TRIGGERnometry - How to Survive the Coming Economic Disaster

Episode Date: April 18, 2022

Jim Rickards is a renowned lawyer, economist and author of Sold Out!: How Broken Supply Chains, Surging Inflation and Political Instability Will Sink the Global Economy, available for pre-order now. SPONSORED BY: *Lost Debate* YouTube show and podcast. New Lost Debate episodes drop twice a week. Search for The Lost Debate on YouTube or wherever you get your podcasts. *StartmaiL* - Private email you can trust. Join our exclusive TRIGGERnometry community on Locals! https://triggernometry.locals.com/ OR Support TRIGGERnometry Here: https://www.subscribestar.com/triggernometry https://www.patreon.com/triggerpod Bitcoin: bc1qm6vvhduc6s3rvy8u76sllmrfpynfv94qw8p8d5 Buy Merch Here: https://www.triggerpod.co.uk/shop/​​​ Advertise on TRIGGERnometry: [e-mail] Join the Mailing List: https://www.triggerpod.co.uk/sign-up/​​​ Find TRIGGERnometry on Social Media:  https://twitter.com/triggerpod​​​ https://www.facebook.com/triggerpod​​​ https://www.instagram.com/triggerpod​​​ About TRIGGERnometry:  Stand-up comedians Konstantin Kisin (@konstantinkisin) and Francis Foster (@francisjfoster) make sense of politics, economics, free speech, AI, drug policy and WW3 with the help of presidential advisors, renowned economists, award-winning journalists, controversial writers, leading scientists and notorious comedians. Learn more about your ad choices. Visit megaphone.fm/adchoices

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Terms apply. The war on the ground is tragic. We all understand that. But the economic war, aside from the human cost, maybe including the human cost, is bigger. You know, the starvation in Sudan might not make the TV as much as atrocities in Ukraine, but it's going to happen. And probably more lives will be lost that way. Hello, and welcome to Trigonometry.

I'm Francis Foster. I'm Constantine Kishenka. And this is a show for you if you want honest conversations with fascinating people. Our brilliant returning guest today is an economist, lawyer, investment banker, author, commentator, speaker. He's all sorts of things. We get them on every time there's a looming economic disaster or an actual economic disaster. Jim Rickards, welcome back to the show. Thank you, Constantine. Thanks, Francis. It's great to be with you.

It's good to have you back. So last time we had you on the show was about two years ago, right as the first instance of lockdown. down here in the UK. And we had you on with another good friend of us, Pippa Malgram. And the things that we were talking about, particularly was that both of you were predicting that there would be inflation coming

as a result of everything that was happening in the world at that time, the actions that the governments in many countries around the world were taking. And we're now starting to see that your predictions were entirely correct. So what do you make of the economic situation we find ourselves in now?

Well, that's a big question. of course. The inflation's here. So we, for, I'll say two years from 2020 to, and over the course of 2021, there was a big debate in economics and among analysts about inflation versus maybe disinflation, you know, still have inflation, but at a lower rate. And that debate kind of went on through all of most of 2021, but that's over. Inflation's here. There's no more debate about it. The new debate is, will it persist? will it get worse, which it might, or will it be subdued in some way? Now, I have actually been in the camp.

Again, you can see the inflation coming. It's here. It's going to persist for a while. That's the big question. We'll kind of tail off quickly over the next few months. Will it kind of be the dominant theme for 2021? Sorry, 2022. I definitely lean to the latter.

However, going out maybe nine months to a year, I see that curve bending and getting into a more disinflationary mode, not for good reasons. It has very, well, it does have to do with the Fed in the sense that they painted themselves into a corner. There's no way to escape the room. They can subdue the inflation, but at the cost of a very severe recession, not a mild recession, a very severe recession. So the question is, to me, the biggest question in economics is, will the Fed go down that path, do what they have? have to do, do the only thing they can do, to subdue inflation at the cost of a very severe recession and something like a stock market crash?

Or will they see that coming? They'll be the last to know. We'll all see it before they do, but they'll be the last note. It's because they rely on flood models and they're kind of in their own economic forecasting bubble and they're very defective ways of thinking about the economy and they're very much a creature of inertia. There are a whole lot of reasons why the Fed is not nimble. is kind of quite the opposite.

But they'll see it eventually, probably when it's too late, and will they block at that point and stop rate hikes and maybe even reduce rates? That could save us from the recession, but that will just amplify the inflation. So rather than say which one's going to happen, I prefer to lay out those two paths and then just watch it very carefully. But more to the point, we've seen this movie before. This is a replay, and I think it's on, you know, you hit the remote control for double or triple speed. It's going to happen faster. But this is a replay of everything that happened from 2013

to 2019 and into 2020, which was, I'll just go through it quickly. So 2013 May, Brunki says we're going to taper asset purchases. That's money printing, quantitative easing, whatever you want to call it. The market, you know, tanks, bonds go down. Everyone's like, oh, it's over. And then Bernanke blocked. But finally in November 2013, they said, okay, the taper begins. They were still printing money, but at a slower rate, and that matters. That went on until late 2014. The taper was over. They stopped buying new assets.

They said, okay, here come the interest rate hikes. Except they didn't come for another year. It wasn't until December 2015. Then Janet Yellen finally raised rates. And then another year for the second rate increase, so it was December 2016. So it was really, really slow. It took two and a half years. But they got to two rate hikes.

But then here comes J. Powell. And then, like, cloud, boom, boom, boom, 25 basis point hikes. every meeting. And all the Fed was trying to do was to get back to normal. They were trying to get interest rates to maybe two and a quarter, two and a half, get the balance sheet down to, you know, something like $2.5 trillion. They never specified it. That would have been a reasonable level. Okay, now interest rates are kind of normal, two and a half, balance sheets down around $2.5 trillion. We're back to normal. We finally got through the global financial crisis in 2008. We undid all that stuff. Well, what happened? From October 1st, 2018 to December 24th, 2018, the stock market dropped 20%. That was the December 24th, 2018, we called the Christmas Eve Massacre. Stock market went down 3% in one day. But the Fed was tightening into the weakness, as they always do. And the last interest rate hike, it was December 16th or 17, within a day or two, but it was,

mid-December, 2018, they were still hiking and raising rates. And that was the last straw. And then the market just tanked. And then finally, J-Powell got that message on first week of January, 2019. He says, okay, that's it. We're going to be patient. Use the word patience. It's one of these code words.

You have to get the code book out and see what it means. But patient means we won't raise rates again without giving you advance warning so you can get out of your carry trades or whatever. And then he went further and said, huh, looks like we got to cut rates. And they did. And then by early 2020, here comes the pandemic. And then they took rates all the way back to zero. And then they started QE, I don't know, six, seven, call what you want. They took the balance sheet to $7.5 trillion after getting it down to $3.5 trillion.

