TRIGGERnometry - James Rickards: The Next Financial Crash is Coming

Episode Date: October 27, 2019

James Rickards is a renowned lawyer, economist, and finance expert. Jim is also the author of Currency Wars: The Making of the Next Global Crisis and five other books. See Konstantin perform Orwell That Ends Well  London: 24 Nov @ Angel Comedy @ The Bill Murray: https://angelcomedyclub.nutickets.com/54960651 Brighton: Nov 23 @ Artista Cafe & Gallery:  https://artistacafe.gallery/whats-on/konstantin-kisin-orwell-that-ends-well-23rd-november-2019/?fbclid=IwAR0W1dO0c0Qb2NmfyRjEYwfaAdHTi4k2_ZqewEj7Ck_kakcXscLqFVTVHNU Cambridge: Nov 17 @ Cambridge Wine Merchants: https://www.cambridgelive.org.uk/tickets/events/wine-gums-comedy-afternoon-0?fbclid=IwAR0l5ZIVjch5Wzn2OCDn8i2GH_9shxvt93ndNJqpSPbOvv9YaPnldrjqi6Y Support TRIGGERnometry: Paypal: https://bit.ly/2Tnz8yq https://www.subscribestar.com/triggernometry https://www.patreon.com/triggerpod 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 (@failinghuman) 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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And welcome to trigonometry. I'm Francis Foster. I'm Constantine. And this is a show for you if you're bored with people arguing on the internet over subjects they know nothing about. At Trigonometry, we don't pretend to be the experts. We ask the experts. Our fantastic guest this week is a writer, economist and a former CIA advisor. Jim Rickards, welcome to Trigonometry.

Thank you, Constit. Thank you. It's great to be here. And I'm sure you're thanking Francis as well. You just left a man of that. Thank you. I should have mentioned as well, your writer and an author of a number of books, the latest of which is after. which is this, get it, it's a brilliant read. And Jim, for anyone who doesn't know who you are, tell us briefly, who are you, how are

you where you are? What has been your journey through life? Well, it's not clear whether my career path is, it could be described as eclectic or I just couldn't decide what I wanted to be when I grew up, but spent most, I'm a lawyer by training, but spent most of my career on Wall Street. So I work for commercial banks, investment banks, hedge funds, stock exchanges, et cetera. along the way, after 9-11, I was tapped by the CIA to help them with financial threats. All of a sudden, financial warfare and what we call market intelligence or market became a big subject inside the CIA. It has not been previously during the Cold War.

I mean, Russia, the Soviet Union, were not in capital markets, so that wasn't part of the battle space. But it certainly is today. And they do a good job of outreach when they kind of know what they don't know and they bring in people. also did that for a long time. And then starting in 2011, I had my first book, Currency Wars, and the new book, Aftermath, and thank you for mentioning that,

is actually volume four of an international monetary quartet. So it was Currency Wars, The Death of Money, the Road to Ruin, and The Aftermath, have these nice cheery titles. So it works as a quartet. I'll talk to my publisher at some point about a box set

so you can get all four in one nice slipcase. But the aftermath completes the quartet. It's the new book, and we're kind of on the road explaining it to people and talking about it. See, Constantine's got a background in economics. I don't, and I found it very, very accessible, and I found it very, very informative. And I love the metaphor you used at the start,

how essentially the U.S. is trying to navigate, and you used the metaphors of monsters from ancient grid. Skiller and Charybdis. And Charybdis, yeah. So if you could go into a little bit about that and explain what these two threats are that the US is now facing? Sure, and that was actually the most difficult part to write.

It's really a challenge when you're writing about economics. Most economists don't write books. They write articles and academic papers and give presentations and all that. It's hard to write a book about economics because either you can do a textbook, which I definitely did not want to do, and it's not a textbook, fortunately.

But because economics tends to be very contemporaries, contemporary market driven, et cetera, a book becomes stale very quickly after it's published. So the challenge is, can you write a book in economics that's interesting, that has a good shelf life, that you can pick it up 10 years later and say, hey, there's still something here for me or something I can learn from. That's what I try to do. And I will say my first book, Currency Wars in 2011, is still selling extremely well. All the books are in print, so none of them have gone out of print. And it's got a second or third life because we're in a currency war. I said in 2011, when the book came out, that we're not always in a currency war, but when we are, it can last 10 or 15 or 20 years.

So I'm not surprised. Here we are in, you know, 2019, and the currency wars are still going on. So that book did it. And then the other book's the same thing. So, Francis, with particular regard to your point. So what did the Fed do, you know, 2008? And we'll talk a little bit more about that. you know, cut interest rates to zero,

expanded the balance sheet from $800 billion to $4.5 trillion. That's how much money the Federal Reserve printed and all the other major central banks, Bank of England, People's Bank of China, did the same thing. So this was a global phenomenon. You're talking about quantitative easing.

Yeah, quantitative easing so called QE. It was QE1, QE2, QE3. As I say, printed, took the balance sheet up to $4.5 trillion. But at some point, they had to get back to normal. Now, maybe we've lost sight of what normal is. Maybe that's interest rates of, you know, three or four percent, which would be a little more normal and getting the balance sheet down to maybe two trillion. It's an inexact science, but if the Fed got interest rates

to four percent, got the balance sheet down to two trillion, I would be the first one to say, nice job, guys, you save the world from a worst outcome in 2008, you got everything back to normal and you're ready for the next recession. That is not what happened. What happened, is they're still stuck, rates are close to zero, they're going down again after going up for the last couple of years, they're going down again. The balance sheet has not come down, has come down very little, maybe around $3.9 trillion, although it's going up again. So what happened was the Fed was trying to, again, get rates up, get the balance sheet down, to get ready for the next recession. But the silly and Caribis metaphor was, in the course of preparing for

a recession, would you cause a recession? By avoiding one danger, where you're selling? into another danger. And that was the Fed's conundrum. I said several years ago, they would not be able to do it. That, in fact, they would cause a recession in the course of doing this. And that's exactly what happened. We got very close. So at the end of 2018, J. Powell or Fed chairman got a wake-up call. It's like, oh, I've tightened too much. I shouldn't have tightened in December of 2018. They're raising interest rates. We are very close to recession, and the U.S. was at the end of 2018. So he quickly reversed course, said first, we're not going to raise rates anymore, and we'll tell you if we do. We'll give you advanced warning, so you won't be caught by surprise.

