IT'S A HYPER MOMENT IN WORLD HISTORY
Episode Stats
Words per Minute
140.85477
Summary
In this episode of the Great America Show, host Lou Dobbs is joined by senior fellow at the Gatestone Institute, Gordon Chang, and author of The Great U.S. vs. China Tech War: How the Marxist Left is Threatening the American Way of Life.
Transcript
00:00:00.000
Ladies and gentlemen, welcome to the Great America Podcast with Lou Dobbs,
00:00:04.200
always in the fight for truth, justice, and yes, our American way of life.
00:00:09.160
And now, here he is, the Peabody award-winning voice of truth, the great Lou Dobbs.
00:00:14.480
Hi, everybody, and good to have you back with us on the Great America Show,
00:00:18.220
committed to truth, justice, and the American way. Our task here is to help all Americans defend
00:00:24.880
and to preserve our great constitutional republic. We fight for truth while others are pushing
00:00:31.120
propaganda, and foremost among those is the Marxist left and their radical allies,
00:00:37.200
whether in the national media, the deep state, in the Senate, or the House, or in the White House
00:00:42.880
itself under the radical Biden administration. And they have allies in our colleges and universities,
00:00:49.420
our public schools, indoctrinating our young people, and in corporate America,
00:00:54.780
driving a coordinated message of Black Lives Matter and TIFA, pushing critical race theory,
00:01:00.860
and trying to drive parents and private citizens out of school boards and their rightful traditional
00:01:07.300
role in deciding what will be taught our children and by whom. The left won many battles during the
00:01:14.640
China virus pandemic, whether the illegal altering of election laws and regulations in a number of
00:01:21.060
states, shutting down public schools, and in so doing, denied education to those who need it most.
00:01:28.140
But the bigger battle is being won. Parents are beginning to once again take charge of their
00:01:34.580
school boards and districts all across the country. And teachers unions and the Marxist left
00:01:40.700
are being driven back by parents. The battle is far from over, but the good news is that the American
00:01:48.040
way is prevailing. Externally, the United States faces a host of severe threats geopolitically and
00:01:55.220
militarily, whether from China, Russia, or Iran. And our economy faces unprecedented shortages of
00:02:03.700
manufactured goods and products, everything from automobiles and trucks and tractors
00:02:09.120
and semiconductors. The shortage of products and parts of all kinds has led to a slowing of our
00:02:16.320
economy. And our capital markets, while still the most secure in the world, now face an unprecedented
00:02:22.700
pressure, namely the export of hundreds of billions of dollars for investment in communist Chinese markets
00:02:30.420
or direct investment of American dollars in China. Hundreds of billions of dollars that otherwise would be
00:02:38.380
flowing into our markets, our businesses, and our economy. The amount of money diverted from our
00:02:45.220
shores is not trivial, and the effect is more damaging to the United States than the multinational
00:02:51.720
corporations, globalist Wall Street financiers, and our politicians, particularly our left-wing politicians,
00:02:59.940
will admit. Part of the supply chain disruption that has pushed back delivery of products and parts of
00:03:06.120
all kinds is the direct result of the purposeful Chinese government policies that are aimed at slowing
00:03:13.620
the flow of goods to the United States, designed to damage our economy. The disruptions are the result
00:03:21.080
of our dependency on foreign goods, the horrific misjudgment of corporate and political leaders
00:03:26.200
who offshored and outsourced American production and jobs. And for a time, we're likely to find it much
00:03:34.560
harder to buy what our businesses need and what our consumers want to buy. Our international trading
00:03:41.260
system is wildly out of balance, and the clear reason is the design of the communist Chinese and the
00:03:48.620
misjudgment and irresponsibility of American policymakers and globalists. It will all likely get much worse
00:03:58.440
before it gets much better. Joining us now is Gordon Chang, senior fellow at the Gatestone Institute,
00:04:05.800
author of The Great U.S.-China Tech War. Gordon, a great American, a good friend, and welcome back.
00:04:13.500
Gordon, let's start with China, the ships it owns that bring the goods they produce. The labor that
00:04:21.620
produces those goods is under the direct control of communist China. How could our leaders in business
00:04:27.500
and government have been so foolish, so venal, irresponsible to make this country utterly dependent
00:04:34.660
on China? Your thoughts? Yeah, a great question. And I think that essentially we're talking about greed.
