You have to ask the question, what's GDP for? Not just what's the structure of it, what are we trying to do? What kind of society do you want? What kind of world do you want? Broadly. What does the U.S. want to be like? What does it want the world to be like? The U.S. is in. Government planning everything is the road to hell. But if you give everyone complete freedom of choice and free will, you will achieve nothing if you don't have morality. And the only way you can have a purely free market is if everyone in the economy has a completely moral sense of what
we hear for. What's GDP for? Rather than just unscrew the next guy to try and get three or four basis points more for the next month. You're listening to The Great Simplification. I'm Nate Hagens. On this show we describe how energy, the economy, the environment, and human behavior all fit together, and what it might mean for our future. By sharing insights from global thinkers, we hope to inform and inspire more humans to play emergent roles in the coming Great Simplification.
One of the unexpected benefits of hosting this show is after almost three years and 150 guests, I now have repeat guests who can come back in interesting combinations on reality round tables. With me today are repeat guests Michael Evry who is a global strategist at the European Investment Bank, Rabobank, and Luke Gromann who founded and runs the financial advisory firm Forest for the Trees LLC.
This was recorded on October 16th. We're going to release it before the election because there are many financial events with oil, with interest rates, with geopolitics, with gold, with the macro economy. This is a fascinating conversation that could easily have gone three or four hours. As you all know, I don't care where the market is headed per se. I care about what the T-leaves in the financial system mean for the future of our society, our civilization, the environment, our culture.
Because I do think that the financial overhang is what is going to be our Achilles heel, Gordian knot, whatever you want to call it. This was a very high octane discussion with the smart gentleman. Please welcome Michael Evry and Luke Gromann. Michael Evry, Luke Gromann, welcome back to the show. Thanks for having me. Great to be here. Due to the time differences, Michael you are in Singapore right now. Our third guest, Helen Thompson, couldn't make this.
It's a round table with just the two of you, but I know you both have a lot to say. You're both now emeritus guests on this show. We go beyond the basics now on this round table. Just a reminder that you both professionally work in the investment markets. This show is not about predicting where interest rates are gold or the stock market or oil is going to go per se.
But it's more than the implications that have for our future society, our future civilization, future decisions, policies, etc. So the broader socio-political backdrop. So with that intro, let's start here. Today is October 16th. In less than three weeks there is a pretty important election in the United States. And of the issues we're going to discuss today, debt, the US dollar, growth, interest rates, the social contract, geopolitics, all of that.
What are some of the key things that each of you think would be different under a Trump administration or a Harris administration? And what aspects of our situation are largely going to be the same no matter who wins? You know, I think ultimately the math doesn't care. We're looking at a situation as we sit today in the United States. 70 to 75% of tax receipts are being paid out every year in entitlements. Those are growing one and a half to two times faster than receipts.
Another 25% of receipts are getting paid out in interest on the federal debt. That is growing a big multiple of receipt growth as interest rate prices from the lag defects of the Fed's interest rate hikes. And that's so that's 90 to 95 to 100% of receipts in interest and interest like obligations growing two to five times faster than receipts.
And we're already in a position where interest on a net basis is already over above defense spending in the United States for the first time in at least 65 years and probably in US history. So we're in uncharted waters and making matters worse is you can't height tax rates because that will cause the deficit to rise as a percentage GDP as we saw with ACA or Obamacare, which was a tax hike back in 2014-15 by 16. The deficit to GDP was higher than it was when they implemented ACA in late 2014.
And so the the math says that the only policy questions are are we going to cut defense and entitlements or are we going to print the interest and if we print the interest how long will we go through a period of dollar up rates up stocks down economy down until we print the interest. And so I expect print the interest will be chosen by either of the candidates pretty earlier in their terms probably in the first one to two years at the latest. And I think the the differences are pretty minimal.
I think the focuses of industrial policy that the United States is clearly engaging on will probably be different under Trump than under Harris. I think US foreign policy will probably be more pragmatic and quite frankly better and peaceful under Trump than under Harris.
And I think the dollar will be lower either way rates will probably be relatively the same either way because some form of industrial policy with Fed or Treasury yield curve control or de facto yield curve control will be the policy chosen by either one. So I schedule these as just three way conversations I don't want them to be debates as you know some other podcasts are I just want it to be kind of a conversation among friends.
So I'm not sure whether to ask Michael to respond to what you just said or just give his view because you mentioned that we're going to print the interest which I agree with a Michael at rabble bank had a recent piece saying we can print the interest but we can't print commodities which I think both of you would agree. And we'll discuss that a little bit later but Michael where'd you like to go on with this intro.
Thank you yeah absolutely no no debating here this isn't model you and we're not trying to win points from each other and in fact. Look at I this is the first time we've met but we have interacted and you know spoiler we agree on about 90% of everything around us fact I think about 95 where we disagree perhaps is in what we think some of the short term medium term and long term outcomes might be that's all but in terms of are we in trouble in the US or globally are we in trouble yeah absolutely.
So in response to what was just said I again I agree with nearly all about the math doesn't care it's exceptionally concerning that the position the US finds itself in. Alongside some exceptional strengths by the way you know there are some incredible strengths remaining in the US alongside huge huge Achilles heels.
Speaking from a global perspective based here in Asia you know having lived in work in nine countries over my professional career nearly everywhere else is in just as much trouble but in slightly different ways there are there are very few places at the moment right now that are sitting pretty and thinking I've got this covered whatever happens in the US and whoever wins the election.
And it is not a sea sort with one side going down and another side going up it's more like the entire backdrop of the theater that this is being stage in just collapsing or the curtain saying on fire while everyone's on stage it's something that dramatic. So you know day in day out when people say to me what does this mean I am supposed to be focusing on what is it mean for the dollar what is it supposed to mean for interest rates etc but if we agree and I do.
That where we are now requires dramatic policies what I think the difference between Trump and Harris was likely to be is how dramatic the policy is and in different areas and I do think both of them will end up having to do some similar things but I think how different foreign policy can be for example that's one front that can have a flow through.
So I do not do many things including defense policy and defense spending for example but more concretely if we are going to be you know printing that interest let's cut to the chase. My broader thesis and we discussed this last time we spoke and I want to get this in early so we can build from there rather than you know slow build up and then dropping it at the end and not being able to discuss it.
So I think that opens opportunities politically for both of them to think about how do we do this tactically and strategically because you can just you know quote unquote monetize or print money but what's the point of doing that if you do it on stupid things. You can do it for a very short period of time before the markets carry you out on the stretcher and you know countries have countries are still and countries will are you going to put it into the supply side.
