TRIGGERnometry - April 06, 2025


We’re Already in Recession - Jim Rickards


Episode Stats

Length

1 hour and 39 minutes

Words per Minute

179.16699

Word Count

17,882

Sentence Count

1,631

Misogynist Sentences

8

Hate Speech Sentences

53


Summary

Summaries generated with gmurro/bart-large-finetuned-filtered-spotify-podcast-summ .

In this week's episode of the podcast, we have a special guest on the show to talk about the current economic situation in the U.S. and whether or not we are in a recession. We also have an interview with economist and Wall Street Journal bestselling author, Michael Hyatt.

Transcript

Transcript generated with Whisper (turbo).
Misogyny classifications generated with MilaNLProc/bert-base-uncased-ear-misogyny .
Hate speech classifications generated with facebook/roberta-hate-speech-dynabench-r4-target .
00:00:01.000 We probably are in a recession.
00:00:03.820 So for Lehman, what is going on?
00:00:06.540 And do you agree with tariffs?
00:00:08.580 Look, Trump's putting all these tariffs on.
00:00:11.100 It's the best economic policy you can think of.
00:00:14.620 It's extremely good for the U.S.
00:00:17.180 This is really going to be bad for Vietnam and China and Malaysia.
00:00:20.980 And I say, yeah, that's their problem.
00:00:24.680 Our job is to make America great again.
00:00:27.320 Why didn't Biden talk to Putin for three years?
00:00:30.580 They wanted the war.
00:00:31.400 The United States wanted the war.
00:00:32.380 We provoked the war.
00:00:34.680 Kim Rick.
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00:01:05.600 Welcome back.
00:01:06.760 Great to be with you.
00:01:07.860 Yeah, it's great to have you on the show again.
00:01:09.220 Interesting economic times, which is usually when we always love having you on the show,
00:01:13.800 because, you know, a lot of people, particularly in this city, in New York, were very excited
00:01:18.600 about the last election, Donald Trump coming into office, because they thought he would
00:01:22.660 be great for the economy and great for business.
00:01:24.640 And that may be true.
00:01:26.060 But a lot of people are also sensing that that might not be true and feeling like we're about
00:01:31.320 to go into a recession, a global recession, perhaps.
00:01:34.240 What's your read on everything?
00:01:35.580 We probably are in a recession.
00:01:38.060 The thing is, you know, the official scorekeeper, this is for the United States, not the world.
00:01:41.840 A world recession is rare, by the way.
00:01:44.340 Usually, you know, one sector, you know, Europe or the United States or Asia could be in a recession.
00:01:49.020 Others might be doing better, trying to pull the world economy out of it.
00:01:51.720 But a global recession, they do happen, but they're quite rare.
00:01:54.860 But just with reference with regards to the United States, there's this National Bureau
00:01:59.300 of Economic Research.
00:02:00.560 It's a bunch of egghead economists up in Cambridge.
00:02:03.140 And they're the official, unofficial scorekeepers.
00:02:05.700 They tell you when you have a recession, when you're out of it, et cetera.
00:02:08.980 And that's widely accepted.
00:02:10.680 The problem is they usually tell you you've entered a recession about six months after it's
00:02:15.540 over.
00:02:15.960 So you can't really rely on them.
00:02:18.100 So you have to look at a lot of other metrics, predictive analytics, and so forth, to
00:02:21.380 if you want to either predict it or just kind of know it in real time.
00:02:25.740 So you're saying the U.S. may already be in a recession.
00:02:28.900 What are the markers?
00:02:29.980 What are the markers?
00:02:30.800 Well, there are a lot of them.
00:02:31.980 But one is, you know, the Federal Reserve Bank of Atlanta has a tracker.
00:02:36.560 It's called GDP Now.
00:02:38.300 It's actually pretty good.
00:02:39.460 Some of these statistical methods, certainly the ones on Wall Street, aren't worth our time.
00:02:44.100 But the Atlanta Fed is a pretty good tracker.
00:02:46.660 It went from, round numbers, kind of positive 2.4% for the first quarter of 2025 to negative
00:02:54.460 2.7% in a matter of days.
00:02:57.180 And it looks like an Acapulco cliff dive.
00:02:59.120 It went straight down.
00:03:00.380 And they said, well, the reason is because of Trump's tariff proposals.
00:03:04.520 And, you know, he puts them on, takes them off.
00:03:05.920 No one really knows.
00:03:06.660 But because of that, there was a surge of imports.
00:03:09.400 People were trying to actually get stuff into the United States before the tariffs hit.
00:03:13.420 And, of course, imports increased the trade deficit, which decreases GDP.
00:03:18.020 And that was the explanation for that.
00:03:19.740 Probably something to that.
00:03:21.140 But there's just a lot else going on.
00:03:23.100 We're not quite at the stage of mass layoffs.
00:03:26.000 But hiring hit a wall about six months ago, a little bit longer, where they just stopped.
00:03:31.580 Basically, people weren't hiring anymore.
00:03:34.200 Firing people is the last thing you do.
00:03:36.040 By the time you get to the layoff stage and see unemployment going up, that's a lagging indicator.
00:03:41.660 You're probably already in the recession because it's so hard to find people, train them, you know, get them going.
00:03:47.500 It's the last thing you want to do.
00:03:48.880 So you'll, you know, cut out the laundry bill, you know, turn down the electricity, negotiate the rate.
00:03:53.780 You'll do a lot else before you lay people off.
00:03:56.000 When you start doing that, we're getting close to that point now.
00:03:59.360 There's been some big layoffs announced recently.
00:04:01.980 So that's another indicator that we're probably already in it.
00:04:05.220 But hiring, new hiring stopped, as I say, six months ago.
00:04:08.540 So there's some technical indicators, not to get too down in the weeds, but the yield curve is, the shape of the yield curve is one of the best economic forecasting tools out there.
00:04:21.280 So about a year and a half ago.
00:04:22.920 Can you stop, Jim?
00:04:24.160 What does that mean?
00:04:25.000 Just because there's a lot of people who are listening to this who are economically illiterate.
00:04:29.100 Right.
00:04:29.980 And they don't know what that is.
00:04:31.460 Well, fortunately, this is an easy one.
00:04:32.880 And so the yield curve is just, you know, a typical curve.
00:04:36.120 So the y-axis, the vertical axis, are interest rates.
00:04:39.680 And the x-axis, the horizontal axis, are maturities.
00:04:43.440 So the U.S. Treasury, people say, you know, government securities.
00:04:46.320 Well, OK.
00:04:46.820 But there's a one-month bill, a three-month bill, a one-year, a two-year note, a five-year note, all the way out to a 30-year bond.
00:04:53.620 So that's the x-axis.
00:04:55.440 So the y-axis are interest rates.
00:04:56.980 Every one of those has a different interest rate.
00:04:59.160 They can be close or there could be a spread.
00:05:02.280 And all you do is you plot those interest rates.
00:05:04.340 So what's a normal yield curve?
00:05:06.240 A normal yield curve is upwardly sloping from left to right.
00:05:10.060 And that makes sense.
00:05:11.080 You know, longer maturity, if I'm going to lend to you overnight, I might want one rate if we're going to lend you for 10 years.
00:05:15.940 I say, well, a lot could happen in 10 years.
00:05:17.760 So I'm going to want a higher rate.
00:05:19.460 So an upwardly sloping yield curve is normal.
00:05:22.460 But periodically, it's not that unusual, a little bit unusual.
00:05:26.540 You get a downward sloping yield curve, where the longer maturities have lower interest rates.
00:05:31.940 What does that tell you?
00:05:33.240 Well, the Treasury market, that's the big money.
00:05:35.320 You know, I used to work for a primary dealer.
00:05:37.080 We were one of the ones authorized to deal directly with the Fed.
00:05:40.100 There are only about 20 banks with that status.
00:05:43.380 So you talk to the Fed every day.
00:05:46.000 A downward sloping yield curve, and this is where, again, the big money kind of sets this, the market sets this, tells you that a recession is coming.
00:05:54.360 And, you know, how do you draw that inference?
00:05:57.820 Well, let's say short-term interest rates are 4%, and longer-term interest rates are 3%.
00:06:03.760 Actually, the actual numbers now are closer to 5% and 4%.
00:06:09.260 So, but you say, well, gee, I'll take a 4% coupon, 4% yield maturity, and a 10-year note, because that's going to look really sweet a couple years from now when interest rates are 1.5%.
00:06:18.760 When the recession kicks in and interest rate collapse, that high coupon is going to look very attractive, number one.
00:06:24.720 Number two, bond math 101 is kind of counterintuitive.
00:06:29.020 But when interest rates go down, prices go up.
00:06:31.720 And when interest rates go up, prices go down.
00:06:34.020 So if you believe recession is coming and interest rates are coming down, you'll lock in the higher coupon now.
00:06:40.300 And when interest rates do come down, you'll have capital gains on that note.
00:06:44.440 So it's a really attractive trade.
00:06:46.520 But meanwhile, back here at the short end of the curve, 30-day bills or three-month bills or six-month bills or whatever, that really is much more subject to Federal Reserve control.
00:06:57.660 It's about the only thing they control, this idea that the Fed can control long-term rates by manipulating short-term rates because this is just the value of a strip of short-term rates.
00:07:09.400 Well, that's all nonsense.
00:07:10.560 And that's a theory.
00:07:11.260 You can do the math, but that's all nonsense.
00:07:13.420 So the point being, when you have a downward-sloping yield curve, that's a sign that the recession is coming.
00:07:19.560 People are bidding for those intermediate-term securities.
00:07:22.300 They're pushing the rate down a little bit, but it's going to look real good when the recession comes.
00:07:24.820 Hold on, Jim.
00:07:25.160 One second.
00:07:25.680 Sorry.
00:07:25.880 Is that a sign that a recession is coming, or is it a sign that people think a recession is coming?
00:07:30.340 Well, people, but the people are the biggest institutions in the world.
00:07:34.040 This curve is set by sovereign wealth funds, endowments, pension funds, insurance companies, the players in that market.
00:07:41.500 It's not that they're infallible, but it's basically a distillation of all the big money in the world kind of saying something to you.
00:07:50.420 The math is simple.
00:07:54.420 The yield curve is simple to look at, but you have to know what it means.
00:07:57.080 And so the downward-sloping yield curve, which did start about a year and a half ago, said that the recession is coming.
00:08:03.460 Now, what's happened in the meantime?
00:08:05.000 The yield curve has flattened.
00:08:06.880 It's actually what's called a bear flattener, where short-term rates came down a lot.
00:08:13.920 Long-term rates came down a little bit, but now it's kind of flat, and it's actually getting back to a normal shape.
00:08:18.480 What does that tell you?
00:08:19.460 It tells you the recession's here.
00:08:21.280 Now that the recession's here, short-term rates should come down a lot, and they have.
00:08:26.200 And this idea that the Fed is, you know, they do have an influence, so I don't want to dismiss them entirely, but I'll come close.
00:08:33.300 The Fed is not leading the market.
00:08:35.680 The Fed is following the market.
00:08:37.700 The best short-term rate indicators are one-month Treasury bill.
00:08:43.060 There's something called the skewered overnight financing rate.
00:08:46.620 It's kind of replaced LIBOR.
00:08:48.380 It's a clunky form of LIBOR.
00:08:50.100 But both of those rates, the skewered overnight funding and the one-month bill, are lower than the Fed fund's target rate.
00:08:57.280 So what that tells you is that the market is sensing exactly what I'm describing.
00:09:02.040 Those rates are going down.
00:09:03.380 So whether, you know, the Fed's going to, you know, whether they cut or pause at a given meeting, you know, I watch it, and it's pretty easy to forecast.
00:09:11.320 But it sort of doesn't matter.
00:09:13.340 And what I'm saying is the Fed's irrelevant.
00:09:15.340 The market's taking interest rates where they need to go.
00:09:17.420 So now that the curve is going from inverted, where the intermediate-term rates are lower, that's the signal.
00:09:23.660 Now it's flattened.
00:09:25.260 It's getting into a normal shape.
00:09:26.540 But all of the rates are coming down.
00:09:28.540 That's the signal that the recession is here.
00:09:30.880 By the way, this idea, we'll stimulate the economy with lower rates, that's nonsense.
00:09:35.980 It doesn't stimulate anything.
00:09:37.400 Low rates are associated with recession, depression, and financial panic.
00:09:41.740 That's when you get low rates, three pretty bad things.
00:09:44.120 In a robust growing economy, rates will be higher.
00:09:47.680 Now I'm not saying sky high, maybe 4%, 5%.
00:09:51.080 But what that tells you is that a borrower expects a higher return.
00:09:55.380 If I think I can get 10% on my investment or more, I'll happily borrow at 4% or 5%.
00:10:01.240 There's also competition for funds.
00:10:03.680 The banks actually love that environment.
00:10:05.920 They have positive spreads.
00:10:06.780 So in a robust economy, you'll see interest rates of, you know, 3%, 4%, 5%, sometimes a little more.
00:10:13.320 In a sick economy, recession or depression, you'll see rates of 1% to 0%, which is where we're heading.
00:10:19.780 And, Jim, there's been a lot of talk about tariffs.
00:10:24.280 Trump has, you know, said he's going to put tariffs on the Chinese products, or rather increase tariffs on Chinese imports.
00:10:31.780 Correct.
00:10:32.060 He's also gone in against the Canadians.
00:10:34.700 I mean, I can't understand why.
00:10:38.260 So for Lehman, what is going on?
00:10:40.880 And do you agree with tariffs?
00:10:42.820 Well, I always tell people who are doing their first overseas trips who are just planning on going abroad,
00:10:48.480 say if you want to go to a country that's most like America, go to Australia.
00:10:53.340 I consider Canada a pretty exotic country.
00:10:55.520 I lived there for a couple of years.
00:10:56.600 So there are some significant differences between Canada and the U.S.
00:11:00.920 Look, Trump's putting all these tariffs on.
00:11:04.340 It's the best economic policy you can think of.
00:11:07.860 It's extremely good for the U.S.