00:04:41.540
We're also talking about people who are not thinking about the national interests of the
00:04:46.180
United States. They're just thinking about their pocketbook. And as you say, they had this globalist
00:04:52.360
mindset, which they believe that it didn't really matter the form of government in China,
00:04:56.980
that we'd all just get along if we could trade. And we know that they set up these global supply chains
00:05:03.140
that are fragile. They stretched halfway around the world. They can work in a period of geopolitical calm
00:05:09.460
in a benign period. But it's no longer benign out there, Lou, as you know. And you've been talking
00:05:14.860
about this more than anybody else. You've talked about it before anybody else. And now we're starting
00:05:20.640
to see what happens when you do have geopolitical tension, where you do see the Chinese manipulating
00:05:26.820
things to create shortages. And therefore, we've got these extraordinary, extraordinary supply
00:05:32.920
chain disruptions. These disruptions, they're referred to in the business press, the popular
00:05:39.440
press, the political press, without explanation. And President Biden himself saying basically the
00:05:47.020
American people are too dumb to really understand supply chains and disruptions, which is utter nonsense,
00:05:55.160
because Biden himself doesn't understand it. And most of his advisors seem to be less experienced,
00:06:02.880
insufficiently knowledgeable to grasp what's really going on here. But in just one frame,
00:06:09.220
I would say this, Gordon, and I'd like you to give us your opinion on what I say about Huawei,
00:06:15.240
the sanctions, and what turned out to be the diminishment of Huawei as a corporation and an
00:06:22.060
effective competitor to U.S. telecommunications and technical companies. And this being a response
00:06:29.400
by the communist Chinese to Huawei's misfortune in running afoul of U.S. law and former President
00:06:37.780
Donald Trump. What do you think? Yeah, President Trump's designation of Huawei as for the entity list
00:06:44.600
run by the Commerce Department was the correct strategic move for a number of reasons,
00:06:49.700
but also it was extremely effective because we have seen Huawei as a concern being crippled.
00:06:55.780
And we got to remember that this is not just some private company that China has. This is a company
00:07:02.060
which is actually controlled by the Chinese state. And Trump's sanctions were effective. We see basically
00:07:09.780
Huawei starting to exit some critical business lines. And Beijing right now, I think, is scrambling to try
00:07:16.140
to figure out how to deal with this. Now, unfortunately, the Biden administration is not doing what's necessary
00:07:22.220
to kill off Huawei. And they've let up in some critical respects. So this is something that we will need
00:07:29.260
extra vigilance on. But clearly, the design that President Trump put in place is working and indeed
00:07:36.560
defends important American interests, because Huawei was stealing American information and information
00:07:42.300
around the world. And if it had been allowed to continue, it would have probably used 5G to
00:07:48.380
manipulate American advices to surveil on us. And so therefore, that would have been, of course,
00:07:53.580
completely unacceptable. And Huawei had access to most of the intelligence operations, if you will,
00:08:03.100
whether it be the 5Is, our principal allies in the Western world. And they were just simply not responding
00:08:15.500
to the President's warning about Huawei's intent and their capabilities. It is strange. But now, in the post-Huwei world,
00:08:26.540
we're seeing this reaction by the Chinese government, it is a paroxysm of anger and retribution on the part of
00:08:35.740
the communist Chinese. And I'm wondering if it ends with supply chain disruptions, and how long they will
00:08:43.100
be permitted to go on. Yeah, certainly, the effectiveness of the Trump sanctions on Huawei is reflected, as you
00:08:52.060
point out, in what the Chinese have been saying. And clearly, right now, I think Beijing is retaliating in
00:09:00.140
a number of ways, including aggravating the supply chain disruptions, which are primarily caused on
00:09:06.060
the other side of the Pacific. So this is a clear connection, which I think will become much better known
00:09:12.460
as we learn more and more about how these supply chain disruptions have actually occurred.
00:09:17.500
And the fact that the United States still remains 70, 70, I wish 70, 90 percent dependent on China for its
00:09:28.500
pharmaceuticals and pharmaceutical ingredients remains absolutely, absolutely dependent on China and Southeast Asia
00:09:39.500
for our clothing, primarily. It's stunning to think what we have permitted in the way of our dependencies to be
00:09:48.380
actually enlarged on a communist nation, rather than reduced and independence being that that strategic
00:09:58.940
goal of the United States rather than dependency.
00:10:02.780
Yes. Well, just to take a look at pharmaceuticals and active pharmaceutical ingredients, as you say,
00:10:08.300
we get about 90 percent of those from China. And we have known from time to time that China has put
00:10:15.820
adulterated pharmaceuticals into the stream of commerce into the United States and Americans have died,
00:10:21.740
most notably Heffron. But it's also other things. So, for instance, surveillance cameras,
00:10:27.980
those could possibly be feeding back all sorts of information to China. And it's clear that the drones
00:10:34.060
and China controls the drone market in the world, they stream information into the cloud where China
00:10:40.860
captured it. So, for instance, the Biden administration, the FBI and the Secret Service have been buying
00:10:46.620
drones from DJI, the Shenzhen-based company. And that's supposed to be for operations. And that means that China can
00:10:54.540
look into the White House or wherever the Secret Service is flying those drones. And this is just inexplicable,
00:11:01.020
Lou. I don't understand why the Biden administration would do this. They weren't buying those drones for reverse
00:11:06.540
engineering. They actually publicly said they were buying these drones for operations.
00:11:12.700
Yeah. And for the Biden administration to blithely go ahead with that suggests a wanton disregard for national
00:11:21.580
security and for the clear warnings of the intelligence department. I have a DJI drone in all disclosure,
00:11:32.460
which means that the Communist Chinese Party has gotten a good look at my pastures for some of my horses.
