A Recession Worse Than 2008? - How To Survive & Thrive The Next Economic Crisis | Peter Schiff | Transcription
Transcription for the video titled "A Recession Worse Than 2008? - How To Survive & Thrive The Next Economic Crisis | Peter Schiff".
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A lot of people say, "Oh, we're leaving all this debt to our grandkids." Grandkids don't have to pay it. I mean, they can leave. People used to ask me, "Where do you stand on a wall?" And the main reason I was against it is I said, "If we build that wall, it can be used to keep the Americans in." There's no way out until there's a violent revolution. During periods of extreme economic uncertainty, like the one that we're living through right now, I really think it's incumbent upon all of us as individuals to face the situation head on and develop a thesis for how to navigate that kind of period well. But most people get overwhelmed and they shut down. Do not let that be you. The intelligent path forward is always a combination of information and action. To that end, I bring you Peter Schiff, the man who believes the economy is headed towards a cliff, but has a plan for how we get off the bus before the inevitable crash. Are we headed towards a recession that's going to be worse than 2008? I think so. In fact, I think we're actually in recession, although by the time they write the history books on this era, it may be considered a depression.
Understanding Economic Fluctuations And Inflation
Are we headed towards recession? (00:56)
I think that the numbers that we get from the government are not accurate by design. So I don't really think that the economy is growing in any real sense. I think that the way they compute the numbers I think is deceiving. I think that for most Americans, their standard of living is declining. I don't think the economy is really getting bigger. I think we're spending more and we're borrowing more and going deeper into debt. We're paying more for everything we buy. And a lot of that consumption ends up feeding into the GDP. And so we get a bigger GDP number and we think, oh, that means the economy is growing. But I think it's all being distorted by the inflation and the debt. Meanwhile, individuals that are living in the economy are struggling. Their cost of living is going up. You have a record increase in the number of people holding multiple jobs, not just two jobs, but three jobs or more. And they still can't make ends meet. You've got record credit card debt, which is now over a trillion dollars first time ever. And we almost have two trillion in student loan debt. I mean, that is just exploded. And all sorts of debt, if we really had a growing economy, people would be getting out of debt. That's what happens when you're doing well. You pay off your debt. You build up your savings. The savings rate has collapsed in the last couple of years. That's not a sign of economic strength. That's desperation. People are tapping into whatever savings they have left just to make ends meet. If you look at Joe Biden's popularity, he's as unpopular as any sitting president since Jimmy Carter. That's quite a feat. But if you remember, when Jimmy Carter was president, things were pretty bad. The misery index, high inflation, high interest rates, high unemployment. You have to go back to that time period. You'll find an incumbent president this unpopular. So what does that tell you? Because normally, you vote your pocketbook. If the economy were really strong, voters wouldn't care if Biden was falling asleep at meetings or couldn't remember who he was married to or where he was given his speech. If people were feeling good about themselves and their economy, they would credit Joe Biden. The fact that he's so unpopular is more a function of how bad the economy is. No matter how much he wants to pretend that it's doing well, the poll numbers display the opposite. And so does everything else with economic reality. We have record budget deficits. If times were good, the government would be running smaller deficits. They would be collecting more taxes. They wouldn't be spending as much on government assistance. Our trade deficits are at record highs. If we had a booming economy, we'd be making more stuff. We'd be exporting that stuff or we'd be importing less because we would just consume what we produced ourselves. But our economy is really shrinking. And that's why we're on life support. We're dependent on foreigners for all the goods that we can't produce.
Point A: Are we in a depression? (04:32)
And we have to pay for it on credit because we don't have the real incomes or the savings to afford it. So I think that answer is going to be jarring for people because for a lot of them, things seem fine. In fact, one thing that I've heard people criticize you for is you've been saying for years now that we're going to get hyperinflation, but it hasn't come yet. And I think a lot of people are going to say depression. We're not in a depression yet for sure. So the economy works in a certain way. There are physics to it. So what is it that you see that makes a recession or depression either happening now or inevitable? What do you see that they're missing? Yeah, first of all, I don't think we're in a depression now as far as the economic conditions. I said that by the time the historians look back on this time period, this could be the beginning of that depression because I think that depression is in our future, really not in our past. And the way we've been kind of holding back the tides of depression is through debt and inflation. And so we've been kicking the can down the road. But we're really sowing the seeds of the future depression that I believe the time period we're in now will just be lumped in with it. This is the earlier stages of that prolonged period that is really going to coincide with having to come to terms with all the mistakes that we've made in the past. It's like the chickens coming home to roost because of bad monetary and fiscal policy that go back for decades. We're in a huge hole. And it isn't going to be easy to get out of it. And the time period where we're going to get out of it, that's going to be hard times. And the government is in a position to make those times a lot harder. So that's a wild card as to how the government is going to react to this unfolding crisis and how much worse they might make it be. Now, as far as hyperinflation, yeah, I was talking about a hyperinflation scenario back in the early days of the 2008 financial crisis based on the way the government reacted to that with quantitative easing. And I knew that the road that we were going down could lead to hyperinflation. Now, I always said that that was a worst case scenario. I never said, hey, it's for sure. But of course, the media, everybody picks up on my warnings of hyperinflation. I still think that that hasn't been taken off the table. And the odds of that are actually greater now than they were when I first started warning about it. But I always said that, look, that's the worst case scenario. You destroy your currency completely, where you're talking Weimar Republic, Zimbabwe. But what I did say was inevitable was very high inflation. And we've just started to experience that in recent years. And I don't think that's over. I mean, I think we're going to see higher inflation. Right now, the high watermark for your CPI was just over 9%. That's not going to cap this. We're going to go into the double digits. And the first digit might not be a one. Now, that still wouldn't be hyperinflation. If we have 20% inflation, that's not hyperinflation. That's curl up in a fetal position and suck your thumb and cry yourself to sleep territory. It's bad. But also, if you compare what we have now, because everybody wants to say, look, it's not that bad, because look how much worse it was in the 70s, where we had inflation and 11, 12% for several years. What people don't understand is that you're comparing apples to oranges, because the CPI that was in use in the 70s is not the same CPI that we use today. Hold on one second, because we're going to have to start teasing this apart for people, because you have so much knowledge.
Inflation issue - quantitative easing (08:24)
I think that people don't necessarily understand the physics of the situation. So I want to talk about-- you talked about the seeds of the depression. I think inflation is going to be one of those maybe the most important. And so what I want to talk about is-- so you mentioned quantitative easing. Quantitative easing. So we come into the 2008 financial crisis. And not knowing that the government is just going to print its way out of this, I certainly didn't understand what the reaction was going to be. Same thing for me happened when we went into COVID. I didn't understand that the government was going to print their way out of this. Now, what does it mean to quantitatively ease a situation? Why does that become problematic? And am I right that that is the most important seed that so's your destruction in terms of inflation? Yeah. Well, first of all, when they print their way out of a short-term problem, they print their way into an even larger long-term problem, which is what they did. Now, quantitative easing is just a euphemism. It's a better sounding name for something that's really bad, which is inflation. So quantitative easing is when the government prints money and buys government bonds. Now, that's inflation by definition, by classic definition. Inflation is when you expand the supply of money. How is the money supply expanded by the purchase of debt? The central bank buys government debt and creates the money to pay for it. That's the mechanism in the United States where the money supply grows. And so that's just inflation. So quantitative easing was inflation. So when Ben Bernanke first launched quantitative easing in 2009 as a way to stimulate the economy, he really said, "Look, let's create a bunch of inflation to stimulate the economy." Now, he didn't want to say that because if he went out and told the public, "Our solution to this financial crisis is to create inflation," people would have said, "But wait a minute. I don't want inflation. I don't want my cost of living to go up. That doesn't sound like a good solution. Is that all you got? You got something else?" So if basically they dress it up and they say, "No, no, no. What we're doing is quantitative easing." See, that doesn't sound so bad. And so that's how they got the public to swallow more inflation is that they wrapped it up in the trappings of quantitative easing. But that's all it was. Now, the reason that we didn't get real big increases in the CPI until really after COVID was that there were a lot of forces in the economy at that time that were pushing prices down and had the government not unleashed all this inflation, we would have seen prices fall. I mean, they never actually fell during any year, but had the government not done that, I'm pretty sure that prices would have gone down and the cost of living would have been lower. Now, a lot of these politicians or Keynesian economists say, "That's terrible. Oh, that's deflation. That's really a bad deal. We don't want that. That's BS." If prices go down, that is good for the consumer. That provides relief because now the cost of living is lower. You don't need as much money to buy food. You don't need as much money to buy energy. You have more money left over to buy other things. You don't have to go into debt to pay for things. And falling prices is even good for business. As long as their costs are falling in line with their prices, they maintain their margins. And now they can sell more. They make it up on volume because when prices are lower, their customers can buy more stuff. So everybody wins from falling prices, but the government doesn't want that. And so it was able to stop that by unleashing inflation. Can I say it a different way? I want to see if I'm understanding this right, the following statement would be true. The government actually does want falling prices because they want to tax that falling price in the form of inflation. But if they don't have the falling prices, when they do inflation, people will really feel it. So for instance, if prices were actually going down by 2%, they inflate by 3%, they now get 5% inflation, but I only feel 3% of it. So now, as the government, I'm able to really take advantage of those falling prices.
Inflation is a tax (13:01)
You hit the nail on the head and I'm glad that you actually picked up on that because inflation is a tax. And people just don't realize it because the government blames it on greedy corporations, on Putin, on OPEC, on everybody but themselves. But it is a hidden tax. And the easiest way to hide it is if you have a productive economy that otherwise would reduce prices. Because if prices were going to go down, let's say by 5%, and they create 5% inflation so that prices remain the same, nobody realizes how much worse off they are because the government stole something they never had. The free market was going to deliver that benefit and the government took it. So what everybody has to understand is every dime that the government spends must be paid for by the public. One way or another, now the traditional way to pay for it is with taxes. The government wants to spend money on the military, they want to spend money on Social Security or Medicare or whatever they're doing. They need to take collect taxes because the government doesn't have any real money because the government doesn't really produce anything. It only has the money it takes from the private sector and then it takes that money from one person and gives it to somebody else. They have to take it first. Well, if they don't take it through taxation, how do they get it? Well, they print it. They sell bonds to the Federal Reserve. The Federal Reserve buys those bonds and puts money into the government's checking account and then the government just spends that. But when the government spends that money, what it does is it reduces the value of the money that already exists. So everybody's paycheck is diminished in value. Everybody's savings are diminished because now prices go up because you have more money in the economy without new production to give that new money value. And that increase in price, that is a result of this deficit spending and money printing, is basically a tax. But the people don't realize they've been taxed. So the politicians love it because they can pretend that the voter is getting something for nothing because the voter doesn't make the connection between the price hikes. And if the economy is really booming so that prices are dropping, you don't even notice the price hikes. But now the problem is we've created so much money, especially after COVID and all the money we printed there, which was off the charts crazy during those years, we now have so much money in the pipeline. And the economy is now being crippled by more regulation and other things that are making it less productive. We're seeing much greater upward pressure on prices. But I tried to make the point earlier is that we would have even seen more movement in the CPI earlier. If it wasn't rigged, I started to say that the CPI we had in the '70s is not the same CPI we have now because in the 1990s, they changed it all. They changed the methodology for computing price increases. And their goal was to have a lower CPI because they claimed that the CPI was overstating inflation. And so they decided to fix it. They fixed it like you would rig a sporting event. The fix is in. But if you measured the prices that we saw the increases in 2021-2022, if you used the 1970s CPI and then took the prices that we were living through, they were double-digit. I mean, we were probably the year that we had 9%. It was probably 18%. I mean, that year. That was probably worse than any year of the 1970s or early 1980s. That's how bad it was.
Consumer price index (16:54)
All right. So really fast, I want people to understand. So CPI Consumer Price Index, it's a basket of goods that economists look at and say, "These are representative of what things cost." Now, if you change the items in that basket to ones that have gone down or stayed the same, you can make it seem like everything is okay. So you actually can go back and look at what was the 1970s basket of goods that they were using, use that exact same basket and do an apples to apples comparison. Is anybody doing that? Can I go somewhere online and see? Shadow stats. Yeah, they've been doing that for a long time. That's the website. But when they change that, back in the 1970s, it was the same basket and they just said, "What did it cost last year?" And what is all that exact same stuff cost this year? But now they don't do that. They change the basket. They take stuff out that's gone up. They put stuff in that didn't go up as much. They adjust it for so-called quality improvements. Oh, that's a much higher quality than the one you bought last year. So let's make the price go down. But it's subjective. Is it really better? I mean, and a lot of times, the quality goes down. I don't think they ever subtract for falling quality. It's like a one-way street. They just assume everything is getting better. When in many cases, people are substituting lower quality ingredients or stuff that used to be included. A classic would be airline. People would buy an airline ticket and they got their seat. They could get food. They could get a pillow. They could get a blanket. They could carry on stuff. Now, all of a sudden, all that's extra. It's not part of the airfare anymore. You want to pick your own seat. That's extra. You want to check luggage. That's extra. You want to blanket. That costs more. All this stuff now are add-ons. That's not part of the CPI. But I think if you look at some of the other measures, where the government uses personal consumption expenditures, there you have lots of hedonics where they just basically say, "Oh, if hamburger gets too expensive, we'll just kick out steak and we'll put hamburger in there." We'll just assume people stop eating steak and they settle for hamburger. We can pretend that the price didn't go up. But the quality is going down. I want to eat steak. I can't afford it. I'm stuck with hamburger. According to the government, that means there's no inflation. By that logic, if I have to give up hamburger and start eating dog food because I can't afford hamburger anymore, as far as the government's concerned, there's no problem because I'm still eating. I don't like having to eat dog food. I'd rather eat people food. This is how the whole thing is rigged. The government, again, they're taxing us through inflation. Then they're lying to us about how bad it is. The ultimate irony is all the years that the Fed was printing all this money, creating all this inflation, they were pointing to a rigged CPI that was less than 2 percent. They said, "We needed higher. We don't have enough inflation." That was the justification for continuously creating more inflation because they theoretically said, "We need to get up to 2 percent." In reality, we were already way above 2 percent. But there's nothing magical. About 2 percent. 1 percent is better than 2 percent. If you have 1 percent, you don't try to get up to 2 percent. You try to go down to zero or negative one. Lower prices are better than rising prices. Only an idiot economist or a central banker, or maybe somebody's Wall Street people, could believe that rising prices are good or that prices that go up by 2 percent every year constitute price stability. That's not stability. That's a continuous increase in price. Stable means the prices don't change. You can reboot your life, your health, even your career, anything you want. All you need is discipline. I can teach you the tactics that I learned while growing a billion-dollar business that will allow you to see your goals through. Whether you want better health, stronger relationships, a more successful career, any of that is possible with the mindset and business programs and impact theory university. Join the thousands of students who have already accomplished amazing things. Tap now for a free trial and get started today.
