Fed Insider Reveals The Feds End Game | Danielle DiMartino Booth

But today we get to sit down with an insider. And I'm so excited for this interview. So Danielle, welcome and thank you for joining us. All Right, so I've watched you and countless interviews and have a good idea of questions I want to ask, but just for the people that are watching, just give us a quick background on on maybe kind of who you are and what you're doing. So I graduated from business school and being finance bright Light Big Cities, started off on Wall Street

in New York. Uh, never thought i'd leave. Nine eleven came and went and the firm that I worked for got about out by a Swiss investment bank which was very quiet and boring. Uh So, after eleven I met the man of my dreams, moved down to Texas. I had gotten my second masters in journalism at Columbia when

I was working on Wall Street. I retired, sold my book of business back to the firm, signed a noncompete and um, and just decided to write for a living and thought that my career was going to be over at that point. And at some point Warren Buffett called, and off I went to Omaha, and you're writing really crazy things and controversial and blah blah blah. And Richard Fisher called from the Federal Reserve. I ended up working for him for nine years of the Dallas Fed as

an advisor. And I'm anything but a FED bureaucrats. It was an interesting fit and I enjoyed myself so much. I came out of the Fed and wrote a book for two and a half years called fed Up, An Insider Stake on why the Federal Reserve is Act for America. So I suppose you could call that my exit interview. And since then I have started a research firm, Quill Intelligence. We published daily, we published weekly. We've got retail and institutional subscribers. And I talk a lot. You do talk

a lot, and we love hearing it. The public, the market has decided they like, they like what you have to say. Now I'm curious, um, the dig into the FED. Now, I saw in another interview, I think it was with Patrick that David and you said that you're fiscally conservative, um, and you believe in bringing down the debt in America. UM. And maybe I'm just curious, is that maybe what happened

at the FED. Right you're fiscally conservative. You weren't a green with their just inflate away till no infinity or into infinity. I I was. I was never a fan of the Fed enabling Congress to borrow as much as it wants. I've yeah, I listened to the conventional wisdom as always, well, you can afford it as long as you can service the debt. I don't. I don't buy that for a minute. But that is what's happened in

the extreme with Uncle Sam. And that is, if the FED brings interest rates down to the lowest level in five thousand years, will low and behold, the government's going to start running up deficits and debts that it cannot in the end afford and look at where we are today. Yeah, exactly, great point. And uh, for everybody that's listening right now, make sure you stick around to the end because I am going to ask Daniel what that end game looks like and we're gonna try and just make some stabs

in the dark edits. So make sure you stick around for that. But back to that point, So, being physically conservative and seeing them spend to infinity, I could understand that stress. I'm curious just what's your viewpoint is, just maybe generally on the FED itself. I mean, from my viewpoint, it seems that, um, they're they're kind of responsible for a lot of the problems that we have. UM through this endless money, inflation, debasement, etcetera. Right, purchasing power has

gone down, that levels of quality. The list goes on. Yeah, so back so so specifically about income inequality. I believe that the FED policy has been a major factor in the income inequality. UM do you would you see that? Yeah? I do. And it's not, Um, it's not only about quantitative easing and injecting liquidity into the system. It's also about indexing and the whole idea of the FED putting a floor under markets, which started with Alan Greenspan in seven.

In the weeks and months that followed the Black Monday, the Crash of seven, he went so far as to allow the New York Fed Markets Desk to inform Wall Street bond traders ahead of FED moves to inject liquidating the system. So that was kind of when moral hazard was born, when the FED put was born, and it's just gotten to be bigger and bigger and bigger over the years. But what's come out of this is this

idea of don't fight the FED. And what don't fin the FED has done is it's fed this huge indexing industry because you don't need to pay for active managements. When a monkey or port Dave Portnoy, take your choice, can simply the row darts at a wall and make tons of money because they own anything and everything, and it all goes up. But what's actually happened in the background. You know, the SMP five hundred recently hit an all time high and we exited from the bear market, and

there were fireworks going off. If you took out the SMP five then the stock market was down about three So but to the point of the Fed and income inequality and don't fight the FED and indexing. If you don't fight the FED and you put your money in the Vanguard SMP index fund, then you're just going to make sure that the biggest companies get bigger. And when big companies get bigger, what they do in competition comes