00:11:10.300 I get in this debate all the time.
00:11:12.040 I'll expand on that a little bit.
00:11:13.480 But when I have this debate and I explain to people why tariffs are good, they say, for the United States, they go,
00:11:19.140 well, yeah, Jim, yeah, but this is really going to be bad for Vietnam and China and Malaysia.
00:11:24.000 And I say, yeah, that's their problem.
00:11:27.240 Our job is to make America great again.
00:11:30.060 Tell President Xi to make China great again if he wants to.
00:11:33.100 Let him figure out policies that actually work other than overborrowing, real estate boom, and corruption, skimming, and a lot else.
00:11:39.320 So our job is to take care of America.
00:11:41.900 And, you know, Keir Starmer can make the U.K. great again.
00:11:45.940 That's all.
00:11:46.480 That's a highly questionable statement, but yes.
00:11:49.500 But that's all fair.
00:11:51.760 So looking at it from the American perspective, what we're seeing is a return to something called the American system.
00:11:58.720 It was invented by Alexander Hamilton in 1790.
00:12:01.520 You know, his problem was first Treasury Secretary.
00:12:05.220 We had revolutionary war debt and state debt that had kind of hung over from before the creation of the United States.
00:12:11.880 And one of the first issues facing Congress is what do we do about all this debt?
00:12:16.480 And so Congress said, well, that's easy.
00:12:18.400 We'll just default as the American way.
00:12:20.680 And Hamilton said, no, we'll borrow more, use that money to pay off the old debt, and then we'll just keep borrowing and just roll over the debt.
00:12:28.080 And that was the creation of the government securities market.
00:12:30.160 It's been going strong for 230 years.
00:12:32.540 You can call it a Ponzi, but, you know, it works.
00:12:35.620 But then you had to finance the government as well.
00:12:38.420 And that's where tariffs come in.
00:12:40.220 We had tariffs in the start.
00:12:41.300 Alexander Hamilton and George Washington took a field trip out to Passat, New Jersey.
00:12:46.480 To show Washington these waterfalls.
00:12:50.160 And they were like, this is perfect.
00:12:51.320 This can, you know, you had water wheels and looms and powering industry.
00:12:56.380 But we need tariffs to protect us from primarily England because they were the leaders in that technology at the time.
00:13:04.160 From 1790 to 1962, the United States grew economically, geographically, technologically, you know, telephone, telegraph, railroad, steam.
00:13:17.880 I'm not saying we invented every one of those things, but we certainly applied them and invented quite a few of them.
00:13:22.620 The greatest invention of all time economically was indoor plumbing.
00:13:28.040 You know, 50% of humanity spent 70% of their time fetching water for 5,000 years.
00:13:34.640 All of a sudden, women were free to do more productive things.
00:13:37.560 So it's a little more powerful than the Internet.
00:13:40.780 But my point is that whole regime, and there were very strong advocates starting, as I mentioned, with Alexander Hamilton and George Washington, Henry Clay, who was not president but was a powerful senator, John Quincy Adams, Abraham Lincoln, William McKinley, Calvin Coolidge, Dwight Eisenhower, all the way through, they all advocated tariffs.
00:14:02.240 Now, the rap on tariffs, the Democrats ran this in the 2024 presidential campaign, and unfortunately, it kind of stuck.
00:14:10.400 So you have to explain it to people.
00:14:12.120 They go, well, tariffs are a sales tax on the American people.
00:14:15.620 That was their statement.
00:14:17.040 So you have a certain good at a certain price, and you put a 20% tariff on it.
00:14:21.420 The price is going to go up 20%.
00:14:23.100 Sales tax on the American people and inflationary.
00:14:26.740 Both of those statements are wrong.
00:14:28.700 Here's why.
00:14:29.200 In a tariff transaction, you have three parties.
00:14:33.280 It could be more, but at least three.
00:14:34.720 You have the producer-exporter in China, Vietnam, et cetera.
00:14:39.460 You have the importer, who's a wholesaler or distributor.
00:14:42.400 And then you have the consumer.
00:14:44.420 So, yeah, we are going to put 20% tariffs on things.
00:14:47.180 It is going to raise the price, at least initially.
00:14:49.600 Who actually pays the tariff?
00:14:51.680 Well, it's the importer, the person who takes the goods off the ship at the Port of Los Angeles.
00:14:55.080 He's got to write a check to the Treasury for 20% of the value of those goods.
00:14:58.700 But who pays it economically?
00:15:01.140 It is split between the producer and the importer, or it's completely pushed back down the supply chain to the producer.
00:15:09.560 So the importer says, hey, I just paid 20% more.
00:15:12.620 You need to lower your price 20% so that when you, or whatever the number is, so that when you throw on the tariff, it comes out about the same.
00:15:19.880 Or the importer will eat it in the form of reduced margins or profits.
00:15:26.620 The original exporter or the producer will eat it in terms of reduced profits or margins.
00:15:32.540 The one party that does not eat the tariff is the consumer.
00:15:35.700 There is no price increase.
00:15:37.500 And why is that?
00:15:38.160 Well, first of all, that's what the economic data shows.
00:15:41.440 But more to the point, if Walmart or Costco or Target or Best Buy could raise prices 20%, why wouldn't they just do it?
00:15:49.300 I mean, why do you need tariffs to do that?
00:15:50.880 Of course you wouldn't raise prices.
00:15:52.340 The reason they can't is because the consumer can't pay it.
00:15:55.200 The consumer's tapped out.
00:15:56.460 You know, credit card lines are used up.
00:15:59.800 Mortgage rates have been high.
00:16:01.960 Hiring has dried up.
00:16:03.560 There are a lot of, you know, and inflation generally, we're still, you know, the thing about the Biden inflation, they say, well, inflation went down from, it was 9.1% in June 2022.
00:16:14.280 It's about 3% today, you know, give or take.
00:16:16.560 It's bouncing around a little bit.
00:16:17.600 They say, well, inflation has come down.
00:16:19.420 Yeah, but the 9% never went away.
00:16:21.160 That 9% increase is still there.
00:16:23.200 The 3% increase is still there.
00:16:25.520 Prices are still going up.
00:16:27.340 But when, you know, the financial television talking heads say, you know, inflation is coming down, people think prices are coming down.
00:16:34.080 Prices aren't coming down.
00:16:36.060 Inflation is going up at a slower level, but it's still going up.
00:16:38.760 And we're building on top of the 9% that we had in 2022, which was the highest since the early 1980s.
00:16:46.680 So given all those price increases, which are now embedded in the other headwinds I described, people can't afford to pay higher prices.
00:16:54.580 Like I said, if they could, they would have been charged that already.
00:16:57.500 So in other words, the tariff does not fall on the consumer.
00:17:01.860 It falls on the producer or the importer or it's split between them in some fashion.
00:17:06.280 So the idea that it's inflationary is not true.
00:17:08.960 And the idea that it is a sales tax on consumers is not true.
00:17:12.740 It does, it could affect margins further up the supply chain, but not at the consumer level.
00:17:17.320 But what else do tariffs do?
00:17:19.240 You basically create a wall.
00:17:20.860 You create high-paying jobs in the United States.
00:17:23.640 Trump has said to everyone, China, Malaysia, Vietnam, I don't know, I'm picking on them.
00:17:27.980 It could be French wine.
00:17:28.920 Well, not French wine.
00:17:29.780 It's not a good example.
00:17:30.700 But the German manufacturers, et cetera, said, hey, you can sell whatever you want to the American people.
00:17:36.600 No problem.
00:17:37.560 But build it here.
00:17:38.680 Put your plant in the United States.
00:17:40.320 Because you've got to, instead of paying the tariffs, if you're the producer, going back to what I just said, the producer bears it.
00:17:46.220 Well, if you don't want to bear it, jump over the tariff wall and put your plant in the United States.
00:17:50.440 Taiwan Semiconductor is spending upwards of $100 billion building new fabrication plants for semiconductors in the United States.
00:18:01.860 Apple just announced $500 billion of investment in the United States.
00:18:06.160 Now, they're a U.S. company, but they've been investing mainly in China and Malaysia and elsewhere around the world.
00:18:14.900 So Honda announced they're building a major car manufacturing plant in the United States.
00:18:21.040 I love my friends, you know, in the upscale zip codes.
00:18:24.100 They're driving Mercedes.
00:18:25.420 I got a nice German car.
00:18:26.520 I said, no, it's not.
00:18:27.200 It's made in South Carolina.
00:18:28.720 I stick to Audi's because they actually are made in Germany.
00:18:31.360 But they, so more and more of these cars are built in the United States.
00:18:36.320 What we're seeing is stage two.
00:18:39.560 This is Lighthizer 2.0.
00:18:41.780 Robert Lighthizer was the deputy U.S. trade representative to Ronald Reagan.
00:18:45.980 He did this to the Japanese car industry in the early 80s.
00:18:49.220 He saved the U.S. car industry.
00:18:51.520 And the Japanese finally said, OK, we hear you.
00:18:54.140 Because he threw huge tariffs on them.
00:18:56.640 He said, we hear you.
00:18:57.560 We'll put our plants in the United States and they're here.
00:19:00.000 Now, Volkswagen is crying because they just built a huge factory in Mexico for the Audi Q5,
00:19:06.940 which is one of their best-selling vehicles.
00:19:09.720 And they're like, wait a second.
00:19:11.800 What about, well, USMCA is a successor to NAFTA.
00:19:15.880 What about those tariffs?
00:19:18.160 And Trump's saying, well, we don't care.
00:19:19.420 We're going to renegotiate.
00:19:20.720 We're putting tariffs on that.
00:19:21.780 You should have put your plant in the United States.
00:19:23.740 Volkswagen, you should have thought of that.
00:19:25.580 But the door's open.
00:19:26.860 You can invest here.
00:19:28.280 Now, what else does it?
00:19:29.220 But, Jim, sorry to interrupt.
00:19:30.760 And this is really interesting because only a week ago we had Liam Halligan, who you know,
00:19:36.160 making many of the exact opposite points of what you're saying.
00:19:39.580 Right.
00:19:39.920 But we respect you both and both really interesting people with interesting perspectives.
00:19:45.160 Wouldn't if you force manufacturers to make things in America,
00:19:50.600 I don't see how that wouldn't be inflationary because you have to pay people higher salaries here.
00:19:55.620 So, yes, you're getting higher paying jobs into the US, but you're also pushing up the price of the things that those people make, aren't you?
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00:21:34.920 Listen, there's no denying it.
00:21:36.280 The shift is accelerating.
00:21:37.700 The question is, will you be ready?
00:21:39.320 First of all, the salary has to be put in the context of productivity.
00:21:44.000 U.S. workers are very productive.
00:21:45.420 When you give them the capital, when you give them the investment, these factories are very productive.
00:21:50.760 And as far as the higher salaries are concerned, the way the Chinese make money is they sell – I hate to be vulgar, but they sell crap.
00:22:00.020 I mean, they sell stuff that falls apart before you open the clamshell box.
00:22:05.920 And when you factor in transportation costs, energy costs, the salary differential is not as great as it once was.
00:22:13.340 I'm not talking – so, you know, if it's $15, $20 an hour, maybe $40 an hour in certain industries, that's a globally competitive rate.
00:22:25.640 The people who are not competitive today are the Germans for – we can talk about that, but for other reasons.
00:22:32.960 And there are only a handful of countries that really have that kind of manufacturing capability.
00:22:37.380 But you lower your distribution costs.
00:22:39.040 You lower your transportation costs.
00:22:40.540 You're going to lower your energy costs because drill, baby, drill.
00:22:44.760 And U.S. labor is productive.
00:22:46.860 So the notion that you've got to pay – it's not like Chinese autoworkers are making $2 an hour and our autoworkers are making $40 an hour.
00:22:55.160 I mean, something like that, not quite as extreme, might have been true in the early 80s.
00:22:59.640 It's not true today.
00:23:00.640 I mean, Liam's working in a world of theory, but all these theories are badly flawed.
00:23:05.840 And, again, I go back to the fact that this whole tariff idea scheme that I just outlined was how the United States operated from 1790 onward.
00:23:18.460 Let me probe some more.
00:23:19.820 Actually, the argument I just put to you wasn't one of Liam's arguments.
00:23:23.060 Liam's argument, I think there were two things, but one of them primarily was what happens when you slap down tariffs on people.
00:23:31.060 Some of them will absorb it, but with the Chinese, they're not going to be prepared to be bossed about in this way.
00:23:37.340 They're going to retaliate.
00:23:38.800 And that's bad for everybody because now you've gone from a mutually beneficial relationship to a zero-sum game.
00:23:44.000 Well, this is the myth of free trade.
00:23:47.080 Even David Ricardo knew that free trade, there was no such thing.
00:23:50.240 The problem with free trade is they, you know, I had a really high grade point average in college, but I struggled a little bit with economics.
00:24:00.160 And I always wonder why.
00:24:01.360 I was like, is that just not bright enough, you know?
00:24:03.460 And it was only later that I realized everything I was taught was garbage.
00:24:06.800 The reason I didn't get it was because it was all wrong.
00:24:09.160 So one of the myths is free trade.
00:24:13.160 So what they teach you is, you know, England is very good at shearing wool and textiles, and Portugal is very good at growing grapes and making wine.
00:24:21.720 It makes no sense to grow grapes in England.
00:24:25.360 It makes no sense to start a textile industry in Portugal.
00:24:28.500 So why don't England make the textiles, Portugal make the wine, and just trade.
00:24:32.940 Everybody's doing what they do best, and that's the theory of free trade.
00:24:36.120 You can write those equations.
00:24:37.840 It's pretty simple.
00:24:40.020 That's a completely abstract, artificial construct.
00:24:45.160 So what does the real world look like?
