In the ever-evolving landscape of economics and finance, the term “recession” often ignites fervent debate among experts and enthusiasts alike. One such discussion recently emerged from an episode of the YouTube channel “Triggernometry,” featuring Jim Rickards, a prominent figure renowned for his insights into financial markets and economic trends. In this episode, Rickards asserts that we may already be in a recession, prompting listeners to reevaluate current economic indicators and forecasts. However, with economic analyses continually shifting and varied opinions circulating among economists, it’s vital to dissect these claims critically. In this blog post, we will delve into the key points raised by Rickards, cross-reference his arguments with prevailing economic data, and provide a comprehensive fact check of his assertions, ensuring that readers grasp the full context of this pivotal discussion.

Find a fact check of this transcript on CheckForFacts

Transcript:

[00:00:00,879]: Uh we probably are in a recession

[00:00:04,119]: So for Lehman what is going on

[00:00:06,579]: And do you agree with tariffs

[00:00:08,600]: Look uh Trump’s putting all these tariffs on it’s the best economic policy you can think of

[00:00:14,619]: It’s extremely good for the US but this is really going to be bad for Vietnam and China and Malaysia

[00:00:20,920]: And I say yeah that’s their problem

[00:00:24,639]: Our job is to make America great again

[00:00:27,379]: Why didn’t Biden talk to Putin for three years

[00:00:30,620]: They wanted the war

[00:00:31,420]: The NSA wanted the war

[00:00:32,479]: We provoked the war

[00:00:34,779]: Jim Rickers welcome back

[00:00:36,659]: Great to be with you

[00:00:37,500]: Yeah it’s great to have you on the show again

[00:00:40,020]: Interesting economic times which is usually when we always love having you on the show because uh you know a lot of people particularly in this city in New York were very excited about the last election Donald Trump coming into office because they thought he would be great for the economy and great for business

[00:00:54,279]: And that may be true but a lot of people are also sensing that that might not be true and feeling like we’re about to go into a recession a global recession perhaps

[00:01:03,939]: What’s your read on everything

[00:01:05,239]: We probably are in a recession

[00:01:07,800]: The thing is you know the official score this is for the United States not the world

[00:01:11,519]: A world recession is rare by the way

[00:01:14,099]: Usually you know one sector you know Europe or the United States or Asia could be in a Others might be doing better trying to pull the world economy out of it

[00:01:21,419]: But a global recession they do happen but they’re quite rare

[00:01:24,639]: But just with reference with regards to the United States there’s this National Bureau of Economic Research

[00:01:30,199]: It’s a bunch of egghead economists up in Cambridge

[00:01:32,779]: They’re the official unofficial scorekeepers

[00:01:35,319]: They tell you when you have recession when you’re out of it et cetera

[00:01:38,620]: And that’s widely accepted

[00:01:40,279]: The problem is they usually tell you you’ve entered a recession about six months after it’s over

[00:01:45,580]: So you can’t really rely on them

[00:01:47,739]: So you have to look at a lot of other metrics predictive analytics and so forth too

[00:01:51,400]: If you want to either predict it or just kind of know it in real time

[00:01:55,319]: So you’re saying the U S may already be in a recession

[00:01:58,260]: What are the markers

[00:01:59,739]: What are the markers

[00:02:00,540]: Well there are a lot of them but one is you know the Federal Reserve Bank of Atlanta has a tracker

[00:02:06,319]: It’s called GDP Now

[00:02:07,940]: It’s actually pretty good

[00:02:09,139]: Some of these statistical methods certainly the ones on Wall Street are worth our time

[00:02:14,279]: But the Atlanta Fed is a pretty good tracker

[00:02:16,320]: It went from round numbers kind of positive 2 4 for the first quarter of 2025 to negative 2 7 in a matter of days

[00:02:26,820]: And it looks like an Acapulco cliff dive

[00:02:28,899]: It went straight down

[00:02:29,679]: And they said well the reason is because of Trump’s tariff proposals

[00:02:34,059]: And you know he puts them on takes them off

[00:02:35,580]: No one really knows

[00:02:36,320]: But because of that there was a surge of imports

[00:02:39,160]: People were trying to actually get stuff into the United States before the tariffs hit

[00:02:43,160]: And of course imports increased the trade deficit which decreases GDP

[00:02:47,660]: And that was the explanation for that

[00:02:49,460]: Probably something to that

[00:02:50,800]: But there’s just a lot else going on

[00:02:52,860]: We’re not quite at the stage of mass layoffs

[00:02:55,779]: But hiring hit a wall about six months ago a little bit longer where they just stopped

[00:03:01,399]: Basically people weren’t hiring anymore

[00:03:03,880]: Firing people is the last thing you do

[00:03:05,679]: By the time you get to the layoff stage and see unemployment going up that’s a sign

[00:03:10,179]: That’s a lagging indicator

[00:03:11,320]: You’re probably already in the recession because it’s so hard to find people train them get them going

[00:03:17,220]: It’s the last thing you want to do

[00:03:18,699]: So you’ll you know cut out the laundry bill turn on the electricity negotiate the rate

[00:03:23,399]: You’ll do a lot else before you lay people off

[00:03:25,559]: When you start doing that we’re getting close to that point now

[00:03:29,039]: There’s been some big layoffs announced recently

[00:03:31,600]: So that’s another indicator that we’re probably already in it

[00:03:34,899]: But hiring new hiring stopped as I say six months ago

[00:03:39,380]: There are some technical indicators not to get too down in the weeds but the yield curve is the shape of the yield curve is one of the best economic forecasting tools out there

[00:03:51,080]: So about a year and a half ago

[00:03:52,679]: Can you stop Jim

[00:03:53,800]: What does that mean

[00:03:54,619]: Just because there’s a lot of people who are listening to this who are economically illiterate

[00:03:59,460]: And they don’t know what that is

[00:04:01,179]: Well fortunately this is an easy one

[00:04:02,899]: So the yield curve is just you know a typical curve

[00:04:05,699]: So the y axis the vertical axis are interest rates

[00:04:09,520]: And the x axis the horizontal axis are maturities

[00:04:13,220]: So the US Treasury people say you know government securities well OK

[00:04:16,480]: But there’s a one month bill a three month bill a one year a two year note a five year note all the way out to a 30 year bond

[00:04:23,100]: So that’s the x axis

[00:04:25,100]: So the y axis are interest rates

[00:04:26,679]: Every one of those has a different interest rate

[00:04:28,980]: They can be close or there could be a spread

[00:04:31,940]: And all you do is you plot those interest rates

[00:04:33,880]: So what’s a normal yield curve

[00:04:36,100]: A normal yield curve is upwardly sloping from left to right

[00:04:39,640]: And that makes sense

[00:04:40,760]: You know a longer maturity if I’m going to lend to you overnight I might want one rate if I’m going to lend you for 10 years and say well a lot could happen in 10 years

[00:04:47,279]: So I’m going to want a higher rate

[00:04:49,140]: So an upwardly sloping yield curve is normal

[00:04:52,720]: But periodically it’s not that unusual a little bit unusual

[00:04:56,279]: You get a downward sloping yield curve where the longer maturities have lower interest rates

[00:05:01,579]: What does that tell you

[00:05:02,579]: Well the treasury market that’s the big money

[00:05:04,959]: You know I used to work for a primary dealer

[00:05:06,720]: We were one of the ones authorized to deal directly with the Fed

[00:05:09,619]: There are only about 20 banks with that status

[00:05:12,980]: So you talk to the Fed every day

[00:05:15,679]: A downward sloping yield curve this is where again the big money kind of sets this the market sets this tells you that a recession is coming

[00:05:25,579]: And how do you draw that inference

[00:05:27,339]: Well let’s say short term interest rates are 4 and longer term interest rates are 3

[00:05:35,260]: Actually the actual numbers now are closer to 5 and 4 So but you say well gee I’ll take a 4 coupon 4 yield maturity on a 10 year note because that’s going to look really sweet a couple of years from now when interest rates are 1 and 1 half

[00:05:48,480]: When the recession kicks in and interest rate collapse that high coupon is going to look very attractive number one

[00:05:55,700]: So bond math 101 is kind of counterintuitive but when interest rates go down prices go up

[00:06:01,420]: And when interest rates go up prices go down

[00:06:03,820]: So if you believe recession is coming and interest rates are coming down you’ll lock in the higher coupon now

[00:06:10,399]: And when interest rates do come down you’ll have capital gains on that note

[00:06:14,079]: So it’s a really attractive trade

[00:06:16,220]: But meanwhile back here in the short end of the curve 30 day bills or three month bills or six month bills or whatever that really is much more subject to Federal Reserve control

[00:06:27,420]: It’s about the only thing they control this idea that the Fed can control long term rates by manipulating short term rates because this is just the value of a strip of short term rates

[00:06:39,119]: Well that’s all nonsense

[00:06:40,160]: And that’s the theory

[00:06:40,880]: You can do the math but that’s all nonsense

[00:06:42,940]: So the point being when you have a downward sloping yield curve that’s a sign that the recession is coming

[00:06:48,679]: People are bidding for those intermediate term securities and pushing the rate down a little bit

[00:06:53,339]: But it’s going to look real good when the recession comes

[00:06:54,480]: Hold on Jim

[00:06:54,859]: One second

[00:06:55,380]: Sorry

[00:06:55,820]: Is that a sign that recession is coming or is it a sign that people think a recession is coming

[00:06:59,940]: Well people

[00:07:01,160]: But the people are the biggest institutions in the world

[00:07:03,640]: This curve is set by sovereign wealth funds endowments pension funds insurance companies the players in that market

[00:07:11,119]: It’s not that they’re infallible but it’s basically a distillation of all the big money in the world kind of saying something to you

[00:07:22,640]: The math is simple

[00:07:24,079]: The yield curve is simple to look at but you have to know what it means

[00:07:26,739]: And so the downward sloping yield curve which did start about a year and a half ago said that the recession is coming

[00:07:33,119]: Now what’s happened in the meantime

[00:07:34,459]: The yield curve has flattened

[00:07:37,480]: It’s actually what’s called a bear flattener where short term rates came down a lot long term rates came down a little bit

[00:07:44,899]: But now it’s kind of flat

[00:07:46,040]: And it’s actually getting back to a normal shape

[00:07:48,079]: What does that tell you

[00:07:49,000]: It tells you the recession’s here

[00:07:51,119]: Now that the recession’s here short term rates should come down a lot and they have

[00:07:56,320]: And this idea that the Fed is they do have an influence so I don’t want to dismiss them entirely but I’ll come close

[00:08:03,079]: The Fed is not leading the market

[00:08:05,339]: The Fed is following the market

[00:08:07,500]: The best short term rate indicator is a one month treasury bill

[00:08:12,579]: There’s something called the skewered overnight financing rate

[00:08:16,380]: It’s kind of it replaced LIBOR

[00:08:18,059]: It’s a clunky form of LIBOR

[00:08:19,899]: But both of those rates the skewered overnight funding and the one month bill are lower than the Fed funds target rate

[00:08:26,700]: So what that tells you is that the market is sensing exactly what I’m describing

[00:08:31,839]: Those rates are going down

[00:08:33,059]: So whether the Fed’s going to whether they cut or pause at a given meeting I watch it

[00:08:39,479]: It’s pretty easy to forecast

[00:08:40,859]: But it sort of doesn’t matter

[00:08:43,000]: And what I’m saying is the Fed’s irrelevant

[00:08:45,099]: The market’s taking interest rates where they need to go

[00:08:47,520]: So now that the curve is going from inverted where the intermediate term rates are lower that’s the signal

[00:08:53,440]: Now it’s flattened

[00:08:54,700]: It’s getting into a normal shape

[00:08:56,200]: But all of the rates are coming down

[00:08:58,239]: That’s the signal that the recession is here

[00:09:00,539]: By the way this idea we’ll stimulate the economy with lower rates that’s nonsense

[00:09:05,599]: It doesn’t stimulate anything

[00:09:06,900]: Low rates are associated with recession depression and financial panic

[00:09:11,400]: That’s when you get low rates three pretty bad things

[00:09:14,179]: In a robust growing economy rates will be higher

[00:09:17,299]: Now I’m not saying sky high maybe 4 5

[00:09:20,760]: But what that tells you is that a borrower expects a higher return

[00:09:25,059]: If I think I can get 10 on my investment or more I’ll happily borrow at 4 or 5

[00:09:30,960]: There’s also competition for funds

[00:09:33,559]: The banks actually love that environment

[00:09:35,539]: They have positive spreads

[00:09:36,440]: So in a robust economy you’ll see interest rates of 3 4 5 sometimes a little more

[00:09:43,299]: In a sick economy recession or depression you’ll see rates of 1 to 0 which is where we’re heading

[00:09:49,820]: And Jim there’s been a lot of talk about tariffs

[00:09:54,280]: Trump has said he’s going to put tariffs on the Chinese products or rather increase tariffs on Chinese imports

[00:10:01,640]: He’s also gone in against the Canadians

[00:10:04,119]: I mean I can’t understand why

[00:10:07,979]: So for Lehman what is going on

[00:10:10,500]: And do you agree with tariffs

[00:10:12,539]: Well I always tell people who are doing their first overseas trips or just planning on going abroad I say if you want to go to a country that’s most like America go to Australia

[00:10:22,940]: I consider Canada a pretty exotic country

[00:10:25,099]: I lived there for a couple of years

[00:10:26,280]: So there are some significant differences between the Canadians and the US

