PBD Podcast - George Gammon Warns About U.S Defaulting On Its Debt | PBD Podcast | Ep. 268 | Part 1

Episode Date: May 16, 2023

In this episode, Patrick Bet-David, George Gammon and Ran Neuner will discuss: U.S. defaulting on its debt The Jobless claims crisis The unemployment rate FaceTime or Ask Patrick any questions on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://minnect.com/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Want to get clear on your next 5 business moves? ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://valuetainment.com/academy/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Join the channel to get exclusive access to perks:⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://bit.ly/3Q9rSQL⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Download the podcasts on all your favorite platforms⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ https://bit.ly/3sFAW4N⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ --- Support this podcast: https://podcasters.spotify.com/pod/show/pbdpodcast/support

I know this right man for me. Yeah, why would you plan on Goliath when we got that David value payment giving values contagious this world on your panoras we can't no value that hate is out of running homie look what I become. what I become. I'm the entrepreneur. Okay, so if you've hit the gym today by the time this podcast is done, your brain is going to have a workout because these two guys are some of the sharpest guys online. When it comes on to talking economics, both of them have a big YouTube podcast show.

You'll find everywhere. One of them is George Gammon. I think George had been on your show before, a couple of years ago. He's a renowned American real estate investor, entrepreneur, YouTuber, and teacher schooling macroeconomics. He creates and stars in the rebel capitalist show. He doesn't believe in capitalism.

He believes in free market capitalism. And the bad, it's his hat here. And then the other gentleman that's here with us is Ran. I was with Ran and Scaremuchin, who was the other gentleman that was with him? Actually, I remember, Scaremuchin. It was really good. It was Mark Yusko.

It was Mark Yusko. We had a really good time. And like I said to you, great host. He's a co-founder and CEO of Onchain Capital, a blockchain investment fund and advisory service. In 2017, he launched crypto trader, the world's first televised cryptocurrency show featured on CNBC.

Today he is the host and executive producer. The show has had huge success and is the most viewed show on the channel today. His show is called... Crypto Banser. Yeah, Crypto Banser and Rebel Capitalists. Thanks for coming on being on this on a company podcast. Thanks for having us. Thanks for having us.

Great to have you guys on. So you live where? You're based out of South Africa, Cape Town. And you're out of Medeen. So neither one of you live in the States. No. I thought for sure you would live in California or Portland or New York and some new States.

I actually left South Africa a couple of years ago, came to live in the States, spent two years in New York, spent a couple of months in Miami, and then went back to South Africa. That's a story for another time. And you're not leaving. You're staying put. I may come to Florida. I have a, I have a, I have a, I love, I love a, I love Florida. So how about yourself, George?

You're staying put. You're not moving. My name. Yeah, you know, I went there originally in 2014 just for investment opportunities and I saw the weather Perfect food is amazing people are awesome salsa dancing. Yeah, Adam knows I'm talking about yeah Opportunity to go with George to night out in Medellin dinner dinner in a movie Is that the time you guys wanted at the church and the pastor was giving great pre- Prank on me. I heard a great incredible message

was give a great, yeah, I heard it. It was a great, incredible message. Well, look, for guys who are, you know, the guys that listen to the podcast, we have another podcast on Slas Tuesday. It's been a crazy week. Maybe we'll talk about some of the stories. We had a great conversation on Thursday with someone, maybe we'll kind of get into it in a minute here.

But more importantly, today, I have so many stories I wanna go through with you, with Tom, with Adam, with Rand, with all of you, economy wise. But if you don't mind for the audience that go through with you, with Tom, with Adam, with Rand, with all of you, economy wise. But if you don't mind for the audience that doesn't know you, of course I give the intro here. But maybe take a minute and give your background of what you've done in the past where you are today.

Both of you will start with you first. Yeah, so I retired in 2012 as an long time entrepreneur. And I didn't know anything about the Fed, the yield curve, nothing about Macro at all, but I knew that I wanted to invest my own money. I didn't want to delegate that to financial planner. So I started studying, and the first stuff that I came across, the first content I came across is Milton Friedman's Free to Choose series. I went back to the 1970s and the 1980s, and that just, I kept me like a bag of bricks. I mean, it just really, really resonated. So from there, I went to of bricks. I mean, it just really, really resonated.

So from there I went to Thomas Soul, I started studying guys like Jim Rogers and Doug Casey and Rick Rule and Peter Schiff. And I just became completely obsessed with it and it became my passion. And then in 2019 I started the YouTube channel. And that grew, for whatever reason, that grew very quickly.

It still kind of amazes me that people actually want to see me talk in front of a camera, but for some reason they do. And then we started another channel, the Rebel Capital's channel, when the whole the mandate thing came out. And I was really pushing back against that. And that channel was really set up and designed to do that. And now we turn that into a podcast.

It's doing really well. And that's how I got to where I am today. We just had our live conferences past weekend, where we had Schiff and Mike Molloney and Lynn Alden and Snyder and Brent Johnson. A lot of kids. Kisaki was there. Yeah, and it's just become this movement

that I'm very proud of. I love it. I love the work you do. When your stuff pops up and I'm listening to it, I get smart about it. I'm done listening to what you have to say. Your views are very, you're a good teacher in the way you explain things. And it's obvious why you're grown. How about yourself? Typical on top of a new story, I think, .com raised money for an internet startup.

I was supposed to start an online wealth management community. BlueMassLap in the .com bubble went in solvent for the first time. BuiltMassLap, built and sold the biggest marketing and advertising agency in Africa, very big acquisition in Africa over $150 million. And then went into cryptocurrency full time. And when I went into cryptocurrency, there was no information. I was looking for information in 2016 and 2017 and there was zero information. Somehow I convinced CNBC to let me run the world's first televised cryptocurrency investment show. And we went live, we ran the show for a couple of

years. And then I realized that media and the way that CNBC were doing it is not the future of media. the way that CNBC were doing it is not the future of media. So I broke away and started my own 24, 7, 365 crypto media platform. You were talking 24, 7, that's a lot of work. I talked 24, 7, just for you. I just have four babies. It's five in a break here. We'll be back. Boom, wives break.

Exactly. Well, you know how to do, right? No, of course, I got four, two. Between the two of you, eight kids. Me and George were at zero. I believe you guys are on the bottom. We? No, of course, I got four, two. Between the two of you, eight kids. Me and George were at zero, I believe. You guys are on the phone. Yeah, we got a catch up. Yeah, we got a catch up.

Yeah, so today we run CryptoBanter, which is a crypto media channel, an amazing community. We're building towards 24, 7, 365 credible crypto streaming content. We do about five hours a day now. And they are a very strong community. One of the most little communities in crypto. Having the time of our lives. I love it. Listen, if you're able to

create content, have fun, and you have a different point of view, you will find the audience eventually. This game is a very honest game. If you don't do it right, they will tell you. If you do it right, they'll show up. I agree. And it's a ruthless game because if you don't do it right, they will tell you if you do it right, they'll show up. I agree. And it's a ruthless game because if you don't do it right, you can get canceled in a minute. But I think more importantly for me, the first time that I built a business and I needed to exit, I was working with a goal in mind and I had something to prove. And this time, I'm actually just there because I'm having a lot of fun. And it's like, I can't imagine having more fun. I just can't imagine.