00:11:40.620
But that's about it, I think. I just can't imagine why in the world the administration would permit such a
00:11:49.500
thing. But then again, there are so many questions about why President Biden has permitted so much.
00:11:58.060
Now, the conversation with President Xi, a virtual summit, if you will, that's probably too glorified a
00:12:09.180
term for a phone call. But it's what it is. The President making it clear to Xi that he wants them to
00:12:16.620
live by the rules of conduct and behavior of civilized nations and President Xi making it clear to Biden
00:12:24.620
that he doesn't want the United States to support Taiwan effectively. Your thoughts?
00:12:30.220
Yes. The Biden administration has a view of China, which is certainly wrong and outdated. And I think it's
00:12:38.780
important to take a look at what the Biden team was saying before the Zoom call, because it really is a
00:12:44.700
glorified Zoom call, as you point out. They were saying that they weren't looking for specific deliverables.
00:12:50.700
Really, what they wanted to do was to establish guardrails, as they put it. Now, Lou, we've had intensive
00:12:57.660
diplomacy with China for a half decade. And if after a half decade, I mean, a half century,
00:13:05.180
if what we're thinking of is asking the Chinese not to kill Americans with coronavirus and fentanyl,
00:13:11.980
if we're asking them not to steal hundreds of billions of dollars of U.S. intellectual property
00:13:16.620
each year, if we're asking them not to foment violence as a means of overthrowing the American
00:13:21.740
government, then our approach to China has really been wrong. I mean, after a half century,
00:13:28.620
we clearly need to be on firmer ground. And I think it's because you can't talk to a militant
00:13:35.260
totalitarian regime. You recognize that from the very beginning. But unfortunately, the Biden team
00:13:41.420
is still hoping beyond hope that they can get China to, as you say, play by the rules. And Xi Jinping is
00:13:48.220
saying, no, we're not playing by anybody's rules except for China's, which means that there are no rules,
00:13:55.100
because China does conduct unrestricted warfare, unrestricted warfare, and acknowledge that they
00:14:03.980
are doing so. They have labeled the relationship between the United States and China one of war.
00:14:12.700
Isn't that correct? It is. In May 2019, People's Daily, which is the most authoritative publication in
00:14:20.940
China, carried a piece that declared a quote-unquote people's war on the United States. During that
00:14:27.420
month, that was one of three People's Daily pieces that spoke about the U.S. in militant terms.
00:14:33.420
And this hostility has continued to the present day. So for instance, on August 29th, People's Daily
00:14:39.020
ran an editorial that accused the United States of committing quote-unquote barbaric acts against China.
00:14:46.140
And this was also after a series of extremely hostile propaganda releases. Now, we Americans
00:14:52.860
don't pay much attention to propaganda, but in this case, we should. Because what China is doing is,
00:14:59.820
as James Lilly, our ambassador to Beijing once said, China telegraphs its punches. And I believe that
00:15:05.980
they're establishing a justification for a strike on America or on American interests. That's why we need to
00:15:13.500
start looking at what the Chinese are actually saying about us.
00:15:18.620
And we've heard some bellicose and threatening language for years now from Beijing. And as we
00:15:27.980
have heard that language, they have built out the islands that are in dispute, claimed by a number of
00:15:34.940
countries. But those are solidly now the property of the CCP and the People's Republic of China.
00:15:44.060
Because they've built those islands out, they have put in defense weaponry, and obviously intend to
00:15:50.620
stay. And there has been no repercussion whatsoever from the West, from the United States, from our allies.
00:15:56.620
And they have about the same level of respect, I would think, for U.S. retaliation or for response,
00:16:08.300
as do the Russians for European responses to the taking of Crimea. What do you think?
00:16:16.700
Well, certainly, though, as Afghanistan was falling, both People's Daily and Global Times, which People's
00:16:23.660
Daily controls, started propaganda narratives that the United States was incapable. One of their themes
00:16:31.340
was that because the U.S. couldn't deal with the Taliban, it had no hope of countering a magnificent
00:16:37.740
China. And so it showed the clear disrespect for the Biden team. And this goes back to mid-March,
00:16:44.060
when China sent its top two diplomats to Anchorage to meet Secretary of State Antony Blinken and National
00:16:50.060
Security Advisor Jake Sullivan. And Yang Jiaxer, who is China's number one diplomat, actually said in a
00:16:56.780
public forum in the beginning that the United States could no longer talk to China from a position of
00:17:02.220
strength, telling us that deterrence was breaking down. The reason why this is important at this
00:17:06.940
particular moment is that we have Russia massing troops on the Ukraine border. They're also pressuring
00:17:13.980
Poland, a NATO ally. They're doing that through Belarus. And it shows that Putin doesn't respect
00:17:20.460
Biden. Remember, one of the most important things that Biden did in his first days in office was to
00:17:25.920
remove the sanctions on the Nord Stream 2 pipeline, thereby giving Russia even more a stranglehold on
00:17:32.720
natural gas supplies in Western Europe. And Biden got nothing in return for that. And I think Putin saw that.
00:17:39.880
He has seen the failure in Afghanistan. He's seen the disarray in the administration.