So look at that whole sequence from 2013 to early 2020, including the pandemic. What happened? They tapered the asset purchases. They raised rates. They sank the stock market. Then they said, okay, no more rates. hikes, then they cut rates, and then they started QE. And by April 2020, where were we? Zero rates, back down to zero, and the balance sheet was a seven and a half trillion after getting down to

about three and a half trillion. So that was a big circle. It ended up back where they started from, but the point being they failed to normalize. They failed to get rates where they wanted. They failed to get the balance sheet where they wanted. They did sink the stock market. Okay, now two years forward, here we are again. What are we doing? They just raised rates at the March meeting. They're going to raise them again in May. And that's the easiest forecast I've ever made, 50 basis points, May 4, boom. You can, you know, you can count on it. And they're going to announce, by the way, I don't have a crystal ball. The Fed told us this. I mean, that's the thing about the Fed. They may be wrong, but they're transparently wrong. So they tell you what mistakes they're going to make in advance. So the Fed forecasting is actually fairly straightforward because you just have to believe them. So they're going to raise rates again in May, probably 50 basis points. They're going to announce a reduction in the balance sheet, whether they actually started, and may they probably will, $100 billion a month, reduction in asset purchases. So that's QT, quantitative tightening.

In other words, they're running the same playbook. They tried to run or they started to run in 2013, 2014. But here's my question. They failed the last time. Why do they think they're going to be any more successful this time? Why do they think they can get out of this? And the answer is, pardon me, the answer is they cannot without a recession. Now, and this is what Larry Summers has been saying, I think he's right.

And, you know, everyone's jumping aboard Allen Blinder and all these other big brains from Princeton. But the point being, they can normalize rates in the balance sheet and they can stop inflation, but not without causing recession and not without causing a stock market crash. So the big question for the next year is, Will the Fed do that? And they may. Paul Volcker did it. Or will they block again, at which point you might rescue the market, but the inflation is just

going to go wild? That's the debate. But the thing is about framing it that way, you've got two paths, and we'll get signals along the way. We won't be the last to know. The Fed will, but we won't. You'll be able to see this coming. Okay.

And Jim, just remember that most of our audience are not financial experts. So you've given us the sort of financial. expert assessment of, you know, the Fed is going to have a choice between controlling inflation by likely causing a recession or allowing inflation to run rampant. How do some of the more recent things that we've seen play into this? Because we don't have time to get into the war in Ukraine, the rights and wrongs of all of that. But in terms of the economic impact, obviously, Russia and Ukraine are two of the world's biggest producers of wheat. So you've got food inflation that may be coming as a result of that, but also for other reasons,

oil and gas and everything that's happening there. How are those events are going to be affecting ordinary people's lives, in your opinion? Well, in a big way, and it's going to get a lot worse. And here we're talking about global supply chains. By the way, I just finished writing a new book. It won't be out until later this year. It's funny, I wrote a book about the supply chain, but the publication is delayed by the supply chain. It is.

They don't have paper. The paper comes in Finland. I talked to my Asian. She said, I represent an author. His book is done. It's printed, but they can't ship it because they don't have cardboard for the boxes. And even if you do, there may not be drivers. There's a queue with the printers.

They're doing triage on books. No need to kind of belabor that. But the point is my supply chain book is being held up by the supply chain. But anyway, that is a big deal. And there, and I'll come back to the Ukraine connection because it's huge. But the supply chain was breaking down before the war in Ukraine. That was breaking down beginning of 2018 with Trump's trade wars. We don't have to debate the pros and cons of tariffs and trade wars.

There are two sides to that. But there's no question that that disrupted the supply chain. When Trump put tariffs on imported solar modules and consumer doorables and refrigerators and air conditioners, everything, coming from everyone, but it was clearly aimed at China. China retaliated by saying, we're not going to buy any more U.S. soybeans and they bought their soybeans from Brazil. And that sounds like, okay, you change a purchase order from the U.S. and Brazil, what's the big deal?

It's a huge deal. They move on ships. You know, you've got to redirect all that ship traffic, change all the shipping lanes, break a lot of long-term contracts. The U.S. has to scramble to say, well, we've got to sell the soybeans to the Dutch because the Chinese aren't buying them anymore. And that's that, you know, so the point being the logistics, the trains, the train lanes, the cargo lanes, the purchase or the currency, it all get scrambled.

So that was going on before the pandemic. Then boom, here comes the pandemic. And the Chinese are, you know, they got the zero COVID policy. You might as well have a zero cold policy. You know, no one can get a cold. We're going to shut down the city of 26 million people, which is Shanghai, because there's a kind of tame version of the flu going around. You know, I'm not charged in China, so I can't change that.

But I do know what they're doing, and they're doing exactly what I just said. Next to Shanghai has a place called Ningbo, which is the biggest port in China. Most of the containers showing up at the port of Los Angeles are coming out of Ningbo. Well, that's all affected. And so the global supply chain is breaking down. It was already breaking down. Now it's a lot worse. Now, along comes to the war in Ukraine.

And you're absolutely right about the wheat. Russia and Ukraine, now I know there are different sides of the world. war, they're in a fight to the death, but taken economically, if you combine Russia and Ukraine, you're looking at 25% of all the wheat exports in the world. Now, obviously, it's a huge number, but the point is there are countries where they get 100% of their wheat from one of those two places. Lebanon gets 100% of its wheat from Ukraine. Lebanon is the best case anyway, and now there's no food. There are countries in Africa where people are going to be starving. So that is a That's going to be not just an economic dislocation and an inflationary vector.

It is that. But you're looking at humanitarian tragedies on a colossal scale. You're looking at starvation in a lot of cases. But let's not, and that's bad enough, let's not stop with wheat. For example, the U.S. said we're not allowing any advanced semiconductors, maybe no any semiconductors at all or high-tech equipment to be exported to Russia. certainly can't come from the U.S., but the United States went further. We said, we don't care who you are, if you're China, Taiwan, Japan, anyone else.

If you're manufacturing advanced technology equipment and tools and using semiconductors, that involve U.S. technology or U.S. tools, because you're operating under a license for the United States, you can't export to Russia either. Now, forcment is another issue, but so far the Chinese have kind of towed that line. So we've cut off visually advanced equipment semiconductors to Russia. Okay, that affects defense and aeronautics and a lot of other industries. Well, Russia said, okay, two can play. How do you make semiconductors?

Well, you know, they're wafers and they're different layers. You need the chemicals and the strategic metals to make those layers. But more to the point, you etch the circuits on the semiconductor with lasers. How do you power the lasers? Well, there's a certain kind of compressed neon gas that's used to power the lasers to edge the semiconductors. 70% of that processed gas comes from a single plant in Odessa in Ukraine. So now, say, this isn't no semiconductors for Russia. This is no semiconductors for the world because the world can't get the neon gas they need to run the lasers to edge the semiconductors.

Now, can you replace it? Yeah, you can probably replace most things, but it takes years. in some cases um to do that and and and you say what would you why hasn't this shown up already well first of all it is i mean tesla assembly lines are shut down uh try getting a new car in the united states you know good luck um you know cars are cars have 1400 semiconductors they're basically computers on wheels you know when i was a kid you learn how to stick a screwdriver in a carburetor if the engine was flooded they don't even have carburetors anymore they got semiconductors semiconductors so these supply chains are breaking down and you're like why isn't it?

worst right now. The answer is they manufacturers and intermediate participants in the global supply chain have what they call safety stock. It's a little extra inventory, maybe more than you want, but just in case there's a minor disruption. Well, this isn't a minor disruption.

This is a major disruption. You can get by for 30 days using up your safety stock, but then you've got to go reorder. That's when you find out that either the price is tripled, or it's just not available at any price. Or even if you can put the order in, the shipping lanes and that transit lanes are broken down and you're not going to see it for next year, until next year.