People don't need to be incentivized to spend. (21:19)
It's interesting. I can actually give you the logic I know because this is how I used to think of it as to why people either there's a natural inclination to believe that 2 percent makes sense or that we're brainwashed to believe it. But my thinking used to be around it's a movement of money thing. You need to get velocity. You need to get people that are spending money. I actually wrote this down as a question I wanted to ask you in the research, you ended up answering it so I know what your punchline is. But my thinking was, "Well, wait a second, at 2 percent inflation, you are incentivizing people to spend their money." Now, you can say that that's actually a moral hazard and that you don't want to incentivize people to spend their money, that you actually want to incentivize them to save it. But if our economy is built around people spending money, then knowing that my money is going to be worth a little bit less a year from now than it is today, it gets me to go in and sort of greases the wheels and gets people spending money. Now, I know what the punchline is, but just so people hear it, why is that a fallacy? Why is it a fallacy to believe that if prices are going down, that people won't just turn in discruge McDuck storing their money away and freezing up the economy? So, first of all, the fact that we have an economy that is based on spending, that's the problem, that's part of a bubble. We have a bubble economy, a legitimate economy would not be based on spending. It would be based on savings and production. You don't have to encourage people to spend. Everybody wants to spend. I mean, that's how we gratify ourselves. We want things. Everybody wants stuff. And so, everybody would spend. I mean, I have young kids. I mean, they would spend constantly if I didn't stop them. I mean, they don't need encouragement. I mean, I have a wife. I don't have to encourage her to spend. I got to do everything I can to stop it, right? So, spending doesn't have to be encouraged, right? Because that's delayed gratification. Savings needs to be encouraged. Do without what you want. Don't have it right now. Wait. Delay your gratification. So, you need to encourage that. And the market does that with interest and other ways of rewarding people for saving. But when interest rates were at zero, and inflation was above zero, we were punishing people for saving. We were punishing people for doing exactly what they need to do. Because what makes a real economy grow is savings. Because savings is what finances capital investment. Capital investment is what leads to increasing productivity and higher living standard. So, everybody wants to buy. That just comes naturally. We all want stuff. So, we don't need to encourage that. But the idea that if prices fall, that people will stop spending and therefore prices need to rise to encourage spending is pure BS. People are going to spend anyway. But they're actually more likely to spend if prices are going down than if prices are going up. And here's why. With these Keynesians, try to sell this nonsense. That if I think the price is going to go down, I'm just not going to buy it. I'm going to wait to get it cheaper. And therefore, no one's going to buy because we're all going to be sitting back waiting for a better deal. And that is nonsense. People buy things when they want them. And the proof of that is all around us. Cell phones. The first cell phone was probably two, three thousand dollars. Well, there used to be a car phone. But when you finally got a portable phone, if you remember, from Wall Street, Gordon Gekko's got this huge thing that he's holding by his ear, those things sold for like two or three thousand dollars a piece. And it was very expensive to use them. I remember when I finally got my first cell phone, I never wanted to use it because it was too expensive. I would say, "Hey, call me on the weekend. I can't talk about my cell phone. It's too expensive." But the reason a lot of people didn't buy the first cell phones is because they were too expensive.
We buy things when we want them. (25:15)
They couldn't afford it. The reason everybody has cell phones now is because they're so cheap. The price going down is what motivated more people to buy. You buy things when you can afford them. And if you can't afford the current price, if the price just goes up, well, then you really can't afford it. The same thing, the first television set probably calls the same as an automobile. Who bought the first television set? Some really rich guy. It was a novelty. But it was a gigantic piece of furniture with like a two-inch screen. And you probably had two channels and you had two or three hours a day where you could watch it. I mean, it was, you know, people bought televisions because they got cheaper. Now, people buy televisions all the time. Everybody knows if I buy a television today, a year from now, I could buy a better one for less money. Everybody knows that. But they buy them anyway. The same thing with a computer or every piece of electronics that you buy, if you just don't buy it and buy it in a year or two, you'll get it cheaper. But people buy them anyway because they want to use them now. Like, I remember the first time I saw a high-def television set years and years ago, it was in like a best buy or something. I walked in, I saw it. And I was really amazed at the clarity. I mean, to me, I was like looking through a window. I was like, because I had never seen high-def before, until I went into the store. I was just used to the old tubes that we had. And I really liked that television set. But I didn't buy one, even though I liked it and I wanted it, because it was like $10,000 back then. I mean, I could have bought a nice car for that. And so I didn't buy it because it was too much money. But some guy that was a lot richer than me, he bought it. And he gave those companies money that they could use to figure out how to make them cheaper. And because the price went down, they're now so cheap, I got those things in every room in my house. And so does everybody else. I mean, you got people now that are living on welfare that got high-definite-nition TVs. I mean, because the price came down. If you own a business and you really want to incentivize people to come in and shop, what do you do?
We spend more when prices are lower. (27:31)
You have a sale. You'll lower the price. Hey, I'm lower in the price, 10% off, 20% off. Now people, they want to shop. Why does everybody come to the stores on Black Friday? Because they lower the price. Because they raise the price. So it's just complete BS that people will stop spending if prices go down. No, no, no, they'll spend more because they can afford to buy more. They'll buy more stuff at lower prices. Okay, I want to start putting all these pieces together because I never intended to get into financial content, if I'm honest. It was only when COVID kicked off and I got really worried about people that I knew and loved. We're going to get mowed over. And then the more I got into it, the more I realized that what people think the economy is and what the economy actually is are wildly different. And they're going to massively impact how you move in a time of high uncertainty like what we're living through right now. So I'm going to paint a narrative based on everything I've heard you say and what I know generally about the economy. Let me know if I get this right. Because if I get this right, it's a very worrisome about where we go from here and B, it will certainly inform how people respond. So the economy seems to be something like this. Over time, innovation is going to drive the price down. The government is always looking for ways to tax people to give them what they want because very much the government certainly the US government in modern times. I will say that panders to the voters in order to get reelected. They have to get reelected every two years. So they want to give them things that feel good in the short term. Everybody's thinking in the economy is very immediate. It's what I want now and a thing that might happen a year or a decade or two decades. I literally couldn't care less. I don't think about that. That doesn't factor into the way that I think of this. So the government goes, "Okay, cool. There's only so much that I can tax people." And by the way, taxing the 1% literally down to zero, they know won't drive revenues up and B, they also know that even if they took every last dollar, it just wouldn't cover it. So you end up having to tax the middle class.
We can't tax billionaires down to nothing, so we tax citizens at large. (29:37)
And so I can't tax the middle class outright. They're not going to feel good about that. I'm not going to get reelected. So what I'm going to do, and I'll even assume that they have good intentions. But what I'm going to do is I'm going to use inflation to distribute money more and more evenly around to people. And I'm going to leverage the fact that innovation is driving costs down so that I can get a bigger bite before people feel it. I'm going to train people that 2%. That's a good number that you actually want 2% inflation. So if costs and obviously I'm swagging, if costs are going down by 3%, and I can get people to believe in 2%, now I can tax 5% every year just on that. And of course, there's still all the other taxes in the world. But I can leverage inflation to do that. Now, where inflation comes from is printing money, period. Now, one thing that I've heard you say, and I guarantee, even though you've touched on it here, people still think what drives inflation is rising costs. When the thing I've heard you say very pointedly is no, inflation is increasing the money supply, and the echo of that is rising costs. But rising costs does not create inflation. It is a symptom of inflating the money supply. Okay, how close are we here? Yeah, no, you're right. I mean, they've got the cart before the horse when you're talking about costs causing inflation.
Rising costs don't create inflation, inflation drives costs up. (31:09)
And the same thing is prices. Sometimes they say, well, costs go up, and that makes prices go up. They talk about the cost-price push. But costs and prices are two words for the same thing. I mean, one person's cost is another person's price, right? If I'm a business and I have to buy steel, well, what's my steel cost? Well, the guy that's selling me steel, my cost is the price he charges me. It's his price. It's my cost. So prices and costs are really the same thing. So why are they going up? What's making them go up when a free market would make them come down? That is the beauty of capitalism. Is it lowers costs? In what way? How does it lower costs? Is it through innovation or is there another mechanism? Yeah, through increasing productivity. I figure out cheaper ways to make stuff. You build a more productive mousetrap so that you can catch more mice for less money. The cost of producing a cell phone today is much lower than it was 20 years ago. That's the reason there's so much cheaper. The free market figured out a better way to produce. And they did that because the companies earn money from selling some very expensive cell phones. They take that money, they invest in research and development to figure out more efficient ways to produce. And of course, as they produce more at lower prices, they also create economies of scale. So that is the natural tendency of a market-based economy. If you look at the US, if you look at the CPI in 1900, and then you look at it in 1800, 100 years earlier, prices are down about 50%. Prices are half what they were in 1900, that they were in 1800. The market cut the cost of living in half. We were on a gold standard for most of that time period other than a few years of the Civil War, where we really started printing money. But in that economy, prices went down. Now, with technology, we should actually be enjoying even faster price declines in this century than they had in the 19th century. The reason we've been robbed of those benefits is because of government. And of course, there is a lot more regulation now than they had then. I mean, the markets are not as free as they used to be, and therefore, they're not as efficient as they used to be. And therefore, prices aren't going down as much as they would if the government got out of the way and allowed entrepreneurs to be more effective.
Why prices aren't falling. (33:40)
Instead of having to waste resources and time on government red tape, they could have devoted those resources to becoming more productive. But there was another reason too that they were able to keep the inflation rate low is we outsourced all of our production to China. And so, we had all these Chinese workers that would do the work for a fraction of what Americans would. And in factories that didn't have to deal with all the regulations of American factories. And so, we got all this stuff coming in from China that helped keep prices down. But the flip side of that was we lost a lot of good paying jobs, and we ran massive trade deficits. And so, now, we have to deal with that problem that we created, trying to kick the can down the road, because you're right about politicians and their time horizon.
The power of short election terms versus long term economic strategy. (34:31)
They can only see as far as their own reelection, which in America, in many cases, is two years. And as you said, people want something for nothing. That is the inherent flaw of a democracy. And that's why the founding fathers established America as a republic, not a democracy. And they tried to protect the country from the evil forces of democracy, which they referred to as mobocracy. So, we're not supposed to be a democracy for the very reasons that democracies create the type of problems that we now have. Okay. So, I think that's a really important point to zoom in on. So, the thing that I think is is potentially problematic in this is just the nature of the human mind.
Assessing The Role Of Politicians, Bankers And Gold In The Economy
The nature of the human mind (35:14)
And so, when I think about why this stuff starts deranging, it's that you really can get a free lunch for a while. And if it didn't work in the short term, we wouldn't have these problems. But it really does work, and it can work for a very long time. And so, I think it's important for people to understand the US as a reserve currency. So, we have privileges. This conversation only makes sense in the context of the US economy. If you were to take this somewhere else where they can't print their way out of this, it would be a very different scenario. But right now, the world is tied to the US dollar. And so, the US dollar is able to create this inflation, actually export some of the negative effects of that inflation. And so, this lets us give people a free lunch for a very long time. And it creates this thing where the first order consequence is awesome. So, take COVID. I was legitimately worried that people were going to get obliterated by COVID. And they didn't, but they only didn't because of printing money. And so, I actually felt good. I was like, "Oh, man, thank God." Like, the government stepped in and helped people. The recent regional banking crisis, right, with SVB. I was like, "Thank God, the government's..." I didn't have any money. I had very small exposure to that that I got out before the government stepped in. So, for me, I had no skin in the game once the bank stepped in, but I was still glad they did it. But that's because first order consequences are positive. The second, third, fourth, fifth, ah, on and on and on, consequences become not only hard to calculate, but they really get confusing. And so, if you boil the frog slowly, not only do you get them used to the problem, but you confuse the shit out of them as to what's causing the pain. Does that all make sense? It makes perfect sense. You know, but everything that you're happy the government did was a mistake. Now, the reason you're happy they did it was because of the short-term benefit of that mistake. But you don't perceive the actual long-term consequences of doing that. It's like maybe, you know, let's say you're a football player, you're in a game, and you injure your ankle, and the coach is like, "Look, let me shoot you up with this so you can keep on playing because we want you in the game." And so, he shoots you up with his medicine and you don't feel the pain, and so you keep running on your foot, and you're able to finish that game. But because you did that, you screwed up your foot so bad you're out for the rest of the season, right? But they were just thinking about one game, and so you ran on a foot that you shouldn't have run on. You got numb to the pain, and your body was like, "Hey, don't run on me. Go rest. Ice me for a while." But that's what the government does. They try to make us numb to the pain, and then we end up doing more damage. And so, what happened after COVID, that policy was horrific, and bailing out the banks both in 2008 and now again with the bank ballots we've had this year. All this is a mistake, but again, the politicians want to get reelected, right? They just want to win this game. They don't care about the season. It's this game, and so they're just doing whatever they can to numb us all to the pain. There's a saying, you talk about a free lunch, that there's no such thing as a free lunch, and that's because somebody's got to pay for that lunch. So, if it's free to you, the question is, who's paying for it? Because the food didn't just magically appear, right? There is a cost. The government can print money, but it can't print stuff. The stuff has to be made. And that's why when you print money without any stuff being made, all that happens is the price of that stuff goes up, right? Because if we could just print money and people could buy stuff, everybody would be rich. We just print up a bunch of money. Why not give everybody millions of dollars, and we all be rich, right? No, the price of everything would just go up. Nobody would be rich. The only way we could all be richer is if we all produce more. Printing more money doesn't change anything, right? You know, you rearrange the deck chairs on the Titanic. You need a more stable boat, right? So, we need to make more stuff. That's how we can satisfy more demand is by creating more supply. If we just print money, we increase demand. Supply is the same. And so prices go up. And that's the inflation. But yes, what we were able to do is we were able to con the whole world, the Chinese and a lot of other people into taking the paper that we print for the stuff they produce, because the dollar is the reserve currency. So instead of actually having to make stuff that the Chinese wanted, we just printed money and say, "Hey, take this." And now they took all this stuff that they made in factories where they actually had to invest in them and people had to do hard work, and maybe they were making pollution, whatever. But the Chinese economy expended real resources to produce all kinds of goods that are filling up the shelves in Walmart that Americans are driving home in their big SUVs. And what are they doing? How are we earning all this stuff?
Where is Winston Churchill and the Pound? (40:33)
The Fed's just printing money and handing it out. What does that cost us? Next to nothing. And so, in the short run, this is a great deal for Americans because we get something for nothing, and the Chinese get nothing for something except they don't realize they're getting nothing. They think this paper has a lot of value. But in reality, it doesn't, because it's an IOU. It's a claim on US production. But what if our production is going down? Eventually, we're going to wipe all that out with massive inflation when the world doesn't want our dollars anymore, and they try to cash them in when they try to buy stuff. It's like, "Well, what are you going to buy? We don't have our factories anymore. They're all in China. That money's no good." I mean, we run this giant Ponzi scheme. We have a $33 trillion national debt that continues to grow trillions of dollars a year, and we finance it like Bernie Madoff did, because we can't pay anybody back, so whenever a bond matures, we find some other sucker to buy it. When we have to pay our interest, we find suckers to loan us that money too. But this only continues as long as the suckers are willing to keep lending. But when people want their money back, we don't have it. Even during the debt crisis, we even admitted that, that we said, "If we can't go deeper into debt, we're going to default because we're broke." All this is going to collapse. The dollar is going to lose its reserve currency status. Then, if Americans want to consume, they're going to have to produce. That's much harder than printing. That's going to mean a lot of people who are not productive are going to have to start working. A lot of people who have jobs, they have non-productive jobs. Those jobs aren't going to cut it. In a society where we're no longer creating the reserve currency, they're going to have to go make some. Let's look at historical examples. I'm taking the flip side of this argument. I'm saying, look, it doesn't have to end in de-dollarization. Even if it does end in de-dollarization, it could happen well like it did for the pound where the pound slowly over time, lost its juice, America rose up, thrown a couple world wars that confuse and discombobulate people. You come out the other side, there was no excluding the wars. I want to be very clear that I don't discount the loss of life. Just looking at the economics, there was a relatively smooth transition from the UK as the dominant global power reserve currency to the US dollar as a dominant world power and currency. It wasn't actually that smooth. And if you look back at the days where the pound really dominated global trade, Britain was an empire. Think about how much influence Britain had all around the world. It's just another country now. It's like the Britain is a shadow of what it used to be. So yeah, it doesn't have anywhere near the economic or military power that it once had when it had that position. So to say that, oh, it was easy for Britain. Imagine what happens when America is just another country. It's going to be a big difference. But I think that our economy structurally is more screwed up than the British economy was. So we're extremely dependent on the dollar status. Now, really fast, are we in a worse position because of the debt crisis? What makes it worse now? Well, and the structure of our economy, we're so dependent, this service sector economy that can't exist unless it's supplied by the rest of the world. And when the pound was the dominant currency, it was backed by gold. I mean, it was a real money. They couldn't just print it like we've been doing. So the dollar is the reserve currency, even though it's backed by absolutely nothing. Really fast. So Winston Churchill said the biggest mistake he ever made was reattaching their currency to gold. Out of curiosity, I'm going to guess you think that was a dumb statement on his part. The reason that he said that I think is because now seeing how much power it gives America to just print, print, print, print, print, print, print, print. And this is like the thesis of my argument. You can get away with the shit for so long that the people that pay the price didn't create the problem. And so just emotionally, nobody has to go through. That's not quite true. You'll get increasingly agitated movements like Occupy Wall Street, which we will almost certainly talk about later because I know that you had a very interesting relationship with them. But you'll get increasingly sort of agitated movements like that until something happens and either it breaks or just the kids that end up taking over the government, they just end up doing things differently. But I think that's why he said that was like, oh my God, we really cripple ourselves and we made it impossible for ourselves to print our way out of this problem. Yeah, I mean, that's one of the reasons that politicians hate gold, is it forces them to be honest?