It's a very different mindset the second time round because you just do what you love And it's like, I can't imagine having more fun. I just can't imagine. Yeah. It's a very different mindset the second time round because you just do what you love and everything falls into place. And in the first time round, you're all going to be saying to prove. So I gotta say, it's very impressive that you have four kids and you're only 27 years old. Yeah. I couldn't believe it. And I respect it before you started early and it is what it is.

So how about we get into some school? We've got a lot of them to cover here. Since you guys are all a lot of economy, we got a lot of economy stories to get into. Let's start off with jobless claims from Fox Business. And then we'll do some musk with the new CEO. We'll talk about Tesla stock. We'll talk about US treasuries, inflation,

Apple's new card, Jamie Diamond with the debt default that people are concerned about. But light parent companies stock downgraded by HSBC. We'll talk some blockchain. We'll talk some Federal Reserve with the Fed now. And some other stories in the back is what we'll get into with CNN, Chris Lick, CNN Town Hall. We haven't responded to the CNN Town Hall president.

A bunch of other things. Let's start off with, jobless claim rise sharply to highest level since 2021. Again, this is a Fox business story. Let's see this here. The number of Americans filing for unemployment benefits last week reached the highest level since 2021 with initial claims surging to by 222, to 264, this figure is well above the pre-pandemic average of 2.18 claims and marks the sharpest level of jobless claims since October 2021, continuing claims which represent Americans continuously receiving unemployment benefits rose slightly to 1.81 million, indicating a potential cool enough

in the historically tight labor market. Economists anticipate further increases in unemployment as a result of rising interest rates leading to potential reductions in consumer and business spending the fed projections suggest that officials expect the unemployment rate to rise above 4.6 percent by the end of next year up from a current three and a half percent this could result in over one million job losses by the end of this year tom what are your thoughts on the story well this is exactly what the fed one of the cause is with uh... whether they're

the direct cause of it or it's now we're going to a cycle of because we had over hired in uh... twenty and twenty one this is what the fed wants to see is rising unemployment jobless claims is where it starts which really interesting is right now the unemployment rate, according to the government, is 3.4%. And so that's 5.7, almost 5.3 quarter million people unemployed officially. But then we have this 1.9 million jobless claims in there.

So when you look at this and say that the last week, the week's claims is 264,000, that's like 25% of the current jobless claims. So it looks like this is inflating. LinkedIn came out, yet another tech company just laid off a little under a thousand people and the list of tech layoffs, we had a couple sheets in here, it was just incredible, Morgan Stanley 3000,

3M 6000, to name a couple of companies that were outside tech, the headlines have been tech layoffs, but it's all coming. And people have been asking, what does this mean? Does this mean the recession is here? Remember that's what they're asking. Does this mean that he keeps interest rates flat

in June when he gets along? And we found an interesting chart here really quick. Malik, do you have the blue bars? Malik. Just to give you some context to what Tom's talking about, when you said this is what the Fed wanted, I believe you were referencing the showdown almost between Jerome Powell and Senator Kennedy over Louisiana when they had this little thing going on

and his character was talking about, that's exactly what the Fed was talking about. You're saying you want the joblessness to go up. You want people to be upset and out of work. Yeah, once you can kind of get past the almost like widely-couple thing is what do you think about the stuff? Well, first of all, see, talking about something called the Phillips curve.

So back in the Phillips curve, they had this idea where there was an inverse relationship between the inflation rate and the unemployment rate. So if the unemployment was low, then inflation would be high. And if the unemployment, as the unemployment rate got higher, then inflation should come back down. That was totally debunked in the 1970s, but for some reason that's still part of their playbook.

Now one thing I'd also point out about jobs, if you go back a couple weeks or last Friday, I think it was the non-farm payroll came out, this blowout number, right? But then they also revised the prior two months down by like 150,000 jobs. And I also saw a chart on Twitter that was very interesting. This chart was how many consecutive months that the actual number exceeded expectations. And it went back, let's say, 20 years, right? And the most

it got up to was about four or five months consecutively, where the actual number exceeded expectations now, or on 13. 13. I mean, it literally goes off the charts, but what they do is they've been revising down every single month prior. You see, so when you think about it, it seems like what they're doing is they're coming out of the blah at number just to make the administration look good. And then the next month, they're just revising it because they know that no one will pay attention to that and they'll just sweep it under the rug. So if you look at the revisions as the actual number, then they jive a lot more with this story that you're reporting on than the actual headline non-farm payroll.

So it's very suspicious to say the least. I love that you use the word suspicious because I completely agree with you. And I also saw the, it sounds like you're reading it the same way I was. About two months ago, they had gone in and revised the definition of seeking work. And it was actually 5.1 million were had, quote, given up. And so they pulled them out of the 166 million total workforce that they estimate, right? 62% participation rate, about 166 million people in the workforce. And what they did, they pulled it out.

But if you put the two together and you doubled it, the unemployment rate instead of being at that point four would have still been closer to seven and three quarters. Yeah, yeah. And the birth death model. Correct. I don't know if you saw that, but I don't know if you guys want me to explain that. But there's something, there's an adjustment for the headline non-farm payroll. It's just birth death.

So what they try to do, it's not human beings, it's businesses. So what they try to do is guess how many businesses were started and how many businesses failed within that time frame. And then since that's, I don't know why they can't report, but for some reason those brand new businesses can't report so that they have to guess as to how many jobs were actually created.

Based on how many LLCs came into existence, and what's odd is they just assume that every single LLC that's created has X amount of employees. And you know, as an entrepreneur, that's how they're estimating. Yeah, that's one of the ways they do that. And so I saw a lot of people that I follow on Twitter that I'm friends with that are very, very smart.

And they took out that adjustment for the birth death model. And then if you do that, then it was basically zero and it was much, much lower, which will most likely next month get revised even lower than that headline number. So it's all this kind of financial engineering, so to speak, that's making the job's numbers look as good as they can.

And keep in mind, that's the only thing that the Fed and the Central Planners and the Janet Yellen types have to say, hey, look at how great the economy is because every single other metric that they have, that even the Fed said like a year ago, that this is how you tell for a recession, I'm referring to something called a near-term-forward spread. I can explain that if you'd like me to, but they used to say, well, this is what you have to look at.

This is what you have to look at. Until that inverted. And they're like, no, don't look at that anymore. Look at that. Yeah, what do we see here? Yeah, look at the same now. So this is all they've got left is the unemployment rate. And that's why they might be kind of using these types of financial. Speaking of suspicious, we did this on the podcast a couple of weeks ago. How Biden created 10 million new jobs. Whatever the crazy number was Rob, you probably have the link. But it turned out it was just people who basically were fired during COVID and then just got their jobs

back. These aren't really created jobs. So it sounds like, but what you can inflate a lot of these numbers. What do we expect? I mean, it follows the process. You first increase interest rates. We've had the fastest interest rate increases since anyone can remember. Naturally, that's gonna bring down inflation because spending is the first thing that stops. And only after spending stops do people stop hiring people. And so the job numbers are coming down.