So that's, and I could go on and on. Probably don't need to go into every example, but I can assure our listeners and reviewers that it's a really long list. You know, aluminum, platinum, palladium. You know, everyone loves EBs, electric vehicles, you know, the Tesla's or whatever. Okay, Tesla's run on batteries. Leave aside the fact that you have to. charge the batteries with coal-fired plants. That's a issue for another day.

I mean, 58% of China's energy comes from coal, not oil, not natural gas, not uranium, coal. And they're the leading producer of electronic vehicles. So they're basically emitting huge amounts of CO2 to charge up your Tesla. It's not like the electricity comes out of the air. But that aside, you can't build those cars without batteries. What's in a battery? Where's nickel come from? It comes from Russia.

You know, lithium ion. You know, where's the lithium come from? It comes from mines, many of which are in Russia. How does Boeing make aircrafts? Well, you need a lot of aluminum. Where's it come from? Russia. Titanium, Russia.

I mean, there's a group called the Five Eyes. You may have heard of them, but Five Eyes are five kind of Anglo-Saxon community, if you want to think of it that way, who share intelligence. They share intelligence that they would not share with anyone else, even allies. And the Five Eyes are UK, Australia, Canada, New Zealand, and the United States. And they share intelligence among themselves. Well, they've now kind of expanded their mandate, if you will. And the Five Eyes recently came out with a report.

I just called the Five Eyes Report. It's got a longer official title. And they looked at what we're talking about. They looked at global supply chains from a strategic dependence point of view. And what they did, they identified over five. thousand categories of goods, intermediate goods, source goods, finished goods, etc. And they looked at all the countries in the world, and they asked themselves two questions. Number one, how much of your supply of that good do you import?

And then number two is more than 50% of that supply from a single source. And if the answer to both questions was, well, the first question is what it is, but if that's a high number and more than half comes from a single source, you would consider strategically dependent on that source. It's just kind of a little algorithm. And they ran it, and the results were shocking. I read the report. You know, I mean, 100% of the aspirin in New Zealand comes in China. So if you're in a trade war with China,

don't look for relief in a hangar record because you're not going to get any aspirin. But on a serious note, the dependencies are huge. UK was actually a little better, a little less dependent than some of the others. But Canada, the U.S., You know, Boeing gets 35% of the aluminum that they use in aircraft manufacturing from Russia. Well, you cut that off. Good luck getting new planes, you know, etc. Pharmaceuticals, strategic metals, oil and natural gas, obviously, wheat.

Oh, the biggest one, maybe fertilizer. Like, oh, no wheat from Ukraine, that's a problem. Well, how about no wheat from the United States? Because you can't get the fertilizer. This is, we're, you know, it's spring in the Northern Hemisphere. This is planting season, right? now, people who are getting fertilizer are paying triple, what they paid last year, and there are shortages. So, you know, good luck with a bumper crop next September because a lot of the

planning is not going to happen. So this is, we're living in a world of very short attention spans, kind of insect level attention spans, but the world goes on with leads and lags. And a lot of things I'm talking about. They don't happen overnight. They are happening, but the impact might show up in three months or six months or a year, et cetera. But it's very easy to see the inflationary potential of all this. So you get two things going on at once. Shortages and supply chain disruption. So you might not be able to get goods. I don't know. I've been to the UK lately. I wish I had. I don't have going there, but it's hard to travel these days. But at least in the United States, you go to the supermarkets and the shelves are partly bare. Now, it's not like every shelf is

bear like, you know, East Germany in 1956, but there's like, you know, hey, there's no peanut butter this week. There's no chips or the soda is gone, et cetera. And then, you know, for example, I like a particular brand of salsa, a hot salsa, and I'll go and there's none there. There's none on the shelf. I'll go again, and there's none on the shelf. So the third visit, they got a case in. Okay, I'll buy half the case because I'm not going to take it. I'm usually by two jars, but I might buy six jars or eight jars, because I don't know when I'm going to see it again. Of course, I'm hoarding, right, and I'm contributing to the supply chain shortage because the next person is not going to get any.

But that's my response function to the fact that I got shut out the last two times. Well, everyone's doing the same thing. That's just human nature. So it's just getting worse. But shortages, yes, some of these will be critical in terms of manufacturing, and some of them will be tragic in terms of starvation and higher prices across the board. Hey Francis, do you like privacy?

Of course I do. I don't want the feds knowing my business in case I get whacked because I got too close to the truth. The man is everywhere and truth seekers like me need to be careful. Mate, you're a burnout former primary school teacher who spends too much time on I'm a fat insel.com. Just because you read that the world is run by cabala lizards doesn't mean it's actually true.

I've never said the world is run by a cabala lizards, but they are definitely tracking my online activity. Well, if you are worried about your data being mined by big tech and sold off to third parties all around the globe, then StartMail is the email provider for you. The email accounts you use aren't free. They're mining your accounts and email for data as we speak. This data can then be sold on to a whole host of different companies. StartMail keeps your messages private. email can be encrypted even if the recipient doesn't use encryption.

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Sign up today and you'll get 50% off your first year. Go to startmail.com slash trigger. That's StartMail with a T, S-T-A-R-T-A-T-Mail.com forward slash trigger, 50% off your first year. StartMail.com slash trigger. Don't let the lizards get you. Every time we talk to you, it seems that we criticize globalization, and we say globalization is done. It's had its day. This is another nail in the coffin for globalization. Isn't this the final nail in the coffin for globalization? It's a great question, Francis.

I would put it slightly differently. And this is the thesis of my new book. I finished writing it, but it won't be out for a while. What's it called, Jim? Tell everybody what's called? It's called sold out. So, you know, hey, go to the store or you're sold out. Sorry, but it's obviously it has a lot more scope than that. But the, you know, I started, I make the point that supply chains have been around since the Bronze Age.

That's not new. But what is new is the science of supply chain management. That's new because we needed the computing power to turn it into a science and mathematical algorithms and so forth. So I talked to a guy who probably more than any individual on the planet is responsible for the global supply chain. No one did it single-handedly, but this guy, both for his own company, which is a model of seamless global integration, as well as the fact that it's a tech company that provided the tools to all the other companies in the world. So this guy kind of gets the credit. And he said to me, he said, Jim, you have to understand. He said, it took his 30 years to build this, roughly.

roughly 1989 with the fall of the Berlin Wall to 2019 just before the pandemic. It took us 30 years to build it. We blew it up in, you know, two or three years. And we can't build it overnight. We can't rebuild it overnight. It's going to take five, ten years to rebuild this. So, you know, war in Ukraine or not, this is not going to be remedy easily. Now, the question is, and this, this is your question, what replaces it is at the end?

end of globalization or is there a new phase of globalization? And I think it's the latter, but what I mean by that is China and the U.S. are going to decouple. And that was happen. Again, some of these things were happening anyway. The war made it worse. The pandemic made it worse, but it was happening anyway. Xi Jinping has now elevated himself through National Party Congresses and other ideological means to the role of the new Mao Cey Tung. So, you know, the, you know, Shang Jaman, Hu Jintao, and these other guys, like, who cares? There are footnotes. Deng Xiaoping, you know, he gets a gold star, but it's really now Mao and Xi Jinping.