00:24:47.140 The idea is called comparative advantage, what I just described.
00:24:50.460 The idea is that Tom Brady shouldn't mow his own lawn.
00:24:53.840 He could probably mow his lawn better than any landscaper in town, but it's not the thing he does best.
00:24:59.480 He should be, you know, in the broadcast booth now and let the landscaper mow the lawn.
00:25:03.800 It's better for everybody.
00:25:05.540 That's comparative advantage.
00:25:06.760 The problem is, and Ricardo actually recognized this, he said that the factors of production were static in that example, but in the real world, the factors of production are not static.
00:25:18.040 They're completely portable.
00:25:19.040 So who's the most sophisticated, largest, best semiconductor producer in the world today?
00:25:26.940 It's Taiwan Semiconductor in Taiwan.
00:25:29.000 Okay.
00:25:29.180 That industry started in the late 1970s.
00:25:31.940 What was Taiwan's comparative advantage in semiconductors in 1979?
00:25:36.540 Zero.
00:25:37.520 Their comparative advantage was tuna fish and rice.
00:25:40.140 So they created it.
00:25:42.260 They created it out of thin air.
00:25:43.580 They said, we're going to do this.
00:25:44.980 They put, they started with state sponsorship, but they grew out of that very quickly.
00:25:50.400 The companies went public.
00:25:51.800 They were very relaxed about, you know, if you were the hot programmer, developer in Taiwan Semiconductor and you wanted to spin out and start your own company, they would say, yeah, I'll give you the money.
00:26:01.020 I'll give you the capital, you know, create a network of those firms.
00:26:04.040 You know, maybe people were studying in Stanford or MIT, but they got back to Taiwan.
00:26:09.720 But that's the problem in China.
00:26:10.980 They send their scholars abroad and they don't all come back.
00:26:13.880 But in Taiwan, in many cases, they did.
00:26:16.920 And now they're the leading semiconductor producer in the world.
00:26:20.740 My point is they created the comparative advantage.
00:26:22.840 Now, same problem with China.
00:26:24.940 And there was a time.
00:26:25.900 It's not as true today, but the labor was cheaper.
00:26:29.180 So that was a comparative advantage.
00:26:30.740 But the capital is completely portable.
00:26:32.360 So you take the cheap labor that's there and the capital, which is portable, which went to China.
00:26:37.720 Now they had they basically created comparative advantage out of thin air.
00:26:42.520 So the idea that it's natural and static is false.
00:26:45.660 And then you get into, you know, we're talking about U.S. tariffs.
00:26:49.800 So guess what?
00:26:50.540 As you know, the rest of the world has very high tariffs on all of our stuff.
00:26:54.920 And then, you know, the other factors are energy, which tends to be a world price.
00:27:00.400 Can I just stop you there, Jim?
00:27:01.880 Because there is there is the other aspect of it that I really want you to address.
00:27:06.180 That is, we are in quite an antagonistic relationship with China at the moment.
00:27:12.560 So that being the case, do we really want to slap these tariffs on or increase these tariffs by a significant amount?
00:27:20.540 And that will be seen as an antagonistic gesture to China, which will then put China on more of a kind of war footing, which means that they will then look covetously, as we already know they're doing at Taiwan, but think to themselves, you know what?
00:27:36.880 What is our relationship like with America?
00:27:38.880 It's not great as it is.
00:27:40.880 This is the moment to strike.
00:27:42.240 I mean, that's a lot of people's concerns, aren't they?
00:27:44.040 Yes, you do hear that argument, but let me just, I'll come back to that point, but let me just separate them for a second.
00:27:51.160 If China's annoyed or miffed or upset or whatever, who cares?
00:27:55.240 I mean, that's not, again, that's not our job.
00:27:57.760 Yeah, we've got to be attentive to China, and we don't want to antagonize them needlessly.
00:28:02.220 But if they have a sense of, you know, we're being antagonistic to them, who cares?
00:28:09.600 So they buy their soybeans from Brazil.
00:28:11.500 You know what happened in 2018 when Trump put tariffs on China?
00:28:16.780 China said, OK, we're not buying any more soybeans from the United States.
00:28:19.520 We're buying them from Brazil.
00:28:21.100 It was a huge disruption in the supply chain.
00:28:23.460 It was one of the factors that fed into some of the inflation in 2022.
00:28:29.160 A lot of it was government spending, but it wasn't that the tariffs were the sales taxes we described.
00:28:35.000 It was that the supply chain was disrupted, which is also that had to do with COVID.
00:28:39.780 But China shifted their soybean purchases to Brazil on long-term contracts because, I mean,
00:28:44.620 the logistics behind that are, you know, the acreage, the port facilities, the transportation facilities.
00:28:50.680 These people want long, they want five-year contracts.
00:28:52.860 They don't want, you know, a six-month deal, et cetera.
00:28:55.420 So what did the United States do?
00:28:57.020 We sold our soybeans to the Netherlands.
00:28:58.460 I mean, it's a big world.
00:29:00.000 So, yeah, we shipped.
00:29:01.880 We found another buyer.
00:29:03.540 China found another seller, but we found another buyer.
00:29:06.040 We're growing just as many soybeans, but we're selling them to Europe.
00:29:09.060 And if China wants some, they can come and get it.
00:29:10.920 My point is, a lot of these threats, there's a lot less there than meets the eye.
00:29:15.280 And I'm not saying, by the way, when I talk about tariffs, I'm not saying global trade is going to go to zero,
00:29:20.580 or it's the new Great Depression, or, oh, that was titled one of my books.
00:29:24.380 But it's not that there's no trade.
00:29:28.060 And even if we have all this U.S. manufacturing, which I described, we're still going to need inputs from abroad.
00:29:34.380 And these things can also be negotiated.
00:29:36.960 Trump's kind of, you know, acting with a pretty blunt instrument at the moment.
00:29:41.160 And if no one wants to deal with them, it'll stay that way.
00:29:44.500 But the door is open for talks.
00:29:46.580 And, you know, certainly U.S.-Canadian car industry, they ought to figure out a way to solve that.
00:29:52.200 But how do you solve it when Canada's been free riding for all these years?
00:29:56.480 So I don't really – the thing is, Francis, you have to have the attitude you don't care.
00:30:02.520 It's like a China Smith, too bad.
00:30:03.780 That's your problem.
00:30:04.840 Figure it out.
00:30:05.560 You know, why doesn't China reorient its economy to consumption from investment, half of which is wasted, by the way?
00:30:12.380 I spent a lot of time in China.
00:30:13.560 I mean, I've been to these ghost cities.
00:30:16.220 You know, you go to one of them.
00:30:17.860 It's, you know, like I say, I got mud on my boots, but I got mud on my Italian loafers.
00:30:23.160 But I did go out to the construction sites.
00:30:26.040 And, you know, I actually had a couple communist party chaperones.
00:30:30.240 And they were my hosts, you know, and so I said, you know, look at this.
00:30:36.460 We have a high-rise hotel.
00:30:38.340 We have a country club.
00:30:39.560 We have a conference center.
00:30:40.580 We have apartment buildings.
00:30:41.620 We have mixed-use office buildings, shops, and everything.
00:30:45.140 It's a – there's an airport nearby.
00:30:46.980 It's a highway exit, et cetera.
00:30:49.800 I said, yeah, but it's all empty.
00:30:51.600 I mean, everything you said was true.
00:30:53.140 I saw it.
00:30:53.560 I was there.
00:30:54.300 And there was more going up, but it was all empty.
00:30:57.160 You know, sometimes when you're, I'll just say, collecting information, you have to sort
00:31:02.660 of have a – you know, you operate under a story, so to speak.
00:31:08.340 And my story was I was there as a potential investor.
00:31:12.080 And, you know, they pictured me as a big tenant, you know, although they don't realize
00:31:16.200 hedge funds don't have a lot of employees necessarily.
00:31:18.720 But as I was going through all this, they were really putting on a hard sell.
00:31:22.300 But I looked down the horizon.
00:31:23.500 There were two more ghost cities on the horizon.
00:31:26.020 You could see them in the distance.
00:31:27.460 They were building a whole string of them.
00:31:29.680 Technically, that's GDP.
00:31:31.360 I mean, there's real steel, real glass, real copper, real construction, 20,000 jobs for
00:31:36.120 two years.
00:31:36.820 That's all real.
00:31:37.820 But when you're done, if you apply generally accepted accounting principles, you'd write
00:31:42.420 it off.
00:31:43.400 You'd say it's worth zero.
00:31:44.900 I mean, Pricewaterhouse would make you write it down to zero.
00:31:47.480 So my point being, the investment's real.
00:31:50.040 But if you subtract the lost value, your GDP is grossly overstated.
00:31:55.400 Even China having coming down from 10% to 5%, which is about what they say, it's probably
00:32:01.920 closer to two, two and a half when you adjust for the kind of waste I'm talking about.
00:32:06.200 And then maybe less than that.
00:32:08.260 So China may already be in a recession.
00:32:10.260 They lie about it.
00:32:11.140 So we don't really know.
00:32:11.980 But again, you have to, you know, you have to have a little bit of an attitude of, you
00:32:19.980 know, who cares?
00:32:20.980 Well, come back to France's point, though, because his point was about you can do that.
00:32:25.120 They're going to invade Taiwan.
00:32:25.900 Yeah.
00:32:27.280 The most likely scenario for Taiwan rejoining the mainland China would be that one of the
00:32:34.040 Kuomintang, the Taiwanese political party, makes it a goal and wins an election and opens
00:32:41.220 negotiations with China.
00:32:42.520 I mean, I'm not saying that that's not my forecast, but I will say that's the most likely
00:32:47.140 path that the Kuomintang would actually cause that to happen from the Taiwanese side.
00:32:52.240 But you notice they have not been winning elections lately.
00:32:55.660 Chinese invasion, it would be messy.
00:33:01.760 I was in the chat.
00:33:06.060 We were doing some more financial war gaming scenarios.
00:33:09.160 I learned to keep my mouth shut about actual military logistics, but I was sitting next
00:33:13.240 to a three-star general.
00:33:14.920 And we were using financial indicators as a predictive analytic tool to see if China
00:33:20.080 would invade Taiwan.
00:33:21.180 So we had a whole list of factors.
00:33:24.100 And I said to this general, I said, well, general, this all works.
00:33:26.900 It's artificial intelligence, actually.
00:33:28.580 We built systems like this.
00:33:30.740 But I mean, wouldn't you see it coming?
00:33:33.240 Like, wouldn't you see like a million people going down and getting on the boats and stuff
00:33:36.420 like that coming over to invade Taiwan?
00:33:38.920 Why do you need these indicators?
00:33:40.760 He said, oh, you see it.
00:33:41.880 But they do it four times a year.
00:33:43.740 And it was they practice the invasion continually.
00:33:46.580 So the real art is when is it real?
00:33:49.020 He said they practice the invasion about four times a year.
00:33:52.540 And they all do exactly what I said.
00:33:54.060 We see it.
00:33:54.860 We just don't know when it's going to be real or not.
00:33:57.040 And that's that.
00:33:58.300 I said, OK, I'll keep out of military planning.
00:34:01.200 But isn't Trump's job, and I understand, and I understand the bullish nature, and I
00:34:06.160 understand the top dog mentality.
00:34:07.700 I get all of that.
00:34:08.640 And America perfectly placed to make those kind of moves.
00:34:15.020 But aren't we also ignoring, Jim, the other element of this, which is diplomatic, which
00:34:21.400 is America is a policeman of the world.
00:34:24.320 America is the strongman of the world.
00:34:27.380 And part of being a strongman isn't just about being robust, isn't just about taking
00:34:34.700 on bullies.
00:34:35.340 It's also finding the most appropriate way of doing this.
00:34:38.580 And if by isolating China, we're being needlessly antagonistic.
00:34:44.820 Well, it's not needless.
00:34:46.380 We're trying to grow the US economy, create high paying jobs.
00:34:50.360 Actually, we build our defensive posture.
00:34:52.220 Now, during the Cold War, we'd always say, well, the US is falling behind.
00:34:58.920 Russia has more missiles, or this or that.
00:35:01.480 And the way to shut down that argument was just to say to the interlocutor, well, who
00:35:04.940 would you rather be?
00:35:06.200 And you say, well, I guess I'd rather be the United States.
00:35:08.880 And that's still true.
00:35:10.080 But because of this world historic blunder in Ukraine with between 700,000 and a million
00:35:19.900 dead Ukrainians basically wiped out a large part of a generation financed by the United
00:35:26.060 States, by the Biden administration, and with all the weapons that we provided them, we've
00:35:31.640 learned two lessons.
00:35:32.660 I'll get back to China.
00:35:33.680 But this idea that we're the policemen of the world.
00:35:36.820 So we have that potential, but not anymore.
00:35:39.940 I think the cops off the beat were focused more on diplomacy.
00:35:44.480 I mean, diplomacy is the alternative to war.
00:35:47.140 If you had better diplomats, you wouldn't have to be the policeman of the world.
00:35:51.240 You would just work things out with, and Trump and Putin are actually talking to each other.
00:35:57.100 Why didn't Biden talk to Putin for three years?
00:36:00.420 They wanted the war.
00:36:01.220 The United States wanted the war.
00:36:02.140 We provoked the war beginning in 2008 with the Bucharest declaration by George Bush, George
00:36:08.060 W. Bush, that Ukraine must join NATO.
00:36:11.760 In 2014, you had MI6 CIA, coup d'etat of a duly elected government.
00:36:17.720 OK, the guy was a little pro-Russian, but he was elected, and he was overthrown.
00:36:22.700 We put a U.S. puppet in place, you know, Victoria Nuland, you know, the warmongers out handing
00:36:29.120 out cookies in Minon Square.
00:36:30.560 That was all orchestrated by the United States.
00:36:32.280 That was a coup d'etat.
00:36:33.660 You know, they did that.
00:36:34.580 Yeah, sorry.
00:36:35.880 You and I have talked about this before.
00:36:37.700 What happened in Ukraine in 2014 is exactly what happened in this country in 1776.
00:36:42.300 You had a revolution.