China style because they print money and they put it into the supply side or are you going to put it into the demand side like tax cuts or you know checks being sent to people to go and buy goods made in China. And if you do it on the latter I don't I think book and I will agree completely what a disaster that's going to be of course Bloomberg and all the financial media will be cheering because you know there's the kind of moronic short term consumption that thrills Wall Street.
But if they put it into the supply side and there are lots of other policies that would have to work alongside that was quite radical quite quite radical vote would be necessary. My suspicion is that not just the market will go along with it for a while but there will be there'll be a gun place that I've all had saying you are going along with this for a while because you really don't like what the world looks like if you don't and that includes Wall Street.
So just potentially we have a short window like one presidency I think that maybe it. To really shake the box and say policy gets weird from here but you know it can be better and then the question is which candidate is prepared to get weirder and I think they can both get weird in different ways. But I suspect and I have suspected since he he first one the election in 2016 that Trump.
Just may have the weirder people around him and I don't mean that in a pejorative sense the way that the the democrats are casting aspersions I mean thinking outside the box. Can you give an example of some of the quote unquote weird things that would actually be long term beneficial just in speculation. Well let's start with a really basic one which at the time we're recording this was still very much a live discussion point because Trump had just been speaking to it again and that's tariffs.
So we don't know what he's going to do on that particular front and they can be very badly mishandled and very inflationary and enormously destructive. Or they can be used in the way that Alexander Hamilton intended them to be you know hundreds of years ago and the way the US economic policy. Use them right the way up until post world war two.
Which is to re industrialize the US to focus supply chains back into areas that you want them to be and into geographies that you want them to be and that can happen. Geopolitically and lots of different dimensions you can say right we're going to tariff you China. But we're going to cut tariffs on this country over here to transport that industry from a to be because geopolitically that suits us.
Or you can try and bring the juicy parts back to the US and does that solve all problems at once. No. But if done coherently and again it's got to be alongside other problems it's got to be other policies alongside transportation infrastructure education. Possibly including capital controls very much you know re regulation in some areas a lot of this would be alien to trump.
But not to all the people around him if you read the people who are you know advising him and the people who are advising them. It could potentially and I stress potentially really reshape large parts of the US political economy back to what they used to look like a long time ago and I'm not saying it would be easy. I'm not saying it can be done quickly and I'm not saying it couldn't fail it could. But it would certainly impact everyone's lives dramatically even in the attempt.
So let me ask both of you this is a follow up to that. We have become very good at kicking the can increasingly financially since 2009 all kinds of too big to fail and artificial guarantees and the Fed and central banks step in. And then stimulus in 2020 to people ever getting everyone getting these checks etc. What this is done is cause this complacency and this.
A nest the tisation that when there's a financial problem the government comes to our rescue and sure they print more money but that's never been a problem. And is the barrier to adopting some of these quote unquote weird but wise long term wise solutions. Is it a recognition of the relationship between money and natural resources and commodities because I don't think most people most people in our country in our world don't understand that we can't print commodities.
And where I'm going with this question is of course we're not going to voluntarily tighten our belts. So we're going to as both of you said print the interest. So when that happens there is an antidote in society that these memes bubble up that that's okay that that's natural.
It's the modern version of Keynesian and Keynesianism is modern monetary theory which since my first interview with both of you has become more prevalent in my opinion it ignores energy ecology inequality the impact on international countries that are tethered to the dollar that don't get the benefits of borrowing more money. So do we do we need still more education on there are physical limits to debt and interest expansion or what are your general thoughts on all that.
I don't think it's physical limits at least in the foreseeable future as much as it is political. In other words I agree with much of what Michael laid out and how it could work and what Michael laid out is the United States unilaterally restructuring ending the dollar reserve status as it's been structured since 1971 and restructuring it into something that is a different type of dollar reserve status.
But it is a reserve status built around subjugating the bond market and subjugating Wall Street and subjugating Washington DC to the 90% of Americans to the US working class to US working in middle class wages and that is a 180 degree political change versus call it 1982 to present which was subjugate the US.
And the US working class and the US defense industrial base in order to support the real value of the US by market in particular the US treasury market and that was very, very good for Washington especially certain interests it was very, very good for Wall Street.
And it was very, very good for the for the 1% America and the point 1% America in particular what Michael lays out which I agree with a lot of would basically be really good on a relative basis for the bottom 99.9% the bottom 99% the American defense industrial base and the US middle and working class at the expense relatively speaking of the point 1% in the US.
And the 1% the 1% Washington DC and Wall Street this is a good thing it's a good thing for the world it's a good thing for America it's a good thing for political cohesiveness in the US and the world. But it requires a political change that is arguably the biggest one we've probably seen in. And decades or centuries I mean it is literally a political revolution and so I hope we can do it I hope we can do it I hope we can do it safely. Peacefully.
However, if we do that then you'll start to see things like you know I thought was really interesting two weeks ago, Kamala Harris in her economic proposal lays out the need to mine more nickel and cobalt and stock pilot that's just a function of the dollar system if you end the dollars reserve status as it's been structured since 71 which is to say get rid of the treasury bond is primary reserve asset which I think we're well on the way to doing that all of a sudden it makes sense to mine our own nickel.
Mine our own coal bought et cetera eventually that will be a problem but that's just a price of the dollar issue in the short run in the long run I agree there are some physical limits based on that that's a price issue that's a system system structure issue but I but I think in the short run some of those physical commodity limits are just a function of of some of how we've managed our economy for the last 40 years.
But let me take the international angle again if I may for a second you know with America again that's what I think is the case as loop just stated it but it would shake up the international economy in a way you can't believe because almost everybody here in Singapore everywhere else I go directly indirectly you know three steps removed four steps removed they're all in the US dollar economy you're all making something that you sell to someone who sells to someone who sells to someone who sells it to the US and a dollar flows down through that pyramid and at the moment.
Yes behind that is US Treasury bonds and US financial assets that are the export if you will from the US the prop that system up and the debt dynamic always says ultimately that collapses and throughout history they always have those kind of systems and particularly with the with the stresses being pressed on the US right now that we're getting there and fast forward.
And if we do go back to this alternative that we're both discussing here it isn't the dollars suddenly going to collapse away and that's it no one wants dollars anymore it would be a different kind of dollar different kind of reserve because if you're moving to a more protectionist world and let's go beyond that a more mechanist world which is what we had on the gold standards in the past at least pre World War 2 where everybody was attempting to try and sit on a cord of gold coins like a dragon by exporting more than they imported that's necessarily zero sum.
Whether you've got a finite small good commodities or not you're trying to make sure that you are the one with the you know the top end of the sea saw and everyone else is at the bottom because then like Germany with Greece within the eurozone system you know before the crisis you basically get to be running the trade surplus lending money to them and then telling them what to do when they can't pay her back.