Then by the spring, he said, well, we're actually going to cut rates, which they did in June and September of 2019. And then finally, they had reversed QE quantitative easing. I still run into people who go, I'm tired of the Fed printing money. We hate quantitative. I said, no, they stopped that in 2014. They've been burning money since then, since 2017, 2017, 2000. the Fed trying to reduce the balance sheet. You may remember, there was a famous cartoon

and showed a manic looking at Ben Bernanke hanging from the strut of a helicopter throwing money. That was the image of helicopter money. Well, instead picture Jay Powell with a pile of $100 bills and shovel throwing money into a furnace. That's what they've been doing. They've been reducing the money supply. Well, this was a double dose of tightening,

higher rates, reduced money supply, almost through the economy into a recession. They've reversed course on both Now rates are coming down again. They're printing money again. And by the way, we're in QE4. They won't call it that, but the Fed is printing a trillion dollars of new money

as of the fall of 2019. So call it what you want. It's QE4. So my point was, on the one hand, you have to get ready for the next recession. On the other hand, are you going to cause a recession? That was Silla and Carrippas. They were trying to sail down the middle

and avoid both dangers. I said they would not be able to do it. they're going to have to choose the enemy or choose the danger, if you will. And they did. They said, we're going to avoid recession, but it means they've thrown in the towel and normalizing. So at a higher level, it means they're not ready for the next recession. So essentially, what you're saying is, and again, layman's terms,

is we have a debt or the U.S. have a debt that is too big for them to service. Correct. I am saying that. That's a separate issue. Let's separate monetary policy and fiscal policy. So monetary policy is the central bank, you know, raising or lowering rates, printing money, or reducing the money supply. So that's the world of monetary policy. Over here, debt, deficits, and the budget, that's fiscal policy.

They are related because where it really gets a little tricky and a little dangerous is if you tell the governments they can spend as much as they want and run up as much debt as they want, what's the discipline on that? Well, the discipline is the market. If the market says, hey, we don't want your paper anymore, we're not buying it, or interest rates go up, that tends to be self-limiting. What if the Federal Reserve is sitting over here saying, hey, no problem, guys. You know, shoot it in, we'll buy all the debt that you want with printed money. Now you're monetizing the debt. So that's where fiscal policy, which is debt and deficits, monetary policy, which is money printing, come together if the Federal Reserve monetizes the U.S. debt. So both things are an issue.

but specifically to the Fed, their failure was they could not get back to normal without causing recession, which means they're not ready for the next recession. On the fiscal side, at least in the United States, we're back to the wonderful world of trillion-dollar deficits last seen in 2011. Well, we'll get into that because one of the things you outlined very well in the book that essentially, historically, the pattern in the United States is that you borrow in times of war and then you repay in times of peace. And we used to do that. We have not been doing that. And one of the interesting things that I rank true with me

is that no one is talking about fiscal conservatism anymore. That is a phrase that used to be a centerpiece of political discussion. Correct. I have not heard that for 10 years, probably, close to 10 years. And I think that's quite telling because, as you mentioned in the book, the U.S. now has a debt which is bigger than its GDP. Right. And it's problematic.

It's not just big. It is, and you're absolutely very constantine. So concern about deficits in the United States, you know, less seen in 2010. That was the rise of the Tea Party, so-called, and, you know, conservative Republicans worried about debt and deficits. And they took over the Congress. The Republicans took our House of Representatives, and they got the Senate later. On the strength of that. A lot of those members are still around, but now that we have a Republican president,

they seem to have forgotten all about fiscal discipline. It was, they were opposed to Democrats spending more, but they seem okay with Republicans spending more. But the way I look at it, I try to keep partisan politics out of it. I have my opinions like everyone else, but I'm looking at Republicans and Democrats in this together, and kind of what you say, Constantine, about the history, 230 years of the government bond market,

the history is the debt to GDP ratio, how much debt relative to the size of the economy, goes up in times of war and down and gets repaid in times of peace. So it hasn't been straight up since George Washington to Donald Trump. It looks more like a sine wave. It goes up and down like this until 2000. That's when things ran off the rail. When Bill Clinton left office, the national debt was $5 trillion.

After eight years of George Bush, it had doubled to $10 trillion. In eight years of Obama, it had doubled again to $20 trillion. And Trump has thrown a couple trillion dollars on it. top of that. So I say we used to have bipartisan responsibility. Today we have bipartisan irresponsibility. It's not specifically a Democrat or Republican issue. As I say, both parties are spending freely. Look, I spend a lot of time telling you what's wrong with the world. So let me tell you about something that's actually right. Sleep, specifically getting more of it, better quality, the kind where you wake up and feel like a human being rather than someone

who's been thrown down a staircase. Most mattresses are just layers of synthetic foam and cross fingers. You're spending a third of your life on the thing and most people have no idea what's actually in it. Avocado green mattress is different. Their mattresses are certified organic built from natural materials designed to actually support your body properly rather than just hold you in one position until morning. The craftsmanship is real. These are mass produced objects. Someone has put thought into them. I'll be honest. I'm not the person who thinks carefully about where he sleeps. My dating history will tell you that. I'm the person who's on the same mattress for eight years and called it fine. But the older I get, the more I notice

that fine isn't actually fine. Your body tells you, if you're going to invest in anything for your home, your bed is the one that pays you back every single night. Avicado products are made, not manufactured, and thoughtfully crafted with real materials to deliver lasting comfort and support. Go to avocado green mattress.com slash trigger to check out their mattress and furniture sale. That's avocado greenmatress.com slash trigger. Avocado green mattress.com slash trigger. So let's look at basically what you're essentially saying is the patient had a heart attack. We've emptied the medicine cupboard.

We haven't restocked it. And before we get onto that, we kind of started with a slightly different order. But I want you just for ordinary people who may be watching this, just briefly summarized for us, why did the 2007-2008 crash happen? Well, the reason it happened is fairly straightforward, and for that we can go back a little further in time to 1998. That was the Russian default. We had a global financial crisis. We had a global liquidity crisis.

It was over somewhat quickly, and it did not lead to a recession, but it was just as dangerous as what happened in 2008. And it all, you know, it kind of started in Thailand, went to Indonesia and Korea and Russia. But it ended up in my lap at a hedge fund in Greenwich, Connecticut, called Long-Term Capital Management Management. And I was their chief lawyer. I was not the head of the Risk Management Committee, fortunately, but I say when people mess up badly enough, it gets dumped on the lawyers. So here was a situation where this fund had lost $4 billion in about five weeks. And people said, well, okay, you know, too bad for you guys. They're too bad for your investors.

But who on earth wants to bail out a hedge fund? That's not our job. And if you're this Fed, and that's what we thought. We said, well, too bad for us, but no one's going to bail us out. But we called the Fed to explain what was happening just to be good corporate citizens. We say, well, we see a train wreck. We're in it. We want to tell you about it.

But we weren't asking for bail it, nor did we expect one. But when the Fed realized that we had $1.3 trillion of derivatives swaps and options with the 14 biggest banks, they said, hey, if you guys go out, you're going to take. take down these banks and that is what would have happened. Interestingly in 98 the first victim would have been Lehman Brothers. They ended up being the first victim in 2008, but they were always kind of the weak sister of the group, you know, all along. That was always true. So the Fed organized a bailout. They didn't do it themselves. There was no government money used, but they were, they did what's called the convening power. They got the banks together. We put a package together five days. No one slept.