[00:10:31,460]: Look Trump’s putting all these tariffs on

[00:10:34,080]: It’s the best economic policy you can think of

[00:10:37,619]: It’s extremely good for the US

[00:10:40,219]: I get in this debate all the time

[00:10:41,760]: I’ll expand on that a little bit

[00:10:43,219]: But when I have this debate and I explain to people that my tariffs are good they say for the United States they go well yeah Jim yeah but this is really going to be bad for Vietnam and China and Malaysia

[00:10:53,780]: And I say yeah that’s their problem

[00:10:57,419]: Our job is to make America great again

[00:10:59,539]: Tell President Xi to make China great again if he wants and let him figure out policies that actually work other than over borrowing real estate boom and corruption and skimming and a lot else

[00:11:08,820]: So our job is to take care of America

[00:11:11,820]: And Keir Starmer can make the UK great again

[00:11:15,719]: That’s a highly questionable statement but yes

[00:11:19,099]: But that’s all fair

[00:11:21,419]: So looking at it from the American perspective what we’re seeing is a return to something called the American system

[00:11:27,719]: It was invented by Alexander Hamilton in 1790

[00:11:31,200]: His problem was first Treasury Secretary we had Revolutionary War debt and state debt that had kind of hung over from before the creation of the United States

[00:11:41,520]: And one of the first issues facing Congress is what do we do about all this debt

[00:11:46,000]: And so Congress said well that’s easy we’ll just default as the American way

[00:11:50,239]: And Hamilton said no we’ll borrow more use that money to pay off the old debt and then we’ll just keep borrowing and just roll over the debt

[00:11:57,739]: And that was the creation of the government securities market

[00:11:59,859]: It’s been going strong for 230 years didn’t call it a Ponzi but it works

[00:12:05,340]: But then you had to finance the government as well

[00:12:08,099]: And that’s where tariffs come in

[00:12:09,859]: We had tariffs in the start

[00:12:11,080]: Alexander Hamilton and George Washington took a field trip out to Passac New Jersey to show Washington these waterfalls

[00:12:19,539]: And they were like this is perfect

[00:12:20,880]: This can you know you had water wheels and looms and powering industry but we need tariffs to protect us from primarily England because they were the leaders in that technology at the time

[00:12:34,739]: From 1790 to 1962 the United States grew economically geographically technologically telephone telegraph railroad steam I’m not saying we invented every one of those things but we certainly applied them and invented quite a few of them

[00:12:52,960]: The greatest invention of all time economically was indoor plumbing

[00:12:57,799]: 50 of humanity spent 70 of their time fetching water for 5 000 years

[00:13:04,299]: All of a sudden women were free to do more productive things

[00:13:07,340]: So it’s a little more powerful than the internet

[00:13:10,539]: But my point is that whole regime and there were very strong advocates starting as I said David Clay who was not president but was a powerful senator John Quincy Adams Abraham Lincoln William McKinley Calvin Coolidge Dwight Eisenhower all the way through they all advocated tariffs

[00:13:32,880]: Now the rap on tariffs the Democrats ran this in the 2024 presidential campaign and unfortunately it kind of stuck

[00:13:39,859]: So you have to explain it to people

[00:13:41,780]: They go well tariffs are a sales tax on the American people

[00:13:45,280]: That was their statement

[00:13:46,359]: So you have a certain good at a certain price and you put a 20 tariff on it

[00:13:51,099]: The price is going to go up 20

[00:13:53,020]: Sales tax on the American people and inflationary

[00:13:56,659]: Both of those statements are wrong

[00:13:58,440]: Here’s why

[00:13:59,539]: In a tariff transaction you have three parties could be more but at least three

[00:14:04,359]: You have the producer exporter in China Vietnam et cetera

[00:14:09,140]: You have the importer who’s a wholesale or distributor and then you have the consumer

[00:14:13,960]: So yeah we are going to put 20 tariffs on things

[00:14:16,820]: It is going to raise the price at least initially

[00:14:19,159]: Who actually pays the tariff

[00:14:21,320]: Well it’s the importer the person who takes the goods off the ship at the Port of Los Angeles

[00:14:24,880]: He’s got to write a check to the treasury for 20 of the value of those goods

[00:14:28,479]: But who pays it economically

[00:14:30,580]: It is split between the producer and the importer or it’s completely pushed back down the supply chain to the producer

[00:14:39,179]: So the importer says hey I just paid 20 more

[00:14:42,200]: You need to lower your price 20 or whatever the number is so that when you throw on the tariff it comes out about the same

[00:14:50,679]: Or the importer will eat it in the form of reduced margins or profits

[00:14:56,739]: The original exporter or the producer will eat it in terms of reduced profits or margins

[00:15:02,159]: The one party that does not eat the tariff is the consumer

[00:15:05,320]: There is no price increase

[00:15:06,900]: And why is that

[00:15:07,880]: Well first of all that’s what the economic data shows

[00:15:11,059]: But more to the point if Walmart or Costco or Target or Best Buy could raise prices 20 why wouldn’t they just do it

[00:15:18,940]: I mean why do you need tariffs to do that

[00:15:20,500]: Of course you want to raise prices

[00:15:21,859]: The reason they can’t is because the consumer can’t pay it

[00:15:24,700]: The consumer is tapped out

[00:15:27,080]: Credit card lines are used up

[00:15:29,820]: Mortgage rates have been high

[00:15:32,020]: Hiring is dried up

[00:15:33,299]: There are a lot of inflation generally

[00:15:36,119]: The thing about the Biden inflation they say well inflation went down from 9 1 in June 2022

[00:15:43,960]: It’s about 3 today give or take

[00:15:46,280]: It’s bouncing around a little bit

[00:15:47,260]: They say well inflation has come down

[00:15:49,059]: Yeah but the 9 never went away

[00:15:50,780]: That 9 increase is still there

[00:15:52,780]: The 3 increase is still there

[00:15:55,820]: Prices are still going up

[00:15:57,419]: When the financial television talking heads say inflation is coming down people think prices are coming down

[00:16:03,859]: Prices aren’t coming down

[00:16:05,659]: Inflation is going up at a slower level but it’s still going up

[00:16:08,580]: And we’re building on top of the 9 that we had in 2022 which was the highest since the early 1980s

[00:16:16,200]: So given all those price increases which are now embedded in the other headwinds I described people can’t afford to pay higher prices

[00:16:24,340]: Like I say if they could they would have been charged that already

[00:16:27,099]: So in other words the tariff does not fall on the consumer

[00:16:31,299]: It falls on the producer or the importer or it’s split between them in some fashion

[00:16:36,140]: So the idea that it’s inflationary is not true and the idea that it is a sales tax on consumers is not true

[00:16:42,260]: It could affect margins further up the supply chain but not at the consumer level

[00:16:47,099]: But what else do tariffs do

[00:16:49,020]: You basically create a wall

[00:16:50,619]: You create high paying jobs in the United States

[00:16:53,320]: Trump has said to everyone China Malaysia Vietnam I’m picking on them could be French wine

[00:16:58,599]: Well not French wine

[00:16:59,520]: It’s not a good example

[00:17:00,419]: But the German manufacturers et cetera said hey you can sell whatever you want to the American people

[00:17:06,239]: No problem

[00:17:07,079]: But build it here

[00:17:08,439]: Put your plant in the United States

[00:17:10,400]: Because you’ve got to instead of paying the tariffs if you’re the producer going back to what I just said the producer bears it well if you don’t want to bear it jump over the tariff wall and put your plant in the United States

[00:17:19,599]: Taiwan’s semiconductor is spending upwards of 100 billion building new fabrication plants for semiconductors in the United States

[00:17:31,959]: Apple just announced 500 billion of investment in the United States

[00:17:35,880]: Now they’re a US company but they’ve been investing mainly in China and Malaysia and elsewhere around the world

[00:17:45,040]: So Honda announced they’re building a major car manufacturing plant in the United States

[00:17:50,520]: I love my friends in the upscale zip codes

[00:17:53,800]: They’re driving Mercedes

[00:17:55,099]: I’ve got a nice German car

[00:17:56,180]: I said no it’s not

[00:17:57,099]: It’s made in South Carolina

[00:17:58,339]: I stick to Audi’s because they actually are made in Germany

[00:18:03,060]: So more and more of these cars are built in the United States

[00:18:06,020]: What we’re seeing is stage two

[00:18:09,199]: This is Lighthizer 2 0

[00:18:11,359]: Robert Lighthizer was the deputy US trade representative to Ronald Reagan

[00:18:15,619]: He did this to the Japanese car industry in the early 80s

[00:18:19,180]: He saved the US car industry

[00:18:21,239]: And the Japanese finally said OK we hear you

[00:18:23,739]: Because he threw huge tariffs on them

[00:18:26,020]: He said we hear you

[00:18:27,280]: We’ll put our plants in the United States and they’re here

[00:18:30,280]: Now Volkswagen’s crying because they just built a huge factory in Mexico for the Audi Q5 which is one of their best selling vehicles

[00:18:39,280]: And they’re like wait a second what about USMCA is a successor to NAFTA

[00:18:45,500]: What about those tariffs

[00:18:47,900]: And Trump’s saying we don’t care

[00:18:49,180]: We’re going to renegotiate

[00:18:50,439]: We’re putting tariffs on that

[00:18:51,500]: Should have put your plant in the United States Volkswagen

[00:18:54,040]: You should have thought of that

[00:18:55,079]: But the door’s open

[00:18:56,599]: You can invest here

[00:18:57,979]: Now what else does that

[00:18:59,060]: But Jim sorry to interrupt

[00:19:00,300]: And this is really interesting

[00:19:01,800]: Because only a week ago we had Liam Halligan who you know making many of the exact opposite points of what you’re saying

[00:19:10,060]: And we respect you both and both are really interesting people with interesting perspectives

[00:19:15,140]: If you force manufacturers to make things in America I don’t see how that wouldn’t be inflationary because you have to pay people higher salaries here

[00:19:25,359]: So yes you’re getting higher paying jobs into the US but you’re also pushing up the price of the things that those people make aren’t you

[00:19:31,859]: Do you have at least 50 000 in your 401k or another retirement account

[00:19:36,599]: If so listen up

[00:19:38,540]: Gold just exploded past 2 800 an ounce shattering all records

[00:19:43,819]: This isn’t just another headline

[00:19:45,439]: It’s part of what experts call the Great Wealth Shift the largest transfer of money from the middle class to the elites in history

[00:19:52,119]: Here’s what’s really happening

[00:19:53,619]: While inflation devours your savings the wealthy are converting their dollars into gold

[00:19:58,479]: They know that every time Washington prints more money your retirement loses value

[00:20:02,800]: But their gold grows stronger

[00:20:04,699]: And now JP Morgan has quietly purchased nearly a thousand tons of gold and central banks are buying at the fastest pace in 55 years

[00:20:13,079]: They’re preparing for something big

[00:20:14,760]: World renowned economist Jim Rickards told us about this already

[00:20:18,119]: Gold will be where countries go and it should be where investors go follow the money as they say

[00:20:25,020]: And central banks have been net buyers for the last 13 years so they’re about the best informed players you can imagine so I’d have some gold

[00:20:32,280]: But here’s the good news

[00:20:33,160]: You still have time to protect yourself if you act now

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[00:21:04,699]: Listen there’s no denying it the shift is accelerating

[00:21:07,380]: The question is will you be ready

[00:21:09,880]: First of all the salary has to be put in the context of productivity

[00:21:13,699]: US workers are very productive

[00:21:15,119]: When you give them the capital when you give them the investment these factories are very productive

[00:21:21,339]: And as far as the higher salaries are concerned the way the Chinese make money is they sell vulgar

[00:21:28,920]: They sell crap

[00:21:30,160]: They sell stuff that falls apart before you open the clamshell box

[00:21:36,160]: And when you factor in transportation costs energy costs the salary differential is not as great as it once was

[00:21:43,739]: I’m not talking

[00:21:45,739]: So if it’s 15 20 an hour maybe 40 an hour in certain industries that’s a globally competitive rate

[00:21:54,939]: The people who are not competitive today are the Germans

[00:21:59,380]: We can talk about that but for other reasons

[00:22:02,780]: And there are only a handful of countries that really have that kind of manufacturing capability

[00:22:07,040]: But you lower your distribution costs you lower your transportation costs you’re going to lower your energy costs because drill baby drill

[00:22:14,520]: And US labor is productive

[00:22:16,599]: So the notion that you’ve got to pay it’s not like China’s autoworkers are making 2 an hour and our autoworkers are making 40 an hour

[00:22:25,380]: Something like that not quite as extreme might have been true in the early 80s

[00:22:29,380]: It’s not true today

[00:22:30,319]: I mean Liam’s working in a world of theory but all these theories are badly flawed

[00:22:36,280]: And again I go back to the fact that this whole tariff idea scheme that I just outlined was how the United States operated from 1790 onward

[00:22:47,979]: Let me probe some more

[00:22:49,619]: Actually the argument I just put to you wasn’t one of Liam’s arguments

[00:22:53,239]: Liam’s argument I think there were two things but one of them primarily was what happens when you slap down tariffs on people

[00:23:00,760]: Some of them will absorb it but with the Chinese they’re not going to be prepared to be bossed about in this way

[00:23:07,040]: They’re going to retaliate

[00:23:08,380]: And that’s bad for everybody because now you’ve gone from a mutually beneficial relationship to a zero sum game

[00:23:14,479]: Well this is the myth of free trade

[00:23:16,739]: Even David Ricardo knew that free trade there was no such thing

[00:23:19,819]: The problem with free trade is that I had a really high grade point average in college but I struggled a little bit with economics