They are manipulated. And they lag, and they lag. They lag, but I think more importantly, I think this is probably the more important thing. The Fed's mandate is based on a concept which was debunked. So the Fed's mandate is based on inflation and unemployment. That's what the Fed looks at. And if you've been looking at what Jerome Powell has been doing and saying, no matter what

happens around it, no matter what we think about the banking collapse or whatever else, we're focused on inflation and we're focused on unemployment. And that's really where the focus area is. And I think that the mandate of the Fed for this kind of scenario is probably wrong. And I mean, I like this in the Fed, but I think the mandate needs to be redefined. Yeah, and another thing that's interesting

we're on the topic of unemployment is one of the presentations from this weekend, a good friend of mine, Jeff Snyder, who's probably the smartest guy I've ever met. He looks at those curves, like the near-term forward spread, which is basically the current three-month treasury yield, minus the three-year treasury yield that the market expects in 18 months,

based on a variety of factors. The price stand. What the yield? So you look at the current three-month yield compared to what the market is predicting the three-month yield will be in 18 months. And then you subtract that. And right now, there's like a 200 basis point inversion.

So what the market is saying is that they're predicting in 18 months or within that time frame, the three-month treasury yield will be 200 basis points lower than it is today. So then he said, you got to sit back and ask yourself, what does that mean? If the three month treasury yield goes down by that much, what would the economic environment have to look like? And where would the Fed have to have interest rates as a result of that economic environment.

Some of the conclusions that he came to is he thought that unemployment would be at double digits by the end of this year. Double digits, unemployment. Double digits and he thought that based on that and based on the yield curve, the normal yield curve and the near-term forward spread and the year dollar futures curve and whatnot, that the Fed would most likely be at 0% by the end of this year. Well, George, what are you saying is pretty shocking. You're saying it's at 3.5% now by the end of this year. And the recession that's producing that causes the Fed to take rates, Fed funds,

down from let's say 5% all the way back down to 0%. And then think about what type of economy, think about the banking crisis. Think about the Black Swan event that we would have to have in order for the Fed to drop rates that quickly. And another thing that I would add, there's a big psychological component here, right?

Because you guys, if you study history, you guys know that history remembers Paul Volker very well. It does not remember Arthur Burns well, right? And he was the Fed chair that preceded Paul Volcker. Everyone thinks that he didn't have the balls, basically, to take interest rates high enough to break the back of inflation. And sure enough, Paul Volcker comes in and he had the wayvos to get in there and do what needed to be done, even though it was very unpopular.

So if you're Jerome Powell, who do you want to be remembered as? Obviously Paul Volcker. So from a psychological standpoint, that puts him in a place where if he's going to air on one side or the other, he's going to air on the side of taking rates too high. But you see the market knows that. And even when you include that psychological component, they still are betting that he's going to take rates almost down to zero or around that area by the end of this year. They're getting Snyder? No, the market, the market, because if you look at how the market is placing their bets,

the bond market as an example, that's what they're saying is going to come to fruition. And the bond market is the smart money. I mean, if you look at just the basic yield curve with the two-year treasury and the ten-year treasury, you can take that all the way back to 1950s. And that has almost 100% accuracy. When that inverts, you 99% of the time, you get a recession. Now, what's interesting is right now, it's still inverted. So the two-year treasury yield is higher than the ten-year treasury. But the stuff doesn't hit the fan when the curve is inverted. It hits the fan when the curve is no longer inverted. And what usually happens is you have a bad inver,

when the yield curve steepens, you have a bad steepener and a good steepener. The bad steepener is when the two-year goes back down below the 10-year and almost always that's a result of the fed dropping rates as a result of some sort of crisis situation. So those people that think that if the fed drops rates, the stock market's going to rip higher that unfortunately they're on the wrong side of history and they might get a rude

awakening to say the least. The bond market is right more often than the fed narrative is right and if you're looking at what the fed- The yield curve is always right. Always right. And if you look at what the fed narrative is now, the Fed narrative is right. And if you're looking at what the Fed, the yield curve is always right. Always right. And if you look at what the Fed narrative is now, the Fed narrative is now we're going to continue raising until the data until the data says otherwise. But I think Paul to the Jones was on CNBC today. And he said, I wish they would say something like what they really wanted to say. So I'm not a big, I'm not a big believer in the black

swan event, which you, which you spoke about. But I do think that there is something else that threatens the job market and could cause mass unemployment. And I think it's going to happen in the next three to six months. But I do think it's going to happen in the next 12 to 18 months. And that's AI. So I think no one is forecasting for the dramatic change that AI is going to have on people's jobs. Because right now it's just chatbots and we're seeing the beginning of it. But remember that AI techn going to have on people's jobs. Because right now it's just chat butts and we're seeing the beginning of it. But remember that AI technologically does that.

Yeah. And I think that that's going to cause a lot of people to lose their jobs. And I don't think we've recreated the jobs, the new jobs as quickly as we're going to lose the old jobs. And I think that's a big thing that we've got to look out for. As I say, I don't think it's three to six months from here. But I do think that 12 to 18 months from here, we've got a massive jobs problem.

And we're going to have a lot of unemployed people. Yeah, but you layer that on top of the $21 trillion time bomb, which is commercial real estate. I mean, let's not forget about that. We see Silicon Valley bank going bust or signature all these regionals. Well, who do you think finances all these commercial real estate deals? And keep in mind when you know this, when you do a commercial real estate deal to buy a 40 story building or something like that, you're not getting a 30 year fixed rate mortgage. You're taking that out with maybe two year debt, maybe five year debt. And within the next, I think it's within the next two years you guys might know, I think it's

like two to 2.5 trillion dollars worth of commercial real estate that needs to be rolled over debt, right? So if you think about where you got that debt to begin with, was these regionals, and they're all going bust. So when you go back to that regional bank, you think that they're gonna be the chomp in the bit

to give you a loan, absolutely not, and that just blew a hole in their balance sheet. So if you can even get a loan, there's going to be a massive risk premium on there. In other words, the interest rate is going to be extremely high as your cash flow has gone down because your occupancy rates have gone down. The cap rates have gone down because the treasuries have gone up and yield, and that's going to, you know, cap rates are going to follow treasuries because that's a competing asset class. So basically, you have your expenses going way

way up. If you can even get debt to roll over and your income is going way way down, your equity is going down because cap rates are going up and this creates a whole big problem. I mean, personally, I don't think that we're over the banking crisis. I think we're probably in ining two or three. Ining two or three. Yeah, and you look at Europe and the commercial real estate is just as bad over there. Yeah. So, I mean, they started with credit suites, but I wouldn't be surprised.

There's nowhere to go. Three years ago, you look for commercial real estate. I agree that we're ining two or three. Yeah, and it's gonna be pretty bad, because you look back at two years ago and what paper did I have at LIBOR Plus X? Now look where LIBOR is. It's impossible to refile. I can't refile it. And my asset value just is, is, is pick a city is taken anywhere for what?

17 to 33% down in the US market on cities. We saw that building in San Francisco. Had a, it's got a $330 million asset value on a bunch of paper that's underneath that building. And they were expecting it to go Sub-100 in a 60 million. Yeah, they're just gonna give the keys back to the bank I was reading a statistic the other day that if you combined all the occupancy in New York City you'd have 34 empire state buildings And think about that. What a statistic but it does mean that we're getting to the end of the tightening cycle and it does mean that we're going to get into an easing cycle much quicker than further letting on.

But let's not forget the interest rate fallacy that Milton Friedman points out that when interest rates are low, that means usually that means money is tight. And for a lot of small businesses, that means that interest rates infinity. Yeah, I hear you, but we're getting to the end of the cycle. We see realist, we see jobless claims start going up. We're seeing real estate starting to, starting to come down. And that's usually the end of the cycle in the beginning of the new cycle. So I think that the tightening cycle, certainly in my opinion, is is, Oh, the tightening cycle is in, yeah, yeah.