00:17:44.900
And he thinks he can make his move. Remember, Russia and China coordinate their foreign policies.
00:17:49.720
They coordinate their military activities. And we're seeing both Moscow and Beijing at this moment
00:17:58.780
To redraw the map. And that map is already being penciled in with more Chinese, communist Chinese
00:18:10.300
interests, whether it be in the South China Sea, whether it be the taking of Hong Kong, because
00:18:16.060
it is precisely that. It is the takeover from what was once handed over by the British.
00:18:23.140
Xi Jinping making it very clear who he is and what he intends. And that is the dominance of the
00:18:30.600
People's Republic of China as a world power. At this juncture, how deeply concerned should we be
00:18:40.760
about President Biden, who appears to be in some ways impaired? One can argue about the extent of
00:18:50.680
that impairment. But there's no question he is a man in frail health. And the nation itself seems
00:18:57.380
enfeebled because of his weak leadership. How great do you see the dangers? How great do you see the
00:19:05.120
threats? We could lose our country, Lou. The United States is, by the metrics, a more powerful country
00:19:12.720
than China. But China has been maliciously assaulting us, attacking us. And the Biden administration
00:19:19.420
doesn't perceive that. They see that China as a competitor. Well, it's not a competitor. It's not
00:19:26.100
even an adversary. It's an enemy. And if we don't defend ourselves, we will lose our country. So yes,
00:19:33.120
we should be extremely concerned that the President of the United States, the one who is constitutionally
00:19:38.940
charged with defending the American Republic, is not doing so.
00:19:42.760
Well, as we conclude here, I want to get your thoughts on overall, the competition and the
00:19:51.620
confrontation between the United States and China. McKinsey reporting that global wealth has surged
00:19:58.660
over the course of the past two decades, the world benefiting, that world worth has tripled in two
00:20:05.500
decades. And in the process, China has overtaken, at least in the metrics employed by McKinsey,
00:20:14.540
overtaken the United States to be number one in the world in wealth, the United States second.
00:20:21.980
You get the last word here. Your thoughts, Gordon?
00:20:25.100
The thing that I'm concerned about is that China is going through a debt crisis now. A lot of that
00:20:30.480
wealth that McKinsey measures is in property. Property prices are falling and property constitutes
00:20:37.740
about 30 percent of the Chinese economy. That means Xi Jinping can see a closing window of opportunity.
00:20:45.600
That means he can lash out. There are a lot of internal reasons for him to do that. And so we're not
00:20:51.320
he's not playing by any rules. He's also calculates his interest very differently than we do.
00:20:58.840
And that means he can take the Biden administration by surprise. So the American people are going to
00:21:04.100
have to be vigilant because apparently the guy in the Oval Office is not.
00:21:10.440
Gordon Chang, as always, great to have you here. Thanks so much. We appreciate it, Gordon.
00:21:19.420
That was Gordon Chang, one of the foremost, if not the foremost, authorities on the designs
00:21:25.100
of Communist China toward the Western world. We continue with the Great America Show in just
00:21:34.960
President Biden has been pushing through trillions of dollars in spending bills to further stimulate
00:21:40.940
an overstimulated economy and, yes, markets as well. So what now does Mr. Biden do? Well,
00:21:48.960
he claims outrageously that his stimulus spending is not inflationary at all, but is actually an
00:21:56.000
anti-inflation program defying all logic, all economic theory, and even the heads of radical
00:22:03.700
Dems are exploding all over Washington, D.C. Not only does Mr. Biden claim stimulus is anti-inflationary,
00:22:12.340
but he now claims energy companies, particularly oil and gas companies, are price-gouging, and he
00:22:19.520
wants an investigation. Doggone it. You can't make up this president and the mad things he says and
00:22:27.180
does, and if you could, my bet is you wouldn't. None of us would. Our Federal Reserve, at times,
00:22:34.900
acts as though they enjoy turning economic policy upside down as well. Fed Chairman Jerome Powell
00:22:41.400
had an early tutorial in Fed chairmanship, but he seems to at least have given up trying to lead
00:22:49.100
markets, and that's a good sign if he does indeed keep his job. On the other hand, Mr. Biden has
00:22:55.760
chosen a Marxist left-winger to become the nation's top banking regulator. She is educated in the Soviet
00:23:02.400
Union, wants to transfer all bank deposits to Fed accounts, as she put it in her redesign of the U.S.
00:23:10.100
financial system. Feeling better about it all? Yes, me too. Her name is Sole Omerova, and joining us to
00:23:18.560
give his perspective on the state of the economy, our prospects for prosperity under this particular
00:23:24.580
president and his zany administration is Steve Hankey. Steve is professor of applied economics at
00:23:31.720
Johns Hopkins University. He's also a senior advisor to governments all over the world on monetary policy
00:23:38.300
and markets. He's also a well-known currency and commodity trader. He's considered by most to be
00:23:44.460
the world's leading expert on hyperinflation. My using the word hyperinflation should give you some
00:23:51.240
sense of how much trouble I think our economy could be in. Let's see what Steve thinks. Steve,
00:23:57.320
it is great to see you again. Great to have you with us on The Great America Show.
