Peak Prosperity - I’ve Got That 2008 Feeling Again…

Episode Date: May 24, 2025

Financial markets show distress signs like 2008; trust is breaking breakdown, we’ve got a rapidly weakening dollar, and long-bonds are breaking down all over the globe sending borrowing costs screaming higher. Time to plant a garden.Click Here for Part 2

The following is the audio version of a video released at peakprosperity.com. Visit peakprosperity.com to watch the video and to find other insightful content such as articles, discussion forums, and exclusive subscriber-only content. Something just broke in the financial markets in the world and I've got that 2008 feeling all over again. We're going to have to take a look at this folks. Hello everyone. Dr. Chris Martinson of peak prosperity here. And I've got that 2008 feeling all over again. Here it is. Now, let's set the context for this. What I mean, 2008. Maybe not everybody listening to this was paying attention to the markets or over again here it is now let's set the context for this what I mean 2008 maybe

not everybody listening to this was paying attention to the markets are very closely but you know there was this great financial crisis right really kicked off 2008 sometime they said it was because of housing and then well it was because of these funny things called synthetic credit default swaps or obligations the CDO blah blah You know what it actually was? Trust got broken. We have a faith based system of money in credit. And if I know that you're good for something and I loan you money, that's great.

I have trust in that situation. But if suddenly trust breaks down, the system can freeze up. And if the system freezes up very bad things happen that's what actually almost broke was the system almost entirely froze why because Bank A no longer could trust Bank B they just I didn't know if I'm Bank A I didn't know that Bank B was gonna be able to honor all of these very complicated pipings and subterranean loan arrangements and collateral swaps and this is and that's so what happened was bank a and bank b

stopped doing business with each other and that's really what we call the financial crisis or it could have been financial entity C and financial entity D or any of these within and across each other in fact the system of our money and piping of our money almost broke, right? And so that's really what it was, is a loss of trust. Now what does loss of trust look like when it applies to an entire nation? Well, it kind of looks like this. The Bank of Japan has been buying a lot of the Japanese government bonds or JGBs, and

now they're breaking. You can see they came all the way down here in 2020 and came to this low but look at this this is an explosion in the yield of the Japanese government 30-year bond. This is a giant loss of trust, a giant loss of faith. The faith in what? The faith in the Japanese government to control its finances, faith in the Bank of Japan to be able to Continue to contain this situation loss of faith in each other all the people who are playing on top of this blah blah blah We have a giant global integrated system of money that it now there's no fire heads no firewalls no bulkheads Anywhere in the system they trade as one giant integrated global system of money across Japan and the entire

Western world. So this breaking down right now, we have severe creaking and popping sounds. And at the same time, we see that the US dollar is getting weak. And by weak, I mean pretty weak. And if it busts below that 98 level, there's nothing but air under that. So this is the US dollar becoming weaker compared to other currencies. This represents a fairly significant change in what's happening in the world. And against all of this, we have team Trump trying to renegotiate or renegotiating global

tariffs, the global economic order. We want a weaker dollar. Everybody else wants their currency weaker. We're starting to see this breakdown in the fair play that you need to have within and across a system of money that's this tightly integrated. And what do I mean by that? I mean, just to be clear, let's look at this. If you just want to sell a single stock, right? We've got two investors at the top of this chart over here, right?

We got investor A and B over here, and they just want to sell a stock to each other sort of you know You have to sell to your broker and then there's a bank involved something called the Depository Trust Corporation And the National Clearing Play Bob Bob. There's all this stuff actually It's a lot more complicated than that This is what's just involved in between a single buyer and a single seller of a single share of a single company stock. Every shape in there whether it's a circle, a square, a pentagon, whatever the shape is, every shape and every line has to be solvent. If this system breaks at any point the

whole thing doesn't work. It just doesn't work. So we have this piping and plumbing of the system. You and I we hear about oh, the stock market went up or down. That's just window dressing. This is what the Federal Reserve and other central banks are busy trying to defend. This is what I'm hearing the creaking and popping sounds from, and this is just to try and buy and execute a trade or a single share of stock.

What if we were in the collateral settlement system? Fancy name for all those Japanese government bonds are a form of collateral. US Treasury notes, a form of collateral. Mortgage obligations that you've packaged and tranched and sold off. Collateral. So we have a collateral settlement system. And again, every single shape and line on this spaghetti chart here has to be solvent. And these are all different, mostly, from these.

