TRIGGERnometry - How to Survive the Coming Economic Disaster

00:00:00.000 The war on the ground is tragic. We all understand that.

00:00:03.360 But the economic war, aside from the human costs, maybe including the human costs, is bigger.

00:00:11.280 You know, the starvation in Sudan might not make the TV as much as atrocities in Ukraine, but it's going to happen.

00:00:21.200 And probably more lives will be lost that way.

00:00:30.000 Hello and welcome to Trigonometry. I'm Francis Foster.

00:00:34.260 I'm Constantine Kishin.

00:00:35.600 And this is a show for you if you want honest conversations with fascinating people.

00:00:41.280 Our brilliant returning guest today is an economist, lawyer, investment banker, author, commentator, speaker.

00:00:47.100 He's all sorts of things. We get him on every time there's a looming economic disaster or an actual economic disaster.

00:00:53.120 Jim Rickards, welcome back to the show.

00:00:54.960 Thank you, Constantine. Thanks, Francis. Great to be with you.

00:00:57.020 It's good to have you back. So last time we had you on the show was about two years ago, right as the first instance of lockdown hit here in the UK.

00:01:07.940 And we had you on with another good friend of ours, Pippa Malgram.

00:01:11.980 And the things that we were talking about particularly was the both of you were predicting that there would be inflation coming as a result of everything that was happening in the world at that time.

00:01:21.120 The actions that the governments in many countries around the world were taking.

00:01:25.560 And we're now starting to see that your predictions were entirely correct.

00:01:30.060 So what do you make of the economic situation we find ourselves in now?

00:01:33.000 Well, that's a big question, of course.

00:01:36.400 The inflation is here.

00:01:37.300 So we for I'll say two years from 2020 to and over the course of 2021, there was a big debate in economics and among analysts about inflation versus maybe disinflation.

00:01:52.080 You still have inflation, but at a lower rate.

00:01:53.980 And that that debate kind of went on through all of most of 2021.

00:02:00.360 But that's over. Inflation is here.

00:02:01.780 There's no more debate about it.

00:02:03.160 The new debate is, will it persist?

00:02:05.780 Will it get worse, which it might, or will it be subdued in some way?

00:02:10.520 Now, I have actually been in the camp again.

00:02:14.180 You can see the inflation coming.

00:02:15.820 It's here.

00:02:16.860 It's going to persist for a while.

00:02:18.480 Well, that's, you know, that's the big question will be will it kind of tail off quickly over the next few months or will it kind of be the dominant theme for 2021?

00:02:27.600 Sorry, 2022.

00:02:28.800 I definitely lean to the latter.

00:02:30.160 However, going out, you know, maybe nine months to a year, I see that curve bending and getting into a more disinflationary mode.

00:02:40.920 Not for good reasons.

00:02:41.900 Well, it does have to do with the Fed in the sense that they've painted themselves into a corner.

00:02:49.920 There's no way to escape the room.

00:02:51.480 They can subdue the inflation, but at the cost of a very severe recession, not a mild recession, a very severe recession.

00:02:58.840 So the question is that to me, the biggest question in economics is, will the Fed go down that path, do what they have to do, do the only thing they can do to subdue inflation at the cost of a very severe recession?

00:03:10.720 And something like a stock market crash, or will they see that coming?

00:03:16.520 They'll be the last to know.

00:03:17.580 We'll all see it before they do, but they'll be the last to know.

00:03:20.980 It's because they rely on flood models and they're kind of in their own economic forecasting bubble and they're very defective ways of thinking about the economy.

00:03:28.740 And they're very much a creature of inertia.

00:03:30.800 There are a whole lot of reasons why the Fed is not nimble.

00:03:33.260 It's kind of quite the opposite.

00:03:34.580 But they'll see it eventually, probably when it's too late.

00:03:37.300 And will they block at that point and stop rate hikes and maybe even reduce rates?

00:03:43.220 That could save us from the recession, but that will just amplify the inflation.

00:03:47.980 So rather than say which one's going to happen, I prefer to lay out those two paths and then just watch it very carefully.

00:03:54.340 But more to the point, we've seen this movie before.

00:03:57.360 This is a replay.

00:03:58.360 And I think it's on, you know, like you hit the remote control for double or triple speed.

00:04:03.600 It's going to happen faster.

00:04:05.140 But this is a replay of everything that happened from 2013 to 2019 and into 2020, which was, I'll just go through it quickly.

00:04:13.400 So 2013, May, Bernanke says we're going to taper asset purchases.

00:04:18.000 That's money printing, quantitative easing, whatever you want to call it.

00:04:21.580 The market, you know, tanks, bonds go down.

00:04:24.220 Everyone's like, oh, it's over.

00:04:25.180 And then Bernanke bought.

00:04:27.940 But finally, in November 2013, they said, OK, the taper begins.

00:04:32.940 They were still printing money, but at a slower rate, and that matters.

00:04:35.880 That went on until late 2014.

00:04:38.100 The taper was over.

00:04:39.000 They stopped buying new assets.

00:04:40.200 They said, OK, here come the interest rate hikes.

00:04:42.380 Except they didn't come for another year.

00:04:43.900 It wasn't until December 2015 that then Janet Yellen finally raised rates. 0.85

00:04:48.580 And then another year for the second rate increase.

00:04:51.040 So it was December 2016.

00:04:52.520 So it was really, really slow, took two and a half years.

00:04:55.360 But they got to two rate hikes.

00:04:57.340 But then here comes J-PAL. 0.87

00:04:59.080 And then like cloud work, boom, boom, boom, 25 basis point hikes every meeting.

00:05:04.120 And all the Fed was trying to do was to get back to normal.

00:05:07.640 They were trying to get interest rates to maybe two and a quarter, two and a half, get the balance sheet down to, you know, something like 2.5 trillion.

00:05:14.220 They never specified it, but that would have been a reasonable level.

00:05:16.240 It was like, OK, now, interest rates are kind of normal, two and a half.

00:05:19.800 Balance sheet's down around two and a half trillion.

00:05:21.940 We're back to normal.

00:05:22.920 We finally got through the global financial crisis in 2008.

00:05:27.200 We undid all that stuff.

00:05:29.300 Well, what happened?

00:05:31.320 From October 1st, 2018 to December 24th, 2018, the stock market dropped 20%.

00:05:38.880 That was the December 24th, 2018, we call it the Christmas Eve massacre.

00:05:43.880 Stock market went down 3% in one day.

00:05:47.020 But the Fed was tightening into the weakness, as they always do.

00:05:52.720 And the last interest rate hike, it was December 16th or 17th, within a day or two, but mid-December 2018, they were still hiking and raising rates.

00:06:03.760 And that was the last straw.

00:06:05.100 And then the market just tanked.

00:06:06.120 And then finally, Jay Powell got that message, first week of January 2019.

00:06:10.440 He says, OK, that's it.

00:06:11.880 We're going to be patient.

00:06:12.800 Use the word patient.

00:06:13.500 It's one of these code words.

00:06:14.500 You have to get the code book out and see what it means.

00:06:16.720 But patient means we won't raise rates again without giving you advance warnings so you can get out of your carry trades or whatever.

00:06:23.880 And then he went further and said, huh, looks like we've got to cut rates.

00:06:27.200 And they did.

00:06:28.020 And then by early 2020, here comes the pandemic.

00:06:31.980 And then they took rates all the way back to zero.

00:06:33.800 And then they started QE, I don't know, six, seven, call it what you want.

00:06:37.920 They took the balance sheet to $7.5 trillion after getting it down to $3.5 trillion.

00:06:43.820 So look at that whole sequence from 2013 to early 2020, including the pandemic.

00:06:49.300 What happened?

00:06:49.800 They tapered the asset purchases.

00:06:52.760 They raised rates.

00:06:54.180 They sank the stock market.

00:06:56.320 Then they said, OK, no more rate hikes.

00:06:58.380 Then they cut rates.

00:06:59.660 And then they started QE.

00:07:01.420 And by April 2020, where were we?

00:07:05.020 Zero rates back down to zero.

00:07:06.880 And the balance sheet was $7.5 trillion after getting down to about $3.5 trillion.

00:07:13.680 So that was a big circle.

00:07:17.240 It ended up back where they started from.

00:07:18.540 But the point being, they failed to normalize.

00:07:22.340 They failed to get rates where they wanted.

00:07:24.140 They failed to get the balance sheet where they wanted.

00:07:25.840 They did sink the stock market.

00:07:27.440 OK.

00:07:28.020 Now, two years forward, here we are again.

00:07:30.160 What are we doing?

00:07:31.400 They just raised rates at the March meeting.

00:07:33.820 They're going to raise them again in May.

00:07:35.180 That's the easiest forecast I've ever made.

00:07:37.060 50 basis points.

00:07:37.960 May 4th.

00:07:38.520 Boom.

00:07:38.900 You can count on it.

00:07:40.860 And they're going to announce – by the way, I don't have a crystal ball.

00:07:43.840 The Fed told us this.

00:07:44.840 I mean, that's the thing about the Fed.

00:07:46.080 They may be wrong, but they're transparently wrong.

00:07:49.040 So they tell you what mistakes they're going to make in advance.

00:07:51.580 So the Fed forecasting is actually fairly straightforward because you just have to believe them.

00:07:56.760 So they're going to raise rates again in May, probably 50 basis points.

00:08:00.260 They're going to announce a reduction in the balance sheet, whether they actually start it in May.

00:08:06.380 They probably will, $100 billion a month, reduction in asset purchases.

00:08:10.820 So that's QT, quantitative tightening.

00:08:13.680 In other words, they're running the same playbook they tried to run or they started to run in 2013, 2014.

00:08:20.980 But here's my question.

00:08:22.560 They failed the last time.

00:08:24.240 Why do they think they're going to be any more successful this time?

00:08:27.320 Why do they think they can get out of this?

00:08:28.960 And the answer is, pardon me, the answer is they cannot without a recession.

00:08:35.140 Now, and this is what Larry Summers has been saying.

00:08:37.440 I think he's right.

00:08:38.560 And, you know, everyone's jumping on board, Alan Blinder and all these other big brains from Princeton.

00:08:42.440 But the point being, they can normalize rates in the balance sheet and they can stop inflation, but not without causing recession and not without causing a stock market crash.