00:24:01.460
Great to be with you, Lou. Steve, I love the fact, by the way, that you, with your extraordinary
00:24:07.860
hyperkinetic schedule and interest, that you were once a professor at the Colorado School of Minds,
00:24:14.680
which I think the world would like to know, but which I would like to share even if they don't,
00:24:20.580
as a high school student, was among my somewhat romantic idea of where I might like to go to college.
00:24:26.640
It was not to be, but I still have great affection for the Colorado School of Minds and, of course,
00:24:32.920
John Hopkins, where you teach and have for so long. So let's get to the point. How threatened is
00:24:38.840
our economy by rising prices and inflation well above Fed targets? We're in dire deep water. You
00:24:47.300
mentioned Chairman Paul. Now, you mentioned a couple of things, Lou, in your intro. In inflation,
00:24:55.280
of course, we have the highest inflation rate that we've had in 30 years. It's clicking along
00:25:01.620
at 6.2 percent per annum. Over a year ago, I predicted that we would end the year at 6 percent
00:25:10.620
or a little above. That was with work I did with John Greenwood, who's a chief economist at Invesco
00:25:17.680
in London. You know, that's that little outfit managing $1.6 trillion in assets. And John and I
00:25:27.280
have, shall we say, a different approach than virtually anyone out there. We are in the mold
00:25:36.420
of Milton Friedman. Remember Milton Friedman, the great monetarist?
00:25:41.140
As a matter of fact, I trudged through the snow as a sophomore at Harvard with some buddies. Our idea
00:25:48.300
of fun was to go listen to a great debate between Paul Samuelson and Milton Friedman at MIT. And it
00:25:57.760
was on that, after watching that performance of Milton Friedman, that I decided to major in economics
00:26:04.920
at Harvard. So, I mean, and yes, I do remember vividly. He and Rose were great friends.
00:26:11.300
And Milton, of course, was one of my mentors. And Milton taught us, Lou, that inflation everywhere
00:26:22.660
and always, or always and everywhere, is a monetary phenomenon. It's all about money. Forget this supply
00:26:31.880
chain nonsense. And, you know, car prices going up, oil and gas supply chains, the ports in Los Angeles
00:26:41.240
and Long Beach. Those are ad hoc explanations for inflation. They actually only explain relative
00:26:51.160
price movement. Some prices move up more than others move up, and sometimes they go down and so forth.
00:26:57.940
Inflation is a general weighted average of all the prices going on in the economy. And as I say,
00:27:08.900
it's at a 30-year high right now. It has nothing to do with supply chains. It has everything to do with
00:27:15.300
the fact that the Fed has been pumping up the money supply ever since COVID broke out in early 2020.
00:27:24.560
And we have a chairman of the Fed, Powell, who in testimony in February, a back and forth with
00:27:33.740
Senator Kennedy from Louisiana, Powell actually said money doesn't matter. M2, that broad measure of the
00:27:43.240
money supply, he said is irrelevant. It doesn't have anything to do with inflation or the economy. Now,
00:27:49.600
how in the world a chairman of the most important central bank in the world, the U.S. Federal Reserve,
00:27:57.380
could make a statement like that is just beyond belief for any economist.
00:28:03.620
Well, let me ask you this. Let me ask you this. I'm sorry, Steve. Let me ask you this.
00:28:08.320
What do you make of a president who says that trillions of dollars in stimulus spending is
00:28:13.340
anti-inflationary and doesn't get called to account by it in the popular press from the Republican Party
00:28:20.500
or anyone else? Well, not only he isn't being called to account, he's had 17 Nobel laureates that
00:28:28.680
have endorsed this nonsensical idea that the stimulus program is going to be a big inflation
00:28:36.840
fighter. It has nothing whatever to do with inflation. Inflation is a monetary phenomenon, period.
00:28:43.040
So why is inflation up? It's up because the Fed has pumped in $5.5 trillion of new money since
00:28:57.880
COVID started. And this, we basically have had about a 35% increase in the money supply,
00:29:07.620
unprecedented since World War II, by the way. And once you put money in what I call a greenwood hanky
00:29:16.420
monetary bathtub, you turn on the faucet, turn on the tap, you run a lot of money in there.
00:29:25.640
And then there are two drains in the tub, normal drains. One drain fuels real economic activity and
00:29:34.180
real growth. And the other accommodates the increased demand for people to hold money and
00:29:41.740
money market accounts, savings account, cash in their pocket, all these things. That is absorbed.
00:29:48.140
Those two drains have absorbed only about a third of what's been put in the tub.
00:29:53.160
So what happens with the excess? It goes in the overflow. And the overflow is the inflation flow.
00:30:03.520
And that happens, Lou, in about a two-year lag. So that's just starting to hit us now.
00:30:11.320
And that's why this idea of transitory, you read this in the press over and over. The press has,
00:30:16.780
as it repeats this thing, it's just an echo chamber, no analysis whatsoever. We have temporary inflation,
00:30:24.920
supposedly. Nonsense. We have persistent. This is going to continue at about the 6% rate.
