: the rents across the whole country and get an accurate number,

655
00:32:30,280 --> 00:32:32,959
Speaker 1: but they don't do that. They somehow just call random

656
00:32:32,960 --> 00:32:37,920
Speaker 1: people apparently now and the numbers are like way different

657
00:32:37,960 --> 00:32:39,840
Speaker 1: than what you see on rent dot com, which actually

658
00:32:39,840 --> 00:32:43,240
Speaker 1: indexes the rents, which is pretty interesting. I mean, that's

659
00:32:43,280 --> 00:32:46,400
Speaker 1: just one example we could go on. But that's thirty

660
00:32:46,440 --> 00:32:51,120
Speaker 1: percent of the basket they showed. Was it a quarter

661
00:32:51,200 --> 00:32:54,400
Speaker 1: or two ago? The biggest drop in CPI was healthcare

662
00:32:54,440 --> 00:32:57,680
Speaker 1: costs went down. What healthcare costs, everybody's insurance went up?

663
00:32:57,760 --> 00:33:00,480
Speaker 1: Like where do they get that number from? And that

664
00:33:00,680 --> 00:33:03,320
Speaker 1: that's even before the manipulation of what goes into the bat.

665
00:33:03,440 --> 00:33:05,560
Speaker 2: So I think that's a big reason why there's such

666
00:33:05,560 --> 00:33:08,720
Speaker 2: a disconnect between what the what the economists are saying,

667
00:33:08,760 --> 00:33:11,000
Speaker 2: inflation's coming down, everyone should be happy, and what the

668
00:33:11,040 --> 00:33:14,280
Speaker 2: public is saying that we're not happy. Because this inflation

669
00:33:14,360 --> 00:33:17,479
Speaker 2: index it's not well constructed. For a lot of people,

670
00:33:17,960 --> 00:33:21,320
Speaker 2: it doesn't represent what they consume every day. And so

671
00:33:21,360 --> 00:33:24,520
Speaker 2: I think that's a cause, a big cause of this

672
00:33:24,600 --> 00:33:27,880
Speaker 2: public disconnect. Now, I like the point that you make

673
00:33:27,880 --> 00:33:30,960
Speaker 2: about our elected officials seemingly not knowing what they're doing,

674
00:33:31,000 --> 00:33:34,200
Speaker 2: what's causing all this inflation. I think it's really it's

675
00:33:34,240 --> 00:33:36,880
Speaker 2: a big problem, and that I think the competence of

676
00:33:36,920 --> 00:33:39,680
Speaker 2: our government today is just much much lower than it

677
00:33:39,760 --> 00:33:41,720
Speaker 2: used to be. A I get the sense that our

678
00:33:41,760 --> 00:33:45,240
Speaker 2: forefathers built these great institutions. It built them so well

679
00:33:45,280 --> 00:33:48,400
Speaker 2: that they just worked that anyone can run them, and

680
00:33:48,440 --> 00:33:50,600
Speaker 2: now anyone does run them, and now that we have

681
00:33:50,680 --> 00:33:53,560
Speaker 2: these challenges, they don't really know how to adapt to that.

682
00:33:53,760 --> 00:33:56,200
Speaker 2: So I think that's that's part of the reason why

683
00:33:56,280 --> 00:33:57,720
Speaker 2: I don't I don't think these are going to get

684
00:33:57,760 --> 00:33:58,800
Speaker 2: better now.

685
00:33:58,840 --> 00:34:01,920
Speaker 1: Speaking of our forefathers, they were amazingly smart, and people

686
00:34:01,920 --> 00:34:05,000
Speaker 1: will just I just as a whole people would just

687
00:34:05,040 --> 00:34:07,239
Speaker 1: never be that smart again, and partly because all they

688
00:34:07,240 --> 00:34:10,680
Speaker 1: did was read books and and debate. That thought that

689
00:34:10,719 --> 00:34:13,239
Speaker 1: was they had had no TV or anything right, and

690
00:34:13,280 --> 00:34:16,640
Speaker 1: that today with our TikTok short term attention span right.

691
00:34:17,160 --> 00:34:20,840
Speaker 1: But our founding fathers gave us many warnings about banks

692
00:34:20,840 --> 00:34:23,719
Speaker 1: and central banks, specifically many warnings and how they were

693
00:34:23,719 --> 00:34:26,959
Speaker 1: more dangerous than a standing army. As somebody who worked

694
00:34:26,960 --> 00:34:28,920
Speaker 1: inside the belly of the beast. I mean, what's your

695
00:34:28,960 --> 00:34:29,440
Speaker 1: take on that.

696
00:34:30,080 --> 00:34:33,520
Speaker 2: So I think that my impression of the FED were.

697
00:34:33,440 --> 00:34:36,000
Speaker 1: They were just the warnings that we were given, And

698
00:34:36,160 --> 00:34:38,319
Speaker 1: are those warnings? Were those warnings? I think?