00:36:43.560 It was supported by outside actors, as every revolution in history is.
00:36:46.920 Well, I beg to differ.
00:36:47.960 It was not a revolution.
00:36:49.180 It was presented as a color revolution.
00:36:52.940 It was actually a coup d'etat sponsored by, well...
00:36:57.140 What about the American revolution sponsored by the French?
00:36:59.200 They spent so much money, they had their own revolution because they ran out of money.
00:37:02.260 Well, that's the French problem.
00:37:03.880 The French were a big help during the American revolution.
00:37:05.660 Yeah, that's what I'm saying.
00:37:06.920 I'll grant that.
00:37:08.120 OK, so we should support the neo-Nazis in Kiev.
00:37:11.700 Is that our goal?
00:37:13.100 Look, they're...
00:37:14.920 Spoken to the head of the U.S. German Marshall Foundation.
00:37:20.620 Basically, it's a U.S.-German NGO.
00:37:24.040 And she was doing all this happy talk about what we're doing in Ukraine.
00:37:26.800 I asked her about the neo-Nazis.
00:37:28.340 And she said...
00:37:29.660 She's a little taken aback.
00:37:30.920 But then she said, well, we've been told not to flirt with them.
00:37:33.980 Those are her exact words.
00:37:35.240 Look, there is a...
00:37:36.400 And they're there.
00:37:37.280 No one's denying that they're there because...
00:37:39.400 OK, well, that's a good story.
00:37:40.540 By the way, fighting for democracy?
00:37:42.740 Hold on, Jim.
00:37:43.360 Hold on.
00:37:43.640 You've got to let me answer what you're saying.
00:37:45.740 So, President Zelensky, a Jewish man, is not a neo-Nazi.
00:37:49.660 The people around him are not neo-Nazis.
00:37:51.600 Yes, they are.
00:37:52.100 No, they're not.
00:37:52.760 OK.
00:37:53.260 Who close to Zelensky is a neo-Nazi?
00:37:56.060 Well, Zeluzny, for starters.
00:37:57.980 Zeluzny is not a neo-Nazi?
00:37:59.300 Yes, he is.
00:38:01.260 They're...
00:38:01.740 That is their sympathy.
00:38:03.340 They're...
00:38:03.640 Vanderites from...
00:38:06.340 This goes back to the 1940s.
00:38:08.420 We're refighting the Battle of Kursk.
00:38:09.940 There were neo-Nazis.
00:38:11.940 There were Nazis in the...
00:38:14.420 It wasn't even Ukraine at the time.
00:38:16.320 There were some Ukrainian nationalists who were absolutely evil, anti-Semitic and Nazis.
00:38:20.300 But they're not in charge of Ukraine.
00:38:22.580 They are a small force within Ukraine.
00:38:25.160 But they're not in charge of Ukraine.
00:38:26.760 And Zeluzny is not a Nazi.
00:38:28.140 Come on, man.
00:38:28.660 He sympathizes with that element in Ukraine.
00:38:32.580 He doesn't have much choice.
00:38:33.820 And by the way, Zelensky's term, leave aside the original election, his term expired in May 2024.
00:38:40.500 He's been a military dictator ever since.
00:38:42.440 No, again, hold on.
00:38:44.420 His term expired in May 2024.
00:38:45.960 Yes, because this is what countries, when they're at war, they declare martial law.
00:38:49.420 In the UK, was Churchill a dictator during the war?
00:38:51.860 Well, in the US...
00:38:52.440 We didn't have an election for 10 years.
00:38:53.780 Well, we had an election in the United States in 1862 and 1864, in the middle of the Civil War, one of the greatest...
00:38:59.500 I know, but Ukraine is in Europe.
00:39:01.340 It's not in America.
00:39:02.420 European countries have always declared martial law and suspended elections in times of war.
00:39:06.460 It's a standard thing to do.
00:39:07.760 He's going to have an election when the war's over.
00:39:09.620 That's why President Trump sent people to try and get other people to instigate an election.
00:39:16.400 They all said, are you crazy?
00:39:17.640 We're not having this.
00:39:18.460 Okay, well, he won't have an election when the war's over.
00:39:20.600 Yeah, he will.
00:39:21.420 Sorry, let me finish my sentence.
00:39:22.940 Sorry.
00:39:23.220 He won't have an election when the war's over because he won't be around.
00:39:26.940 So his days are numbered.
00:39:29.700 And it's not clear that there'll be much left to Ukraine other than a landlocked, rumped state.
00:39:34.580 So we'll see what happens.
00:39:37.000 But my point was a little different, which...
00:39:40.600 Okay, fair enough.
00:39:41.700 We may disagree on that.
00:39:43.140 I have to say, I spend a lot of time thinking about a lot of problems, and I solve a lot of them.
00:39:49.000 Some of them I can't solve.
00:39:50.140 One of the ones I absolutely cannot solve, I'm learning, trying to absorb as much as I can,
00:39:55.580 is why the UK, in particular, France is sort of a tagline, but why the UK is so committed to extending the war,
00:40:06.240 or killing more Ukrainians, fighting the Russians, the Russophobia in the UK.
00:40:12.060 I don't understand it.
00:40:13.580 There's no more natural alliance in the world than Russia and Germany, for example.
00:40:19.500 You know, Russia, they have a lot of technology, of course, but they have massive natural resources, agricultural resources, et cetera.
00:40:24.680 Germany doesn't have much land.
00:40:26.420 That's why they always went looking for it at everyone else's expense.
00:40:29.480 But great technology, highly educated workforce, and so forth.
00:40:34.040 But the German economy is de-industrializing.
00:40:37.860 It's almost in a state of collapse.
00:40:39.640 I just, I did take delivery on a new Audi recently, and I always read this.
00:40:43.260 Second time you mention that, Jim.
00:40:44.640 Well, but I have a footnote, which is I'm very careful about the specs.
00:40:48.100 I saw that the engine was made in Hungary.
00:40:50.360 Now I'm okay with that.
00:40:51.280 The Hungarians are very, they're also well-educated and productive and so forth.
00:40:55.240 But I said, why is a Bavarian auto company outsourcing the engines to Hungary?
00:41:01.040 And the answer is energy costs.
00:41:03.720 So Angela Merkel spent 14 years shutting down every coal-fired energy plant in Germany, closed all but two nuclear power plants.
00:41:14.420 And then Germany acquiesced while friends at MI6 and CIA blew up the Nord Stream pipeline.
00:41:19.800 So the reason they're outsourcing to Hungary is Hungary has much lower energy costs.
00:41:26.200 So why, it's sort of industrial suicide.
00:41:30.960 It is.
00:41:31.400 Well, it's because Europeans have gone insane on this net zero thing.
00:41:35.020 Correct.
00:41:35.440 That's why.
00:41:36.220 We're at a point where we actually need more CO2 emissions.
00:41:39.520 It's plant food.
00:41:40.480 We're going to kill all the plants and starve ourselves to death that we don't keep up the CO2.
00:41:44.860 Well, come back to your point.
00:41:45.840 But I don't understand why the UK are such rabid warmongers about this.
00:41:54.280 They wouldn't see it like that, Jim.
00:41:55.880 They would see that Putin presents an existential threat to Europe and obviously to Ukraine.
00:42:03.440 It's an illegal invasion.
00:42:05.440 He has a habit of doing these types of things.
00:42:07.740 He's also, as well, he has poisoned UK citizens on UK soil.
00:42:15.580 He's a hostile actor.
00:42:17.120 Yeah, he's a hostile actor.
00:42:18.980 And he presents, they would perceive it, and I perceive it, he presents a very real existential threat.
00:42:25.260 There are people in Lithuania, Estonia, and other countries as well who are getting very nervous whilst looking at what Putin is doing.
00:42:34.980 Like, that's why Europe's concerned about it.
00:42:37.800 Yeah.
00:42:38.640 Yeah.
00:42:39.820 He basically came to the rescue of the Russian-speaking population in Donbass, in the eastern part of Ukraine.
00:42:48.800 By the way, I...
00:42:50.060 Jim, my family are Russian-speaking Ukrainians.
00:42:52.660 Okay.
00:42:52.980 None of them support what's happened, and they're all pro-Ukrainian.
00:42:55.960 This is a very one-dimensional way of looking at this.
00:42:59.020 Okay.
00:42:59.240 I would argue there are many people, like my family mostly, is in the south of Ukraine, quite close to the front line.
00:43:06.320 This idea that if you're Russian-speaking in Ukraine, that means you support Russia or you needed protection.
00:43:12.300 Zelensky is a Russian-speaking Ukrainian.
00:43:15.680 I understand that this is an argument.
00:43:19.840 I think in Europe we see these things very differently because we're a little bit closer physically as well.
00:43:25.220 Now, having said that, I mean, I think there's been also...
00:43:29.680 We just had Boris Johnson on the show, for example.
00:43:31.560 Oh, I was just going to bring him up, but please.
00:43:33.420 Right.
00:43:33.800 So there's this idea that Boris Johnson went to the Ukrainians and prevented them from signing a peace deal, right?
00:43:39.940 And I was going to challenge Boris Johnson on this very thing, right?
00:43:43.820 So I went and I looked at that claim, where it came from.
00:43:48.220 And it was a bunch of publications, mostly on the right, which is fine.
00:43:52.260 A lot of our guests are on the right.
00:43:53.520 And they referenced an interview with Ukraine's lead negotiator, David R. Hermia, I think his name is.
00:44:00.200 Right.
00:44:00.480 I went and listened to that interview.
00:44:02.260 He says the exact opposite of what these people are claiming.
00:44:04.820 So there is a lot of stuff lying about.
00:44:07.560 That's not to say that all the people pro-Ukraine are telling the truth all the time.
00:44:12.280 But I think that we've got ourselves into these very two polarized narratives when I think actually the truth is NATO expansion is not something that Russia likes.
00:44:22.940 I think we can all agree on that.
00:44:24.940 And to that extent, you could argue that they were provoked.
00:44:27.220 The counterargument to that, which no one ever puts, and I think it's worth discussing, is if NATO hadn't expanded eastwards, where would Putin's control over Eastern Europe be now?
00:44:37.120 Would it still be where it is or would it be further west?
00:44:39.680 And my argument is, of course, it would be further west because every time that Russia can expand westwards and it's strong, that's what it does.
00:44:46.040 Historically, that's why all these countries in Europe are concerned, because we know our own history.
00:44:51.340 Why is the EU basically voided what would otherwise be a legitimate election in Romania?
00:44:57.480 That I have no idea about.
00:44:58.580 Well, again, it's another example of Europe's, you know, pretending to support democracy when, in fact, they support autocracy or anything that the leading, Carly Giordesco was the leading candidate in Romania who was, I won't say pro-Russian, but he was certainly against the war and willing to work with Putin or with, you know, Russian Federation.
00:45:24.780 But, you know, Putin's in charge, as is the Slovak Republic, Hungary, Orban certainly has an open line there.
00:45:32.320 So you're not seeing Russia invade Eastern Europe.
00:45:35.000 What you're seeing is Eastern Europe come to their senses about working with other powers and actually trying to get peace.
00:45:41.740 But that's not true in Poland, Latvia, Estonia, Lithuania, right?
00:45:45.080 Those countries are very concerned.
00:45:46.700 I mean, Finland and Sweden have joined NATO.
00:45:48.860 That's how concerned they are, right?
00:45:50.320 Yeah, yeah.
00:45:50.960 Well, look, maybe we'll just agree to disagree.
00:45:56.080 The thing is that we could carry on for hours.
00:46:00.100 Let's come back to economics.
00:46:01.220 But I do, sorry, I wanted to come back to France's point, which is about the U.S. being the world's policeman.
00:46:07.500 So we're kind of off-duty, capable of that.
00:46:10.460 But here's what Ukraine has revealed, the war in Ukraine has revealed, leaving aside causes and all that stuff.
00:46:17.900 Our stuff doesn't work.
00:46:19.060 So Patriot missiles, Patriot missile batteries cannot shoot down a hypersonic missile.
00:46:23.920 We cannot shoot down a Russian missile.
00:46:25.900 A cruise missile, yes, they would go about 500, 600 miles an hour.
00:46:28.800 But these missiles are going 10,000 miles an hour.
00:46:30.880 Yeah, the ballistic missiles.
00:46:32.040 We can't shoot them.
00:46:32.920 So the Russians have blown up seven Patriot missile batteries using hypersonic missiles.
00:46:38.540 They're a billion dollars apiece.
00:46:40.500 Okay?
00:46:40.700 So there's $7 billion out the window.
00:46:42.200 And you have no air defense.
00:46:43.660 Bradley Fighting Vehicles.
00:46:44.820 Remember the famous offensive in 2023?
00:46:48.280 You know, we never know if it was spring, summer, winter, fall, because the Ukrainians kept balking.
00:46:52.640 But they launched this major offensive.
00:46:54.440 Bradley Fighting Vehicles were left burning on the battlefield.
00:46:57.240 The Challenger tanks, which are from the U.K., the Leopard tanks, which are from Germany,
00:47:01.780 the Abrams tanks from the United States were all left burning on the battlefield.
00:47:05.820 Now, the United States actually called Ukraine and said, please don't use our Abrams tanks.
00:47:10.420 It's very bad for sails.
00:47:11.400 They were actually left in the rear echelons because every time they attacked, the Russians blew them up.
00:47:17.120 Our HIMARS artillery is precision-guided artillery.
00:47:20.000 It doesn't work because, well, they shoot them, but they go in cornfields because the Russians figured out how to jam the GPS,
00:47:26.480 so they send them off course.
00:47:28.340 I could list a lot of other systems.
00:47:29.940 But my point is, A, every one of these systems has failed.
00:47:33.320 The Russians have no desire to go west of the Nipah River, unless maybe the Ukrainians keep fighting.
00:47:40.300 But if they wanted to, there'd be nothing to stop them.
00:47:43.120 I'm not saying they will.
00:47:43.980 I think they have no intention of that.
00:47:45.560 I think that's just wrong.
00:47:48.060 But if they did, there'd be nothing to stop them.
00:47:50.540 NATO is a papier-mâché alliance.
00:47:55.000 Now, 155-millimeter shells, there aren't any.
00:47:58.600 We're out of them.
00:48:00.120 We've taken down our reserves, and they said, Europe, you know, you talk about Europe, yeah, a couple years ago,
00:48:05.660 they said, well, we're going to make a million shells a year.
00:48:07.960 They couldn't make any.
00:48:10.380 They de-industrialized.
00:48:12.180 You can't get this.
00:48:13.080 You can create a plant to make 155-millimeter shells.
00:48:16.140 It takes two or three years to get the plant going.
00:48:18.580 The idea that they were delivering them, they actually authorized contacts to go around to illegal arms dealers around the world