00:30:33.400
We'll be there at the end of this year when we turn over a new calendar, the end of the next year,
00:30:45.720
So people, Steve, everyday folks like me, when we go to buy something, whether it's a car,
00:30:52.940
whether it's a piece of equipment, or to the grocery store, or to the drugstore, we're saying prices go
00:31:00.800
through the roof. And the question is, why now? And why all of this blather about supply chains?
00:31:08.520
Because all we know is, it takes now six months to order a vehicle. It takes three months to get
00:31:16.040
a piece of furniture delivered. And the price is 40% higher often on those products than they were a
00:31:23.900
year ago. What do we do, and which of these policies? We've got $8.5 trillion, thereabouts,
00:31:32.100
on the Fed's balance sheet. We've got over $30 trillion in national debt and rising.
00:31:42.020
Well, a lot of what you see in the press is really just a distraction. And it's a distraction. Like now,
00:31:52.980
Biden is going after the oil companies. You see, they're gouging us. The reason gas prices are going
00:31:59.740
up, it doesn't have anything to do with this mass of excess money that's in the bathtub. It has nothing
00:32:07.040
to do with that. It's the greedy capitalist and monopolist running the oil companies that we have
00:32:16.660
to investigate about these gas price increases. This is exactly what, we're going to get a replay
00:32:24.960
of Jimmy Carter in the 70s. That's what's going on. They're not focused on the cause of inflation,
00:32:32.060
but all these other ad hoc excuses and so forth. And, you know, we have to have price controls on
00:32:40.680
drugs and pharmaceuticals because that's why the prices are going up. The pharmaceutical companies
00:32:47.700
have monopoly power and so forth. So I think we're really headed down the wrong track completely
00:32:55.660
on the inflation problem because no one will confess what the source is. Contrary to what Joe Biden said
00:33:05.320
during the campaign, Biden said Milton Friedman isn't running the show anymore. No, Milton Friedman
00:33:11.380
is running the show. And in fact, when you look at Biden, the lesson there is either you run the
00:33:20.040
show or the show runs you. And what's happening, the inflation show is running Biden.
00:33:27.220
Well, it comes down to this because I think there are some issues around that, Steve, and I want to
00:33:33.840
your perspective on it. First of all, I don't believe there's a supply chain disruption. I believe that
00:33:40.020
communist China is disrupting the so-called supply chain and quite intentionally and in retaliation
00:33:47.460
for Huawei sanctions that President Trump and the U.S. government put on them, which has been
00:33:52.840
devastating to Huawei. This is a response. We remain 97 percent dependent on pharmaceuticals and
00:34:00.100
pharmaceutical ingredients from China. And at the same time, they control all container shipping around
00:34:09.840
the world, nearly all of it. And these are not accidents. These are stratagems.
00:34:17.620
Yeah. Well, let me take issue with you a little bit on this.
00:34:25.780
That's not the way I see it at all, Lou. I'm looking at the supply chain thing, and we have
00:34:35.840
the same kind of supply chain disruptions are occurring in China. In China. They have a tremendous
00:34:45.720
number of supply chain bottlenecks, glitches, and so forth going on. The same thing is occurring in
00:34:52.460
Japan. The same thing is occurring in Switzerland. And the inflation rate in China, Japan, and Switzerland
00:35:01.940
is less than 1 percent per annum. And they have the same supply chain problem. So we can just forget
00:35:10.440
about the supply chain thing. It's all the money supply and the growth in the money supply. And the
00:35:16.820
money supply is well-behaved in China, Japan, and Switzerland. They do not have a Federal Reserve that's
00:35:26.740
gone bonkers with modern monetary theory and all these other notions.
00:35:31.560
Don't you agree, Steve, that the Federal Reserve is sort of, as it were, paid to go bonkers because
00:35:39.480
they are supporting the world's reserve currency, unless you include Bitcoin now as the primary
00:35:47.300
reserve, which I know you don't. So we got $8.5 trillion on our balance sheet that's supporting
00:35:54.740
the financial systems of at least the Western world. And they're taking on all sorts of missions that
00:36:09.340
Yeah, well, here's what's going on with the Fed. And you say, well, why is the money pump
00:36:16.960
going, have been going so hard? The government spending has gone bonkers. The fiscal deficit has
00:36:26.720
gone bonkers. And who has been monetizing that debt? The Fed. The Fed has been buying the government
00:36:37.040
bonds. That's why the balance sheet of the Fed has been expanding so rapidly. That's why the money
00:36:43.200
supply, the rate of growth and the money supply is growing. They've slowed it down. It isn't exploding
00:36:50.400
anymore, but it's still growing M2 over 12 percent per annum. And it would have to be growing at five
00:36:57.520
to six percent if, in fact, the Fed was trying to hit its inflation target of two percent. So it's still
00:37:05.860
growing even even after they slowed things down. It's still growing twice as fast as it should be
00:37:11.780
growing. And the reason for that is they're accommodating. They're playing ball with with
00:37:18.740
Biden and the White House and all the libs on Capitol Hill that want to spend money because
00:37:25.780
let's let's let's let's be fair here. They were also playing ball eventually with the Trump administration
00:37:33.220
and Steve Mnuchin and the same agencies and departments that were trying to stave off the
00:37:40.820
impact and consequences of the China virus pandemic. So but then, you know, with with the pandemic easing,
00:37:51.060
the Biden administration saw that as an opportunity to put the pedal to the metal and they have done so.