699
00:34:38,480 --> 00:34:40,680
Speaker 2: I think you guys, I think from the private sector,

700
00:34:40,680 --> 00:34:42,879
Speaker 2: it gives too much credit to the FED. Honestly, they're

701
00:34:42,920 --> 00:34:46,600
Speaker 2: just regular people paying mortgage, bumbling wrong. I don't think

702
00:34:46,600 --> 00:34:51,279
Speaker 2: there's any mel intent or some kind of conspiracy.

703
00:34:51,400 --> 00:34:54,400
Speaker 1: Honestly, that's call it. Call it, call it ignorance, called stupidity,

704
00:34:54,440 --> 00:34:57,960
Speaker 1: call it whatever. The founding I mean, to the point

705
00:34:57,960 --> 00:35:00,000
Speaker 1: of fine fathers, they've warned us that the Central Bank

706
00:35:00,080 --> 00:35:02,520
Speaker 1: for more dangerous to the American people than a standing army.

707
00:35:02,840 --> 00:35:05,600
Speaker 1: They said that at the rate the standing armies or

708
00:35:05,680 --> 00:35:08,040
Speaker 1: the central banks will go, your kids will one day

709
00:35:08,040 --> 00:35:09,879
Speaker 1: wake up in a land that they own nothing of.

710
00:35:11,120 --> 00:35:13,239
Speaker 1: There's numerous warnings that I can't recite them off the

711
00:35:13,239 --> 00:35:13,719
Speaker 1: top of my head.

712
00:35:13,760 --> 00:35:16,319
Speaker 2: Well, I mean, depending on so listen, if you were

713
00:35:16,600 --> 00:35:19,520
Speaker 2: living in Jefferson's world, we would all be farmers hanging

714
00:35:19,560 --> 00:35:22,480
Speaker 2: out on the farm, right. So a vision of the

715
00:35:22,520 --> 00:35:25,600
Speaker 2: world a few hundred years ago is not necessarily in

716
00:35:25,640 --> 00:35:27,880
Speaker 2: line with the world we are and today with all

717
00:35:27,960 --> 00:35:30,960
Speaker 2: that we know in our technology and so forth, what

718
00:35:31,000 --> 00:35:33,680
Speaker 2: we did learn over the past couple hundred years is

719
00:35:33,680 --> 00:35:36,920
Speaker 2: that central banks can be helpful. We had too, right

720
00:35:37,360 --> 00:35:39,760
Speaker 2: Andrew Jackson got written rid of the last second one,

721
00:35:39,920 --> 00:35:44,200
Speaker 2: and then finally we decided that actually they have they

722
00:35:44,200 --> 00:35:45,960
Speaker 2: are good things about certain banks as well. They can

723
00:35:46,040 --> 00:35:49,840
Speaker 2: help us fight banking panics. So if you look across

724
00:35:49,840 --> 00:35:52,680
Speaker 2: the world all their countries, they do they fight banking

725
00:35:52,719 --> 00:35:54,560
Speaker 2: panics or do they put out the fires they start?

726
00:35:55,400 --> 00:35:57,279
Speaker 2: So there were fires before there were central.

727
00:35:57,040 --> 00:35:59,279
Speaker 1: Banks, right, fires before there were central banks. How are

728
00:35:59,280 --> 00:35:59,960
Speaker 1: their fires for some?

729
00:36:00,719 --> 00:36:03,719
Speaker 2: So central banks of roasts because there were fires. Let's

730
00:36:03,760 --> 00:36:04,359
Speaker 2: talk about that.

731
00:36:04,480 --> 00:36:06,560
Speaker 1: Sure, so you're talking about the era of free banking

732
00:36:06,600 --> 00:36:07,480
Speaker 1: and LA eighteen hundreds.

733
00:36:07,560 --> 00:36:10,520
Speaker 2: Yeah, so every now and then you would have a panic, right,

734
00:36:10,600 --> 00:36:12,839
Speaker 2: so you would you could sometimes the private sector could

735
00:36:12,880 --> 00:36:15,560
Speaker 2: build them out, like JP Morgan, the real JP Morgan

736
00:36:15,600 --> 00:36:19,279
Speaker 2: person built out the bank sector in New York in

737
00:36:19,320 --> 00:36:23,399
Speaker 2: the over twentieth century. But you know what they thought

738
00:36:23,480 --> 00:36:26,319
Speaker 2: could be even better was to have this institution who

739
00:36:26,360 --> 00:36:27,200
Speaker 2: could actually.