So that's where you would move towards and for that you do need a strong military industrial complex because it's going to involve a lot of muscle and you need a lot of nickel a little coal and a lot of you know physical strength across the spectrum to say to people that you know we are still top dog in a mechanist world we can do mechanism again and we can do it well and you know the US did do it well for a very very long period of time now you got China up against you right now which is a far larger producer of almost everything.
Physical not commodities but everything else so the US challenge day needs to say okay how can we manage to pivot back to production as quickly as possible and I think it will have to be within a nexus of allies I mean Canada's not going to get a choice they're going to be roped in and obviously the you know the election in Canada is likely to return a government that I think would get along properly fairly well with Trump were he to win or conversely if true though were to pull something out of the hat you know he'll continue to get along well with Harris the UK you know speaking of the world.
Speaking as a Brit no idea where they're going at the moment you know they're just waiting for a larger dog to to bark and to follow a lead Australia New Zealand.
Japan South Korea this is a nexus of countries that I think are going to have to integrate more and more together and where the US isn't able to produce right now set say that next three years is going to have to lean more and more in Japan South Korea for example for shipbuilding I can I can imagine for a few years you're going to be building US Navy vessels in Japan or South Korea.
Until you get the shipyards back up to scale again within the US I mean this is a hypothetical but it seems quite a realistic one to me so the world starts the shift and change quite dramatically side start having to be taken. You know bamboo curtains and I I I'm going back up between who doesn't doesn't trade with each other and so there's a geopolitical kind of threshold to this as well which doesn't sit well when you're thinking about the earth as a single entity biologically.
And how you cooperate and collaborate across international borders to try and get the best of all outcomes so it's quite frightening to think of it from a one well perspective but it seems to me. The only way we're going to ever get around to actually addressing the underlying and balances which create larger problems is by creating geopolitical problems the look just as scary if you see what I mean.
I do see what you mean and let me for those that don't follow a British accent or history you mentioned Merck and Tilism a couple times which my understanding is back in the 16th and 17th century it was based on the premise that kind of wealth was static and you had to manage the prosperity of your country by doing trade and being a bigger.
And being a bigger exporter of things rather than an importer which is kind of the opposite of what the US has been we import so much because of the dollar because of the reserve currency and all that so barring barring a war a big war which we can talk about in the second isn't mercantilism or some sort of world like that. A natural progression of once we reach peak growth and we kind of bounce around for a while that that's naturally where where countries will will try to go.
I think it is if you go back to 1980 the head of the BIS yells Elstras said look and you we survive the first oil crisis we survive the second oil crisis but the world cannot cannot survive a third oil crisis because.
Oil importing countries won't be able the oil exporters won't want the paper of the oil importers because the real value of the paper will be declining against oil and so the oil exporters will start demanding a settlement asset that preserves their real purchasing power because otherwise they're just better off leaving it in the ground.
If you have a treasury bond that when you go back in time from 73 to 0 3 for 30 years the value of a $1,000 face value treasury bond was remarkably constant in barrels of oil it traded between call it 15 and 22 barrels of oil for 80 to 90% of the time and one oil hit 30 the fed was tightening to slow the US economy is the biggest importer and consumer of oil globally.
And the Saudis were increasing production as our partner in that deal and on the flip side when oil got down to 15 12 the United States was cutting rates and the Saudis were cutting production and they kept and the deal was under that system for 30 years is the US treasury bonds were as good as gold for oil.
And so that's exactly what zilester was talking about in the problem is is that system began to break down around 2005 due to a combination of geological factors that you're the you guys are both well aware of which is peak cheap oil. It began to break down because the emergence of China was driving a new major importer of oil and all of a sudden the real value of treasuries in oil terms in in underlying physical world terms began collapsing.
The US shale miracle revolution whatever you want to call it which was a combination of cheap money and significant technological advancement of a 30 40 year old fracking technology. But time for that the United States has been able to support the oil value of the treasury bond as a reserve asset by virtue of shale now we are seeing what we're seeing in shale shale production hasn't grown in four years.
It's probably not going to grow a whole lot barring oil prices that go a lot higher but oil prices going a lot higher create empirically problems in the treasury market and so we've reached this point where I think to your point that once it's it's it's trifinst dilemma.
If you are settling in a debt instrument sooner or later you have so much if trade grows globally as it has over the last 50 60 years sooner or later you have so many debt instruments out so many calls on the productive economy of the underlying issuer.
You have to devalue and it begins to incent a move towards you know what Michael referred to as mercantilism i'm not sure it's exactly that because it's not because the price of gold would not be fixed any nation's currency it would be fixed to a value of energy of value of oil.
And so it would float in all currencies and so it would actually incent not mercantilist behavior of hey we need to sit on our pile of gold but more hey energy now costs hard money and if energy costs hard money that starts in sending all kinds of really good behaviors if I have to actually emit gold that I have a finite amount of and that gold floats against my currency as I admit it to pay for my energy imports.
Well guess what I'm going to do I'm going to invest in energy efficiency I'm going to invest in alternative energy sources I'm going to invest in nuclear I'm going to invest in electrification so unlike the mercantilism of hey the dollar is $20 an ounce of gold or the British pound is whatever.
For pounds eighty six or whatever it was of of of gold however the some sort of fixed parity that's never coming back but what the energy realities and the debt realities and trifons dilemma is pushing us toward it is pushing us toward gold but not go or more gold mercantilism it's pushing us towards fixing a unit of energy in a weight of gold and as that happens that is an outcome that is super good for humanity that's the best possible outcome that's the Nash equilibrium because that is.
Since since me to go alright my wife's driving an eight thousand pound truck because I'm an American because I can print I can print money for the oil Americans have printed money for oil what do I care gasoline three bucks for me I don't care now if I have to emit my gold effectively to pay for my wife's truck it's like well alright I'm going to actually have where we're going to sell that at a huge loss and we're going to get something that's electric or hybrid or something that's smaller so that's what you need to really drive it but it's it's not mercantilism it's it's a.
It's a it's a shift in policy but it's not mercantilism as it was you know 100 years ago 200 years ago 300 years ago I have so many questions just on oil just on debt just on geopolitics just on the dollar we could all spend 90 minutes on that so this is unfortunately you know going to be too short of a conversation I think Luke's example of his wife's eight thousand pound vehicle is a microcosm for all of the people who are in the world.
It's a very hard for a lot of work for a lot of work for all of the things that we face and I have some other follow up questions but Michael I'll let you respond now.
Okay, this is where I really regret that is very late night my time because this is an extremely complicated argument I have to try and put together really quickly in order to kind of follow on from the conversation and to remember everything that Luke said which is very coherent this is one of the few areas where we do disagree and when we've had chats together,
we've come to different conclusions as I said having recognized the same problems first of all very very briefly yeah my cancelism was a European concept where you had to basically recognize that money was either silver or gold it was usually silver back in those days not gold.