00:08:53.360 So the big question for the next year is, will the Fed do that?

00:08:58.000 And they may.

00:08:59.100 Paul Volcker did it.

00:09:00.800 Or will they balk again, at which point you might rescue the market, but the inflation is just going to go wild.

00:09:07.360 That's the debate.

00:09:08.660 But the thing is about framing it that way, you've got two paths and we'll get signals along the way.

00:09:14.140 We won't be the last to know.

00:09:15.820 The Fed will, but we won't.

00:09:17.460 You'll be able to see this coming.

00:09:18.460 OK, and Jim, just remember that most of our audience are not financial experts.

00:09:23.960 So you've given us the sort of financial expert assessment of, you know, the Fed is going to have a choice between controlling inflation by likely causing a recession or allowing inflation to run rampant.

00:09:37.360 How do some of the more recent things that we've seen play into this?

00:09:40.940 Because we don't have time to get into the war in Ukraine, the rights and wrongs of all of that.

00:09:45.260 But in terms of the economic impact, obviously, Russia and Ukraine are two of the world's biggest producers of wheat.

00:09:51.500 So you've got food inflation that may be coming as a result of that, but also for other reasons, oil and gas and everything that's happening there.

00:09:59.200 How are those events are going to be affecting ordinary people's lives, in your opinion?

00:10:03.340 Well, in a big way, and it's going to get a lot worse.

00:10:06.560 And here we're talking about global supply chains.

00:10:09.500 By the way, I just finished writing a new book.

00:10:12.400 It won't be out until later this year.

00:10:14.040 It's funny.

00:10:14.780 I wrote a book about the supply chain, but the publication is delayed by the supply chain.

00:10:19.980 It is.

00:10:21.620 They don't have paper.

00:10:22.940 You know, the paper comes from Finland.

00:10:24.760 I talked to my agent.

00:10:25.840 She said, I represent an author.

00:10:27.780 His book is done.

00:10:28.700 It's printed, but they can't ship it because they don't have cardboard for the boxes.

00:10:32.300 And even if you do, there may not be drivers.

00:10:34.900 There's a queue with the printers.

00:10:36.340 They're doing triage on books.

00:10:37.900 You know, no need to kind of belabor that.

00:10:40.900 But the point is, my supply chain book is being held up by the supply chain.

00:10:44.280 But anyway, that is a big deal.

00:10:46.720 And there, and I'll come back to the Ukraine connection because it's huge.

00:10:49.920 But the supply chain was breaking down before the war in Ukraine.

00:10:54.680 That was breaking down beginning in 2018 with Trump's trade wars.

00:10:58.700 We don't have to debate the pros and cons of tariffs and trade wars.

00:11:02.480 There are two sides to that.

00:11:03.680 But there's no question that that disrupted the supply chain when Trump put tariffs on imported solar modules and consumer durables and refrigerators and air conditioners and everything coming from.

00:11:16.840 Well, it was coming from everyone, but it was clearly aimed at China.

00:11:21.100 China retaliated by saying, we're not going to buy any more U.S. soybeans.

00:11:24.940 And they bought their soybeans from Brazil.

00:11:27.280 And that sounds like, oh, OK, you change your purchase order from the U.S. to Brazil.

00:11:30.340 What's the big deal?

00:11:31.140 It's a huge deal.

00:11:32.280 They move them on ships.

00:11:33.440 You know, you've got to redirect all that ship traffic, change all the shipping lanes, break a lot of long-term contracts.

00:11:39.680 The U.S. has to scramble to say, well, we've got to sell the soybeans to the Dutch because the Chinese aren't buying them anymore.

00:11:45.460 And that's, you know, so the point being the logistics, the trains, the train lanes, the cargo lanes, the purchase order, the currency, it all gets scrambled.

00:11:56.060 So that was going on before the pandemic.

00:11:59.100 Then, boom, here comes the pandemic.

00:12:01.520 And the Chinese are, you know, they've got the zero COVID policy. 1.00

00:12:04.860 You might as well have a zero cold policy.

00:12:07.120 You know, no one can get a cold.

00:12:08.960 We're going to shut down a city of 26 million people, which is Shanghai, because there's a kind of tame version of the flu going around.

00:12:16.980 And, you know, I'm in charge of China, so I can't change that.

00:12:20.760 But I do know what they're doing, and they're doing exactly what I just said.

00:12:24.960 Next to Shanghai is a place called Ningbo, which is the biggest port in China.

00:12:29.640 Most of the containers showing up at the Port of Los Angeles are coming out of Ningbo.

00:12:34.400 Well, that's all affected, and so the global supply chain is breaking down.

00:12:40.440 It was already breaking down.

00:12:41.400 Now it's a lot worse.

00:12:42.540 Now, along comes the war in Ukraine, and you're absolutely right about the wheat.

00:12:46.220 Russia and Ukraine, now I know there are, you know, different sides of the war.

00:12:51.020 They're in a fight to the death.

00:12:52.400 But taken economically, if you combine Russia and Ukraine, you're looking at 25% of all the wheat exports in the world.

00:12:59.900 Now, obviously, that's a huge number, but the point is there are countries where they get 100% of their wheat from one of those two places.

00:13:09.460 Lebanon gets 100% of its wheat from Ukraine.

00:13:12.800 Lebanon is the best case anyway, and now there's no food.

00:13:16.140 There are countries in Africa where people are going to be starving.

00:13:18.380 So that is a – that's going to be not just an economic dislocation and an inflationary vector.

00:13:26.220 It is that.

00:13:27.340 But you're looking at humanitarian tragedies on a colossal scale.

00:13:32.260 You're looking at starvation in a lot of cases.

00:13:35.700 But let's not – and that's bad enough.

00:13:37.640 Let's not stop with wheat.

00:13:39.600 For example, the U.S. said we're not allowing any advanced semiconductors, maybe no – any semiconductors at all or high-tech equipment.

00:13:48.380 To be exported to Russia certainly can't come from the U.S.

00:13:52.260 But the United States went further.

00:13:53.960 We said we don't care who you are, if you're China, Taiwan, Japan, anyone else.

00:13:58.260 If you're manufacturing advanced technology equipment and tools and using semiconductors that involve U.S. technology or U.S. tools,

00:14:06.940 because you're operating under a license from the United States, you can't export to Russia either.

00:14:11.940 Now, enforcement is another issue, but so far the Chinese have kind of towed that line. 0.99

00:14:17.380 So we've cut off basically advanced equipment and semiconductors to Russia.

00:14:21.060 Okay, that affects defense and aeronautics and a lot of other industries.

00:14:25.980 Well, Russia said, okay, to comply, how do you make semiconductors?

00:14:30.840 Well, you know, they're wafers and they're different layers.

00:14:33.600 You need the chemicals and the strategic metals to make those layers.

00:14:36.900 But more to the point, you etch the circuits on the semiconductor with lasers.

00:14:44.240 How do you power the lasers?

00:14:45.560 Well, there's a certain kind of compressed neon gas that's used to power the lasers to etch the semiconductors.

00:14:50.960 70% of that processed gas comes from a single plant in Odessa in Ukraine.

00:14:57.620 So now, it's like, this isn't no semiconductors for Russia.

00:15:01.960 This is no semiconductors for the world because the world can't get the neon gas they need to run the lasers to etch the semiconductors.

00:15:10.600 Now, can you replace it?

00:15:11.600 Yeah, you can probably replace most things, but it takes years in some cases to do that.

00:15:18.440 And you say, well, why hasn't this shown up already?

00:15:21.220 Well, first of all, it is.

00:15:22.780 I mean, Tesla assembly lines are shut down.

00:15:24.900 Try getting a new car in the United States.

00:15:26.760 You know, good luck.

00:15:28.480 You know, cars have 1,400 semiconductors.

00:15:33.120 They're basically computers on wheels.

00:15:34.980 You know, when I was a kid, you'd learn how to stick a screwdriver in a carburetor if the engine was flooded.

00:15:39.360 They don't even have carburetors anymore.

00:15:40.680 They've got semiconductors.

00:15:42.920 So these supply chains are breaking down.

00:15:44.640 And you're like, why isn't it worse right now?

00:15:45.960 The answer is manufacturers and intermediate participants in the global supply chain have what they call safety stock.

00:15:55.560 It's a little extra inventory, maybe more than you want, but just in case there's a minor disruption.

00:16:00.320 Well, this isn't a minor disruption.

00:16:01.760 This is a major disruption.

00:16:03.340 You can get by for 30 days using up your safety stock, but then you've got to go reorder.

00:16:07.420 That's when you find out that either the price has tripled or it's just not available at any price.

00:16:12.820 Or even if you can put the order in, the shipping lanes and the transit lanes are broken down and you're not going to see it for next year, until next year.

00:16:21.140 So that's, and I could go on and on.

00:16:25.060 Probably don't need to go into every example, but I can assure the listeners and viewers that it's a really long list.

00:16:32.480 You know, aluminum, platinum, palladium, you know, everyone loves EVs, electric vehicles, you know, the Teslas or whatever.

00:16:40.500 Okay.

00:16:41.360 Tesla's run on batteries.

00:16:43.160 Leave aside the fact that you have to charge the batteries with coal-fired plants.

00:16:49.000 That's an issue for another day.

00:16:51.460 I mean, 58% of China's energy comes from coal.

00:16:54.440 Not oil, not natural gas, not uranium, coal.

00:16:58.560 And they're the leading producer of electronic vehicles.

00:17:01.180 So they're basically emitting huge amounts of CO2 to charge up your Tesla.

00:17:06.940 It's not like the electricity comes out of the air.

00:17:10.440 But that aside, you can't build those cars without batteries.

00:17:13.980 Well, what's in a battery?

00:17:14.880 Nickel.

00:17:15.460 Where does nickel come from?

00:17:16.540 It comes from Russia.

00:17:17.820 You know, lithium ion.

00:17:20.240 You know, where's the lithium come from?

00:17:21.680 It comes from mines, many of which are in Russia.

00:17:24.320 How does Boeing make aircrafts?

00:17:25.880 Well, you need a lot of aluminum.

00:17:26.940 Where does it come from?

00:17:27.700 Russia.