[00:23:29,839]: And I always wondered why

[00:23:31,040]: I was like was I just not bright enough

[00:23:32,880]: And it was only later that I realized everything I was taught was garbage

[00:23:36,300]: The reason I didn’t get it was because it was all wrong

[00:23:39,239]: So one of the myths is free trade

[00:23:42,880]: So what they teach you is England is very good at shearing wool and textiles and Portugal is very good at growing grapes and making wine

[00:23:51,599]: It makes no sense to grow grapes in England

[00:23:55,020]: It makes no sense to start a textile industry in Portugal

[00:23:58,199]: So why doesn’t England make the textiles Portugal make the wine and just trade

[00:24:02,619]: Everybody’s doing what they do best and that’s the theory of free trade

[00:24:05,780]: You can write those equations

[00:24:07,479]: It’s pretty simple

[00:24:10,640]: That’s a completely abstract artificial construct

[00:24:14,780]: So what does the real world look like

[00:24:16,540]: The idea is called comparative advantage what I just described

[00:24:20,180]: The idea is that Tom Brady shouldn’t mow his own lawn

[00:24:23,500]: He could probably mow his lawn better than any landscaper in town but it’s not the thing he does best

[00:24:29,140]: He should be in the broadcast booth now and let the landscaper mow the lawn

[00:24:33,599]: It’s better for everybody

[00:24:35,119]: That’s comparative advantage

[00:24:36,780]: The problem is and Ricardo actually recognized this he said that the factors of production were static in that example but in the real world the factors of production are not static

[00:24:47,839]: They’re completely portable

[00:24:49,319]: So who’s the most sophisticated largest best semiconductor producer in the world today

[00:24:56,560]: It’s Taiwan Semiconductor in Taiwan

[00:24:59,119]: That industry started in the late 1970s

[00:25:01,560]: What was Taiwan’s comparative advantage in semiconductors in 1979

[00:25:06,276]: Zero

[00:25:07,336]: Their comparative advantage was tuna fish and rice

[00:25:10,376]: So they created it

[00:25:11,876]: They created it out of thin air

[00:25:13,216]: They said we’re going to do this

[00:25:14,636]: They put they started with state sponsorship but they grew out of that very quickly

[00:25:20,076]: The companies went public

[00:25:21,516]: They were very relaxed about you know if you were the hot programmer developer in Tomlinson McDoctor and you wanted to spin out and start your own company they would say yeah I’ll give you the money I’ll give you the capital you know create a network of those firms

[00:25:34,296]: You know maybe people were studying in Stanford or MIT but they got back to Taiwan

[00:25:39,456]: But that’s the problem in China

[00:25:40,656]: They send their scholars abroad and they don’t all come back

[00:25:43,636]: But in Taiwan in many cases they did

[00:25:46,716]: And now they’re the leading semiconductor producer in the world

[00:25:50,376]: My point is they created the comparative advantage

[00:25:52,676]: Now same problem with China

[00:25:54,556]: And there was a time it’s not as true today but the labor was cheaper

[00:25:58,776]: So that was a comparative advantage

[00:26:00,376]: But the capital is completely portable

[00:26:02,036]: So you take the cheap labor that’s there and the capital which is portable which went to China

[00:26:07,356]: Now they had they basically created comparative advantage out of thin air

[00:26:12,136]: So the idea that it’s natural and static is false

[00:26:15,276]: And then you get into you know we’re talking about US tariffs

[00:26:19,516]: So guess what

[00:26:20,156]: As you know the rest of the world has very high tariffs on all of our stuff

[00:26:24,576]: And then you know the other factors are energy which tends to be a world price

[00:26:30,056]: Can I just stop you there Jim

[00:26:31,636]: Because there is the other aspect of it that I really want you to address

[00:26:35,876]: That is we are in quite an antagonistic relationship with China at the moment

[00:26:42,436]: So that being the case do we really want to slap these tariffs on or increase these tariffs by a significant amount

[00:26:50,796]: And that will be seen as an antagonistic gesture to China which will then put China on more of a kind of war footing which means that they will then look covetously as we already know they’re doing at Taiwan but think to themselves you know what what is our relationship like with America

[00:27:08,456]: It’s not great as it is

[00:27:10,696]: This is the moment to strike

[00:27:11,856]: I mean that’s a lot of people’s concerns aren’t they

[00:27:14,376]: Yes you do hear that argument but let me just I’ll come back to that point but let me just separate them for a second

[00:27:20,856]: If China’s annoyed or miffed or upset or whatever who cares

[00:27:24,456]: I mean that’s not again that’s not our job

[00:27:27,216]: Yeah we’ve got to be attentive to China and we don’t want to antagonize them needlessly but if they have a sense of you know we’re being antagonistic to them who cares

[00:27:39,156]: So they buy their soybeans from Brazil

[00:27:41,116]: You know what happened in 2018 when Trump put tariffs on China

[00:27:46,496]: China said OK we’re not buying any more soybeans from the United States we’re buying them from Brazil

[00:27:50,536]: It was a huge disruption in the supply chain

[00:27:53,036]: It was one of the factors that fed into some of the inflation in 2022

[00:27:59,356]: A lot of it was government spending but it wasn’t that the tariffs were the sales taxes we described it was that the supply chain was disrupted which is also that had to do with COVID

[00:28:09,316]: But China shifted their soybean purchases to Brazil on long term contracts because I mean the logistics behind that are you know the acreage the port facilities the transportation facilities

[00:28:20,336]: These people want long they want five year contracts

[00:28:22,416]: They don’t want you know a six month deal et cetera

[00:28:24,976]: So what did the United States do

[00:28:26,556]: We sold our soybeans to the Netherlands

[00:28:28,396]: I mean it’s a big world

[00:28:29,816]: So yeah we shipped we found another buyer

[00:28:33,436]: China found another seller but we found another buyer

[00:28:35,656]: We’re growing just as many soybeans but we’re selling them to Europe

[00:28:38,656]: And if China wants some they can come and get it

[00:28:40,536]: My point is a lot of these threats there’s a lot less there than meets the eye

[00:28:44,956]: And I’m not saying by the way when I talk about tariffs I’m not saying global trade is going to go to zero or it’s the new Great Depression or oh that was tied to one of my books

[00:28:55,836]: But it’s not that there’s no trade even if we have all this U S manufacturing which I described we’re still going to need inputs from abroad

[00:29:04,156]: And these things can also be negotiated

[00:29:06,736]: Trump’s kind of you know acting with a pretty blunt instrument at the moment

[00:29:10,936]: And if no one wants to deal with him it’ll stay that way

[00:29:14,296]: But the door is open for talks and certainly U S.-Canadian car industry they ought to figure out a way to solve that

[00:29:21,956]: But how do you solve it when Canada’s been free riding for all these years

[00:29:26,356]: So I don’t really the thing is Frances you have to have the attitude you don’t care

[00:29:32,136]: If they get China’s myth too bad that’s your problem

[00:29:34,736]: Figure it out

[00:29:36,196]: Why doesn’t China reorient its economy to consumption from investment half of which is wasted by the way

[00:29:42,036]: I spent a lot of time in China

[00:29:43,056]: I mean I’ve been to these ghost cities

[00:29:46,036]: You know you go to one of them it’s you know like I say I got mud on my boots but I got mud on my Italian loafers

[00:29:52,776]: But I did go out to the construction sites

[00:29:56,516]: And I actually had a couple Communist Party chaperones and they were my hosts you know

[00:30:03,516]: So they said look at this we have a high rise hotel we have a country club we have a conference room we have apartment buildings we have mixed use office buildings shops and everything

[00:30:14,716]: It’s a there’s an airport nearby it’s a highway exit et cetera

[00:30:19,436]: I said yeah but it’s all empty

[00:30:21,256]: I mean everything you said was true I saw it I was there

[00:30:23,896]: And there was more going up but it was all empty

[00:30:27,996]: You know sometimes when you’re I’ll just say collecting information you have to sort of have a you know you operate under a story so to speak

[00:30:37,816]: And my story was I was there as a potential investor and you know they pictured me as a big tenant you know although they don’t realize hedge funds don’t have a lot of employees necessarily

[00:30:48,376]: But as I was going through all this they were really putting on a hard sell

[00:30:51,796]: But I looked out on the horizon there were two more ghost cities on the horizon

[00:30:55,756]: You could see them in the distance they were building a whole string of them

[00:30:59,796]: Technically that’s GDP

[00:31:00,956]: I mean there’s real steel real glass real copper real construction 20 000 jobs for two years

[00:31:06,216]: That’s all real

[00:31:07,516]: But when you’re done if you apply generally accepted accounting principles you’d write it off

[00:31:12,796]: You’d say it’s worth zero

[00:31:14,576]: I mean Pricewaterhouse would make you write it down to zero

[00:31:17,196]: So my point being the investment’s real but if you subtract the lost value your GDP is grossly overstated

[00:31:25,056]: Even China having come down from 10 to 5 which is about what they say it’s probably closer to 2 2 and 1 half when you adjust for the kind of waste I’m talking about

[00:31:35,796]: And then maybe less than that

[00:31:38,056]: So China may already be in a recession

[00:31:39,936]: They lie about it so we don’t really know

[00:31:42,816]: But again you have to have a little bit of an attitude of you know who cares

[00:31:50,556]: Well come back to Francis point though because his point was about you can do that

[00:31:54,976]: They’re going to invade Taiwan

[00:31:55,656]: Yeah

[00:31:56,896]: The most likely scenario for Taiwan rejoining the mainland China would be that one of the Kuomintang the Taiwanese political party makes it a goal and wins an election and opens negotiations with China

[00:32:12,156]: I mean I’m not saying that

[00:32:13,576]: That’s not my forecast but I will say that’s the most likely path that the Kuomintang would actually cause that to happen from the Taiwanese side

[00:32:21,836]: But you notice they have not been winning elections lately

[00:32:25,156]: Chinese invasion it would be messy

[00:32:31,016]: I was in the chat we were doing some more financial war gaming scenarios

[00:32:38,876]: I learned to keep my mouth shut about actual military logistics but I was sitting next to a three star general and we were using financial indicators as a predictive analytic tool to see if China would invade Taiwan

[00:32:50,836]: So we had a whole list of factors

[00:32:53,716]: And I said to this general I said well general this all works

[00:32:56,636]: It’s artificial intelligence actually

[00:32:58,176]: We built systems like this

[00:33:00,596]: But I mean wouldn’t you see it coming

[00:33:02,956]: Like wouldn’t you see like a million people going down and getting on the boats and stuff like that coming over to invade Taiwan

[00:33:08,516]: Why do you need these indicators

[00:33:10,436]: He said oh you’d see it but they do it four times a year

[00:33:13,356]: And it was they practice the invasion continually

[00:33:16,216]: So the real art is when is it real

[00:33:18,716]: He said they practice the invasion about four times a year and they all do exactly what I said

[00:33:23,696]: We see it

[00:33:24,456]: We just don’t know when it’s going to be real or not

[00:33:26,616]: And I said OK I’ll keep out of military planning

[00:33:31,256]: But isn’t Trump’s job and I understand and I understand the bullish nature and I understand the top dog mentality

[00:33:37,356]: I get all of that

[00:33:38,736]: And America perfectly placed to make those kind of moves

[00:33:45,376]: But aren’t we also ignoring Jim the other element of this which is diplomatic

[00:33:50,856]: Which is America is a policeman of the world

[00:33:53,856]: America is the strongman of the world

[00:33:57,956]: And part of being a strongman isn’t just about being robust isn’t just about taking on bullies

[00:34:05,016]: It’s also finding the most appropriate way of doing this

[00:34:08,296]: And if by isolating China we’re being needlessly antagonistic

[00:34:14,876]: Well it’s not needless

[00:34:16,596]: We’re trying to grow the US economy create high paying jobs actually rebuild our defensive posture

[00:34:21,856]: Now during the Cold War we’d always say well the US is falling behind Russia has more missiles or this or that

[00:34:31,036]: And the way to shut down that argument was just to say to interlocutor well who would you rather be

[00:34:35,816]: And you say well I guess I’d rather be the United States

[00:34:38,456]: And that’s still true

[00:34:39,916]: But because of this world historic blunder in Ukraine with between 700 000 million dead Ukrainians basically wiped out a large part of a generation financed by the United States by the Biden administration and with all the weapons that we provided them we’ve learned two lessons

[00:35:02,296]: I’ll get back to China

[00:35:03,376]: But this idea that we’re the policemen of the world we have that potential but not anymore

[00:35:09,536]: I think that the cops off the beat were focused more on diplomacy

[00:35:14,156]: I mean diplomacy is the alternative to war

[00:35:16,916]: If you had better diplomats you wouldn’t have to be the policeman of the world

[00:35:20,936]: You would just work things out with and Trump and Putin are actually talking to each other

[00:35:26,836]: Why didn’t Biden talk to Putin for three years

[00:35:30,016]: They wanted the war

[00:35:30,856]: The United States wanted the war

[00:35:31,876]: We provoked the war

[00:35:32,676]: Beginning in 2008 with the Bucharest Declaration by George Bush George W Bush that Ukraine must join NATO

[00:35:41,856]: In 2014 you had MI6 CIA coup d etat of a duly elected government

[00:35:47,316]: Okay the guy was a little pro Russian but he was elected and he was overthrown

[00:35:52,436]: We put a US puppet in place you know Victoria Nuland the warmongers out handing out cookies in Maidan Square