And when you traded it left your pocket and it went to the other city so if you ran a trade deficit money physically left your economy there was no money for anyone to pay their debts or to buy anything etc your economy collapse so people tried to hold money by only running a trade surplus and it's neck economically inefficient but it's very good for the person who's on the upside of the sea so yes I'm not saying we go back to that completely.
And as a quick quick adjunct for that the people who do think we are going back to that completely you're not one but there are people out there listening who think well you know if the dollar is going to collapse the US goes back on gold this isn't dungeons and dragons we're not going to be walking around with little coin purses on our on our waste going I've got I've got five gold pieces and 20 silver pieces and some copper pieces right it's not how it's going to work even if it did go back to that you would still have dollars in your pocket but when you went for the bank you could exchange them for gold if you had to and on an international balance of the world.
International balance of payment spaces payments would be made between countries on gold okay so let's get back that clear for a start in terms of energy this is where I see things slightly differently yes of course it's important I don't deny that for a moment even if new energy sources are coming along all the time and changing you know that the parameters of what isn't is impossible and the price point of which it isn't as impossible but to extend we already have that kind of discipline of energy prices built in if we go through a period of high energy everyone starts tightening their belt if it's cheap energy every day.
It's cheap energy everyone does silly stuff that's just basic economics and we have it now but the Fed as currently constituted which I am no fan of you know the comments that Trump was making about it today the day that or yesterday sorry in the US that the day that we're recording saying you know it's the easiest job in the world you flip a coin and everyone talks about your like your God which you.
I've been wanting to make comments like that even stronger than the ones I normally rate for a long time they have a weapon right now for example if they ever wanted to try and you know get oil prices down above and be on the White House's ability past ability to use the strategic petroleum reserve which they did temporarily you know in recent years you could just say right let's jack up interest rates to seven or eight percent now provided inflation is an out of control that particular time money floods out of the Middle East it floods out of commodities suddenly Saudi Arabia can't afford to.
Build the ridiculous you know straight line cities made of glass in a desert which are just you know absolute flights of fantasy that tell you the Middle East has got more money than sense when it's thinking about things like that it can still do that and because of the power of fear which temporarily I said at the beginning is still there temporarily you can turn around and do that for a narrow window whilst using acronyms like BTFP is a really boring technical one that was really good.
Last year by the Fed to try and make sure that when we had a banking crisis or look like a banking crisis that all that funding could flow to the banks like an access capital again China uses similar mechanisms all the time which is here's a kind of a off balance sheet or you know one step removed financing mechanism for this particular constituency so you don't worry about the effects of high interest rates but you feel them in full of sure you can use that combination of interest rate weapons and it is a weapon against others to the
world together with more focused incentives and free money for people who want to try and restructure the physical side of your economy to achieve what you want to achieve and I have to just move on to one very quick point here is like a tennis return back to you look because that's basically me running to try and catch the ball but now to pass it back if I can.
We spoke at the end I think I said something I if I remember correctly that I want to throw in now much earlier which is I remember in America quite a few years ago people wearing these bracelets with it WW JD what would Jesus do on them that do you guys remember that was a thing. So the reason I'm bringing it up is most people in markets day to day say to me you know what's GDP going to be or what's GDP. And I'm literally writing a piece at the moment explaining when you look at the world.
In terms of economic state craft them from a bigger picture view you have to ask the question what's GDP for. Not just what's the structure of it what are we trying to do and the link to this bracelet is this if you're just worried about is it 2.1 or 2.2 and you think 2.1 or 2.2 matters.
So I've completely missed the big picture which is what kind of society do you want what kind of world do you want and I don't mean trying to micromanage everything because that's the road to hell but broadly you know big picture what is the US want to be like what does it want the world to be like the US US is in.
And does it really require a flat rate of interest either high or low for everyone to get there my argument is it doesn't and the person backing me up on this actually is someone who was a fan of gold. Shumpeter I'm sure you both heard of shumpeter at the the great economist from the past we normally refer to him in modern economics purely in terms of talking about creative destruction that's probably like the shorthand bullet point we're all aware of.
Well with the guy wrote telephone book thick. You know economic literature there incredibly economically dense I defy anyone listening to this today to pick up an original text by shumpeter and start reading and you see what a real genius. Things like when they're writing someone with a planet size brain who's incredibly cultured was the finance minister of Austria really knows their history politics culture theory maths everything.
So anyway most of his life of course he was anti state anti big government anti trying to micromanage everything pro free market but within the rigid. Straight jacket of wanting hard money and gold and I think he would have been you know hard energy in those days to if that had been more of a finite limit.
But on his deathbed on his deathbed he recanted and he openly said you know he become more religious as you got older he was Catholic I'm not I don't know if you guys are but he got more and more religious as you got older and he realized he said government planning everything is the road to hell. I know I largely agree with that we start well and it goes wrong but if you give everyone complete freedom of choice and free will. You will achieve nothing if you don't have morality.
So when you have the w w jd bracelets it's supposed to say to you you can do whatever you want on this earth but what would Jesus do would he really be doing that. And the only way you can have a purely free market is if everyone in the economy has a completely moral sense of what are we here for what's gdp for rather than just I'm going to screw the next guy to try and get three or four basis points more for the next month.
And even if you go back to gold that won't work that won't help heal society gold has always been a very cruel mistress for the poor and for the middle class has been good for the rich generally. And even if we go to oil as a modern gold that would be good for efficiency I'm in favor of energy efficiency of course but it turns off your possibility of saying well we can use fear to print for a few years to finance a project.
But like the new deal the fdr used you know to build dams etc which were necessary for hydropower you can't do that if you're a rigid straight jacket so we need to have some sort of reinvention and it's going to get weird to go back to that really weird to think what is gdp for how do we get there and doesn't mean we just have one fed fund rate or we do do we have variable once you get cheap money you get expensive money and we want to blow you up.
I'd the you know with a high interest rate or if it's someone being too cheeky to you politically politically do we really literally mean blowing people up sometimes to to add in to that I would say first the seven to eight percent rate you highlight that the fed could do to fight oil that used to be true it's not true anymore for two reasons number one seven to eight percent rates are going to crater you a shale.
Number and which has been 90 percent of global production growth over the last decade so basically you would actually very possibly by sending rates to seven to eight percent actually send oil prices up not down and then the second part is at seven to eight percent with 35 trillion and dead 120 percent that the gdp and and receipts that are extraordinarily interest rate sensitive you would actually send us interest expense pro forma above.
Receipts just the interest expense not even the three point three trade and entitlement at seven to eight percent and so that I think are the two things that the world sees that sort of the American dollar status quo centric.
