00:00:05.000And also Warren Davidson, we talk inflation, we talk spending, we talk fiscal policy, and we close with, according to Wallet Hub, what is the happiest city in America?
00:00:45.000We will not embrace the ideas that have destroyed countries, destroyed lives, and we are going to fight for freedom on campuses across the country.
00:00:57.000Brought to you by the Loan Experts I Trust, Andrew and Todd at Sierra Pacific Mortgage at andrewandTodd.com.
00:01:06.000This hour will be dedicated to some very serious questions about our currency, about inflation, about our fiscal health, our fiscal solvency.
00:01:14.000Joining us now is E.J. Antoni from the Heritage Foundation, the new and improved Heritage Foundation, economist and very smart man.
00:01:40.000You know, inflation is, in the short run, really difficult to measure.
00:01:43.000In the long run, it's pretty easy because everything tends to go up by about the same amount.
00:01:47.000But in the short term, it's affected by what government is purchasing and where the money is going at first before it has a chance to filter out to the rest of the economy.
00:01:57.000So we have a lot of different ways to measure inflation, but all of the official government metrics have a lot of flaws to them, not the least of which is the fact that they fail to account for those who are affected the most by inflation and taking a more accurate measurement of the cost increases that those people are facing.
00:02:17.000And once you do that, in my opinion, you add at least two or three percentage points to the official inflation metric.
00:02:25.000You can look at something like eggs, for example.
00:02:27.000That is a very good illustration of how the poor who disproportionately use eggs as a source of protein have been just dramatically affected by the increase in food prices because eggs have gone up so much more than filet mignon, for example, on a percentage basis.
00:02:49.000Let's go into the main drivers of this.
00:02:51.000We created $6 trillion out of thin air in, I think, really fiscal mismanagement over the last couple of years.
00:03:00.000And we're not seeing inflation slow down in any of the kind of core consumer price index metrics that I think really matter.
00:03:07.000Are we going to see a cooling off in your estimation with inflation now that money's getting more expensive and interest rates are going up?
00:03:14.000What do you think the next six to 12 months are going to hold?
00:03:17.000Well, unfortunately, while we have seen some moderation in the Fed's growing of the money supply, now all of that is being reversed with all of these bailouts.
00:03:26.000Every time the Fed creates money, it is increasing the money supply.
00:03:31.000And so we have to realize that the Fed doesn't have a vault of cash.
00:03:34.000Calling it the Federal Reserve is really a misnomer.
00:03:39.000It creates money whenever it gives that money out.
00:03:42.000So every time the Fed finances one of these bailouts, it's reversing what we call the quantitative tightening that it has been doing for months now.
00:03:50.000Now, you have to remember that anytime the Fed acts, the effects are not immediate.
00:03:55.000you usually see months pass by before those effects actually manifest themselves in the term of high terms of higher or lower prices.
00:04:03.000So we probably will see a lot of those official inflation metrics continue to moderate.
00:04:09.000We're not going to get back to 2% anytime soon.
00:04:11.000But eight or nine months from now, what we're going to feel are the effects of all the money creation that's going on today to finance these bank bailouts.
00:04:20.000So in addition to that, as we deteriorate our currency and we weaken the dollar, the world's reserve currency is built on the American dollar.
00:04:30.000It seems as if the Chinese, the Russians, and the Saudis are all talking about using a petro won.
00:04:35.000Let's play cut 44 of Fareed Zakaria, play cut 44.
00:04:39.000The dollar is America's last surviving superpower.
00:04:43.000It gives Washington unrivaled economic and political muscle.
00:04:47.000It can slap sanctions on countries unilaterally, which frees that country out of large parts of the world economy.
00:04:54.000And Washington can spend freely, certain that its debt will be bought up by the rest of the world.
00:05:02.000The share of dollars in global central bank reserves has dropped from roughly 70% 20 years ago to less than 60% today and falling steadily.
00:05:14.000The Europeans and the Chinese are trying to build international payment systems outside the dollar-dominated SWIFT.
00:05:21.000Saudi Arabia has flirted with the idea of pricing its oil in Yuan.
00:05:25.000India is settling most of its oil purchases from Russia in non-dollar currencies.
00:05:31.000Digital currencies might be another alternative.
00:05:33.000And in fact, China's central bank has created one.
00:05:41.000They're dumping the dollar as the world reserve currency.
00:05:44.000And what does that mean for American strength and sovereignty?
00:05:48.000Well, we need to realize that by having the dollar as the reserve currency of the world, one of the things that that has allowed the Federal Reserve to do is export inflation abroad.