We worked around the clock. We got it done. And in effect, Wall Street took over our balance sheet with their own money, unwounded slowly over the course of a year and the whole thing went away. My point is, people forget about that. It was 21 years ago. And people are like, yeah, I kind of remember that. Or if you're younger, you've maybe never heard of it. But we were... I was living in Russia at the time.

You had a front row seat also. And as I said, I did it on the bailout. But we were hours away from the sequential closure of every stock and bond market in the world. That's how dangerous it was, and that's how close it was. Now, when you had that kind of danger and it doesn't happen, the plane doesn't crash, people tend to shrug it off. But as an insider, sitting there with the Fed and the Treasury and the head of Goldman Sachs and J.P. Morgan and their lawyers and those are the people we were up against. And we did get it done. We all understood the seriousness of it.

It was a deal that no one wanted to do and everyone had to do. So then what was the aftermath of that, if you will? Well, the lessons I learned and the lessons I think everyone should have learned to see, let's get rid of derivatives, you know, not all of the mess, but most of them. Let's have more transparency. Let's have less leverage. Let's keep banking and investment banking separated as they had been under our Glass Stigel law for 80 years, which worked very well. And the government policy response was the exact opposite.

They repealed Glass Stigle. They all of a sudden allowed commercial banks and investment banks to be in the same business, turned Citibank into a hedge fund, for example. All the conflicts that had existed in the 1920s were back again. They repealed regulations on swaps. All of a sudden, you could do swaps on everything, including oil, which led straight to Enron, which was a massive collapse in the early 2000s. So as the 2008 crisis was approaching 2005, 2006, I'm watching this.

And it's like I'm watching the same movie. I'd live through it. You know, live through the horror show of long-term capital management. I'm seeing the same thing happen over again. Now it was in mortgages, so-called junk mortgages, subprime, and similar types of non-creditworthy mortgages. The previous time it had been in international bond markets. It doesn't matter.

The catalyst can come from a lot of places, but what does matter is that the system is so interconnected and you have what's called contagion where one sector or one player goes down, but they take other people with. them that's a domino effect and it keeps spreading that's what we had in 1998 it was truncated by this bailout that's what we had in 2008 but you know the first symptoms were in the spring of 2007 and it was actually Hong Kong

Shanghai Bank in their US operations said you know our earnings were a little below expectations because our mortgage losses were higher than we thought everyone's like okay you missed your earnings target but that was a that was a red light that was hey something's wrong in the mortgage market something below the surface. And then in March 2007, Ben Bernanke famously said, oh, this won't be a problem, this will blow over. Just one more example of central banks not understanding what they regulate. And then in the spring, or sorry, the summer of 2007, you had the equivalent of a heart attack where Societet General in France, their money market funds were closed. And then the Fed had to

cut the discount rate. And then the crisis began really a year before. The acute stage was September, 2008. Lehman Brothers goes bankrupt, ARG gets bailed out, etc. But it started in the summer of 2007 with early warning in the spring of 2007. So it was mortgage-related, of course. And I'll give you a very concrete example. There were a trillion dollars of subprime mortgages. These are mortgages that, you know, no documentation, don't have to prove your income, very non-creditworthy. but there was a bubble mentality, a frenzy, and everyone, hey, buy a house and borrow money, fix it up, sell it for twice as much, walk away rich, you know, and everybody was doing it.

And it was a trillion dollars worth. Now, mortgage default rates rarely get about 5%. 5% is really high in the mortgage market. So people were saying, you know, smart people like Ben Stein, the financial analysts, but the central bank and others were like, well, okay, let's get crazy. Let's assume a 20% default rate, which has never happened, But just to assume that's true.

On a trillion dollars of subprime mortgages, the 20% default rate would be a $200 billion loss, which was only slightly higher than the S&L crisis of the 1980s. You know, justice for inflation, it would have been a comparable loss. And the attitude was, well, we survived the 80s, we'll survive this. Yeah, it's bad.

Banks will take losses. Stock prices go down a little bit, but we'll survive. What they missed is, yes, there was $1 trillion of subprime mortgages, but there were six trillion dollars of derivatives. That was invisible. So all of a sudden, 20% of that was 1.2 trillion. So you had... Before anyone who doesn't know,

derivative is essentially a way of placing a bet on the future price of something. Correct. That's exactly what. It's a side bet with no underlying. So let's say I borrow a million dollars from Francis. Highly unlikely. Believe me. Highly unlikely.

I've got the money. I just don't know. I'll lend it. Well, okay. But let's say you were in a good mood that day. So we have a real loan. Francis gives me a million dollars. I sign a note.

That's a real transaction. But then I call you up and say, hey, Constantine, you want to make a little side bet on whether I pay Francis back? And you're like, yeah, I'll take the action. And then we call somebody else. So you create derivatives out of thin air. And there's no limit on how many you can have. They're off balance sheet, meaning giving the balance sheet of the company, I won't see them.

You have to read the footnotes. And then the information behind the footnotes. So non-transparent, unregulated, no limit on size. And that's what happened. It's gambling, basically. Correct. It used to be illegal because of gambling laws that had been around on the books for a long time. So you had this trillion dollars of subprime mortgages,

but about $6 trillion of bets. Exactly, right, sidebets. So the crisis was actually much worse than anyone realized. And then when it started to collapse, the contagion spread throughout the financial system. And the scary thing is, and what I gleaned a lot from your book, is that we haven't learned the lessons of 2008. Well, that's exactly right. And my point about 2008, it was because we did not learn the lessons of 1998, and we flew right into 2008. But once again, we have not learned the lessons of 2008, and we're going to fly right into the next storm.

Sounds a lot like my life, Jim, I'll be honest with you. Well, with one distinction, which is that in 1998, Wall Street got together and bailed out of hair. hedge fund. In 2008, the central banks got together and bailed out Wall Street. Who's going to bail out the central banks? And it was the point is each crisis is bigger than the one before. The intervention gets elevated, larger dollar amounts. And are we now at the point where there's no one left to bail us out?

Except the taxpayer. Yeah. Well, although the taxpayers are in near revolt as it is. So you're right, that's the ultimate source of money or Fed printing. Yeah. And you were saying, you were talking about, you were saying in your book about how actually what the, this sort of black hole of debt is student loans, which blew my mind. Correct.

And one of the questions I'm asked most frequently is, okay, Jim, I kind of follow your analysis on how risk works and how complexity theory is in capital markets, how that works. But where's the crisis coming from? What's going to be the catalyst? And that's, there's actually a long list. Now, student loans, there are $1.6 trillion worth of student loans. Those, this is in the United States. So it's 50% more than the subprime mortgages in 2008.