He's the new Mao. That's the way to understand it. And he had decided to decouple the Chinese economy from the U.S. anyway, before everything we're talking about. And, of course, Trump, when he was president, was kind of thinking along the same lines. Now he got a Biden. I mean, he's not all there. but he's certainly got a globalist crowd around them.

But too bad. It's not working. So we're going to blow up the global supply chains we already have. They'll be rebuilt, but along new lines. So let me give you a very concrete example because I realize I'm speaking in kind of big picture stuff. The biggest semiconductor manufacturer in the world and the most sophisticated is Taiwan semiconductor manufacturing TSM. Okay, so they, and then Intel is like a close second. They're both really good.

They're down to five nanometer chips working on three, but the best the Chinese can do is maybe, I don't know, 10 or 15. They're just not in the same league, the same with the Russians. They have separately announced they're building new fabs, fabrication plan for semiconductors, in the United States. Taiwan, and they're $10 billion each, and they're going to take three to five years to build because you can't start a question four walls.

These things are very sophisticated, very hard to do right. So Taiwan's semiconductors putting theirs I believe in Texas and Intel announced that they're putting theirs in Oregon. Okay, why is the biggest semiconductor company in the world based in Taiwan building a plant in Texas? Well, welcome to the new globalization, which is the U.S. is onshoreing all this technological capability.

We don't want to be dependent on China or Taiwan or for that matter, South Korea. We don't want to be dependent on those supply lines. We're going to build it here. If you're Taiwan semiconductor, you want to do the same thing because are you waiting for the Chinese invasion? Well, maybe, you know, we'll wake up and here it comes. Now, there's a new military doctrine called the broken nest, and it's based on a Chinese

proverb. And the proverb is, if there's a broken nest, how can the eggs not be broken? If you've got fall the nest, the eggs are going to fall and they're going to break too. And as applied to Taiwan, China may or may not invade. I think the odds of that have gone up. I'm not saying it's going to happen imminently, but the odds have certainly gone up. That's easy to see if they do. And the big military questions, will the U.S. 7th Fleet intervene and will be in a shooting

where we're China and we're sinking their aircraft carriers and they're trying to sink ours, etc. I don't know the answer to that. But I do know that either we or the Taiwanese will destroy all the semiconductor capacity in Taiwan. We're not going to leave that for the Chinese. This is scorched shirt. This is what the Russians did to Napoleon. Hey, welcome to Moscow, but good luck finding some food. If the Chinese take Taiwan, they're not going to have a semiconductor industry,

which makes them, has a deterrent value. It would make you think twice about doing it if you're the Chinese. We can leave that for the game theorist. But that's why the semiconductor industry is coming back to the United States. Now, apply that to pharmaceuticals, mining, you know, strategic metals, and a lot else. And you can see the implications of it. So now I hypothesized, but I think there's good evidence for it that there will be a new globalization, but it will be like a club, members only.

And the members will be, you know, the five eyes and close allies. And, you know, let's include the French. You know, they can join the club. But the point being, we'll trade among ourselves. What we'll have in common is democracy, you know, while it lasts and some rule of law and some common culture, et cetera. But the Chinese are going to have to start their own club. And, you know, maybe in East Asia, hopefully the Japanese will be in our club. The Russians remains to be seen.

And the big wild card is India, because India is probably, like, as we're speaking, surpassing China and population, India will be the, if it isn't already, it'll be the number one most populous country on earth. And to their credit, they've had a functioning democracy since 1947. Now, lots of other problems with socialism and inefficiency and some corruption and all that. But they're a longstanding democracy with the largest population in the world, immense potential human capital. So where do they come out? So that's to be determined.

But we'll probably end up with a new globalization that will be quite different because it will involve a lot more onshoreing, less reliance on trading partners. And to the extent you do have to rely on trading partners, that's always a fact of life. it'll be a kind of member's only club and the Chinese will go their own way. But that also means things are going to be more expensive. Jim, I find the picture of your painting of the world incredibly bleak because what you have is China and its allies, the West and their allies, and everyone else, I mean, well, they're screwed, aren't they? Because supply lines are going to become more and more difficult to come by.

They're going to become more and more unreliable. There's going to be food shortages. food shortages leads to riots and therefore leads to political instability, which then means that certain countries are going to, well, they're going to be plunged into chaos, which then means migrant crises. This is huge. I agree with that. And the case that I...

You're not making me feel better, Jim. Well... That's not what we get Jim on the show for. It's never for that, is it? Hopefully we offer realism and good forecasting, by the... I'm a cheerful person personally, but I don't let that get in the way of good analysis. To me, the saddest case, and I've spent a lot of time there going back 40 years, is Africa. Because Africa does have enormous potential.

I always tell people, Africa doesn't exist. You have to travel around Africa to know it doesn't exist. It's like 58 countries with a large section that's unpopulated, the Sahara Desert. I've been out in the Sahara Desert. You know, Northern Africa, of course, is Muslim and Arabic, speak Arabic and Berber culture and descent. A lot of European influence. It's almost like an extension of Europe in some ways. I mean, certainly in antiquity, that was true.

And then South Africa, lots of political problems, but moderate climate, great wine, you know, beautiful, beautiful part of the world. You know, a lot of people haven't been there just picture it as jungle. Well, there's some jungle. I've been in the jungle, but there's high plateau, just gorgeous areas. East Africa is mostly high plateau. So it's got incredible diversity, incredible different cultural strands and threads, huge natural resources. What they don't have is a good rule of law. They don't have governance. That's just, and I don't know why you think someone would wake up, but they don't. But they're going to, but to your point, Francis, they're going to have to pick sides. You know, some of these countries, and I would say Zambia, you know, yeah, Zambia, but also Zimbabwe, some of the others are practically Chinese colonies. I know colonies a bad word, and we don't have them anymore, but economically we do. And China has gone in. When China does a mining project, it's like they create a lot of local jobs. Some, they send in Chinese by the thousands, you know, by the plane load, build company towns.

mostly populated with Chinese, strip the minerals. They're not environmentally conscious. I know I'm involved with the gold mining industry here and there. And I visited mines and refineries and mills where they crush the ore and turned into what's called d'ore. I mean, they have these vats. You do use cyanide in extracting gold, in getting gold out of the ore. but you have to have a vat, a cache, and you've got to account for every drop. And when the cyanide that comes out has to be measured against the cyanide that went in,

and they better be the same. Like, you can't be throwing the cyanide into rivers and streams, but they do in China. They do, and water's poisoned, and, you know, they poisoned something like 90% of their freshwater rivers are literally poisoned. So that's how they treat Africa. Now, and I'm sure the leaders, you know, my day that the leaders used to get 30% off the top, except for Mobutu who took 50%. But, you know, to the extent they're still doing that, if that doesn't change, then Africa is just kind of a basket case.