00:05:58.000And so it has isolated Americans from some, but certainly not all, of those cost increases.
00:06:03.000The rest of the world is catching on to this.
00:06:05.000And so they don't want to rely on a currency that is as volatile as the dollar has become.
00:06:11.000But on top of that, there's a political point here that needs to be made.
00:06:15.000Not because this is inherently a political issue, but because politics has now invaded the monetary field.
00:06:22.000After the war in Ukraine commenced, we actually confiscated dollars that were owned by the Russian people and by the Russian central bank.
00:06:32.000And this is not justifying at all what Putin has done, to be clear.
00:06:36.000But it is the case that what we did is we broke a contract that we were going to hold those dollars available for depositors.
00:06:44.000And as soon as that happened, we effectively weaponized the dollar.
00:06:49.000And as a consequence of that, a lot of countries around the world are now wondering, are we, for example, woke enough for the Biden administration?
00:06:57.000What if we disagree with the Biden administration on climate change, on gender-related issues, on abortion?
00:07:06.000Countries are now Wondering, are my dollars safe if this administration disagrees with me politically?
00:07:13.000And the answer to that right now is frankly very vague.
00:07:16.000And with all of that doubt, the dollar is now losing its rock steady dependability, and people are losing their faith in the dollar.
00:07:25.000The reason why this is so scary, and what the viewers and listeners really, really need to understand here is that there are right now trillions of dollars overseas that are being used to conduct international commerce.
00:07:38.000If people no longer want to conduct commerce in those dollars, if they want to use the Chinese currency, or if they want to use the Russian ruble, or if they want to use gold, whatever the case may be, all of those dollars come back here because this is going to be the only place you can spend those dollars.
00:07:55.000You are talking about maybe doubling the money supply here in the United States.
00:08:00.000I mean, the inflationary effects of this would be so catastrophic, they can't be overestimated.
00:08:23.000There are a lot of foreign countries that own dollars because what happens when you have a trade deficit as massive as we do, we are constantly sending dollars abroad.
00:08:34.000And so, those countries have a stockpile of dollars.
00:08:37.000They can take those dollars and invest them back here in the United States.
00:08:41.000They can put them on deposit perhaps to earn some interest.
00:08:44.000And so, the Russian central bank had a massive stockpile of dollars.
00:08:49.000We're talking billions and billions of dollars here in the United States.
00:08:53.000Now, those did not belong to the United States.
00:08:55.000They did not belong to the American people.
00:08:57.000They did not belong to the United States government.
00:08:59.000They belonged to the Russian central bank and the Russian people.
00:09:02.000And what the United States government did was literally confiscate those dollars from the Russian central bank.
00:09:09.000And as soon as that happened, people are now, people then began to wonder again: am I going to be next?
00:09:16.000You know, obviously, again, what Putin did was wrong invading another country.
00:09:20.000This is not supposed to be some kind of defense of Putin's actions.
00:09:23.000It's merely to point out that the promise that those dollars would be kept safe and would be available whenever the creditor wanted them, that promise was broken.
00:10:53.000Federal government is doing more than ever.
00:10:55.000The fourth branch of government seems completely just unchecked and they are doing whatever they want.
00:11:01.000So, EJ, We're seeing this confusing economic time, and it's hard to pinpoint exactly where we are at.
00:11:09.000And I know this is a difficult question, but if you were to forecast the economic trends, do you think we're going to already in a deep recession?
00:11:17.000We're going to stay in a deep recession.
00:11:22.000Carly, it's a really, really great question.
00:11:25.000And when we try to determine, for example, when a recession begins or ends, we have to look at a whole host of different factors.
00:11:31.000And right now, the majority of those are pointing down, but probably not enough to really say definitively, yes, the economy is contracting right now.
00:11:41.000But what it looks right now, just given today's data, before year's end, we are definitely going to be into that downswing where the economy is, in fact, contracting.
00:11:52.000And I have quite frankly given up on all of the so-called experts who are supposed to officially determine whether or not we're in a recession.
00:12:07.000And again, the so-called experts never batted an eye.
00:12:11.000Whether or not that was politically motivated, I'll leave that to you to determine.
00:12:15.000But the fact remains that the economy did contract for the first half of last year, and it's very likely going to begin contracting again in the very near future.
00:12:24.000One of the key things to look at, which a lot of people don't for some reason, is new orders for businesses.
00:12:30.000And what we've found is that when you examine that data, there is not enough new orders coming in to sustain current levels of output.
00:12:38.000Businesses have literally been surviving in part on old backlogs of orders.
00:12:47.000But once those are gone, there's again not enough new orders for businesses coming in to sustain current levels of output, which means you can't sustain current employment, which means layoffs.