Politicians and bankers vs. gold (45:30)
And that's the last thing that a politician wants to be. I mean, they don't get elected telling the truth. And if they've been in office for a long time, it's because they're very good liars because that's how you get reelected. But the public wants gold because we want to keep the politicians honest. I don't think the public understands gold. No, well, they don't think they've been deliberately confused about it by a government that doesn't want the public to understand it because the government wants to be in charge of the money so that they can manipulate and tax us and try to tinker with the economy in ways that might make their reelection easier. And so we're not on a gold stand. Again, it's like kids at a high school prom, they don't want the chaperones because they want to do a lot of things that the chaperones won't approve of. But the parents want the chaperones because they don't want the kids doing that stuff. That's why they're there. So gold is like the chaperone to keep the politicians and the bankers honest. But that's not what they want. They want to be up to no good and gold stands in their way.
Gold and economic freedom (46:40)
That's why if you look at, read for example, Alan Greenspan's essay, "Gold and Economic Freedom." And he wrote this years before he became Fed chairman, but he does a great job of explaining this concept. And gold and economic freedom go hand in hand. We want honest money. We want sound money. I mean, money is supposed to have real value. It's not supposed to just be conjured into existence out of thin air by a central bank. We'll get to that in a second. So if Alan Greenspan writes this thing and really understands gold and understands how a true sound money that is tied to something that can't be faked, if he understands that, why when he was Fed chair, did he not lobby to get us back on a gold standard? He was a sellout. I mean, that's why. You know, and he thought, well, he was saying that he was as good as gold. He said he was trying to manage the dollar with the price of gold. In his mind, it was when gold was at 400. So he used to say, if the gold price is above 400, then I know that I'm too easy. If it's below 400, I know I'm too tight. Well, look where we are now, 1900. So clearly the Fed has been too loose based on the barometer that Greenspan had back then. But he had some arrogance. You know, once he got into power, he enjoyed being called the maestro. You know, there's an old saying, "Lord Acton, power corrupts, absolute power corrupts absolutely." And so you get absolute power over the monetary system. And this is what happens. But, you know, I know that if I could have a private conversation with Alan Greenspan, he, you know, he would very much like the country to go back to a gold standard. He doesn't, he's never repudiated a single word that he wrote in that essay, "Gold and Economic Freedom." In fact, I was speaking to Ron, you know, Ron Paul about who had a birthday the other day. But Ron told me of a story where he was talking to Greenspan in the halls of Congress, and he had the Atlas Shrugged book or capitalism, the new, the capitalism, the unknown ideal. And he asked Greenspan, you know, "Point, Blake, hey, I've got this book. You know, your, your article is in here, "Gold and Economic Freedom." You know, is there, you know, do you want to, you know, retract any of that, right? Because now you're saying things. And he told Ron Paul, "Nope, I wouldn't change a word." So he still believed it. You know, regardless of the public persona, he still knew it.
Hypocrisy on Wall Street, selling out for personal gain (49:17)
He believed it. You know, that's why he was in many ways a hypocrite. But as bad as Greenspan was, and of course, when I was forecasting the 2008 financial crisis for years and years, for most of those years, Greenspan was Fed chairman. And so I always blamed the crisis on Greenspan, not necessarily Bernanke because he inherited the bubble, but Greenspan inflated it. Now he was oblivious to it. And of course, everything Bernanke did in the aftermath of the financial crisis was a mistake. And we're paying for that mistake, and we're going to pay for that mistake. But Greenspan started, you know, and I said he was the ace of spades in the deck of cards, trying to figure out who caused the 2008 financial crisis. You know, I wanted to go to Congress and testify because they had a hearing on why we had a financial crisis. And I was like, you know, the kidding class, "Ooh, pick me, pick me," right? Because I had been warning about I wrote a book forecasting it. I mean, it basically happened the way I said it would for the exact reasons that I said it would. In fact, I even helped set up a hedge fund that was short the subprime market. I was, you know, got as many people as I could, the short subprime in 2006, and then it blew up in 2007. But I knew exactly why we had a financial crisis. I knew exactly what caused it. And so I wanted to go to Congress and testify, but they wouldn't let me. Instead, they had a bunch of people that didn't predict a crisis, that had no idea that it was coming, that were completely blindsided by the crisis. And then they blamed it on the free market. They blamed it on a lack of regulation. They blamed it on everything that had nothing to do with it. It was the Fed. It was Fannie. It was Fray. It was all these government agencies that caused the problem. That's how I knew it was coming. That's how I knew exactly, you know, the consequences, because I understood the mistakes that they were making. But the people who testified at that hearing made the mistakes. They had no idea why we actually had a crisis. But the real purpose of the hearing was not to find out why we had a crisis, but to blame it on a private sector so that we could use that as an excuse to create even more power for the government and the Federal Reserve that collectively caused that crisis. And based on what they did in the aftermath, we're going to have it even worse.
Occupy Wall Street issue targeting (51:38)
But that was the impetus for the Occupy Wall Street. Because if you remember, everybody was protesting all the bailouts and what was going on. And you had this group of people in New York that were mad at the private sector for getting bailed out, and I wanted to go down there and say, "You're mad at the wrong target. You should be down in Washington on Pennsylvania Avenue. You should be protesting the White House, Congress, the Fed. Don't protest the companies that took the bailouts, protest the government that gave them the bailouts. I mean, who's not going to take a bailout if it's offered to you? If somebody offers your kid a bunch of candy and then your kid eats it, I mean, yeah, what kid's not going to eat candy? You blame the guy that gave them all that candy." And so I said, "That's how I went down there." And I said, "Look, don't protest capitalism. Capitalism is the solution to the problems that you're worried about. Protest government, protest socialism, the central bankers. They're your enemy, not private businessmen."
Debating Capitalism Versus Socialism
Why people think capitalism is evil (52:44)
Okay, having seen you debate people down at Occupy Wall Street, I can say that at least people that were a part of that movement and probably people that are a part of that, a very similar vibe now would all disagree for one very simple reason. Capitalism is evil. It concentrates money in the hands of a very few who have effectively stolen it from people, either through back Ali dealings, back government. I don't know if they'd use the word bribe, but like, lobbying government, using official bribery channels and the like. And when I think about that argument, which I'll let you directly respond to, but to me, the problem feels like you are simply up against human nature. And human nature is such that I want you to give me something now, and I have a very hard time calculating the negative second and third order consequences. And when the second and third order consequences come, people probably, they may not even necessarily be lying, although I heard you about politicians and they do well as they get better at lying. But even being generous and saying they're not lying, they just don't understand it, because this stuff is very complicated. And I my unfortunately, life has taught me the moment you're asking the masses to hold a sophisticated idea in their head that it is never going to work. And you you will only if you ask the masses to hold a sophisticated idea in their head, they will only calculate first order consequences period. And therefore, anything that happens in second and third order, it is as if it doesn't exist. But then subsequent, either years or generations down the road, you get fucking obliterated. And Ray Dalio is clock this, all of every empire that has ever existed ever, every reserve currency that has ever existed ever, they have all collapsed, but they all collapse for the same reason. And it's what we're living through right now. And that's what I'm like, what the fuck? Like, I don't see how this isn't inevitable.
Capitalism vs. socialism (54:49)
Yeah, you know, human nature is one thing that doesn't change. I mean, we're more sophisticated now, we have a lot more technology now, but that hasn't changed. We haven't learned from the mistakes of the past, we just keep on repeating them in an endless loop. But yes, a lot of people believe that capitalism is evil. But you know, capitalism is the least evil economic system that exists. I mean, this is probably because the teachers don't understand this either. And so we have a bunch of kids that learn bad things from teachers who don't get it in these government schools. But it's socialism that's inherently evil, not capitalism. Capitalism is about freedom. It's where individuals are free to transact with one another and pursue their interests, their self-interest, without government intervention. Now, people think, well, then people are just going to exploit other people and take advantage of them and screw them over. But that's not how it works. Because if I want to enrich myself in a system of voluntary interaction, I can't force anybody to buy my products. If I want somebody's money, I have to earn their money. I can't force them. I'm not a government. I can't tax them. I can't take stuff from them against their will. I have to convince them that it's in their self-interest to buy what I want to sell. If I want to hire somebody, I have to pay them more than anybody else is willing to pay them. Or I have to give them a combination of pay and benefits and a work environment, where they voluntarily accept my offer of employment. I can't constrict them into service, like the government and a draft. I can't force you to work for me. I have to give you a deal that you decide to take because it's better than somebody else's deal. And so everybody is acting with one another voluntarily. Capitalists, the way you get rich, is I try to figure out, hey, what is something that would make everybody's life better? What do we need that a lot of people don't have? And if they had it, their life would be better. And then I'd come up with something. Or maybe I'd come up with something. You didn't even realize you wanted it until I showed it to you. And then when you saw it, oh my God, my life would be so much better if I had that. And then you buy it from me. And I get rich because I made your life better. I'm getting rewarded for improving your life. That's capitalism. We all get rewarded for making everybody else lives better. And it's all about voluntary exchange and interacting. There's no coercion. Nobody is forced to do something that they don't want to do. Compare that to socialism or government. The government forces people to do stuff whether they want to do it or not. Here's this law. You have to abide by that. You can't do this. You must do that. You have to pay that. You can't do this. This is coercion. This is force. And the government can say, and we're going to take all this money away from you. We don't have to earn your money. We're just taking it. And if you don't give it to us, we're going to put you in jail. There's no businessman that can put you in jail if you don't buy their product or accept their employment offer. They have to entice you to buy their stuff. And so I want to live in a world where people have to win my business, right? Where they have to improve my life. Not where they can ruin my life and put me in jail if I don't do what they tell them to do. So that's socialism. And when people think, well, people are inherently evil. They're not going to cheat. They're going to try to rip me off and give me poison food and shoddy merchandise. Some people will do that. Some people are going to cut corners and try to pull a fast one. Some people will commit fraud in the marketplace. They'll lie about something. But those people are not going to be hugely successful businessmen. The free market will weed them out. They'll go out of business. People will tell their friends and they'll get bad reviews. And eventually, they're going to go away. They may make some money in the short run. But if you want to build a good reputation and have a lasting business, you don't do it by ripping off your customers. You do it by serving your customers so they keep coming back and they don't go to your competitor. But yes, there's going to be some bad apples in capitalism. But you know what? There's even more bad apples in socialism. Why people think that businessmen are greedy, but they trust politicians. Those people in government are as greedy as anybody. They want to make money too. But now they have power over you. Now they can make money through corruption, through graft. And if you want to look at these socialist countries, who are the wealthiest people? The people that work for government. They have all the money. They have all the stuff. There's a huge divide. They say, oh, it's going to be equal. Everybody is going to be equal. Yeah. Everybody is equally poor, except the people who work for government and they're rich. And they get rich by stealing money from the public. But in capitalism, people get rich by serving the public. And there's a much better distribution of wealth in capitalism than socialism, because you have a middle class. I mean, capitalism created the American middle class without capitalism. There wouldn't have been a middle class, right? There just been a bunch of poor people and then some rich bureaucrats at the top that were sucking the lifeblood out of everybody else. For the average person today, that does not feel true.
Importance of economic mobility (01:00:36)
For the average person today who economic mobility has begun to decrease, and look, I doubt you know much about my background, I could not be a more die-hard capitalist. But I want to make sure that we steal man the flip side of that coin. So for somebody that's growing up now, call it just bad luck of timing. And boomers created a system that just drained the wealth. They've trapped it and it's not getting back into the system. Whatever reasoning ends up being the right analysis in the final look at this. But nonetheless, economic mobility has scaled back. You get people like Ray Dalio, who I think has looked at this problem more closely than just about anybody. And he's like, look, we do need to make changes to the system. Otherwise, you're just going to keep getting this massive divide. And for people familiar with the Jenny coefficient, if you want people to fight, then have people that have massive wealth and people with no wealth be next to each other. Because all you care about is what your neighbor has. And so that's what we're getting right now, right? So people are just like, fuck this guy, like he's got so much money, Elon Musk, he's making whatever he's worth $160 billion. He's hoarding that money. That's all money that would have gone to me. But now I'm not getting it because this asshole has all that money. And so I think they have identified the wrong solution, but they're not wrong that there's a problem. Like growing up in the 80s, I really felt like I could do anything. And now my life becomes proof that that's true. I did not grow up with money, but I have made a lot of money. You don't get rich by hoarding your money, because if your money is hoarded, it doesn't grow. The way people get rich is by investing their money, by creating economic growth, by producing more products, providing more employment. So the last thing you want to do is take that wealth away from the rich, because they use it so productively. They're not just sitting on a pile of cash in their backyard. Their wealth is out there working and growing the economy. But the reason that we have so much less upward mobility than we could have is because of all the roadblocks that government has placed in people's paths that wouldn't be there, but for government. I mean, it's very hard now for someone just to get a job, because we've made it so difficult to employ people. If you want to go out and hire people, the government says, well, here's a minimum wage. You can't hire somebody if they have very low skills and they're worth less than a minimum wage. So immediately you price a lot of people out of the labor market, because they're not worth the minimum wage. You might hire them if you could do it at $4 an hour, but you won't do it at $9 an hour. Now, you might say, well, why would somebody work at $4 an hour? Well, they have no skills and they want to get some skills. And if you have no skills and you want to get some skills, the best way to get them is to get a job and learn them. And so, in many cases, you're paying somebody $4 an hour to teach them how to do something. But once they learn how to do it, then you have to pay them more money or they're going to quit and they're going to go someplace else. But we also have all these employment taxes that increase employment costs, make it more expensive to hire people, Social Security, unemployment. And then we also empower workers where you can sue your boss eight ways from Sunday. I mean, one of the easiest things to do in America is sue your boss. And that means that people are reluctant to hire. Who the hell wants to get sued? So a lot of fewer people get hired because the employer doesn't want to risk a lawsuit. And this is particularly problematic for minorities who may have a greater tendency to sue because they can bring up discrimination and stuff like that. It's so easy to claim, oh, I got fired because I'm African American or I didn't get promoted because I'm a woman or I was handicapped. I mean, there's different things you can say or somebody insulted me at work. I mean, so employers want to reduce their legal liability. And they do that by hiring fewer people, by outsourcing to other countries, by automating where they might prefer a human, but the computer can't sue them. So the government has just made it very difficult for people to climb up the economic ladder because in many cases, the first few rungs of that ladder have been destroyed by the government. And so if we could just have a free country, when my grandfather came into this country, they didn't have any of these laws. There was no minimum wage. There was no welfare. There was no unemployment. There was no Social Security. He came with nothing. He didn't even speak the language. He was like 12 or 13, but he got a job right away. And then eventually he had his own little business and he employed people. But he didn't have to do all this with his employees either. I mean, I don't even think he kept track of how much money he made because why keep track? There was no taxes to pay. It was a free country. You can concentrate on running your business, not figuring out how much you had to cut the government in on. The only taxes were sales taxes. Which was easy. This was your dad or your tax. My grandfather. Okay. My grandfather. There was no tax? Not it. Well, they didn't have income taxes. They didn't have Social Security taxes. The only taxes you had, it was like a tariff. You didn't even see the tariffs, right? Because they were embedded in the products. And the cities, the locals, they did have like sales tax. But that's it. That's all there was. Nobody had to fill out forms. Nobody had any money taking out of their paycheck. I mean, that's what America used to be like. And people weren't starving. People were dying for lack of medical care. If you didn't have money, doctors worked for nothing. It was, we ran great. Government was tiny, 100 years ago, 1900, 1890, 1910. Now, we didn't have as much technology then as we have now. But, you know, can you imagine if if the government had stayed in the same relative size that it was in 1900, if we never had an income tax, corporate income tax, personal income tax, we never had all these government programs, Social Security, Medicare, Medicaid, Obamacare, right? If we had just stayed the same, you wouldn't even recognize America today. We would be so wealthy. It would be unrecognizable. The living standard of the average American would be unlike anything that we see today on Earth. But we were robbed of all of those benefits because we gave up on on capitalism and we went all in on almost on socialism and we really transformed the nation. And we've all suffered whether we realize it or not. Okay, so I am hearing this as somebody who is very skeptical of capitalism.