Does it doesn't see which and it's the reason why gold has and has completely diverged from real rates it's not the people want to go to gold it's that people are looking at the math and going okay it's seven to eight percent the US cannot keep shale producing where it is which is the only reason my treasury bonds have not continued collapsing against oil post
so eight number one okay so that tells me I need to get rid of if all I care about if I care about preserving the purchasing power of my reserves I have to switch from treasuries to gold number one and then number two.
If the Americans can't make their debt if they can't even make the interest payments at seven to eight percent out of receipts without printing the money why do I own this paper again that also speaks to gold and so I think those are the shifts that are occurring in the reason why we're seeing the behavior
we're seeing again I agree with you so I but literally that's part of the argument I was making because while that is still true and I you can't mathematically push back against that what I'm saying is you can kind of cheat in that for example let's say you specifically spoke to shale so you're saying seven or eight percent Fed funds shale blows up now I'm no energy expert I really want to make that clear but I know that's true so what happens if you hypothetically and it's not any kind of forecast you put Fed funds back up even going up to five and a half
would freak people out but let's say you go to seven right the low end of that but at the same time the Fed as the regulator gets on the phone to every bank that's lending to shale and said you're lending to them at two they could well they could absolutely do that however and you made what you made the very valid point that that's what China does but but but China has capital controls the dollar as the dollar as the dollar as structured post 1971
cannot have large capital controls you start putting large capital controls on the dollar and the dollars reserve status changes it has they stop reserving dollars and so you can do that and perfect example of that is we already ran that playbook we said Russia we disagree that you invaded Ukraine we're going to seize your treasuries haha and you know what happened free markets happen what happened the Russians said that's fine we use gold and the Saudis I've heard multiple people
and very high levels of Saudis Saudis were quote unquote terrified what did the Saudi start doing buying gold not treasuries what did global central banks do they started buying gold not treasury so you can do that yes I totally agree you can do that if you do that that is a restructuring of dollar reserve status full stop end of story to a system where gold is the neutral reserve asset no longer treasury
bonds no one's going to reserve treasuries under that system if you're going to pick and choose what the rate is based on what suits you that you would be a fool to do that just want to jump in because you you both have talked about the power of fiat and is the power of fiat ultimately the dollar and the bond market or
underneath that is it the technology and productivity of the economy or underneath that is some hard currency backing it like gold or the three of us understand that energy is is what powers the world and money is ultimately a claim on energy and if you even go a layer below that it's the military power that enforces things around the world so how much how much of
that is all tethered to that like we're printing money to pay for our defense budget to build new naval fleets and move to the Middle East et cetera Michael go ahead yeah I mean you've literally gone where I was going to go because look and again we we agree and disagree at the same time we're seeing the same things and maybe just looking at different sides of the same gold coin when we're when we're describing it is it's not like we're
disagreeing we're just viewing it from different angles I am saying exactly that yeah capital controls would be required and I mean internally to make sure you don't lend to someone at two and they lend it to someone else at seven yeah you'd have to do that like in a war we've done that before in the west we'd have to do it again and it would mean an massive international explosion because all of the Euro dollar debt 50 or
trillion over however it's constituent constituted people would not have dollars to get hold of them is very dollar positive because those who want to remain in the US camp we're trying service their debt those it would say that we can see which way the ship is sailing or the dreadnought or the battleship or the aircraft carrier and we're not going to go with that
particular fleet so we're just going to default and we know the list of countries who will probably do that it would come creditors are the ones that would default by the way sure the creditors was with the yeah and then we'd find out then how stable their economies really are when you wipe out the whole pillar of collateral that they're using domestically like you know China relies on dollars still trust me if that all disappeared it would be a big push even though they could do it to try and
reallocate towards towards something else particularly for country with very few commodities albeit lots of widgets you know which last very long most of the time okay so I agree that's the case but and if you then say well the US dollar is again going back to a mercantilist or quasi-mechancelist asset which is backed by the world's most powerful military
and a lot of commodities because the US still has a lot of different kinds of commodities and by the way Canada gets no choice all the energy in Canada and the and you know the the the other the untapped projects in Canada you're now with us and Australia which is just full of assets you're with us and New Zealand and Japan which has productive capabilities but doesn't have any any commodities in South Korea too if all of those guys basically get ringfenced in together which is where the
US military bases are and you know it's already moving together in tandem I still think and again this is not a 12th month not a 24 month forecast although trust me things can move faster than you expect if geopolitics suddenly goes
goes haywire but this is the this is the glide part you are next to remove towards because if you don't if we stick with the US dollar and the and the as as as it is now and you stick with treasury bonds as the main asset and reserve class which you're talking about yeah you continue to de industrialize you continue to see your military strength gradually hollowed out to the point where other people can push you and you can't push back
which we're seeing in location after location and if we're talking about oil and energy in the Middle East which I think is a great way to pivot to it maybe like a you know the next point that I think you know think they were saying you wanted to get to earlier if you look at the Saudis yes they've been kissing up to Iran recently you know and everyone was saying look they've joined the bricks etc. I mean anyone who knows the region well I know it
pretty well for an outsider they you know they were doing the typical bizarre I'm not interested in that when you want to buy it you know the one thing you don't ever do is go to a bizarre in the Middle East and say oh that's nice how much is that you're going to pay 10 times the price
you know you act very very cool so that was basically giving themselves a plan B while they were trying to get US nuclear technology a US defense shield guarantee and as you know as a path for that some kind of peace treaty with Israel at some point and there are not
another lot of big wrinkles there but that's what they're like and when you see in the next couple of months and it will happen Israel rolling out its new laser defense screen first of all that's going to be truck based to be able to shoot down drones and small items but they think within another 12 months you're actually going to have a science fiction style laser shield but basically can shoot down most things coming through the sky
yeah I think Saudi Arabia is going to be looking at it and thinking I'd rather be on that side with my oil than on the side that's going to be firing impotently things they just can get shot down so there's a lot of real well nastiness and unpleasantness there that can decide which countries sit alongside other countries
while they're trying to flesh out what does a new financial system look like a new trading architecture look like and a new what is GDP 4 look like for our team and within that I still think there's going to be a need for some fear for a while to lubricate things in the same way that during a war
you never turn around and say well you know we're going to run a type we're going to turn from the tight ship and we're going to run a balanced budget during a war you never do that you bring money like crazy but for a purpose I think it's a very fair point I think it raises a really important point that may pull what you highlighted forward which is that I think after the election it's going to become clear to most of the west that NATO lost a Russia in Ukraine
there's already signs if you look in between the lines and I've been getting credible rumblings that that's been the case for about the last two three four months and I think ultimately talking about morally reprehensible things I think we are seeing strategies to basically extend things
till after the election because one side thinks it'll help the incumbent if they don't have to sort of say NATO lost here that's never happened in a US election before never right which is exactly right so I think what that means is sort of this military backing of which side do we on we better have those lasers because if we don't the decision may not go the way you think it's going to go you know in the same way that I heard you know five six years ago
one of biggest tech companies in Asia from from a relationship like look don't make us pick because a push comes to shove we have to pick China let me just add a further wrinkle into this what are the implications for Europe of all the fiscal problems that you mentioned and and the Euro dollar and and all the debt if it also has to address rearming if this NATO situation kind of unravels and the US moves its support to the Middle East or or just stops its support there