So you can start to get the sense here that the piping and plumbing of our financial system is actually super important. And it has to operate both within and across countries. And it can't freeze up. This is what's at risk right now. Further, if you have a derivative, a derivative is really just a contract. You can see at the top here.

What's a derivative? Well, you do some due diligence. You get your counterparty approvals because you and I could enter into a derivative arrangement where we agree to bet money, maybe a lot of money, on what the temperature is going to be in Tokyo next February at 3 o'clock in the afternoon on the 3rd. We could write a derivative contract about anything.

Okay. Well, and then we have to write up the legal documentation around that. We'll have these master agreements and then we'll execute that trade. But once we've done sort of the legal part, the trading part, post-trade, well, I've got to confirm this trade confirmations, collateral management, maybe you're losing, I'm winning, I'm winning, you're losing, vice versa, I'm losing, you're winning, and we're gonna have to post collateral

into a collateral system, maybe we're posting stocks, and they have to be held in escrow across this system. Point I'm getting to is this whole system is now a very, very complex, complicated, but also complex system. And as a complex system, complicated means you can break it down and understand it and rebuild it. A complex system has behaviors that you kind of try and contain, but they emerge. So complex systems can't really be predicted or controlled. They can be understood, but they can't really be directed complicated systems. You can't. So there's some complex, complicated mechanisms in all of this.

This is complicated, but it also, there's some complexities in here, uh, including human behavior and international relationships and money systems and things like that very complex but Every shape every line every box every counterparty has to be solvent anything breaks in this system anything shuts down well Then you have some problems on your hand All right, well, let's take a quick break. we'll be right back after this message. I know what's plaguing you. You feel like everybody around you has gone insane.

Hello, Dr. Chris Martinson here. Look, we've built a world on cheap oil, endless growth, and borrowed time. But the cracks are showing. Inflation's up, resources are thinning, and the old rules don't seem to apply anymore. I've tracked this for years from the crash course to today, and I'm not here to sugarcoat it. At Peak Prosperity, I'm your information scout hunting down the facts, cutting through the noise and showing you how to adapt.

This isn't just information, it's a lifeline. The game is changing fast. Are you ready? Subscribe to Peak Prosperity now and let's get ahead of the curve. Alright, welcome back from that. Look, Warren Buffett said that said look derivatives are financial weapons of mass destruction carrying dangers that while now latent are potentially lethal and the problem is is that these big all these derivatives and all these

complex systems they all have to function perfectly and in fact derivatives represent a form of insurance that is only good as long as everybody doesn't try and use the insurance. It's an insurance product, ultimately. I'm trying to hedge my risk. Let's say it's interest rates. I don't want them to go up. You don't want them to go down.

We hedge. We use a derivative. If interest rates move a lot, that creates a problem because I thought I was covered. You thought you were covered. Maybe we're not. Here's the point about insurance. Everybody can't be insured against something at the same time Insurance is designed for the tail risks at the edge

Something really extreme happens, but that's it So you know three homes burned down in a city you can insure against that the whole city burning down Can insure against that insurance doesn't work as a concept so That's what derivatives are supposed to have been is an insurance product Where everybody's convinced that they all have hedged the risk away. And by the way, this is a big, giant, huge machine. Seven point five trillion dollars per day. Of over the counter, OTC derivatives trading happens. A lot of it. Most of it actually is housed in where the UK

This little tiny little island nation 60 plus million people right is responsible for three point seven trillion dollars per day of OTC foreign exchange instruments and so this just includes stuff like spot transactions forwards foreign exchange swaps currency swaps Blah blah that kind of stuff. Okay. This is massive and Trillions and trillions of dollars have to change hands every day enough this freezes up if the plumbing in this system Freezes for any reason because trust gets broken Because party a and party B no longer trust each other in this arrangement Then the whole thing freezes up then the whole thing freezes up and the whole system freezes up

and if the system freezes up, nothing works anymore. So that's why Warren Buffett said, weapons of financial mass destruction. Because if this bomb ever goes off, the whole thing, the whole system is potentially at risk. If you understand that, you'll understand things around what's called the great taking and why laws have been written to summarize and condense and also then offload the risk in the system to, well, you and me, unfortunately. I took a

deep dive into derivatives. They go a lot further. That was episode four of the great financial crisis And great taking series that I dove into trying to connect all that up So if you want to look into that it's really good series Everybody should be aware of it if only to dismiss it and say that sounds nutty to us Chris Gold gold is also telling a story. It's up 27 percent this year. That's a pretty big deal. It continues to go up. Today it's up another $69. I just took this snapshot a few minutes ago. So gold is telling a story.