00:37:57.860
I don't believe it's an accident in any way in terms of what is happening with fiscal policy.
00:38:04.100
I don't think it's an accident either with monetary policy. I think you're exactly right about the
00:38:09.580
foundation of inflation. I would only disagree that I don't see a break on inflation here,
00:38:16.960
whether it would be coming from either fiscal policy or monetary policy.
00:38:23.140
Oh, I don't either, because if you if you go out to what John Greenwood at Invesco and I have done,
00:38:30.020
we've we've we've not only looked at what the amount of money that's been put in the monetary
00:38:35.860
bathtub. OK, and you've got this huge excess amount that's already in there, already in there.
00:38:41.380
So this means we're going to have persistent inflation through 2024. But if you if you simulate out
00:38:50.100
what the Fed will probably do, they will taper and slow the money, money growth down, get it into the
00:38:58.180
five or six percent range, probably, hopefully. But what does that mean? That means that we're going to
00:39:06.660
still have a huge amount of excess going into the monetary bathtub and in the inflation overflow for some
00:39:16.900
time. And that's why I say everybody's got to wake up. We're going to have around six percent inflation
00:39:24.740
and probably until the end of 2024. Now, that's that's under a good scenario, by the way. It could
00:39:32.900
actually be worse if if the Fed doesn't slow the rate of growth down to that five to six percent level.
00:39:40.980
Yeah, there is a countervailing consequence here, though, if the Fed does. And what we witnessed
00:39:48.100
in the early days of the Trump administration is Jerome Powell takes the car out for a spin
00:39:53.780
and he finds himself trying to get ahead of the markets and and creating serious problems for the
00:40:00.020
economy. If they try to break the trying to do one hundred and twenty billion dollars a month
00:40:07.140
in so-called tapering against eight and a half trillion dollars, we're not going to see a lot
00:40:11.060
of consequence. But to come up with a nominal number like one hundred and twenty billion without
00:40:18.180
having modeled out the consequence of that, and I'm sure they have not, is to me silly. And the American
00:40:24.900
people want to know, will my mortgage interest rates permit me to buy a new house? Will my current
00:40:32.500
mega mortgage be relatively secure against inflation and the prospect of higher rates if they happen to
00:40:43.540
be adjustable? This is a this is a top time. And how am I going to buy a car when it takes me six months
00:40:49.540
to get it? And now I'm looking at nine percent interest rates all of the 1970s and 80s.
00:40:55.940
And you can add to that if you're a wage earner, your paycheck is not going up as fast as inflation
00:41:07.540
is eating away. This is just a theft. You've got you've got a pickpocket in there taking money out
00:41:15.220
of your wallet and and the real inflation adjusted wage you're receiving is going down, not up.
00:41:22.900
Mm hmm. Well, and what is the impact on Wall Street? We're looking at, you know,
00:41:28.260
the strong numbers here of late. But at the same time, we're watching all of the major Wall Street
00:41:34.980
firms start pushing investment in China, you know, whether it's, you know, in the credit markets or
00:41:42.900
whether it's equities. And we're talking about hundreds of billions of dollars possibly per month.
00:41:51.300
My my only view on that is that I think there will be a lot of tears shed on some of these investments,
00:42:04.020
because as the Fed starts tightening up, which they eventually will, because the sequence is very clear,
00:42:11.140
you expand the money supply, eventually you get inflation and interest rates. You mentioned
00:42:17.380
mortgages interest rates follow inflation. Inflation goes up and eventually interest rates on the long
00:42:25.700
end. You know, those over two years in duration for sure are going to go up and that that's going
00:42:32.260
to catch mortgages. And it will also mean when these interest rates go up, Lou, that the multiples on the
00:42:41.140
stock market will come way down and we're going to see a pretty big correction down the road here in
00:42:47.940
the stock market as a result of this monetary misbehavior and this fiscal spending spree that
00:42:56.260
we've been on. Ultimately, the inflation leads to higher interest rates and lower multiples in the stock
00:43:05.940
market. And lower multiples in this case, given the multiples that we're looking at historically,
00:43:12.740
this would be quite a break in the market if the worst case scenario were to occur.
00:43:20.660
I want to I want to I want to ask you. Absolutely. And what what internationally now,
00:43:25.620
you mentioned China in the China market. This right now, with all this excess money,
00:43:32.260
we're we're in a risk what they call a risk on situation. People people go into risky things.
00:43:40.260
They go on to it. But as the tightening occurs and these multiples come down and the stock market
00:43:46.740
starts correcting, you're going to see a risk off situation where people pull their money back into
00:43:55.700
safe harbors, things that they view as less risky. And that will mean pulling things away from China,
00:44:06.020
because that's that is a risky place. Any way you want to cut it, China is a risky place.