740
00:36:26,920 --> 00:36:29,080
Speaker 1: JP Morgan thought it would be better because he had

741
00:36:29,080 --> 00:36:31,640
Speaker 1: a lot of public backlash against him and So what

742
00:36:31,680 --> 00:36:33,759
Speaker 1: he thought is, well, if I create this conglomerate of

743
00:36:33,800 --> 00:36:35,759
Speaker 1: banks that I take myself out of, then there'll be

744
00:36:35,840 --> 00:36:37,840
Speaker 1: more public support for that. If we go back to

745
00:36:37,880 --> 00:36:40,040
Speaker 1: the era of free banking in late eighteen hundreds, where

746
00:36:40,200 --> 00:36:41,920
Speaker 1: banks were going to boom and bust and people were

747
00:36:41,920 --> 00:36:45,200
Speaker 1: losing money, that was true, that's one thing that happens

748
00:36:45,200 --> 00:36:47,400
Speaker 1: in a private market, a free market. But the problem

749
00:36:47,440 --> 00:36:49,520
Speaker 1: in the free banking era was there was no free market,

750
00:36:49,600 --> 00:36:52,759
Speaker 1: and so government regulations prevented free banking from working. So,

751
00:36:52,840 --> 00:36:57,520
Speaker 1: for example, the free banks, the banks in that era,

752
00:36:57,600 --> 00:37:00,359
Speaker 1: they couldn't have more than one bank, So I had

753
00:37:00,400 --> 00:37:03,479
Speaker 1: one in New York, but I couldn't have one in Louisiana, right,

754
00:37:03,520 --> 00:37:06,440
Speaker 1: And each bank would create their own currency, so we

755
00:37:06,480 --> 00:37:09,360
Speaker 1: had all these different currencies, and then what would happen

756
00:37:09,400 --> 00:37:11,319
Speaker 1: is I'd take the bank from a currency from one bank,

757
00:37:11,360 --> 00:37:12,879
Speaker 1: But then when I go to Louisiana and nobody wanted

758
00:37:12,920 --> 00:37:14,440
Speaker 1: that currency, so I'd have to give it at a

759
00:37:14,480 --> 00:37:16,920
Speaker 1: deep discount. And that's no different than when I go

760
00:37:16,960 --> 00:37:19,560
Speaker 1: down to Mexico. If I'm in the main town of Mexico,

761
00:37:19,560 --> 00:37:21,920
Speaker 1: they'll give me about par for my dollar. But if

762
00:37:21,960 --> 00:37:24,800
Speaker 1: I go out into the note. When I go surfing

763
00:37:24,840 --> 00:37:26,480
Speaker 1: on a remote beach, they don't want that dollar. They're

764
00:37:26,480 --> 00:37:28,440
Speaker 1: gonna give me a massive discount to that because now

765
00:37:28,480 --> 00:37:31,439
Speaker 1: they have duration risk and when can I go exchange it? Right,

766
00:37:31,520 --> 00:37:33,000
Speaker 1: And so that's sort of what happened in the free banking.

767
00:37:33,040 --> 00:37:35,840
Speaker 1: So that kind of crippled the banking sector. But the

768
00:37:35,880 --> 00:37:38,759
Speaker 1: bigger problem is the same thing that happened to the

769
00:37:38,760 --> 00:37:41,680
Speaker 1: free banks, the same thing that happened to SVB in

770
00:37:41,680 --> 00:37:44,239
Speaker 1: twenty twenty three, is the banks were forced to buy

771
00:37:44,239 --> 00:37:46,560
Speaker 1: those government bonds that became worthless and a lot of

772
00:37:46,600 --> 00:37:52,640
Speaker 1: them caused the financial hardship for them. So back to

773
00:37:52,800 --> 00:37:55,600
Speaker 1: did they put out a fire that they started? And

774
00:37:55,640 --> 00:37:57,200
Speaker 1: then that argues as the FED and the government.

775
00:37:57,960 --> 00:38:03,200
Speaker 2: I think there's any institution costs and benefits, right, there

776
00:38:03,200 --> 00:38:05,279
Speaker 2: are probably things that are good. If we just had

777
00:38:05,280 --> 00:38:08,719
Speaker 2: free banking, everyone banks issue their own currency, maybe they

778
00:38:08,719 --> 00:38:10,600
Speaker 2: would be more of a self interest that the banks

779
00:38:10,640 --> 00:38:12,879
Speaker 2: would make better loans. Nothing to want to build them out.

780
00:38:13,920 --> 00:38:16,160
Speaker 2: But as a society, you know, I look at this

781
00:38:16,200 --> 00:38:19,400
Speaker 2: as a big social experiment, right. We each have different

782
00:38:19,400 --> 00:38:21,879
Speaker 2: things that we do, and some work and they stay

783
00:38:21,880 --> 00:38:24,160
Speaker 2: and some don't. Working When they go away. Now this

784
00:38:24,520 --> 00:38:27,640
Speaker 2: central banking that we've had seems to work, and so

785
00:38:27,760 --> 00:38:32,240
Speaker 2: it's still here. That's true across the world as well.

786
00:38:33,000 --> 00:38:36,040
Speaker 1: There's a chart I've used many times before, and I

787
00:38:36,040 --> 00:38:37,319
Speaker 1: was going to see if I could just find it

788
00:38:37,400 --> 00:38:39,400
Speaker 1: real handy here because I want to show it to you.