What story is it saying? When gold is up this much, gold is a monetary metal. Silver is an industrial metal. That's why I don't say gold and silver like it's one word. It's two words. Gold is a and silver like it's one word. It's two words gold is a monetary asset and it trades like one and China's been accumulating a lot of it and So of other people and we're hearing more and more stories that big money is moving into gold in a big way

Now we would also call that the smart money retail us Europe is still not Still not there, but but they'll get there but this is telling us for those with ears to hear and eyes to see this is telling a very important story gold is saying that there is something wicked this way potentially coming within the world monetary system now of course we always knew that was coming I've been talking if not preaching about this for close to 20 years because it's just a math problem The United States as the core of this because we have the world's reserve currency

What we've done is we've gotten ourselves into a bit of an economic predicament a fiscal predicament a monetary predicament We have way too much debt in the system too much can't pay it back So there's two ways you can go down this path of figuring out what to do about the predicament. One is to say, look, we live beyond our means for a while. We borrowed too much money. We made too many promises. Medicare, Medicaid, such that we can't can't meet them. So what do we do? Well, since we live beyond our means, borrowed money, we maybe shouldn't have for stuff we didn't need. We're going to have to live below our means for a while. Now, that's the situation that Trump and his team and the sent came in under

originally back in January of twenty, twenty five. And they said, we're going to do this doge thing. We're going to contain spending. We're going to have to chop a trillion dollars off of this big old budget of ours. And we're going to contain spending. And that's how it's going to be painful we're gonna take some lumps and but good you know it's somebody had to do it that's path a path a is voluntary simplicity and austerity at B is just kick the can down the road a little longer and you just let nature

take its course and at some point the whole system just falls apart and you get into a big giant nasty hairy ugly sort of Crisis fiscal monetary crisis path a or path B. Well, they started us down path a but just a couple days ago We found out that they ditched that and the big beautiful budget bill came through and we now have an academic accident is on the way It's assured at this point it's gonna happen. Another 22 to 25 trillion dollars in deficits are on the way. The blue line here is the deficits that we were gonna have before this big beautiful bill came through. That blue line that shows that too that's two trillion dollars of fiscal deficits in 2025. It was gonna

wobble down a little bit to maybe 1.8 trillion here over till 2027 but then it was gonna wobble its way all the way up to about two point seven trillion dollars of fiscal deficit by 2035 now It's gonna be one to two trillion dollars higher. I mean a trillion dollars higher ish in here, so We're to go from two to three instead of from 1.7 to 2.5. We're going to, it's like at least, uh, it's about $2.5 trillion of new debt per

year is coming on on that, uh, under that standpoint. So yeah, what's that four or $500, $300 dollars more per year but you add it up you when you start at two and you end at three over ten years we can average that the two and a half two and a half for ten years is about 25 trillion more bucks that's gonna be added to this whole thing so I can guarantee you what's gonna happen. And oh by the way all of that that's without anything extra like a war or a recession or depression Those are extra that's like going to a car lot and buying a car and you're signing the paperwork to take your car And they said oh wait wait wait did you want a windshield and tires with that because those are extra

They never plan for extra in these budgets, so this is best-case scenario They never plan for extra in these budgets, so this is best case scenario It could get a lot worse than that at any rate That's gonna lead to a massive massive financial accident at some point I think we're already seeing the early creaking and popping sounds in the global bond market Which is why in the part two of this for my subscribers? I'm gonna go into why It's over. I think prepare for battle as Gandalf said prepare for battle folks this is it there's nothing we can do this is now locked in stone and we have too many creaky sounds coming out of the

bond markets I think we're in the final stages of this I hope we have a couple of years left in this story and that's if we're lucky so with that thanks, thanks very much for listening. Let me know what you think in the comments down below and I will see you next time. Bye for now. you