Freeing success and prosperity (01:07:24)
I'm thinking, "Law of the jungle is the strong will do what they will and the weak will suffer as they must." And the whole idea behind a government is that you're going to protect the smaller person. You're going to create the environment where they can be successful. And what I hear you saying is that, "Oh, everybody is so magically kind that if we had a true capitalist society, doctors will take care of the sick for free. Nobody's going to die on the stair steps. Pregnant women aren't going to die in childbirth in their homes because they were too poor to go to the hospital. They look around and they see a broken system. They see us in late stage capitalism. We tried it, Peter, and it led to derangement. It led to evil behavior. If it wasn't for things like Obamacare, just the number of people that would be dying in the streets. This is crazy. You're just a rich guy speaking your book right now. That's just government lies. I mean, the most the freest period of time in American history really was from the end of the Civil War to the beginning of the First World War. That was really when we were the freest, right? No more slavery. African Americans were head-bed freed. And we were on a very solid gold standard during that period of time. That was the industrial revolution. You've never seen a period of time where real incomes rose faster, where real GDP grew faster than during those years. And that's when we had the least amount of government really in history. Look, the conditions to achieve success exist naturally. All the government can do is diminish those conditions by imposing barriers. Now, it's not that I'm saying, hey, we shouldn't have any laws. Yeah, the local government, yeah, should it be illegal to defraud somebody? Yes. We shouldn't just, hey, you can commit crimes as long as you get away with it. No, because in a free market, you could do whatever you want. You just can't harm somebody else. So I can't deliberately steal your stuff. Theft is wrong. I have to earn money. I can't steal your money, which means I can't defraud you out of your money. So that's still a crime. I still want to punish criminal behavior because everybody has to respect everybody else's rights. My freedom to move my fist stops at your face. I can do whatever I want with my fist. I just can't hit you. The minute I hit you, I violated your rights. So we have to leave each other alone. But that doesn't mean that if I see somebody starving on the street, I'm going to leave alone. I'm a human being. I'm going to care about my fellow man. See, I have no problem with voluntary charity. And we had plenty of that before the government took it over. I mean, you talk about doctors. Doctors did so much pro bono stuff for free when they didn't have to pay income taxes. They didn't have all these other paperwork and forms that they could actually be doctors instead of government bureaucrats. They had a lot more free time and they didn't have to charge as much for their services. But people should be free to voluntarily donate money to people in need and help them out. What is wrong is when the government steals money from somebody because they claim somebody else needs it. That's wrong. Theft is immoral just because the government is doing a stealing. And if you rob from the rich and give to the poor, it's still wrong. Even if the poor need the money, the ends don't justify the means. The rich have to voluntarily donate to the poor, which they will. But here is the unfortunate reality of government running charity is every government has a huge bureaucracy. So in order for a government to give the poor 10 cents, they have to take a dollar from everybody else. It's very inefficient. But if you look at private charities, they raise a dollar and the poor get 90 cents. It's a much more efficient way to help people if you keep the government out of it. Plus, and this is probably the more important factor. The government wants to perpetuate poverty because they want to perpetuate their own existence. So if you're in charge of this anti-poverty program, the last thing you want is to eliminate poverty because you're out of a job. Your job is, I want more poverty so I can get a bigger budget. And so they design these welfare systems that create dependency. But a private charity doesn't want the people to stay poor. It wants them to not need the charity anymore. It wants to give them a handout, not a handout. So you want the private sector to be doing these things. You don't want to turn over this function of government. There's a few things that I think government can do well. But charity is not one of them. Neither is education. Neither is health care. Those are things where the government should stay completely out because all they do is screw it up. Okay. So what do you say to the people that are choking to death on the idea that we were at our freest?
Less rights but more freedom (01:12:31)
And you use the word freest so I don't want to put words in your mouth to say we're at our best or anything like that. But that we were at our freest from post-Civil War to World War One because they're thinking, bro, we didn't even have civil rights. This is crazy. People were being abused in ways that by a modern standard we cannot fathom. First of all, I don't believe in these civil rights. I believe in individual rights. Everybody has rights because they're an individual. Nobody has special privileges because they're a member of a group. I'm Jewish. I don't have special rights because of my Judaism. I'm older now. I'm 60. I don't have senior rights. I don't have different rights than I had when I was 40 or 30. But other people that fall into certain groups, if you're African-American, you don't have special rights because you're African-American. If you're homosexual, you don't get extra rights because you're homosexual. We all have the same rights. It doesn't matter which group we happen to fall into. We all have the same individual rights. What people are trying to do is get special privileges from government because they're a member of a particular group. That's wrong. That's a faction. I think we're actually worse off now than we were before we had all these so-called civil rights because what they really are are limitations on individual rights. What the government is saying is you can't do this. For example, if I'm a religious person and I don't want to participate in a gay wedding, I don't want to bake a wedding cake for a gay wedding. I'm just religious. The government says, "No, you can't do that. You got to bake that cake whether you want to or not. We don't give a damn about your own religious beliefs. You've got to do something that you don't want to do." That's wrong. You're limiting individual rights. If I own a bakery, I can decide. If I want to turn down your business, I don't want your money, they get somebody else to bake your cake. There's plenty of people who will take the money. I just think that we've all lost rights in the name of giving other people privileges. The country is less free now. People say, "Oh, people shouldn't discriminate." You know what? You have a right to discriminate. You can't tell me, "Hey, you can't discriminate against me." Yes, you can. It's a free country. You can do it. You can associate with whoever you want. You can hire whoever you want. I can't tell you that you can't discriminate against me. It's your business. You decide who your customers are going to be, who your employees are going to be. That's up to you. If you can survive in the marketplace that, well, then you survive. That's light. That's how you live in a civilization. Today, everybody wants to force everybody else to tolerate anything that they do. That's wrong. And people don't want to be offended. "Oh, you said something that hurt my feelings." Off and off. That's life. You don't have a right not to have hurt feelings. People can express their opinion. Even if that opinion causes you to feel bad about something. I mean, that's being an adult, living in a society. We all have freedom of expression. We have free speech. That means we can say things that other people disagree with, that other people think are offensive. And if you don't like that, then you got to go someplace else. I think people are going to be more outraged by the idea that you have a right to discriminate than they will by you saying that the government is the root of all of our economic problems. Help me understand. My immediate reaction is, "Okay, discrimination can get pretty nasty." We have seen where people enshrine that in law, and it makes things from my perspective. It can't be in the law. So you're right. Back prior to the Civil Rights Act of 1964, you had southern states where the governments were mandating discrimination, and that was absolutely wrong. The government should never tell a business, you must have a white bathroom and a black bathroom. That's wrong. Now, if the business on its own decides that that's what I want to do, well, that's a different thing. But the big problem down south was not that businessmen wanted to discriminate. The government was forcing them to discriminate. It was government that caused all these problems, not capitalism, because if you're a business, you're going to try to appease your customers. You're going to try to get as many customers as you want. You're not going to try to piss them off. Even if you're a racist, let's say I was down south, and whatever reason I don't like blacks, I still want them to shop in my store. I still want their money. But it was these government laws that were forcing discrimination that never would have existed. So yes, in that respect, there was less freedom in that one aspect. But I would say that even though African Americans faced that type of discrimination down south, because of government, not because of capitalism, on balance, they were still freer because, hey, there wasn't even that big a problem back in 1780, 1790, 1900. You didn't have as big an issue. But they had no income tax, no IRS, no Social Security. They didn't have all these forms. They didn't have to keep all these records. If they wanted to start a business, they could just start it. They didn't need all these forms. They didn't need all these licenses. They didn't have all these bureaucrats. They didn't have the higher counts. They didn't have the higher lawyers. So I think overall, the level of freedom was higher. But yes, I am glad that we made it illegal for these southern states to force private businesses and private individuals to discriminate when they didn't want to. But that's different than having a private individual decide on their own if they want to discriminate. That's totally different. If you want to choose to do that, then you've got to suffer the consequences. The woman, I just meant an example, somebody didn't want to bake the wedding cake for a gay wedding, okay, now they lost out on the money. That's the business they turned down. There's plenty of bakers that don't care, that don't have any problem with gay marriage. If I ran a bakery, yeah, give me all the gay wedding cakes you want. I'll bake them all. Wedding cakes are like the holy grail of cakes. If you're a baker, you're waiting for order for a wedding cake. You make a lot of money on those things. So the more gay weddings, the better if I'm making wedding cakes. But if somebody else has a moral problem with it, that's their business. And I wouldn't, look, I'm Jewish. If I went into a cake, I wanted to buy a cake for my kids, Bonnitzvah. And I went in there and I said, hey, I want you to bake a Bonnitzvah cake. And the guy said, oh, I don't like to bake by mitzvah cakes. I don't like Jews. I mean, I'm okay. I'm going to go someplace else. I'm not going to care. I'm not going to sue the guy. In fact, if there's an anti-semite, I'd rather that person tell me upfront that, hey, I don't like Jews. So I go and take my business someplace else. Because what if he just took my money and then like spit in the cake or whatever? I mean, I'd rather have the anti-semite, let me know right off the bat so I don't work with them. But we make the now, no, I got to file a lawsuit. I got to force this guy to bake this cake. I mean, it's ridiculous. It's interesting though. And I think it's a sign of the problem that I think we're really battling and that I'm trying to find the edges of in this conversation, which is what you are up against is human nature. You are up against people. You are up against the way that they think, the way that they act.
Universal principles lead to democracy (01:20:21)
And when you get them into large groups, you get these societal movements that either are moving in the right direction or meaning they help more people thrive or they are moving in the wrong direction and they begin to curtail things, adding back in the complexity of first sort of consequence, good. Like, I'll be honest, the first sort of consequences of all the things you just said, they sound awesome, like civil rights. Awesome. Making people, I don't know, I'd have to think about the cake one. I won't take a stance on that. But these things sound like it sounds right, like that somebody shouldn't discriminate. They shouldn't be unkind. And that brings me, I'm not, hold on, because I'm not justifying my position on that. I'm just saying that's my initial reaction is I like the idea of somebody being taken care of. The problem is where I start to worry about the state of the economy and their physics to the economy, it works in a certain way. This is all tied to individuals and how people are and what they act like when they come together in a collective is that right now and maybe always the thing that we're up against with a movement, I'll make a prediction. Every economy ever in the history of all time will, if they start as a capitalist economy, will move towards socialism. And the reason I think that that will happen in a loop is as things get better and capitalism pulls you out of difficulty and creates a thriving middle class and things are going well and things are looking up and better than ever, you're the reserve currency. Yay, like things are awesome that you start going, ooh, but I don't want to see people suffer. I don't want to see tragedy. Yeah, it's not, the inherent flaw is in capitalism, it's democracy. So if you have a democracy and capitalism, then you're going to have that because it's the voters that are falling victim to the politicians that say, hey, look at that guy's richer than you, that's not fair. Let's take some of his money and then you're more deserving, right? And the public doesn't get it and they vote for this, but capitalism itself is not creating the problem. It's creating the prosperity that enables the politicians to now play on people's greed and their envy and all the lowest common denominator. But I wanted to also just talk about the discrimination.