But the default rates actually are 20%. Again, in... But I'm guessing they're not as much subject to derivatives as the subprime mortgages. Well, that's correct. But the loss falls directly on the taxpayer because they're all issued by or guaranteed by the United States Treasury. Now, it ended up being the case that the government had to get involved and guaranteeing a lot in 2008 but at least initially those mortgages were not guaranteed by the

government but the student loans are so this will go and kind of this gets to your point Francis you know how does the how do capital markets and money markets and Fed policy kind of leach into to debt and deficits so when you know a lender credit union or anybody or university makes a loan to a student and the Treasury guarantees that loan which they do, it's off budget. Again, it's not strictly a derivative, but it is non-transparent. So then the student defaults and the lender simply turns to the Treasury and said, here's, here's your loan file, pay me, and the Treasury pays the lender because they've guaranteed the loan.

Now it's on the Treasury. But until that point, that loss is not on the books in the government. That loss is not part of the deficit. But when the Treasury writes the check to make good on the guarantee, it does go into the deficit. So we think deficits are high now, but there's this, you know, trillion-dollar tsunami of student loan losses that's going to pile on top of the structural deficits and make it even worse. So all these things are, you know, I spend all my time analyzing these things. I see them all. I can describe them. I can see how they're going to converge into a worse crisis. But in the short round, people either ignore them, or they just don't know anything about them.

Why should they? I mean, every day people don't. Although I do say when it comes to your own money, everyone has a PhD. But for the most part, this is technical stuff and people don't get it. This is why I like talking to you because you can break quite complicated things down

in a way that makes them accessible. I was going to ask, just as a very quick aside, a few of the Democratic presidential candidate. Is that what you're going to ask? Bernie. Yeah. Bernie in particular, they're talking about canceling student debt. So that would take the off-balance sheet loss

straight into the balance sheet immediately. And what do you think the impact of a policy like that would be? Well, there are two schools that thought. My view is just disastrous, and I could give a lot of reasons why. But why would Bernie Sanders even suggest that? By the way, he's not alone. I think the other candidates of Elizabeth Warren and Joe Biden and Kamala Harris, one way or another, have suggested that they would do something similar,

that we need student loan relief, and that ends up going onto the budget and onto the taxpayers. But there's a school of economics. I talked about this in chapter five of my book. It's called Modern Monetary Theory, MMT for short. We just lost half of you. Well, fair enough. I'm kidding.

I can explain it very simply. I wouldn't expect everyday viewers, everyday people to know anything about it. But more to the point, economists don't know anything about it. This is a new school of economics, if you want to think of it that way. So it's 1929, along comes John Maynard Keynes with new theories on, you know, aggregate demand or whatever. Well, there is this modern monetary theory. But the leading light, the leading scholar of modern monetary theory is a lady named Stephanie Kelton, who's a professor of the State University of New York.

But she is the financial advisor to Bernie Sanders 2020. I think I might have met her at Kilkenomics, actually. Yeah, yeah, we might have. Very nice lady. I disagree on theory. but yeah she's a nice person very bright and she wasn't good economics um she's the financial advisor to bernie sanders right so this is where this is coming from so you're right bernie sanders not going to go to a you know a clam bank in new hampshire or a cookout in iowa and talk about

modern monetary theory he'd lose the audience but that's what's behind the thinking but what modern monetary theory says is it actually there's no limit on the amount you can spend you can spend as much as you want and the market will either buy the debt or if they balk the federal monetize the debt and right now the US so how much debt is there relative to the size of the economy that this is called the debt to GDP ratio but the way it's a simple fraction you learn in the fifth grade how much debt divided by the size of the economy so in a simple example if you had five trillion dollars of debt and a 10 trillion dollar economy that that fraction would be one half.

So you would say the debt, the GDP ratio, is one half or 50%. Today, the debt is larger than the economy. That ratio is over 100%. We had round numbers, about $23 trillion of debt and about a $22 trillion economy. So the ratio is about 105%, highest since World War II.

That troubles me, it troubles other economists. But my friend Stephanie says, What's the problem? You could take it to 150%. 200%, 250%. By the way, that's where Japan is. Japan's at 250%. Greece is 175% or so.

Italy's 135%. They're all still standing. Go to Italy. Barely. Well, you ought to go to Italy. The lights are on, you know. Bars are open. Go to the Ginza.

You know, it looks like Times Square. So you don't see visible signs of stress. And here's the irony. Ben Bernanke would absolutely not agree with this theory, and he said so publicly. But Professor Kelton says to Bernanke, you proved our point. You were the one who took the Fed's balance sheet and quadrupled it from $800 billion to $4.5 trillion or so. You proved that you can print trillions of dollars of money without causing inflation, without causing high interest rates, without causing a run on the bank.

So all we're saying is, you know, you did it to prop up Jamie Diamond's bonus. We wanted to do it to forgive student loans. We may have different policy objectives, but the process is the same. What's the problem? Now, of all the things I've debated, for years, I was dragged into Bitcoin versus Gold debates, which I thought were silly. I mean, I don't like Bitcoin. I do like gold, but it's like fish versus bicycles.

I mean, the debate never made sense to me, even though I did a lot of them. But this, of all the things I've had to provide, this was actually the most difficult because it's superficially appealing. First of all, legally, it is true that the Fed can take their balance sheet as high as they want. There's no legal limit on the Fed's ability to print money. It is true that Japan has a much higher debt to GDP ratio, and they're still standing. It is true that the Treasury can borrow as much as they want, subject to periodic increases in the debt sale, which have never been denied, and the Fed can monetize the debt.

So all the elements of the thesis are actually correct. So how do you refute it? And the answer is that legally it can be done. And if your goal is to print a lot of money and forgive student loans or give a guaranteed job or guarantee basic income, whatever it is, in theory you could do that. But there is an invisible psychological boundary. And this is what the modern monetary theorists don't understand. And I don't think Ben Bernanaki understands it.

There comes a time when people wake up and they say, you know, I don't know what's going on here. I don't have a PhD, but get me out of the dollar. It doesn't, so, you know, I'll buy gold, I'll buy silver, land, oil, natural resource, buy a new car, buy a house. Get me out of the dollar into something tangible because I no longer trust the monetary authorities. I no longer trust the Congress. I can't believe that you're going to spend this much money without ceiling, without limit, without causing inflation. My inflationary expectations will go up. And the way to deal with that is to buy hard assets, starting with gold, but not exclusively gold.

They're, as I say, land, real estate, natural resources. They're all good substitutes. At that point, interest rates will skyrocket. All of a sudden, the bond market will have difficulty selling it. The president of the Congress could take away some of the fed's independence. All of these assumptions could come crashing down very quickly, very unexpectedly, and that's the problem with the theory. And Jim, there's a question that I want to ask, and it enrages me every time.