I think it's, I think it's close to done. I agree with Paul Tudor Jones. I know you guys had it up there, but I agree with Paul Tudor Jones. And I think it's close to done. Yeah, yeah, I would agree. Tom, will you say something? Yeah, the period at the end of the sentence

is I wanted to step back from the numbers and manipulated numbers. I really want to know what the consumer thought. So I dug in and I found this, if we can go to it now, the blue bars. And what it is, it broke up the generations right now and then it said, okay, what do these generations feel about job security?

Well, if you run a national poll, 53% of people in America are not worried at all about job security, then you peel back the onion. 82% of boomers close to retirement or fighting the last inning of their own financial war. 82% that they're not worried about job security. Until you get to Gen Z Millennials, only 25% of Gen Z and 37% of Millennials and 48% of Gen X are feeling good about job security. So you forget about the manipulated, you know, unemployment figures that we're talking about.

And go look at what the common man, this is a broad based survey. And this tells you, it tells me that what the average worker is feeling is that the younger generations, you know, the ones that exported the 20% raises during COVID. Yeah, yeah. Or suddenly feeling a little different about job security. But this is all directly connected. You know, this reminds me of a video I did the other day on these buy now pay later loans.

I don't know if you guys saw this. Oh, a firm, thin tech companies and others like them. No, just how many people right now, how many Americans are using buy now pay later? They said 44% of Americans said that they will likely have to use a buy now pay later loan within the next six months. And then that survey broke down. You know, what do you think you'll need that buy now pay later loan for?

And so 44% of Americans said that and of the 44% 21% so that they'd needed to buy groceries. I mean, here's a story that you're talking about. Americans are spending big credit cards. Here's what that means for the possibility of a recession, CNBC story, consumer spending accounts for more than half of the economy, making it a significant factor in maintaining economic stability, court-long, chief economist at National Association of federally insured credit unions stated, if consumer spending is strong, that alone is generally speaking enough to keep the economy from slipping into

a recession. In the first quarter of 2023, GDP showed a modest growth of 1.1 percent compared to the previous quarter, the improvement from the mid-2022 GDP figures, which initially raised recession concern, can be attributed to consumer spending. Consumers are spending, despite rising prices, leading to a decline in personal savings. Many Americans, particularly, those with lower incomes are increasingly relying on credit cards for their day-to-day expenses. Bank of America Institute economists reported that roughly 29% of household earnings. Earning less than 50,000 a year are using credit

cards for spending, 29%. Additionally, the average tax refund has decreased negatively impacting spending for household that rely on refunds. So when you're in a situation like this, and you're seeing data, and then you're looking at the stock market, markets doing OK, nothing crazy's going on. And you're like, well, I guess we're kind of recovering. Everything's going back to normal. And like, well, real estate's not really dropping that much.

Yeah, maybe a little bit of movement. Yeah, it's gone down maybe 5, 10, 15 points in certain markets. But no one's still selling their house because they know if I sell the house, I still have to go buy a house, the similar price and I'm not going to go out there and try risking fine. So maybe it's not as bad as it is. And then there's the other side that's saying, listen, it's not as bad as it is. They're expecting a recession Q4, Q1 of next year, it's coming 10% unemployment, etc. They kind of like what you were talking about. And there's a third party that says, yeah, it's going to be soft landing. It's not going to be as bad as people think it is. Things you have to worry about

is AI. You got to worry about the debt, the default election, the real, there's so many different things going on, more important in the economy. The economy's stuff about fear porn. It's not real. They're just trying to scare you for eyeballs. What do you say to those people? Just two words yield curve That's it. So what I mean by that is I know I know what you mean by that Talk to a person that doesn't consume financial Content all day the regular person sitting at home. they're 35 years old, makes 82 grand a year, household income, 130, 135,

that like, George, what are you talking about? Explain to me what I should be worried about and shouldn't be worried about. Yeah, so let's go back to 2020. Okay, let's go back to March. And we all know what happened in March. You know, we thought the world was going test right. So around that time, the Fed funds was right around 1%.

Now, they were supposed to meet on a Wednesday, and that on an emergency meeting on the Sunday prior. And they met that night, and they came out and announced that they were going to drop rates right down to zero. So from 1% down to they're going to drop it by 100 basis points, and they were going to commit to basically QE infinity and they're going to commit to doing up to a trillion dollars a day in the repo market. So just providing that type of liquidity, kind of the oil of the lubricant of the financial

system. Well, the very next day the stock market went down by about 1500 points and it continued to go down until we got the CARES Act where you had this fiscal stimulus, and then the market started to go back up. But my point is that the Fed dropped rates by 100 basis points, boom, right? Why?

Because we thought the world was coming to an end. So what these curves are telling us right now, and they're almost always right, is that the Fed is going to do that again by the end of 2023, but this time they're not going to drop from 1% to 0%. This time they're going to drop from 5%, maybe not all at one time, but they're going to drop from 5% down to 0% or close to that, right? So think about that, If they had to drop by a hundred percent because of COVID because the world is coming to an end, what does the world look like if they're dropping by four hundred basis points or five hundred basis points? Tell us what does it look like? What does it look like? It looks like worse than what we saw in 2020. It looks like worse than the GFC unpack that.

It looks like worse than the GFC unpacked that it looks okay So it looks like unemployment just going up past double digits. I wouldn't be surprised I don't know about 2023 but going into 2024 I would not be surprised if unemployment got north of 15% 15% absolutely absolutely and I think that you're looking at a Over the long period of time because the residential real estate doesn't crash. It slowly goes down over time. I mean, it peaked out in 2006, and we didn't see a bottom until 2012 when you adjust for inflation.

And you can see that real price decline as nominal prices are flat if we have a certain degree of inflation. But I think that over the next five or six years, you're going to see real estate really come down. Commercial real estate, I think that over the next five or six years, you're going to see real estate really come down, commercial real estate, I think might crash. But then you're looking at the S&P going down by 30, 40, 50 percent. And we have to, another thing to keep in mind here is tax receipts, Patrick, because you know that the government is spending like a

drunken sailor will say, right? So they have this huge deficit. And if we go into a session, what are they gonna do? They're gonna have to increase deficit spending because this is monetary heroin. And what I mean by that is if you do five trillion of deficit spending to cover COVID, you have to keep doing more and more and more

and more to get the exact same result. So let's say this time, they have to do 10 trillion in deficit spending, right? Okay, well, let's also keep in mind that tax receipts are not a derivative of tax rates. That is total nonsense. Because you go back to the 1940s, regardless of whether the rate has been 90%,

or 25%, they still get about 18% of GDP as far as tax revenue. But now, especially since the economy has been so financialized, since the 1980s and 1990s, now tax receipts are really tied to the stock market. And what we have seen, and we can talk about this, I was talking about this the last night, is this blow up in the one month treasury, where the other day it went up in one day by a hundred basis points. I mean, you never see that type of volatility ever.

And this most likely was a result of the government coming out that day and saying, hey, guess what? Not only do we have this debt ceiling crisis, but all that tax money that you thought we were going to get, we're not getting that. Because asset prices haven't gone down this year. They've gone down this year. And so if we have this recession, if those, the market goes down by that much, tax receipts are going to go down by that much as well.