[00:36:00,136]: That was all orchestrated by the United States

[00:36:01,896]: That was a coup d etat

[00:36:03,096]: You know they did that

[00:36:04,916]: Sorry you and I have talked about this before

[00:36:07,156]: What happened in Ukraine in 2014 is exactly what happened in this country in 1776

[00:36:11,996]: You had a revolution

[00:36:13,276]: It was supported by outside actors as every revolution in history is

[00:36:16,776]: Well I beg to differ

[00:36:17,596]: It was not a revolution

[00:36:18,836]: It was a it was presented as a color revolution

[00:36:22,596]: It was actually a coup d etat sponsored by well they are What about the American revolution

[00:36:27,776]: It was sponsored by the French

[00:36:28,836]: They spent so much money they had their own revolution because they ran out of money

[00:36:32,116]: Well that’s the French part

[00:36:33,516]: The French were a big help during the American Revolution

[00:36:35,436]: Yeah that’s what I’m saying

[00:36:36,376]: I’ll grant that

[00:36:37,856]: Okay

[00:36:38,576]: So we should support the neo Nazis in Kiev

[00:36:41,396]: Is that our goal

[00:36:43,016]: Look the I’ve spoken to the head of the U S German Marshall Foundation

[00:36:50,316]: Basically it’s a U S.-German NGO and she was you know was happy to talk about what we’re doing in Ukraine

[00:36:56,416]: I asked her about the neo Nazis and she said she was a little taken aback but then she said well we’ve been told not to flirt with them

[00:37:03,596]: Those are her exact words

[00:37:04,876]: Look there is a I mean They’re there

[00:37:06,916]: No one’s denying that they’re there because Okay

[00:37:09,376]: Well that’s a good start

[00:37:10,356]: By the way Hold on hold on

[00:37:11,196]: Fighting for democracy

[00:37:12,476]: Hold on Jim

[00:37:13,056]: Hold on

[00:37:13,356]: You’ve got to let me answer what you’re saying

[00:37:15,816]: So President Zelensky a Jewish man is not a neo Nazi

[00:37:19,296]: The people around him are not neo Nazis

[00:37:21,236]: Yes they are

[00:37:21,756]: No they’re not

[00:37:22,596]: Okay

[00:37:23,576]: Who close to Zelensky is a neo Nazi

[00:37:26,136]: Well Zelensky for starters

[00:37:27,636]: Zelensky’s not a neo Nazi

[00:37:28,936]: Yes he is

[00:37:31,516]: That is their sympathy

[00:37:32,696]: They’re Banderites from this goes back to the 1940s

[00:37:38,096]: We’re refighting the Battle of Kursk

[00:37:40,776]: There were neo Nazis

[00:37:41,676]: There were Nazis in the it wasn’t even Ukraine at the time

[00:37:45,916]: There were some Ukrainian nationalists who were absolutely evil anti Semitic and Nazis but they’re not in charge of Ukraine

[00:37:52,116]: They are a small force within Ukraine but they’re not in charge of Ukraine and Zelensky’s not a Nazi

[00:37:57,796]: Come on man

[00:37:59,416]: He sympathizes with that element in Ukraine

[00:38:02,016]: He doesn’t have much choice

[00:38:03,556]: And by the way Zelensky’s term leave aside the original election his term expired in May 2024

[00:38:10,136]: He’s been a military dictator ever since

[00:38:13,076]: Again hold on

[00:38:14,176]: His term expired in May 2024

[00:38:15,616]: Yes because this is what countries when they’re at war they declare martial law

[00:38:19,016]: In the UK was Churchill a dictator during the war

[00:38:21,476]: Well in the US We didn’t have an election for 10 years

[00:38:23,556]: Well we had an election in the United States in 1862 and 1864 in the middle of the Civil War one of the greatest I know but Ukraine is in Europe

[00:38:30,796]: It’s not in America

[00:38:32,056]: European countries have always declared martial law and suspended elections in times of war

[00:38:36,176]: It’s a standard thing to do

[00:38:37,476]: He’s going to have an election when the war’s over

[00:38:39,296]: That’s why President Trump sent people to try and get other people to instigate an election

[00:38:46,016]: They all said are you crazy

[00:38:47,296]: We’re not having this

[00:38:48,336]: Well he won’t have an election when the war’s over

[00:38:50,276]: Yeah he will

[00:38:50,956]: Come Let me finish my sentence

[00:38:53,196]: He won’t have an election when the war’s over because he won’t be around

[00:38:56,656]: So his days are numbered

[00:38:59,496]: And it’s not clear that there’ll be much left of Ukraine other than a landlocked Trump state

[00:39:04,136]: So we’ll see what happens

[00:39:06,736]: But my point was a little different which okay fair enough

[00:39:11,336]: We may disagree on that

[00:39:12,776]: I have to say I spend a lot of time thinking about a lot of problems and I solve a lot of them

[00:39:18,656]: Some of them I can’t solve

[00:39:19,876]: One of the ones I absolutely cannot solve I’m learning trying to absorb as much as I can is why the UK in particular France is sort of a tagalong but why the UK is so committed to extending the war killing more Ukrainians fighting the Russians the Russophobia in the UK

[00:39:41,716]: I don’t understand it

[00:39:43,696]: There’s no more natural alliance in the world than Russia and Germany for example

[00:39:49,096]: Russia they have a lot of technology of course but they have massive natural resources agricultural resources

[00:39:54,136]: So Germany doesn’t have much land

[00:39:56,096]: That’s why they always went looking for it at everyone else’s expense

[00:39:59,636]: But great technology highly educated workforce and so forth

[00:40:03,996]: But the German economy is de industrializing

[00:40:07,596]: It’s almost in a state of collapse

[00:40:09,396]: I did take delivery on a new Audi recently and I always read this

[00:40:12,916]: Second time you mention that Jim

[00:40:14,316]: Well but I have a footnote which is I’m very careful about the specs and I saw that the engine was made in Hungary

[00:40:19,996]: Now I’m okay with that

[00:40:20,876]: The Hungarians are very they’re also well educated and productive and so forth

[00:40:24,956]: But I said why is a Bavarian auto company outsourcing the engines to Hungary

[00:40:30,656]: And the answer is energy costs

[00:40:33,416]: So Angela Merkel spent 14 years shutting down every coal fired energy plant in Germany closed all but two nuclear power plants

[00:40:43,776]: And then Germany acquiesced while our friends at MI6 and CIA blew up the Nord Stream pipeline

[00:40:49,876]: So the reason they’re outsourcing to Hungary is Hungary has much lower energy costs

[00:40:55,836]: So why it’s sort of industrial suicide

[00:41:00,936]: It is

[00:41:01,336]: It’s because Europeans have gone insane on this net zero thing

[00:41:04,896]: Correct

[00:41:05,036]: That’s why

[00:41:05,836]: We’re at a point where we actually need more CO2 emissions

[00:41:09,296]: It’s plant food

[00:41:10,076]: We’re going to kill all the plants and starve ourselves to death if we don’t keep up the CO2

[00:41:14,456]: But come back to your point

[00:41:15,496]: I don’t understand why the UK are such rabid warmongers about this

[00:41:24,156]: They wouldn’t see it like that Jim

[00:41:25,616]: They would see that Putin presents an existential threat to Europe and obviously to Ukraine

[00:41:33,136]: It’s an illegal invasion

[00:41:35,096]: He has a habit of doing these types of things

[00:41:38,056]: Also as well he has poisoned UK citizens on UK soil

[00:41:45,176]: He’s a hostile actor

[00:41:47,076]: Yeah he’s a hostile actor

[00:41:48,756]: And he presents they would perceive it and I perceive it he presents a very real existential threat

[00:41:54,976]: There are people in Lithuania Estonia and other countries as well who are getting very nervous whilst looking at what Putin is doing

[00:42:05,746]: That’s why Europe’s concerned about it

[00:42:07,676]: Yeah

[00:42:10,596]: He basically came to the rescue of the Russian speaking population in Donbass in the eastern part of Ukraine

[00:42:18,476]: By the way

[00:42:19,716]: Jim my family are Russian speaking Ukrainians

[00:42:22,896]: None of them support what’s happened and they’re all pro Ukrainian

[00:42:25,716]: This is a very one dimensional way of looking at this I would argue

[00:42:30,136]: There are many people like my family mostly is in the south of Ukraine quite close to the front line

[00:42:36,156]: This idea that if you’re Russian speaking in Ukraine that means you support Russia or you needed protection Zelensky is a Russian speaking Ukrainian

[00:42:45,496]: I understand that this is an argument

[00:42:49,756]: I think in Europe we see these things very differently because we’re a little bit closer physically as well

[00:42:55,496]: Now having said that I mean I think there’s been also we just had Boris Johnson on the show for example

[00:43:01,216]: Oh I was just going to bring him up please

[00:43:03,316]: Right

[00:43:03,456]: So there’s this idea that Boris Johnson went to the Ukrainians and prevented them from signing a peace deal right

[00:43:09,796]: And I was going to challenge Boris Johnson on this very thing right

[00:43:13,676]: So I went and I looked at that claim where it came from

[00:43:17,876]: And it was a bunch of publications mostly on the right which is fine

[00:43:21,936]: A lot of our guests are on the right

[00:43:23,916]: And they referenced an interview with the Ukraine’s lead negotiator David Arhami I think or Rakhman his name is right

[00:43:30,156]: I went and listened to that interview

[00:43:31,656]: He says the exact opposite of what these people are claiming

[00:43:34,656]: So there is a lot of stuff lying about

[00:43:37,456]: That’s not to say that all the people pro Ukraine are telling the truth all the time

[00:43:41,776]: But I think that we’ve got ourselves into these very two polarized narratives when I think actually the truth is NATO expansion is not something that Russia likes

[00:43:52,876]: I think we can all agree on that

[00:43:54,576]: And to that extent you could argue that they were provoked

[00:43:56,796]: The counter argument to that which no one ever puts and I think it’s worth discussing is if NATO hadn’t expanded eastwards where would Putin’s control over Eastern Europe be now

[00:44:06,916]: Would it still be where it is

[00:44:08,076]: Or would it be further west

[00:44:09,616]: And my argument is of course it would be further west

[00:44:11,936]: Because every time that Russia can expand westwards and it’s strong that’s what it does historically

[00:44:16,076]: That’s why all these countries in Europe are concerned because we know our own history

[00:44:21,296]: Why is the EU basically voided at what would otherwise be a legitimate election in Romania

[00:44:27,116]: That I have no idea about

[00:44:28,236]: Well again it’s another example of Europe pretending to support democracy when in fact they support autocracy or anything

[00:44:38,856]: The leading it was Carly Giurgescu it was the leading candidate in Romania who was I won’t say pro Russian but he was certainly against the war and willing to work with Putin or with Russia the Russian Federation but Putin’s in charge as is the Slovak Republic Hungary Orban certainly has an open line there

[00:45:01,976]: So you’re not seeing Russia invade Eastern Europe

[00:45:04,636]: What you’re seeing is Eastern Europe come to their senses about working with other powers and actually trying to get peace

[00:45:11,236]: But that’s not true in Poland Latvia Estonia Lithuania right

[00:45:14,816]: Those countries are very concerned

[00:45:16,356]: I mean Finland and Sweden have joined NATO

[00:45:18,496]: That’s how concerned they are right

[00:45:19,976]: Yeah

[00:45:20,396]: Yeah

[00:45:21,216]: Well look we’re maybe we just agree to disagree

[00:45:25,776]: The thing is that we could carry on for hours

[00:45:29,796]: Let’s come back to economics

[00:45:30,936]: But I would do sorry I wanted to come back to Francis point which is about the US being the world’s policeman

[00:45:37,056]: So we’re kind of off duty capable of that

[00:45:39,996]: But here’s what Ukraine has revealed the war in Ukraine has revealed leaving aside causes and all that stuff

[00:45:47,576]: Our stuff doesn’t work

[00:45:49,296]: Patriot missiles Patriot missile batteries cannot shoot down a hypersonic missile

[00:45:53,556]: We cannot shoot down a Russian missile

[00:45:55,556]: A cruise missile yes they would go about 500 600 miles an hour

[00:45:58,376]: But these missiles are going 10 000 miles an hour

[00:46:00,736]: Yeah the ballistic missiles

[00:46:01,676]: Yeah you can’t shoot them

[00:46:02,616]: So the Russians have blown up seven Patriot missile batteries using hypersonic missiles

[00:46:08,116]: They’re a billion dollars apiece

[00:46:10,056]: Okay

[00:46:10,396]: So there’s 7 billion out the window and you have no air defense

[00:46:13,276]: Bradley fighting vehicles

[00:46:14,636]: Remember the famous offensive in 2023

[00:46:17,716]: We never know if it was spring summer winter fall because the Ukrainians kept walking but they launched this major offensive

[00:46:24,016]: Bradley fighting vehicles were left burning on the battlefield

[00:46:27,076]: The Challenger tanks which are from the UK the Leopard tanks which are from Germany the Abrams tanks from the United States were all left burning on the battlefield

[00:46:35,376]: Now the United States actually called Ukraine and said please don’t use our Abrams tanks

[00:46:40,116]: It’s very bad for sales

[00:46:41,076]: They were actually left in the rear echelons because every time they attacked the Russians blew them up

[00:46:46,496]: Our HIMARS artilleries precision guided artillery it doesn’t work well they shoot them but they go in cornfields because the Russians figured out how to jam the GPS so they send them off course

[00:46:57,756]: Now I could list a lot of other systems but my point is A every one of these systems has failed