00:44:12.260
But meanwhile, Wall Street and their favored, if you will, offshore
00:44:17.780
target for investor money, they're they're they're without question recommending and driving capital
00:44:28.660
to China and irresponsibly so. And you don't hear a word from the SEC. And of course, none of the
00:44:35.700
private economists are talking about the the reality that this should be a risk off moment for
00:44:44.580
everyone, given the slowdown in the economy in China and the unexplained level of the China Wuhan virus
00:44:53.220
that's having some effect. Many experts believe that that's one of the reasons for the current
00:44:58.820
slowdown in the Chinese economy. So we're being poorly served by Wall Street right now in terms of
00:45:05.940
targeting investment and sure and playing Sherpa to our money and the destination still China.
00:45:14.500
When you look at Wall Street and the investment banks, they're on on on the same nutty supply chain
00:45:23.220
kind of explanation, ad hoc explanations for inflation. If you read the press or you read investment bank
00:45:31.780
reports, you don't never they never even mention the word money. How in the world can you be talking
00:45:39.140
about inflation, analyzing inflation and never mention the word money? They're exactly like Jerome
00:45:46.100
Powell in his February back and forth testimony with Senator Kennedy when he said money is irrelevant.
00:45:52.820
Money doesn't matter. Well, money, money does matter. I mean, no, Milton Friedman is running the show.
00:45:59.140
Yep. Steve, I want to say this has been a great this. We've gone farther into the weeds and
00:46:07.540
probably we should have. And I appreciate the audience staying with us through this. But what
00:46:13.380
Steve Hankey has been saying is critically important for you to hear risk off in my judgment. And Steve,
00:46:21.220
you correct me if I'm wrong. I personally believe it is time for risk off for every investor because the
00:46:28.660
the signs are so clear, the level of price increases is so extraordinary. I would just say that it's
00:46:37.380
risk off now, irrespective of what your friend at a Wall Street firm that has your account is saying.
00:46:46.740
Think about it. I would caution you as an investor to think about risk off your thoughts. You get the
00:46:52.660
last word, Steve. I completely agree with your statement about risk off risk. Keep your eye on
00:47:02.100
the central bank. That is what the source is of the problem. And so are they going to be slowing down
00:47:10.420
the money supply growth? How fast are they going to slow it down? It will be disruptive as they slow it
00:47:16.260
down because eventually they're going to have to fight inflation. What's happening right now, Lou,
00:47:23.620
is that President Biden has hit the panic button. And you know very well that you can't predict,
00:47:30.820
actually, what's going to happen in a panic. If you have a panic in a movie theater, you don't know
00:47:37.140
what in the world is going to happen with you. And that's why you want to be in this risk off mode.
00:47:44.740
The president has hit the panic button. He doesn't really understand or know what he's doing. He has
00:47:51.620
very poor advice and poor advisors. And we don't know what they will do to fight the inflation problem.
00:48:01.060
Will they go the Jimmy Carter kind of route and fool around with these ad hoc kind of
00:48:07.860
notions? Or will they finally get some sense and go with Milton Friedman and realize
00:48:14.260
what the real problem is, the money supply growth, and start slowing it down? We don't know what
00:48:19.300
they're going to do. And when you don't know what they're going to do to react to a problem,
00:48:25.700
you have to go risked off. Steve Hankey, we thank you for being with us. I've got one,
00:48:30.580
just we're over, but I want to ask you one last quick question with a quick, if you may answer.
00:48:36.500
Okay. What is the safe harbor for investors right now when they go risk off? Well, if you really want
00:48:44.260
safe harbor, you've got US government inflation protected securities tips. Right. I mean,
00:48:54.660
that's a very conservative thing, but it's a winner. I mean, it's not going to make you a fortune,
00:49:02.260
but you don't want to be losing real purchasing power or real value of your assets. So that would
00:49:12.020
be one sure bet safe harbor. Yeah. And great counsel from Steve Hankey as always. Steve,
00:49:20.500
I hope you'll come back with us soon. We have so much to talk about. I wanted to get into Venezuela,
00:49:27.060
crypto, uh, Bitcoin, uh, what is happening in Europe, water resources in this country.
00:49:33.860
Let's do that. Let's do that in our next session. You got a deal. Uh, see you soon.
00:49:39.700
Okay. Thank you, Steve. Steve Hankey, uh, a man that, uh, we think it's important for you to,
00:49:46.740
to listen to, uh, whose thinking is, uh, I think, uh, should be forefront in your investment
00:49:53.540
considerations, uh, and your understanding of what is happening when people talk about
00:49:59.620
hyperinflation, stagflation. Uh, this, uh, Steve Hankey knows very well, uh, the issues and, uh,
00:50:09.860
many of the solutions. Uh, Steve Hankey. Thanks again.
00:50:13.460
Join us again tomorrow for the great America podcast. Stay in the fight. Truth, justice,
00:50:18.980
justice, and the American way will prevail against all enemies, against all odds.