At a time, when the government is having to spend more than they did during COVID to try to patch this whole, right? And then who is buying these treasuries? At the short end, you might have a buyer, but the long end, do we go into a recession where interest rates are actually going up at the long end? I mean, these are all questions that we need to think. So by the way, the last time, did somebody say something? No, I was going to say, I don't share such a gloomy view to be honest.

Let me say this, let me say this, I'm just gonna yield curves. I'm coming to you next. So last time we hit 15% was 1940, 14.6%. We got up there, we got close to that COVID. Yeah, I mean, COVID, you can't really count COVID because COVID to me is, I understand what you're saying, but COVID to me was a complete different,

black swan that we went through, non-black swan, 1944. But you're saying, but COVID to me was a complete different, you know, black swan that we went through. Non-black swan, 19-4. But you're talking about unemployment? It's a free-form. Okay. 14.6%. Yes. What did I say?

I said something. No, no, no, no. It's clear. On a point of 14.6%. So, the entire hospitality industry was told to stay home. Yeah. So, so this, this is the part. I really, I'm really curious, you know, George, ran your thoughts on a time, you as

well, is, here's the difference where, where I, George, ran your thoughts on a time, you as well, is here's the difference, where I become a little bit skeptical of my own trends that I look at, and I say, this should move this. That should move this. This should get destroyed. This should come up. The last three years, it's been a little out of whack

that the stuff that moves another thing doesn't move it anymore. So why is there, what is the difference between 1940 and today? Here's a difference that I see. Now I want you to push back and find the leak in my argument. 1940, we were on the gold standard. You couldn't really manipulate that much.

You were still protected by the gold standard. As much as you wanted to manipulate, you know, and kind of play the game, you couldn't fool, you could do it. Don't get me wrong. Joseph Kennedy mastered it in 20s and he caused the whole 1929, all that stuff. Fine. But you still had a certain level of the fed, still had a certain level of accountability to what they could do and what they couldn't do. Post, you know, 1972, 73 gold standard, we're off of a Nixon, whether you agree with it or not,

you know, to where we are today. Today, these guys have more levers to control and manipulate and play with than ever before. They're like, yeah, you know, we're gonna kinda go like this. Yeah, we're gonna go like this, like the whole thing with the default. Like, you know, could we really default back in the days

every time we wanted to spend something and this is like a little over a hundred years ago. You have to avoid it, you know, report it line by line. Then all of a sudden it becomes what? No, let's just let's just increase the debt limit and let us do whatever we want to do with the money because we need it. And you know what? Now we make it political. Now it becomes a vice. I think they have so many different things to manipulate, to put temporary band-aids on a catastrophic event that they could delay, that each time you're like,

yeah, they delayed it for five more years, yeah, they delayed it for five more years, yeah, they delayed it for 10 more years. Do you agree or do you disagree with the fact that they have more manipulation today than before? Oh, absolutely. And I don't want to be clear,

I'm not saying there's a high probability that they default. If we even, if we go to this debt ceiling, I think that's going to be resolved, for sure. Isn't it always resolved? Yeah, it's almost solved. I'm less concerned about the default we'll get into that story. I'm more concerned about 15% unemployment, Q1 of 2024. Yeah, but so what you're saying is what Jerome Powell was saying is that, hey, I've got the tools for this. Yeah. Right? Well, okay, did he have the tools for Silicon Valley Bank? He came out and created that new facility. I forgot what it's called, the bank fund lending facility

or something like that. But then what do we have? Then we had first republic. You see what happens? Every single time they come out and say that I've got a tool, you know, we've got the tools. Don't worry Adam, we've got the tools. But then you have another bank bloop.

Say, oh, well, actually we got to create more tools. But it was, but what it was because they're always behind the insured, it was to protect the, the positive, the, well, actually, we got to create more tools. But it was because they're always behind the insured, though, it was to protect the depositor, not the, they never said they're going to protect the dollar. Well, they could borrow against it. They couldn't unload them. They could borrow against them in a hundred percent of the dollar. But they would have to repay the loan. Yeah, but it's not a offloading.

Well, if they had a deposit flight, they could get those assets. They could get a hundred cents on the dollar. They could borrow a hundred cents on the dollar for the face value of those assets, which they thought was their problem. But then you had first republic, right? Didn't solve that problem. So what I'm saying is the Fed thinks they can solve these problems, but they're way behind the curve.

And if they weren't behind the curve, they wouldn't have to do 45 rounds of quantitative easing as an example. That's an example of their tool. They just have to do over and over and over again. Well, if it's so powerful, why do they have to do it 45 times? And if they've got all the tools for this, why do we still have these blowups when they have to create another tool? You see the problem here is the global monetary system is broken. And if it wasn't broken, you wouldn't have a Silicon Valley bank. You know, why can't they go to the discount window? Why can't they go to the repo market? Why can't they use all of these free market solutions, well, not

the discount window, but the repo market, why can't they of these free market solutions, well, not the discounted one, but the repo market? Why couldn't they use these free market solutions where the other banks would give them the liquidity they need? Because there's too much counterparty risk in the system, because all the banksters know that the system's broken. And the only person that's willing to come in and clean up the mess is JP Morgan, if they unload the risk of the asset side of the balance sheet they're incorporating onto the taxpayer. And they say, oh, by the way, in order for us to do this deal, we're going to have to borrow $50 billion from the taxpayer.

And I don't know if you read that story, but they took an immediate gain of $2.6 million. And they're projected to make $500 million a year on that deal. JP Morgan is, and he didn't even have any out of pocket cost to do the deal. And he said, FDIC, you've got to ensure 80% of the losses that I incur if I absorb this balance sheet. I mean, it's just like, it's a freebie, but you see my point. But if the I see assisted, itDI's if the IC assisted rescue packages, which means a taxpayer is funding assisting JP Morgan and the bigger banks in rescuing

the smaller banks. That's what that's all it is rescuing. I'm not rescuing. Sorry. I'm a Christmas gift. Yeah, taking over. But that goes back to my question though. That goes back to my question that they will use every lever today because there is no accountability

to manipulate any data point they want. That's what I'm saying. Yeah, so you go back to COVID and everyone said, what you're saying is that there's a fed put. There's a fed put, George, so we shouldn't worry about it because they can kick the can further down the road. That's the argument. That's what seems to be happening.

You're saying that in COVID, you could see that the fed put expired because the fed tried to come in with their put and the market kept crashing. It just said, you know what, the Fed puts done. How long did it crash though? What was it probably a week or two? Yeah, but that's, but it kept crashing until the government came out. That's that point. Okay, so then we go from a Fed put to a government put. So the question now becomes, can the government act the same way that the Fed did? And if we are in an environment where inflation is 0% or they're worried about deflation, the answer would most likely be yes assuming that the Democrats and their Republicans could get along, who knows, right? But if we're in an environment where inflation is extremely high,

you know, is the public gonna have the stomach for the Biden or any administration to come out and say, yes, we're gonna do another five trillion when they realize that that five trillion created this inflation that they're having to suffer through now. You think the public's gonna say no to it? You think the public's gonna say no to it? You think the public's gonna say no to it? They're gonna say yes, they're gonna open up the arms.

They're gonna say drop the tin. I mean, look, this is why the system that we have in America and away it's broken because there's no such thing as earning the right to vote. Anybody, if you allowed the majority to vote, this was a republic gradually becoming more of a democracy where the individual's not protected from the majority.