[00:47:04,196]: The Russians have no desire to go west of the Dnieper River unless maybe the Ukrainians keep fighting

[00:47:09,916]: But if they wanted to there’d be nothing to stop them

[00:47:12,696]: I’m not saying they will

[00:47:13,576]: I think they have no intention of that

[00:47:15,116]: I think that’s just wrong

[00:47:17,716]: But if they did there’d be nothing to stop them

[00:47:20,936]: NATO is a papier mâché alliance

[00:47:24,936]: Now 155 millimeter shells there aren’t any

[00:47:28,176]: We’re out of them

[00:47:29,976]: We’ve taken down our reserves

[00:47:31,796]: And they said Europe you talk about Europe a couple of years ago they said well we’re going to make a million shells a year

[00:47:38,336]: They couldn’t make any

[00:47:39,956]: They de industrialized

[00:47:41,656]: You can’t get this

[00:47:42,756]: You can create a plan to make 155 millimeter shells

[00:47:45,956]: It takes two or three years to get the plant going

[00:47:48,316]: The idea that they were delivering them they actually authorized contacts to go around to illegal arms dealers around the world and try to scrounge up some shells

[00:47:57,496]: Seriously

[00:47:57,796]: And they found some that were like I mean a couple hundred thousand I think in Saudi Arabia that were because the Czechs are very good at this and they kind of got the nod

[00:48:06,596]: But they were like 30 years old

[00:48:07,996]: Nobody knew if they actually worked or not

[00:48:09,476]: We’re out of 155 millimeter shells

[00:48:12,596]: And the US isn’t much better

[00:48:13,916]: The US has a little productive capability

[00:48:16,176]: So my point being all of our premier advertise all of these magic solutions not one of them worked

[00:48:24,476]: And not only did they fail and allowed the Russians to do what they’ve done but it makes no sense to rebuild these things to make more of them

[00:48:32,436]: We need completely we need tens or hundreds of billions in R D completely new systems

[00:48:37,736]: And by the way this would be very good for the US economy

[00:48:40,276]: And this will all be domestic

[00:48:42,556]: So the reason I’m talking about with the US being the policeman of the world isn’t just military interventions or supporting Ukraine

[00:48:51,916]: You have Iran at the moment

[00:48:54,516]: Iran is effectively sponsoring terrorism throughout the Middle East

[00:49:00,296]: Let’s be honest the war in Gaza as awful it is is a glorified proxy war

[00:49:04,966]: Are you sure

[00:49:06,666]: Yeah

[00:49:06,786]: Yeah

[00:49:07,346]: And then you’re hearing that they’re building military capabilities nuclear capabilities

[00:49:12,826]: And you go this is absolutely terrifying

[00:49:15,626]: This is terrifying with a nation that is genocidal when it comes to Jewish people and the land of Israel

[00:49:21,946]: Right

[00:49:22,506]: And you go who else is able to step in and ensure that these things don’t happen other than the United States

[00:49:30,326]: What the French

[00:49:31,326]: The Germans

[00:49:32,086]: The Italians

[00:49:32,926]: The British

[00:49:33,946]: We’re all on our arse Jimmy

[00:49:35,626]: You missed one

[00:49:37,126]: Israelis

[00:49:38,146]: The U S and the Israelis are working together

[00:49:40,746]: We’ve already denuded Iran of their air defenses

[00:49:43,926]: Look it’s a big country physically about a little less than 80 million people

[00:49:49,166]: Obviously they have the oil revenue so I’m not saying that Iran is some kind of a pushover

[00:49:55,286]: But there’s a lot less there than the MECI

[00:49:57,306]: Their regime is extremely unpopular with their people

[00:50:00,106]: The average Iranian is decently well educated or highly educated cosmopolitan they’ve got a deep history and a strong culture

[00:50:10,506]: They would love nothing more than to be I’ll not say Western but part of the West in other words

[00:50:17,166]: But they’ve got a leadership that is in the Middle Ages

[00:50:21,206]: And by the way everything you said was exactly right Francis

[00:50:23,886]: And who financed it

[00:50:24,926]: The United States

[00:50:27,066]: Obama and Biden gave Iran tens of billions of dollars actually more than that closer to 100 billion left gold and pallets of currency on the runway

[00:50:38,486]: And they had to go to the Central Bank of the Netherlands to get euros because they couldn’t give them dollars because they were kicked out of the dollar system

[00:50:44,486]: So when we gave them billions of dollars in cash on pallets they were euros

[00:50:49,546]: But they put them to good use financing the Houthis and Hezbollah and Hamas not as much on the West Bank but that was the whole Shiite crescent

[00:51:01,146]: And by the way one thing we haven’t talked much about that is let’s go back to Samuel Huntington is because we’re so secularized people don’t understand the importance of religion in everything we’re talking about

[00:51:13,506]: Now and this is a huge factor in Ukraine getting back to Ukraine for a second

[00:51:20,886]: But regardless of political sympathies the Eastern half is Russian Orthodox they look to the patriarch in Moscow and the Western half is more Catholic and they look to the Pope in Rome

[00:51:31,306]: That’s been going on for a thousand years

[00:51:32,726]: But my point is there’s no more natural solution than a peaceful division of the country

[00:51:37,746]: And even if it were still a separate country an Eastern and Western Ukraine one looking to the East one looking to the West

[00:51:45,306]: And the people who did this I was in the Slovak Republic I was in Bratislava and I was a guest of one of the members of parliament

[00:51:52,206]: And he took me onto the floor of the Slovak Republic Parliament and I spent a lot of time with him

[00:52:00,146]: And I said what they did was amazing because they Czechoslovakia which is this put together thing they realized themselves internally that this wasn’t a good fit that splitting the country down the middle breaking into two republics made a lot of sense

[00:52:15,406]: The people supported it

[00:52:16,686]: It was done through negotiations it was done peacefully with referenda

[00:52:20,966]: There was no there were no riots there was no color revolution there was no mine on square and there was no war

[00:52:26,666]: So a solution like that going to your point Francis that’s an example of it was internal so not diplomacy in the strict sense but diplomacy negotiation and good faith in action

[00:52:39,686]: And that’s what Trump’s trying to do

[00:52:41,686]: We finally have some diplomats we had Tony Blinken so

[00:52:44,726]: But let me push back on that idea Jim because I agree with you for the most part

[00:52:49,606]: And even with people like Putin and even people like Gito you know those types of people you can negotiate

[00:52:59,626]: Iranian leaders are nutters to put it mildly

[00:53:01,706]: They’re absolutely off their rocker mental completely insane ideologues Islamists

[00:53:10,456]: How much can you actually negotiate with somebody who is that insane to put it bluntly

[00:53:16,366]: Well they may not be open to negotiations for the reason you mentioned but they do pay attention to financial sanctions

[00:53:23,806]: Now Obama started a financial war against Iran not shooting but you know financial with sanctions and so forth in late 2007 early 2012

[00:53:37,086]: His goal was to get to this Joint Comprehensive Memorandum the JCPOA which was Joint Comprehensive Points of Agreement I think it is

[00:53:51,086]: But be that as it may this nuclear deal basically slowed down the nuclear enrichment process in Iran

[00:53:58,126]: And they did it

[00:53:59,866]: And you know they kicked them out of SWIFT that’s rare but they did it

[00:54:05,086]: They cut off some oil exports you know obviously no loans or aid

[00:54:10,186]: Europe was helping us with that

[00:54:12,386]: And they got the Iranians to the table and they negotiated this JCPOA

[00:54:18,626]: So I met with a treasury official a deputy secretary sorry deputy assistant secretary who was in charge of this and I said nice job I said why did you stop

[00:54:29,306]: You were winning the financial war why didn’t you dial up the pressure a little bit

[00:54:33,006]: They said well our goal was to get them to the table and we did

[00:54:36,686]: And I said yeah and you negotiated a really you know poor agreement

[00:54:42,306]: But when so then when Trump came in and then that was it then we started giving them money once they signed that well actually it was never signed actually

[00:54:50,046]: And experts have looked at the Persian and the U S versions of it and got expert translators and they don’t match

[00:54:58,366]: So we didn’t agree to anything but we acted like we did

[00:55:01,466]: But when Trump got in he instituted what was called the Maximum Pressure Campaign

[00:55:06,066]: And that worked

[00:55:07,466]: No more gifts no more pallets of money no more gold no more you know it was maximum pressure

[00:55:15,706]: And the oil exports were greatly affected and there was no money coming in

[00:55:20,806]: They were out of the banking system and I did some work for the intelligence community and all this

[00:55:26,626]: My point being it worked

[00:55:29,546]: And then Iran was I wouldn’t say tottering but there was certainly they were feeling the pressure

[00:55:37,786]: And what you didn’t have was the kind of terror and wars and attack from Gaza and other things you’ve seen coming out of the Middle East

[00:55:45,866]: So who gets in next but Biden

[00:55:48,586]: We’re not talking about the 2020 election although you haven’t heard the last of that

[00:55:53,126]: But Biden gets in and again turns on all the spigots takes off all the sanctions you know reinstates their access to banking oil exports go up and we give them more money

[00:56:02,686]: We release more frozen assets

[00:56:04,986]: So what happens next

[00:56:06,106]: The Middle East blows up

[00:56:08,166]: And so Trump’s back and what he’s saying to Iran is I’m going to do maximum sanctions 2 0 but I’ll give you a chance to talk first

[00:56:17,746]: And that’s where we are right now

[00:56:19,226]: The door is open

[00:56:20,086]: I agree with you

[00:56:21,566]: They don’t seem to get it

[00:56:23,486]: By the way the Iranian Revolutionary Guard Corps is basically a criminal business enterprise

[00:56:31,046]: It does have military capability it has terrorist capability no doubt about it

[00:56:35,066]: But they basically have taken over about 40 of the Iranian economy and they just skim and they I don’t know where all their mansions are probably in Dubai

[00:56:42,966]: But they are it’s an utterly corrupt whoever is not a theocratic extremist is a corrupt government official not counting the everyday people in Iran

[00:56:56,646]: But the Israeli attacks last year did destroy most of the Iranian air defenses

[00:57:03,606]: The Iranians were surprised

[00:57:04,886]: You know the Russians can keep sending them S 400s or whatever but we keep blowing them up

[00:57:09,126]: So let me just because interrupt you there Jim because what you’re saying is very obviously is very interesting

[00:57:16,166]: We had Tony Abbott former Prime Minister of Australia on the show a few weeks back

[00:57:20,926]: And he said it’s common knowledge among security forces that Iran is a few months away from being able to create nuclear weapons

[00:57:29,666]: That’s true

[00:57:30,106]: Just to be fair he didn’t say security forces

[00:57:32,266]: He said if you talk to people who know that’s what they say

[00:57:35,806]: Just for clarification

[00:57:38,506]: Five eyes

[00:57:39,106]: Yeah

[00:57:39,666]: If you listen to what people whose business it is to know as much as we can about this if you listen to them they seem convinced that Iran is it’s more a matter of months than years

[00:58:03,386]: Months

[00:58:05,186]: Months

[00:58:05,846]: So we are months away from the Ayatollah potentially like maybe from… Unless something can be said or done that interrupts their obvious march towards it

[00:58:32,046]: Now that is that’s terrifying isn’t it

[00:58:35,046]: And that really does mean that we need to take this incredibly seriously

[00:58:39,366]: Well it is true based on my best information but I’ll say Abbott’s very plugged in so that’s true

[00:58:46,166]: But it has been true for several years meaning they have six months to go but they stopped the clock

[00:58:52,586]: And so the clock’s not ticking

[00:58:54,586]: Now could they reactivate it

[00:58:56,046]: Yes

[00:58:56,286]: And could they have something in six months do a test

[00:58:58,986]: Yes

[00:59:00,246]: But they haven’t

[00:59:02,126]: Why not

[00:59:02,766]: Because if they go down that road they will be attacked

[00:59:05,266]: So they know that much

[00:59:07,506]: Jim I want to come back to economics because it’s an interesting detour into geopolitics and I think it’s interesting to have a disagreement and discussion about those things

[00:59:15,926]: But actually if someone’s tuned into this going I want to understand where the economy is going

[00:59:21,026]: We started with two interesting things

[00:59:23,346]: We’re in a recession probably

[00:59:25,026]: You said Trump’s tariff policy is the best policy in the world

[00:59:30,386]: Does that mean the US is about to actually bounce back and have a good economic few years

[00:59:36,546]: Not quite

[00:59:38,686]: No it’s a great question

[00:59:41,266]: The kind of expanding economy first of all everything I described would take a year to two years to really show its effects in the best of circumstances

[00:59:52,146]: I say high paying US jobs yes

[00:59:54,766]: Foreign investment in the US yes

[00:59:56,566]: But Honda’s not going to build that plant in two months

[00:59:58,606]: It’s going to take two years

[01:00:00,766]: Same thing with Taiwan

[01:00:01,546]: These things are going to take one or two years even longer

[01:00:05,666]: I mean semiconductor fabs are incredible laboratories

[01:00:11,306]: I mean they have to be built very slowly very carefully because of particles and pollutions and all this

[01:00:16,926]: This stuff will take years

[01:00:18,266]: But it’ll happen

[01:00:19,766]: So I have a very positive outlook for 2026 and beyond

[01:00:25,106]: But 2025 we’ve got a hangover from Biden’s Inflation Reduction Act well it was really Pelosi’s Inflation Reduction Act which was not only misnamed that was the Green New Scam in disguise