along is they eat it. And anytime there's an innovator, you can to the people who sold um I think it's Instagram. Uh, and they they they thought they were really wealthy when they sold it to one of the big five, but they realized a few years later that instead of multi millionaires, they could have been millionaires. But they didn't. But but what's happened Because the FED makes the biggest companies bigger, and because the FED foster's monopolization

of the US economy, it ends up stifling innovation. It ends up killing the ability to be an entrepreneur. And you you take the wind out of the American dream of anybody being able to to start a business and become successful because it's much harder to do if you live in a monopolized economy, which is something that the FED has fed. Yeah, that's such a great point. And to be honest, it's something that's it's a little bit

of a different twist than I've actually looked at. Obviously, I see government policy going into a lot of the monopolization, but I haven't really thought and of course the easy flowing money go is into that as well. Letting these big companies running running massive losses, right Like, Uh, that's one reason why I think like Warren Buffetts maybe kind of lost it because he's still looking for that value investor. But today companies aren't about making money. They're just about

growing um. And that's the thing, you know, if the FED and its current policies and people people people think that zombie corporations are something new. You know, prior to the pandemic, four of companies in America were zombie corporations. So the FED has been fostering keeping deadwood alive, keeping non productive entities in the in the economy. The fetes had a great track record of doing that for years.

Post COVID, it's popped up to of companies because the Fed's been so aggressive at keeping companies that should go out of business alive by putting more debt on their balance sheet. Yet, but there's something beyond the zombie uh, the danger of creating all these zombies and the fact that it's going to suck productivity out of future growth and hold back the ability to create jobs because you're keeping companies in the industry when if they came out,

innovators could enter. But there's there there's something that even goes um beyond that when when it comes to zombie corporations, and that's that if you pile on so much more debt onto these companies, pay attention when you read Chapter eleven headlines. Pay attention when you see bankruptcy filings. Today, more often than not, you're seeing companies go straight from

filing to liquidation. And that's the difference that having way too much debt sets that you need to file Chapter eleven and having so much debt that there's no value that you can carve out in the end that saves jobs. And that is what this current generation, this last iteration of the Feds hurah is doing. Yeah, So just to dig into that just for a second. So typically you would file see a company file for Chapter eleven, which

would give them protection to reorganize. But you're saying they're not bothering, they're just going straight to liquidation because there's just no hope. There's no hope, and because there's so much more debt than there would have been otherwise had the junk bond market not been kept wide open by the FED to keep them alive when they otherwise would have had to restructure. The more pot the more debt you pile on, the less value you can extract in

the end. Yeah, and that's been my argument creditors. Yeah, that's been my argument, you know, with with this whole you know, just picking out Airlines for example, which I know you have used on the airlines, but you know, everyone's like, oh, we can't let them go bankrupt. And it's like, well, we you know, we need to protect the jobs and this and that, and it's like, well, just because they go bankrupt doesn't mean the jobs go away.

They just get re orged, right, and they get rid of the debt and now they're a lean, mean company that can grow again. But instead you're saddling them with more debt. That's not like a good thing. But like I mean, American Airlines had in one press release that they were going to be issuing one to trillion dollars of debt and oh, By the way, on September thirty, when the bailout expiration ends, they're gonna be upping their layoffs from twenty five thousand people. Who puts that in

the same press release. Yeah, the nerve of these people so um. It seems like, you know, I'm not the brightest guy. I didn't. I don't have your pedigree, but it just seems like so obvious to me. And I see comments. I mean I see five ten comments a week on my videos, and it seems like people get this. Um. Would you say that the FED policy to do this is they're completely just missing the picture, or they know what they're doing, but they're doing it anyway. I think

it's the ladder. I think that I think that that J. Powell has seen the whites of the eyes of how big of a monster this credit is, and he's scared. Um. You know, I tell this story all the time. General Electric debt was downgraded Halloween two thousand and eighteen, fourteen days later junk bond issue and shut down in the

United States for forty one days. The collateral backing exchange traded bond funds was trading by appointment only, and there was a huge liquidity issue, and there was the risk that that systemic risk was going to be unleashed. And that was what brought out the Powell pivot, when he realized that so much debt has been created that this this is possibly worse than the subprime crisis would be. Because in the aftermath of the subprime crisis, everybody decided

that quantitative easing was the way to go. Everybody was lower for longer, whether it became a global phenomena, and now you have pushing three trillion dollars of debt worldwide and a beast that central bankers simply don't feel like they contain. Yeah, I really want to dig into that three hundred trillion dollar debt balloon that constantly has this big hole in it. But before we do, I just want to jump back into the FED policy a little bit.