But they could pick size. They could join this club that I've described and it may be benefit from that. But that's, it's going to be a little bit more like, oh, the 50s and 60s, you know, the expect, you don't hear of my. anymore, but the third world. It was U.S. and Western Europe and, you know, Australia and a few other places were the first world and the communists were the second world. Everybody else was in the third world. It was synonymous with underdevelopment corruption and worse. But we may get back to that where it's, you know, the U.S. and, you know, the five eyes and the club that I've described on the one hand, China and it's, you know, tag alongs on the other. And then everyone else is going to be third world or you're going to have to pick sides. Jim, and you make an interesting points because the day that the Russia invaded, I said this was going to be a mountain, it was going to have a huge impact on the world. And I think we're seeing that happen. And that, you know, I think it was, it felt to me like it was going to be the start of another Cold War. And I think what you're describing is essentially that in many ways. The one thing that it strikes me is kind of obvious out of what you're saying. When I was studying economics university, the thing that everyone talked about was, well, no two countries with the McDonald's have ever gone to war. And this was like a shorthand for countries that trade, generally speaking, don't go to war with each other.

We've seen that challenge somewhat recently. But broadly speaking, my concern with what you're talking about would be that we're creating these two blocks. And when you've got these two blocks, what happens between blocks, right? What do they do? Well, they're competing for resources. They're competing for land. And my father-in-law spent a Soviet father-in-law spend a lot of time in Angola and other African countries because that's what the plays were at the time.

You try and control parts of the world where you're not physically present, but you try and get them to have the right ideology or to support you militarily or with resources. Is that what's going to happen now? There's going to be these two blocks fighting over land all over the world physically, kinetically, but also economically and culturally. something like that first thing uh constantine you have to bear in mind the guy who said that no two countries with macdonalds would ever go to war with each other was tom friedman who hasn't been right about anything for 40 years so i wouldn't put too much weight on that um he wrote a really good book in the 80s but not not much sense um uh so yeah i wouldn't i wouldn't put too much dark two blocks maybe maybe three blocks uh maybe four with some members you know kind of

switching sides, a little bit more dynamic. But yeah, something like that. I guess, Jim, sorry to interrupt. My point was, as much as we uphold elements of what globalization has done to our countries and to what is done to our independence and the ability to choose our own energy policy or whatever, was it something that gave us peace, which we're no longer going to have? That's what I'm asking you.

It contributed to peace. Yeah, I think you have to say that. but and we don't have it right now given what's going on in Ukraine. But I have actually looked at some studies on this. I think the end of history thesis and Francis Puguyama, he taught at my old school, I think that was wrong. I think there was, and I want to say premature. I think we did have a long period from the fall of the Berlin Wall till fairly recently

where there were not any major wars involving. major powers, at least not to the close proximity that we have today. But instead of saying, well, that was the new normal, I hate that expression, but okay, that was the new normal and now where things are falling apart again, that may have been the anomaly and that things are actually, it's back to business as usual, which is war, including war in Europe. So I'm not, I'm not sure that we left that behind as much as some scholars, some analysts believe. But we may be heading in, you know, but, you know, even in the, in the 80s, certainly the 70s, I mean, there were proxy wars all over the world, Vietnam, Angola, and elsewhere. The U.S. and Russia never fired a shot at each other.

I hope that continues to be the case. I am deeply concerned about kind of the warmonger element in the United States. You know, I studied nuclear war fighting in the late, beginning in the late 60s. And the scholars that I was reading in the late 60s, as a college student, had done a lot of the work in the 50s. And it was Henry Kissinger. He's still around the way. Good for him. Henry Kissinger, Herman Kahn.

Herman Kahn wrote a book. It's like a 700-page book called On Thermonuclear War. I don't think it's a bestseller today, but in the 50s, you just, you read, if you were in that field, you read Herman Kahn. A lot of it was, you know, kind of game theoretic. Well, the nuclear weapons never went away, but we did get some treaties and we got some inspections and we got some changes and people stopped thinking about it. And I think millennials and Generation Z, I'm not sure they really know what the nuclear weapon is or how they work. But we're back. It's back.

Now, Putin has said, not casually, but I'm sure it was calculated, but, you know, we may have to use tactical nuclear weapons, or at least we don't rule it out. That's what you say. We don't rule it out. And that's just every statement of what's called the no first use doctrine. Neither Russia nor the United States have ever adopted the doctrine of no first use. In other words, we've reserved the right to use them first if we think that's called for. Now, going back to use Herman Khan, particularly Rick Kissinger and other scholars, Wolfstetter,

they all said the same thing. They had differences, different ways of analyzing the problem. but they all said the same thing. Don't go there. Don't go there. What I mean by that is nobody wakes up and says, oh, nice day. I think I'll start a nuclear war.

Let's see how that works out. Nobody does that. Nobody. But the way you get to a nuclear war is escalation. So you raise the ante and I invade and I give some more troops and, you know, I use missiles and so forth. And then you get to a point, it was somewhere down the road where one side feels it's existential. They didn't start out that way, but through escalation, they arrive at a point where they're like,

you know what, now I've got to use, I've got to stop this, I've got to use some tactical nuclear weapons. And here's where you get really deep into the game, theoretic side of it, because the side that's, one side's thinking about using tactical nuclear weapons, and Putin already says, we don't rule it out. But the other side says, huh, if you're going to do that, I better sure. shoot first. I better use my nuclear weapons first because now you get into whole first strike, second strike, counterforce, countervalue. I mean, you can go on and on with this theory. We don't need to belabor it. But the point is you actually get to a point where the side that was least likely to do it becomes the one that shoots first because I think the other guy's going to

shoot. And the dynamic takes over. That's really the point. So what the scholar said is don't go down that road. And the closest we ever got until today was the Cuban missile crisis. And, you know, you can fault Kennedy and Khrushchev. Cruise Chub was Ukrainian, by the way, just for a historical footnote. But you can fault Kennedy and Khrushchev for getting there, but then you have to give them some credit for finding a way out. And that was a lesson to the world. I remember those in, you know, I was 12 years old or whatever.

But, you know, the front page of the New York Times showed a, they didn't have pictures. black and white map kind of thing. I used to have a picture, but not color. But it was North America with Cuba and then concentric circles showing the range of known missiles. And everyone was saying is my locality in one of those circles because that means I could get bombed. My wife asked me the other day. She said, do you think that this could turn into, what she said is if it turns into a nuclear war,

do you think they'll strike us? You know, a very practical question. and I can point out the window here, viewers can't see it, but there are three nuclear submarines, nuclear attack submarines, a couple hundred yards away because I live in Portsmouth, New Hampshire, which is one of four bases in the world authorized to do maintenance work and refueling on the U.S. nuclear submarine fleet. So there are three nuclear submarines across the river. Well, it's been nice knowing you, Jim.

We're on the list. Yeah, I do take it seriously. But I do. I don't think it's an nervous statement to say we're closer to that kind of outcome than we have been since the Cuban missile crisis. I mean, that is a deeply sobering way to look at the world. Hey, Francis, do you like podcasts and politics? No, mate, I'm a real man. I'm only interested in football, birds and fast cars.

Last time you tried to drive a car, you had a panic attack when you got overtaken by a granny. She was driving very aggressively and used disgusting language for a woman of her age. Well, for those of you who do like podcasts and politics, then you have to check out the Lost Debate. It's a podcast and YouTube show for political eclectics who want to escape their media bubbles and engage in good faith with ideas from across the political spectrum. It's three friends from across the political spectrum discussing the big issues of the day. Ravi's a former Obama staffer and school principal. Corey's a former Fox Radio news host and Ricky's a New York post columnist.