789
00:38:40,800 --> 00:38:41,600
Speaker 1: It's a chart going back.

790
00:38:41,640 --> 00:38:42,399
Speaker 2: I'd have seen it before.

791
00:38:42,480 --> 00:38:45,600
Speaker 1: It's a chart going back to eighteen hundred and it

792
00:38:45,640 --> 00:38:53,120
Speaker 1: looks like this, and it basically it shows booms and

793
00:38:53,200 --> 00:38:59,719
Speaker 1: bus nineteen thirteen. You ever seen that chart? You think

794
00:39:00,719 --> 00:39:03,640
Speaker 1: each boom and bus has gotten bigger since we crossed

795
00:39:03,640 --> 00:39:06,239
Speaker 1: that date of nineteen thirteen, and you think about it, Joseph, Right,

796
00:39:06,280 --> 00:39:08,160
Speaker 1: So like, if I'm carrying two books in my hand,

797
00:39:08,320 --> 00:39:10,000
Speaker 1: it's pretty easy to carry two books in my hand.

798
00:39:10,120 --> 00:39:12,440
Speaker 1: If I stack two hundred books, like, WHOA, how do

799
00:39:12,520 --> 00:39:13,200
Speaker 1: I balance that?

800
00:39:13,320 --> 00:39:13,520
Speaker 2: Right?

801
00:39:13,760 --> 00:39:16,239
Speaker 1: So, every time we increase the monetary supply, these are

802
00:39:16,280 --> 00:39:19,360
Speaker 1: going to get bigger and bigger and bigger. I have

803
00:39:19,400 --> 00:39:21,000
Speaker 1: the chart, I tell yeah, I'll.

804
00:39:20,880 --> 00:39:22,640
Speaker 2: Take a look at it. But that just strikes me,

805
00:39:22,719 --> 00:39:24,920
Speaker 2: as you know, I would think that having a central

806
00:39:24,960 --> 00:39:28,080
Speaker 2: bank you would have less panics. So, but there are

807
00:39:28,080 --> 00:39:29,799
Speaker 2: a lot of things, other things happening in this time

808
00:39:29,840 --> 00:39:31,919
Speaker 2: as well. Right, you had you know, two great world

809
00:39:31,960 --> 00:39:34,920
Speaker 2: wars that that that impacts the business scle as well.

810
00:39:35,800 --> 00:39:38,000
Speaker 2: Later on you also have like you know, going off

811
00:39:38,040 --> 00:39:40,520
Speaker 2: the gold standard that Yeah, I.

812
00:39:40,440 --> 00:39:43,000
Speaker 1: Don't have the chart handy, I'll finance an over too.

813
00:39:44,920 --> 00:39:47,359
Speaker 1: But let's go back to we're kind of running out

814
00:39:47,360 --> 00:39:50,200
Speaker 1: of time here, So back to the runaway train. Yes,

815
00:39:51,480 --> 00:39:56,160
Speaker 1: really the FEDS just bumbling along. Uh maybe that you

816
00:39:56,200 --> 00:39:58,879
Speaker 1: said that, that was your words. And the fiscal thing

817
00:39:58,960 --> 00:40:01,080
Speaker 1: is maybe the runaway train. It's the government spending the

818
00:40:01,120 --> 00:40:05,280
Speaker 1: CBO sort of projects, maybe conservatively where things are going.

819
00:40:05,719 --> 00:40:07,520
Speaker 1: I showed you some charts yesterday, and I'm not going

820
00:40:07,520 --> 00:40:08,680
Speaker 1: to hold you to it because I know you haven't

821
00:40:08,680 --> 00:40:11,480
Speaker 1: really had time to review them. But total global equity

822
00:40:11,600 --> 00:40:13,720
Speaker 1: mapped over the S and P five like a ninety

823
00:40:13,719 --> 00:40:17,759
Speaker 1: five percent correlation, which is pretty interesting. And so it

824
00:40:17,800 --> 00:40:21,400
Speaker 1: does seem like as this spending, as this liquidity continues,

825
00:40:21,400 --> 00:40:24,160
Speaker 1: it's pushing acid prices higher. So back to wirehouses, S

826
00:40:24,200 --> 00:40:26,360
Speaker 1: and P five hund and gold making new all time highs.

827
00:40:27,200 --> 00:40:30,680
Speaker 1: Maybe it's the liquidity stupid, Maybe it's the dollar that's depreciating,

828
00:40:31,040 --> 00:40:33,360
Speaker 1: or maybe and that's what I said to you story,

829
00:40:33,440 --> 00:40:34,759
Speaker 1: That's what I said to you. I said, maybe it's

830
00:40:34,800 --> 00:40:38,080
Speaker 1: not a bubble and ascid prices, it's a bubble and denominator.