So recently UM FED FED chair Jerome Powell came out and said that he he did not believe the FED policy created inequality, and my right, I mean he said that, And then and then we have Senator Elizabeth Warren introduced a bill with a few other people UM, a bill to specifically have the FED fight inequality. So currently, a FED policy should be to maintain stable inflation and maximize employment. But apparently it's not good enough. Now. Now the Fed's

going to fight the inequality that they create. Um, the deference to Senator Warren, I couldn't think of a worst way of trying to approach the issue of incomm inequality. If you want to stop the FED from from widening the income inequality divide, then just tell them to quit supporting Wall Street in you know, with Main with Main Street as the loser curio. Yeah, okay, yeah, I just hand again Like I said, it's like, it's just seems

so obvious to me. And in the comments that I see, UM to see Senators Maxine Waters and whatever going behind this. I I guess it goes back to that previous question do they not know? And maybe Acine Waters and Elizabeth Warren don't. I would venture to say that Elizabeth Warren completely understands what the FETE is doing, and that in a post COVID world, you know, because of the programs that that the FETE is laid out, that that and

and this is her thing. She didn't like the big banks, and yet when the FED prize opened the credit markets and all these companies are rushing to do record levels of bond issuance. Sorry, but that is a great pop to the revenue line of these biggest banks. And that is what this policy, this post pandemic policy, has done, along with quantitative easing. I mean, somebody's got to sell the bond, sell the bonds to the fet somebody's gonna

make money on that. Somebody's gonna help these these companies issue record levels of debt. They're gonna make big fat investment banking fees on that. We wonder with all these credit lost provisions, why the banks aren't doing worse. Well, it's because the ft is effectively subsidizing them with policy. That's what Elizabeth Warren should be concerned with, right, Yeah, So yeah, it just seems so obvious that they're missing it. So it seems like they have to know and and

intentionally be doing that. I know you've talked to quite a bit of good, good politics, good optics, all that good b s. Yeah. Um, yeah, I mean it's apparent, well, it seems apparent that they're really trying to help out the buddies, right and not not main street Joe. But um, I've seen you know, you've talked quite a bit about the pandemic, and you just mentioned it as well. I don't want to dig into, uh, the pandemic per se, but but the economy post pandemic or or during pandemic

or post pandemic, and um, what's your view. I know we seem to have a V shaped recovery in the markets, but the economy ain't have a no vcaped recovery, right, Uh. I've seen you recently say maybe a W maybe it's an L. I don't know. But what do you see about the economy kind of moving forward in this post pandemic world? Well, I think that uh, And and I

don't mind being a little bit controversial about this. I think had we had a uniform national mask policy, that we the economy will be in a lot better place. It was finally forced on the state of Texas where I live, and lo and behold, we've got the hospitalization right down. Smaller businesses or reopening, people feel safe for going out. It makes a huge difference. And the fact that we had a patchwork approach meant that the biggest spenders in the economy were too frightened to come out

of their house. And that's just flat out gallop polling, non biased polling. So well, they weren't just scared to come out of their house. I live in California and we were mandated. I mean the businesses were forced to shut down. It wasn't a matter of being scared business well, no, I'm talking about states that reopened and when businesses were wide open and come on in. There was there was there was two little follow through economically speaking. Something was missing.

And the something that was missing was that the people who have the most money to spend still weren't coming out of their houses because there was no policy mandating that that you wear a mask. I just the thing that gets me about masks the most is that it has nothing to do with science. It has to do with economics and the top of earners in America, the top two quintiles of earners account for sixty one of consumption.