Why haven't we learned lessons? Why do we make the same mistakes again and again and again? Great question. And there are two reasons. One is the models that the policymakers use are all wrong. If you have the wrong model, you're going to get the wrong policy every single time. So what are the efficient market hypothesis? It says that you can't beat the market because markets get the information.

faster than you do. They quickly and smoothly incorporated into the price. Yeah, the price will go up or down. You can win or lose, but what you can't do is beat the market because you can't, you know, think faster than the news is coming in. The market as a whole adjust. That's not true. I mean, we've had, how do you explain crashes and panics? How do you explain situations where stock falls 20% in a minute, which happens for an individual stock? Or for that matter, October 19, 19, US stock market fell 22% in one day. Today, by today's measure on the Dow Jones Industrial average, that wouldn't be 500 points. That would be 5,000 points.

That happened on October 19, 1987. That's not efficient. So my point is, that's a pillar of modern financial theory, but it's junk science. The Phillips curve, you know, there's an inverse relationship between unemployment and inflation. So when unemployment gets really low, which it is, inflation has to go up. False. It's not true.

Unemployment is really low, but inflation is really low also. So that's junk science. Value at risk. This is used by all the big banks to manage their risks. And it basically says that, you know, I don't have to look at gross positions. So I buy a $5 billion swap from one person and I sell the same $5 billion swap to another person. And I can net them down and my risk is tiny because I'm long and short the same amount. that's what value at risk would say

and you don't need much capital for that tiny little risk. Not true because what if this guy goes bankrupt? All of a sudden this short position becomes this balance position becomes net short and I got to go out and buy something to cover it. So all these assumptions are wrong but people cling to them

and with wrong assumptions, wrong models you get bad policy every time. That's one reason. The other reason is just outright corruption. I was invited by the United States. Treasury to come down, meet behind closed doors of senior officials, to give them my view of how best to manage risk. And they were very nice to invite me and had a good audience and they were attentive and

it was a good opportunity. Nothing changed, but that's their problem. Sounds like being a comedian, no matter what you say, nothing's going to change. Just do it again. But in the middle of the presentation to the senior official who was there, I have a habit of interrupting myself. and I was going through risk and all that. And I turned him, I said, you know, I don't envy your job

because the banks own this town. We were in Washington. She said, the banks own this town. And I thought he would be outraged and that's an insult. What are you saying, whatever? He didn't know, he looked at me and said, you're right. Meaning they can't regulate in a way to control the banking system because the bank lobbyists and the banks themselves control Washington.

What banker is going to encourage a law, rule, or regulation that reduces his pay? even by a nickel. So between the Fed and the Treasury not understanding risk because the models are flawed and bankers pulling the strings, which they do, and my wife hates me to admit it, but I was a registered lobbyist at one point. I ran in Washington office. I spent a lot of time on Capitol Hill. I work behind the scenes on exactly the kind of thing we're describing. So you don't have the right model. You can't see problems coming. You're not going to get the right laws, rules, and regulations, and it will keep happening again.

But my point is, every time it happens, it's worse than the time before. And does there come a time when the crisis is so acute, so big, so out of control, and there is no one to bail it out, going back to what we said earlier, how can the Fed, you know, they've taken their balance sheet to $4 trillion in their back, they're printing money again. What are they going to do next time? $5 trillion? $6 trillion?

Well, my friend, Stephanie Kellett, would say yes, and I would say no, because you're going to destroy confidence. And you talk about the corruption where is that why we didn't see top executives prosecuted in the aftermath of the financial crash? No prosecutions, no pay cuts, no penalties. They're all back to their, you know, $20, $50 million bonuses. Jamie Diamond is a billionaire. Why should a banker be a billionaire? You know, if you're, you know, you create a Silicon Valley company or a great app or you run a hedge fund, they're like legitimate hard work.

Or a podcast? Exactly. There are legitimate ways to be a billionaire, but being a banker isn't one of them. You should have a nice pay and a nice retirement. So that's a pretty good example. Guys, if you give us money on Patreon, you realize we're not billionaires.

Or really, nowhere remotely near being billionaires. Keep giving us money. Absolutely. Look at the way he's dressed, right? Sorry, Jim, carry on. You're the one that gets all the comments about your appearance. I don't know why you try and make it about me. It's not going to work, Francis.

It's just the jokes have to have some better. basis in reality and yours don't. Now, well, Jim, it's interesting to talk about all this stuff and I guess the question I was going to ask you is some of your detractors might say, you have been predicting a crash for a while.

Right. And it hasn't happened. Right. So is that because it's just around the corner or is that because you're wrong? It's because it could be just around the corner. It could be delayed. But here's the point. Just look at recent history. And I kind of

this from October of 1987. You could go back further. But that's 1987, late 80s, that was really the rise of derivatives, the rise of link trading between the stock exchange and the futures exchanges. A lot of, you know, increased automation, faster telecommunication, a lot of the things we're still wrestling with today, really emerged in the late 80s and got more intense than the 90s and through the 21st century. October 19, 19, 1987, stock market falls 22% one day. mentioned that.

1994, the Mexican tequila crisis. The Fed had to use a slush fund to bail out Mexico because our Congress said no. 1997, the Asia financial crisis. 1998, Russia, long-term capital management. We talked about that. 2000. Dot com. NASDAQ got down 80%.

2007, the mortgage crisis. 2008, the global financial crisis. These things happen every five, seven years with some regularity. It's not, you can't quite say you're watched by it, but pretty close. It's been 11 years since the last one. So who wants to bet that it will never happen again? I just turn it around on them and say, okay, do you want to bet your net worth, your retirement,

your family's well-being, this will never happen again? How do you feel? And then they get some thinking, well, maybe it will happen again. And I also make the point that each one's bigger than the last one, so the next one is going to be worse than you can imagine, something we've never seen maybe since the 14th century, who knows. And then I make another point, which is, because people sort of say to me, Jim,

I've read your books, I've heard your presentations. I actually kind of agree with what you're saying. Would you mind calling me at 3 p.m. the day before, and I'll sell my stocks and buy gold. I said, well, first of all, I'm not going to know the day. I can, with science, with very good, you know, kind of rigorous support, you can estimate the magnitude of it and the fact that it will happen. Timing is the most difficult. People say, well, what good is it? Well, it's like an avalanche, you know.

How does that work? Well, snow builds up and it builds up and it builds up. And an experienced mountaineer can look at that and say, that's going to collapse because, you know, it's windswept, the temperature's too warm today. You can see the avalanches coming, but it doesn't have to be today or tomorrow or the day after. But do you want to ski under it? Do you want to take that chance that, you know, today's your lucky day or perhaps your unlucky day? And the other point I make is that when this hits, we'll all know it. You'll know it. You'll know it. The audience will know it.

it's going to be too late to protect yourself. You're going to say, oh, maybe I should get some gold, you know, called the gold dealer. Well, if you're not a customer, they're not going to take your call. The dealers are going to be back ordered. The mints are going to be back ordered. Gold's going to be going up $100 an ounce a day, not a week or a month, but a day, and you're going to say, get me some gold and you won't be able to get it. I want to sell my stocks.