Analyzing Government Acts And Their Influences On Market And Society
All forms of discrimination (01:22:44)
People shouldn't discriminate. It's bad. Look, everybody discriminates in their private lives. I mean, you discriminate on who your friends are going to be. I mean, you have certain characteristics that you look for in your friends. Not everybody is your friend and you discriminate when you're dating, when you're marrying. I mean, I'm a straight guy, but I mean, there are all sorts of women that write up the bat. I'm not going to date you, I'm not going to date you. I mean, because you have tastes and you have certain things that you prefer and you discriminate against the women that don't have what you like as a man in a partner or whatever. So we all discriminate. Now, the question is, well, if I can discriminate in my personal life, can I discriminate in my business life? And I don't make a distinction. If I decide to start a business, I don't surrender my rights because I have a business just like my customers. I mean, people, people, you can discriminate among businesses. Let's say I'm African American and I want to go to, I want to patronize a business that's owned by an African American. I could do that. If I don't buy, if I don't shop at some store owned by a white guy, he can't sue me and say, hey, you should have come to my store. Why'd you go to this guy? I mean, you know, he's black and I'm white and you're just going over there. You're discriminating against me because I'm white. Yeah. I mean, look, there's people right now. There's businesses that want to help African Americans that are going out of their way to try to hire them. And now they're getting sued for that. It's like, look, if you want to do that, you're a business. You can decide that that's what you want to do. But you also have to accept the consequences. If you discriminate for an irrational reason, right? If I'm a businessman and I've just got a prejudice and so I'm going to, I'm going to deliberately not hire people that are in particular groups because I just, whatever reason, don't like those groups, I'm not going to be as competitive as people who don't consider those factors, right? The companies that are going to be the most successful in a capitalist system are those that only discriminate on relevant characteristics, which would be competence and skill level and other characteristics, honesty, punctuality. I mean, you want to hire the right people and irrelevant characteristics, what gender they are, what race they are, what sex, you know. But now sometimes they may be, they may be a factor, you know, because there are some jobs that I might determine, hey, this job is going to be better performed by a man. Being a man actually, you know, maybe it's a physically challenging job or there's something about it that, you know, men are more likely, some jobs women are more likely to succeed as it, you know. So, but it's up to the businessman to decide and then live with the consequences because the people who are discriminating are not going to do as well and they'll go out of business. But you know, what happens now with all these anti-discrimination laws, a lot of people who otherwise would not discriminate end up discriminating. That's the irony of all this because the government has made it so easy to get sued. And I know this because I've spoken to businessmen, small business owners, who are reluctant to hire African Americans or in some cases women or somebody who's, you know, where they can tell that they're gay, they don't want to hire these people, not because they have any prejudices against them. They don't. But they're afraid of getting sued. They're afraid of what might happen if they don't work out and they have to terminate them or maybe some one of their other employees says something that offends them. And then so if you're running a very small business, you have three or four or five employees, the safest thing you could do is just hire white men. Then you're pretty much bulletproof, straight white men. No one's going to sue you. I mean, I mean, it's possible, but it's very unlikely. And because they're the, you're saying they're the least protected group? They're the ones you, it's very hard to say he fired me because I'm a white man. I mean, most, even though I was going to buy that, right? I mean, it's like, or he fired me because I'm straight. I mean, it just, so businessmen look at somebody coming for a job interview. And if they're, if they're, if they're one of these groups that can sue you easily because they can claim you discriminated against them, there's like a big flashing thine on their head, you know, don't hire me, don't hire me. Or you've got to be so good that it's worth the risk to the employer of hiring you, right? Because they think, okay, this guy's not going to sue me. But, you know, nobody, it's so expensive. And these lawyers will sue you these, you know, they take the cases on contingency. They shake you down. I mean, some people, when it comes to the disabled, that's where it's the worst, you know, it was much easier for the disabled to get jobs before the Americans with Disabilities Act. Now it's so much harder. Unemployment is a lot higher now because that act made it so expensive and risky to hire the disabled that people stopped doing it. You know, but before that, yeah, people would go out of their way to accommodate the disabled without the law. But the law came in and now they can't afford it. So it's, the government just screws everything up. They don't make anything better. You know, people just think, oh, yes. So it's terrible, you know, if somebody discriminates against me. You know what? Just go out there and prove to the world if somebody, you know, that you could do it. And if someone doesn't like you because of your religion or your sexual orientation, it's their problem. You know, they're the ones that got a problem, not you. And just ignore it and just go on and succeed because you're going to do it. I mean, people now been trained to think. The reason I can't succeed is because of racism or sexism or that's not why you can't succeed either because the government is making it difficult or because you're just buying into this nonsense that the deck is stacked against you. You know, when you can succeed, you know, and in fact, if you look at a lot of African Americans, you look at the immigrants that come in from like a Nigeria, you know, they're the same color as everybody else, yet they succeed. Their incomes, I think, are maybe even higher than whites because they don't buy into that nonsense and say, well, discrimination is my enemy. They just work harder. You know, that's what you do. You know, you don't rely on the government to give you a crutch and think, well, I need this government crutch because then, you know, then they cripple you. So you always need that crutch. I'm going to walk on my own two feet and I'm going to go out there and I'm going to succeed. And you will, without all this, the government bureaucracy, getting in your way, and these laws, these well-intentioned laws that actually backfire and make it harder for you. How often are you checking your credit score, afraid of identity theft or account breaches? 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Government Acts and Discrimination Home and Work (01:30:11)
And my interpretation of that is that you can get so good at something that no matter how much people hate you, want you to lose, they just can't stop you because you can outperform them. But to talk about discrimination, I think we really have to separate, and this is something I've heard Jordan Peterson talk about, and it's interesting, but I think the right way to think about it is you have to, it's almost a problem that they have the same words for when you're discriminating versus what you're discriminating based on what you like when you're talking about choosing a sexual partner or whatever. I think everybody has a type, there's just something that you're into, the most basic categorization, be male, female, but even then within that, it's going to you know, go down a list of for whatever weird reason, like you're into this thing. So that I get, but when it is systemic discrimination, and it is a larger societal echo of what I call school of fish, so it's inevitable that the way the human animal is we are a tribal creature, we're a social creature, so you end up going with people that you identify with, which often takes on very surface level characteristics of they look like me. And so you're just going to see that. People will cluster in groups of people that they identify with. So those two things to me, while they probably are born of like a similar region of the brain and from an evolutionary perspective, they're very different. One is like, yes, I would never want to tell somebody what they should do, who they should be attracted to. I think it's absolutely absurd when people are like, oh, you're not into me, then you're whatever phobic, I'm just like, that is just ridiculous. But at the same time, good? Yeah, here's an example of that, because yeah, I mean, obviously to a degree, you're going to see a preference that people are going to want to be around people that they're more familiar with, that they have more in common with. That's just a natural tendency for a lot of people, although some people might prefer more variety in their social engagements. But when it comes to employment, the most and the work sector and running a business, there you're focused on on on profits and making money. And how do you do that? Well, you have to be efficient. You have to generate customers. You have to get them, as I said earlier, to voluntarily patronize your business. And so there, that monetary economic factor is going to be more important than your own, you know, preferences or even if you had some prejudices, you're willing to overlook those if it improves the bottom line. It's only when there's no cost to that that you'll discriminate for those reasons.
The Free Market Will Always Find the Best (01:33:13)
And it's the government that takes away the cost of discrimination. And a good example of this is with the Chinese, when they were here in the United States, you know, many years ago, there was a lot of discrimination against Chinese. I mean, and but what happened was people, the Chinese were getting jobs. They were getting a lot of jobs. And people were hiring them, even though they still had prejudices. And the reason they were hiring them is because to overcome those prejudices, they were willing to offer their services at a lower wage, right? They were saying, look, I know you don't like me because, but I'll do the job for less money. And they're like, well, okay, you got the job, right? You know, so a lot of Chinese were getting hired. And so the white men didn't like this. They didn't like all these Chinese coming in and working for lower wages and taking their jobs. So they got the minimum wage law pass. And they said, look, you can't do that. You got to pay everybody the same. It doesn't matter if they're white or Chinese, everybody's got to get paid the same. And now that prevented the Chinese from trying to overcome this prejudice by offering their labor at a lower price. And so now, if I'm a white guy who prefers white guys to the Chinese, if I can't get the Chinese on sale, right, if I got to pay the same as the white guy, well, what the hell, I might as well hire the white guys. And that's what happened. And that was the motivation for the minimum wage. It was to put the Chinese out of work by forcing the people who were bigots to pay them more money. But the free market was dealing with the prejudice. And you know, if you're prejudice against the Chinese, but you start hiring them anyway, because the work cheaper, maybe you won't be prejudiced that much longer, maybe after being around the Chinese, you know, and you're working with them and you're saying, God, these guys aren't so bad. I don't know why I didn't like them, right? Because the prejudice is all irrational, right? I mean, and that's why when you say it's systemic, it's not systemic. In fact, there is a lot less racism and prejudice today than there was 100 years ago. And that's a good thing. I think fewer people, you know, feel that way. I mean, is nobody out there a racist or? No, of course. And there are races in all races, right? There are people who are white who are racist. There are people who are black, there's racist in every race. But fortunately, there's a small percentage. The average person is not racist. And so the idea that it's some systemic problem, the problem is smaller than it was 50 years ago. It's smaller than it was 100 years ago. The systemic problem is government. That's it. It's the welfare state. That's the problem. The problem in a lot of these communities is government. And what they've done, you know, government has destroyed the black family, not racism.
Government to blame, family destroyed (01:35:58)
You know, even slavery couldn't do that, not that I would ever defend that institution. But the minute they came up with the war on poverty under Linda Johnson, they started paying women to have babies. And they punished them if they had a husband. They said, the only way you're going to get this money is if you're at a wedlock and you have babies. I mean, we destroyed the family. I mean, it happened with white families too. It wasn't just African Americans, but they were disproportionately impacted by this. Then you have the war on drugs that is hurting disproportionately. I mean, all this should begin. I talk about capitalism. And capitalism, it wouldn't be illegal. Marijuana would be legal everywhere. Cocaine would be legal. These drugs would be legal. And if they were legal, there wouldn't be any criminals involved. It would all be safer. It would be the free market. They would be competing. It'd be honest. There wouldn't be all these people dying from having their drugs cut with something. Just unfortunately what Robert De Niro's grandson, 18 died because of some bad drugs he had there. If they were legal, that wouldn't happen to him. I mean, not, I'm not condoning drug use, but I think it'd be a lot less drug use if it was legal than what we had now. During prohibition, more people drank during prohibition than before prohibition. There were more speakeasies in New York during prohibition than bars before prohibition. So the government made it illegal to drink and then more people drank. But the problem was that also created them all because now it was all illegal. So you had all the crime. You legalized drugs. You get rid of the crime. You get rid of the corruption of the police force, all the drug money buying off all the cops. I mean, all this stuff happens. And so much crime is committed by drug addicts who need to buy expensive drugs. Everybody is a victim of the war on drugs. Whereas if drugs were legal and the prices were a lot lower, nobody would have to commit crimes to afford to support their habit. But I think fewer people would even get addicted if it was legalized. So that, you know, the government created these problems. And once upon a time these drugs were legal and we have much bigger problems now, then they were legal. I mean, what do you think cocaine is? I mean, Coca-Cola, where do you think the name came from? There was cocaine in there. It wasn't illegal. All right. A lot of what you're saying people are going to think is hyper counterintuitive, bringing it back to the economy.
Hyperinflation, prices out of control (01:38:30)
The good news is the only way to make money is to bet against the consensus and be right. So you seem to have, it's very interesting to me that you can talk in a very, you've obviously thought a lot about both the economy and human nature. To me, they feel like they're the same thing essentially. Like once you understand human nature, you understand the propensity for short term thinking, not understanding second and third order consequences, wanting your lunch for free on and on and on, the way that people act when they're free, when they're not, the propensity for government to get big, that it is going to inevitably inform the way that you look at the markets. So knowing what's going on right now, knowing that people are getting the short term lunch for free through the inflation of the money supply, that we've just been pumping money into it, what do you think in terms of things like the banking crisis? Are we at the beginning of this? Is this something that is over? Have we stabilized? We have a bigger problem coming? Like what does the nature of the situation tell you about where that's going? Yeah, in fact, I'm glad you asked me that question. But even before I do, I just want to just say one thing to finish up that last topic in case some people, after they hear me say these things, oh, this white guy, I mean, I'm, I must be a racist. Look, I'm a very tolerant individual. I don't harbor any animosity, any racist feelings myself. But I'm willing to tolerate those feelings in other people, even though I don't share them, and I don't think it's right. People have to recognize, if you want to consider yourself a tolerant person, you have to tolerate other people's intolerance. That's just the reality. You have to recognize that people have a right to be wrong. People have a right to be a borish. They have a right to have crazy thoughts and to be mean. And so if you really believe intolerance, which you should, then you have to tolerate intolerance. I mean, that's the hypocrisy of the left right now, is they want to pretend that they tolerate. And then if you want to do something that they don't like, they want to punish you. They want to put you in jail or they want to tax you or they want to sue you. No, you have to, you have to accept everyone, including the bigots, including the racists. They have a right to exist. They have a right to their opinions. They have a right to be wrong. And you have a right to ignore them. You have a right not to patronize their businesses. You have a right not to work for them. You could completely disassociate yourself with them.
Tolerance of Intolerance (01:41:05)
Or you know, you can engage them in a way that may help them overcome those prejudices and realize that they're wrong. But anyway, let me answer your question because yes, the way you make a lot of money as an investor is you figure out where everybody else is wrong and then you take the opposite side of that trade. Because that's how you can make the most amount of money. Because you have identified something in the market where there's a mispricing. Because the market is wrong. There's an idea of the efficient market that everything is priced right. Because everybody has the information and that's all reflected in price. But if everybody is wrong, if everybody thinks something and you know that they're wrong, the price is going to be wrong. Either it's too high or too low. Now, we mentioned earlier the subprime and the way people made money shorting subprime and not that many people made money because most people took the other side of the trade. They were buying the mortgages. They couldn't figure out the problem. But you had all these people who believe that housing prices can only go up and that these bonds would never default because who would ever default on a mortgage because the price would go up and the bank could just sell the property and get their money back. People, they're guaranteed or they're high rated and everybody believed that S&P or Moody's or Fitch or whatever. And so you had this bubble in home mortgages and people didn't care. Nothing down, negative am, teasers are loan. I mean, standards went out the window because people just thought that these loans would never go bad. And to me, this was sheer lunacy. I was like, this is an accident waiting to happen. And so it was by betting against that. And eventually, all of a sudden in 2007, the bottom dropped out because people figured it out. It took a while. But when they did, the mortgage market collapsed. People lost a lot of money who owned mortgages. Banks failed. I mean, a lot of money would have been lost. But a few people who bet that this was going to happen made money. It made a lot of money because not that many other people made the same bet. And so if people ask me, okay, well, what do you see now that reminds you of the mortgage market back then? Where is everybody wrong? And how do I make money betting that they're wrong? What's going to happen? They've been wrong for a long time. But I think the big thing now is the markets believe that the Fed is going to be able to engineer this soft landing, that the Fed could take the inflation rate back down to 2%. And it's going to stay there indefinitely. Just like we had 10 years or whatever years of 2% inflation as measured by the CPI, that the Fed is going to be able to bring inflation back down to that level so that it can reduce interest rates, which are now at a 16-year high. And they're still not that high. They're going a lot higher. But that these high rates are just temporary because it's enough to put the inflation genie back in the bottle. And so the Fed's going to be able to cut rates back down and everything is going to be fine because inflation is going to be eventquished. And we're going to go back to these low interest rates that everybody needs. The reason everybody needs low interest rates is because everybody has so much debt. Why does everybody have so much debt? Because interest rates were so low. Because the Fed Reserve kept interest rates so artificially low, it encouraged people to keep borrowing more and more money. And not just people, the government, federal government, state governments, corporations, everybody has loaded up with debt because the government artificially suppressed interest rates. Had they not done that, had the government not done quantitative easing, not blown up its balance sheet, interest rates would have been much, much higher over the last 20 years than they were. And as a result of that, we have much less debt. People would not have borrowed so much money. They wouldn't have started up a bunch of hairbrained companies that really have no chance of success. We wouldn't have these zombie companies. Individuals wouldn't have bought so much on credit. They would have actually saved because they could have got interest on their savings. So we'd have more savings. We'd have less debt. We'd have a much healthier economy. We'd have a more productive economy. But because of what the Fed did, the economy's all screwed up. Now, the market just thinks that we can go right back to where we were. They're wrong, that that ship is sailed. We're done. The years of low inflation are over. They're not coming back. There is so much inflation in the pipeline. And the dollar is going to start to really fall. The minute the Fed stops hiking, or indicates that it's done, and that's going to really accelerate the increase in prices. And you have the world now de-dollarizing. We actually sped up the process with the sanctions against Russia, which was one of the dumbest things that Biden did, was punish Russia for doing exactly what we need them to do. Russia was holding a lot of its reserves in US dollars and US treasuries, which is exactly what we need the world to do so we can export our inflation. And we punished them for doing that. We said, "You know what? We're going to take that away from you, and we're going to deny you access to the Swiss system." And we basically told the whole world, de-dollarize, or we got you by the balls. We could do the same thing to you. So that was a wake-up call. For the world, we needed an alternative to the dollar. When they have an alternative, we're SOL. We're going to implode. So the markets are basically assuming that interest rates go down, inflation goes down, and so stocks are overpriced, bonds are overpriced, gold is underpriced, the dollar is overpriced. You have all these prices that are wrong because investors are betting on an impossible outcome, because they don't understand all the mistakes that the Fed made since the 2008 financial crisis. In fact, they didn't understand the mistakes that they made before the crisis. That's why they didn't realize it was coming. I understood those mistakes. That's why I warned about the crisis in advance, and I know everything they've done since that crisis was a mistake too and made the problem worse, and the stuff that we did with COVID exacerbated the problem. But I think the markets are going to correct this, just like they corrected the housing and the mortgage market. A lot of people are going to lose a lot of money this time, but a lot of the losses are going to be in real terms, and we call some inflation. There's two ways you could lose money. You could just actually lose your money. I have $100,000, and I invested it, and I've got $20,000 left. I lost $80,000. But what if you don't lose any of your money? You still have your $100,000, but prices go up five times because of inflation. Well, I still have $100,000, but it feels like I got $20,000. I lost 80% of my purchasing power to inflation. Most of the losses that I think people are going to have to endure are going to be of that variety, where they still have their money, but they don't have much value in it. Everything costs so much more. So yeah, your bank doesn't fail. You still have your money, but you can't buy much with it. So it's not that big a consolation to have a bunch of money that's practically worthless. So what people have to do is they have to position themselves now against that consensus by buying non-dollar assets, by buying dividend-paying stocks around the world in the countries that I think are in best positioned to thrive in a post-US dollar reserve currency environment, because America has benefited from the dollar being the reserve currency at somebody else's expense. We get to live beyond our means, but that's only because other people have been content to live beneath their means.