00:17:28.620 Titanium.

00:17:29.220 Russia.

00:17:29.640 I mean, there's a group called the Five Eyes.

00:17:32.240 You may have heard of them.

00:17:33.380 But Five Eyes are five kind of Anglo-Saxon community, if you want to think of it that way, who share intelligence.

00:17:44.160 They share intelligence that they would not share with anyone else, even allies.

00:17:48.280 And the Five Eyes are UK, Australia, Canada, New Zealand, and the United States. 0.87

00:17:54.040 And they share intelligence among themselves.

00:17:55.700 Well, they've now kind of expanded their mandate, if you will.

00:17:59.500 And the Five Eyes recently came out with a report.

00:18:01.800 I just call it the Five Eyes Report.

00:18:03.080 It's got a longer official title.

00:18:05.780 And they looked at what we're talking about.

00:18:07.460 They looked at global supply chains from a strategic dependence point of view.

00:18:11.540 And what they did, they identified over 5,000 categories of goods.

00:18:16.800 Intermediate goods, source goods, finished goods, et cetera.

00:18:20.840 And they looked at all the countries in the world.

00:18:23.480 And they asked themselves two questions.

00:18:25.720 Number one, how much of your supply of that good do you import?

00:18:30.920 And then number two, is more than 50% of that supply from a single source?

00:18:36.940 And if the answer to both questions was, well, the first question is what it is.

00:18:41.120 But if that's a high number and more than half comes from a single source, you would consider strategically dependent on that source.

00:18:47.020 It's just kind of a little algorithm.

00:18:48.900 And they ran it.

00:18:49.500 And the results were shocking.

00:18:50.940 I read the report.

00:18:53.580 You know, I mean, 100% of the aspirin in New Zealand comes from China.

00:18:58.160 So if you're in a trade war with China, don't look for relief in the hangover because you're not going to get any aspirin.

00:19:04.180 But on a serious note, the dependencies are huge.

00:19:08.140 The U.K. was actually a little better, a little less dependent than some of the others.

00:19:12.520 But Canada, the U.S., you know, Boeing gets 35% of the aluminum that they use in aircraft manufacturing from Russia.

00:19:20.340 Well, you cut that off, good luck getting new planes, you know, et cetera.

00:19:25.680 Pharmaceuticals, strategic metals, oil and natural gas, obviously wheat.

00:19:31.220 Oh, the biggest one, maybe fertilizer.

00:19:33.780 Like, oh, no wheat from Ukraine.

00:19:35.260 That's a problem.

00:19:35.960 Well, how about no wheat from the United States because you can't get the fertilizer?

00:19:40.440 This is, you know, it's spring in the Northern Hemisphere.

00:19:42.880 This is planting season right now.

00:19:44.920 People who are getting fertilizer are paying triple what they paid last year, and there are shortages.

00:19:50.640 So, you know, good luck with a bumper crop next September because a lot of the planting is not going to happen.

00:19:57.180 So, this is, we're living in a world of very short attention spans, kind of insect-level attention spans.

00:20:04.800 But the world goes on with leads and lags.

00:20:09.280 And a lot of the things I'm talking about, they don't happen overnight.

00:20:11.940 They are happening.

00:20:12.600 But the impact might show up in three months or six months or a year, et cetera.

00:20:17.780 But it's very easy to see the inflationary potential of all this.

00:20:20.980 So, you've got two things going on at once.

00:20:23.180 Shortages and supply chain disruption.

00:20:25.040 So, you might not be able to get goods.

00:20:26.880 I don't know.

00:20:27.460 I've been to the UK lately.

00:20:28.560 I wish I had.

00:20:29.180 I'm going there.

00:20:29.880 But it's hard to travel these days.

00:20:31.880 But at least in the United States, you go to the supermarkets, and the shelves are partly bare.

00:20:37.600 Now, it's not like every shelf is bare, like, you know, East Germany in 1956.

00:20:43.000 But there's, like, you know, hey, there's no peanut butter this week.

00:20:45.820 There's no chips here.

00:20:46.840 The soda is gone, et cetera.

00:20:50.440 And then, you know, for example, I like a particular brand of salsa, hot salsa.

00:20:55.700 And I'll go, and there's none there.

00:20:57.720 There's none on the shelf.

00:20:58.920 I'll go again, and there's none on the shelf.

00:21:00.560 So, the third visit, they've got a case in.

00:21:02.600 Okay, I'll buy half the case because I'm not going to take it.

00:21:05.580 I'm not usually going to buy two jars, but I might buy six jars or eight jars because I don't know when I'm going to see it again.

00:21:10.320 Of course, I'm hoarding, right, and I'm contributing to the supply chain shortage because the next person is not going to get any.

00:21:16.180 But that's my response function to the fact that I got shut out the last two times.

00:21:20.900 Well, everyone's doing the same thing.

00:21:22.320 That's just human nature.

00:21:23.240 So, it's just getting worse.

00:21:25.100 But shortages, yes.

00:21:27.300 Some of these will be critical in terms of manufacturing, and some of them will be tragic in terms of starvation.

00:21:35.360 And higher prices across the board.

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00:22:09.740 Hey, Francis, do you like privacy?

00:22:12.600 Of course I do.

00:22:13.760 I don't want the feds knowing my business in case I get whacked, because I got too close to the truth.

00:22:22.140 The man is everywhere, and truth seekers like me need to be careful.

00:22:27.620 Mate, you're a burnout former primary school teacher who spends too much time on iamafatincel.com.

00:22:34.180 Just because you read that the world is run by a cabal of lizards doesn't mean it's actually true.

00:22:38.960 I've never said the world is run by a cabal of lizards, but they are definitely tracking my online activity.

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00:24:02.740 Don't let the lizards get you.

00:24:04.400 Every time we talk to you, it seems that we criticize globalization and we say globalization is done.

00:24:13.720 It's had its day.

00:24:14.860 This is another nail in the coffin for globalization.

00:24:17.680 Isn't this the final nail in the coffin for globalization?

00:24:20.220 It's a great question, Francis.

00:24:23.240 I would put it slightly differently.

00:24:27.260 And this is the thesis of my new book.

00:24:30.880 I finished writing it, but it won't be out for a while.

00:24:33.620 What's it called, Jim?

00:24:34.380 Tell everybody what it's called.

00:24:35.820 It's called Sold Out.

00:24:38.040 So, you know, go to the store or you're sold out.

00:24:40.360 Sorry, but it's obviously it has a lot more scope than that.

00:24:46.800 But the, you know, I started, I make the point that supply chains have been around since the Bronze Age.

00:24:53.420 That's not new.

00:24:53.940 But what is new is the science of supply chain management.

00:24:56.520 That's new because we needed the computing power to turn it into a science and mathematical algorithms and so forth.

00:25:02.580 So, I talked to a guy who probably more than any individual on the planet is responsible for the global supply chain.

00:25:12.480 No one did it single-handedly, but this guy, both for his own company, which is a model of seamless global integration,

00:25:20.120 as well as the fact that it's a tech company that provided the tools to all the other companies in the world.

00:25:24.900 So, this guy kind of gets the credit.

00:25:27.100 And he said to me, he said, Jim, you have to understand.

00:25:29.980 He said, it took us 30 years to build this, roughly 1989 with the fall of the Berlin Wall to 2019, just before the pandemic.

00:25:38.640 It took us 30 years to build it.

00:25:40.040 We blew it up in, you know, two or three years.

00:25:43.120 And we can't build it overnight.

00:25:44.880 We can't rebuild it overnight.

00:25:46.320 It's going to take five, ten years to rebuild this.

00:25:49.940 So, you know, war in Ukraine or not, this is not going to be remedy easily.

00:25:56.260 Now, the question is, and this, Francis, this is your question, what replaces it?

00:26:02.020 Is it the end of globalization or is there a new phase of globalization?

00:26:07.480 And I think it's the latter.

00:26:09.160 But what I mean by that is China and the U.S. are going to decouple.

00:26:13.340 And that was, again, some of these things were happening anyway.

00:26:15.800 The war made it worse. 0.67

00:26:17.760 The pandemic made it worse.

00:26:19.640 But it was happening anyway.

00:26:20.800 Xi Jinping has now elevated himself through National Party Congresses and other ideological means to the role of the new Mao Zedong.

00:26:31.100 So, you know, the Jiang Zemin, Hu Jintao, and these other guys, who cares?

00:26:37.300 They're footnotes.

00:26:38.940 Deng Xiaoping, you know, he gets a gold star.

00:26:42.000 But it's really now Mao and Xi Jinping.

00:26:44.480 He's the new Mao.

00:26:45.760 That's the way to understand it.

00:26:46.900 And he had decided to decouple the Chinese economy from the U.S. anyway before everything we're talking about.

00:26:54.540 And, of course, Trump, when he was president, was kind of thinking along the same lines.

00:26:59.860 Now we got a Biden.

00:27:01.220 I mean, he's not all there, but he's certainly got a globalist crowd around him.

00:27:05.780 But too bad.

00:27:06.940 It's not working.

00:27:07.960 So we're going to blow up the global supply chains.

00:27:10.320 We already have.

00:27:12.800 They'll be rebuilt, but along new lines.

00:27:15.660 So let me give you a very concrete example because I realize I'm speaking in kind of big picture stuff.

00:27:21.400 The biggest semiconductor manufacturer in the world and the most sophisticated is Taiwan Semiconductor Manufacturing, TSM.

00:27:31.480 Okay.

00:27:31.680 So they, and then Intel is like a close second.

00:27:35.220 They're both really good.

00:27:36.260 And they're down to five nanometer, you know, chips working on three.

00:27:41.360 But the best the Chinese can do is maybe, I don't know, 10 or 15. 0.84

00:27:45.220 They're just not in the same league and same with the Russians. 0.99

00:27:47.060 They have separately announced they're building new fabs, a fabrication plan for semiconductors in the United States, Taiwan.

00:27:57.120 And they're $10 billion each.

00:27:59.560 And they're going to take three to five years to build because you can't, you know, start a question in four walls.

00:28:04.240 These things are very sophisticated, very hard to do right.

00:28:07.060 So Taiwan Semiconductor is putting theirs, I believe, in Texas, and Intel announced that they're putting theirs in Oregon.