[01:00:37,806]: The Inflation Reduction Act so called which increased inflation by the way was the Green New Scam

[01:00:43,896]: And they gave John Podesta a 900 billion slush fund and basically allowed him to allocate it

[01:00:51,486]: Now if you look at the line items that the money went to they sound good

[01:00:56,126]: We’re going to help rural people put solar cells or solar modules on their roofs and we’re going to do this and going to do that

[01:01:05,646]: What they actually do is nothing

[01:01:07,186]: They hire their friends

[01:01:08,726]: They buy jets

[01:01:09,486]: They buy fancy office buildings office suites

[01:01:14,006]: They travel around

[01:01:14,986]: They go to conferences

[01:01:16,086]: They inflate their payrolls

[01:01:17,086]: And they give money to the Democrats

[01:01:18,166]: That’s where the money actually goes

[01:01:20,546]: And that’s all being demonstrated thanks to and people knew it but Elon Musk has got the I hate to use cliches but he’s got the receipts

[01:01:27,666]: I mean they can actually show all that

[01:01:30,586]: The Green New Scam has been a front for basically a massive multi ten trillion dollar beyond wealth transfer from North to South

[01:01:43,766]: Well if you’re in the South why wouldn’t you want that

[01:01:45,806]: If you’re the middleman why wouldn’t you want that

[01:01:48,326]: So it’s a grift

[01:01:49,986]: It’s a scam

[01:01:51,126]: But people are waking up not only waking up to it I mean the scientific evidence is very clear that no one other than plant food which is a good thing no one quite knows what CO2 does

[01:02:02,406]: It’s a trace gas

[01:02:03,626]: It’s like a fraction of 1 of the molecules in the air

[01:02:12,766]: And it’s mostly oxygen hydrogen a few other things

[01:02:16,506]: So it’s a trace gas

[01:02:18,706]: There’s no evidence that CO2 causes warming

[01:02:22,946]: The evidence is the opposite

[01:02:24,526]: If there’s warming and there are a million reasons why that could be happening it tends to release more CO2

[01:02:30,446]: So when you see you know this is the first thing you learn in statistics you know CO2 is going up temperatures are going up oh this must cause this well no it’s actually the other way around

[01:02:39,546]: Warming if it’s happening and that’s debatable could cause a release of CO2

[01:02:44,006]: We probably need more CO2 as I explained

[01:02:46,546]: Having said that so the science I mean if you said what causes climate change

[01:02:51,626]: I mean they’ve given up on global warming

[01:02:53,246]: We said the coldest winter in 40 years but what causes climate change

[01:02:58,606]: We have a pretty good idea

[01:03:00,566]: It’s solar cycles volcanoes ocean currents subduction a few other contributing factors that we can’t control

[01:03:08,726]: No one thinks that you can control the sun

[01:03:11,906]: Maybe Al Gore but the point is there are things that we cannot control

[01:03:16,946]: The evidence is clear

[01:03:19,866]: In the third century BC you had the Roman warm period

[01:03:23,686]: This is a big help to Hannibal getting over the Alps with his elephants

[01:03:28,266]: Around 1000 AD you had the medieval warming period

[01:03:32,426]: This is how the Vikings finally got to Canada

[01:03:35,806]: There’s some evidence they went up the St

[01:03:37,526]: Lawrence River to some extent but they had farms in Greenland

[01:03:40,266]: They were growing crops and livestock in a thriving community et cetera

[01:03:47,406]: Then it all went away

[01:03:48,386]: That’s because it was actually I don’t want to say warm it’s not tropical but relatively mild in Greenland in 1000 AD

[01:03:55,766]: Then from roughly the mid 14th century to the mid 19th century with some peaks and valleys was the so called Little Ice Age

[01:04:04,726]: In the 17th century they had ice bears

[01:04:07,566]: The Thames was frozen solid

[01:04:09,226]: You didn’t need bridges

[01:04:10,566]: You could walk across the Thames on the ice

[01:04:13,186]: They had these fairs where you put up your booth and your wares and everything on the river because it was frozen solid

[01:04:19,166]: This is Hans Brinker in the Silver Skates

[01:04:22,566]: Those canals in Holland I’ve been to Utrecht a number of times haven’t been to Amsterdam but Utrecht has these lovely canals

[01:04:29,266]: They were all frozen solid

[01:04:30,866]: Then it all began in the late 19th century

[01:04:34,166]: Maybe it’s been warming a little bit since

[01:04:36,336]: The best measurement of water levels actually we’re here in New York down at the Battery

[01:04:43,446]: There’s a measurement a gauge that’s been monitored and recorded since the late 19th century around 1890 give or take a few years shows that the oceans are rising at a rate of seven inches per 100 years subject to reverse because these things tend to reverse over time

[01:05:02,846]: Seven inches in 100 years it’s not going to get Anderson Cooper’s feet wet any time soon

[01:05:07,866]: My point being climate does change

[01:05:10,666]: The evidence is clear

[01:05:11,726]: None of it had anything to do with CO2 automobiles or emissions et cetera and yet somehow that became a 900 billion slush fund for the Democratic Party

[01:05:23,666]: That’s all over

[01:05:25,206]: Some of the money is out the door

[01:05:26,506]: They’re trying to get some of it back

[01:05:28,246]: A lot of it has been wasted

[01:05:29,226]: To your point Konstantin that’s the hangover

[01:05:34,386]: The inflation that we saw in 2022 and lingering even today it’s not as high but it’s still there was because of this pumping too much money into an economy that couldn’t absorb it

[01:05:45,706]: That is a cause of inflation

[01:05:48,506]: It’s nothing to do with the Fed or money printing

[01:05:50,406]: That’s all nonsense

[01:05:51,126]: It does have to do with fiscal policy and huge budget deficits

[01:05:56,866]: Coming into Biden we had a baseline deficit like the deficits that were just there

[01:06:01,706]: If you kept everything the same a trillion dollars a year which is a big number but today it’s beyond 2 trillion a year

[01:06:08,726]: Even if you cut a trillion out which is good luck they’re trying but even if you cut a trillion out which is almost impossible you’d still have a trillion dollar deficit left over

[01:06:19,366]: We’re trying

[01:06:20,126]: This Inflation Reduction Act there are new studies coming out showing that the impact of it will add 6 trillion to the deficit over a period of about 20 years

[01:06:33,766]: The way they’re scoring is a term of art but the Congress has to score a piece of legislation to figure out how you’re going to pay for it et cetera

[01:06:44,206]: They have a horizon

[01:06:45,946]: It’s five years or seven years depending on what the OMB wants but it doesn’t mean the law goes away in seven years

[01:06:52,766]: It just means that we’re only going to count seven years but as long as it’s on the books it goes on forever and this new study from the Cato Institute shows that that actual cost is going to be in the tens of trillions of dollars

[01:07:09,436]: Can we get that amended or rescinded somehow

[01:07:12,326]: Let’s see but you’ve got to get rid of that inflation hangover

[01:07:18,286]: The tariffs will cause some supply chain disruption

[01:07:22,326]: They won’t cause inflation but they will cause some supply chain disruption

[01:07:25,846]: That’s a bit of a headwind for the economy

[01:07:28,266]: These government layoffs terminations whatever you want to call them haven’t shown up in the unemployment figures yet

[01:07:35,846]: They will but that’s probably coming this summer because you get laid off but you get severance or you get a notice period or whatever so you can’t actually apply for unemployment until a little further down the road so that’s somewhat delayed but that’s coming

[01:07:52,186]: So we’re going to see unemployment go up

[01:07:54,386]: We’re going to see interest rates come down but not for good reasons

[01:07:58,106]: There’s nothing to cheer about

[01:07:59,546]: As I said it’s more a sign of recession then there’s no stimulus from it

[01:08:03,266]: That’s nonsense

[01:08:05,646]: So now this was not orchestrated but it’s happening

[01:08:11,386]: Biden did what he did

[01:08:12,886]: Trump’s got to get out of it

[01:08:14,246]: That’s going to involve some short term pain but it’s not gratuitous

[01:08:18,586]: The best example best analog really was Ronald Reagan

[01:08:22,046]: So Ronald Reagan was elected in 1980

[01:08:25,366]: In 81 82 we had the worst recession since the Great Depression

[01:08:30,746]: Now we’ve had a worse one since but at the time that was the worst recession

[01:08:35,606]: Unemployment was over 10 inflation remember my first mortgage was 13 I told my mother she cried because her first mortgage was 2

[01:08:47,666]: But I explained to my mother I said Mom it’s OK because my mortgage is 13 but inflation is 15 so it’s actually negative 2 in real terms

[01:08:57,566]: I’m not sure my mother was with me on that but I said my real rate of interest is negative 2 and I was in a 50 tax bracket at the time and it was fully tax deductible

[01:09:07,706]: So I got six and a half points back from Uncle Sam so my real rate was negative 8

[01:09:16,106]: So borrowing money at 13 was smart in a world of 15 inflation and a 50 tax benefit

[01:09:23,706]: Today the opposite of all that is true

[01:09:27,186]: But Reagan got through that recession

[01:09:29,566]: Then from 1983 to 1986 three years sorry 83 84 85 up to 1986 we had 16 real growth real not nominal

[01:09:42,186]: And he won re election in 1984 with one of the greatest landslides in history because the economy was on that path

[01:09:50,086]: So when you have a real recession you can come out of it gangbusters

[01:09:54,286]: I mean it may be the case that the most the US the US is a mature economy the most we can grow in real terms maybe 3 5

[01:10:05,266]: That’s true over a long period of time but for short periods where you’re coming out of a recession you can grow a 4 or 5 because there’s a lot of excess capacity that gets used up

[01:10:17,326]: Now the most important thing for anyone trying to analyze the US economy you’ve got to look at Scott Besson’s 333 plan

[01:10:23,846]: There was some talk about it in late December during the transition then it kind of fell off the radar screen

[01:10:30,186]: But this is what they’re doing

[01:10:31,266]: It’s one of the things they’re doing

[01:10:32,966]: And what he meant by that is get the deficit to 3 of GDP

[01:10:38,566]: Get real growth of 3 or more and pump 3 million barrels a day more than we’re currently pumping

[01:10:46,706]: So that’s the 333 plan

[01:10:48,726]: Now what’s the meaning of that

[01:10:50,226]: The oil speaks for itself but obviously lower oil prices

[01:10:53,126]: By the way I was in a debate with I was talking to Peter Navarro who’s now the trade and manufacturing czar for the White House and I think we were talking about the war in Ukraine

[01:11:04,326]: I said I said Peter you want to end the war in Ukraine get oil prices down to 30

[01:11:11,006]: The weapons won’t stop Putin the money won’t stop Putin but 30 oil will stop him in his tracks

[01:11:15,786]: So he’ll be at the table before you know it

[01:11:18,726]: I goes ah

[01:11:20,366]: So that may be

[01:11:21,946]: That’s definitely true

[01:11:23,026]: That is definitely true

[01:11:23,546]: I know we’ve disagreed about Ukraine

[01:11:26,186]: Well actually if you look at the entire boom in the Russian economy under Vladimir Putin it’s basically been one thing which is oil prices have gone up energy prices have gone up

[01:11:36,766]: Well that’s how they finessed it and then they put the economy on a war footing

[01:11:40,306]: There’s a lot to the Russian economy but Putin will be at the table in a heartbeat at 30 oil

[01:11:48,126]: So why have we done that

[01:11:49,386]: Because Biden wanted the war

[01:11:50,926]: That’s the point

[01:11:52,006]: Trump wants to end the war

[01:11:53,166]: Trump’s funny that way

[01:11:54,026]: He likes to end wars

[01:11:55,046]: But see in Europe we have this net zero obsession

[01:11:59,126]: Yeah and that’s keeping oil prices high

[01:12:00,826]: Well absolutely

[01:12:01,586]: Because well you know this better than that

[01:12:03,626]: We have industrial energy prices in the UK are four times what they are in the US

[01:12:09,006]: And that is because we refuse to produce our own energy and then we put all sorts of difficulties and tariff rates and whatever

[01:12:16,566]: This is just madness

[01:12:18,286]: So what I don’t understand is why don’t Europeans Europeans do not want this war

[01:12:22,746]: Absolutely do not want this war

[01:12:25,266]: Why haven’t we just started making our own energy

[01:12:29,206]: Why explode the Nord Stream Pipeline

[01:12:31,766]: Well my view on that is that the Americans blew it up because it’s good for them so that they can export their energy to Europe

[01:12:38,726]: Well I think obviously the Americans and the Brits blew it up to basically keep Germany from you know keep Germany alive basically

[01:12:47,346]: Yeah keep them dependent on US energy

[01:12:49,566]: But Biden did everything possible to keep the price of oil high shut down the Keystone XL Pipeline took millions about millions of acres of federal land off the table in terms of exploration for oil and natural gas

[01:13:02,566]: You know and then they I don’t know was it Karine Jean Pierre whatever her name was she’d say well there are like 5 000 leases that were just given out

[01:13:10,106]: They’re all dry holes

[01:13:11,026]: I mean yeah they got the leases and they drilled

[01:13:12,466]: There’s nothing there

[01:13:13,186]: I said OK let’s go over to the next place

[01:13:15,486]: Off limits

[01:13:16,066]: It’s a national park

[01:13:16,946]: So some people might be watching this

[01:13:18,826]: And there’ll be a lot of people who watch our show that agree with you about Ukraine which is totally you know people are right to have different opinions

[01:13:23,846]: Let’s explore the argument that you’re making so that people have at least heard it