if if Europe has to rearm how do they do that with all the trillions and debt extent I work for European bank so we have this conversation regularly and I think you know the the exasperation you just saw on Luke's face is what I experienced daily for rediscovering this and I think that the perfect encapsulation of that is the one European country that has really got serious about this and it's very pro-US
is Poland Poland is currently spending an enormous amount on defense it's it's really really ramping up its defense spending if it keeps doing what it's doing now within another few years that's going to be a very very very credible very powerful army probably the only one in Europe apart from France because of its nuclear triad and even that is the only pie is resting on now really
and yet Brussels so the center point of the European Union is about to find Poland for running too large a budget deficit as being the only country that's rearming and defending Europe's eastern frontier they have no idea what they're doing and I tell them regularly in fact tomorrow morning I've got an early breakfast following this very late night podcast in which I'll be talking to Europeans and telling them you all tell yourself you're searching for strategic autonomy
and actually you're going to end up with strategic on top of me like everyone's going to be dog piling on you if you don't wake up but we one more point on that if I may we looked at this using the kind of framework I'm describing here within Europe and my European colleagues are excellent and they've done great work
looking at the nuts and bolts of Europe in a way that I don't have the time or the energy to look at but within this conceptual framework and we spent a long time coming out with a paper which we published in December last year and I'm very proud of it called strategic autonomy and actually I got a good pun in it was called a trial and error TR-OY-AL how to cure Europe's Achilles heels and we made the argument there that I'm making here I said that they're going to have to print it
they're going to have to print it on the supply side they're going to have to have tarots which is an affimilar to Europe they're going to have to introduce them to kick Chinese products out they're going to have to reshape every other policy to link up with it and it will mean a complete reshaping of their entire political economy of what is Europe four and it's not for soft power and free trade and euro trash and and rock concept and festivals in the summer and you know nice holidays in Italy it's a much more muscular being and then just recently we had Mario Draghi
former ECB president mr whatever it takes he comes out with his competitiveness report on Europe and it says exactly what we said and he even came out with the same figures we said look it's going to take we think between four and six percent of GDP in new spending most of which will be printed every year for at least a decade if not decades to get Europe to where it needs to be and you know frankly internally we were having conversations before we published it can we publish something
that crazy six percent of GDP every year being printed more or less you know this is low lowland draghi draghi you know soto watch on how it's going to be done but it will have to be printed pretty much he said the same thing because that's the only route you can go or you or he said it's slow agony and that's true for America true it's slow agony you're looking at if you don't do it so I've a follow up to that and then and then look I'll let you respond in some ways you know the role of a podcast like this
is to be an over 10 window sort of thing to get ideas that are too politically difficult out in the sphere so that they normalize the conversations around them in the same way that your report Michael possibly was taken up by draghi because we're in a situation now where the things that need to happen are still socially and politically untenable to voice in the media and at press conferences so that's really going to be a great deal
for the conference is so that's why you know these conversations to me are important Luke did you want to respond anything to what Michael just said you know I Europe has been the degree of European self-imulation has been probably one of the biggest surprises to me and it was
spent two weeks in Europe about two months ago and as I talk to people you know they of course wanted to ask about the US election but then they asked you know we the conversation would turn to their politics as well sometimes
and what I found was a complete disconnect between a lot of people in Europe and their leaders in other words they don't want to fight Russia they want cheap Russian gas they don't lose their factories to America because oh by the way mr. America didn't you blow up our pipeline the Nord Stream sure seems like you did yeah maybe we did I don't know they say no but that doesn't mean so you're our ally and you want us to buy weapons from you
and you blew up our pipeline and I said oh it gets better at 10 years ago we had a white paper talking about how to weaponize migration from the Middle East and they're like what and so like to me there's this really interesting dynamic going on in Europe which is and I agree with michael's point that hey they're going to print it and the drug e I saw that great interest
you know let's see what they actually do but when I was when I spent you know two three weeks there a couple months ago I was really struck by the degree of awareness and the degree the difference between their leadership and so you earlier in the summer we saw like you know this this years version of oh gosh far right people are you know winning elections in Europe and oh gosh you know AFD is winning more and more seats in in provinces in Germany oh god
and like then you see what the platforms are that they're winning on it's like let's have common sense immigration let's not fight Russia let's get cheap gas let's not send our factories to America because we can't afford the energy because we have to buy expensive LNG from America instead of cheap gas from Russia
and so like I hear I hear the strategic the top down from Europe but I think their leaders don't have a clue what their people want I think they're trying to fit you know some sort of idealistic plan and it's never going to work at the ground level Europe's fix is make peace with Russia buy the gas fix Nord Stream 2 compete restart the nuclear power plants instead of panicking and shutting them down like Germany did and and then go to the Middle East
and like you did with sedam and oh three and say listen sell us oil in euros so we can print euros to buy oil because a reality is a drag you can print all he wants if they can't print euros for oil they're done
so that to requires an end of the dollar reserve status is structured and and and sort of gold as a new to reserve us because Europeans aren't going to settle all this printing all in in of to buy the commodities in your debt because that's not what they do you can't do that and build factories so there are slight a lot of fundamental inconsistencies
and so you know until Europe actually takes a strategic view a real strategic view which is hey let's listen to what our people want common sense immigration cheap Russian gas nuclear power plants and let's buy energy in our own currency Europe is on the path to being a place that is very cheap for rich Americans and rich Chinese to go visit in the summertime
I'm struck by so many things that in this conversation which I wish could be longer so many of these things like we want to do what the people want yet the backdrop of what the two of you are inferring is no matter how we slice it in the not too distant future we humans in aggregate the world over
are going to have to use less the rest is details less material throughput on average I don't know how that's sliced and maybe there's some faction of humans that use more and a lot of others use considerably less
what do you think about that I mean there is the the poll push between humans wanting more and doing the pragmatic things that look just suggested and the ability for the global economy to continue to grow in the face of energy depletion climate disruption geopolitics and the bricks and currency dislocations and all that Michael start with you
and we need one of the questions of the human condition isn't it I think we've we've described a lot of the complexities and we've still only just brush the surface because you know just to reflect back to one quick point or two quick points with may previously on one hand you know no one knows what's
happening with Russia Ukraine but let's presume that may or may not be done soon one way or another and Russia may or may not have the upper hand let's let's say it does OK hypothetically on the other hand you could see the you know Israel looks like it's in a much stronger position in the
state is relatively now than it did six months ago and with the correct application of you know further targeted force. You know maybe making a wrong look like a lot a lot weaker than people thought that was six months ago and China with Taiwan they just practice to blockade around it that's making China
relatively a lot stronger so it's a mixed picture within this kind of you know anti anti Western anti us block but in terms of how we address that fundamental human issue related to this I was having a chat with someone who's very intelligent chat just the other day and they were talking about Europe's desire for sustainability in the food system which obviously at Rabobank where I work is a very important part of what we do and obviously it's a very important part of the climate puzzle
and we were discussing geopolitics and food and I said there's always been geopolitics in food this isn't this isn't a new thing since the year dot I've got food and you haven't makes me rich and powerful and also not sleep very well at night because you haven't got food and I have
you can go to free trade route and presume that the more you free trade together the more integrated you are and the more interdependent you are as we were talking about at the beginning and yet the history of economic outcomes and economic history is that you have periods of interdependence and it actually then creates polarization winners and losers this country is doing better than that one this demographic in each country is doing better than that one the rich get richer the poor get poorer and then it actually breaks down and country start realizing now we're not interdependent we're depending on the world and we're not going to be able to do that.