00:28:13.240 Okay.

00:28:14.080 Why is the biggest semiconductor company in the world, based in Taiwan, building a plant in Texas?

00:28:20.900 Well, welcome to the new globalization, which is the U.S. is onshoring all this technological capability.

00:28:26.300 We don't want to be dependent on China or Taiwan or, for that matter, South Korea.

00:28:31.260 We don't want to be dependent on those supply lines.

00:28:33.380 We're going to build it here.

00:28:34.420 If you're a Taiwan Semiconductor, you want to do the same thing because are you waiting for the Chinese invasion?

00:28:39.440 Well, maybe, you know, we'll wake up and here it comes.

00:28:43.080 Now, there's a new military doctrine called the broken nest, and it's based on a Chinese proverb.

00:28:50.480 And the proverb is if there's a broken nest, how can the eggs not be broken?

00:28:57.640 In other words, if you have a faulty nest, the eggs are going to fall and they're going to break too.

00:29:00.800 And as applied to Taiwan, China may or may not invade.

00:29:04.960 I think the odds of that have gone up.

00:29:06.600 I'm not saying it's going to happen, you know, imminently, but the odds have certainly gone up.

00:29:10.920 That's easy to see.

00:29:13.940 If they do, and the big military question is, will the U.S. 7th Fleet intervene and we'll be in a shooting war with China and we're sinking their aircraft carriers and they're trying to sink ours, etc.

00:29:24.380 I don't know the answer to that, but I do know that either we or the Taiwanese will destroy all the semiconductor capacity in Taiwan. 0.99

00:29:34.440 We're not going to leave that for the Chinese. 1.00

00:29:36.600 This is scorched shirt.

00:29:39.460 This is what the Russians did to Napoleon. 0.94

00:29:41.960 Hey, welcome to Moscow, but good luck finding some food.

00:29:44.600 If the Chinese take Taiwan, they're not going to have a semiconductor industry, which makes them, has a deterrent value, makes you, would make you think twice about doing it. 0.97

00:29:53.780 If you're the Chinese, we can leave that for the game theorists. 1.00

00:29:56.500 But, but that's why the semiconductor industry is coming back to the United States.

00:30:00.320 Now apply that to pharmaceuticals, mining, you know, strategic metals, and a lot else.

00:30:08.420 And you can see the implications of it.

00:30:11.340 So, so now I hypothesize, but I think there's good evidence for it, that there will be a new globalization, but it'll be like a club, members only.

00:30:23.020 And the members will be, you know, the five eyes and close allies.

00:30:26.800 And, you know, let's include the French, you know, they can join the club.

00:30:29.860 But, but the point being, we'll trade among ourselves.

00:30:33.740 What we'll have in common is democracy, you know, while it lasts, and some rule of law and some common culture, et cetera.

00:30:41.820 But the Chinese are going to have to start their own club.

00:30:45.380 And, you know, maybe in East Asia, hopefully the Japanese will be in our club.

00:30:50.580 The Russians remains to be seen. 0.73

00:30:53.060 But, and the big wild card is India, because India is probably like, as we're speaking, surpassing China in population.

00:31:01.520 India will be the, if it isn't already, it'll be the number one most populous country on earth.

00:31:06.960 And to their credit, they've had a functioning democracy since 1947.

00:31:11.740 Now, lots of other problems with socialism and inefficiency and some corruption and all that.

00:31:16.940 But, but they're a, they're a longstanding democracy with the largest population in the world, immense potential human capital.

00:31:24.480 So where, where do they come out?

00:31:26.620 So that's, that's to be determined.

00:31:28.660 But we'll probably end up with, with a new globalization that will be quite different because it will involve a lot more onshoring, less reliance on trading partners.

00:31:40.140 And to the extent you, you do have to rely on trading partners.

00:31:43.380 That's always a fact of life.

00:31:44.640 It'll be a kind of members only club and the Chinese will, will go the wrong way. 1.00

00:31:49.000 But that also means things are going to be more expensive.

00:31:52.320 Jim, I find the picture you're painting the world incredibly bleak because what you have is China and its allies, the West and their allies, and everyone else. 0.98

00:32:02.920 I mean, well, they're screwed, aren't they? 0.71

00:32:04.900 Because supply lines are going to become more and more difficult to come by. 0.97

00:32:09.900 They're going to become more and more unreliable.

00:32:12.420 For example, there's going to be food shortages.

00:32:14.980 Food shortages leads to riots and therefore leads to political instability, which then means that certain countries are going to, well, they're going to be plunged into chaos, which then means migrant crises.

00:32:28.560 This is huge.

00:32:29.940 I agree with that.

00:32:33.500 You're not making me feel better, Jim.

00:32:37.880 That's not what we get Jim on the show for.

00:32:40.160 It's never for that, is it?

00:32:41.840 Hopefully we offer realism and good forecasting, but I'm a cheerful person personally, but I don't let that get in the way of good analysis.

00:32:50.920 To me, the saddest case, and I've spent a lot of time there going back 40 years, is Africa because Africa does have enormous potential.

00:33:03.280 I always tell people Africa doesn't exist. 1.00

00:33:05.360 You have to travel around Africa to know it doesn't exist.

00:33:07.760 It's like 58 countries with a large section that's unpopulated in the Sahara Desert.

00:33:14.240 I've been out in the Sahara Desert.

00:33:16.820 Northern Africa, of course, is Muslim and speak Arabic and Berber culture and descent, a lot of European influence.

00:33:27.660 It's almost like an extension of Europe in some ways.

00:33:30.540 I mean, certainly in antiquity, that was true.

00:33:32.080 And then South Africa, lots of political problems, but moderate climate, great wine, beautiful, beautiful part of the world.

00:33:41.960 A lot of people haven't been there, just picture it as jungle.

00:33:44.260 Well, there's some jungle.

00:33:45.240 I've been in the jungle, but there's high plateau, just gorgeous areas.

00:33:48.840 East Africa is mostly high plateau.

00:33:51.060 So it's got incredible diversity, incredible different cultural strands and threads, huge natural resources.

00:33:59.240 What they don't have is a good rule of law.

00:34:02.740 They don't have governance.

00:34:04.240 That's just, and I don't know why you think someone would wake up, but they don't.

00:34:10.660 But to your point, Francis, they're going to have to pick sides.

00:34:14.220 You know, some of these countries, and I would say Zambia, yeah, Zambia, but also Zimbabwe, some of the others are practically Chinese colonies.

00:34:25.440 I know colonies is a bad word, and we don't have them anymore, but economically we do.

00:34:30.300 And China has gone in.

00:34:31.660 When China does a mining project, it's like they create a lot of local jobs, some.

00:34:36.860 They send in Chinese by the thousands, you know, by the plane load, build company towns, mostly populated with Chinese, strip the minerals. 1.00

00:34:47.700 They're not environmentally conscious.

00:34:50.080 I know I'm involved with the gold mining industry here and there, and, you know, I visited mines and refineries and mills where they crush the ore and turn into what's called dore.

00:35:03.540 I mean, they have these vats.

00:35:04.860 You do use cyanide in extracting gold and getting gold out of the ore, but you have to have a vat, a cache, and you got to account for every drop.

00:35:16.660 And when the cyanide that comes out has to be measured against the cyanide that went in, and they better be the same.

00:35:22.480 Like, you can't be throwing the cyanide into rivers and streams, but they do in China. 0.86

00:35:27.200 They do, and the water's poisoned, and, you know, they've poisoned something like 90% of their freshwater rivers are literally poisoned.

00:35:34.360 So, that's how they treat Africa.

00:35:39.520 Now, and I'm sure the leaders, you know, in my day, the leaders used to get 30% off the top, except for Mobutu, who took 50%.

00:35:48.500 But, you know, to the extent they're still doing that, if that doesn't change, then Africa is just kind of a basket case. 0.97

00:35:55.520 But they could pick sides.

00:35:58.580 They could join this club that I've described and maybe benefit from that.

00:36:02.700 But it's going to be a little bit more like, oh, the 50s and 60s.

00:36:08.220 You know, you don't hear it much anymore, but the third world.

00:36:10.640 You know, it was U.S. and Western Europe and, you know, Australia and a few other places were the first world, and the communists were the second world. 0.81

00:36:17.780 Everybody else was in the third world.

00:36:19.380 It was synonymous with underdevelopment, corruption, and worse.

00:36:23.120 But we make it back to that, where it's, you know, the U.S. and, you know, the Five Eyes and the club that I've described on the one hand, China, and its, you know, tag-alongs on the other.

00:36:36.200 And then everyone else is going to be third world, or you're going to have to pick sides. 0.95

00:36:40.020 Jim, and you make an interesting point, because the day that Russia invaded, I said this was going to be a month.

00:36:47.880 It was going to have a huge impact on the world, and I think we're seeing that happen.

00:36:52.160 And, you know, I think it felt to me like it was going to be the start of another Cold War, and I think what you're describing is essentially that in many ways.

00:37:01.660 The one thing that strikes me is kind of obvious out of what you're saying.

00:37:04.500 When I was studying economics at university, the thing that everyone talked about was, well, no two countries with a McDonald's have ever gone to war.

00:37:11.360 And this was like a shorthand for countries that trade, generally speaking, don't go to war with each other.

00:37:17.640 We've seen that challenge somewhat recently.

00:37:19.960 But broadly speaking, my concern with what you're talking about would be that we're creating these two blocks.

00:37:26.260 And when you've got these two blocks, what happens between blocks, right?

00:37:31.760 What do they do?

00:37:32.720 Well, they're competing for resources.

00:37:34.060 They're competing for land.

00:37:36.040 You know, my father-in-law, Soviet father-in-law, spent a lot of time in Angola and other African countries, because that's what the plays were at the time.

00:37:44.700 You try and control parts of the world where you're not physically present, but you try and get them to have the right ideology or to support you militarily or with resources.

00:37:53.560 Is that what's going to happen now?

00:37:55.260 There's going to be these two blocks fighting over land all over the world, physically, kinetically, but also economically and culturally.

00:38:03.500 Something like that.

00:38:04.600 First thing, Constantine, you have to bear in mind, the guy who said that no two countries with McDonald's would ever go to war with each other was Tom Friedman, who hasn't been right about anything for 40 years.