831
00:40:37,640 --> 00:40:40,440
Speaker 2: Exactly exactly, Mark. And you know you've been on top

832
00:40:40,480 --> 00:40:42,680
Speaker 2: of these liquidity metrics and they seem to seem to

833
00:40:42,719 --> 00:40:45,560
Speaker 2: be related to the higher acid prices. Right, So I

834
00:40:45,880 --> 00:40:48,640
Speaker 2: look at the source of this from my from my framework,

835
00:40:48,719 --> 00:40:51,200
Speaker 2: I look at the source of this as Frystal spending

836
00:40:51,440 --> 00:40:54,040
Speaker 2: printing trillions of dollars a year not going to stop.

837
00:40:54,680 --> 00:40:57,759
Speaker 2: So I think the end result is that we crash up.

838
00:40:58,080 --> 00:41:00,880
Speaker 2: So there's the risk right now, I think is that

839
00:41:00,960 --> 00:41:04,080
Speaker 2: things go higher than anyone expects them to. In the past,

840
00:41:04,200 --> 00:41:06,600
Speaker 2: we would always be afraid of left tail risk, what

841
00:41:06,640 --> 00:41:09,440
Speaker 2: if it crashes This time, I think you also have

842
00:41:09,520 --> 00:41:11,719
Speaker 2: to be aware of what if it crashes up?

843
00:41:11,920 --> 00:41:15,280
Speaker 1: Yeah, a crash up. Now, if we identify a crash

844
00:41:15,440 --> 00:41:19,239
Speaker 1: as something happens to my standard of living, right, so,

845
00:41:19,320 --> 00:41:21,160
Speaker 1: typically in a crash down, a left tail risk, a

846
00:41:21,280 --> 00:41:23,239
Speaker 1: crashed down, you would say I lost my job, I

847
00:41:23,280 --> 00:41:25,279
Speaker 1: took a lower paying job, or my business doesn't make

848
00:41:25,280 --> 00:41:28,320
Speaker 1: as much income. In either case, I can't take asimnifications

849
00:41:28,440 --> 00:41:29,880
Speaker 1: or go out to eat as much, so my standard

850
00:41:29,920 --> 00:41:32,600
Speaker 1: living went down. But that can also happen on a

851
00:41:32,640 --> 00:41:35,719
Speaker 1: crash up because prices go up so fast, I can't

852
00:41:35,760 --> 00:41:37,000
Speaker 1: afford the vacations.

853
00:41:36,640 --> 00:41:38,560
Speaker 2: And go out to no I think that's happening right now, Mark,

854
00:41:38,880 --> 00:41:42,400
Speaker 2: So let's look at what the consumers are saying through poles.

855
00:41:42,880 --> 00:41:45,719
Speaker 2: They're all saying that things are getting worse. They're unhappy. Now,

856
00:41:45,800 --> 00:41:47,960
Speaker 2: what could be the reason for that? I think it's

857
00:41:48,000 --> 00:41:51,120
Speaker 2: exactly as you described now. If you have assets, if

858
00:41:51,160 --> 00:41:53,759
Speaker 2: you own a home, if you own stocks, those have

859
00:41:53,800 --> 00:41:56,040
Speaker 2: gone up a lot. We've seen that the past couple

860
00:41:56,080 --> 00:41:58,560
Speaker 2: of years. But the crazy thing is that if you

861
00:41:58,600 --> 00:42:01,560
Speaker 2: look at FED data, about half the population barely has

862
00:42:01,600 --> 00:42:04,760
Speaker 2: any assets at all. And so those people they're seeing

863
00:42:04,800 --> 00:42:07,640
Speaker 2: the cost of everything they purchase go up. Their wages

864
00:42:07,680 --> 00:42:09,839
Speaker 2: have gone up a bit, but for many people, they

865
00:42:09,880 --> 00:42:12,719
Speaker 2: haven't got caught up with the rising prices. So for

866
00:42:12,800 --> 00:42:16,960
Speaker 2: fifty percent of the population, they're basically all being left behind.

867
00:42:17,080 --> 00:42:20,400
Speaker 1: Right So, which is a bigger risk. It is because

868
00:42:20,440 --> 00:42:22,280
Speaker 1: you don't get a reset, you don't get a chance

869
00:42:22,320 --> 00:42:23,000
Speaker 1: to get back in.

870
00:42:23,520 --> 00:42:25,360
Speaker 2: One of the things about the Great Depression of the

871
00:42:25,400 --> 00:42:27,680
Speaker 2: nineteen thirty is it was a great reset. You know,

872
00:42:27,880 --> 00:42:31,960
Speaker 2: basically everyone was reset and after that we had, you know,

873
00:42:32,080 --> 00:42:36,120
Speaker 2: decades of I guess the more egalitarian and maybe a

874
00:42:36,120 --> 00:42:40,759
Speaker 2: more harmonious society. There's less inequality for sure. So yeah,

875
00:42:40,920 --> 00:42:42,400
Speaker 2: there's no reset in this situation.