Well, yeah, okay, they're down 40%, you know, you're welcome to it. You've lost half your money. And it was these things happen so quickly that when people were, you're going to be able to when people realize the panic is on, it will be too late to get out of losing positions, too late to preserve wealth. And so what I say to people is, what are you waiting for?

You know, I'm not saying, you know, people, when you're in my position, people love to put words in your mouth, like, oh, Jim Rickard says, you know, it's the end of the world, sell everything by gold. I've never said any one of those things. It won't be the end of the world. It could be a very different world on the other side.

That sounds so reassuring. It won't be the end of the world. Number one. And there are things you can do today. Don't sell everything and buy gold, but have about 10% gold in your portfolio. It's like 10 quid. Buy 10 quits worth of gold.

No, no, 40 quid. 40 quid. How much gold can you buy for 40 quid? Not much. I didn't think so. It's about, it'd be about, what, 1,200 pounds per ounce, so a fraction of an ounce. Wow, okay.

What does an ounce look like physically? amounts of gold. What's interesting about an ounce of gold, it's a large coin. It's a large of the old sovereign. That's 1,200 pounds thereabouts. Exactly, right. The classic British sovereign I occasion buy

sovereigns for, as a collectible, it's not good value for money in terms of gold, and I understand that, and they could buy gold bullion or coins or whatever for that purpose, but I do collect some gold coins, and I have some sovereigns. They were seven grams, about a quarter ounce. But, you know, I have a picture of King George the Fifth on one side, George slain the dragon on the other side,

you know, but 22-carat gold, not 92% pure gold. They put in a little alloy. You still got your weight in gold, but they put in a little alloy just to make adorable, because this was what we call in Philadelphia walking around money. You know, you had it in your pocket or your purse, and you would spend it, and an ounce was almost too much. It was too much value, so the quarter ounce was just right, and that was the classic British sovereign. But the point is, the one ounce coin a little bit larger in diameter than coins we use today but what surprises people when you give them an ounce of gold is the weight it's very dense it's one of the densest metals in the periodic table the elements and people like

oh that's kind of kind of heavy and they're very impressed by it and it's pretty too the fact that it's pretty is not a reason to have it but the fact that it has retained value and it's scarce and it checks all the boxes in terms of a good form of money but people are surprised at how heavy I've been in some vaults where, you know, you see these 400-ounce bars. They're sort of trapezoidal-shaped. I want to lift that bar up. It's 35 pounds.

It's like if you go to freeways, that's fine. It's kind of heavy to lift one up. And what about those people who are saying, well, I'm going to be fine. I've got Bitcoin or whatever it is. I like that. That's a good reaction. What is your opinion on Bitcoin? Because it only seemed like six months ago, it was that everybody was talking about.

it and you know, crypto and all the rest of it. Yeah, well, Bitcoin, just empirically, before we get into the substance of it, was the greatest bubble in the history of the world. As Bitcoin was going up, so now we're talking about the fall of 2017. It was going up like a thousand dollars per coin per week. It was 7,000, 8,000, 9,000, 10,000. And I did an interview at the time. This was early December, 2017.

And I've never been a fan of Bitcoin. Don't recommend it. think anyone should have it. And the host asked, said, well, Jim, what's going to happen? I said, well, it's going to keep going up. This is a bubble, and they go up until they don't. So I could see Bitcoin going to $20,000 and then crashing straight down. That's exactly what happened. It went to $20,000 and then they crashed straight down. Now, you say, oh, well, gee, if I had bought them for $10, and it wasn't that long ago when you could have bought them for $10,000, and they went to $20,000, and you had sold them all, you could have made millions. I know people who did that. There are

legitimate Bitcoin millionaires, maybe even a few Bitcoin billionaires, I don't doubt that those people are out there, and I even know some. But the point I make is that how did they make that money? This is a zero-sum game. That came out of the pockets of people who did pay $15,000, $15,000, $17,000. South Korean garage mechanics who hawk their inventory just to buy a couple of coins. You know, Netherlands, you know, middle class individuals who sold their houses and lived in trailers so they could buy coins at these high prices they've lost all their money they've been suicides around that you have blood on your hands so my point is if that's how you enjoy making money I'll leave you to it but I you know so I have no problem with the fact that

Bill Gates is worth a hundred billion dollars let's say he actually earned it he he and his colleagues and his co-hearted created something created something that's worth incalculable so you know trillions and trillions of dollars of value for the world if his share is a hundred billion, you're welcome to it. He earned his money. But Bitcoin, you don't earn your money. You just take it from somebody else in a zero-sum game. That adds nothing to society, no value, no increase in wealth. It is gambling, except there's no casino. You just take it right from the other player. There you go. So the answer there is buy gold, about 10%, and if that's what you want to do, and send it to us to support the show. Can you imagine that instead of Patreon, like $5 a month,

we just get a gold sovereign once a month. Yeah, absolutely. You come in dressed like Mr. T. It'd be brilliant. Yeah, just in teeth. But anyway, let's move on to one other issue that we wanted to discuss with you, something that you know a hell of a lot about, and we wanted to raise with you. Donald Trump during his election campaign in 2016

spent a hell of a lot of time talking about China. He was ridiculed for this. He was mock for this. Most people who are not experts didn't even understand why he was talking about it. Somewhere in the periphery, people might have thought, well, he's talking about it because a lot of manufacturing jobs have gone to China. Right. But if you listen to some of his advisors, if you listen to some of the other people who

talk about the threat that China poses to the rest of the world, economically more than anything, there are many more layers to it than that. Right. So lay that out for us. Sure. Trump is a difficult to understand genius. And I look at the fact that he won in 2016 and Chris were coming in. into the 2020 elections.

And I predicted the Trump victory in 2016. So I'm in that business of predictive analytics. I have Trump as a strong favor to win again. But one of the factors I look at, I look at his opponents, the media, the Democrats, the progressives. And I say, did they learn anything? Did they learn anything in 2016

so that they can do something different today and perhaps beat him? And so far the answer is no. They haven't learned a thing. Well, they've doubled down on all the crazy culture. stuff that got them in trouble in 2016. That's exactly right. They've doubled down. That's a good way

to put it. But no sign at all that they've learned anything. But so I describe Trump's relationships with the media as the media are a herd of puppies and Trump's the master with a red rubber ball and he throws the ball and all the puppies chase the ball.

One of them fetches it and brings it back and he says very good and he throws the ball over there and they do the same thing. Meanwhile, he's doing serious stuff. So what's the ball? You know, Stormy Daniels. impeachment, collusion, Russia, gay. These things are distractions, no substance to any of them. The media keeps chasing.