00:38:13.900 So I wouldn't put too much weight on that.

00:38:17.080 He wrote a really good book in the 80s, but not much since.

00:38:20.260 So, yeah, I wouldn't I wouldn't put too much.

00:38:23.620 Two blocks, maybe maybe three blocks, maybe four with some members, you know, kind of switching sides, a little bit more dynamic.

00:38:33.220 But, yeah, something like that, because I guess, Jim, sorry to interrupt.

00:38:35.980 My point was, as much as we abhor elements of what globalization has done to our countries and to what it's done to our independence and the ability to choose our own energy policy or whatever.

00:38:47.080 Was it something that gave us peace, which we're no longer going to have?

00:38:51.400 That's what I'm asking you.

00:38:52.360 It contributed to peace.

00:38:58.100 Yeah, I think you have to say that.

00:38:59.580 But and we don't have it right now, given what's going on in Ukraine.

00:39:03.280 But I have actually looked at some studies on this.

00:39:07.380 It I think the end of history thesis and Francis Fukuyama, he taught at my old school, the I think that was wrong.

00:39:16.340 I think there was I wouldn't I wouldn't want to say premature.

00:39:18.820 Sure. I think we did have a long period from the fall of the Berlin Wall till fairly recently where there were not any major wars involving major powers, at least not to the close proximity that we have today.

00:39:34.980 But instead of saying, well, that was the new normal, I hate that expression, but OK, that was the new normal.

00:39:40.620 And now we're things are falling apart again.

00:39:43.020 That may have been the anomaly and that things are actually it's back to business as usual, which is war, including war in Europe.

00:39:49.660 So I'm not I'm not sure that we left that behind as as much as some scholars, some analysts believe.

00:40:00.000 But we may be heading in.

00:40:02.320 But, you know, even in the in the 80s, certainly the 70s, I mean, there were proxy wars all over the world.

00:40:08.520 Vietnam, Angola and elsewhere, the US and Russia never fired a shot at each other.

00:40:14.640 I hope that continues to be the case.

00:40:17.020 I am deeply concerned about kind of the warmonger element in the United States.

00:40:23.260 You know, I studied nuclear war fighting in the late six beginning in the late 60s.

00:40:29.360 And the scholars that I was reading in the late 60s as a college student had done a lot of the work in the 50s.

00:40:36.680 And it was Henry Kissinger.

00:40:38.240 He's still around.

00:40:39.320 Good for him.

00:40:41.460 Henry Kissinger, Herman Kahn.

00:40:43.520 Herman Kahn wrote a book.

00:40:44.480 It's like a 700 page book called On Thermonuclear War.

00:40:48.740 I don't think it's a bestseller today.

00:40:50.340 But in the 50s, you just you read if you were in that field, you read Herman Kahn.

00:40:54.640 A lot of it was, you know, kind of game theoretic.

00:40:57.380 Well, the nuclear weapons never went away, but we did get some treaties and we got some inspections and we got some changes and and people stopped thinking about it.

00:41:07.960 And I think, you know, millennials and Generation Z, I'm not sure they really know what a nuclear weapon is or how they work.

00:41:18.020 But we're but we're back.

00:41:20.420 It's back.

00:41:21.100 Now, Putin has said, not casually, but I'm sure it was calculated.

00:41:26.560 But, you know, we may have to use tactical nuclear weapons or at least we don't rule it out.

00:41:31.360 That's what he said.

00:41:31.860 We don't rule it out.

00:41:32.940 And that's just a restatement of what's called the no first use doctrine.

00:41:36.280 Neither Russia nor the United States have ever adopted the doctrine of no first use.

00:41:42.260 In other words, we reserve the right to use them first if we think that's called for.

00:41:45.740 Now, going back to to use Herman Kahn in particular, Rick Kissinger and other scholars, Wolfsteader, they all said the same thing.

00:41:53.820 They had differences, different ways of analyzing the problem, but they all said the same thing.

00:41:59.080 Don't go there.

00:42:00.900 Don't go there.

00:42:01.700 What I mean by that is nobody wakes up and says, oh, nice day.

00:42:05.420 I think I'll start a nuclear war.

00:42:08.780 Let's see how that works out.

00:42:10.220 Nobody does that.

00:42:11.240 Nobody.

00:42:12.060 But what you but the way you get to a nuclear war is escalation.

00:42:15.300 So, you know, you raise the ante and I invade and I give the some more troops and, you know, I use missiles and so forth.

00:42:24.060 And then you get to a point.

00:42:27.000 It was somewhere down the road where one side feels it's existential.

00:42:31.680 They didn't start out that way.

00:42:33.180 But through escalation, they arrive at a point where they're like, you know what?

00:42:36.020 Now I've got to use I've got to stop this.

00:42:37.560 I've got to use some tactical nuclear weapons.

00:42:39.020 And here's where you get really deep into the game theoretic side of it, because the side that's one side's thinking about using tactical nuclear weapons.

00:42:48.100 And Putin already says we don't rule it out.

00:42:50.220 The other side says, huh, if you're going to do that, I better shoot first. 0.82

00:42:54.740 I better use my nuclear weapons first. 0.93

00:42:56.540 Because now you get into the whole, you know, first strike, second strike, counterforce, countervalue.

00:43:01.040 I mean, you can go on and on with this theory.

00:43:02.640 We don't need to belabor it.

00:43:04.340 But the point is you actually get to a point where the side that was least likely to do it becomes the one that shoots first because they think the other guy's going to shoot.

00:43:13.860 And the dynamic takes over.

00:43:15.880 That's really the point.

00:43:16.680 So what the scholar said is don't go down that road.

00:43:19.940 And the closest we ever got until today was the Cuban Missile Crisis.

00:43:24.120 And, you know, you can fault Kennedy and Khrushchev.

00:43:29.540 Khrushchev was Ukrainian, by the way, just for a historical footnote.

00:43:32.740 But you can fault Kennedy and Khrushchev for getting there.

00:43:37.820 But then you have to give them some credit for finding a way out.

00:43:41.460 And that was a lesson to the world.

00:43:43.140 So I remember it was, you know, I was 12 years old or whatever.

00:43:48.320 But, you know, the front page of the New York Times showed a, they didn't have pictures, a black and white map kind of thing.

00:43:55.680 I used to have pictures but not color.

00:43:56.860 But it was North America with Cuba and then concentric circles showing the range of known missiles.

00:44:05.960 And everyone was saying, is my locality in one of those circles?

00:44:09.760 Because that means I could get bombed.

00:44:11.040 So my wife asked me the other day, she said, do you think that this could turn into, you know, what she said is if it turns into a nuclear war, do you think they'll strike us?

00:44:19.900 You know, very practical question.

00:44:22.460 And I can point out the window here, viewers can't see it, but there are three nuclear submarines, nuclear attack submarines, a couple hundred yards away.

00:44:29.940 Because I live in Portsmouth, New Hampshire, which is one of four bases in the world authorized to do maintenance work and refueling on the U.S. nuclear submarine fleet.

00:44:40.480 So there are three nuclear submarines across the river.

00:44:44.260 Well, it's been nice knowing you, Jim.

00:44:46.940 We're on the list.

00:44:48.760 Yeah, I do take it seriously.

00:44:49.980 But I don't think it's an overstatement to say we're closer to that kind of outcome than we have been since the Cuban Missile Crisis.

00:44:59.520 I mean, that is a deeply sobering way to look at the world.

00:45:04.000 Hey, Francis, do you like podcasts and politics?

00:45:07.240 No, mate, I'm a real man.

00:45:09.180 I'm only interested in football, birds and fast cars.

00:45:13.400 Last time you tried to drive a car, you had a panic attack when you got overtaken by a granny. 1.00

00:45:17.240 She was driving very aggressively and used disgusting language for a woman of her age. 1.00

00:45:22.280 Well, for those of you who do like podcasts and politics, then you have to check out The Lost Debate.

00:45:27.200 It's a podcast and YouTube show for political eclectics who want to escape their media bubbles and engage in good faith with ideas from across the political spectrum.

00:45:36.340 It's three friends from across the political spectrum discussing the big issues of the day.

00:45:42.000 Ravi's a former Obama staffer and school principal.

00:45:45.020 Corey's a former Fox Radio News host.

00:45:48.740 And Ricky's a New York Post columnist.

00:45:51.220 Instead of being at each other's throats, they focus on bringing new perspectives to the table in constructive debates that sound less like crossfire and more like discussions between real people.

00:46:00.920 They sound like us, apart from the whole sound like real people bit.

00:46:05.120 That, and they might actually know what they're talking about.

00:46:07.180 Check The Lost Debate out on YouTube or wherever you get your podcasts.

00:46:11.420 I'm looking at the picture that you've painted.

00:46:17.000 It's a very bleak picture, but it's one that I agree with and we're already seeing the effects from.

00:46:21.580 Are there any solutions or any things that we can do in order to try and rail back, in order to maybe try and, how can I put it, heal the wounds that have been done, rebuild bridges, etc.?

00:46:36.420 There are, and one of the scholars who articulated this best is Edward Lutbach.

00:46:45.040 I don't know if the name rings a bell, but he was a classmate of mine, but he's a little older.

00:46:51.460 But he's brilliant, absolutely brilliant, and has written some excellent books and articles.

00:46:57.640 And his whole career, he was waiting to be the new Kissinger, except Kissinger is still alive, so it's been a long way.

00:47:02.940 It's kind of like Prince Charles, but Lutbach is a big brain.

00:47:07.280 And he advanced a concept in the 1990s called geoeconomics.

00:47:12.760 Now, geopolitics, yeah, a big field, been around forever.

00:47:16.800 Economics, at least since Adam Smith, but probably longer.

00:47:22.420 And they've always been related.

00:47:24.120 The Napoleon's invasion of Russia and Spain was because they didn't join the continental system to defeat the Royal Navy blockade.

00:47:30.980 So the two have always been intermingled.

00:47:33.560 People forget that, by the way, that six months, or really five months before Pearl Harbor, FDR put economic sanctions on Japan.

00:47:43.560 He froze their bank accounts and cut off their oil supply.

00:47:47.720 Sound familiar?