Exploring Financial Survival In An Inflated Economy
So when America's standard living goes down because we can no longer just claim so much of the world's production with our printing press, other people are going to see their standard living go up. They're going to consume the stuff that Americans can no longer afford. And so I want to be invested and have exposure to the economies that are going to expand as ours can track. Countries that have freer economies, smaller welfare states, sounder fiscal policy, trade surpluses, stuff like that. And I want to own real resources. I think in the inflationary environment that we're in, you want to own energy related investments, agriculture, nettles, industrial metals, and in particular precious metals, I think that what's going to replace the dollar as the primary monetary reserve asset. It's not going to be another currency. It's not going to be the pound. It's not going to be the euro. It's not going to be the Japanese yen. It's not going to be the Chinese R&B. It's going to be gold. Because none of those currencies have what it takes. They all have problems. And a lot of people just assume that the dollar is going to reign supreme because they don't see another currency that could take its place. They're ignoring gold. Gold is in a currency. Gold is money. And before the dollar was the reserve currency, it wasn't the pound. It was gold. Gold was the reserve for every currency, including the dollar up until 1971. And when we did Bretton Woods, which is where the dollar really became the reserve, back then it was backed by gold. The dollar was as good as gold because if you had dollars, you had gold. If you had $35, you had an ounce of gold. You could take those dollars to the United States and they would redeem them with an ounce of gold. Give them $35, you get an ounce of gold. So it was gold that backed up the dollar. And that's why the rest of the world agreed to use it as the reserve. Now, we screwed the world over in 1971. We defaulted on our commitment. We promised to pay gold. And then we told our creditors, we're paying nothing. We basically just said these checks are no good. We made a commitment and we're defaulting on it. Now, the dollar went down a lot during the 1970s. It lost about two thirds of its value relative to other fiat currencies like the Deutschmark or the Swiss Prime. People didn't de-dol-rise then. When the US D-dol- or sorry broke the relationship to gold, why didn't a currency rise at that moment that was tied to gold? Well, there were no- there really weren't many currencies left that were still tied to gold because they were tied to the dollar. And then the dollar, you know, detethered or from gold. But what happened was the dollar lost a lot of value during the 70s, right? The Swiss Frank went from 25 cents to 75 cents. The yen, it went from 360 yen to the dollar to maybe about 150. I think the Deutschmark, we used to get four marks to the dollar. Then it went down to like one and a half. And so the dollar got marked down. Oil went from $3 a barrel to $30 a barrel in the 70s. Gold went from 35 to 800, right? So the dollar lost a lot of value. And that meant every American got poorer in the 1970s. That's the main reason that so many women started working in the 1970s. During the 1960s, if you were a married woman, most- you didn't have a job. Your husband could support you. It didn't even matter what kind of job. He blew collar job. He supported his wife. But inflation was so high. And people's money lost so much value that in order to pay the bills, the wife had to get a job. It wasn't like, "Oh, women felt liberated." So they decided to work. They were liberated when they didn't have to work. They were forced to work because their husbands couldn't support them anymore because of the inflation. But the dollar did stabilize in the '80s with the very high interest rates under Volcker. Rates went to 20%. And Reagan came in. And we kind of saved the dollar. Got to reprieve. But now I think the de-doloration is going to be complete because the other thing that happened to support the dollar was the petro dollar. So what happened is we went off the gold standard. So there was no longer any gold. We made a deal with Saudi Arabia to price oil in dollars. Say, "Hey, we'll defend you. We'll defend your regime and we'll keep your enemies at bay. You just price your oil in our currency." So now all of a sudden, we did create a use for the dollar because if you wanted oil, which everybody wanted, you needed dollars to pay for it. So that also really helped support the dollar. But the petro dollar now, unless you're blind, is on its way out.
Gerald vs. Modern Day Peter (01:54:05)
A lot of these countries are trying to figure out how to bilaterally deal oil in currencies other than the US dollar. And so when the world moves away from the dollar totally, then the collapse is going to continue. It started in 1970. It's going to continue. We're going to see a huge erosion of purchasing power. But it's going to be even worse. The economy today, the US economy, is in much worse shape than it was in 1970. I mean, we were a creditor nation in 1970. Even in 1980, we were still a creditor nation. That meant the world owed us a lot more than we owe the world. Today, not only are we the biggest debtor nation, we owe more money than all the other debtor nations in the world combined. Back even in the mid 1980s, America still had trade surpluses. Our factories were productive enough that we exported more than we imported. Now we have the biggest trade deficits in the world. I mean, biggest trade deficit, so the economy is a shadow of what it was. We had much more saving back then. Why does debt matter? What's the problem? Well, because when you're wealthy, I mean, look, if you get into trouble, do you want to have a nest egg to fall back on? We save for a rainy day. You don't borrow for a rainy day. Why do you build up a rainy day fund? So you have something to fall back on if times are tough. But if you're broke, if you have nothing, what are you going to do? We are vulnerable. We're no longer self-reliant the way we used to be. I mean, the economy is all screwed up. And so I think that the decade ahead is going to be a lot more challenging than was the 1970s. It's going to be a much bigger adjustment. Now, obviously, women can't start working. They're already working. So it's like we have a spare laborer that can pick up the slack like we had back then. So now we have more technology now. That's a positive. And now the whole specter of AI, that could help out. I mean, that could help increase productivity there. I just don't think it's a get out of jail free card that it's going to be like a miracle thing. But I think it's going to help. And a lot of other technologies that we have will help. But the problem is government, because I'm afraid that instead of getting out of the way, which is what you need, right? We're in a mess. Capitalism is our only way out. The free market, right? We could work our way out of this hole, right, that the government put us in. But if the government reacts to this problem with even more government, more regulation, more spending, there's no way out. I mean, we're just going to be impoverished until there's a violent revolution, right? Which, who knows when that's going to be? Can you imagine any scenario where government actually gets smaller? Well, yes, only in a scenario where things get better, because there's it's actually inversely proportionate. Prosperity is inversely proportionate to the size of government. The smaller the government, the more prosperous the society and the bigger the government, the less prosperous. I mean, you know, I have to do look, you know, you can pair, you have countries where they split it. East Germany, West Germany, South Korea, North Korea, right? You know, look at these countries where you take the exact same society and just cut it in half and you have one that's socialist and one that's more capitalist, which one has more a higher standard of living? Which one does better? Who did better? Communist China or Taiwan or Hong Kong? You know, China didn't start doing well until they started adopting free market capitalism. Yes, but they did it. They did it in a government controlled way. I don't want to derail and change. But I'm talking about if you go back to the 1970s and say, Hey, where was it better in mainland China or Taiwan? Taiwan. It was better in Hong Kong. Why? Because mainland China was run by the communists. It wasn't until really the 1990s that the communists realized that communism doesn't work. Right? So they didn't come out and tell the people it didn't work because you still have the communist party. But they started changing the nature of the economy to allow entrepreneurship, to allow private ownership of the means of production. That's what made China what it is today. It was as capitalism came into. Sort of Xi Jinping looked at Russia and said, okay, what did Russia do wrong? Russia let capitalism break down the control of the government. We're never going to let that happen. And so he, I mean, look, I'm not defending China, but I want to make sure that we're taking a realistic look. Because remember, my thesis is all about human nature is a thing. And if you're not dealing with that, you're going to get blindsided by something. So Xi Jinping said, man, cool. I saw what Russia did mistake, not going to repeat that mistake. And as soon as he realized, oh, these billionaires are getting too uppity. They're getting too much control, giving too much lip back to the government. He kidnaps Jack Ma takes him in somewhere and like re educates him and and then re releases him back into the wild. And they're like clamping down. So I'm just saying, like, hey, like, they that was still all communism. It was communism leveraging far smarter tools of an open market and all that stuff. But I would I don't think communism, the authoritarian top down control, that's probably a better word than communism. They never let go of authoritarian top down big government, you can do what I tell you. And that's that. Yeah, I mean, I'm not defending communism. All I'm saying is that as China became more capitalistic, you know, their standard living went up. 100% agree with that. Before they did that, there was a lot more capitalism in Taiwan or in Hong Kong. You had the same basic, you know, Chinese people there. But they did much better. Their living standards were much higher. 100%. I want people to hear me. I am a dyed in the wool capitalist. I believe in capitalism. What I'm trying to make sure that we chart a course through here is that you the question was, do do you see, and I'm talking in an American context, do you really see a path by which Americans start voting for a smaller government? My answer is no. I don't see a way to unwind the direction that we're headed except massive pain and suffering.
Will the higher inflation lead to economic freedom and smaller government? (02:00:14)
And once we have enough suffering, then I think that we might rebound and start unwinding. Do you agree with that? Yes. No, no. I agree. Until we have a lot of pain and suffering, nothing's going to change. And as long as the government can bail everybody out by printing money, they're going to do it. But if I'm right and I'm convinced that I am, and we have massive inflation that hopefully doesn't become hyperinflation, but it could. But things are going to be so bad that people may finally have enough of a belly full of government that they just puke it all out. And that a message of economic freedom actually works. That some people like me and other people, and we have the internet and we have a way of communicating to let people know, hey, the government did this. The government is not part of the solution. The government is the problem. That's what Ronald Reagan used to say, right? The government isn't the solution. The government is the problem. Those are second and third of all the consequences. I get it, man. And look, I believe in all of that. I am totally on that page, but I don't. Those are second and third order consequences. And if I'm correct that the masses that that is a sophisticated idea that you're just never going to get on mass adoption. Now, I want to be very clear. I am not a believer in elites get to tell people what to do just to plant that flag. So here, I want to walk through after you know way more about the economy than me. So I'm going to lay out a scenario where I go wrong, point me in the right direction. But this is largely informed by you, Ray Dalio, a handful of other very smart people I have been following for quite some time and have built my sense of where this all goes. So here is a layman's understanding of what is a flavor of how this might play out. It's not the only way that this could play out. But here's what I want listeners of this show to prepare themselves for. I live by a maxim that life is a beautiful game. You need to master it. And if you want to do well in this hyper uncertain time that we're about to go through, I think that you need to understand that it's probably going to look something like this. And Peter's going to tell me where I go wrong. Okay, so right now you you have already done the inflation. The person has been shot. They are bleeding out. But somehow they don't recognize yet that they have been shot.
Preparing for the coming financial collapse… you better sit down (02:02:45)
So inflation is coming for you. Now, as the Fed tries to manage that inflation by raising rates, they're probably going to chicken out. And so they're going to try to cut or something. The second they try to cut inflation is going to rear its ugly head again. And then as inflation starts happening, and they realize that they're no longer going to be able to cut rates, you're going to start raising rates as they raise the rates to try to tamp that back down, then treasuries are going to take off. Bonds are going to tank. You just tweeted about this. In fact, I have the suite. Let me read it. This is from you. We're in what will likely become the worst secular bond bear market in US history. The bear market in the 1970s ended with 10 year treasury yields above 13% and 30 year yields above 15%. With today's 16 year high yields of 4.35% and 4.46% yields still have a long way to rise. So that makes sense to me. So now if we're going to see interest rates going up, people are going to leave the stock market because it's going to be very hard for you to get that kind of yield that you can get in a treasury bill, which is nice and safe. Just park my money with the government. It's yielding a copious amounts of money if this is correct. And when that happens, they're also going to flee regional banking. Now this is where the scary part starts as they flee regional banking, regional banks, which are insolvent as far as I can tell because they are not marking to market, which you should probably explain to people in a second. So regional banks then are going to be fucked. And so they're going to start collapsing. The government's going to step in. They're going to print the shit out of money. They're going to inflate it again. And as they inflate the money supply, they're going to have to raise rates again, which is going to pull people out of regional banks even faster. It's going to pull people out of the stock market. So everything consolidates into like four way too big to fail banks. The stock market fucking struggles for God knows how long. And now everybody's putting their money into T bills. But that's the government that you're now betting on. And if you're right, and de-dollarization is happening like crazy because, and I can't remember if you said this exact thing, but right now the BRICS nations are creating a new currency or threatening to that's backed by gold. And so now your own thesis comes back to haunt us as Americans and people like holy shit, you're inflating this thing to deal with the regional banking collapse. And now we've got, oh, hey, this other sexy thing over here, which is backed by gold. And now, and because I am a believer in a more technical future, I think people also are going to flee into Bitcoin. I get it. You're not a Bitcoin guy, but I'm just saying for a techno person like myself and for a lot of younger people, I think that will make sense. And we'll debate that later. But like, they're going to flee to things that they see as backed by something quote unquote real. We'll stick with gold for now not to get into an argument. And that's how the collapse happens. And look, no one wants that to not happen more than me. But that's how it fit one flavor of how that could play out. What did I get right? Well, let me there's a lot there's a lot there. But first of all, I think you probably have a better understanding of the problem than a lot of people who have Nobel prizes in economics. So don't, you know, sell yourself short because you have common sense, which is, which a lot of professional economists don't don't have. But also, unfortunately, we actually need a collapse. So it's not like we should say, you know, you don't want one. It's like, you know, we don't want it to be as bad as it's going to be. But it's like, you know, in California, those tremors are a good thing because having tremors means you don't have the big one. You got to, you know, there are, there are imbalances that we need to have like you need far far as fires, because if you don't have some, then eventually you have a really big one, right? So we have problems in the economy. They have to be unwound. The sooner the better. And so we're going to have to go through some pain if we want gain. I mean, that's just, it's inevitable.
Why raising rates will do nothing to suppress inflation (02:06:44)
But let me go back to the beginning of what you're talking about. So first of all, yeah, the Fed has been raising rates in an effort supposedly to fight inflation. But it doesn't work because the only way that higher rates impact prices and inflation is if they encourage people to save more and spend less. That's the whole purpose. They have to, that the prices are going up because we're buying stuff. And so the Fed is supposed to raise rates to discourage us from spending and causing us to save more. So now the savings, we can have, you know, more production. But that hasn't happened. Even though the Fed has raised rates, the savings rate has collapsed. And credit card debt is at a record high. Government debts are at a record high. So the Fed's rate hikes have done nothing to impact savings and spending. So they've done nothing to bring down inflation. What they have done is increased costs because when prices do go up, I mean, when interest rates go up, everybody who has debt, including all businesses who have debt, now have to pay higher interest on that debt. That's the same thing as paying higher wages to your workers, higher rent to your landlord. It's another cost that ultimately gets factored in. So the Fed was artificially suppressing those costs for years and years. And so businesses were able to pass that on to their customers. But now that interest rates are normalizing, they have to raise prices to make up. So it's actually been adding to inflation. The reason that we've had to come down in inflation because of the rate hikes is the rate hikes caused the dollar to go up. Because as the Fed started hiking rates, currency traders bid up the dollar and they expected rates to keep going up. The dollar had a big rally and that brought down oil prices. Oil prices went way down. Other commodity prices went down because the dollar went up. That's what temporarily brought down the CPI. That is all changing. That's stopping. The dollar has topped out and it's headed lower. Commodity prices have bottomed out. They're headed higher. So we're going to lose that benefit. We're going to start to see prices rising again and the rate heights have done nothing. Because the only way we're going to get to the root cause of inflation is if we cut government spending dramatically. And that's not happening. And the government spending is going up. The Fed is going to go back to quantitative easing. They've already showed their hand with these last bank bailouts. And by the way, years and years ago, exactly what happened to these regional banks is exactly what I predicted would happen. Exactly like I got the 2008 financial crisis, I nailed this on the head. I said for years as the Fed held interest rates low that they were, this was a ticking time bomb for the banks. Because I said the banks are going to be stuck with all this low yielding debt. And when interest rates eventually rise, they're going to go broke. You had all these other analysts that were saying, oh, buy the financials because interest rates are going to go up and that's going to help the financials. I was like a lone voice saying no, higher interest rates are going to be the death mill for these financials. Look, people were talking about mortgages, right? Hey, everybody is refinancing their mortgages. Everybody's getting a 3%, 3.5% mortgage. Isn't that great? Because now the homeowners can pay these low mortgages for the next 30 years. I was the only person out there in the financial community saying, wait a minute, what about the lenders? What about the banks who are going to be stuck with the paper? They're clipping these coupons for 30 years. What happens when interest rates go to 5%, 6%, 7%, and they've already loaned out all their money at 3%, they're all insolvent, which is what they are. Why do you think you're bank? Go to your bank, Bank of America, Wells Fargo, see what their deposit rates are, see where their CDs are. They're paying nothing. They can't afford to pay you any money because they've already loaned it all out. It's stuck. So they're all insolvent. They're all going to collapse. What's going to happen is the Fed's going to end up bailing them out with inflation.