[01:13:28,366]: Why did Biden won the war

[01:13:30,526]: Because they want to topple Putin

[01:13:32,606]: Ukraine is a the million dead

[01:13:37,409]: a million dead Ukrainians is a world historic tragedy

[01:13:41,089]: Of course

[01:13:41,769]: Completely unnecessary it’s a war that never should have happened

[01:13:44,809]: Having said that we sponsored it the UK Europe sponsored it because we wanted to topple Putin

[01:13:50,449]: But if you topple Putin you’re probably gonna get someone worse

[01:13:52,869]: Of course

[01:13:53,769]: So why do they want to topple Putin

[01:13:55,149]: Because they don’t know anything about Russian history they don’t understand Russia they don’t you know the people Constantine we’re all kind of captives to our own upbringing in the academic sense and what I mean by that is you know I got I did graduate work in economics and international relations during the 1970s the absolute height of the Cold War and I had a certain view of things but the policy makers in the Biden administration talking about George Kent and George Kent Fiona Hill Victoria Nuland and Tony Blinken and Jake Sullivan and the whole warmonger class their formative years were in the 1990s

[01:14:30,589]: What was going on in the 1990s

[01:14:32,509]: You had Boris Yeltsin who was a complete drunk and so you know the Soviet Union formally dissolved on Christmas Day 1991

[01:14:43,349]: You now have the Russian Federation

[01:14:46,749]: Gorbachev steps aside Yeltsin comes in there’s and it was like Chicago in the 1920s it was gang warfare machine guns in the streets of Moscow but the US advisor came in and said we’ll show you how to build a stock exchange we’ll show you how to privatize

[01:15:01,389]: They did privatize these companies and they handed out the shares to everyday Russians and what the oligarchs did they set up card tables in the lobbies of apartment buildings and when people would come home from work like hey I’ll buy your shares like yeah thanks here’s some ripples to give me the shares and they aggregated these shares but there could have been multiple factions with you know 20 each or 30 each and then they just got the machine guns out and they killed each other

[01:15:24,249]: I mean I’ve been to Moscow I’ve seen all these oligarch limos entourages and so forth

[01:15:29,869]: I was in one I was with my translator I don’t speak Russian but I’ve been there and these three black SUVs with tinted glass pull up at the hotel all in a row and he goes hey hold on a second watch this here’s some oligarch here you know

[01:15:47,429]: So the first car and the second car all the doors open all these security guys get out they form a security perimeter you know you can see they got guns under their jackets everyone’s looking around he goes this’ll be great let’s see who it is and the door opens and two nine year old girls in party dresses came out but they were the daughters of oligarchs they only do a birthday party

[01:16:07,589]: So but Americans who were coming of age meaning 20 something 30 something no let’s say 20 something getting their graduate degrees in their Georgetown you know take a punch and all that stuff looked at that and said Russia’s a pushover they’re falling apart weak leadership huge wealth we can basically dictate what happens there we can carve it up it was an imperial ambition based on a perception of Russian weakness

[01:16:33,629]: The problem was that Putin came along and restored Russian pride by the way Putin’s support does not come from the oligarchs he hates the oligarchs

[01:16:41,089]: And they hate him

[01:16:42,249]: Yeah but what they hate him but what he did I forget the guy’s honestly Berezovsky the Yukos head they put him

[01:16:49,549]: Khodorkovsky

[01:16:50,049]: Khodorkovsky sorry put him in jail for you know chomped up charges but the message to the other oligarchs is that you can keep your money you can keep your companies but keep it out of politics

[01:16:59,729]: And they got the message and they stayed out of politics

[01:17:02,449]: Putin’s support is from the military the intelligence services everyday Russians and the church

[01:17:11,549]: He built bridges to the Russian

[01:17:14,329]: Well the head of the Russian church is also a former KGB agent so that was easy

[01:17:17,809]: Okay well the point is his base of support is solid his popularity ratings are actually true they’re in the 80

[01:17:25,749]: I wouldn’t go that far but he’s popular in Russia

[01:17:29,009]: Okay so my point being the warmonger class the people who started this war and provoked this war came up at a time when Russia looked like easy pickings

[01:17:40,229]: Putin pulled the rug out from under them they hate Putin

[01:17:42,369]: They wanna go back to a broken up Russian Federation seven or eight different countries easy to manipulate

[01:17:50,409]: They’re profoundly disappointed that the 90s the party their point of view the party of the 90s didn’t carry on in the 21st century

[01:17:58,629]: Putin ended the party they hate Putin

[01:18:00,529]: So that’s where they’re coming from

[01:18:03,389]: So therefore they provoked this war again starting in 2008

[01:18:08,769]: Minsk won Angela Merkel said we never intended on keeping our promises

[01:18:12,709]: She said that publicly

[01:18:15,429]: And again we may disagree in my view that was well not view there’s good evidence that that was a coup d etat

[01:18:22,969]: You know and then a couple months later Putin took Crimea and then they basically there was talk about Georgia joining NATO and in August 2008 Putin invaded Georgia

[01:18:38,589]: So what part of an invasion did the West not understand

[01:18:41,449]: We were crossing the red lines and he said okay I’ll take Crimea I’ll take Georgia your move

[01:18:47,529]: And so there came a time when the West should have said okay he’s serious but Putin doesn’t bluff

[01:18:51,909]: Now whatever you think of him he does not bluff

[01:18:54,029]: He’s very his two sports are chess and martial arts and he’s very thoughtful

[01:18:59,929]: He gives things a lot a good listener gives things a lot of consideration and when he says something he means it

[01:19:06,089]: So that’s the other Western fallacy oh he’s bluffing he’ll never do it you know

[01:19:10,649]: So we’ve got Russia all wrong but it was a class of public intellectuals and scholars and so forth who grew up at a time when Russia looked like a pushover and they never got over it

[01:19:20,669]: I suppose the one counter argument to that Jim is wouldn’t that class have learned from the disaster that was Afghanistan Iraq et cetera particularly Iraq where we had this grandiose idea that we were gonna come in we were gonna overthrow Saddam it was all gonna be the land of milk and honey democracies blah blah blah and it’s turned into a hellhole and millions of people have died and it’s been a tragedy

[01:19:43,829]: Correct well great question and the answer is no they haven’t learned

[01:19:48,929]: We wouldn’t have had the war in Ukraine if they had learned anything from Iraq

[01:19:52,789]: We wouldn’t have had the situation in the Middle East today if they had learned anything from oh Iraq was a good object lesson

[01:20:00,309]: So the answer is great question they should have but they didn’t

[01:20:03,849]: But we get set in our ways but I say there are formative years where time went we won the first Gulf War

[01:20:11,869]: I mean people were killed but with relative ease as wars go

[01:20:16,169]: I’ve been to Kuwait a number of times

[01:20:17,429]: They love Americans

[01:20:19,089]: They always say thank you when you get off the plane

[01:20:21,629]: So no that was a time and they are warmongers

[01:20:25,389]: They are the neocons and they believe in a kind of US imperialism

[01:20:32,249]: It’s not just the policeman of the world it’s the dictator of the world if you wanna put it that way

[01:20:36,849]: But anyway getting back to oil Biden did everything possible to keep the price of oil as high as possible for two reasons

[01:20:43,089]: One they wanted to make solar modules and other substitutes you know the windmills and solar modules and all that stuff more affordable

[01:20:50,669]: They’re not never will be but on a relative basis they became a little bit more affordable

[01:20:55,249]: He’s subsidizing Teslas

[01:20:57,449]: I lived in a town where a lot of people had Teslas and every time I saw one I wanted to pull them over and ask for my 7 000 back because I’m a taxpayer and this guy got a 7 000 subsidy

[01:21:08,029]: So but again I mentioned Keystone Pipeline federal oil and gas drilling cutting off drilling in the Gulf of America

[01:21:15,869]: And so they did everything possible to keep oil high basically to keep the war going

[01:21:25,209]: And again if you wanted to stop the war get the price of oil down to 30 which is Wait that doesn’t make sense to me

[01:21:31,149]: Maybe I’m misunderstanding but I understand you think they wanted a war in order to get rid of Putin but making oil more expensive gives Putin more money

[01:21:42,569]: If you wanted to overthrow Putin you would collapse oil price wouldn’t you

[01:21:46,629]: Yeah but But they didn’t

[01:21:48,249]: Well that was because of the Green New Scam

[01:21:50,029]: I mean the high price of oil was because of the Green New Scam

[01:21:55,029]: They wanted gas at the pump to be 10

[01:21:57,009]: It didn’t get there but it got pretty close in California

[01:21:59,049]: But isn’t that deeply unpopular with the American people

[01:22:01,529]: They don’t care about the American people

[01:22:03,089]: They care about Well they care about winning elections

[01:22:06,789]: Yeah and they learned the hard way that they’re never gonna win another election if they keep going

[01:22:10,609]: But here’s the thing Konstantin

[01:22:15,549]: Ideologues are ideologues

[01:22:17,209]: The root word of ideologue is idea

[01:22:18,829]: They have an idea in their head and they’re impervious to facts

[01:22:21,529]: They’re impervious

[01:22:22,069]: You just advanced a good argument

[01:22:24,409]: Francis you’ve advanced some good arguments

[01:22:26,409]: Hopefully I have but my point is ideologues are impervious to logic and facts

[01:22:31,249]: They just have an idea

[01:22:32,489]: And if you believe in the Green New Scam if you think that and by the way it was a grip

[01:22:38,289]: Some people were getting rich over it

[01:22:40,109]: But if you thought CO2 was warming the planet which it’s not and if you thought that you had to go to net zero and substitute solar modules I mean I built the largest solar module array in New England non commercial

[01:22:56,329]: So there are towns and industries that are bigger ones but I have the biggest privately owned solar array in New England

[01:23:03,309]: And it produces 7 1⁄4 kilowatt hours and it powers my house very nicely so long as it’s not snowing

[01:23:11,169]: You know then you get into batteries

[01:23:12,909]: You don’t run off of solar power

[01:23:14,229]: You run off of batteries and all that

[01:23:16,389]: I cleared three acres to do it

[01:23:18,849]: Some guy was like arguing with me said well you don’t need three acres for nine towers which is what I have

[01:23:25,289]: I said well you don’t in Arizona but you do in New England

[01:23:27,489]: We have trees and you don’t want the trees falling on your towers

[01:23:30,709]: But my point being so I built that and I know how much it costs

[01:23:34,329]: I know how it works

[01:23:34,969]: I know what the shortcomings are but that’s to run one house

[01:23:37,769]: And I didn’t do it for environmental reasons

[01:23:39,449]: I did it to be robust from a power grid failure which is a completely separate issue

[01:23:45,389]: So I had my own reasons

[01:23:46,829]: But my point is I know a little bit about it and I know that it doesn’t work at night

[01:23:51,709]: It doesn’t work in bad weather

[01:23:54,329]: Batteries are very expensive and the idea that you can power cities or factories on these things is nonsense

[01:24:01,109]: They’re trying

[01:24:02,069]: They’re spending the money on it but it’s a complete waste

[01:24:04,289]: But my point is high oil prices were crucial to doing that

[01:24:09,449]: I don’t know whether they ever made so they didn’t think to your point Gustin they didn’t think Putin was going to get the money

[01:24:17,889]: Yeah the oil prices were that high but the other side of that coin was cut off his oil exports blow up the Nord Stream Pipeline shut down various transit routes et cetera get others to join in the boycott and Russia wouldn’t actually get the money

[01:24:33,089]: They did

[01:24:33,909]: The boycott never well Europeans are still buying oil

[01:24:35,729]: I mean that’s the crazy part

[01:24:38,189]: There’s still gas

[01:24:39,649]: There’s still Russian natural gas going through Ukrainian pipelines to Central Europe and Ukraine gets a toll charge for that and Russia’s getting the money

[01:24:48,749]: So it’s like Western Europe is paying Russia to fight in Ukraine and Ukrainians are collecting money from the Russian pipeline to fight the Russians

[01:24:56,369]: I mean we’re financing both sides of the war

[01:24:59,749]: But the fact remains get oil down and Putin will come to the table if he hasn’t already

[01:25:06,909]: But we’re gonna do that and that’s coming and that’s very beneficial for the U S economy

[01:25:11,249]: That’s another reason to be bullish in the long run despite the short run adjustment

[01:25:15,669]: But getting back to 3 33 for a minute the deficit’s 3 of GDP or less and real growth of 3 or more

[01:25:27,129]: What’s the significance of that

[01:25:28,769]: We can talk for economics for hours

[01:25:30,829]: I love doing it but there’s only one number that really matters

[01:25:34,749]: It’s the debt to GDP ratio

[01:25:37,349]: Everything else is either a derivative of that or it’s driven by that

[01:25:41,509]: That’s the most powerful explanatory

[01:25:43,389]: And that’s terrible right now

[01:25:45,269]: Correct

[01:25:46,209]: So there’s been very great research by Ken Rogoff at Harvard Carmen Reinhart and they’ve not only collaborated on books and papers but they’ve done their own

[01:25:56,129]: I give Carmen Reinhart enormous credit

[01:26:00,189]: But what they showed is that up to a 90 debt to GDP ratio there is a Keynesian multiplier

[01:26:07,329]: People mock it but it’s real

[01:26:08,909]: Doesn’t mean you’re investing productively but you borrow a dollar you spend a dollar and you get more than a dollar of GDP

[01:26:16,389]: You might get 1 50 you get 1 25

[01:26:19,069]: But like many phenomena it’s subject to diminishing marginal returns