If you're not going to convince them to come out, you're dead in the water with trying to reopen an economy. It's just not gonna happen. And lo and behold, it didn't happen. And when you look at spending by zip codes, the highest income zip codes have had the highest degree of small businesses closing, and that's a shame because again, had they felt safe going out, maybe their dry cleaner wouldn't be out of business, maybe the restaurant down at

the corner wouldn't be out of business. But nobody had any continuity. I mean, Angela Merkel don't. I don't agree with all of her policies, but she was like, fine, fine, literally you you were fined and Germany opened back up. So I think that the to answer your question, the long term damage to the economy because so many small businesses have been sacrificed because we haven't had strong leadership. It's going to stay with us for a generation. You

can't bring back small businesses overnight. So this is actually going to increase the divide between the oligopolies and the monopolies and the biggest companies and the smallest companies. And it was a policy error that occurred in Washington, d C. And it's a shame. Yeah, you know, I know, as you said, it's controversial, and a lot of times talking about politics is because there's opinion in there. But you

can't understand finance without talking about politics because they're so intertwined. Right, So I get that I'm curious though, because it seems like, um, we've seen the middle class be hollowed out in the United States and and and through policy after policy after policy, whatever you wanna call it. That a combination of as we've as you've already said, right, indexing and giving free money away and uh, you know, chrony capitalism, regulations, outsourcing,

all those things. But it almost seems to me, again if you would look at it from politically, like there is a reason why they want the middle class hollowed out, and this almost seemed like a continuation of that, because it's it's the mom and pops. I can't go to my local store, but I can go to Walmart. I can't go to my local hardware store, but I can go to home depot. Like it's like purposely targeting the

middle class. Almost it is. And and again, had there been a cohesive leadership structure that said we're going to open up all businesses and we're gonna open up all businesses safely, then you wouldn't have seen such destruction in the small business sector. Had the paycheck Protection program not just been for W two employees, had there been ten

that were able to be included. Had they accounted for the fact that if you're a restaurant and you're being told that you can only reopen with twenty five or fifty percent capacity, you might want to bend the rules someway somehow to allow the small business to stay both in compliance with regulations in terms of social distancing and not have them lose the loan ability because they're not covering seventy of the loan proceeds with employment when you're

not allowing them to employ their employees. So Washington, in my opinion, has completely failed the middle class yet again. And at the same time, they've you know, they've effectively introduced socialism into the U. S. Economy with the stimulus Bill, and now that now that workers in the economy have gotten a flavor for what twenty four extra hundred dollars a month, feels like they're like, I like this universal

basic income, Let's get some more of it. So it's a dangerous path we've gone down to have signed in legislation without really thinking about it, legislation that helped people not work, and legislation that put hard working small businesses out of business. Yeah, So, um, I agree with what you're saying, I mean you're talking about multigenerations or a decade to come back. I think maybe multigenerations because we've seen like restaurant chains that have been passed down through

multigenerations are gone now. Um, and so a lot of that that's not coming back at all. And also like, uh, you know, um, I I grew up racing dirt bikes, super dangerous. I've metal in every limb of my body. Uh, it's one of the three boys. I'm happy they didn't take that up, even though one of them flies planes. Anyways, Yeah, I mean it's one That's one thing that's helped me with investing because I'm not afraid of the risk. But it's also I've made a lot of money, I've lost

a lot of money. But my point is is my doctor would always tell me stay off of it. So I go there, I'm like, hey, doc, you know my ankle gun herds all stay off of it. But like, hey, I gotta go to work. I can't just stay off of it. So I thank thank you for your opinion. But I understand there's a bigger picture that I have

to look at. I can't just look at the medical and we it kind of look at the medical but we didn't take in all the other ramifications of that, right, And so like you're talking about business shutdown, Well that changes the trajectory of of of multigenerations. And even today, right kids can't go back to school, parents are quitting their job. You take two or three years off in the middle of your career, you're not getting back onto that same trajectory you're on, and then your kids aren't

going to be on the same trajectory. Right right, It trickles down and it's a real crying, dying shame. It truly, truly is. Again, I there was a way to safely reopen the economy. If you look at certain countries in Asia that have been scarred by prior pandemics, they never shut down the restaurants just said, oh god, look at another pandemic. They got rid of half the restaurants. Excuse that they go at a half the tables inside the restaurant,

they just put them in the back. They socially distanced, they put their masks on. They did not close their economies down, and they haven't had this massive loss to their small business economies that we have. But yet nobody in in a leadership position. And I'm not talking about I'm talking about both sides of the aisle. Nobody was strong enough to say, you know what, let's be humble about this. We're not a country that's accustomed to pandemics.