Meanwhile, what is Trump actually doing? The largest tax cut in history, he is remaking the federal judiciary, appointing judges at an unprecedented rate, taking control of the courts. And it's from a list produced by the Federalist Society. They're very staunch, reliable conservatives. And they pick them in the early 40s

because it's a lifetime appointment. So you'll be on the bench 40 years from now. Now, the Trump judiciary is going to run the United States long after, well, at least after I'm gone, you guys are younger, but for maybe four decades or so in the future. The Trump owns the Fed. Trump came in. There were two vacancies on the board of governors of the Federal Reserve. Why were the two vacancies? Well, Obama was so sure that Hillary was going to win that he didn't bother with the appointments.

He said, well, I'll give him the Hillary. She'll appoint some strong hands. So Trump got two seats right off the bat. Then there were a couple of resignations. So that kind of went up to four seats. And then one more since then, plus promoting Jay Powell from a governor where he already was a governor before Trump to chairman. So Leo Braynard is going to end up as the only non-Trump appointee on the board of governors of the Federal Reserve. She must feel like a hostage when she goes into the room.

But the point is so Trump owns the Federal Reserve. He's taking control of the judiciary. He's burning the Code of Federal Regulations. I mean, literally burning it down so you can actually have some freedom, and the largest tax cut in history, and confronting China, and that was your point, Constantine. So the press is chasing the rubber ball. He's doing big stuff.

That's really going to be world historic. So as it relates to China, so for 20 years, I would say the 1990s and the early 2000s, a little beyond that, really up until Trump, the globalist view, when I say, I use these phrases, but I name names, because we know who these people are. People like Jeffrey Sachs at Columbia University, Richard Haas of the Council of Foreign Relations, John Kerry, who was our Secretary of State,

and of course President Obama. And President Bush, I don't see much difference between Bush and Obama on this point, but the globalist view was, okay, we know the Chinese are kind of bad guys. We know they're, you know, communists, but if we trade with them and open our doors and let them break the rules

and let them steal our intellectual property, with their low-cost, you know, Lego-style manufacturing assembly, they'll grow rich, and in the fullness of time, they'll be just like us. Once they taste the fruits and the benefits of capitalism, they'll gradually, you know, they may not be like a liberal democracy the next day, but they will move away from communism. And I said 20 years ago, I said, no, you've got this exactly wrong. You don't understand the communist. And people go, oh, jam, you know, the communist, it's just a couple 80-year-olds on the Apollo Bureau, they'll die soon, you know. The communism is anachronistic in China. I said,

No, they're hardcore communists. Well, so all this accommodation, so, you know, China in 1994 does a maxi devaluation of the Yuan. 2001, they joined the WTO, proceeded to break every rule and every promise. It's kind of like getting into a club and you go, you know, an exclusive club. You go before the membership committee and they say, well, we're going to admit you to the club, but, you know, we have a very strict dress code. And you say, yes, I understand. I'll adhere to the dress code.

And you show up the next day and, like, flip-flops and the t-shirt. That's China. They shopped on the t-shirt and say, you know, give me a drink. 2016, the IMF admitted them to these small group of five currencies that are used to calculate the value of world money, world money, SDR, you know, the special drawing rights, world money printed by the IMF. But you had to make certain promises to do that,

including one that you would have an open capital account. They immediately proceeded to close the capital account. In other words, China's willing to lie, she'd steal. We know that. But what was interesting is that the U.S. was willing to tolerate it for the sake of a, you know, chimera or a mirage of a more liberal China. And that hasn't happened. The opposite has happened. President Xi was made president for life.

They had a two-term, two-five-year term rotation. And in your second five-year term, you had to appoint your successor who would smoothly come in and take over at the end of your five-year term. Second five-year term. That's gone. Xi is president for life. They've now created a new branch of ideology. called Xi thought. Well, there's only one other dictator in China

who had thought, that was Mal thought. So Xi is the first head of the Communist Party since Mao Zedong to have a school of thought named after him. This is a little of truth perhaps to the West, but these are really important things inside of China. So he's head of the Communist Party for life, has his own school of thought, is suppressed all of his enemies.

I was in Hong Kong not long ago, a very elite audience at the Asian Asia society, the biggest property owners, scholars, et cetera, in Hong Kong. And they were all, see, these people are globalists. I don't know why I get invited to these things, but they do invite me. And they're all globalists and they're all saying nice things about China. And when it came my turn, I just looked at this one guy, I said, what happened to Bojili Lai?

Bojili Lai was a rivaled as Xi Jinping. He was the mayor of a head of the Communist Party of Shang-Chang. And he was the up-and-comer. He was making his own play disappeared. We haven't heard from Bojali in about four years. So they've been tortured and sent to a re-education camp. Let's say you're a Muslim Uyghur in Western China or you're a Catholic almost anywhere in China. And in addition to having religion, because they're officially atheist, you express a little bit of dissent while they arrest you.

They put you in a concentration camp, a real one, not to make up on some of our squad in the U.S. It's thought reeducation, so they basically try to brainwash you in a real one. to getting with the program. Some people do that or pretend to, but let's say you still don't do that, you're not with the program. They strap you to an operating table without anesthetic and they surgically remove your organs

to supply a multi-billion dollar organ transplant industry in China and you die having your organs removed without anesthetic and then they cremate the body. Where have we seen that before? So this is China, these are your friends. Atheist, murderers, deny human rights, drown 20 million girls in buckets, because they had the one child policy,

but everybody won a boys. So if a girl, they kept a bucket of water by the delivery bed and if a girl was born, they drowned her on the spot. So why are we doing any business with China? That's what I don't understand. And my friend Kyle Bass agrees, he's been very successful hedge fund manager, he agrees. So what Trump has done?

He's taking- Presumably, Jim, sorry to interrupt, presumably although all those things, of course, terrible, I don't imagine that American voters were, concerned about China on those issues? No, they were actually very concerned about China because they were the ones losing jobs. They were the ones who saw the income stagnated.

But is it just jobs or is it China's trade policy, what people call mercantilism? Is there other thing, you mentioned stealing intellectual property? Tell us more about some of those things. Well, there's been this myth, and it goes back to the 1890s, when the US announced the open door policy, which meant that, you know,

we don't want to conquer you, but we were forcing you to try. trade with us. You know, that was the advantage for Americans. And the myth was, boy, so many people in China, if you could just sell everybody one T-shirt and one bottle of Coke, you'd make a fortune. That has never panned out. It has never panned out. So today, the modern version of that is, boy, if I could just sell everybody in China, you know, one cell phone with my patented technology or whatever. But China says, sure, come on in and set up your plant. By the way, you can only own 49 percent. We own 51 percent. And you have to hand over all your patents and all your intellectual

property is the price of admission. And companies say, okay, because they want to sell those phones. They then hand that to Huawei, which reverse engineers, it puts it in their own phones and puts you out of business. That's the price of doing business with China. So a couple things. One, companies are waking up to this. American workers knew it a long time ago because they were the ones losing their jobs. And you're right, Constantine.