00:47:48.300 So this is not brand new stuff.

00:47:51.840 But what Lutbach did, he said, you know, it's not even that they're kind of related anymore.

00:47:56.420 They're merged.

00:47:57.340 They're the same.

00:47:58.180 And actually, wars in the future will be fought economically more so than kinetically.

00:48:03.200 And by the way, I teach a seminar on exactly this topic at the U.S. Army War College down at Carlisle, Pennsylvania.

00:48:11.320 But the seminar is not limited to people in the Army.

00:48:18.220 It's because everything's across, everything's joint these days in the U.S. military.

00:48:23.160 So my class would be Army, Navy, Marines, Airmen, intelligence officials, and others.

00:48:31.100 But it's an elite group.

00:48:32.340 It's called the Advanced Strategic Arts Program.

00:48:34.520 But these are kind of mid-career, you know, major lieutenant colonel, colonel, and then senior intelligence officials who are kind of in their, you know, right around 40, late 30s, 40,

00:48:46.500 who have been singled out as the big brains of the future, the people who will be running the show in 10 or 15 years.

00:48:53.020 And I teach economic repair to the group.

00:48:55.520 And I had my lecture coming up, and I said to the colonel who's organizing this, I said, well, we've been talking about economic war for seven years.

00:49:04.660 Now we've got a war, a real war.

00:49:07.040 But this economic war is unlike anything that's ever been done before.

00:49:11.760 Again, the continental system, other, you know, FDR, other examples, Lend-Lease, et cetera, in two ways.

00:49:20.480 Number one, like, the war on the ground is tragic.

00:49:22.880 We, you know, we all understand that.

00:49:26.340 It's a little callous to say, well, that's what wars are, which they are, but it's tragic.

00:49:34.100 But the economic war, aside from the human cost, maybe including the human cost, is bigger.

00:49:40.440 You know, the starvation in Sudan might not make the TV as much as atrocities in Ukraine, but it's going to happen.

00:49:51.760 And probably more lives will be lost that way.

00:49:55.480 The economic impact is orders of magnitude greater.

00:49:59.040 But here's the point.

00:50:00.880 It won't be over soon.

00:50:02.040 I don't think the shooting war is going to be over soon either.

00:50:05.300 I think this will likely go on.

00:50:07.940 I can see it going on until May or June.

00:50:10.640 Beyond that, it's hard to have a forecast because there are so many uncertainties.

00:50:14.100 But the economic war is going to go on for years, decades.

00:50:18.600 Maybe it just morphs into this new world, new version of the supply chain that we talked about earlier.

00:50:23.880 But the United States said, again, none of this is spec, you know, forecasting is difficult, but none of what we're talking about is really speculation.

00:50:31.780 You just have to look at the record.

00:50:32.920 The United States said, our sanctions on Russia will remain until all the Russian troops are out of Ukraine.

00:50:40.600 That's what we said.

00:50:41.640 Well, Russian troops aren't leaving Ukraine.

00:50:43.680 Whether they get Kiev, whether they take the West, whether they stay in the East, whether they just take Donbass and they've already got Crimea.

00:50:54.660 You know, if the U.S. considers Crimea part of Ukraine, well, the Russians aren't leaving Crimea for, you know, several centuries probably.

00:51:00.660 Odessa is the big wild card.

00:51:05.140 You know, you can see the beginning of a Russian air, combined air amphibious assault on Odessa.

00:51:11.380 They're Russian amphibious assault vessels.

00:51:16.660 They kind of look like aircraft carriers, but they're smaller.

00:51:18.760 But they're designed to put, you know, 5,000 Marines and helicopters and attack aircraft ashore on very short notice.

00:51:24.960 That left the Far East a few weeks ago.

00:51:27.800 And I calculated the sailing time to get to the Black Sea and came out around mid-April, mid to late April.

00:51:37.380 Now, there's a big question.

00:51:38.460 Will Turkey let them through the Bospers? 1.00

00:51:40.520 I don't know the answer to that.

00:51:41.540 That's going to put Turkey on the spot. 0.99

00:51:42.840 But my point is, this is going to go on.

00:51:44.940 But so Russia's not leaving Ukraine.

00:51:49.080 Even if there's a treaty or an armistice of some sort, Russia's going to keep its gains. 0.97

00:51:56.500 Ukraine will go on with what's left.

00:51:59.820 But if the U.S. is to be taken literally, legally, sanctions are not ending.

00:52:06.940 So you could have, now I'm hypothesizing, you could have an armistice in June with sanctions going on for three or four years or longer.

00:52:15.360 So unless the U.S. modifies its position as part of some kind of peace treaty.

00:52:20.580 So I don't know.

00:52:22.360 I mean, my point is the impact of the economic war will be larger, longer lasting, quantitatively higher, and maybe even higher from a humanitarian perspective than the shooting war.

00:52:35.040 Jim, that makes a lot of sense.

00:52:37.440 And one of the things, obviously, without any attempt to minimize any of the horrible things that we've been talking about, whether it's the war on the ground or the economic situation, which I think you're right.

00:52:48.540 And no matter how strongly I feel about what's happening in Ukraine, the truth is the impact of the economic war will be even greater in terms of people's lives lost or damaged by all of this.

00:52:59.120 So without disregarding any of that, is there not also some positive trade-offs of this reordering of the global situation in the sense that, you know, you've talked for a long time about the dangers of doing business with countries like China and the way that they do business with the West.

00:53:19.960 And we on our show have talked a lot, not so much with you, but with others, about a sort of cultural self-loathing that seems to have emerged in the West where we're so internally focused that we maybe lack something to push back against.

00:53:33.980 And so we're focusing inward instead.

00:53:36.200 Do you think that as a result of this, much like in the Cold War, where, yes, there would have been economic costs to this standoff between these two superpowers, but it gave the West a focus and something to win.

00:53:50.720 And it also meant that we were more united and we had a better sense of who we are.

00:53:55.200 And we also weren't doing business with countries where they were taking advantage of us like China.

00:54:00.340 Right. By the way, I'll answer that, Constantine.

00:54:05.360 Let me just step back for one second because I don't think I quite answered the last question.

00:54:11.880 Is there any way out of this?

00:54:13.340 Yeah.

00:54:13.880 I think I can give an extended analysis of the problems.

00:54:16.260 There is.

00:54:17.320 And it's kind of sad because all Ukraine has to do is say two things.

00:54:23.220 We won't join NATO and we'll remain neutral.

00:54:27.980 That's it.

00:54:28.620 But, yeah, a few tweaks around that, maybe expand a version of that.

00:54:34.060 And we have models for that, you know, during the Cold War.

00:54:36.200 Finland was neutral.

00:54:38.760 Austria, Austria was neutral, you know, until kind of very late in the Cold War.

00:54:43.980 So there are models for that.

00:54:45.300 It's a classic role of a buffer state.

00:54:46.700 It's exactly what Ukraine should be. 0.96

00:54:48.180 If you're going to be stuck between superpowers of the West and the superpower of Russia, neutral is a good thing to be. 0.98

00:54:55.020 All Zelensky had to do was say that and get, you know, sign a buy-in from the United States.

00:55:01.340 And Putin said, OK, that's all I want.

00:55:03.320 You could have avoided this war. 0.61

00:55:04.500 I've never seen a war that was easier to avoid.

00:55:07.300 Now, the same thing is true. 0.95

00:55:08.740 I've never seen a war that was easier to end, which is stand up and say, hey, we're not going to join NATO.

00:55:14.300 We're not going to, we're going to be neutral.

00:55:17.020 Maybe we won't join the EU, but that's that.

00:55:20.240 And make that enforceable in some way.

00:55:22.600 So, and I think that's how it's going to turn out, which means that this is an enormous tragedy in the sense that the war is going to end up exactly where it started, except you could have skipped the war.

00:55:37.220 In other words, if they had, if Ukraine had been willing to make the commitments that it's going to have to make at the end of the day, it's going to end up in the same place, except for the human tragedy, the infrastructure destruction, death, you know, et cetera, across the board.

00:55:52.440 So, there's never been a less necessary war because you're going to end up where you started, except a lot of people got killed, which is sad.

00:56:02.140 But what it means is that there is a way out, but it's the way I just described.

00:56:06.600 Short of that, it's just going to be like World War I. 0.82

00:56:09.600 And I've read, you know, 1,000-page books on World War I, and I can rarely finish one because I get like 500 or 600 pages into it.

00:56:16.520 I'm like, this makes no sense.

00:56:18.400 It's just death, just death.

00:56:20.820 But what was the reason?

00:56:22.440 What came out of it?

00:56:23.620 What good it was accomplished?

00:56:24.720 And I can't answer any of those questions.

00:56:27.960 So, but getting back to your point, Constantine, it's, you know, we're going to remake the world.

00:56:38.620 We are remaking the world.

00:56:40.260 And it'll be less efficient, but more robust.

00:56:47.900 And that's always a trade-off.

00:56:51.280 And resilient is another word.

00:56:54.160 That's always a trade-off.

00:56:55.300 If you want robustness and resilience, there's a price associated with it.

00:56:59.900 If you, you know, we all have insurance, homeowners insurance, you know, against fire and flood and all that stuff.

00:57:06.420 But, and we hope we never have a claim.

00:57:08.920 And when we write the check or make the payment for the insurance premium, we don't think we're throwing our money away.

00:57:15.460 We don't say, gee, I really wish we'd have a fire because I could put a claim in.

00:57:19.200 We hope we never have a tragedy.

00:57:20.740 We hope we never have a claim.

00:57:22.220 And we don't think spending the money is a waste.

00:57:25.840 Same thing with the new global system.

00:57:28.220 It'll be more costly, less efficient in an abstract sense, but more robust, more resilient, and better serve our purposes.

00:57:35.220 China, I'm shocked.

00:57:39.820 I mean, I know what's going on in China.

00:57:41.080 I've been there many times.

00:57:42.240 And not just in, you know, Beijing or Shanghai.

00:57:44.740 I've been out in the country.

00:57:45.540 I've been all over the place.

00:57:46.460 Genocide, concentration camps, thought re-education camps, organ harvesting from live dissidents without anesthetic, 30 million girls drowned at birth because they were girls, atheist communists. 0.97

00:58:05.120 That's China. 0.88

00:58:06.200 Is that your business partner?