Instead of being at each other's throats, they focus on bringing new perspectives to the table in constructive debates that sound less like crossfire and more like discussions between real people. They sound like us, apart from the whole sound like real people bit. That and they might actually know what they're talking about. Check the lost debate out on YouTube or wherever you get your podcast. I'm looking at the picture that you've painted. It's a very bleak picture, but it's one that I agree with and we're already seeing the effects from. Are there any solutions or any things that we can do in order to try and rail back in order to maybe try and how can I put it, heal the wounds that have been done, rebuild bridges,

etc? There are. And one of the scholars who articulated this best is Edward Ludvok. I don't know if the name rings a bell, but he was a classmate of mine, but he is a little old. but he's brilliant, absolutely brilliant, and has written some excellent books and articles. And his whole career, he was waiting to be the new Kissinger, except Kissinger still alive. So it's been a long way. It's kind of like Prince Charles, but Lutvac is a big brain.

And he advanced a concept in the 1990s called geo-economics. Now, geopolitics, yeah, Bigfield, been around forever, economics, you know, at least since Adam Smith, but probably longer. And they've always been related. You know, the Napoleon's invasion of Russian Spain was because they didn't join the continental system to defeat the Royal Navy blockade. So the two have always been intermingled. People forget that, by the way, that six months, really five months before Pearl Harbor,

FDR put economic sanctions on Japan. He froze their bank accounts and cut off their oil supply. Sound familiar? So this is not brand new stuff. But what Ludvok did, he said, you know, it's not even that they're kind of related anymore. They're merged. They're the same. And actually, wars in the future will be fought economically, more so than kinetically.

And by the way, I teach a seminar on exactly this topic at the U.S. Army War College, Donald Carlisle, Pennsylvania. But the seminar is not limited to people in the Army. It's everything's cross, everything's joint these days in the U.S. military. So my class would be Army, Navy, Marines, airmen, intelligence officials, and others. But it's an elite group. It's called the Advanced Strategic Arts Program, but these are kind of mid-career, major lieutenant colonel, colonel, and then senior intelligence officials, who are kind of in there, you know, right around 40, late 30s, 40,

who have been singled out as the big brains of the future, the people who will be running the show in 10 or 15 years. And I teach economic affairs to the group. And I had my lecture coming up and I said to the colonel who's organizing this, I said, well, we've been talking about the economic war for seven years. Now we got a war, a real one. But this economic war is unlike anything that's ever been done before. again, the continental system, other, you know, FDR, other examples, lend the lease, etc. In two ways. Number one, like the war on the ground is tragic.

We, you know, we all understand that. It's a little callous to say, well, that's what wars are, which they are, but it's tragic. But the economic war, aside from the human cost, maybe including the human cost, is bigger. You know, the starvation in Sudan might not make the TV as much as atrocities in Ukraine, but it's going to happen. And probably more lives will be lost that way. The economic impact is orders of magnitude greater. But here's the point.

It won't be over soon. I don't think the shooting war is going to be over soon either. I think this will likely go on. I can see it going on until May or June. Beyond that, it's hard to have a forecast because there are some of the uncertainties. But the economic war is going to go on for years, decades, maybe it just morphs into this new world, new version of the supply chain that we talked about earlier. But the United States said, again, none of this is suspect, you know, forecasting is difficult, but none of what we're talking about is really speculation. You just have to look at the record.

The United States said our sanctions on Russia will remain until all the Russian troops are out of Ukraine. That's what we said. Well, Russian troops aren't leaving Ukraine. Whether they get Kiev, whether they take the West, whether they stay in the East, whether they just take Dumbos and they've already got Crimea. You know, if the U.S. considers Crimea part of Ukraine, while the Russians aren't leaving Crimea for, you know, several centuries probably, Odessa is the big wild card. You know, you can see the beginning of a Russian air combined air amphibious assault. on Odessa. The Russian amphibious assault vessels, they kind of look like aircraft carriers, but they're smaller, but they're designed to put, you know, 5,000 Marines and helicopters and attack aircraft ashore on very short notice that left the Far East a few weeks ago, and I calculated

the sailing time to get to the Black Sea and came out around mid-April, mid-to-late April. Now, there's a big question. Will Turkey let them through the Bosporus? I don't know the answer to that. That's going to put Turkey on the spot. But my point is, this is going to go on. But so Russia's not leaving Ukraine, even if there's a treaty or an armistice of some sort, Russia is going to keep its gains.

Ukraine will go on with what's left. But if the U.S. is to be taken literally, legally, sanctions are not ending. So you could have, now I'm hypothesizing, you could have an armistice in June with sanctions going on for three or four years or longer. So unless the U.S. modifies its position as part of some kind of peace treaty. So, so I don't know. I mean, this, my point is the impact of the economic world will be larger, longer lasting, quantitatively higher, and maybe even higher from a humanitarian perspective than the shooting war. Jim, that makes a lot of sense.

And one of the things, obviously, without any attempt to minimize any of the horrible things that we've been talking about, whether it's the war on the ground or the economic situation, which I think you're right, and no matter how strongly I feel about what's happening in Ukraine, the truth is the impact of the economic war will be even greater in terms of people's lives lost or damaged by all of this. So without disregarding any of that, is there not also some, positive trade-offs of this reordering of the global situation in the sense that, you know, you've talked for a long time about the dangers of doing business with countries like China

and the way that they do business with the West. And we on our show have talked a lot, not so much with you, but with others about a sort of cultural self-loathing that seems to have emerged in the West, where we're so internally focused that we maybe lack something to push back against it, and so we're focusing inward instead. Do you think that as a result of this, much like in the Cold War, where yes, there would have been economic costs to this standoff between these two superpowers, but it gave the West a focus and something to win, and it also meant that we were more united and we had a better sense of who we are, and we also weren't doing business with countries where they were taking advantage of us like China? Right. By the way,

I'll answer that, Constantine. Let me just step back for one second because I don't quite answer the last question. Is there any way out of this? Yeah. They can give it extended analysis of the problems. There is. And it's kind of sad because all Ukraine has to do is say two things. We won't join NATO and will remain neutral.

That's it. Yeah, a few tweaks around that, maybe expand a version of that. And we have models for that, you know, during the Cold War, Finland was neutral. Austria was neutral, you know, until kind of very late in the Cold War. So there are models for that. It's a classic world of a buffer state. That's exactly what Ukraine should be. If you're going to be stuck between superpowers of the West and the superpower of Russia, neutral is a good thing to be.

All Zelensky had to do was say that and get, you know, sign and buy in from the United States. And Putin said, okay, that's all I want. you could have avoided this war i've never seen a war that was easier to avoid now the same thing is true i've never seen a war that was easier to end which is stand up and say hey we're not going to join nato we're not going to uh we're going to be neutral maybe we won't join the u but um that's that and make that enforceable in some way so and i think that's how it's going to turn out which means that this is a an enormous tragedy in the sense that the war the war is going to end up exactly where it started, except you could have skipped the war.

In other words, if they had, if Ukraine had been willing to make the commitments that it's going to have to make at the end of the day, it's going to end up in the same place, except for the human tragedy, the infrastructure, destruction, death, you know, et cetera, across the board. So there's never been a less necessary war because you're going to end up where you started, except a lot of people got killed, which is sad. But what it means is that there is a way out, but it's it's the way I just described. Short of that, it's just going to be like World War I. And I've read, you know, a thousand page books on World War I.