We're dependent on you we rely on your food or I you know I don't want to rely on you one way or the other.
So things do fall apart food has always been geopolitical and it will be again and I said imagine your Europe and you've got this perfect plan for how the world should look in terms of sustainability for food which they do I said what are you going to do if everyone else says no. If one by one countries democratically vote for it democratically and so we're not interested with poor we want to eat more meat not less.
Yeah the price is going to keep going up as a market function there's nothing we can do about that but we're not going to voluntarily give it up or we're going to try and become friends with countries that can produce it like Brazil because they know that they can do that relatively cheap cheaper than America.
So we're just going to try and become friends with them and if they become friends with China and Russia so we're friends with China and Russia because we want more meat are you going to invade the Europe.
Are you going to say tough tough tough are you going to start a committee you're going to wear a t-shirt you're going to make a documentary what are you going to do to actually make the world be the way you want it to be and I said I don't have an answer for you but you don't have the force to do it if you did morally would you want to do that probably not. So how do you persuade people and this is where the plan economy wrote a hell comes from we've all got a vision for how great it would be.
If we could all could all do it most people's visions are wrong and when you impose them you actually create more evil than the good you're trying to do but if you leave it to the free market which is what the other here is say you end up with a rich getting richer the poor getting poorer people you know ripping everybody off for a few base basis points so and let's imagine ecological collapse at the end of that keep going.
So you see you know again I'm a secular person I want to be completely clear on that but I completely echo what I've been hearing in fact I've been saying it the years well before they were what I've been hearing very intelligent chats like Brett Weinstein saying saying recently which is I wish I were religious because I fully understand that without a core value system telling you what GDP is for.
At every level up to the geopolitical from the local and without a market that works within those paradigms nothing works. And I really hope we can come to that conclusion but that's only going to happen when is in science you know progress comes one death at a time. One person shuffles off this mortal coil someone comes onto it hopefully with a different way of seeing the world.
And eventually the ship of state can turn around but. You know we're going to have to do it on fast forward in the next few years and to go back to the point you know we've discussed a few times that's why I am still clinging to something. You know silly and I know dangerous like fear because. I don't think we've got a generation to have that shift we've got like four to eight years one or two elections to try and get some movement on it and if we have to print some money to do it.
I'm willing to take the risk of that turning out wrong these are the playing by the rules which aren't rules that work. I think we'll stay with fear I just think we won't stay with saving and fear you it's sure that's a system that can't work. If you're going to print it. It's better than it's better than what we have now which is actually the system of saving in houses.
Almost almost almost almost every global economy everyone just wants to put in in houses I mean you know I got Australia is the same disease I got a New Zealand is the same disease every country Europe the same disease the UK same disease. I mean I think the same disease is the same disease. China is letting home prices fall and they're letting people save and gold and China what do we hear from every Western economist China is collapsing China's doom China.
It's fascinating to me like they're actually making the right move which is save and something that is not used for anything rather than something that is used for something because that is in the long run. Politically stabilizing if you have a bunch of young people they can't afford a house that is not politically stabilizing who is more politically stable right now based on their policies going forward.
If I had to bet I would bet heavily the China is going to be more politically stable than the US over the next two to four years. Well first of all that's a no brainer on any any year you could have said that about China apart from you know very very brief window.
I used to cover China in a professionally for a long time I speak bad tourist Chinese and I lived in greater China for a number of years but above and beyond that I'm not sure if I revealed this last time we spoke Nate but I grew up in a Marxist household.
You know that great European tradition with similar to like you know maybe some parts of the US East coast and nowadays anyone at a US university where it's completely okay to be a radical Marxist and still think you know the Euro flag waving member of the country.
Now that doesn't mean I am but I was absolutely brought up in that tradition you know we had you know communist party literature on the shelves etc etc and Marx was like a regular figure in conversation so I know my Marxism for a non Marxist really well you know Marxist academics of course can run circles Army because they're specialized in their whole life.
But if you if you understand that which I do and you understand Lenin it was a whole dangerous ballgame further on and you know China fairly well the only part of that that I push back against which I think is important for the listeners to understand is that temporarily China may or may not and I'm not saying it is although Hong Kong today here
now time and again this will be dated when viewers listen to this have said that it's new economic plan is to be a gold trade gold trading hub internationally which is interesting when I saw that I thought hmm wonder if they're going to have the Hong Kong dollar peg to gold rather than you are still going forward but China would never allow anything like gold to actually be gold within China because the one what rule of what is GDP for in China it's for the CCP you don't worship gold gold worships you that that's the way that I do it.
Actually I think that's this I think that is what the Western mindset is missing what China is doing with gold which is gold the Yuan is down 50% against gold in the last two years and so people frequently I think what China wants what why China would set up a gold trading hub in Hong Kong is not that they have any designs of paging the Hong Kong dollar gold God know or the Yuan to gold there is no chance that's going to happen what they are doing is if when they sit down with the gold.
When they sit down with the Saudis when they have sat down with the Russians when they sat down with the Russians 10 years ago and say we China are going to collapse if we have to buy our oil in dollars and because we're going to run out of dollar reserves and the price of oils rising because of all the things we've highlighted we've talked about here peachy bull et cetera we have to be able to buy our oil in Yuan when we want to not all of it not even the majority of it.