It's a complete different concept of what America was truly founded for. That's my concern. My concern is there's way too many levers to bullshit the real economy and put a big ass bandit, so everybody thinks, oh, things are great, guys, let's go ahead and get real luck, even before midterms, what happened, pre-midterms? Let's use all the stuff that we've been having for oil and all that in our reserve guys. Dump it, dump it, use all of it, use all of it. When you use all of it, use all of it. $6, $5.50, $5.50. Did you notice how in the last midterms it's supposed to be a red way

poem? It's not. What happened to, well, we fixed the economy, month later back to the same shit again. So the point I'm trying to make to isn't I disagree with you Mm-hmm. I think we should be at 15% I think the mess that we have should be a 15% clean out the system But but we have created zero George zero accountability Well, we allowed these guys to get away with murder because whoever controls the knob Yeah controls what they can do to delay the current issue.

That's my concern. We're aligned on the same page. I'm worried who's controlling the knob. Remember before the elections there was the recession and then the definition of recession was two quarters. Two quarters. But didn't they had two quarters and they said no, no, no, that's not a recession. That's not the definition of a recession.

It's okay. Give us what the definition of a recession is. Well, that's not that's not a recession. That's not the definition of a recession. It's okay Give us what the definition of a recession is. Well, that's not the definition of a recession that that was the manipulation Yeah, the other big manipulation is Marking not having to mark tables to market in other words not you know when the interest rate goes up Not having to reduce the value of your holding on your balance sheet if you're holding government treasuries or Words back or more get back security. What that means is that it's that is manipulation. That is as if you're if I buy a property today and I buy the property today for a million dollars and then the interest rate goes up and the property is only with $600,000.

If I say that I'm going to hold the property until the end of the mortgage, then you don't have to write it down. And that's manipulation because you don't know as a bank when your deposit is going to want their money back. And when that happens, you're going to have to sell these mortgage back securities or these tables to under that. And so the biggest manipulation and the biggest scam was not having to mark these things down.

Basically accounting trip, where we're able to put an account called hold to maturity is what he's referring to. Yeah, so it's a very good point. All they had to do was say, we're going to hold these tables to maturity and you could write them at the value of maturity, even though the value had decreased by 40%. So a million dollar table, if you held a million dollar table for 10 years, it was on your balance sheet at one million dollars. Even though if you wanted to sell it in the open market today, you would get six or seven hundred thousand dollars for it. Because you said you were going to hold it to maturity. But if your deposits came and knocked on the door and said, we want our deposits back,

well, you only got six hundred thousand dollars. You got to sell it. That is the manipulation. Yeah, and that's why the Fed fed us up with facility. Correct. Can I ask you guys a question? This is kind of to Pat's point. Let me just be clear about the question.

You're basically saying the system's broken. We got to, would you say, end the Fed over here. Pat's basically saying somebody needs to be the bad guy. We're almost on a steroid or a heroin trip right now right now. We're inflating the economy. My question is, we know that the administration, whether it's the current Democratic administration under Biden or whether it's Trump, they don't want to be the bad guy, because why they'll not get reelected after the election cycle.

So who needs to be the bad guy to get us out of this mess? If the system is broken, is it the Fed? Is it the... I'm sorry, I'm sorry, I'm sorry, I'm sorry. I think it goes back to Pat's point that usually the way these things end is just slowly and gradually the politicians try to kind of dodge responsibility and the people that end up holding the bag or the porn middle class. And that's what's very, because if you go through what Pat is saying, okay, they come out with more fiscal that kicks the can down the road, but

that doesn't mean that it fixes the economy. Ever. The economy continues to get worse because like, as an example, if you go back to purchasing power, right, we have had nominal wages go up. But if you look at the actual real wages since 2019, they've gone down when you were just for inflation. Yeah, they're getting destroyed. That's right. We we're eliminating middle America,

even though you get these steamy checks, let's say they do UBI next, right? To try to fix the problem. Well, yes, I agree with you, that poor middle class are gonna say, yeah, let's take that, let's take that, let's take that. I think that's good. But unfortunately, it's gonna make them

worse off over the long run, because they're always the ones gonna have to pay the money. But if you're making 40, 50 grand a year and someone wants to send you money, you're never going to say no. We have the same conversation with Andrew Yang. But you know what's crazy. Let me tell you.

So, let's talk as capitalists here, okay? Who have somewhat won the business game. We're doing okay for ourselves, right? Okay. There's a community that'll say, well, that's easy for you to say, because you made your money and now you got all the money and you want them to go, because you want to see the market crash and all this other stuff, because that's how you're going to make the money. First of all, a true free market capitalist is going to do good in a good

market, a bad market, a terrible, it doesn't matter, they're going to excel. So if you print more money and you send five trillion dollars through the economy, I'm going to make money. Why? Because low and middle income economy, I'm going to make money. Why? Because low and middle income families don't know how to spend money. Still comes to us. If you don't give the money and you hold these politicians accountable, we're going to go through season where all the fake capitalists are going to be filtered out and they're going to go out and work for a true capitalist. And then we're going to have some real people that are doing it the right way, operate companies. And then people are going to say, I want to work there.

I want to work there quite frankly, all these banks that are going out of business. You buy a long term, 64%, 63% of your assets are sitting in that and rates are being called and a JP Morgan sitting on 14%, whatever their numbers was, 14, 15%. Some of you guys are playing the risky game. And guess what? You shouldn't be in business. There is guys that should be out of business. So for those that fall into this trap, what the rich people want, the recession to it,

nobody wants the recession to it, nobody wants the money to be printed. We simply want accountability. Accountability gets to it of fake players in the game. There's way too many fake players in this game and nobody knows who's who. You're not going to get accountability because I'm going to explain to you hard works. I live in South Africa. In South Africa, we used to have a reasonable economy. Today, we have 10 hours a day of no electricity. Okay, you have to understand, we have 10 hours a day, every single day, with a government switch is all by electricity, unashagled. So,

you get 10 hours a day of no electricity. For everyone across the country? Across the country, 10 hours a day, you don't have any of these. If you're rich poor middle income, they just shut down, they say, ford loaded hell, bang, they shut down ford loaded hell, ford loaded hell is gone from two to six. Now you think.

California are you listening? Now you think that you think, okay. It could be next. You think that's cool, like, okay, so the studio doesn't have lights, so you don't have lights at home. The traffic lights don't work, which means that the traffic becomes, you can't go to a meeting because there's no traffic lights

The stores can't operate so now you're asking for a cannibals. Let me tell you how this happens There's no accountability. It just gets worse and worse and worse and worse and worse For the middle and lower class until something breaks. Yeah, when something breaks. How does the government respond? More many just makes it rain What happens to the more money? Yes, to the top. We have a period like COVID where everyone has more money. The people that don't know how to save, the ones that aren't capitalist, the ones that aren't successful, spend all their money. And the cream rises higher to the top and the people that are successful rise to the top. So all that happens is is there's no accountability and what happens is the rich get richer and the poor get poorer

I've seen the extreme you guys are living in the US. You're not in the extreme. I'm in South Africa. I see it the rich 0.1% the poor are 99% and the gap is huge And I'm seeing the state to exactly the same thing. We're on track the rich are getting ready The poorer getting for it. We're on track the only thing is you still have 24 hours of electricity just for now for now Some states let's carry on yeah, sometimes you need you can't use water from time Sometimes you need to see an example. Yeah, you need to be outside of something you guys live it But sometimes you need to be outside Let's go to the next story we've been on this story for a while

I'm gonna go to the next door with Jamie diamond said and we'll comment on it as well so Jamie diamond warns us that the fault is potentially catastrophic asks JP Morgan has a war room he warned the us that default would be potentially catastrophic for the economy emphasizing the urgency for Congress to raise the debt ceiling and avoid defaulting on financial obligations diamond expects panic in the markets if lawmakers fail to address the issue leading to volatility and potential primes in both the stock and Treasury markets. He stressed the need for politicians to negotiate a deal and come to an agreement. He is preparing for the risk of a default by holding regular war room meetings which

will increase in frequency as a deadline approaches the stand off between Republicans and Democrats over the debt ceiling. Deadlet me continues a repub which with Republican seeking spending cuts and Democrats insisting on a clean debt ceiling bill. Tom, thoughts on this? Well, you know, we've been watching this for several years now and it really seems like the potentially catastrophic debt ceiling is like the latest avengers movie. We're going to have a whole lot of stress and a whole lot of things coming on and then someone's going to save us one day at Spider-Man the next day at the Ant Man.