876
00:42:42,760 --> 00:42:47,279
Speaker 1: Yeah, now how does this end? Yes, so let me

877
00:42:47,520 --> 00:42:49,000
Speaker 1: let me let me phrase it up the way I

878
00:42:49,000 --> 00:42:52,640
Speaker 1: think and put some context to this. So you know,

879
00:42:52,920 --> 00:42:55,680
Speaker 1: again the left tile risk. Everyone's waiting for the big crash. Yeah,

880
00:42:55,800 --> 00:42:58,279
Speaker 1: the ninety percent crash. Harry Dan's calling for it's coming,

881
00:42:58,360 --> 00:43:02,919
Speaker 1: the ninety percent crash. But it seems like what under

882
00:43:02,960 --> 00:43:06,720
Speaker 1: kins in economics or maybe MMT now, the central bank

883
00:43:07,040 --> 00:43:09,440
Speaker 1: is there to ease the booms and bust and they

884
00:43:09,480 --> 00:43:12,480
Speaker 1: do that with debt, right, but the law of diminishing

885
00:43:12,560 --> 00:43:15,040
Speaker 1: return shows us that we're not getting the same amount

886
00:43:15,080 --> 00:43:17,680
Speaker 1: of growth for the debt anymore. And last I had looked,

887
00:43:17,719 --> 00:43:19,920
Speaker 1: it was we're getting about forty cents of growth for

888
00:43:19,960 --> 00:43:22,760
Speaker 1: every dollar of debt, and then it seems like eventually

889
00:43:22,800 --> 00:43:24,640
Speaker 1: we get twenty cents of growth, and then ten cents

890
00:43:24,680 --> 00:43:26,040
Speaker 1: of growth, and then maybe we get no growth for

891
00:43:26,080 --> 00:43:30,120
Speaker 1: a dollar of debt. So I've kind of been in

892
00:43:30,120 --> 00:43:31,759
Speaker 1: the camp that things go out with a wimp or

893
00:43:31,800 --> 00:43:34,759
Speaker 1: not with a bang. We want to run away train.

894
00:43:35,320 --> 00:43:36,840
Speaker 2: What do you mean by a whimper? Just kind of

895
00:43:36,880 --> 00:43:37,960
Speaker 2: malaise or.

896
00:43:38,400 --> 00:43:40,359
Speaker 1: Yeah, well instead of forty cents of growth, we get

897
00:43:40,400 --> 00:43:42,520
Speaker 1: thirty cents, and then we get twenty cents, and then

898
00:43:42,520 --> 00:43:44,839
Speaker 1: we get ten cents and we just sort of mud along.

899
00:43:44,880 --> 00:43:46,319
Speaker 1: And I think we have plenty of examples of this.

900
00:43:46,400 --> 00:43:49,720
Speaker 1: So I mean, just look at Argentina, Venezuela, Lebanon, Turkey, Peru,

901
00:43:49,960 --> 00:43:52,480
Speaker 1: like I mean, they're all around us, they're all Zimbabwe,

902
00:43:52,480 --> 00:43:55,920
Speaker 1: they're all sort of going into this. You know, there

903
00:43:55,920 --> 00:43:58,080
Speaker 1: are in different rates of inflation. Some you could argue

904
00:43:58,080 --> 00:44:01,600
Speaker 1: maybe hyperinflation technically, you know, whatefty percent.

905
00:44:01,800 --> 00:44:03,520
Speaker 2: Life goes on there, right, you get used to it,

906
00:44:03,600 --> 00:44:05,719
Speaker 2: you continue to live and you know, do the things.

907
00:44:05,960 --> 00:44:09,279
Speaker 1: The gross completely stalls out, inflation keeps raging, and they

908
00:44:09,280 --> 00:44:11,560
Speaker 1: just muddle along. And that's what I mean, more of

909
00:44:11,560 --> 00:44:14,360
Speaker 1: a whimper, like they're still there, the currencies are still working.

910
00:44:14,800 --> 00:44:17,000
Speaker 1: George was just down in Argentina and he said, to

911
00:44:17,000 --> 00:44:18,680
Speaker 1: get a meal. It was like counting like a twenty

912
00:44:18,719 --> 00:44:21,640
Speaker 1: thousand stack, you know. So that's kind of what I

913
00:44:21,640 --> 00:44:24,359
Speaker 1: think a whimper, not a bang. So everybody's waiting for this,

914
00:44:24,480 --> 00:44:27,960
Speaker 1: like the dollar's going to crash. It's all going to end,

915
00:44:28,120 --> 00:44:30,279
Speaker 1: and I just that's not my view. But how do

916
00:44:30,320 --> 00:44:31,000
Speaker 1: you think it ends?

917
00:44:31,520 --> 00:44:36,200
Speaker 2: So I think this ends largely through a political process.