00:48:25.320 and try to scrounge up some shells.
00:48:27.580 Seriously.
00:48:27.940 And they found some that were, like, a couple hundred thousand, I think, in Saudi Arabia that were, because the Czechs are very good at this,
00:48:35.100 and they kind of got the nod.
00:48:37.100 But they were, like, 30 years old.
00:48:38.340 Nobody knew if they actually worked or not.
00:48:40.140 We're out of 155-millimeter shells.
00:48:42.840 And the U.S. isn't much better.
00:48:44.160 The U.S. has a little productive capability.
00:48:45.900 So my point being, all of our premier, you know, advertised, all of these magic solutions, not one of them worked.
00:48:54.320 And not only did they fail and allow the Russians to do what they've done, but it makes no sense to rebuild these things, to make more of them.
00:49:02.620 We need completely, we need tens or hundreds of billions in R&D, completely new systems.
00:49:08.280 Yes.
00:49:08.560 And by the way, this would be very good for the U.S. economy.
00:49:10.560 This will all be domestic.
00:49:11.620 But so the reason I'm talking about with the U.S. being the policemen of the world isn't just, you know, military interventions or supporting Ukraine.
00:49:22.040 You have Iran at the moment.
00:49:24.360 Iran is effectively sponsoring terrorism throughout the Middle East.
00:49:28.680 Right.
00:49:29.140 You know, let's be honest.
00:49:31.800 The war in Gaza, as awful as it is, is a glorified proxy war.
00:49:36.300 Sure.
00:49:36.980 Yeah.
00:49:37.340 Yeah.
00:49:37.500 And then you've got, and then you're hearing that they're building military capabilities, nuclear capabilities.
00:49:43.260 Right, right.
00:49:43.520 And you go, this is absolutely terrifying.
00:49:46.040 This is terrifying with a nation that is genocidal when it comes to Jewish people and the land of Israel.
00:49:52.300 Right.
00:49:52.820 And you go, who else is able to step in and ensure that things, these things don't happen other than the United States?
00:50:00.840 What, the French, the Germans, the Italians, the British?
00:50:04.540 We're all on our ass, Jimmy.
00:50:05.900 You missed one.
00:50:07.500 Israel is.
00:50:08.540 The U.S. and Israel is working together.
00:50:10.720 Yeah.
00:50:10.940 We've already denuded Iran of their air defenses.
00:50:14.380 Look, it's a big country physically, about a little less than 80 million people.
00:50:19.420 Obviously, they have the oil revenue.
00:50:20.880 So I'm not saying that Iran is some kind of a pushover.
00:50:25.800 But there's a lot less there than ECI.
00:50:27.740 Their regime is extremely unpopular with their people.
00:50:30.540 The average Iranian is decently well-educated or highly educated, cosmopolitan.
00:50:39.020 They've got a deep history and a strong culture.
00:50:41.160 They would love nothing more than to be, I'll not say Western, but part of the West in other words.
00:50:47.540 But they've got a leadership that is in the Middle Ages.
00:50:51.660 And by the way, everything you said was exactly right, Francis.
00:50:54.320 And who financed it?
00:50:55.380 The United States.
00:50:56.540 Obama and Biden gave Iran tens of billions of dollars, actually more than that, closer to $100 billion, left gold and pallets of currency on the runway.
00:51:08.780 And by the way, they had to go to the Central Bank of the Netherlands to get euros because they couldn't give them dollars because they were kicked out of the dollar system.
00:51:14.980 So when we gave them billions of dollars in cash on pallets, they were euros.
00:51:20.120 But they put them to good use, financing the Houthis and Hezbollah and Hamas.
00:51:26.260 And, you know, not as much on the West Bank.
00:51:27.760 But that was the whole, you know, Shiite crescent.
00:51:31.160 And by the way, one thing we haven't talked much about that is, let's go back to Samuel Huntington, is because we're so secularized, people don't understand the importance of religion in everything we're talking about.
00:51:44.580 Now, and this is a huge factor in Ukraine, getting back to Ukraine for a second, but regardless of political sympathies, the eastern half is Russian Orthodox.
00:51:55.120 They look to the Patriarch in Moscow, and the western half is more Catholic, and they look to the Pope in Rome.
00:52:01.760 That's been going on for a thousand years.
00:52:03.220 But my point is, there's no more natural solution than a peaceful division of the country, and even if it were still a separate country, an eastern and western Ukraine, one looking to the east, one looking to the west.
00:52:15.760 And the people who did this, I was in the Slovak Republic.
00:52:18.980 I was in Bratislava, and I was a guest of one of the members of parliament.
00:52:22.220 And he took me onto the floor of the Slovak Republic parliament and spent a lot of time with them.
00:52:29.760 And I said, you know, what they did was amazing, because they, Czechoslovakia, which is just this put-together thing, they realized themselves internally that this wasn't a good fit, that splitting the country down the middle, breaking into two republics, made a lot of sense.
00:52:46.040 The people supported it.
00:52:47.140 It was done through negotiations.
00:52:48.760 It was done peacefully with referenda.
00:52:50.880 There was no, there were no riots, there was no color revolution, there was no mine on square, and there was no war.
00:52:57.200 So a solution like that, but going to your point, Francis, that's an example of, oh, it's internal, so not diplomacy in the strict sense, but diplomacy and negotiation and good faith in action.
00:53:10.180 And that's what Trump's trying to do.
00:53:12.100 We finally have some diplomats.
00:53:13.840 But let me push back on that idea, Jim, because I agree with you, for the most part.
00:53:20.140 And even with people like Putin, and even people like G to a certain, you know, those types of people you can negotiate.
00:53:29.880 Iranian leaders are nutters, to put it mildly.
00:53:32.300 Correct.
00:53:32.480 They're absolutely off their rocker, mental, completely insane ideologues, Islamists.
00:53:40.760 How much can you actually negotiate with somebody who is that insane, to put it bluntly?
00:53:46.740 Well, they may not be open to negotiations for the reason you mentioned, but they do pay attention to financial sanctions.
00:53:54.260 Now, Obama started a financial war against Iran, not shooting, but, you know, financial with sanctions and so forth, in late 2007, early 2012.
00:54:07.540 His goal was to get to this joint comprehensive memorandum for the JCPOA, which was joint comprehensive points of agreement, I think it is.
00:54:21.060 But be it as it may, this nuclear deal basically slowed down the nuclear enrichment process in Iran.
00:54:28.640 And they did it.
00:54:30.080 And, you know, they kicked them out of SWIFT.
00:54:32.700 That's rare, but they did it.
00:54:35.100 They cut off some oil exports.
00:54:38.720 You know, obviously no loans or aid.
00:54:40.640 Europe was helping us with that.
00:54:42.880 And they got the Iranians to the table, and they negotiated this JCPOA.
00:54:48.060 So I met with a treasury official, a deputy secretary, sorry, deputy assistant secretary, who was in charge of this.
00:54:56.440 And I said, nice job.
00:54:58.240 I said, why did you stop?
00:54:59.760 You were winning the financial war.
00:55:01.360 Why didn't you dial up the pressure a little bit?
00:55:03.520 And they said, well, our goal was to get them to the table, and we did.
00:55:07.140 And I said, yeah, and you negotiated a really, you know, poor agreement.
00:55:11.540 But when, so then when Trump came in, and that was it, then we started giving them money once they signed that, well, actually it was never signed, actually.
00:55:20.280 And experts have looked at the Persian and the U.S. versions of it and got expert translators, and they don't match.
00:55:28.840 So we didn't agree to anything, but we acted like we did.
00:55:31.600 But when Trump got in, he instituted what was called the maximum pressure campaign, and that worked.
00:55:37.780 No more gifts, no more palace of money, no more gold, no more, you know, it was maximum pressure, and the oil exports were greatly affected, and there was no money coming in.
00:55:51.260 They were out of the banking system.
00:55:52.640 And I did some work for the intelligence community on all this.
00:55:57.040 My point being, it worked.
00:55:59.900 And then Iran was, no, I wouldn't say tottering, but there was certainly, they were feeling the pressure.
00:56:08.320 And what you didn't have was the kind of terror and wars and attack from Gaza and other things you've seen coming out of the Middle East.
00:56:16.080 So who gets in next but Biden?
00:56:18.540 We're not talking about the 2020 election.
00:56:21.180 Although you haven't heard the last of that.
00:56:23.340 But Biden gets in and, again, turns on all the spigots, takes off all the sanctions, reinstates their access to banking, oil exports go up, and we give them more money.
00:56:33.140 We release more frozen assets.
00:56:35.440 So what happens next?
00:56:36.500 The Middle East blows up.
00:56:38.800 And so Trump's back, and what he's saying to Iran is, I'm going to do maximum sanctions 2-0, but I'll give you a chance to talk first.
00:56:48.140 And that's where we are right now.
00:56:49.800 The door is open.
00:56:50.560 I agree with you.
00:56:51.200 They don't seem to get it.
00:56:53.740 By the way, the Iranian Revolutionary Guard Corps is basically a criminal business enterprise.
00:57:01.540 It does have military capability.
00:57:03.000 It has terrorist capability, no doubt about it.
00:57:05.220 But they basically have taken over about 40% of the Iranian economy, and they just skim, and they – I don't know where all their mansions are, probably in Dubai.
00:57:13.400 But they are – it's an utterly corrupt – whoever is not a theocratic extremist is a corrupt government official, not counting the everyday people in Iran.
00:57:25.200 But the Israeli attacks last year did destroy most of the Iranian air defenses.
00:57:34.200 The Iranians were surprised.
00:57:35.280 You know, the Russians can keep sending them S-400s or whatever, but we keep blowing them up.
00:57:39.120 So let me just – because – interrupt you there, Jim, because what you're saying is very – obviously – is very interesting.
00:57:46.720 We had Tony Abbott, former prime minister of Australia, on the show a few weeks back.
00:57:51.040 And he said the – it's common knowledge among security forces that Iran is a few months away from being able to create nuclear weapons.
00:58:00.140 That's true.
00:58:00.580 Just to be fair, you didn't say security forces.
00:58:02.800 You said if you talk to people who know.
00:58:04.840 Yeah.
00:58:05.140 That's what they're saying.
00:58:05.840 Just for –
00:58:06.600 Just for – just for clarification.
00:58:08.620 Now –
00:58:08.740 Five eyes.
00:58:09.480 Yeah.
00:58:09.700 If you listen to what – people whose business it is to know as much as we can about this, if you listen to them, they seem convinced that Iran is – it's more a matter of months than years.
00:58:33.400 Months.
00:58:35.460 Months.
00:58:36.060 So we are months away from the Ayatollah, potentially, like, maybe from –
00:58:45.280 Unless – unless – unless something can be said or done that interrupts – interrupts their obvious march towards it.
00:59:02.460 Now, that is – that's terrifying, isn't it?
00:59:05.440 And that really does mean that we need to take this incredibly seriously.
00:59:09.660 Well, it is true, based on my best information, but I'll say Abbott's very plugged in, so that's true.
00:59:16.680 But it has been true for several years, meaning they have six months to go, but they stopped the clock.
00:59:23.060 And so the clock's not ticking.
00:59:25.260 Now, could they reactivate it?
00:59:26.480 Yes.
00:59:26.780 And could they have something in six months, do a test?
00:59:29.420 Yes.
00:59:30.780 But they haven't.
00:59:32.280 Why not?
00:59:33.160 Because if they go down that road, they will be attacked.
00:59:35.640 So they know that much.
00:59:38.000 Jim, I want to come back to economics, because it's an interesting detail into geopolitics, and I think it's interesting to have a disagreement and discussion about those things.
00:59:46.060 But actually, if someone's tuned into this going – I want to understand where the economy is going.
00:59:51.420 We started with two interesting things.
00:59:53.840 We're in a recession, probably.
00:59:55.620 Right.
00:59:55.880 You said Trump's tariffs policy is the best policy in the world.
01:00:00.220 Correct.
01:00:00.520 Does that mean the U.S. is about to actually bounce back and have a good economic few years?
01:00:06.760 Not quite.
01:00:08.780 No, it's a great question.
01:00:11.960 The kind of expanding economy – first of all, everything I described would take a year to two years to really show its effects in the best of circumstances.
01:00:22.840 I say high-paying U.S. jobs, yes.
01:00:25.100 Foreign investment in the U.S., yes.
01:00:26.820 But Honda's not going to build that plant in two months.
01:00:29.040 It's going to take two years.
01:00:30.800 Same thing with Taiwan.
01:00:31.980 These things are going to take one or two years, even longer.
01:00:36.040 I mean, semiconductor fabs are like incredible laboratories.
01:00:41.300 I mean, they have to be built very slowly, very carefully because of particles and pollutions and all this.
01:00:47.400 This stuff will take years, but it will happen.
01:00:50.260 So I have a very positive outlook for 2026 and beyond.
01:00:54.640 But 2025, we've got a hangover from Biden's Inflation Reduction Act.
01:01:00.740 Well, it was really Pelosi's Inflation Reduction Act, which was not only misnamed.
01:01:05.540 That was the Green News scam in disguise.
01:01:07.900 The Inflation Reduction Act, so-called, which increased inflation, by the way, was the Green News scam.
01:01:14.340 And they gave John Podesta a $900 billion slush fund and basically allowed him to allocate it.
01:01:21.880 Now, if you look at the line items that the money went to, they sound good.
01:01:26.440 You know, we're going to help rural people buy, you know, put solar cells or solar modules on their roofs and we're going to do this and going to do that.
01:01:36.280 What they actually do is nothing.
01:01:37.660 They hire their friends.
01:01:39.200 They buy jets.
01:01:40.020 They buy fancy office buildings, office suites.
01:01:44.220 They travel around.
01:01:45.340 They go to conferences.
01:01:46.420 They inflate their payrolls and they give money to the Democrats.
01:01:48.660 That's where the money actually goes.