But let's look at countries whose economies are not being devastated by a pandemic and maybe emulate what they're doing. It wasn't there wasn't any logic to it. Sure, Yeah, well no, no doubt, no doubt that it could have been done better. And and the sad thing is is continuing to be done bad. Um, So we'll see, we'll see how that that goes on. But um, jumping back into the FED stuff, because I got my FED insiders,

I want to ask you questions there. Um. So you know, they're constantly saying they have this target of two percent inflation and I and I and I heard you mentioned I think it was on David's podcast. You know the CPI, which is the consumer price index what they measure, and it seems to me that you know, over time they continually change what they're looking at to get the c p I. Um, and supposedly they can't get any inflation but yet main street knows that. I mean, for sure,

healthcare education have gone up big time. For sure, we know that home prices have gone up, and even my milk and my steak have gone up and like big time. So what the heck are they looking at for CPU? They're they're not looking at. What part of the Fed's problem is is very basic. They try and smooth everything out. Well, we don't live in a smooth world. But they try and smooth inflation out by removing inflated by removing food and energy costs. Sorry, but those are pretty important to

most families. I mean, when I've got all four kids in the house, we drink a gallon of milk a day, I can tell you exactly fifty nine down at the store for the gallon period, and it was three a few months ago. So I mean, but the FED excludes things so that they can keep things that they can smooth out their models. In addition to that, the FED

does not use the CPI. The FED uses pc which is an alternative measure of inflation, which uses my biggest pet PEEVE, which uses Medicare and Medicaid reimbursement rates for the input for health care inflation. I can tell you that that's not what I pay for healthcare at all, that my premiums have gone up, that my codepas have gone up, and that's the largest The second are just

input to inflation. The largest input to inflation is housing, and they impute inflation some way, somehow that has again zipped to do with what you're actually spending in the real market. So by understating inflation, which is infuriating, they can hide behind that target and say, as long as it's below two percent, we can keep the printing press going. I've seen them say recently. Uh it was one of

the smaller FED Bank chairs. I forget which one, but he said they're gonna, quote let it run hot, right, so like they're gonna go instead of like tapering down as they're getting close to target. He says, they're gonna run out hot to two percent, which means they're gonna wagh overshoot their goal, which if they're looking at over shooting two percent, what the heck does that mean for us? Right? Well, look, they haven't been able to hit their target in the

first place. They haven't been able to hit the two percent target in the first place, because they know that

they have a manipulated metrics. So for them to say that they're gonna let inflation run hot is simply code word for saying we're never going to stop printing money, that if it does creep above two percent by some miracle with oh, I don't know, all these people losing their jobs, companies losing pricing power, disinflationary pressures building up in the background, but somehow they're gonna let inflation run hot. I mean, it's it's if these people live in a

different planet, right, But they need the inflation. They want the inflation, right, I mean, I mean they, I mean they not not we, but they need the inflation, uh, in order to keep alive. It almost seems like the minute they stop printing, the whole system collapses, right, And they have now so much debt they have to continue to inflate it away. Is that correct? They want inflation

to inflate away the debt. But at the same time, if they truly had higher interest rates, this whole house of debt cards would come just it would implode under the weight of whether you're talking about households debt service or corporation's debt services. Inability to refinanceer. For God's sake, uncle, say what the interest expense of the country would be if we truly had normalized interest rates? As you think about it, inflations is actually the fed's worst damn nightmare.