Maybe this time it's time for Aquaman, but at the last minute a deal gets cut and Jamie Diamond is trying he has seen the stalemate now going on between Kevin McCarthy and Joe Biden. And you notice that there were three different meetings that they had over the course of five days. And then it was all leaked out. Perform McCarthy was in his limo. The White House was leaking out. Oh, McCarthy started yelling. They used the word yelling. You mean yelling? No, I mean, holler. No, Janet wasn't there, you know, it was just, they were hollering at each other and they

the White House leaked that out to make him look bad before he even had a chance to get to the microphone. And I know you both follow this and I'm talking about. And I think what's about to happen is who's going to save it this time? And what Jamie Diamond is trying to do is push forward to get them to come together and to agree for the... Who has leverage? Who has more leverage

right now. The question becomes who has more leverage who truly is going to wait the last second who's got bigger balls and who is more worried about this hurting their reelection you know any of that stuff. Those are real questions we got to answer. I think I think right now McCarthy has cards he knows it because it's a bigger election for the Dems because they could lose the White House that they have.

So right now, I think McCarthy has the ability to go that 5% further and get them to blink on his terms. But make no mistake, the debt ceiling's going up, it's just going to be what other concessions are underneath that deal. What I think? What we're watching there is a marketing campaign for a game of chicken. That's what it is.

You've had the two marketing campaigners that have come out in the last couple of weeks, Janet Yellen has come out and panicked everybody about what's going to happen if the debt ceiling doesn't get raised. She's been on every single TV station. And the next point in the marketing campaign is Jamie Diamond. But ultimately, I think everyone knows, American or not American, knows it.

They're not gonna default on their debt. The US isn't gonna default on their debt. It's a negotiating tactic. It's a negotiating play between the Dems and the Republicans. And I think I'm in the same camp as you, where I think Macardi's got 5% more. And that's it. That's where it ends. The US ain't gonna default.

Yeah, I don't follow the politics too much. From a macro standpoint, I don't usually say this, but I actually agree with Jamie Diamond, I think he's understating it. If they default on those tables, you got Mad Max. Let me put it to this way. I have my two-hour quarterly meeting with my Goldman Sachs cab before this meeting.

They flew in, we had lunch at the house, and we talked about it. And their position was to move money at a certain bonds because they're not fully sure for now on what's going to happen between May, June, maybe July, we revisit. I don't like Goldman's taking that position. Yeah. Why is Goldman taking that position? You never know. In the history of the last 100 years, only six countries have defaulted. And we've never defaulted. Like Russia, Argentina, Germany, what did it? Lebanon, Greece, Venezuela. It's really those six have defaulted. Okay. You guys are thinking

we may be one? No, we're not saying we are. We just think we have to be ready. Okay. So then you hear, you know, the numbers comes out on how much we have in our treasury general account, right? Our GDP right now is 23 and a half trillion dollars, but we only have 200 billion in that account. That's like somebody making 239 a year, 239,000 dollars a year, and you got 200 bucks in savings. That's America today. Okay. That's current America's financial situation. 200 billion sounds like a lot of money. We don't have a lot of money. But for me, this is what it's going to come down to. I don't remember when the whole midterms was going back and forth and they thought it was going to be a red wave and McCarthy thought he was going to need anybody from the Maga campus. Like, I don't give a shit with those guys.

And we can do whatever we want to do to them and they're like, oh, that's how you talk to us beyond closed doors. No problem. It's not a red wave. So guess who you need to negotiate with. You need to negotiate with the guy you hate the most. What's his name? Matt Gates. I'm right here. Let's negotiate. You got to call Trump.

Last minute here, call him. He's got on the phone, all this stuff. Because Trump is a ball-busting negotiator that's willing to use the threats. Like the whole thing in the CNN town hall that he says, so when you were president, you said this, and then how he said, yeah, that's when I was president but what's the difference between now because I'm not president because he knows how to use leverage does

McCarthy have that kind of backbone to really negotiate and get everything he wants I don't know if he has that kind of backbone quite frankly based on what you hear from a lot of different people he's more part of a you know swamp camp than some of these other guys are because they're on the go-shing with each other. What ends up happening here at the end of the day, of course they're going to end up figuring out a way not to default. You heard Trump said, let them default. Let them go through it.

That's the DNA of a negotiator that's willing to go all the way to say, no problem. Let's go ahead and do it because in reality is let's just say they do default. Okay. Who loses? Well, can you, President Biden, can you imagine because of Congress, because of Congress, because of Congress is the reason why we default. And if it wasn't for Congress, President Biden, a hundred years from now, when history books write who defaulted, one's gonna say congress

Because they know we're gonna remember McCarty unless if he comes to president They're gonna say there was a president. They call him the worst president of all time Second to Jimmy Carter and he beat Jimmy Carter's name is Joe Biden Son a hundred years ago. This guy was the president that defaulted the concern of putting the fear on congress Congress should not be afraid right now. Congress should sit there and say, it's kind of like the movie air. I don't know if you've seen a movie air with Michael Jordan and Ben Affleck is playing the role

and Sonny is played by Matt Damon and Matt Damon sits down in the board room and is having this conversation with Michael. And says, Michael, let's face it, no one's gonna remember us. Everyone's gonna remember you. They're gonna remember your story. They're gonna tell movies.

You, they're gonna do this to you. They're gonna, but no one's gonna remember us. We're not gonna remember you. They're gonna remember your story. They're gonna tell movies. You, they're gonna do this to you. They're gonna, but no one's gonna remember us. We're not gonna remember it. Congress is not gonna remember it. President's gonna remember it. Congress has to know that they have the leverage. If they're able to negotiate accordingly with that, then they can get a lot of things

that especially would accountability. If not, it's gonna be another, hey, we need a few more trillion hours. Oh, okay, here we go. Can we go to the same bar together? Yes. Help me out with my reelection bid to make it a little bit easier next time.

In case Trump wins, that's the stuff that's gonna happen. I hope I'm wrong. I hope they stay strong, because I think the leverage today is with Congress. It's just what we'll see if McCarthy is a good negotiator. Maybe McCarthy needs to, in the next 24 to 40 hours, take a break from everybody and read a book called

Art of the Deal. The this guy who was a good business guy back in the days, then, you know, things changed. You said, there was six. Who wrote Art of the Deal? Who was this one? This one. No, it's his name, Donald Trump, yeah.