I can rarely finish one because I get like five or six hundred pages into it. I'm like, this makes no sense. It's just death. Just death. But what was the reason? What came out of it? What good it was accomplished? And I can't answer any of those questions.

So, but getting back to, to your point, Constantine, it's, you know, we're going to, we're going to remake the world. We are remaking the world. And it's, it'll be less sufficient, but more robust. And that's, that's always a tradeoff. And resilient is another word. That's always a tradeoff. If you want robustness and resilience, there's a price associated with it.

If you, you know, we all have insurance, homeowners insurance, you know, against fire and flood and all that stuff. But, and we hope we never have a claim. And when we write the check or make the payment for the insurance premium, we don't think we're throwing our money away. We don't say, gee, I really wish we'd have a fire because I could quit a claimant. We hope we never have a tragedy. We hope we never have a claim. And we don't think spending the money is a waste. Same thing with the new global system.

It'll be more costly, less efficient in an abstract sense, but more robust, more resilient, and better serve our purposes. China, I'm shocked. I mean, I know what's going on in China. I've been there many times and not just in, you know, Beijing or Shanghai. I've been out in the country. I've been all over the place. Genocide, concentration camps, thought re-education camps, organ harvesting from live dissidents without anesthetic. 30 million girls drowned at birth because they were girls, atheists, communists.

That's China. Is that your business partner? You know, Walt Disney, Nike, and a long list of others. They're maybe two most prominent names, but there's a long list. And I think the answer is no, that can't be your business partner. I remember during the Cold War when Pepsi Cola was the first kind of major Western business to open something in Russia or Soviet Union. They had a bottling plant and you could get a Pepsi in Moscow.

That was a big deal. That was like headline news all over the world. It's like, oh, gee, a bottle of soda, that's it? That was about it. Other than we bought, you know, you bought natural resources, and we didn't sell them much, and there weren't many U.S. businesses there. I think we'll end up with something like that in China.

And then that'll put China on the spot. Can China develop internal demand, an internal consumption ethic, a financial system, a rule of law, et cetera, to displace Western capital. And I think the answer is no, they'll fail. So I would look for catastrophes coming out of China. But maybe that's the topic for next year or two years. Jim, we've been talking at the macro level, and it's obviously been fascinating.

But I think it's very important that we talk about the micro level, the individual, particularly. Now, there is some, there's lots of people from all different parts. society who are listening to this and thinking, oh, right, what can I do? What can I do as an individual to better protect myself from these financial and economic shockwaves? What are they, Jim? A couple of things. Number one, I would increase my allocation to cash for a couple of years. Really?

Yeah. I did not expect you to say that, Jim. I had my money on gold quite literally. Well, okay. I'll stick with cash, but let me kind of put that in a context. The most powerful investment tool we have is diversification. Now, that sounds like an obvious statement. Oh, yeah, everybody knows that.

They teach you in the first week of risk management. Diversification is the way to go. Well, it is the way to go. The problem is people don't understand what diversification means. So I run into people all the time. They say, well, I'm completely diversified. I own 50 different stocks in 10 different sectors, you know, semiconductors, consumer non-dorables, you know, minerals, et cetera.

And I say, you're not diversified. You may own 50 stocks in 10 sectors, but you have one asset class, stocks, which are subject to conditional correlation. In common markets, yeah, they're idiosyncratic, but in panics, they all go down together or in bubbles, they all go up together. So you're not diversified. So what is diversification? Diversification is having slices of asset classes that are,

that are minimally correlated, it's probably not zero, but as close to zero as you can get. So what would that be? You'd have a slice of gold, but I recommend 10%. People, I have some strong views on gold

and I've written a lot about it, but people are surprised to hear me say 10%. And like, Jim, why isn't 50% or 100% if you believe all this? Well, I do believe it. I wouldn't say it if I didn't, but you don't want to be 100% in anything. You don't want to be 50% in anything.

10% is fine. If I'm wrong, you won't get hurt. And if I'm right, you're going to make so much money that it'll actually kind of be the insurance on the rest of your portfolio. But that leaves 90%. So I would have a large slug in cash, maybe 30%. And people say, well, wait a second, banks paying me 25 basis points.

You know, stock market's going up. Why would I want to be in cash? It's horrible. A couple of things. Number one, the stock market might not always go up. But number two, cash is the opposite of leverage. So leverage increases the volatility of the rest of the portfolio. You'll get much bigger returns, but you have much bigger losses. If you have a slice of cash, and say you've got a volatile asset over here, which are stocks and other volatile asset over here, gold's fairly volatile for reasons we can,

you know, we don't have to get into it right now. If you got that volatility and you have cash, it will reduce the overall volatility, so you can sleep better at night. Cash is a great asset in deflation. We've spent a lot of this interview talking about inflation, which is here, and then you've got to deal with that. but don't rule out deflation.

If we go into a recession because the Fed over titans or, you know, the thing about the inflation, just a quick side, it comes to two flavors. There's cost push and demand pull. Demand pull is when individuals are worried about inflation, and they start accelerating purchases. Like, hey, I better go buy that washing machine right now because the price is going up or better go buy that house right now because the price is going up.

That's demand pull. Cost push comes from the supply side, not the demand side. And that's what we're seeing because of what we talked about, supply chain, energy, cost. The Fed can't drill for oil. You know, raising interest rates doesn't get you more oil or natural gas. So the Fed can't do anything about it except kill the economy. Yeah, and that'll cool it off. But when you pay, you know, I put gas in my car.

I don't just read about this stuff. You know, it used to be $45. Now it's about $75. Well, when that's, multiply that by 200 million cars across America, what happens is it reduces your discretionary income. If you're paying another 30 bucks at the pump twice a week, then you're not going to go out to dinner Friday night. You're not going to, you know, take a vacation, whatever it may be.

So that depresses all those other areas. So there is this recursive function. So don't rule out deflation down the road, not right away, but, you know, maybe next year. So cash, but here's the biggest value of cash. it gives you optionality. People don't understand this. What if I said to you, hey,

I'll sell you a call option and at the market call option on every asset class in the world. He goes, yeah, that sounds kind of valuable. You know, well,

that's what cash is. You know, when things are crashing, you're the one who can go shopping. And nobody's better at this the Warren Buffett. He's got his cash level at virtue halfway is at an all-time high.

So there's a place for that. You can have some stocks, but I would look at the energy sector. I mean, this, I've done a lot of work in climate change. Climate change is real. Okay, let's start there.

I used to live for 10 years on a beautiful body of water, Long Island Sound. You can fish and swim and sail and do all kinds of things, great lobsters. But it's the shape it is because it used to be a glacier. In the last ice age, it was the lowest latitude of glaciation in the northern hemisphere. That's why it has a rocky coast. So there's climate change. It was a glacier. Now it's a, now you can go sailing.

So it's real, but it's slow. And all the stuff about the existential crisis in 10 years. They've had a rolling 10-year doomsday for 40 years. So that lacks credibility. There is no climate crisis. There is no existential crisis. So you have to discount the climate alarmists. And they want, you know, wind turbines and solar and maybe a couple other so-called renewable sources.