00:58:08.540 You know, Walt Disney, Nike, and a long list of others.

00:58:12.640 They're maybe two most prominent names, but there's a long list.

00:58:16.660 And I think the answer is no, that can't be your business partner.

00:58:21.060 I remember during the Cold War when Pepsi-Cola was the first kind of major Western business to open something in Russia or Soviet Union.

00:58:30.880 They had a bottling plant and you could get a Pepsi in Moscow.

00:58:34.120 That was a big deal.

00:58:34.960 That was like headline news all over the world.

00:58:36.380 It's like, oh, gee, a bottle of soda, that's it?

00:58:38.740 That was about it.

00:58:39.540 Other than we bought, you know, you bought natural resources and we didn't sell them much and there weren't many U.S. businesses there.

00:58:46.320 Well, I think we'll end up with something like that in China.

00:58:50.320 And then that'll put China on the spot. 0.99

00:58:52.880 Can China develop internal demand, an internal consumption ethic, a financial system, a rule of law, et cetera, to displace Western capital?

00:59:04.080 And I think the answer is no, they'll fail.

00:59:05.460 So I would look for catastrophes coming out of China. 1.00

00:59:09.200 But, you know, maybe that's the topic for next year or two years.

00:59:12.680 Jim, we've been talking at the macro level and it's obviously been fascinating.

00:59:17.880 But I think it's very important that we talk about the micro level, the individual particularly.

00:59:22.380 Now, there is some, there is lots of people from all different parts of society who are listening to this and thinking, oh, right, what can I do?

00:59:30.880 What can I do as an individual to better protect myself from these financial and economic shockwaves?

00:59:37.000 What are they, Jim?

00:59:38.600 A couple of things.

00:59:39.500 Number one, I would, I would increase my allocation to cash for a couple of years.

00:59:46.360 I did not expect you to say that, Jim.

00:59:50.500 I had my money on gold, quite literally.

00:59:54.040 Well, let me, okay.

00:59:55.600 I'll stick with cash, but let me kind of put that in a context.

00:59:59.880 The most powerful investment tool we have is diversification.

01:00:05.060 Now, that sounds like an obvious statement.

01:00:06.860 Oh, yeah, everybody knows that.

01:00:07.960 They teach you in the first week of risk management.

01:00:10.020 Diversification is the way to go.

01:00:11.600 Well, it is the way to go.

01:00:12.720 The problem is people don't understand what diversification means.

01:00:16.540 So I run into people all the time.

01:00:18.540 They say, well, I'm completely diversified.

01:00:20.520 I own 50 different stocks in 10 different sectors, you know, semiconductors, consumer non-durables, you know, minerals, et cetera.

01:00:29.100 And I say, you're not diversified.

01:00:30.960 You may own 50 stocks in 10 sectors, but you have one asset class, stocks, which are subject to conditional correlation.

01:00:38.320 In con markets, yeah, they're idiosyncratic.

01:00:41.440 But in panics, they all go down together. 0.99

01:00:43.880 Or in bubbles, they all go up together.

01:00:46.240 So you're not diversified.

01:00:47.980 So what is diversification?

01:00:49.780 Diversification is having slices of asset classes that are minimally correlated.

01:00:56.480 There's probably not zero, but as close to zero as you can get.

01:00:59.660 So what would that be?

01:01:00.840 You'd have a slice of gold.

01:01:01.940 But I recommend 10%.

01:01:03.040 People might have some strong views on gold, and I've written a lot about it.

01:01:06.220 But people are surprised to hear me say 10%.

01:01:08.560 I'm like, Jim, why isn't it 50% or 100% if you believe all this?

01:01:11.460 Well, I do believe it.

01:01:12.620 I wouldn't say it if I didn't.

01:01:13.520 But you don't want to be 100% in anything.

01:01:15.080 You don't want to be 50% in anything.

01:01:17.040 10% is fine.

01:01:18.080 If I'm wrong, you won't get hurt.

01:01:20.380 And if I'm right, you're going to make so much money that it'll actually kind of be the insurance on the rest of your portfolio.

01:01:25.380 But that leaves 90%.

01:01:27.220 So I would have a large slug in cash, maybe 30%.

01:01:31.360 And people say, well, wait a second.

01:01:34.140 Banks pay me 25 basis points.

01:01:36.160 You know, stock market's going up.

01:01:37.500 Why would I want to be in cash this horrible?

01:01:39.420 A couple of things.

01:01:40.120 Number one, the stock market might not always go up.

01:01:42.780 But number two, cash is the opposite of leverage.

01:01:46.980 So leverage increases the volatility of the rest of the portfolio.

01:01:50.680 You'll get much bigger returns, but you'll have much bigger losses.

01:01:53.580 If you have a slice of cash and you say you've got a volatile asset over here, which are stocks and other volatile assets over here, gold's fairly volatile for reasons we don't have to get into right now.

01:02:06.140 If you've got that volatility and you have cash, it will reduce the overall volatility so you can sleep better at night.

01:02:11.520 Cash is a great asset in deflation.

01:02:13.940 We've spent a lot of this interview talking about inflation, which is here.

01:02:18.520 You've got to deal with that.

01:02:20.900 But don't rule out deflation.

01:02:22.800 If we go into a recession because the Fed over tightens or, you know, the thing about the inflation, just a quick side, it comes in two flavors.

01:02:31.520 There's cost push and demand pull.

01:02:33.940 Demand pull is when individuals are worried about inflation and they start accelerating purchases.

01:02:40.620 Like, hey, better go buy that washing machine right now because the price is going up.

01:02:44.160 Or better go buy that house right now because the price is going up. 0.83

01:02:47.300 That's demand pull. 0.98

01:02:48.060 Cost push comes from the supply side, not the demand side.

01:02:53.600 And that's what we're seeing because of what we talked about, supply chain, energy cost.

01:02:58.240 The Fed can't drill for oil.

01:03:00.920 You know, raising interest rates doesn't get you more oil or natural gas.

01:03:04.400 So the Fed can't do anything about it except kill the economy.

01:03:09.180 Yeah, and that'll cool it off.

01:03:10.120 But when you pay, you know, I put gas in my car.

01:03:13.920 I don't just read about this stuff.

01:03:15.540 You know, it used to be $45.

01:03:17.000 Now it's about $75.

01:03:18.020 Well, when that's, multiply that by 200 million cars across America, what happens is it reduces

01:03:25.680 your discretionary income.

01:03:27.240 If you're paying another 30 bucks at the pump twice a week, then you're not going to go out

01:03:31.100 to dinner Friday night.

01:03:32.020 You're not going to, you know, take a vacation, whatever it may be.

01:03:35.920 So that depresses all those other areas.

01:03:38.200 So there is this recursive function.

01:03:39.920 So don't rule out deflation down the road, not right away, but, you know, maybe next year.

01:03:43.960 So cash.

01:03:44.660 But here's the biggest value of cash.

01:03:46.200 It gives you optionality.

01:03:48.760 People don't understand this.

01:03:50.760 What if I said to you, hey, I'll sell you, I'll sell you a call option and at the market

01:03:55.680 call option on every asset class in the world.

01:03:58.400 He goes, yeah, that sounds kind of valuable.

01:04:00.120 You know, well, that's what cash is.

01:04:01.540 You know, when things are crashing, you're the one who can go shopping and nobody's better

01:04:05.940 at this than Warren Buffett.

01:04:07.020 He's got his cash level at virtue of Hathaway is at an all time high.

01:04:10.300 So there's a place for that.

01:04:11.360 You can have some stocks, but I would look at the energy sector.

01:04:14.580 I mean, this, you know, I've done a lot of work in climate change.

01:04:19.360 I mean, climate change is real.

01:04:21.040 Okay, let's start there.

01:04:22.860 I used to live on a, for 10 years, on a beautiful body of water, Long Island Sound.

01:04:27.160 You can fish and swim and sail and do all kinds of things, create lobsters.

01:04:34.220 But it's the shape it is because it used to be a glacier.

01:04:37.500 In the last ice age, it was the lowest latitude of glaciation in the Northern Hemisphere.

01:04:42.240 That's why it has a rocky coast.

01:04:44.380 So there's climate change.

01:04:45.380 It was a glacier.

01:04:46.020 Now it's a, now you can go sailing.

01:04:47.880 So it's real, but it's slow.

01:04:50.160 And all this stuff about the existential crisis in 10 years, they've had a rolling 10-year

01:04:54.080 doomsday for 40 years.

01:04:56.600 So that lacks credibility.

01:04:58.460 There is no climate crisis.

01:05:01.460 There is no existential crisis.

01:05:02.900 So you have to discount the climate alarmists.

01:05:05.200 And they want, you know, wind turbines and solar and maybe a couple other so-called renewable

01:05:13.000 sources.

01:05:13.860 I actually built and I own the largest non-commercial solar module field in New England.

01:05:20.600 And I run my house off it.

01:05:22.240 It produces about 7.5 kilowatt hours.

01:05:25.680 So I know a little bit about it.

01:05:28.620 And what I know is it doesn't work at night.

01:05:31.340 It doesn't work.

01:05:32.640 It doesn't work in snow.

01:05:34.440 It doesn't work in rain.

01:05:35.460 It doesn't work in really cloudy days.

01:05:36.960 By the way, you don't run your house off of solar modules.

01:05:39.560 You run your house off of batteries.

01:05:41.200 Yeah.

01:05:41.480 And the modules charge the batteries.

01:05:43.100 So you watch the battery level.

01:05:44.240 That's how you manage it.

01:05:46.420 Don't run the, you know, the dishwasher on a cloudy day.

01:05:50.400 But, so it works fine.

01:05:52.260 But if you think you can run cities with that, forget it.

01:05:54.560 I mean, I had to clear three acres to put up my towers.

01:05:57.900 People say, why'd you clear three acres?

01:05:59.280 They don't think of that much room.

01:06:00.240 I said, well, have you ever heard of trees?

01:06:01.880 There's no trees in the desert, but they have them where I live.

01:06:04.240 And you don't want a tree falling on your tower.

01:06:06.620 So it's just not practical at that scale.

01:06:11.320 And even if you thought it was, and it isn't, that's very clear.