But again, when you purposely understate it, then you can hide behind it and ignore asset price inflation and ignore food price inflation and just keep the game going. Right. But I saw you mentioned before to that you know by doing this, the FED has basically destroyed price discovery. Now do you see that as only destroying price discovery in the financial sector or like money or price price

discovery across everything. No, I was really referring more to stocks and bonds, and but but those are those are critical cogs in the system. I mean there was before the FED stepped in and intervened in the investment grade bond market and even in the junk bond market. As as a trader, you know, you knew that you the value that you were getting, you could assess what an investment should be. Every time a price agnostic buyer enters

a market, your price discovery shot to hell. Yeah, I mean, if you want to extrapolate that to the real world, private equity backed investors swarmed into certain inland Empire Phoenix that they went into certain markets in America and bought up prices without even without even inspecting the homes and lo and behold today we have home prices that are too high. And they started this cult of investing in homes.

And that is something that I also leave at the foot of the Fed because if money is so cheap for so long, investors are going to find new and exciting in different ways to come in and destroy price discovery in real markets that affect households as well. Yeah, you know, I've definitely been influenced big time in the Austrian school of thought, right, a lot of the mesas stuff and whatnot, and a lot of f high I can.

You know they talk about like money is communication and I kind of believe that, you know, central planning fails, and so how do you organize million people? And so through money? Money is communication is price discovery. So how do I know I need to order new supplies? How do I know I need to raise the price of my my thing? Right? Well, the market can organize all those people when there's prices, when there's price in there. But when money is distorted, then nobody knows what the

heck to do? Do you see that? And and that is that that is also the case when it comes to uh companies, the ease with which companies can can access borrowing as well, and so they end up taking on more death than they should because they think that there and then all of a sudden, when you have

a recession, come along, poof, they're gone. So uh No, the ability to run businesses at the most at the most fundamental level, to your point, uh is, depends critically on true price discovery, which is why when when you look at socialism UH and you look at the problems it has when they have everything controlled by the government, you lose all of that and then you end up

with massive shortages. They don't have enough parts to fix their car, they don't have enough food to eat, right, And it's all because it's been completely captured and controlled. Ye I lived in Venezuela. I live in Venezuela before socialism came about. So i'm i'm I'm a big study of that. And I nothing scares me anymore than the armies of modern monetary theorists to think that that we can just print away as much as we want to give everybody everything they need in a pony and no,

it's it's it's a very slippery slope. But again, I don't think there's enough of a recognition of the fact that we've taken a step in that direction with the

magnitude of the stimulus bill. If you look at the past um six recessions, Yes, if you look at the past six recessions going back to disposable personal income adjusted for inflation and declined by o point five percent during those recessions, real disposable income inflation adjusted disposable income in this country has risen by in the current procession on an annualized rate because we've given away so much. But again,

we've taken we've taken socialism for a test drive. And my greatest concern is that they're going to be there's gonna be enough critical mass to keep it going, because we have to remember this was signed into law with a Republican in office. See what they wanted? One tint inswer three. But yeah, um, but but I'm you know, the one thing that I kind of look at and of course, I mean I see the same thing and like Bernie Sanders, the first guy running on an open

socialist platform. But I don't look at it as like a defining moment. We were capitalism and now we're socialist. Right, It's always like a blend and so it's like we're part socialist, we're part capitalist. And and people point to you know, uh, the you know, some of the Nordic countries and say this is the same thing. But everyone's kind of like a blend um and it seems like maybe, and you can speak to this because you've been there,

but maybe Venezuela was way more socialist. China had started to become a little more capitalist, right that we've seen that. But like you talk about like the money going out, the stimulus whatnot. But we already have welfare in California. If you were to before pre pandemic a year ago, if you were to collect all the unemployed, all the welfare benefits that are available to you, I think it's like almost forty thousand a year. Why it was the highest state in the nation. I think it was like

sixty thousand a year, and that's no taxes. So like we're already kind of had a socialist nation. I would say, right, we uh, you know, I like to say that the past ten fifteen years, because of FED policy, because of interest rates at or close to the zero bound, that we've had the stealthiest expansion of the social safety nets since f DR was in office. People just haven't paid

attention to it. And again, borrowing costs at artificially low levels bring about all manner of sins and we've seen them. We're more aware of them today. But this has been going on for a very long time. Yeah, now, UM, I know we're I want to start wrapping it up here, but for everyone who's still listening, I am going to We're gonna dig into the inflation versus deflation debate or not debate with the conversation, But before we get into

