The Great America Show - IT'S A HYPER MOMENT IN WORLD HISTORY

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 0.99

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 0.96

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 1.00

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 1.00

00:04:34.660 on China? Your thoughts? Yeah, a great question. And I think that essentially we're talking about greed. 1.00

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, 1.00

00:05:55.160 because Biden himself doesn't understand it. And most of his advisors seem to be less experienced, 1.00

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 0.97

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 0.81

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 1.00

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, 0.67

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 0.97

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 0.99

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

00:17:55.840 trying to redraw the map through force.

00:17:58.780 To redraw the map. And that map is already being penciled in with more Chinese, communist Chinese 0.96

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.

00:21:15.240 Look forward to seeing you soon.

00:21:17.060 Thank you, Lou.

00:21:18.500 Thank you.

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 0.96

00:21:32.340 moments. Stay with us.

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 0.66

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 0.70

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,

00:30:40.100 the end of the next year, and into 2024.

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.

00:31:40.420 What are we to do here?

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 0.99

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.

00:34:25.220 I like that.

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

00:36:05.300 are not theirs, at least by design.

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 0.90

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, 0.94

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.

The Great America Show - November 24, 2021

IT'S A HYPER MOMENT IN WORLD HISTORY

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