01:01:50.960 And that's all being demonstrated thanks to – people knew it, but Elon Musk has got the – I hate to use cliches, but he's got the receipts.
01:01:57.980 I mean, they can actually show all that.
01:02:01.240 The Green News scam has been a front for basically a massive multi-10 trillion dollar beyond wealth transfer from north to south.
01:02:14.220 Well, if you're in the south, why wouldn't you want that?
01:02:16.280 If you're the middleman, why wouldn't you want that?
01:02:18.320 So it's a grift.
01:02:20.300 It's a scam.
01:02:21.540 But people are waking up – not only waking up to it.
01:02:24.640 I mean, the scientific evidence is very clear that no one – other than plant food, which is a good thing, no one quite knows what CO2 does.
01:02:32.840 It's a trace gas.
01:02:33.920 It's like a fraction of 1% of the molecules in the air.
01:02:42.160 And, you know, it's mostly oxygen, hydrogen, a few other things.
01:02:46.860 So it's a trace gas.
01:02:48.240 There's no evidence that CO2 causes warming.
01:02:53.400 The evidence is the opposite.
01:02:55.000 If there's warming, and there are a million reasons why that could be happening, it tends to release more CO2.
01:03:00.760 So when you see, you know, this is the first thing you learn in statistics.
01:03:04.420 You know, CO2 is going up.
01:03:06.080 Temperatures are going up.
01:03:07.420 Oh, this must cause this.
01:03:08.320 Well, no, it's actually the other way around.
01:03:09.940 Warming, if it's happening, and that's debatable, could cause a release of CO2.
01:03:14.500 We probably need more CO2, as I explained.
01:03:16.780 Having said that, so the science – I mean, if you said, what causes climate change?
01:03:22.140 I mean, they've given up on global warming.
01:03:23.660 We just had the coldest winter in 40 years.
01:03:25.820 But what causes climate change?
01:03:29.100 We have a pretty good idea.
01:03:31.040 It's solar cycles, volcanoes, ocean currents, subduction, a few other contributing factors that we can't control.
01:03:39.120 No one thinks that you can control the sun.
01:03:42.360 Maybe Al Gore.
01:03:43.000 But the point is, there are things that we cannot control.
01:03:47.720 The evidence is clear.
01:03:49.480 In the 3rd century BC, you had the Roman warm period.
01:03:54.200 This was a big help to Hannibal getting over the Alps with his elephants.
01:03:58.080 Around 1000 AD, you had the medieval warming period.
01:04:02.840 This is how the Vikings, they only got to Canada.
01:04:06.280 There's some evidence they went up the St. Lawrence River to some extent.
01:04:09.500 But they had farms in Greenland.
01:04:10.720 They were, you know, growing crops and livestock and a thriving community, et cetera.
01:04:17.800 Then it all went away.
01:04:18.840 That's because it was actually – I don't want to say warm.
01:04:21.560 It's not tropical.
01:04:22.260 But relatively mild in Greenland in 1000 AD.
01:04:26.160 Then, from roughly the mid-14th century to the mid-19th century with some peaks and valleys, was the so-called Little Ice Age.
01:04:34.740 In the 17th century, they had ice fairs.
01:04:38.100 The Thames was frozen solid.
01:04:40.000 You didn't need bridges.
01:04:40.940 You could walk across the Thames on the ice.
01:04:43.660 And they had these fairs where you put up your booth and your wares and everything on the river because it was frozen solid.
01:04:49.500 This is Hans Brinker and the Silver Skates.
01:04:52.580 Those canals in Holland.
01:04:54.520 I've been to Utrecht a number of times.
01:04:56.740 I haven't been to Amsterdam.
01:04:57.360 But Utrecht has these lovely canals.
01:04:59.700 They were all frozen solid.
01:05:01.460 And then the thaw began in the late 19th century.
01:05:04.600 And maybe it's been warming a little bit since.
01:05:07.060 The best measurement of water levels – actually, you know, we're here in New York down at the Battery.
01:05:13.020 There's a measurement, a gauge that's been monitored and recorded since the late 19th century around 1890, you know, give or take a few years – shows that the oceans are rising at a rate of 7 inches per 100 years, subject to reverse because these things tend to reverse over time.
01:05:32.880 So 7 inches in 100 years, it's not going to get, you know, Anderson Cooper's feet wet anytime soon.
01:05:37.800 My point being, climate does change.
01:05:41.060 The evidence is clear.
01:05:42.080 None of it had anything to do with CO2, automobiles, or emissions, et cetera.
01:05:46.720 And yet, somehow that became a $900 billion slush fund for the Democratic Party.
01:05:54.140 So that's all over.
01:05:55.700 Some of the money is out the door.
01:05:56.960 They're trying to get some of it back.
01:05:58.760 A lot of it has been wasted.
01:05:59.880 But to your point, Constantine, that's the hangover.
01:06:04.340 The inflation that we saw in 2022 and lingering, even today, it's not as high, but it's still there, was because of this pumping too much money into an economy that couldn't absorb it.
01:06:15.920 And that is a cause of inflation.
01:06:18.780 It's nothing with the Fed or money printing.
01:06:20.840 That's all nonsense.
01:06:21.600 It does have to do with fiscal policy and, you know, huge budget deficits.
01:06:27.080 We had a – coming into Biden, we had a baseline deficit.
01:06:30.780 Like, the deficits, they're just there.
01:06:32.160 If you kept everything the same, a trillion dollars a year, which is a big number.
01:06:36.300 But today, it's beyond $2 trillion a year.
01:06:39.160 So even if you cut a trillion out, which is, you know, good luck, they're trying.
01:06:43.100 But even if you cut a trillion out, which is almost impossible, you'd still have a trillion dollar deficit left over.
01:06:49.580 But this Inflation Reduction Act, I mean, there are new studies coming out showing that the impact of it will add $6 trillion to the deficit over a period of about 20 years.
01:07:02.700 And the way they – scoring is a term of art, but the Congress has to score a piece of legislation to figure out how you're going to pay for it, et cetera.
01:07:14.180 But they have a horizon that's five years or seven years, depending on what the OMB wants.
01:07:21.120 But it doesn't mean the law goes away in seven years.
01:07:23.400 It just means that we're only going to count seven years.
01:07:26.160 But as long as it's on the books, it goes on forever.
01:07:29.760 And this new study from the Cato Institute shows that that actual cost is going to be, you know, in the tens of trillions of dollars.
01:07:38.980 So can we get that amended or rescinded somehow?
01:07:42.600 Let's see.
01:07:43.260 But that's – you've got to get rid of that inflation hangover.
01:07:49.260 The tariffs will cause some supply chain – they won't cause inflation, but they will cause some supply chain disruption.
01:07:56.260 That's a bit of a headwind for the economy.
01:07:58.660 These government layoffs haven't – you know, terminations, whatever you want to call them – haven't shown up in the unemployment figures yet.
01:08:06.240 They will – but that's probably coming this summer because, you know, you get laid off and you get severance or you get a notice period or whatever.
01:08:15.660 So you can't actually apply for unemployment until a little further down the road.
01:08:19.400 So that's somewhat delayed.
01:08:20.920 But that's coming.
01:08:22.680 So we're going to see unemployment go up.
01:08:24.780 We're going to see interest rates come down, but not for good reasons.
01:08:28.560 There's nothing to cheer about.
01:08:30.000 As I said, there's more a sign of recession than – there's no stimulus from it.
01:08:33.580 That's nonsense.
01:08:34.320 So now, this was not orchestrated, but it's happening.
01:08:41.420 Biden did what he did.
01:08:43.280 Trump's got to get out of it.
01:08:44.820 That's going to involve some short-term pain.
01:08:47.580 But it's not gratuitous.
01:08:48.940 The best example, best analog really was Ronald Reagan.
01:08:52.660 So Ronald Reagan was elected in 1980.
01:08:55.640 In 81-82, we had the worst recession since the Great Depression.
01:09:00.820 Now, we've had a worse one since, but at the time, that was the worst recession.
01:09:05.780 Unemployment was over 10%.
01:09:08.020 Inflation – remember, my first mortgage was 13%.
01:09:12.740 I told my mother she cried because her first mortgage was 2%.
01:09:16.280 But I explained to my mother, I said, Mom, it's okay because my mortgage is 13%, but inflation is 15%.
01:09:25.080 So it's actually negative 2% in real terms.
01:09:28.000 I'm not sure my mother was with me on that, but I said, my real rate of interest is negative 2.
01:09:33.840 And I was in a 50% tax bracket at the time, and it was fully tax deductible.
01:09:38.340 So I got 6.5 points back from Uncle Sam.
01:09:44.820 So my real rate was negative 8.
01:09:46.520 So borrowing money at 13% was smart in a world of 15% inflation and a 50% tax benefit.
01:09:53.660 Today, the opposite of all that is true.
01:09:56.420 So – but Reagan got through that recession.
01:10:00.500 Then from 1983 to 1986, three years – sorry, 83, 84, 85, up to 1986, we had 16% real growth.
01:10:10.400 Real, not nominal.
01:10:12.680 And he won re-election in 1984 with one of the greatest landslides in history because the economy was on that path.
01:10:20.200 So when you have a real recession, you can come out of it gangbusters.
01:10:24.760 I mean, it may be the case that the most of the U.S. – the U.S. is a mature economy, the most we can grow in real terms, maybe 3.5%.
01:10:34.840 That's true over a long period of time.
01:10:37.380 But for short periods where you're coming out of a recession, you can grow a 4.5% because there's a lot of excess capacity that gets used up.
01:10:46.080 Now, the most important thing for anyone trying to analyze the U.S. economy, you've got to look at Scott Besson's 333 plan.
01:10:54.280 There was some talk about it in late December, doing the transition, and then it kind of fell off the radar screen.
01:11:00.640 But this is what they're doing.
01:11:01.740 It's one of the things they're doing.
01:11:03.400 And what he meant by that is get the deficit to 3% of GDP.
01:11:08.640 Get real growth of 3% or more and pump 3 million barrels a day more than we're currently pumping.
01:11:17.180 So that's the 333 plan.
01:11:19.140 Now, what's the meaning of that?
01:11:20.720 The oil speaks for itself, but obviously lower oil prices.
01:11:23.600 By the way, I was in a debate with, I was talking to Peter Navarro, who's now the trade and manufacturing czar for the White House.
01:11:32.700 And I think we were talking about the war in Ukraine.
01:11:34.820 I said, Peter, you want to end the war in Ukraine, get oil prices down to $30.
01:11:40.420 That'll stop.
01:11:41.520 The weapons won't stop Putin.
01:11:43.100 The money won't stop Putin.
01:11:44.260 But $30 oil will stop him in his tracks.
01:11:46.260 So he'll be at the table before you know it.
01:11:49.280 I go, ah.
01:11:50.760 So that may be.
01:11:52.000 That's definitely true.
01:11:53.160 I know we've disagreed about Ukraine.
01:11:56.260 Well, actually, if you look at the entire boom in the Russian economy under Vladimir Putin, it's basically been one thing, which is oil prices have gone up.
01:12:05.780 Energy prices have gone up.
01:12:07.260 Well, that's how they finessed it.
01:12:08.760 And then they put the economy on a war footing.
01:12:10.800 Yeah, there's a lot to the Russian economy.
01:12:12.820 But Putin will be at the table in a heartbeat at $30 oil.
01:12:18.720 So why have we done that?
01:12:19.700 Because Biden wanted the war.
01:12:21.340 That's the point.
01:12:22.420 Trump wants to end the war.
01:12:23.600 Trump's funny that way.
01:12:24.400 He likes to end wars and save lives.
01:12:25.420 But see, in Europe, we have this net zero obsession.
01:12:29.520 Yeah, and that's keeping oil prices high.
01:12:31.260 Well, absolutely.
01:12:31.980 Because, well, you know this better than that.
01:12:34.060 We have industrial energy prices in the UK are four times what they are in the US.
01:12:38.760 And that is because we refuse to produce our own energy and then we put all sorts of difficulties and terror rates and whatever.
01:12:46.880 This is just madness.
01:12:48.720 So what I don't understand is why don't Europeans – Europeans do not want this war.
01:12:53.120 Absolutely do not want this war.
01:12:54.640 Why haven't we just started making our own energy?
01:12:59.660 Why actually blow up the Nord Stream pipeline?
01:13:02.080 Well, my view on that is that the Americans blew it up because it's good for them so that they can export their energy to Europe.
01:13:08.820 Well, I would say the Americans and the Brits blew it up to basically keep Germany from – keep Germany in line basically.
01:13:17.820 Yeah, keep them dependent on US energy.
01:13:19.780 But Biden did everything possible to keep the price of oil high, shut down the Keystone XL pipeline, took millions upon millions of acres of federal land off the table in terms of exploration for oil and natural gas.
01:13:32.840 And then they – Karine Jean-Pierre, whatever her name was, she'd say, well, there are like 5,000 leases that were just given out.
01:13:40.780 They're all dry holes.
01:13:41.540 I mean, yeah, they got the leases and they drilled.
01:13:43.000 There's nothing there.
01:13:43.680 I said, OK, let's go over to the next place.
01:13:45.140 Sorry, off limits.
01:13:46.480 It's a national park.
01:13:47.400 So some people might be watching this and there will be a lot of people who watch our show that agree with you about Ukraine, which is totally – people are right to have different opinions.
01:13:54.360 Let's explore the argument that you're making so that people have at least heard it.
01:13:58.820 Why did Biden want the war?
01:14:01.020 Because they want to topple Putin.
01:14:02.480 The Ukraine is a – the million dead Ukrainians is a world historic tragedy.
01:14:11.460 Of course.
01:14:12.240 Completely unnecessary.
01:14:13.480 It's a war that never should have happened.
01:14:15.280 Having said that, we sponsored it, the UK, Europe sponsored it because we wanted to topple Putin.
01:14:20.960 But if you topple Putin, you're probably going to get someone worse.
01:14:23.420 Of course.
01:14:24.300 So why do they want to topple Putin?
01:14:25.560 Because they don't know anything about Russian history.
01:14:28.020 They don't understand Russia.
01:14:29.000 They don't – you know, the people – Constantine, we're all kind of captives to our own upbringing in the academic sense.
01:14:36.220 And what I mean by that is, you know, I got – I did graduate work in economics and international relations during the 1970s.