that and where this endgame is. But before we get into that, UM, talking about deflation, you had mentioned how, um, you know, how technology has improved things and now with post pandemic people working from home streamlining things like that, UM, technology has it is and should be deflationary, right, Uh, we make things easier and it's deflationary. And for me it seems like deflation is a really good thing, Like do I want my dollars to buy more things in

the future? Or less. Right. Uh, the Kenzian system has taught people that we need inflation. What do you where do you sit on that? Do we need inflation or is deflation good? H Well, we don't need deflation in our earnings, that's for sure and that. But but if if they purchased more, it's always purchasing power, right, purchasing power. Yes. But but but you're talking about utopia. You're talking about people with no debt. So that's the always the argument, right, Well,

we need inflation because of debt. Well what if we didn't, What if we weren't a debt addicted world, if we weren't a debt addicted world, then we wouldn't care about deflation at all. I mean, that's that is utopia. I mean, you know, I personally, I had a mortgage for a while and I you know, I lost sleep every single night until the mortgage finally went away. Uh. But not a lot of people think like me. And we are a debt our nation and we have ingrained into society

the idea of borrowing and living beyond your meat. This is one of the things that has to be expunged. Or are you our fate is a nation is is at risk. Yeah. So having lived in Venezuela and and seeing that kind of firsthand, Um, where do you see us on that scale? Do you think there's hope? Well, now, I was in Venezuela the summer before Chaves came on

and really socialism started to get going. And I will tell you that, Um, and again capitalist total conservative right here completely, But I will tell you that the level of poverty that I witnessed and the level of homelessness, and you know, but the time I I spent a few months living there, I left. You know, this is prior to all of the knowledge that I have today about economics. But just as somebody observing what was going on, I knew that the environment was right for somebody to

come up and try and help the people. And if you if there's enough suppression that goes on, then you end up with a big enough ground swell to bring about a change in an economy where it's not the balance that you describe, but something that swings too far

to left. You certainly don't want that. But and again that is why I think it's so critical that education reform and reforming the FED be pursued, because ultimately the country pays the price if you allow the income inequality divide to get completely out of hand, and there is concern for that right now. There is talk of mass homelessness in our future. There already is mass homeless in California. Man, you live in California. Last time I was in Los Angeles,

I was, I was. I mean, it's my children were, They've never seen anything like that. But when when you're talking about a world a decade in which FED policy made it for every real estate developer. The only way that they could make the math work in a zero interest rate environment was to build luxury units. So now we've got a bunch of high rises and beautiful condos that nobody can afford. And the only the only thing that home builders built for a decade where luxury homes.

So there's there's a there's an argument to be made for the FED having made housing out of reach. You don't want to be working in a in a hospital downtown or in a hotel downtown and have a two hour commute and you know you can't find an apartment that's a reasonable rent. So again, this is not how economies should work. But when you artificially repress interest rates. It's exactly what's happening. Yeah, And I've I've made the argument.

I think it's maybe a pen tweet on my on my Twitter threat is uh, you know, real economies make real things, and we've financialized the economy. So that's hard. That's hard. Big thing is like finance, and everything's gotten during the real estate boom, what were we doing? I mean, what was productive about building all those homes and all those mansions. I mean, we we we came out on

the other end of it. There was those homes because because the price signal was wrong the first the price signal was wrong because because Alan Greenspan interest rates too low for too long, and subprime mortgage went through the roof right in your backyard, New Century country wide, and all those names probably ring about oh yeah, oh yeah. I I got caught up in that, and unfortunately it

didn't end good for me as well. And that's that's part of the reason why I really dug into gold and learned about hard sound money and found Mike Maloney and Ron Paul and I started chanting in the Fed with him, and uh, here I am a dozen years later. Um. But getting back into that, UM, I would just say one comment. I didn't have this on my list of things, but you know, I'm I'm forty five, so I'm like old enough to have kind of grown up to like

be fearful of the USSR. And I remember thinking like communist Russia, like they tell you what you can do for work and what you can't do. And I remember as a kid, like people like coming from Cuba and like risking their life, and I was thinking, like, oh, they're swimming in shark infested water to like escape, you know.