DJ, DJ, DJ. You said there were six countries that have defaulted on their debt, right? I think that was Argentina five. Argentina? Argentina, Argentina. Argentina's done it for five times. So this is a little naive of a question because we Argentina's done it. Okay, gotcha. So this is a little naive of a question

because we've never done it in the United States. Walk me through what happens if we do default at a low, like I think Tom had a great analogy where it's almost like a Marvel movie. They come in in the last minute, but let's say there's no one to save you. Superman doesn't swoop in and save Lois Lane. What happens in America?

It's different when it's the US. So when Argentina defaulted or when Greece defaulted, okay, it's a small country, third world country defaulting on its debt. But you think about all the countries holding US sovereign debt on their balance sheets. And it becomes a cataclysmic worldwide event. That's big of a lie. You know what, if the US missed one payment, the discussion that he had with Goldman is irrelevant, because it means that everything goes to zero.

So it's not going to happen. You know what it is? If the aliens invade Earth, I have a feeling that Russia and Ukraine will fight the aliens together. It's that kind of like, you're talking about saying that's so big and so macro, that if it happens, everybody will fight together to make sure the Democrats and Republicans will become best friends in making sure that it doesn't happen. When Alien show up, I'm just saying, and George, you use that big.

You use the mad max analogy. Yeah, because I think it's even, so you're saying that all of these global governments have these T-bills as an example on their balance sheet. So first and foremost, you have to differentiate. Are you talking about defaulting on payments like they just have to close down some parks and stuff? Or are you talking about default that these T-bills are maturing and they literally can't pay back

their T-bills? Because those are two completely separate questions. So let's just go down that path that for whatever reason, the US says, okay, we're not paying back our T-bills. Those T-bills that you have them are cheering, you can go ahead and pound sand. So not only are they on the balance sheet of these central banks, but more importantly,

they're the underpinning of the global monetary system. So let's go back to 2008. The problem that you had in the main problem is that the global monetary system was using two main forms of collateral, mortgage-backed securities and T-bills. All of a sudden they woke up one morning and they saw, oh, you know what? These mortgage-backed securities, they're not good as collateral, they're not a hundred

cents in the dollar, and then you have the whole monetary system implode, which gives us the GFC. Now we've got one form of collateral. That would be those T-bills. So if you take out that jenga piece, that's the last one. Now, in who, if it's one day, will that jenga piece come out? I don't know. But you don't want to play that game. And going back to his point, which is very good, I think in that type of situation, everyone's going to be on the same side, because they're going to be getting so many calls. They're going to be getting calls from Jamie Diamond.

If you're McArthur, would you take it to that level? Well, well, I don't know how much he understands the global monetary system, but he's going to be getting calls from every single world leader saying, you better do this because you don't understand the fire that you're playing with right now. If I was McCartney, I definitely play that card because, as you said, he's got less to lose because the reputation, the reputation is unbiting. No one's going to, you said it. You said it.

In the, you know, presidents, presidents because they want to do good and they want to be remembered as being presidents, they do good and no president wants to go down as the worst president in history. And I don't think that, I think the Democrats have just got, I think Biden's got much more to lose. And I think to your point, Michael, McCarthy's got 5% more. And that could be the risk that the bond market is pricing in. If I have six bullets in a battle and you've got five, I've got more shots than you.

Yeah, but if I can bluff you to scare the crap out of you, there's no bluff that cards all on the table. Oh, no, no. So here's what's in the game they're in, in the world of politics, the way they use ways to put the fear of death in you, is very different than capitalism. In capitalism, someone's gonna say, I'm gonna recruit away your best talent,

and I'm gonna take your best customers, and I'm gonna open up an office right across the street from you, we gotta compete, right? In politics, you wanna do that? Do you want us to release that story about you, I want to open up an office right across the street from you. We got to compete, right? And politics. You want to do that? Do you want us to release that story about you 17 years ago? Do you want mainstream media come and talk about Gina? Who's Gina?

You don't remember Gina in college? Second year. Yes, it's good. I'm going to tell you about Kevin. Oh, you forgot about Gina? No problem. Hey, keep doing that, buddy. Tomorrow, everyone's going to know about this. Cronin and Gina.

By the way, there's no such thing as a girl with Kevin McCarty and Gina. I'm just making, I don't want people. No, it is there. Oh, Gina. That's kind of how. Kevin, you're listening up. Yeah. So I don't know. We'll see what happened there. The reality is, if it does, you're talking about our currency is going to be devalued. You're talking about global catastrophic

events with economy. It's going to be catastrophic at the highest level. If we move to the next global reserve, currency real quick. I think maybe an interesting question would be, okay, let's just assume that they do fix the problem of the debt ceiling if they extend it, then what happens? Because to Pat's earlier point, the TGA right now only has, I think it's even less than 200 billion. because to Pat's earlier point, the TGA right now only has, I think it's even less than 200 billion. But Janet has come out and said that she would like to see five or 600 billion in there.

So let's assume that they get this thing resolved. And Janet Yellen goes straight up to the market and says, here's $500 billion worth of treasuries. Increased liquidity. So then what does that do? What does that do to interest rates? If there's not enough buyers out there for those treasures? She scaled that in.

Does she issue all of the debt at the front end of the curve where there is a lot more demand? Then you bring down the average maturity of that $32 trillion in debt from two years down to like one year, then the short-term interest rates impacts their budget, the treasury, the federal government, much more than it did before. You can literally see them painting themselves into a corner in real time. Let me ask you another question. If in the unlikely event that there is a default,

what assets would you be wanting to hold on the day of a default? Bullets. I agree, I agree. I agree because I've seen this. I agree, Bullets is a great one. I see this, Zimbabwe is just, it's one of my neighbors. I've watched the currency go from something to zero in matter of weeks.

You want to own Bullets, you want to own property because a house and a property always has value. You want to hold gold. And then to me, you want to probably hold digital gold. I'm not pushing the crypto narrative, but if there is a default, then there's not going to be a default. The chance is zero, zero, zero, zero, zero, zero, one. You've got to start thinking, what are the assets that you actually want to be holding?

But you're saying there's still a chance still. There's always a chance. And I'm a philosopher. There's always a chance. And you're saying there's still a chance still. That's what you're saying. Same and I'm just a philosopher. And I'll play Devils Advocate here and I'd say that you want to hold dollars as well. Uh, dollars? Yeah. Absolutely. Yeah. People will be dumping their teables. Okay, fine. So you're looking at the assets out of the balance sheet. Look at the liability side. So all those dollars say there's a hundred trillion dollars

in the world right now, which is probably a four point. Okay, so you got asset, but how did that hundred trillion come into existence through debt? So you still got to pay back that hundred trillion. It's five points. And if you want to dump those, someone else is picking them up. You've still got the exact same amount of future demand for those dollars.

You see, it's just like you add, let's say you've got a million dollar mortgage right now, it's denominated in dollars. And you say, you know what, Pat, I really don't like what's going on with the dollar. I want you to go ahead and pay me in Bitcoin or pay me in gold or Russian rubles or the new bricks currency. That's fine. But at the end of the month, you still got to come up with dollars, bigger mortgage. You see, and what happens is if the world economy collapses, so do banks, there's no liquidity, and there's no dollars in order to pay back all of those loans that are due at the end of the month.

And you have a rush to dollars, and you see it spike from 101 on the DXY up to 120, 131, 40, it's almost like a short squeeze on the dollar, and that could be just as disruptive as the default on the debt.