01:14:42.860 The absolute height of the Cold War and I had a certain view of things.
01:14:47.400 But the policymakers in the Biden administration talking about George Kent, George Kent, Fiona Hill, Victoria Nuland, and Tony Blinken, and Jake Sullivan, and the whole warmonger class, their formative years were in the 1990s.
01:15:00.680 What was going on in the 1990s?
01:15:02.960 You had Boris Yeltsin, who was a complete drunk.
01:15:05.920 And so, you know, the Soviet Union formally dissolved on Christmas Day, 1991.
01:15:13.900 You now have the Russian Federation.
01:15:16.760 Gorbachev steps aside.
01:15:18.380 Yeltsin comes in.
01:15:19.960 And it was like Chicago in the 1920s.
01:15:22.420 It was gang warfare, machine guns in the streets of Moscow.
01:15:26.060 You know, but the U.S. advisor came in and said, we'll show you how to build a stock exchange.
01:15:30.260 We'll show you how to privatize.
01:15:31.940 They did privatize these companies, and they handed out the shares to everyday Russians.
01:15:37.320 And what the oligarchs did, they set up card tables in the lobbies of apartment buildings.
01:15:41.180 And when people come home from work, like, hey, I'll buy your shares.
01:15:43.720 Like, yeah, thanks.
01:15:44.420 Here's some Rupus to give me the shares.
01:15:46.080 And they aggregated these shares.
01:15:47.080 But there could have been multiple factions with, you know, 20 percent each or 30 percent each.
01:15:52.540 And then they just got the machine guns out, and they killed each other.
01:15:54.720 I mean, I've been to Moscow.
01:15:55.660 I've seen all these oligarch limos, entourages, and so forth.
01:16:00.740 I was in one with my Sherpa, my translator.
01:16:04.880 I don't speak Russian, but I've been there.
01:16:06.860 And these three black SUVs with tinted glass pull up at the hotel all in a row.
01:16:14.100 And he goes, hey, hold on a second.
01:16:15.800 Watch this.
01:16:16.240 There's some oligarch here, you know.
01:16:17.740 So the first car and the second car, all the doors open.
01:16:21.520 All these security guys get out.
01:16:23.040 They form a security perimeter.
01:16:24.300 They're, you know, you can see they got guns under their jackets.
01:16:26.860 Everyone's looking around.
01:16:27.540 He goes, this will be great.
01:16:28.340 Let's see who it is.
01:16:29.300 And the door opens, and two nine-year-old girls in party dresses came out.
01:16:32.800 But they were the daughters of oligarchs.
01:16:34.600 They only do a birthday party.
01:16:35.920 So, but Americans who were coming of age, meaning 20-something, 30-something, let's say 20-something, getting their graduate degrees in their Georgetown, you know, ticket punched and all that stuff, looked at that and said, Russia is a pushover.
01:16:52.380 They're falling apart.
01:16:53.200 Weak leadership.
01:16:54.420 Huge wealth.
01:16:55.720 We can basically dictate what happens there.
01:16:58.700 We can carve it up.
01:16:59.520 It was an imperial ambition based on a perception of Russian weakness.
01:17:04.080 The problem was that Putin came along and restored Russian pride.
01:17:08.040 By the way, Putin's support does not come from the oligarchs.
01:17:10.640 He hates the oligarchs.
01:17:11.580 And they hate him.
01:17:12.200 But what he did, I forget the guys, I want to say Berzovsky, the Yukos head, they put him in jail for, you know, trumped up charges.
01:17:24.640 But the message to the other oligarchs is that you can keep your money.
01:17:28.260 You can keep your companies, but keep it out of politics.
01:17:30.300 And they got the message, and they stayed out of politics.
01:17:32.940 Putin's support is from the military, the intelligence services, everyday Russians, and the church.
01:17:42.200 He built bridges to the Russian church.
01:17:44.720 Well, the head of the Russian church is also a former KGB agent, so that was easy.
01:17:48.380 Okay.
01:17:48.700 Well, the point is his base of support is solid.
01:17:52.900 His popularity ratings are actually true.
01:17:55.000 They're in the 80%.
01:17:56.300 I wouldn't go that far, but he's popular in Russia.
01:17:59.180 Okay.
01:17:59.700 So my point being the warmonger class, the people who started this war and provoked this war, came up at a time when Russia looked like easy pickings.
01:18:10.220 Putin pulled the rug out from under them.
01:18:12.260 They hate Putin.
01:18:12.940 They want to go back to a broken-up Russian federation, seven or eight different countries, easy to manipulate.
01:18:20.420 They're profoundly disappointed that the 90s, the party, their point of view, the party of the 90s didn't carry on in the 21st century.
01:18:28.960 Putin ended the party.
01:18:29.940 They hate Putin.
01:18:30.520 So that's where they're coming from.
01:18:33.380 So, therefore, they provoked this war, again, starting in 2008.
01:18:39.120 Minsk won.
01:18:40.160 Angela Merkel said, we never intended on keeping our promises.
01:18:43.280 She said that publicly.
01:18:45.460 And, you know, again, my Don, we may disagree.
01:18:48.380 In my view, that was, well, not view.
01:18:50.540 There's good evidence that that was a coup d'etat.
01:18:52.800 You know, and then a couple of months later, Putin took Crimea.
01:18:57.200 And then they, you know, they basically, there was talk about Georgia joining NATO.
01:19:06.080 And in August 2008, Putin invaded Georgia.
01:19:09.360 So what part of the invasion did the West not understand?
01:19:12.020 We were crossing the red lines.
01:19:14.220 But he said, OK, I'll take Crimea.
01:19:16.080 I'll take Georgia.
01:19:17.300 Your move.
01:19:17.780 And so there came a time when the West should have said, OK, he's serious.
01:19:21.440 But Putin doesn't bluff.
01:19:22.760 Now, whatever you think of him, he does not bluff.
01:19:24.480 He's very, his two sports are chess and martial arts.
01:19:28.580 And he's very thoughtful.
01:19:30.380 He gives things a lot, a good listener, gives things a lot of consideration.
01:19:34.360 And when he says something, he means it.
01:19:36.640 So that's the other Western fallacy.
01:19:38.960 He's bluffing.
01:19:39.620 He'll never do it, you know.
01:19:40.940 So we've got Russia all wrong.
01:19:43.340 But it was a class of, you know, public intellectuals and scholars and so forth who grew up at a time when Russia looked like a pushover and they never got over it.
01:19:51.200 I suppose the one counter argument to that, Jim, is wouldn't that class have learned from the disaster that was Afghanistan, Iraq, et cetera, particularly Iraq, where we had this grandiose idea that we were going to come in, we were going to overthrow Saddam, it was all going to be the land of milk and honey, democracies, blah, blah, blah.
01:20:09.980 And it's turned into a hellhole and millions of people have died and it's been a tragedy.
01:20:14.280 Correct.
01:20:14.860 Well, great question.
01:20:16.180 And the answer is no, they haven't learned.
01:20:18.880 They're, you know, we wouldn't have had the war in Ukraine if they had learned anything from Iraq.
01:20:23.340 We wouldn't have had, you know, the situation in the Middle East today if they had learned anything from, oh, Iraq was a good object lesson.
01:20:30.820 So the answer is great question.
01:20:32.960 They should have, but they didn't.
01:20:34.300 But it kind of, we get, you know, we get set in our ways, you know.
01:20:36.840 But I say there are formative years where time went, we won the first Gulf War.
01:20:41.320 I mean, people were killed, but with relative ease as wars go.
01:20:46.700 I've been to Kuwait a number of times.
01:20:48.100 They love Americans.
01:20:49.520 They always say thank you when you get off the plane.
01:20:51.940 So, no, that was a time.
01:20:54.180 And they are warmongers.
01:20:55.840 They are, you know, the neocons.
01:20:58.580 And they believe in a kind of U.S. imperialism.
01:21:02.860 It's not just the policeman of the world.
01:21:04.200 It's the dictator of the world, if you want to put it that way.
01:21:07.460 But anyway, getting back to oil, Biden did everything possible to keep the price of oil as high as possible for two reasons.
01:21:13.640 One, they wanted to make solar modules and other substitutes, you know, the windmills and solar modules and all that stuff, more affordable.
01:21:21.220 They're not, never will be.
01:21:22.760 But on a relative basis, they became a little bit more affordably subsidizing Teslas.
01:21:28.040 I lived in a town where a lot of people had Teslas.
01:21:30.720 And every time I saw one, I wanted to pull them over and ask for my $7,000 back because I'm a taxpayer and this guy got a $7,000 subsidy.
01:21:37.760 So, but again, I mentioned Keystone Pipeline, federal oil and gas drilling, cutting off drilling in the Gulf of America.
01:21:46.580 And so they did everything possible to keep oil high, basically to keep the war going.
01:21:55.540 And again, if you want to stop the war, get the price of oil down to $30,000, which is...
01:22:00.160 Wait, that doesn't make sense to me.
01:22:01.760 Maybe I'm a misunderstanding.
01:22:03.000 But I understand you think they wanted war in order to get rid of Putin, but making oil more expensive gives Putin more money.
01:22:13.120 If you wanted to overthrow Putin, you would collapse the oil price, wouldn't you?
01:22:17.020 Yeah, but...
01:22:18.180 But they didn't.
01:22:18.740 Well, that was because of the Green News scam.
01:22:20.520 I mean, the high price of oil was because of the Green News scam.
01:22:25.580 They wanted gas at the punt to be $10.
01:22:27.540 It didn't get there, but it got pretty close in California.
01:22:29.540 But isn't that deeply unpopular with the American people?
01:22:31.820 They don't care about the American people.
01:22:33.720 They care about...
01:22:34.260 Well, they care about winning elections.
01:22:37.200 Yeah, and they learn the hard way that they're never going to win another election if they keep going.
01:22:41.120 But here's the thing, Constantine.
01:22:46.040 Ideologues are ideologues.
01:22:47.640 The word of ideologue is idea.
01:22:49.380 They have an idea in their head, and they're impervious to facts.
01:22:52.040 They're impervious...
01:22:52.580 You just advance a good argument.
01:22:54.800 Francis, you've advanced some good arguments.
01:22:56.840 Hopefully I have.
01:22:57.480 But my point is, ideologues are impervious to logic and facts.
01:23:01.680 They just have an idea.
01:23:03.040 And if you believe in the Green News scam, if you think that...
01:23:07.060 And by the way, it was a grip, so people were getting rich over it.
01:23:10.480 But if you thought CO2 was warming the planet, which it's not,
01:23:14.500 and if you thought that you had to go to net zero and substitute solar modules...
01:23:19.240 I mean, I built the largest solar module array in New England, non-commercial.
01:23:26.880 So there are towns and industries that are bigger ones.
01:23:28.820 But I have the biggest privately owned solar array in New England.
01:23:33.840 And it produces 7 1⁄4 kilowatt hours.
01:23:37.980 And it powers my house very nicely, as long as it's not snowing.
01:23:42.120 You know, then you get into batteries.
01:23:43.540 You don't run off of solar power.
01:23:44.700 You run off of batteries and all that.
01:23:45.880 But I cleared three acres to do it.
01:23:49.340 Some guy was arguing with me.
01:23:51.000 He said, well, you don't need three acres for nine towers, which is what I have.
01:23:55.800 I said, well, you don't in Arizona, but you do in New England.
01:23:58.020 We have trees.
01:23:58.880 And you don't want the trees falling on your towers.
01:24:01.240 But my point being, so I built that.
01:24:04.000 And I know how much it costs.
01:24:04.860 I know how it works.
01:24:05.540 I know what the shortcomings are.
01:24:06.700 But that's to run one house.
01:24:08.480 And I didn't do it for environmental reasons.
01:24:09.980 I did it to be robust from a power grid failure, which is a completely separate issue.
01:24:15.920 So I had my own reasons.
01:24:17.600 But my point is, I know a little bit about it.
01:24:19.440 And I know that it doesn't work at night.
01:24:21.960 It doesn't work in bad weather.
01:24:24.520 Batteries are very expensive.
01:24:26.640 And the idea that you can power cities or factories on these things is nonsense.
01:24:31.760 They're trying.
01:24:32.580 They're spending the money on it.
01:24:33.620 But it's a complete waste.
01:24:34.800 But my point is, high oil prices were crucial to doing that.
01:24:40.220 I don't know whether they ever made a sale.
01:24:42.400 They didn't think, to your point, Gustin, they didn't think Putin was going to get the money.
01:24:48.480 Yeah, the oil prices were that high.
01:24:50.100 But the other side of that coin was cut off his oil exports, blow up the Nord Stream pipeline,
01:24:55.820 shut down bearish transit routes, et cetera, get others to join in the boycott.
01:25:01.120 And Russia wouldn't actually get the money.
01:25:03.640 They did.
01:25:04.420 The boycott never were.
01:25:05.160 Europeans are still buying it.
01:25:06.300 I mean, that's the crazy part.
01:25:08.480 There's still guests.
01:25:10.120 There's still Russian natural guests going through Ukrainian pipelines to Central Europe.
01:25:14.660 And Ukraine gets a toll charge for that.
01:25:17.940 And Russia's getting the money.
01:25:19.680 So it's like Western Europe is paying Russia to fight in Ukraine.
01:25:23.800 And Ukrainians are collecting money from the Russian pipeline to fight the Russians.
01:25:26.920 I mean, we're financing both sides of the war.
01:25:29.380 But the fact remains, get oil down and Putin will come to the table if he hasn't already.
01:25:36.520 But we're going to do that.
01:25:39.200 And that's coming.
01:25:40.000 And that's very beneficial for the U.S. economy.
01:25:41.820 That's another reason to be bullish in the long run, despite the short-run adjustment.
01:25:45.980 But getting back to 3-3-3 for a minute, the deficit is 3% of GDP or less.
01:25:55.340 And real growth is 3% or more.
01:25:57.740 What's the significance of that?
01:25:59.380 We can talk for economics for hours.
01:26:01.400 I love doing it.
01:26:02.120 But there's only one number that really matters.
01:26:05.280 It's the debt-to-GDP ratio.
01:26:07.460 Everything else is either a derivative of that or it's driven by that.
01:26:12.040 That's the most powerful explanatory.
01:26:13.860 And that's terrible right now.
01:26:15.480 Correct.
01:26:16.580 So there's been very great research by Ken Rogoff at Harvard, Carmen Reinhardt.
01:26:22.840 And they've not only collaborated on books and papers, but they've done their own.