00:12:57.000We've already started to see that on a small scale in select industries.
00:13:01.000But as we go into the recession, that becomes widespread.
00:13:04.000Yeah, and it's interesting because I was talking to some private equity guys earlier, and they say they actually have had no difficulty raising money from higher income clientele.
00:13:14.000And I think there's a lot of dollar bills out there, which is the X factor, right?
00:13:19.000So we're not going to have a liquidity crunch, at least in the short term that we saw in 2008, but we certainly are going to have a value implosion crisis, which is, have we allocated dollar bills to businesses and industries that have just kind of been Potempkin villages?
00:13:35.000Therefore, the only way to let that correct is through collapses or actual economic calamity.
00:13:43.000I mean, so EJ, I guess what I'm getting at is we're in an unprecedented economic moment, and the only way out of it would be a restoration of sane fiscal policy.
00:13:56.000Is there a soft landing you see in the next couple of years?
00:14:00.000No, I don't think there's any way you get out of this through a soft landing.
00:14:04.000You know, you can't spend, borrow, and print trillions upon trillions of dollars and not expect negative consequences for it.
00:14:12.000There is just no way to softly land this thing.
00:14:15.000You can't take the plane up to 50,000 feet, burn out the engines, and then expect that you're somehow miraculously going to cruise to that soft landing.
00:14:25.000The Fed has set this economy up for a disaster, and they have done it in large part because they needed to finance the trillions of dollars that the government spent that it simply didn't have.
00:15:05.000Plus, the Fed is sitting on unrealized losses of $1.2 trillion on their $8.3 trillion bond portfolio.
00:15:12.000And the Fed will continue to raise rates, even if they tank the economy.
00:15:15.000Do you know who are the only ones that are not afraid?
00:15:17.000The ones that are invested in gold with Noble Gold Investments.
00:15:20.000Gold is the most stable asset outside of any government control.
00:15:24.000I love the people at Noble Gold, use promo code Charlie.
00:15:27.000In fact, we just had a friend of ours that did a $100,000 gold purchase with NobleGoldInvestments.com, and she said her experience was easy, seamless, kind, transparent, ethical, honest.
00:16:10.000So Matt Taibbi testifies in front of Congress, asked questions by the weaponization of government committee, and talks about how Twitter has been involved with the federal agencies.
00:16:22.000And then he gets a knock on the door from the IRS.
00:16:47.000This is Stalinistic, Maoist behavior from the Biden regime to try to chill speech and intimidate journalists.
00:16:54.000Could you imagine that if when Trump was president, this is the equivalent, that when Trump was president, Maggie Haberman got a knock on the door from the IRS and they just knock on the door to Matt Taibbi.
00:17:05.000Well, it'll be a shame if you get audited.
00:17:07.000I mean, we're supposed to believe this is a coincidence.
00:19:23.000We want people to care about their neighbors, social, you know, care about a just society, and we want good governance in our companies.
00:19:32.000But the exact thing that they're putting out there that sounds so nice is really just meant to be cancel culture against disfavored, totally legal, but disfavored things.
00:19:42.000And it's selectively applied only to American companies.
00:19:46.000So companies like BlackRock in the private sector, ostensibly private sector, will cancel American companies, do things that hurt Exxon, where they're on the board of directors.
00:19:57.000Meanwhile, they'll bid up contracts that go to the Chinese-backed companies that they're partnered with the Chinese government on, because they don't apply the ESG standards outside the United States.
00:20:09.000So it is, you know, a way to deprive Americans of capital formation and selectively give it to people that are good with the cause.
00:20:40.000Yeah, I mean, every kind of hearing that you could think of where the Democrats have said, all but, gosh, we really envy the power the Chinese Communist Party has.
00:20:49.000We should implement something like that here in America.
00:20:53.000What was going on here with the bill that he vetoed, it was a bipartisan bill that passed the House and the Senate, made it to his desk.
00:21:00.000And what it did is it said, the people that manage your retirement savings, they're supposed to manage it so that it's in your best interest, that it gets a return.
00:21:08.000People plan and plan for, prepare for retirement by earning returns in their retirement savings account, not by pushing a woke domestic agenda favoring one party's domestic politics.
00:21:21.000And that's basically what Joe Biden said.
00:21:23.000We're going to keep using all of your money to work against your own interests and to advance the cause of our ideology.
00:21:31.000And very few people understand the threat that ESG poses to the entire society.
00:21:38.000And we do not have enough votes to overcome the veto.