01:06:15.000 But here comes, you know, wind turbines and solar.

01:06:19.160 And I'm not against it.

01:06:20.080 Like you say, I own one.

01:06:21.520 But they're not scalable.

01:06:23.600 They're intermittent.

01:06:24.920 And they don't give you the base power, baseline power you need to run a modern power grid.

01:06:30.460 Meanwhile, here's global demand.

01:06:32.340 Okay?

01:06:32.700 So the gap, the gap's getting bigger.

01:06:35.280 It's not getting smaller.

01:06:36.900 Renewables, whatever the pros and cons, are not closing the gap.

01:06:40.140 The gap's getting bigger.

01:06:41.120 There is no substitute for oil and natural gas and uranium.

01:06:44.840 You got to put uranium in the mix.

01:06:46.440 And hydro, if you live in Quebec, that's great.

01:06:48.320 A lot of hydro, but not so much in the desert.

01:06:50.720 And I've spoken to, you know, without mentioning names, I would say you can go no higher in terms of who knows.

01:06:58.280 Let's just say board members of the five biggest oil companies in the world who said, yeah.

01:07:05.740 As you said, we talk about that, but we can't say it publicly because we'll be, you know, chained and dragged through the streets.

01:07:14.100 But that's just, those are just the facts.

01:07:16.060 So therefore, if you have an oil sector that's been bashed by the climate alarmists, but you can't do without it, which is true, buy some oil companies, you know, when they're, you know, so there's your stock portfolio.

01:07:26.920 Private equity, venture, real estate, not commercial, but residential, yes.

01:07:33.180 And, you know, farmland, that's one of the hottest asset categories.

01:07:36.980 And gold.

01:07:38.400 So that's diversification.

01:07:41.360 And that's the kind of portfolio you want, kind of seasoned to taste.

01:07:44.240 And no crypto, Jim.

01:07:48.020 Well, look, I enjoy playing roulette and I have my system.

01:07:53.860 I'm still, like, Marcel Duchamp, still working on it.

01:07:56.660 But the thing, the reason I prefer roulette to crypto is because you get a free drink when you're in the system.

01:08:03.580 But that's how I think about crypto.

01:08:05.720 I'm not a crypto basher.

01:08:06.880 When I was a teenager, there was a popular song called Shout, Shout, Knock Yourself Out.

01:08:13.680 And it was, you know, a nice dance.

01:08:15.540 But if you want some crypto, knock yourself out.

01:08:18.220 Go get it.

01:08:18.720 I'm not bashing it.

01:08:19.600 I'm not against it.

01:08:20.040 I don't own any.

01:08:21.460 I don't plan to.

01:08:22.800 I don't recommend it.

01:08:23.880 But I'm not like some, I'm not lying down in front of a truck trying to stop the crypto move.

01:08:28.980 It's here.

01:08:29.340 I've actually studied it more than all but a few people.

01:08:32.900 And I've arrived at ways of understanding it that are probably nobody in the world really gets.

01:08:39.760 Although I've started to write and talk about it.

01:08:42.180 So I think I have a very good handle on it technologically, mathematically, and really in terms of communications theory.

01:08:49.800 But it's not.

01:08:52.860 Well, let me put it this way.

01:08:53.980 I'll say crypto is not money.

01:08:56.920 But what crypto is doing is erasing the definition of money.

01:09:04.020 So maybe the dollar is not money either.

01:09:05.880 And that's really the point.

01:09:06.840 It's not the case that Bitcoin is going to replace dollar as a global reserve currency.

01:09:10.640 That's not going to happen.

01:09:12.000 But Bitcoin might contribute to a concept of moneyness.

01:09:17.540 Not money, but moneyness, which is kind of like money.

01:09:19.980 But maybe the dollar is getting there also, and we're losing the threat.

01:09:23.660 We don't know.

01:09:24.880 My thesis would be we don't know what money is anymore, but we don't know that we don't know.

01:09:29.960 It's like some metaphors are better than others.

01:09:33.880 But they're saying we don't know who discovered water, but we're sure it was not a fish.

01:09:39.820 Because the fish is in the water.

01:09:41.720 You've got to take the fish out of the water and say, hey, where's the water?

01:09:44.700 But when you're immersed in something, you actually don't know what it is.

01:09:47.420 And we're immersed in electronic orb, if you will.

01:09:53.040 And it's erased a lot of concepts, but we don't know it.

01:09:58.540 And so I think we're seeing the end of money.

01:10:01.580 Very interesting, Jim.

01:10:02.340 Well, I'm sure we'll get an opportunity to talk to you about that next time,

01:10:05.100 because I think it deserves a little bit more than a couple of minutes.

01:10:08.940 But as always, thank you so much for coming back on the show.

01:10:11.480 We're going to do a couple of very special questions from our audience for you,

01:10:15.200 from our local supporters.

01:10:16.720 Before we do that, we, as always, have our last question, which is,

01:10:19.960 what is the one thing we're not talking about as a society that you think we should be?

01:10:28.460 Probably debt.

01:10:31.940 And again, it kind of goes back to, you know, we're losing the concept of money.

01:10:35.580 Well, are we losing the concept of debt?

01:10:38.080 And I've studied, you know, I've read and researched and done my own work on the history of debt.

01:10:46.220 And, of course, we're seeing the rise of modern monetary theory.

01:10:51.140 And, you know, you go around the U.S. Congress, I dare say, you know,

01:10:54.740 out of 535 members, you can't find more than five or six who could tell you what modern monetary theory is.

01:11:01.380 But that doesn't matter because they've all adopted it.

01:11:03.880 Our fiscal policy in the United States is modern monetary theory, whether the members know it or not.

01:11:13.200 And the theory is, part of the theory is that the debt can be as high as you want.

01:11:18.280 Debt to GDP ratios don't matter.

01:11:20.820 As long as the debt's in a currency that you print, what's the big deal?

01:11:23.900 You can always just print it and pay the debt.

01:11:25.920 But there are unmet needs in society and to the extent that they require money.

01:11:30.460 Just print the money.

01:11:31.480 And the leading advocate, you know, Stephanie Kelton, a professor at State University of New York,

01:11:37.860 said we don't even need a bond market.

01:11:42.040 And, again, this is from her book.

01:11:43.720 So I'm not putting words in her mouth.

01:11:46.140 These are her words.

01:11:47.260 She said the U.S. Treasury market only exists as a favor to investors.

01:11:52.800 We're giving you a place to put your money if you want to.

01:11:55.560 But we don't actually need it.

01:11:56.800 We could actually just give wire instructions from, you know, Lockheed and Boeing and Medicare to the Fed.

01:12:04.960 They could just send the money right to Lockheed to pay for stuff.

01:12:08.280 Why don't we have to issue bonds and take the money and, you know, get the Fed to buy the bonds

01:12:12.480 and then use the money to pay military contractors?

01:12:15.320 Just send them the money.

01:12:16.240 What's the big deal?

01:12:16.940 So that is what's going on.

01:12:21.980 But there was a reason we used to care about debt because it was sort of there's something behind it that is being taken for granted,

01:12:29.220 which is creditworthiness.

01:12:30.920 Yeah, we don't have to pay off the national debt.

01:12:33.440 We don't.

01:12:34.000 But we have to roll it over.

01:12:35.400 That's the thing.

01:12:36.560 And is your continued access to the market.

01:12:39.720 If you take that for granted, you're probably eroding your credit standing.

01:12:43.000 And there was a reason we used to lower the debt.

01:12:48.620 This goes back to David Hume, among others.

01:12:52.260 And it was in case you had to issue debt to fight a war.

01:12:56.620 You know, the history of U.S. debt is it's not a straight line from zero to 30 trillion.

01:13:04.660 It goes like this.

01:13:06.100 It goes up and down, you know, adjusted for inflation as even more more extreme.

01:13:10.020 But the point being, you would pay down your debt in times of peace so that you could borrow money in times of war.

01:13:15.960 It was that simple.

01:13:17.880 And the only exception to that was the Great Depression.

01:13:19.940 And you can kind of think of the Great Depression as an economic war.

01:13:23.140 But that was abandoned around 2000.

01:13:28.220 But really starting with Obama and Trump.

01:13:32.260 And now we've lost the concept.

01:13:34.740 So the U.S. is ill-prepared for a day when credit may be an issue and we may actually need to borrow the money.

01:13:43.500 There we go.

01:13:44.320 Jim, we're going to ask you a couple of questions that I said for our locals.

01:13:46.880 But thank you so much for coming back on.

01:13:48.520 I look forward to reading Sold Out.

01:13:51.280 And where can people find you online?

01:13:53.740 What's the best way for people to follow your work?

01:13:56.080 Well, I have a newsletter, Strategic Intelligence.

01:13:59.120 And it's the best value out there.

01:14:01.560 We have some more high-priced products.

01:14:04.460 But for $49 a year, you get 5,000 words a month.

01:14:09.480 I put my heart and soul into it.

01:14:10.640 So that's a good thing.

01:14:12.260 And also very active on Twitter, at James G. Rickards.

01:14:15.380 R-I-C-K-A-R-D-S, one word, at James G. Rickards.

01:14:19.920 Jim, it's been an absolute pleasure as always.

01:14:22.960 Thank you so much.

01:14:24.060 And if you've enjoyed this episode, they always go out Wednesdays and Sundays, 7 p.m. UK times.

01:14:30.520 Our raw shows are always Thursday, Friday, and Saturday.

01:14:34.380 And for those of you who like your trigonometry on the go, we're also available as a podcast.

01:14:39.340 Thanks for watching.

01:14:40.160 If you want to hear Jim's answers to our last two questions from our audience, make sure to join locals.

01:14:44.640 Take care.

01:14:45.280 We'll see you soon.

01:14:45.820 I always say if you want to slaughter cattle, you have to herd them into a chute and get them into the slaughterhouse.

01:14:53.280 And digital money is the cattle chute, so we can all be slaughtered in digital form.

01:14:59.300 We'll see you soon.

01:15:29.300 June 7, 2026, at the Princess of Wales Theatre.

01:15:33.040 Get tickets at mirvish.com.

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TRIGGERnometry - April 18, 2022

How to Survive the Coming Economic Disaster

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