01:26:26.660 I give Carmen Reinhardt enormous credit.
01:26:29.900 But what they showed is that up to a 90% debt-to-GDP ratio, there is a Keynesian multiplier.
01:26:37.640 People mock it, but it's real.
01:26:39.340 It doesn't mean you're investing productively.
01:26:41.540 But you borrow a dollar, you spend a dollar, and you get more than a dollar of GDP.
01:26:47.060 You might get $1.50.
01:26:48.520 You get $1.25.
01:26:49.460 But like many phenomena, it's subject to diminishing marginal returns.
01:26:55.360 So what's the critical threshold, as physicists would say?
01:26:58.000 Well, it's about 90% debt-to-GDP.
01:27:00.520 And by the way, this is why Maastricht and Merkel insist on 60%, because they didn't want to get close to 90%.
01:27:06.280 So as you get closer to 90%, borrow a dollar, spend a dollar, $1.50, $1.20, $1.10, $1.50.
01:27:14.260 At 90% debt-to-GDP, it goes negative.
01:27:17.080 Now you borrow a dollar, you spend a dollar, and you get $0.90 of GDP, and then progressively less.
01:27:23.460 So you're right, the United States is at about 125%, highest in history, higher than the end of World War II.
01:27:30.960 At least we won the war.
01:27:33.120 Now we're not winning anything.
01:27:35.860 Who's at our lunch table?
01:27:37.620 Greece, Lebanon.
01:27:39.800 You know, those are the other, and Japan's, they're in a world of their own, but that's about closer to 300% at GDP.
01:27:46.940 But a quick sidebar, I had a discussion with Saki Khabarasan.
01:27:52.760 He was known in the 1980s as Mr. Yen.
01:27:56.240 He was the deputy assistant finance minister.
01:27:59.380 His job was to manage the currency.
01:28:00.860 I said, Saki Khabarasan, I mean, your debt-to-GDP is like 300%.
01:28:05.820 You know, you've been in a depression since 1990.
01:28:10.500 You've had nine separate technical recessions, but all within the confines of one 30-year-plus.
01:28:16.940 Remember the last decade, and the fourth last decade?
01:28:20.680 You've been in depression for like almost 40 years.
01:28:24.760 And he said, but, Rickerson, you're missing something.
01:28:26.720 I said, what's that?
01:28:27.320 He goes, our population is declining.
01:28:29.020 So our GDP, our per capita GDP figures look much better than our aggregate GDP figures.
01:28:34.420 And I knew what he meant.
01:28:35.740 And I said, oh, well, you're absolutely right.
01:28:37.960 I mean, you've got a Ginza, the lights are on.
01:28:39.880 So I said, see where this ends up?
01:28:42.120 There's one person left in Japan, and she owns the whole country.
01:28:45.960 He didn't think it was too funny.
01:28:47.600 But that's the reductio ad absurdum of where Japan's going.
01:28:51.500 But leaving that aside.
01:28:53.060 So what's Trump going to do about the debt-to-GDP?
01:28:55.020 So what Trump's going to do?
01:28:56.520 Now, Americans like bang the table about paying off the national debt.
01:29:00.300 It's never going to happen.
01:29:00.940 We haven't paid off the national debt since Andrew Jackson, 1836.
01:29:04.400 That was the last time the U.S. was debt-free.
01:29:05.860 Where you don't have to pay it off.
01:29:10.220 What you do have to do is roll it over, which is the genius of Alexander Hamilton.
01:29:15.200 He figured that out.
01:29:16.580 So what makes it sustainable?
01:29:19.340 Interest rates cannot get too high, and the dollar cannot collapse.
01:29:22.040 Because this plays out in the foreign exchange markets.
01:29:24.620 Everyone's focused on interest rates.
01:29:26.700 Okay, fair enough.
01:29:27.460 But you've got to look at foreign exchange markets as well.
01:29:30.040 And by the way, if you want to put a thermometer in the patient's mouth, look at the dollar price of gold.
01:29:34.120 Because everyone's like strong dollars.
01:29:35.800 I mean, it's been down a little bit the last couple of months.
01:29:39.620 But for a year and a half, the dollar was hitting new all-time highs.
01:29:43.600 You know, DXY, Bloomberg Index, and so forth.
01:29:46.160 But, well, against the euro, yeah.
01:29:49.520 Against yen, Swiss francs, and pound sterling, yes.
01:29:53.100 But they're all passengers in the same lifeboat.
01:29:56.500 They're all going to sink or swim together.
01:29:58.280 You're comparing currencies to currencies when you use those indices.
01:30:01.680 What's the one yardstick, the one metric, where you can gauge the value of the dollar without using another currency?
01:30:08.620 The answer is gold.
01:30:09.320 And with the dollar, you know, it used to be, it wasn't that long ago, it took $2,000 to get an ounce of gold.
01:30:15.340 Now it takes $3,000.
01:30:16.800 Well, that's a one-third collapse in the value of the dollar if you're using gold as your yardstick, which I do.
01:30:24.220 But so all you have to do, you're not going to pay off the debt.
01:30:29.060 The debt's going to grow.
01:30:29.840 The debt's going to get bigger.
01:30:31.200 But this, you know, $36 trillion, it's a big, scary number.
01:30:34.400 But it doesn't matter.
01:30:35.560 Come back to that ratio.
01:30:36.680 If you see that ratio going from 125 to 120, 115, 110, and it's heading in the right direction, that's a sign of improving health.
01:30:46.300 That's a sign of sustainability.
01:30:49.220 The market will continue to roll over the debt.
01:30:51.940 So the math, at least for me, it was fifth grade math.
01:30:55.060 I'm not sure what ATC states.
01:30:56.480 But what you need to do, you need to grow the economy faster than the debt's growing.
01:31:02.800 But here's the key.
01:31:03.920 When we do this ratio, you're in nominal space.
01:31:07.180 I'm a big hawk on, you know, you've got to be real, take out inflation, let's talk real numbers.
01:31:11.640 But this is one where it's nominal.
01:31:13.640 If I owe you a dollar, I owe you a dollar.
01:31:16.120 It's interesting if it's worth 90 cents or $1.25, but it's a nominal number.
01:31:20.640 So if you have 3% real growth, which is what Besson wants, but inflation is 2% or 3%, which it is, you're going to have 5.5%, 6% nominal growth.
01:31:30.640 So if you get the deficit, the 3% of GDP, and growth is, nominal growth is 5% or 6%, 3% real, you know, 3 plus 2, 5 or 6% real, guess what's happening?
01:31:43.100 The ratio is shrinking.
01:31:44.500 In other words, the economy, the nominal economy is growing faster than the nominal debt.
01:31:49.360 That means the ratio is going down and we're getting healthier.
01:31:52.340 And that's his goal.
01:31:53.240 Except...
01:31:53.720 That's what Trump's going to do.
01:31:54.780 That's interesting, Jim, but this is probably a very stupid question, so feel free to clarify.
01:32:00.180 But if you also, at the same time, have a giant budget deficit, your debt is also going up at the same time.
01:32:07.100 It doesn't matter.
01:32:09.040 No, it matters what you're spending it on.
01:32:11.420 You could be wasting it, and I agree with that.
01:32:13.720 I'd love to see the deficit come down, but it doesn't matter.
01:32:17.040 What does matter, is the deficit growing more slowly than the economy?
01:32:21.680 Yes.
01:32:22.080 Okay.
01:32:22.720 The deficit is what...
01:32:23.880 But how quickly is the deficit growing?
01:32:26.280 Well, let's step back for a second.
01:32:27.820 Let's not...
01:32:28.640 Maybe I'm confused.
01:32:30.440 We have to separate deficit and debt.
01:32:32.480 Yes.
01:32:32.860 The deficit's the annual.
01:32:34.100 It adds to the debt.
01:32:35.000 Yes.
01:32:35.540 That's why I brought it up.
01:32:36.460 I'm talking about the debt to GDP.
01:32:38.020 But let's just say there's a large deficit.
01:32:39.280 But debt to GDP...
01:32:40.440 Sorry, I'm just trying to get more clarity on what I'm saying.
01:32:43.140 Debt to GDP is dependent on debt, and debt is going to increase if you have a budget deficit.
01:32:49.360 Correct.
01:32:49.600 And we will have...
01:32:50.420 You're right.
01:32:51.260 And we will have deficits, and the debt will increase...
01:32:53.880 Yes.
01:32:54.440 ...but that doesn't matter as long as the nominal economy is growing faster than the debt.
01:32:58.640 Yeah, okay.
01:32:59.400 That means the fraction's going down.
01:33:01.260 Yeah, no, that I understand.
01:33:02.480 And we're heading in the right direction.
01:33:03.840 By the way, we did this already.
01:33:05.680 In 1945, at the end of World War II, the debt to GDP ratio was 120%.
01:33:10.180 The highest in U.S. history up to that time.
01:33:12.760 It's higher today.
01:33:14.120 120%.
01:33:14.520 1980, when Ronald Reagan was sworn in, it was 30%.
01:33:17.200 How did we get from 120% to 30%?
01:33:20.960 Well, the debt didn't go down.
01:33:22.560 The debt grew enormously.
01:33:23.600 We had deficits not every year, but most of those years.
01:33:27.120 You grew the economy.
01:33:28.060 You grew the economy faster than the debt.
01:33:30.380 And that was the key.
01:33:31.380 And we kept inflation under control.
01:33:33.640 So what struck me about them?
01:33:35.440 I studied that.
01:33:36.420 I looked at the debt cycles throughout U.S. history.
01:33:40.220 By the way, the idea that Hamilton borrowed money and it's been going up ever since is not true.
01:33:46.440 The U.S. debt and the debt to GDP ratio, which is the key, is more of a sine wave.
01:33:53.060 It goes up and down and up and down.
01:33:54.840 When does it go up?
01:33:55.820 In a war.
01:33:56.800 When does it go down?
01:33:57.580 In times of peace.
01:33:58.980 There was one exception to that, which was the Bush and Obama administrations, and Obama in particular.
01:34:05.360 That's when it skyrocketed and there was no war.
01:34:07.560 Now, we did have the war in Iraq in 2003 and the war on terror, if you want to count that.
01:34:12.660 But not exactly Vietnam and World War II or Korea.
01:34:16.260 But the point is we would run up the debt and we'd win the war.
01:34:20.380 And after the war, we'd bring it down again.
01:34:21.880 This was the first time after I would.
01:34:24.060 And Reagan took the ratio from 30% to 50%.
01:34:27.580 He was a big spender.
01:34:29.640 But 50 is still manageable.
01:34:30.940 But again, we won the Cold War.
01:34:33.060 So we got something for it.
01:34:34.240 But since then, it's just been going straight up.
01:34:36.560 But what struck me about that post-World War II episode going from 120% to 30%, it was bipartisan.
01:34:43.640 It was Democrats, Harry Truman, JFK, LBJ, Jimmy Carter, and you had Republicans, Dwight Eisenhower, Richard Nixon, and Gerald Ford.
01:34:55.020 So it was not a political issue.
01:34:57.280 It was an American issue.
01:34:58.540 And both parties over decades worked together to accomplish it.
01:35:02.660 We could do that again.
01:35:03.640 Scott Besson is trying to move us in that direction.
01:35:06.100 That's where the 3-3-3 comes in.
01:35:09.420 Keep deficits at 3% of GDP, grow the economy at 3% or more, and 3 million barrels of oil will lower the price of oil.
01:35:18.660 That's what they're doing.
01:35:20.160 That's a winning strategy.
01:35:21.120 But I don't really see the payoff until 2026 and beyond.
01:35:25.860 2025, we've got the Biden hangover, and we have to get through it.
01:35:29.900 Jim, great to have you back.
01:35:31.100 We're going to go to Substack and ask you questions from our supporters.
01:35:36.060 Before we do, we always end with the same question, which is, what's the one thing we're not talking about that we should be?
01:35:41.700 Before Jim answers a final question, at the end of the interview, make sure to head over to our Substack.
01:35:46.800 The link is in the description where you'll be able to see this.
01:35:50.720 What does Jim make of Trump's desire to economically subjugate Canada?
01:35:55.340 What, in your opinion, are the safest investments in the current economic climate?
01:36:01.680 Why is it quantitative easing in the U.S. and the U.K., but printing money in Zimbabwe and Vimar Germany?
01:36:09.460 Well, I don't think anyone, we touched on this briefly, but I don't think anyone's talking enough about religion.
01:36:16.700 And I'm not proselytizing, I'm not preaching religion.
01:36:19.600 I'm just saying that to ignore the cultural value and the cultural impact and the behavioral impact of religion on people's lives all over the world.
01:36:27.360 I just returned from two weeks in India.
01:36:31.220 Hard to find a good Catholic there.
01:36:33.460 There are some, but...
01:36:35.500 You need to go to go with Jim.
01:36:37.560 But 200 million Muslims, more than Pakistan, which was the original Islamic State, but there are more Muslims in India, more than any other country in the world, except Indonesia, which is somewhat more, but...
01:36:51.780 Well, 220 million, and approximately 1 billion Hindus, very large, actually not so large, Buddhist population, but there are, well, six, Jains.
01:37:05.640 And everybody gets along.
01:37:08.500 I mean, I know in the past there, I understand the history, I've said it closely, but it's a very, very peaceful country, but there's not even, the notion of a separation of church and state kind of doesn't exist because there's so, religion is so much a part of what everybody does every day.
01:37:28.460 You care about your religion, but you don't think about it as like, oh, something I do on Sunday or one day a week.
01:37:33.520 Yeah, you go to the temple, et cetera, but it infuses the culture, the population, and one of the reasons that they're so adamant about not giving the states too much power, the history of India is just fractured.
01:37:50.860 I mean, 1947 was the first time it was ever a united country, even under the Mughal Empress, there were Hindu leaders in the South and so forth.
01:37:59.880 But we talked about Ukraine, we talked about the Slovak Republic, we talked about Putin and the church.
01:38:08.080 It's a, you know, Samuel Huntington said, this is the early 90s, he said, take a map of the world, put a transparency on it, and draw lines every place there's bloodshed.
01:38:18.020 And in Northern Ireland at the time, but fortunately not true today, but Middle East, obviously, but there were these, there was killing all over the world along these lines.
01:38:28.760 He said, now take another transparency and draw the dividing lines among the major religions and put one over the other and you'll discover they're the same.
01:38:37.220 That the explanatory power of religion in terms of where the world is fighting is extremely powerful, and yet we don't talk about it.
01:38:48.640 So I would say that's one for the next time.
01:38:53.220 Does Jim believe Trump is actively promoting cryptocurrency?
01:38:57.540 If yes, what is Trump's motivation?
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