00:21:41.000And I mean, money managers across the country, if any of you out there are using Vanguard or Fidelity, I got to tell you, you are part of a very dangerous trend of a Chinese-style social credit system that is coming via through rating companies and fund managers.
00:22:16.000The share of dollars in global central bank reserves has dropped from roughly 70% 20 years ago to less than 60% today and falling steadily.
00:22:27.000The Europeans and the Chinese are trying to build international payment systems outside the dollar-dominated SWIFT.
00:22:34.000Saudi Arabia has flirted with the idea of pricing its oil in Yuan.
00:22:38.000India is settling most of its oil purchases from Russia in non-dollar currencies.
00:22:44.000Digital currencies might be another alternative.
00:22:47.000And in fact, China's central bank has created one.
00:22:50.000We are seeing the deterioration of the American dollar.
00:23:12.000We destroyed the value of the dollar by spending too much money.
00:23:18.000We spent more money, not just more money than we were collecting in taxes, not just more money than people would lend us.
00:23:24.000We spent so much money that the Federal Reserve's balance sheet in 15 years' time has grown from less than $1 trillion before the 08-09 financial crisis to a little over $4 trillion back then by 2010, 2011, to now it's up at around $9 trillion.
00:23:40.000And it's growing because there's no appetite in the market to keep taking up all the money that needs to be created to cover for the massive spending.
00:23:50.000So this is how it's related to the debt ceiling fight.
00:24:07.000And it's a combination of too much spending by the federal government, the Federal Reserve intervening and loading up their balance sheet, the Federal Reserve artificially holding rates the wrong way, too low for long, and then juicing them real fast instead of letting the market set rates.
00:24:23.000And then lastly, we're disincentivizing the productive part of our economy.
00:24:27.000We're paying adults not to work, not to participate in the economy.
00:24:32.000And working-age adults need to participate in the economy.
00:24:35.000We can't get a growth rate without it.
00:24:37.000That's one of the biggest constraints on supply when you talk to everyone across the economy.
00:25:15.000Kevin McCarthy has said we absolutely need to negotiate.
00:25:19.000We have to talk about how did we get here and how are we going to make sure not only do we not bankrupt America now, we don't bankrupt America in the future.
00:25:28.000So of course we're not going to default on America's debt.
00:25:31.000The question is, are we going to come up with a plan not to default on our debt down the road?
00:25:35.000And that's the conversation Joe Biden wants to avoid that we have to have.
00:25:40.000We have to turn back and cut some of our spending.
00:25:43.000We have to scale back some of the Federal Reserve's non-market interventions.
00:25:47.000We have to let markets set rates and we have to get people back to work.
00:25:51.000Where do you think we're most likely to actually get some spending cuts anywhere?
00:25:57.000I mean, we're spending way too much money and our debt is $30 plus trillion dollars and we just seem comfortable with it.
00:26:04.000Where do you think is the place that we can isolate where we can actually get some serious spending cuts?
00:26:10.000I think the easy thing are the things that Joe Biden is doing that are already unconstitutional.
00:26:14.000Things like student debt forgiveness that has a price tag of anywhere from $400 billion to $1 trillion, depending on who's scoring it.
00:26:22.000And I think the other thing is there's a lot of money that was created, part of that $9 trillion that's on the Federal Reserve's balance sheet.
00:26:29.000That cash is sitting in the U.S. Treasury unspent.
00:26:34.000So if it stays laying there, it's going to get spent on something.
00:26:37.000We should roll that back and that'll give us a start.
00:26:41.000And it's not something that Congress is in the habit of doing.
00:26:44.000I mean, since I've been here, I haven't really seen anything get cut.
00:26:48.000We still have Obama phones, for example.
00:26:50.000So there are a lot of low-hanging items out there that we could cut.
00:26:54.000And then there's tougher conversations where I think, you know, like President Trump has been right to point out, we have to take some things off and make them off limits.
00:27:08.000And I think it would be really fraud on behalf of the United States government to somehow change the deal after people have already retired.
00:27:16.000So you should stop letting people scare seniors about that.
00:28:25.000I would love to learn why, because if you were to say, Charlie, this would be one of the nastier cities in America, not one of the happier.
00:28:32.000Burlington, Vermont is the 10th happiest city in America.
00:28:37.000No, there's voter fraud in this survey.
00:30:28.000And then Fremont, California, number one, which might just be because there's a bunch of Asians there and they just are generally really happy people.
00:31:47.000That Pearl City, Hawaii, Honolulu, Hawaii, San Jose, California, and Irvine, California have the lowest depression rates in the entire country.
00:31:55.000And the highest depression rates are in West Virginia, West Virginia, Tennessee, Washington, Washington.