[01:26:24,449]: So what’s the critical threshold as physicists would say

[01:26:27,389]: Well it’s about 90 debt to GDP

[01:26:30,029]: And by the way this is why Maastricht and Merkel insist on 60 because they didn’t want to get close to 90

[01:26:35,829]: So as you get closer to 90 borrow a dollar spend a dollar 1 50

[01:26:40,789]: 1 20

[01:26:41,669]: 1 10

[01:26:43,069]: 1 05

[01:26:43,729]: at 90 debt to GDP it goes negative

[01:26:46,549]: Now you borrow a dollar you spend a dollar and you get 90 cents of GDP and then progressively less

[01:26:52,969]: So you’re right the United States is at about 125 highest in history higher than the end of World War II

[01:27:00,549]: At least we won the war

[01:27:02,529]: Now we’re not winning anything

[01:27:05,249]: Who’s at our lunch table

[01:27:06,969]: Greece Lebanon you know those are the other Japan’s they’re in a world of their own but that’s about closer to 300 debt to GDP

[01:27:18,029]: But a quick sidebar I had a discussion with Saki Kibara san

[01:27:22,129]: He was known in the 1980s as Mr Yen

[01:27:25,809]: He was a deputy assistant finance minister and his job was to manage the currency

[01:27:30,409]: I said I said Saki Kibara san I mean your debt to GDP is like 300

[01:27:35,629]: You know you’ve been in a depression since 1990

[01:27:40,109]: You’ve had nine separate technical recessions but all within the confines of one 30 year plus remember the last decade when I was like in the fourth last decade

[01:27:50,129]: You’ve been in depression for like almost 40 years

[01:27:54,309]: And he said but Rikerson you’re missing something

[01:27:56,229]: I said what’s that

[01:27:56,809]: He goes our population is declining so our per capita GDP figures look much better than our aggregate GDP figures

[01:28:03,829]: And I knew what he meant

[01:28:05,169]: I said oh well you’re absolutely right

[01:28:07,429]: I mean you got to get into the lights on

[01:28:09,369]: So I said so where this ends up there’s one person left in Japan and she owns the whole country

[01:28:15,349]: He didn’t think it was too funny but that’s the reductio ad hoc

[01:28:18,969]: I don’t know if that absurdum of where Japan’s going but leaving that aside

[01:28:22,489]: So what’s Trump gonna do about the debt free GDP

[01:28:24,529]: What Trump’s gonna do

[01:28:26,569]: Now Americans like bang the table about paying off the national debt

[01:28:29,729]: It’s never gonna happen

[01:28:30,389]: We haven’t paid off the national debt since Andrew Jackson

[01:28:33,169]: 1836 was the last time the U S was debt free where you don’t have to pay it off

[01:28:39,689]: What you do have to do is roll it over which is the genius of Alexander Hamilton

[01:28:44,649]: He figured that out

[01:28:46,789]: So what makes it sustainable

[01:28:48,369]: Interest rates cannot get too high and the dollar cannot collapse because this plays out in the foreign exchange markets

[01:28:54,129]: Everyone’s focused on interest rates

[01:28:56,229]: Okay fair enough but you got to look at the foreign exchange markets as well

[01:28:59,469]: And by the way if you want to put a thermometer in the patient’s mouth look at the dollar price of gold because everyone’s like strong dollars

[01:29:05,229]: I mean it’s been down a little bit the last couple months but for a year and a half the dollar was hitting new all time highs you know DXY Bloomberg Index and so forth

[01:29:16,209]: Well against the euro yeah

[01:29:19,309]: Against yen Swiss francs and pound sterling yes

[01:29:22,669]: But they’re all passengers in the same lifeboat

[01:29:25,989]: They’re all gonna sink or swim together

[01:29:27,809]: You’re comparing currencies to currencies when you use those indices

[01:29:31,149]: What’s the one yardstick the one metric where you can gauge the value of the dollar without using another currency

[01:29:38,049]: The answer is gold

[01:29:39,469]: And with the dollar it used to be it wasn’t that long ago it took 2 000 to get an ounce of gold

[01:29:44,729]: Now it takes 3 000

[01:29:46,309]: Well that’s a one third collapse in the value of the dollar if you’re using gold as your yardstick which I do

[01:29:55,009]: So all you have to do you’re not gonna pay off the debt

[01:29:58,729]: Debt’s gonna grow the debt’s gonna get bigger

[01:30:00,669]: But this you know 36 trillion it’s a big scary number but it doesn’t matter

[01:30:05,049]: Come back to that ratio

[01:30:06,389]: If you see that ratio going from 125 to 120 115 110 and it was heading in the right direction that’s a sign of improving health that’s a sign of sustainability

[01:30:18,689]: The market will continue to roll over the debt

[01:30:21,529]: So the math at least for me it was fifth grade math

[01:30:24,569]: I’m not sure what they teach these days

[01:30:26,589]: But what you need to do you need to grow the economy faster than the debt’s growing

[01:30:32,229]: But here’s the key

[01:30:33,949]: When we do this ratio you’re in nominal space

[01:30:36,629]: I’m a big hawk on you know you gotta be real take out inflation let’s talk real numbers

[01:30:41,049]: But this is one where it’s nominal

[01:30:43,009]: If I owe you a dollar I owe you a dollar

[01:30:46,029]: It’s interesting if it’s worth 90 cents or a buck 25 but it’s a nominal number

[01:30:50,589]: So if you have 3 real growth which is what Besson wants but inflation’s 2 or 3 which it is you’re gonna have 5 5 6 nominal growth

[01:31:00,589]: So if you get the deficit the 3 of GDP and growth is nominal growth is 5 or 6 three real you know three plus two five or six real guess what’s happening

[01:31:12,349]: The ratio’s shrinking

[01:31:14,069]: In other words the nominal economy is growing faster than the nominal debt

[01:31:18,849]: That means the ratio’s going down and we’re getting healthier and that’s his goal

[01:31:22,929]: That’s what Trump’s gonna do

[01:31:24,449]: That’s interesting Jim but this is probably a very stupid question so feel free to clarify

[01:31:29,829]: But if you also at the same time have a giant budget deficit your debt is also going up at the same time

[01:31:36,869]: It doesn’t matter

[01:31:38,429]: What matters no

[01:31:39,309]: It matters what you’re spending it on

[01:31:40,849]: You could be wasting it

[01:31:41,709]: And I agree with that and I’d love to see the deficit come down but it doesn’t matter

[01:31:46,529]: What does matter is the deficit growing more slowly than the economy

[01:31:51,809]: Okay the deficit is what well

[01:31:53,989]: But how quickly is the deficit growing

[01:31:55,689]: Well let’s step back for a second

[01:31:57,329]: Let’s not maybe I’m confused

[01:32:00,029]: We have to separate deficit and debt

[01:32:01,929]: Yes

[01:32:02,309]: The deficit’s the annual it adds to the debt

[01:32:04,509]: Yes that’s why I brought it up

[01:32:05,909]: I’m talking about the debt to GDP

[01:32:07,509]: But let’s just say there’s a large deficit

[01:32:08,749]: But debt to GDP sorry I’m just trying to get clarity on what I’m saying

[01:32:12,829]: Debt to GDP is dependent on debt and debt is going to increase if you have a budget deficit

[01:32:19,289]: And we will have you’re right

[01:32:20,689]: And we will have deficits and the debt will increase

[01:32:23,749]: Yes

[01:32:23,949]: But that doesn’t matter as long as the nominal economy is growing faster than the debt

[01:32:28,149]: Yeah okay

[01:32:28,829]: That means the fraction’s going down

[01:32:30,729]: Yeah no that I understand

[01:32:31,729]: And we’re heading in the right direction

[01:32:33,289]: By the way we did this already

[01:32:35,169]: In 1945 at the end of World War II the debt to GDP ratio was 120

[01:32:39,949]: The highest in U S history up to that time

[01:32:42,349]: It’s higher today 120

[01:32:44,149]: 1980 when Ronald Reagan was sworn in it was 30

[01:32:47,249]: How did we get from 120 to 30

[01:32:49,989]: Well the debt didn’t go down

[01:32:52,009]: The debt grew enormously

[01:32:53,149]: We had deficits not every year but most of those years

[01:32:56,629]: You grew the economy

[01:32:57,649]: We grew the economy faster than the debt

[01:32:59,809]: And that was the key

[01:33:00,889]: And we kept inflation under control

[01:33:03,269]: So what struck me about them I studied that

[01:33:05,669]: I looked at the debt cycles throughout U S history

[01:33:09,689]: By the way the idea that Hamilton borrowed money and it’s been going up ever since is not true

[01:33:16,549]: The U S debt and the debt to GDP ratio which is the key is more of a sine wave

[01:33:22,609]: It goes up and down and up and down

[01:33:24,269]: When does it go up

[01:33:25,269]: In a war

[01:33:26,289]: When does it go down

[01:33:27,089]: In times of peace

[01:33:28,429]: There was one exception to that which was the Bush and Obama administrations and Obama in particular

[01:33:34,709]: That’s when it skyrocketed and there was no war

[01:33:37,049]: Now we did have the war in Iraq in 2003 and the war in terror if you want to count that but not exactly Vietnam or World War II or Korea

[01:33:45,669]: But the point is we would run up the debt and we’d win the war and then after the war we’d bring it down again

[01:33:51,549]: This was the first time after I would

[01:33:54,169]: And Reagan took the ratio from 30 to 50

[01:33:57,389]: He was a big spender

[01:33:58,909]: But 50 is still manageable

[01:34:00,369]: But again we won the Cold War

[01:34:02,549]: So we got something for it

[01:34:03,689]: But since then it’s just been going straight up

[01:34:06,189]: But what struck me about that post World War II episode going from 120 to 30 it was bipartisan

[01:34:13,449]: It was Democrats Harry Truman JFK LBJ Jimmy Carter and you had Republicans Dwight Eisenhower Richard Nixon and Gerald Ford

[01:34:24,269]: So it was not a political issue

[01:34:26,629]: It was an American issue and both parties over decades worked together to accomplish it

[01:34:32,029]: We could do that again

[01:34:33,069]: Scott Besson is trying to move us in that direction

[01:34:35,709]: So that’s where the 3 3 3 comes in

[01:34:39,029]: Keep deficits at 3 of GDP grow the economy at 3 or more and 3 million 3 million barrels of oil will lower the price of oil

[01:34:48,589]: That’s what they’re doing

[01:34:49,649]: That’s a winning strategy

[01:34:50,549]: But I don’t really see the payoff until 2026 and beyond

[01:34:55,669]: 2025 we got the Biden hangover and we have to get through it

[01:34:59,329]: Jim great to have you back

[01:35:01,349]: We’re going to go to Substack and ask you questions from our supporters

[01:35:05,609]: Before we do we always end with the same question which is what’s the one thing we’re not talking about that we should be

[01:35:11,349]: Before Jim answers a final question at the end of the interview make sure to head over to our Substack

[01:35:16,309]: The link is in the description where you’ll be able to see this

[01:35:20,329]: What does Jim make of Trump’s desire to economically subjugate Canada

[01:35:25,009]: What in your opinion are the safest investments in the current economic climate

[01:35:31,209]: Why is it quantitative easing in the US and the UK but printing money in Zimbabwe and buy my Germany

[01:35:38,829]: Well I don’t think anyone we touched on this briefly but I don’t think anyone’s talking enough about religion and I’m not proselytizing I’m not preaching religion

[01:35:49,169]: I’m just saying that to ignore the cultural value and the cultural impact and the behavioral impact of religion on people’s lives all over the world

[01:35:56,749]: I just returned from two weeks in India

[01:36:01,109]: Hard to find a good Catholic there

[01:36:02,889]: There are some but

[01:36:05,009]: You need to go to go with Jim

[01:36:09,069]: But 200 million Muslims more than Pakistan which was the original Islamic state but there are more Muslims in India more than any other country in the world except Indonesia which is somewhat more but well 220 million

[01:36:24,709]: And one approximately one billion Hindus very large well actually not so large Buddhist population but there are well six Jains

[01:36:36,349]: And everybody gets along

[01:36:37,969]: I mean I know in the past there I understand the history I’ve studied it closely but it’s a very very peaceful country but it’s not even the notion of a separation of church and state kind of doesn’t exist because there’s so religion is so much a part of what everybody does every day

[01:36:58,049]: You care about your religion but you don’t think about it as like oh something I do on Sunday or one day a week

[01:37:02,989]: Yeah you go to the temple et cetera but it infuses the culture the population and one of the reasons that they’re so adamant about not giving the states too much power the history of India is just fractured

[01:37:20,649]: I mean 1947 was the first time it was ever a united country even under the Mughal emperors there were Hindu leaders in the South and so forth

[01:37:30,049]: We talked about Ukraine we talked about the Slovak Republic we talked about Putin and the church

[01:37:37,529]: It’s a Samuel Huntington said and this is the early 90s he said take a map of the world put a transparency on it and draw lines every place there’s bloodshed and in Northern Ireland at the time but unfortunately not true today but Middle East obviously but there were these there was killing all over the world along these lines

[01:37:58,169]: He said now take another transparency and draw the dividing lines among the major religions and put one over the other and you’ll discover they’re the same that the explanatory power of religion in terms of where the world is fighting is extremely powerful and yet we don’t talk about it

[01:38:18,189]: So I would say that’s one for the next time

[01:38:23,369]: Does Jim believe Trump is actively promoting cryptocurrency

[01:38:27,129]: If yes what is Trump’s motivation

[01:38:29,229]: We’ll see

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