But when we call and say it had this shipment has to be in Yuan or else you have to say yes Saudi you have to say yes Russia you have to say yes Iran and the answer then is as you know Kyle Bass says why would they take the Wampum or as as you Henry says why would they take the red cabbage two reasons. Number one it's good for Huawei 5G equipment and and and and they're the factory of the world and any net settlement will be done in gold.
In Hong Kong in London where there is an offshore R&B clearing bank in Switzerland where there is an offshore R&B clearing bank in UAE.
In Singapore right so you're going to to the extent there is net gold settlement of energy for China that is what China is doing with this they and now why why would Saudi do that will look what gold is doing in Yuan terms it's it's up 100% in the last two years in Yuan terms so now in Saudi goes I need Huawei 5G for my Chinese you know glass houses in the desert the make no sense.
They call up China go hey we need we need Huawei 5G and China says hey good news the gold you have buy you twice as much 5G equipment constant all constant you on as it did two years ago and the more oil you buy in it the more it's going to buy in the future it's a virtuous cycle of trade.
That China is instituting like in plain sight and sort of people don't see that the sort of like well are they going to their bond market isn't big enough to settle Yuan in balances no but gold is will not occur prices exactly again we're looking at similar things but just interpreting it in different ways that's perhaps the best the best analogy it's like it's slightly
Rorschach and you're seeing one thing in it I'm seeing something that's similar but a bit different so when you said why would you take the Remimbi they don't take the Remimbi they immediately say well we we want to offset that against these many goods which are made in China so not actually keeping it is that any different than what they do with the US where they actually
it used to be that they would actually send dollars to each other and then there would be a balance in dollars in one country the other now it's like we're not even with pricing in dollars which is important how much is that 70 bucks how much is that 70 bucks like widget right okay we'll swap them and you know technically we can say we
voice Tim Remimbi but we know what the actual price was when we converted it goes across and you're describing the euro dollar system without the euro dollar system well I'm describing barter that's one that's the euro dollar system without the euro dollar system without
dollars right that's the euro dollar system is based on is based on debt and there's no debt on the back of this there are no financial issuance here it's purely just one physical good for another which is good and bad at the same time so they're very very different right but that's how they get out of the problem well yes and no but this this is the this is the broader point I want to come back to if we say that some aspect of that starts to emerge the second
and third and fourth order effects of that are calamitous I've already described the hypothetical where Europe and America might be saying right here a capital controls domestically so I lend money to you to him at seven you can't lend your money to him you're not allowed to the people watching you and you know money won't go into the US the extension of that more broadly is that the entire global network of trade and finance flows collapses with massive defaults
but it doesn't you just said it doesn't by virtue of the board barter China then calls the next day after that happens China calls up Saudi and says listen will value will value you know your barrels of oil for our Huawei and no dollars need to change hands and we'll do it just like we did yesterday if you actually look through the numbers of the trade data and I can't tell you how boring this is to do but I've done it over the years
you end up with a chart that shows you that yes all this is happening within let's call them bricks even though Saudi Arabia hates Iran and there's no bricks friendship there you know Iran just recently let it be known if their oil gets blown up they'll blow up Saudi's oil so like they're not friends right but within the bricks camp that's all swapping swapping around right and trades going up all the time
but if you look at how much trade as a group they do with the OECD so into the west into Europe and into America in particular it dwarfs it and it's still accelerating into the OECD so the day on which China finally says right this is working this system you're describing we're going to push it past a certain threshold and Trump or Harris may have different tolerances for that threshold to bring it back to the election
they lose everything going into the U.S. and suddenly all the support for tens of millions of workers who make widgets but go to Europe or America disappear and they have to find someone in the bricks who can buy a staggering amount of product and this is for an economy in China which won't inflate its own consumer demand
that's what the gold swore though as they're inflating their gold as they've been encouraging the Chinese people to buy lots of gold since 2002 state media the gold goes up in that scenario gold explodes higher because because the other side of the coin to what you just described yes I agree it's going to be very deflationary for the bricks it is going to hyper inflationary for the west
think about what you just said we're going to cut off all that stuff from China shelves go empty in the west the bond market collapses the Fed prints it to keep keep financing the government gold goes to the moon so now when gold goes to the moon in the bricks we've got how many how much gold did Chinese people own or number one and then how many do the Indians are there you're going to create a consumer class overnight
I again I understand the vision but just to retort quickly it's not that it can't happen that is a possible future but what if the Fed do with gold in the 30s just confiscated it all it would take in that kind of environment which be a war like environment would be one step away from global war
with that to happen because it would be 2008 but with guns loaded on all sides is to say no one does any business with them you get arrested if we see any of you doing it and we're doing massive fear to immediately within our group of producing countries set up factories for everything we're going to have a really crappy three or four years or two or three years depending on how much groundwork we've done building up to it but on the other side there's a hard break you've got your shiny gold middle over there it's illegal here internationally nothing comes in or goes out of the port you're going to have to be smuggling things in
like you know medieval style again on little boats to try and get in your television sets like I'm reluctant to ask this but it's a natural progression of where you're going does this Bitcoin or crypto offer any relief valves to the direction you guys were just talking about I think Bitcoin does yeah potentially I mean if particularly you're talking about a new money source you can print or Bitcoin you can create new coins right which is the same thing is printing if you can get in the market
if you can get enough people to use it sure but I mean how you use it and how it's going to be used I think it will be part of it but there are many different ways it could be so ultimately and I you know it's approaching midnight where you are I'm feeling a professional breakfast I don't know how you're going to get to sleep after this but
all I've got to say something far more prosaic that thank you for the opportunity to both of you to discuss this today because I think all of us agree on an awful lot it's only merely just a difference of nuance and timing in terms of how we think it's best expressed as a way to address this we're not arguing in terms of the problems that we face and what we
would like to see happen it's just how do we get there and over what time frame and how best and I would hope that more conversations like this can flow from this one I hope people watching if they enjoy can share it with others and can start trying to have their own discussions because this is a complex field and let me tell you don't feel intimidated by it because if you talk to someone who's your typical Wall Street economist or a brilliant trader they'll understand parts of this
and large parts of it will be alien and if you talk to a politician they'll understand different parts and large parts will be alien you talk to someone in the military and they'll understand a different part you talk to an environmentalist they'll get a different part but what we then need to do is get all of these guys watching these kind of conversations you know better smaller than people than me certainly talking to each other and understanding what do we all need to understand about each
other in order to understand what GDP is for and as you said what money is for and then hopefully collectively we get an answer so that that's where I'd like to conclude if I can that's the pathway thank you both for your continued herculean efforts to understand this complex space and Michael I hope you can get some sleep and to be continued my friends absolutely thanks so much for having me on and Michael thank you for the first time
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