Get in a lifeboat (02:10:42)
So you're not going to lose your money, but your money is going to lose its value. All this is going to happen and the situation that you described, the piper is going to have to be paid here. But the best thing you could do, if you want to try to save yourself financially, but also maybe have a positive impact on the rest of the world, don't go broke. Don't go down with this ship. Get off the ship, get in a lifeboat so that when everybody else is drowning, you can reach in and pull them out. So preserve your own wealth. And the way you do that is take your money out of the bank. Don't leave it there. You're going to lose it one way or the other. Do something with it. You could buy gold. You can invest it productively outside the US. You could buy quality stocks that pay good dividends that will rise with the falling dollar that will also go up with inflation because the businesses are selling things where they have pricing power. In an inflationary period, you want to be in a business where you're selling stuff that people have to buy, not the stuff that they stop buying because they can't afford the stuff they have to buy. So there are certain types of companies that you want to own. If we own those companies and they're paying good dividends and we manage these portfolios. So that's the first thing. We can't do anything to stop this. I was powerless to stop the 2008 financial crisis, but I could try to figure out how to profit from it. I can't do anything about this. I've tried my best to warn people. I've been out there. I've testified before Congress twice. I wish I could have gone there more often. But nothing I say matters to these guys because again, they don't care about the country. They care about themselves. They care about getting reelected. Everything that they would have to do that was right for the country jeopardizes their reelection. The only way they can stay in office is to do what's wrong for the country. So that's their paramount concern is perpetuating their political careers and not helping the country. So all you can do is save yourself at this point because there's not enough of us who are going to figure this out to have any influence on the next election. But we can protect ourselves. I mean, that's why you know, at my company, your Pacific asset management, I'm doing my best to save as many people as I can, get them with the right portfolios that will allow them to come off of this. There were people that made money in the 1970s with all that inflation. Most people lost a ton of money during that decade. But a few people who read the writing on the wall were positioned properly and they cleaned up in the 1970s. I think the same thing is going to happen in this decade. I think I'm extremely well positioned that I think everybody who's been following my advice. I mean, sure, I mean, I've been giving this advice out for a while. So I've been early, but I know that I'm right. And the fact that we've kicked a can down the road for as long as we have simply means that it's that much more important to be positioned this way because the bubble has gotten much bigger. So yes, I had to wait a little bit longer to get paid, but I think it's a bigger payday because the problems that I was worried about a decade ago, none of them have been solved, they're all much worse. And so now the fallout is going to be much greater. And so the losses for the people who don't anticipate this and position them out, that was felt properly, those losses are going to be greater. And yes, people need to own people need to own gold. I mean, I've been operating shift gold for a long time and people should take advantage of that and buy gold. It's still about $1,900 an ounce. That may seem like a high price, but I think it's actually very low are relative to where it's going to be. And again, it's not gold going up. Gold pretty much stays the same. It's the dollar that's going down. You're going to need more and more dollars to buy that ounce of gold. And so if you want to preserve your purchasing power, you convert your dollars into gold now. And then when you need to buy something in five or 10 or 20 years, you'll be able to afford it. If you just keep your money in cash, you may not be. This stuff is terrifying. And I really wish I didn't have to think about this. It is a level of complexity that I do not enjoy and really want to think about other things. But I think that not focusing here would be a mistake.
Insights Into Financial Collapse And How To Protect Ourselves
What does Michael Burry's bet mean? (02:14:45)
And I encourage everybody, if you're anything like me, you want to bury your head in the sand, not a winning strategy. To that point, Michael Burry, who predicted the housing crisis along with you is one of the rare voices that was like, hey, this bad thing is coming. He just bet essentially is a way to look at it. 1.6 bill, the billion dollars. I'll call it against the stock market. Have you looked closely enough at that to know what is he really trying to say with that bet? Well, look, he may make a lot of money. And it's all leverage. So he didn't basically put up 1.6 billion. He put up a much smaller amount, and he's willing to lose it if he's wrong. But he's probably controlling with leverage or options or whatever. I haven't looked at the way he's constructed that position. I know I thought myself a few weeks ago, even near the highs, about maybe I should get short to the stock market. I've been short to the bond market, not in a big way like that. But if the Fed did the right thing, and if they do the right thing, he's going to clean up on that position. If the Fed does the right thing. The problem is the Fed might cave and do the wrong thing, in which case he'll lose. But I don't know what the rest of his bets are, because given where interest rates are and where they have to go, and given what's going to happen to corporate earnings, stocks are so extremely overpriced right now. They have to collapse. The only way they won't is if the dollar goes down instead. So if the Fed is willing to sacrifice the dollar to save the stock market and to bail out the US government, then they might do that. The Fed may decide to change its rhetoric. We're done hiking raids, or they might cut raids, or go back to QE in an official way, and the market's going to rally if that happens. But in real terms, the market's not going to rally, because the dollar, I think, will lose more value than the stock market gains. But when you're buying puts or you're doing some of these shorts, it's nominal. That's what matters. So if gold goes from 1900, to 3000, and the stock market goes up 10%, in real terms, the stock market got killed. But you're going to lose on your short, because it's all about the nominal price when it comes to a short, not the real price. So for my money, I know that no matter what, the Fed's going to eventually do the wrong thing. But even if they do the right thing, in the environment where they do the right thing, the price of gold is still going to go off. I just don't really see any scenario where it goes down. And I don't really see any scenario where the dollar goes up. I mean, it could go up in the short run, but in the long run, it has to go down. I mean, there's no way this thing is going to shake out where the dollar has more value and not less value. So I think my portfolios, I think, are more likely to do well, and then just being short. I mean, you could make money short, but you could end up losing money in the long run, depending on what happens with inflation. But I think that for most people, being long, the underpriced assets that will benefit from these events as they play out is probably a better way to play it than to just make a short-term speculative bet on the direction of the stock market where you could end up being wrong and losing everything. Now, do you think that that's true because getting the timing right is the hardest of all the bets?
Commercial real estate and we work (02:18:17)
Yeah, I mean, look, it's very hard to get the timing right. But look, I think the market looks weak. I mean, if I had a place of bet on where I thought the market was going to go, I would bet it's going lower. So Barry's made that bet. And I'm not sure exactly when he put on the trade. I mean, how early was he? Did he get it on right at the top or was it a few months ago? And is he kind of breaking even now? It was reported on the 8th, I think, of August? If that's when he put it on, then he should be in pretty good shape on that trade right now. Because I think the market topped out about four weeks ago. And we're still very close to the highs. And so there's a lot of air to come out of this, especially in the NASDAQ, especially in a lot of these text stocks that have had really big rallies. But again, it's hard to know what the government's going to do and when they're going to do it to try to put a band-aid on this because they could change policy. The Fed could just reverse if they start to see the markets really coming under pressure, if they see some blow-ups in the banks again, in the money markets. Because this commercial real estate problem, which I also warned about years and years ago, is playing out the way I warned. I mean, commercial real estate prices are already down in many parts of the nation by 50% or more. How did you see that coming without COVID? Were you predicting that before COVID? Well, because I knew that interest rates would eventually go up because real estate prices are a function of interest rates, especially income-producing commercial property. They kind of trade like a bond. So when interest rates are really low, it affects the cap rates on commercial real estate. So people were willing to overpay for real estate in an environment of 0% interest rates. I knew eventually rates would go up and then commercial prices would have to go down, just like I knew bonds would come down. And so that's going to put problems. And I also could see what was happening with the internet and more and more people buying online. And so there wasn't as much need for all this retail space. People weren't going to the stores. They were just clicking a mouse or on their smartphone. But with COVID, it accelerated. Yeah, I didn't see that aspect coming of it. I already knew that it was going to be bad. Just COVID made it that much worse. It just took a bad situation and made it even more horrific situation. But as real estate owners are losing a lot of money on their commercial real estate, a lot of those losses are with the lenders. Because if the real estate is not worth the loan, then the owner just walks away and the bank is stuck with the collateral that isn't worth what they loaned. And now they have huge losses that they have to deal with on their books. And with all this supply on the market, in fact, I was particularly warning about what was gone with we work. Back in the day when we work was buying up all this office space and committing itself to long-term leases and then renting out short-term. I was predicting the demise of we work long before it demise. It collapsed, but I also was saying that how it's going to impact the property market when all their property comes up for lease or comes up for sale. So this commercial real estate problem is a banking problem. And the banking problem means it's an inflation problem because how do you bail out the banks? You have to print more money. And so all this is happening, but the residential market is also a completely dysfunctional disaster. What's happening in residential markets? And I predicted this years ago. I mean, if you listen to my podcast, I talked about all this stuff years ago. I mean, it wasn't like I'm reacting to it after it happens. I warned about it years before it happened. So I predicted that a big problem in the real estate market and apart from all these banks that were going to be underwater, that were stuck with these loans. But I said that Americans who have mortgages are going to be stuck in their homes because they're not going to be able to sell because the mortgage is in a sumable. So let's say I have a 3.5% mortgage and now mortgage rates are 7.5% and they're headed higher. I can't move. I can't sell my house because then I'd have to take on a new mortgage. Most Americans, if you're a homeowner, your most valuable asset is your mortgage, right? Because you have the right to keep paying that mortgage for the next 20, 25 years, 30 hour or many years you got, the bank is losing a fortune on that mortgage. You're making a fortune. So people are going to stay in homes. Even if they'd rather have a bigger home or a different home, they're stuck where they are. Now maybe they could rent it out and keep the mortgage. But a lot of the housing stock is off the market now because nobody is going to get rid of it because that's tied to their mortgage. And in many cases, rents are rising so fast that paying your mortgage is cheaper than paying rent. If you've got one of these, the low was two and five-eighths, I think. There are people that got mortgages below 3% during like COVID-19 days. So those people are never selling. They're there, right? If they die, their kids will keep the place. They have to keep that mortgage. So you don't have this housing stock. Meanwhile, landlords know that those houses aren't coming up for sale. They got a captive audience. Their tenants can't afford to buy anymore because the rates are so high. So they can jack up the rent. I mean, eventually home prices have to collapse. What's keeping that from happening is an absence of supply. But at some point, people are going to die. People get divorced. I mean, there was going to be circumstances. People lose their jobs. And even though they have a low mortgage, they can't even afford to pay that. Right? So there's going to be housing that's going to come on the market. And then the price is going to implode because nobody can afford to buy the houses at these high mortgage rates. I mean, the reason real estate prices went up so much is because the mortgage rates went down so much because people didn't buy price. They bought the monthly payment. That's what was the deciding factor on what they can pay. And the monthly payment was determined by the race. Now, also the absence of a down payment. So down payments went from 20% down to zero. I mean, they've come back up a little bit. I think the average down payment now is more like 5 or 6%. But that's like nothing because it costs 5% to sell your house. You got to pay the real estate agent, the commission. But the absence of lending standards, and a lot of that was because of government guarantees and Fannie and Freddie and all this stuff. I mean, people were encouraged to overpay for homes that they really shouldn't have bought. And I think it's important that people put up a down payment when they buy a home. They need to have some skin in the game. They need to demonstrate the ability to save money because as a homeowner, I know that real estate is very expensive. You own a house, things go wrong. They're like money pits. They cost a lot of money. If you're a renter, that's your landlord's problem. You just pay your set rent. You don't have to worry about any unanticipated major expenses. Americans don't have money for unanticipated major expenses. So the banks did a good job when they required 20% down to making sure that people didn't buy houses unless they were responsible enough to take on the liability. But the government incentivized everybody to buy houses and overpay. You get tax breaks and government guarantees. So the government caused people to buy houses that shouldn't have bought them. But the point I'm making now is that eventually real estate prices are going to fall. They have to if rates stay up. And now there's defaults. And now the banks are going to lose money on their residential real estate loans in addition to their commercial. And I think you're going to see a wave of defaults in credit card debt. I mean, right now, credit card debt is at a record high. Interest rates on credit card debt are at a record high. It's over 20%. If you've got a balance on your credit card and you're paying over 20% interest and you have record balance, there's going to be waves of defaults in credit card debt. In fact, I think what people are doing now who have credit card debt before they default, they're just running up as much debt as they can. Because if you know that you're going to default and go bankrupt, you might as well go out with a bank, right? The more money you can borrow while you can, the better. Buy as much stuff as you can on credit and then default. So I think we're going to see a wave of default in credit cards. And what does that mean? That means the banks are going to lose because they're not going to get that money back. They're going to have to write off all those losses. So it's just more money printing. I mean, this financial crisis that we're headed for is worse than the one we had in 2008. It's going to make 2008 look like a Sunday school picnic, which is why I think we're going to have a dollar crisis instead. The Fed is going to not going to sit back and let all this happen. They're going to think they can make it all go away with massive quantitative easing, more money printed because, hey, it worked before. It worked in 2001. It worked in 2008. It worked during COVID, so we'll just do it again. Well, you know what? It's not going to work this time. It's like, you know, you can only take so much of a drug until you dive in overdose. And every time we did more of this monetary heroine, we had to up the dosage because we kept upping the problem. But it's so big right now that if the Fed tries to drug us up again, the amount of monetary heroine that would be required would kill us. And that's killed a dollar. And everything's going to come toppling down.