I don't suggest that every unemployed blue-collar American worker who lost a job that Chinese was as concerned as I may be about human rights violations, but they're learning about them and they're not surprised. And so Trump is the first one to stand up to them and say, no, theft of intellectual property is over. Investment in China is over. We've weaponized certain statutes that the United States uses to protect our national security and that have been on the books for a long time, but they weren't kind of strictly enforced.

They've all been weaponized. Today, you know, to say that China couldn't buy Verizon, which is one of our biggest telecommunications companies, that's true. China can't buy an ice cream stand. China can't buy anything. Huawei might as well pack up their bags and leave. They're not going to do any business in the United States. And we're going to see through Europe and Japan

and our allies that they don't do any business with anybody else either. And if they do, they can't do business in the United States. That's a secondary program. So we're playing hardball. But if you want to boil this all down, in October 2018, our Vice President, Mike Pence, gave a speech before a think tank.

It's readily available on the internet and the White House website, easy to find. And people are calling it the Pence Doctrine. It's the first time I've ever seen Trump not name something after himself. He allowed Pence to go ahead, and so it's the Pence doctrine. Do you reckon there's a tiny room in the White House? The Pence room is like a little covered as a bit. Yeah, where they keep the brooms. Yeah, well, Pence might have a design on the Oval Office in 2024.

We can talk about that later. So, but what the vice president said, and this is the serious party, he says, yeah, This is a currency war. This is a trade war. Those are important things. But this is a much bigger issue. We've got human rights violations, geopolitical confrontation in the South China Sea,

theft of intellectual property, trade war, currency war, and the other things we mentioned. That this is more like Cold War II. Doesn't mean you have a shooting war, but it means that the confrontation is much bigger, broader, and will be more long-lasting.

And actually, Pence is preparing to deliver part two with the Pence doctrine. There will be another speech very soon. And when this, in my view, will be on a par with the Marshall Plan, or what's called the Long Telegram by George Cannon, which was turned into an article called Sources of Soviet conduct. But that article, which I think came out in 1947, they could be off by a year, thereabouts, was the blueprint for the conduct of U.S. foreign policy during the entire Cold War, right up until 1989. Everybody looked at that canon article and said, yeah, this is the way to do it.

And it wasn't a war. It was containment. Just boxed it in, starve them out, and they fell. That's exactly what happened. It took 45 years, but it happened. This Pence doctrine is going to be the new long telegram. It's going to define our confrontation with China. And then the thing I love is all these scholars, you know, TB pundits, whatever.

It was a book called The Thucydides Trap. And of course, Thucydides, the Greek historian. chronicle of the Peloponnesian War. And he said, well, you have the established power, Sparta, and the rising power, Athens. Whenever you have a rising power meeting and established power, they come, it comes to a war. There was a war between them, and that was the history of the Pelopinian War. So everyone's glommed on to this and said, yeah, here we go again. You know, the city's trap.

The U.S. is the established power, and China's the rising power, and it's going to come to a confrontation. There's no way around it. There may be some truth in that, but what they ignore is that Sparta won. In other words, Athens did not win the Peloponnesian War. Sparta destroyed Athens. So that would suggest that the U.S. will destroy China. We're not going to physically destroy it, but either China will transform into a more liberal society or the U.S. will box them in and defeat them at every turn, not let them steal the intellectual property.

And just to make it very concrete, U.S. companies are already moving the supply chain. coming out of China, they're going into Vietnam, Indonesia, Philippines, Thailand, Malaysia, other countries that have enough infrastructure, enough trained workers, with low wages that you can replicate what China offers without the baggage, without the theft of intellectual property and without supporting the human rights violations. Now, here's the thing. These are 10-year decisions. You don't close a plant and build a new one and then go back next year because everyone's, you know,

kissing and making up. You move your plan. You keep it there for 10, 15. years. So these jobs are coming out of China, but they're not coming back. And the Chinese economy is in much worse than people, much worse than people realized, much more indebted, much more vulnerable. And to top it off, the history of China for 5,000 years is centralization of power, followed by dissolution and decentralization, then the warring kingdoms, then it centralizes again, and it falls apart again, over and over through centuries.

and through dynasties. Right now, China is at peak centralization, going back to what I said about Xi, which means it's very easy to forecast what's going to happen next. It's going to fall apart. Well, on that happy note, we've got one more question for you, Jim.

What is the thing that we are not talking about, but we really should be talking about? The question is, when the next crisis comes, and it will come. So that's the easy part. It will be worse. That's the easy part. Timing, hard to say,

and you write about that. My answer is, what are you waiting for? Get ready now. When it comes, what will the world look like afterwards? And I talk about this in my book in Chapter 8 and the conclusion of the book. And I suggest that there's only one clean balance sheet left in the world. The central banks have not normalized their balance sheets.

We talked about that. There is one clean balance sheet left, which is the IMF, the International Monetary Fund. So just as central banks bail out Wall Street, perhaps the IMF will have to bail out the central banks. In other words, reliquify the world. Where's the source of liquidity? Where's the money coming from when there isn't enough money,

when everyone wants their money back and selling everything, prices are crashing, money is disappearing in front of your eyes. Where does the money come from to get the system back to normal? It might only come from the IMF if they can get their act together. But they issue this world money, this SDR, as they call it. I love the way they make up names of no one under you. understands. I call the IMF transparently, non-transparent. They actually tell you what they're doing, but no one understands it. It's very hard to read. But if that happens, you're going to need

China to agree and Russia to agree and other countries that are very adverse adversaries to the United States and also don't like the dollar. So the price of poker, if you will, is, yeah, we'll flood the zone with STRs. We'll relinquify the world with world money. But it means starting now, the dollar is no longer the dominant reserve currency. You know, the price of oil will be denominated in STRs. The balance sheets of the 100 largest corporations will be recorded in STRs. The STR will be how we maintain our reserves. It doesn't mean the dollar goes away, but it becomes a local currency. Like I go to Mexico, you buy some pesos. You know, if you visit the United States, you'll buy some dollars,

but it won't play the role it plays today. And US power will fall with it. Throughout history, Rome, British Empire, Spanish Empire, Dutch Empire, etc. When their currencies lost value, their empires fell. So there are much larger forces in play, and what I say to people is, you know, it will be

the end of the world? No. But it might be almost a semi-agrarian world. Life might look a little bit more like it did in 1910. Well, thank you very much for coming on the show, Jim. Thanks, fantastic. Yep, as always, subscribe.

Follow Jim on Twitter. Your Twitter handle is, Jim? At James G. You're very active on there. I follow you with great interest. It's the only social media I use, but I am fairly active, right. Yeah, so follow Jim there,

follow us at Triggerpot on all the social media. We'll put the postal address to send all your gold in the bottom of the video. And we will see you in a week. See you later, guys. Bye-bye.