918
00:44:36,360 --> 00:44:40,200
Speaker 2: So what I think happens is as we continue to

919
00:44:40,320 --> 00:44:44,120
Speaker 2: crash up, there's this disparity between the haves and have

920
00:44:44,320 --> 00:44:48,239
Speaker 2: nots just become really wide, and that's going to force

921
00:44:48,280 --> 00:44:51,640
Speaker 2: some degree of political change. Now I think we're seeing

922
00:44:51,719 --> 00:44:55,080
Speaker 2: the beginnings of that. It could be higher taxes. Now

923
00:44:55,640 --> 00:44:59,040
Speaker 2: the US, compared to other countries, actually has relatively low taxes.

924
00:44:59,239 --> 00:45:01,360
Speaker 2: You know, you hit your tax rate here in the

925
00:45:01,440 --> 00:45:05,040
Speaker 2: US five ersand and eighty thousand. Across other Western countries,

926
00:45:05,160 --> 00:45:07,360
Speaker 2: it's more like when fifty two hundred thousand and you

927
00:45:07,400 --> 00:45:09,120
Speaker 2: get hit with the highest tax rate, which is actually

928
00:45:09,160 --> 00:45:11,400
Speaker 2: higher than our highest tax rate. So not if you

929
00:45:11,440 --> 00:45:14,400
Speaker 2: live in California, Ah, the People's Republic of California is separate.

930
00:45:15,520 --> 00:45:17,960
Speaker 2: So the way that I think this happens is that

931
00:45:18,040 --> 00:45:21,880
Speaker 2: we just have this tremendous amounts of social unrest. We

932
00:45:21,920 --> 00:45:26,560
Speaker 2: eventually the government does something and gets control of the

933
00:45:26,560 --> 00:45:29,920
Speaker 2: fiscal situation, and an inflation through higher taxes and a

934
00:45:30,000 --> 00:45:33,840
Speaker 2: little bit less spending. Now, what that happens to growth?

935
00:45:34,200 --> 00:45:36,080
Speaker 2: I think growth is not going to be good going

936
00:45:36,120 --> 00:45:39,240
Speaker 2: forward either, because in the process of trying to control

937
00:45:39,320 --> 00:45:42,759
Speaker 2: higher inflation, they're going to have more and more I guess,

938
00:45:42,920 --> 00:45:46,240
Speaker 2: administrative measures, trying to control prices, trying to have more regulation.

939
00:45:46,520 --> 00:45:48,879
Speaker 2: That seems to be the trend going forward. Now, when

940
00:45:48,920 --> 00:45:51,239
Speaker 2: I think about what creates growth, at the end of

941
00:45:51,239 --> 00:45:54,799
Speaker 2: the day, it's the hard working ingenuity of the individual.

942
00:45:55,000 --> 00:45:57,480
Speaker 2: You have to have some businessman go out, take a risk,

943
00:45:57,600 --> 00:45:59,840
Speaker 2: create something new. And the way that they can do

944
00:45:59,880 --> 00:46:02,200
Speaker 2: that is if they have the freedom too, like less

945
00:46:02,280 --> 00:46:05,200
Speaker 2: regulation and the incentive to they have the tax structure

946
00:46:05,200 --> 00:46:07,920
Speaker 2: in place. That's I think a big reason why the

947
00:46:08,040 --> 00:46:11,839
Speaker 2: US has so vastly outperformed let's say Western Europe, where

948
00:46:12,080 --> 00:46:14,840
Speaker 2: taxes are super high, regulation is super high. Look at

949
00:46:14,920 --> 00:46:16,680
Speaker 2: they don't have any tech over there, all the tech,

950
00:46:16,760 --> 00:46:19,880
Speaker 2: all the new things of the new world from the US.

951
00:46:20,280 --> 00:46:22,240
Speaker 2: And I think we are kind of in a sense

952
00:46:22,360 --> 00:46:25,759
Speaker 2: heading towards that direction where you just have in order

953
00:46:25,800 --> 00:46:29,200
Speaker 2: to I think, have more control of the economy. The

954
00:46:29,239 --> 00:46:31,600
Speaker 2: government's just expanding the reach and so I think that's

955
00:46:31,600 --> 00:46:34,040
Speaker 2: going to be negative for growth going forward as well.

956
00:46:35,920 --> 00:46:38,040
Speaker 2: Just how this process plays out, whether it's or not,

957
00:46:38,080 --> 00:46:39,040
Speaker 2: it's very disorderly.

958
00:46:39,600 --> 00:46:41,480
Speaker 1: I think we almost play out. Let's put a time

959
00:46:41,520 --> 00:46:43,960
Speaker 1: frame on that, so like six sixth.