The government can't afford rising interest rates (02:28:15)
Well, that is certainly optimistic. That all hits a little too close to home. It feels very real. That was the thing that you were saying there about people defaulting on their credit card. That's something that we hadn't really gotten into, which is rising interest rates seems, from my perspective, seems good because I can take my money out of the stock market or whatever and put it into T-bills. And if T-bills are kicking off 15%, I'm laughing. That would be amazing. Except for when you look across the entire economy, people have so much debt. The government has so much debt that when you try to service something with a raising interest rate, it gets gnarly really, really fast. Think about this. So we have a $32.7 trillion debt, which is rising by trillions of dollars a year. As of today, interest on the national debt is now the third biggest line item in the budget. So number one is Medicare, then Social Security, then interest on the debt, then national defense. We're actually spending more to pay interest on the money we borrowed than we're spending on defense. And of course, I think we're spending too much on defense. I think we should spend less, but we're spending more on interest. But here is the real problem. That number keeps growing. A couple of years ago, interest on the national debt was $300 billion a year. Now it's over $700 billion. By the end of the year, it'll be a trillion. By the end of next year, it'll be $2 trillion. In three or four years, the US government will be paying more in interest on the national debt than it collects in taxes. So this is impossible. Now the only way around that is if- Well, because the only way around that is if the Fed slashes interest rates. But what if they can't? What if they have to keep rates where they are? The government must default. There is no way that it can afford to make these payments because the Fed would have to print so much money to monetize that debt that it would create so much inflation that it would push interest rates even higher. Because the more inflation there is, the less private sector demand there is for government debt. But the more money the Fed prints to prevent interest rates from rising, the more inflation they create and the less attractive the government debt becomes. And now the Fed is the only buyer of treasuries. But now it's not just treasuries. What about municipal debt? What about all these municipalities and states that loaded up on debt? What's going to happen when it matures and they have to roll it over at much higher rates? What about all these corporations that borrowed a bunch of money to buy back their own stock? What's going to happen when that debt matures and now they have to try to refinance it and the rates have tripled or quadrupled for them? Everybody is going to collapse. Look, the problem is we need higher interest rates. Higher interest rates is part of the cure. But it's also what's going to kill the current economy. You can't get rates from where they are now to where they need to be without a collapse. It's like you can't make an omelet without breaking eggs. Well, we're going to break a hell of a lot of eggs because of how much debt we have. Why do we have so much debt? Because we had 20 years of artificially low interest rates of punishing people who saved and rewarding people who borrowed. And so the whole economy is screwed up. We can't unscramble this egg. It's going to be bad. But I think that because it's going to be so bad, the Fed is going to choose what it perceives to be the lesser of the two evils. It will choose inflation over collapse, depression, financial crisis, bankruptcy. That's why I'm convinced that my portfolios are the correct approach. Just be in real assets, be out of the dollar, be in precious metals, be prepared to avoid the inflation tax. Because that's the tax that's going to clobber everybody.
What time period is the collapse going to play out over? (02:32:11)
What time period is this all going to play out over? Well, I mean, look, I mean, I've sounded the alarm in the past. I thought that the problem was was more imminent in 2008 and '09. And they pulled a few rabbits out of the hat. I mean, we really bought a lot of time. When I was warning about the financial crisis back in 2002 and in '03, my first book, Crash Proof, had a profit from the coming economic collapse, came out in February of '07. And so when I was writing that book, in fact, that book was initially going to be something like the American nightmare. It was going to be about real estate and why real estate was going to crash and all that. But I didn't think that that book had brought enough appeal. So I made a broader book about the economy in general, and real estate was a part of it. There was a chapter on the real estate bubble and how the government inflated it. But back then, I thought that if we did what I thought we were going to do, which we ended up doing, I predicted quantitative easing before they even came up with the word. I knew what they were going to do. I just didn't know what they were going to call it until they did it. But I wouldn't have thought back then, and I didn't think back then, that we would be here in 2023, and they would have been able to run up the debt to 32 trillion, and they would have been able to keep interest rates as low as they did for as long as they did. So that already surprised me. But because they succeeded in doing that, they just made the problems that I was worried about back then so much worse. And so now, I think we're pretty much run out of time. I mean, we're literally living on borrowed time. So any day, I just think any day you go to sleep, you could wake up and it could be a whole new world. And that's why you got to be prepared. I know that I'm not going to wake up to that disaster financially. It could be bad just as an American, but as an investor, I think I'm prepared. And I think our fate will likely be sealed in the foreign markets. It's going to be our creditors during the debt ceiling debate. And we keep saying we got to raise the debt ceiling. We have to raise the debt ceiling so we can keep borrowing. And if we can't keep borrowing, we're going to default, which is an admission that we're running a Ponzi scheme. I used to joke. In fact, you can see my stand up routine on YouTube. If you Google, if you YouTube, Peter Schiff stand up. But I used to tell this joke, I used to get a lot of laughs. But back in the Bernie Madoff days, when Bernie Madoff, when they were first talking to him, the New York Times did an article and Bernie Madoff said, look, the US government's running the biggest Ponzi scheme ever. I'm a piker compared to the government. And so people would say, well, who cares what Bernie Madoff says? He doesn't have any credibility. He's a criminal. And what I used to say back then was, well, he's got credibility in one area. And that's Ponzi schemes. He knows one when he sees one. And if Bernie Madoff says the US government is running a Ponzi scheme, he ought to know. And then I used to joke and I said, instead of putting him in jail, we should make him secretary of the treasury. Because he would do a much better job of running the scheme because I pointed out that you had secretaries of the treasury like current Janet Yellen. She comes out and says, hey, if we don't raise the debt ceiling, we're going to default.
How will the government default? (02:35:33)
That's an admission. It's a Ponzi scheme. Janet Yellen didn't say if we don't raise the debt ceiling, we're going to raise taxes so we can pay our bills. We're going to cut so security so we can pay our bills. No, if we don't raise the debt ceiling, we're going to stop paying our bills, right? That's why we get a laugh. They say we have to raise the debt ceiling so we pay our bills or so America always pays its bills. No, we need to raise the debt ceiling to continue not paying our bills. The reason we have a stack of $32 trillion of unpaid bills is because we don't pay them. We go deeper into debt. I used to joke and I said, it's Ponzi 101. When you're running a Ponzi scheme, you keep it quiet. You don't tell the people that you're running a Ponzi scheme. So at least we could have bluffed and pretended that no matter what, we're going to pay. No, we told everybody that the only way America is going to pay its bills is if we can find some other sucker who will lend us the money. But at the minute, we run out of suckers and we can't borrow well, you're SOL. That's basically what they admitted. So yeah, it's a gigantic Ponzi scheme and I think the Fed is going to try to prevent the government from defaulting by buying those bonds and printing the money. And that means the default takes the form of depreciation of the currency because the debt is unpayable. The one thing that you know for sure is the government's not going to pay its bills. It's not going to pay the debt. The only question is how does it default? Does it do it honestly by just not paying or dishonestly through inflation? Personally, not paying. Default would be much better. I mean, I would like to see a complete restructuring of the government where the government cuts a lot of spending including the debt. I think we should basically try to negotiate or maybe 50 cents on the dollar, 25 cents on the dollar. It's better to repay our creditors less money than pay them in full with inflated money where they end up with even bigger losses. But unfortunately, that's the path we're going to go down because from a political perspective, nobody wants to do the truth now. They just want to kick the can down the road. I mean, you don't want to defuse the bomb before it blows off. You want to let it, before it blows up, you want to let the bomb explode and then point the fingers and blame it on somebody else and say that there's nothing we could have done. No, nobody could have predicted this. Peter, what would your advice be to the youth of the nation? They're going to inherit this mess. They are though part of the human nature that makes this problem. Do we need an era of austerity? Is it just what you're saying? Restructure slash. I've heard you give a talk where you were like, there's whatever 15 governmental units, keep five, kill 10. Those aren't the exact numbers, but that was the spirit. Yeah. What is your letter to the youth of the nation? Well, I think the youth are actually in better shape than let's say my generation. I'm at the tail end of the baby boom. I'm 60. But if I'm right, that inflation is how this ends. It's a lot of older people who are going to get wiped out. If you're young, chances are you don't have a lot of savings. In fact, you probably have no savings whatsoever. And so, inflation is not going to affect you in that way. And you're still out there working. You can demand a raise. You can earn more money to cover the fact that costs have gone up. But if you're older, if you're retired, if you're living off investments, you get decimated. A lot of people say, oh, we're leaving all this debt to our grandkids. The grandkids don't have to pay it. I mean, they can leave. In theory, we'd have to raise taxes massively on the younger generation to pay off the debts of their parents and grandparents. But what if they just leave? When I ran for Senate, I did that once in 2010. And obviously, I didn't get elected saying the type of stuff I say, right? It's difficult. But I ran one time in 2010. But people used to ask me, where do you stand on a wall, on building a wall between Mexico and the United States? And I was always against the wall. And the main reason I was against it is I said, if we build that wall, it works both ways. It's not just that it keeps Mexicans out, but it can be used to keep the Americans in. That's what scares me. Because what if we have to raise taxes so much on the young generation to make the Social Security payments and the Medicare payments and all that? That they want to leave? That they just say, screw this, I'm not paying 50, 60, 70% income tax. I'm going, I'm going to Mexico. I'm going to play sales. I mean, that's what happens with countries when people want to leave because the government's are too big, that they make it illegal to leave.
How Peter Schiff is trying to protect everyone (02:40:24)
In order to renounce your citizenship, there was a form that you had to fill out. And that form was free. Then they raised the price of the form to like 500 bucks. Now it's $5,000. You have to pay $5,000 if you want to give up your citizenship. Now, why is the government making it more expensive to give up your citizens? Because more people want to do it. Well, what if they increased the price to a million dollars? They're forcing people to stay. Obviously, there's a reason for that because they can keep on taxing you. Because if you're a US citizen and you live someplace else and earn money, you still owe taxes to America. That's not the case with just about everybody else in the world. We talked about the UK. I mean, if you're British, you're British passport, and you go to, let's say Dubai and you live and work in Dubai, they have no income tax in Dubai, you don't pay any taxes back to Britain. You live in Dubai. You're still a British citizen. But you don't pay any taxes to the UK government if you're not in the UK. But if you're an American citizen and you go to Dubai and you work right next to that British guy and you have like to work for the same company, you're doing the same job, you're paying taxes to America, even though you're not in America. So America is unique in that we tax your income no matter where you are in the world earning it. But yeah, I mean, it's going to be difficult to keep the young people. I mean, obviously it's harder for the IRS to get you if you're in another country and you never come back. But I think that the younger people are going to ultimately get off the hook from the debt because we're going to inflate it away. But if we don't do that, if we try to tax them, they're just going to leave. And even if we build walls, they'll get under them. They'll get over them. I mean, it's a big country. We got two oceans. If they try to force the young people to stay, it ain't going to be easy. But that's one of the reasons that I oppose the government getting more power over us to snoop on us and know everything we're doing. Because if people are ever at the point where they want to flee the country, I want them to be able to do it. I don't want the government to be able to stop them. I don't want the US government to be able to force people to stay here if they want to leave. I want people to be free to go. And in fact, if the government knows that people will leave, then that's going to keep them more honest. If they know that people can escape the taxes by leaving, then that's an incentive not to raise them up to I. If they think that they've got the border sealed and everybody is captive, well, then they can they can tax even more.
Protective Measures Against Contemporary Inflation For Young People
What should young ppl do to protect themselves from contemporary inflation? (02:43:09)
Peter, that is a sobering answer to the youth of America. You can still escape, boys and girls. Don't worry. But it's not just that. It's that they don't have a lifetime of savings that's going to get destroyed by inflation. And I don't think they're going to get stuck with the debt. Again, the debt's going to be inflated away. And so it's almost like a debt jubilee. We're kind of going to start over. But when the debt gets inflated away, one person's debt is somebody else's asset. If somebody owes money, they owe it to somebody else. So somebody is a debtor and somebody is a creditor. So when inflation wipes out debt, it wipes out the creditor as well. Now, who is the biggest debtor on the planet Earth? The US government. In fact, we might be the biggest debtor in the universe. I mean, I think if we could find life on another planet, I doubt there's a government on that planet that has as much debt as the United States. I think, I mean, maybe I'm wrong, but I doubt it. But the US government is the biggest debtor. And so the US government actually has the most to gain from inflation. That's why it creates it. Right? That the government wants inflation. They just don't want us to realize that they're creating it. And they don't want it to get out of hand. But it will get out of hand, right? It's like, you know, it's like you let loose the monster, right? It's like the government is, you know, Dr. Frankenstein, and they think they can control the monster. But the monster is going to end up beyond their control. Peter, this has been an incredible conversation. Thank you for taking the time. Where can people follow you? Well, I'm doing a lot of social media. I do my own podcast. I'm going to do one live tonight, as a matter of fact. So got to rest up my voice because I'm going to do a podcast after the Republican debate on Fox tonight. So at 10 o'clock, I'm going to go live on my website. It's on YouTube. It's Peter Schiff's show. And it's called The Schiff Report, and my YouTube channel got about 500, I don't know, 60,000 or so subscribers. So small, you know, compared to what you guys are doing. But I hope it grows. And I'm trying to, you know, get the word out there on freedom and liberty and economics and all that. I do a lot of tweeting. You mentioned one of my tweets. I do all that myself. I mean, I don't have somebody else that does it for me. I've got almost a million followers now. There's a lot of engagement on my site. I noticed that compared to other Twitter sites that even have a lot more followers, have a lot less engagement. So there's a lot of discussion going on on my Twitter. So people should take part in that and follow me there. But I'm on the other one's Instagram, Facebook, TikTok. I mean, I have a presence everywhere. But just try to follow me wherever I'm active and try to encourage other people to do that. And, you know, if you're somebody who has the wealth, right, if you've got savings, if you've got a portfolio that is at risk right now from inflation and overpriced US stocks and bonds, you really should do something. And I can help you through my asset management company at your Pacific Asset Management, you know, the website is zeropack.com. And you can go on there and you can call us up or, you know, exchange emails and talk with an advisor about how we can help you. I have five mutual funds that I actually own and operate. They're available no load on all of the major discount brokerage platforms. So you can kind of do it yourself at Schwab, Fidelity, you know, eTrade, TD Interactive Brokers. I mean, you can get my funds. A lot of other places and I'll manage them for you. You know, have a gold fund that invests in gold stocks, emerging market fund, a foreign dividend payers fund, foreign value fund, international bond fund. So all this stuff is foreign assets that I think will, you know, help get you out of arms way. I mentioned gold, you know, shift gold is the company where I sell gold and silver. I strongly recommend that if you don't have any, you buy some, you know, not as an investment, but as savings, as insurance. You don't put your whole portfolio in there, but five, 10%, maybe a little more depending on your circumstances. Everybody should have some. It's, you know, but more of your money, I think should be invested in growing companies that pay dividends. It's just that the US, they're too expensive. And I think there's a huge economic financial crisis that's going to devalue all US financial assets. So I'd rather invest abroad, just like people made a lot more money during the 1970s in the Japanese stock market or in the German stock market than they did in the US. I think the same thing's going to happen this decade. Only, I think the discrepancy is going to be even greater. So I think the outperformance of the foreign markets will be even greater than it was during then, especially when you look at where we're starting from, because the US market has never been so expensive in relation to those foreign markets as it is right now. And in fact, developed markets have really never been this expensive relative to emerging markets.
What can we do to preserve our wealth? (02:48:14)
So I think the emerging markets actually have the most potential when it comes to the equity investments. So if you're, you've got portfolios or money, you should contact me or if you're young, but your father or your uncle or your boss or somebody that you know has the means and they need to protect themselves. And they should give me a call as well. So we can do something. And it's not just, again, I say, not just so I can protect you. I think that the country is going to go through a big problem. And as an American, I'm hoping that we can come out of this in a good way. And so the more Americans that don't go broke, the more Americans that preserve their wealth by getting it abroad, by owning gold, the better off we're all going to be collectively, because that means there'll be more people who can supply the capital that we need to rebuild, to re-industrialize, to rehire. If you go wipe, if you get wiped out and you're broke, what can you do? You don't have the means to help anybody. So preserve your wealth. And then you can help a lot of people as you redeploy that wealth here, right? All the money that we send abroad, we can bring home. After the crisis, in the aftermath of the crisis, we can repatriate all that money and help rebuild what's going to collapse in a better way, in a stronger way, get a viable economy again, not one gigantic bubble. Well said. All right, everybody. If you haven't already, be sure to subscribe. And until next time, my friends, be legendary.
Take care. Peace. For a deep dive on the global economy, check out my conversation with Balaji Srinivasan. The problems go all the way to the bedrock of the financial system in terms of treasureries being the new toxic waste. It's going to be at least as bad as it does need to probably worsen that.