I actually built and I own the largest non-commercial solar module field in New England. And I run my house off it. It produced about 7.5 kilowatt hours. So I know a little bit about it. And what I know is it doesn't work at night. It doesn't work in snow. It doesn't work in rain. It doesn't work in really cloudy days.

By the way, you don't run your house off of solar modules. You run your house off of batteries. Yeah. And the modules charge the batteries. So you watch the boundary level. That's how you manage it. Don't run the dishwasher on a cloudy day. So it works fine.

But if you think you can run cities with that, forget it. I mean, I had to clear three acres to put up my tower. As people say, why did you clear three acres? They don't take up that much room. I said, well, have you ever heard of trees? There's no trees in the desert, but they have them where I live. And you don't want a tree falling on your tower. So it's just not practical at that scale.

And even if you thought it was. And it isn't. That's very clear. But here comes, you know, wind turbines and solar. And I'm not against it. Like you say, I own one. But they're not scalable. They're intermittent.

And they don't give you the baseline power you need to run a modern power grid. Meanwhile, here's global demand. Okay. So the gap, the gap's getting bigger. It's not getting smaller. Renewables, whatever the pros and cons, are not closing the gap. The gap's getting bigger. There is no substitute for.

oil and natural gas and uranium. You got to put uranium in the mix. And hydro, if you live in Quebec, that's great, a lot of hydro, but not so much in the desert. And I've spoken to, you know, without mentioning names, I would say you can go no higher in terms of who knows, let's just say board members of the one of five biggest oil companies in the world who said, yeah, as he said, we talk about that, but we can't say it publicly because we'll be, you know, dragged, you know, chained and dragged through the streets. But that's just, those are just the facts. So therefore, if you have an oil sector that's been bashed by the climate alarmists and, but you can't

do without it, which is true, buy some oil companies, you know, when they're, you know, so there's your stock portfolio. Private equity, venture, real estate, not commercial, but residential, yes. And, you know, farmland, that's one of the hottest asset categories and gold. So, so, so, That's diversification, and that's the kind of portfolio you want, kind of season to taste. And no crypto, Jim. Well, look, I enjoy playing roulette, and I have my system. I'm still like Marcel Duchamp.

I'm still working on it. But the reason I prefer roulette to crypto is because you get a free drink when you're in. But that's how I think about crypto. I'm not a crypto basher. when I was a teenager there was a popular song called shout shout knock yourself out and it was nice dance but if you want some crypto knock yourself out go get it I'm not bashing and I'm not again I don't know I don't own any I don't plan to I don't recommend it but I'm not like some I'm not lying down in front of a truck trying to stop the crypto move it's here I've actually studied it

more than all but a few people and I've arrived at ways of understanding it that are probably nobody in the world really gets, although I've started to write and talk about it. So I think I have a very good handle on it technologically, mathematically, and really in terms of communications theory. But it's not, well, let me put this way. I'll say crypto is not money, but what crypto is doing is erasing the definition of money. So maybe the dollar is not money either. And that's really the point. It's not the case that Bitcoin is going to replace dollars of global reserve currency. That's not going to happen.

But Bitcoin might contribute to the concept of moneyness, not money, but moneyness, which is kind of like money. But maybe the dollar is getting there also, and we're losing the threat. We don't know. My thesis would be we don't know what money is anymore, but we don't know that we don't know. It's like, you know, some metaphors are better than others, but, you know, the same way, we don't know who discovered water, but we sure it was not a fish. Because the fish is in the world.

You've got to take the fish out of the water and say, hey, where's the water? But when you're immersed in something, you actually don't know what it is. And we're immersed in electronic orb, if you will, and it's erased a lot of concepts, but we don't know it. And so I think we're seeing the end of money.

Very interesting, Jim. Well, I'm sure we'll get an opportunity to talk to you about that next time, because I think it deserves a little bit more than a couple of minutes. But as always, thank you so much for coming back on the show. We're going to do a couple of very special questions from our audience for you, from our local supporters. Before we do that, we as always have our last question, which is what is the one thing we're not talking about as a society that you think we should be?

Probably debt. And again, it kind of goes back to, you know, we're losing the concept of money or are we losing the concept of debt? And I've studied, you know, I've done read and researched and done my own work on the history of debt. And, of course, we're seeing the rise of modern monetary theory. And, you know, you go around the U.S. Congress, I dare say, you know, out of 535 members, you can't find more than 5 or 6 who could tell you what modern monetary theory is. But that doesn't matter because they've all adopted it. our fiscal policy in the United States is modern monetary theory, whether they, whether the members know it or not.

And the theory is, part of the theory is that the debt can be as high as you want. Debt to GDP ratios don't matter. As long as the debt's in a currency that you print, what's the big deal? You can always just print it and pay the debt. They're unmet needs in society. And to the extent that they require money, just print the money. And the leading advocate, you know, Stephanie Kelton, as a professor at State University of New York, said, we don't even need a bond market. And again, this is from her book, so I'm not putting words in her mouth.

These are her words. She said, the U.S. Treasury market only exists as a favor to investors. We're giving you a place to put your money if you want to. But we don't actually need it. We could actually just give wire instructions from, you know, law. and Boeing and Medicare to the Fed. They could just send the money right to Lockheed to pay for stuff. Why do we have to issue bonds and take the money and, you know,

get the Fed to buy the bonds and then use the money to pay military contractor. Just send them the money. What's the big deal? So that is what's going on. But there was a reason we used to care about debt because it was sort of, there's something behind it that is being taken for granted, which is creditworthiness. Yeah, we don't have to pay off the national debt.

We don't, but we have to roll it over. That's the thing. And is your continued access to the market, if you take that for granted, you're probably eroding your credit standing. And there was a reason we used to lower the debt. This goes back to David Hume, among others. And it was in case you had to issue debt to fight a war. And the history of U.S. debt is it's not a straight line. from zero to 30 trillion, it goes like this.

It goes up and down. You know, and justice for inflation, there's even more extreme. But the point being, you would pay down your debt in times apiece so that you could borrow money in times of war. It was that simple. And the only exception that was the Great Depression, and you can kind of think of the Great Depression as an economic war. But that was abandoned around 2000, but really starting with Obama and Trump, and now we've lost the concept. So the U.S. is ill-prepared for a day when credit may be an issue and we may actually need to borrow the money.

There we go. Jim, we're going to ask you a couple of questions that I said for our locals, but thank you so much for coming back on. I look forward to reading sold out. And where can people find you online? What's the best way for people to follow your work? Well, I have a newsletter, Strategic Intelligence, and it's a, it's a, it's a, it's a, the best value out there. We have some more high-priced products, but for $49 a year, you get 5,000 words a month that put my heart and soul into us. That's a good thing. And also very active

on Twitter at James G. Rickards, R-I-C-K-A-R-D-S-1 word at James G. Rickards. Jim, it's been an absolute pleasure, as always. Thank you so much. And if you've enjoyed this episode, they always go out Wednesdays and Sunday, 7 p.m. UK times. Our raw shows are always Thursday, Friday and Saturday. And for those of you who like your trigonometry on the go, we're also available as a podcast. Thanks for watching. If you want to hear Jim's answers to our last two questions from our audience,

make sure to join locals. Take care. We'll see you soon. I always say if you want to slaughter cattle, you have to herd them into a shoot and get them into the slaughterhouse. And digital money is the cattle shoot, so we can all be slaughtered in digital form.