960
00:46:43,719 --> 00:46:45,600
Speaker 2: The rest of the decade, the rest of the decade,

961
00:46:45,680 --> 00:46:48,279
Speaker 2: I think we'll see thee We'll see the end of

962
00:46:48,280 --> 00:46:50,719
Speaker 2: this process by then. So I think we are at

963
00:46:50,760 --> 00:46:53,719
Speaker 2: a point where one point five percent deficit. This is

964
00:46:53,760 --> 00:46:57,040
Speaker 2: something that just can't be sustained for for any more

965
00:46:57,080 --> 00:47:00,000
Speaker 2: than a few years. Eventually, the vesters everyone will watch

966
00:47:00,120 --> 00:47:04,000
Speaker 2: is up to it. We see everything, We'll see all

967
00:47:04,040 --> 00:47:07,359
Speaker 2: the acid markets inflates hugely, and I think that's when

968
00:47:07,360 --> 00:47:09,799
Speaker 2: it caused a lot of social unrest, and that's going

969
00:47:09,840 --> 00:47:13,320
Speaker 2: to I think, force to change the political change. Have

970
00:47:13,360 --> 00:47:14,280
Speaker 2: you been to the big cities.

971
00:47:16,080 --> 00:47:17,719
Speaker 1: We might be already close to them.

972
00:47:17,840 --> 00:47:22,400
Speaker 2: Yeah, yeah, that's in California. I'm sure it's some of

973
00:47:22,440 --> 00:47:23,319
Speaker 2: the leading edge.

974
00:47:23,360 --> 00:47:28,240
Speaker 1: I mean Philadelphia, Baltimore, Chicago. Yeah. Anyway, Okay, good stuff.

975
00:47:29,200 --> 00:47:32,640
Speaker 1: So when I lived in Puerto Rico in twenty twenty one,

976
00:47:32,719 --> 00:47:34,360
Speaker 1: my best friend over in the Aland was CuPy. I

977
00:47:34,360 --> 00:47:36,319
Speaker 1: don't know if you're familiar with his work, I've heard

978
00:47:36,320 --> 00:47:39,279
Speaker 1: copy copy brilliant, and his thing was always like, we're

979
00:47:39,360 --> 00:47:40,240
Speaker 1: just not long enough.

980
00:47:40,800 --> 00:47:43,360
Speaker 2: We're not long I like couppies projects Zimbabwe. That's a

981
00:47:43,400 --> 00:47:44,320
Speaker 2: beautiful hashtag.

982
00:47:44,480 --> 00:47:46,959
Speaker 1: Yeah, and we're just not long enough, like because he's

983
00:47:46,960 --> 00:47:50,719
Speaker 1: in the crash up basis as well. So stay long

984
00:47:50,760 --> 00:47:53,200
Speaker 1: through twenty twenty six. I'm sorry through twenty thirty.

985
00:47:53,880 --> 00:47:57,359
Speaker 2: Yeah, that's that's my thinking again, non investment advice. Always

986
00:47:57,400 --> 00:47:59,359
Speaker 2: be careful. It's going to be a volatile, right, I think,

987
00:47:59,400 --> 00:48:02,920
Speaker 2: but I think the trend is clearly up and higher

988
00:48:02,920 --> 00:48:04,320
Speaker 2: than anyone expects.

989
00:48:04,600 --> 00:48:09,800
Speaker 1: All Right, the FED guy working from the innerbelly of

990
00:48:09,840 --> 00:48:12,400
Speaker 1: the base here and giving you information. So you have

991
00:48:13,120 --> 00:48:16,480
Speaker 1: some courses on the FED, I'm sorry, courses on the

992
00:48:16,520 --> 00:48:18,480
Speaker 1: central bank, and some news are go ahead and tellus

993
00:48:18,480 --> 00:48:18,719
Speaker 1: about that.

994
00:48:18,760 --> 00:48:20,640
Speaker 2: Yeah. So, if you guys are interested in learning more

995
00:48:20,640 --> 00:48:23,560
Speaker 2: about my work, I have a weekly newsletter on fedguid

996
00:48:23,600 --> 00:48:26,120
Speaker 2: dot com where I give you my thoughts on the markets.

997
00:48:26,280 --> 00:48:28,680
Speaker 2: I also have a YouTube channel it's called Joseph Waang

998
00:48:28,920 --> 00:48:31,440
Speaker 2: where I would debrief you about what's happening in the markets.

999
00:48:31,640 --> 00:48:34,000
Speaker 2: And again, if you're really interested in learning about central banking,

1000
00:48:34,000 --> 00:48:36,120
Speaker 2: I have a best selling book called Central Banking one

1001
00:48:36,120 --> 00:48:40,239
Speaker 2: oh one, and also online courses about understanding markets at

1002
00:48:40,360 --> 00:48:42,160
Speaker 2: Central Banking one on one dot com.

1003
00:48:42,200 --> 00:48:42,640
Speaker 1: There we go.

1004
00:48:42,800 --> 00:48:44,000
Speaker 2: Thanks so much for having me Mark.

1005
00:48:44,080 --> 00:48:44,360
Speaker 1: Thank you