And I remember the Berlin Wall, and I remember these thoughts as a kid, like what if I was like at my friend's house and then I woke up in the morning and the fence was up and I couldn't get back, And like, um, we have all these examples, and we have real life examples in Venezuela. Right, Um, why do people still think it's a good idea? Uh? Well, it's it's an easy way of thinking. It is. It's

it's the easy way out. And on top of that, you've had a lot of corruption in public education in America such that you have generations of people who feel like they're stuck in this loop and they can't escape poverty, and in many cases you can't. I mean, I've I've actually written uh some ideas down I've published some papers

about education reform. And you know, if you want to spend taxpayer dollars on something, then make sure a working mom has has childcare coverage in the first few months of a child's life so that she can rejoin the workforce. Don't make it so prohiberitly expensive that she has to drop out and go on welfare, because then she's going to be stuck in a loop and her kid's going

to be stuck in the same loop. And there there's make it to where people can work, and that is what you need to do, I think, to ensure that because working parents teach their kids to get educated. Parents who don't work don't and that is part of the problem. Is it comes down to the parents, and that is part of where financial illiteracy is so rife in this

in this country. Yeah, that so that we can have a whole show on that, and I don't I don't really want to jump into that, but but you're absolutely right. It's always about education. Our food that we eat, our medicine that we take, everything always boils down to education.

And I think the system has uh intentionally we know this, right, we know it's been taken over, and it's intentionally created a bunch of victims, like, Hey, you can't get ahead because you're poor, you can't get head because you're black, you can't get ahold head because you're a woman. And now when when you when you become a victim, then

you're looking for a savior instead of empowering people. Right, And so I mean just that little minor shift, and I and I just had this thought that's like analogy, and it's like, uh, right, if the state is going to keep us safe from every virus and every sickness and every poorness and every all these things, were like, shoot, just put me in a cage and give me a steak once a day, and like I'm good, right, like a lion. I guess, like I won't roam the planes

because that's a hard life on the planes. Sometimes I don't eat. I have other animals and hunters that try to kill me. So put me in a cage and give me a steak every day and keep me safe. Like and that's kind of like where people are at right, Uh, Anyway, that's a whole another conversation. But let's jump back into this. So I know we're gonna wrap it up here. So UM,

I know that you're really bullish on gold. You've talked about that, UM and right now, right now, we've got one too many speculators in the house in my opinion. But anyways, Yes, it is a long term hold, one term. What do you mean by that, Warren Buffett jumping in. No, I don't think he's I don't think he's a speculator. I think Warren Bufett jumping in is a reflection on the fact that there's nothing of value to buy out

there right now because prices are so distorted. No, I just mean that it feels like there's been a lot of hedge funds, a lot of fast money has moved into precious metals of late UM. But you're always going to have that at certain times in UH in economic cycles. Sure, but I would say, you know, you said long it's it's a long term hold. Right, So we see, UH FED can continue print money. Interest rates are probably going to be continue to be held low for a really

long time. Why hold UH bonds that are going negative when I could just go to gold. Right. Um, so there's like this, my my long maturity bonds have treated me very well. I still have those two, so you're lucky. I'm talking about like treasuries, you know what I mean, Like treasuries only one percent or half a percent, but you know, justin for real inflation or whatever, it's like it's it's a negative. Um. What are your thoughts on bitcoin? I think bitcoin is is kind of the young hip

crowd hit hip crowd's gold. I think that it is a reflection of the disgust with fiat money and and the Fed monetizing the dead. I think bitcoin is I literally think it's a modern day equivalent to gold or I think that that's how it's perceived. Um. You know, from from what little I understand about it, the economics of mining for bitcoin or not ideal. And once quantum comes about, I think that that could revolutionize how the

world views cryptos. But at the same time, we already know that all major central banks in the world are looking at sovereign cryptocurrencies, such that you have to wonder if there are crypto sovereign currencies, what the fate would be then of something that was not sovereign well, um, you know, bitcoin is not cryptos. So bitcoin is a decentralized system that's built on proof of work on a

minor system. Um, so all the other cryptos are centrally controlled, and sovereign cryptos will be the same thing, centrally controlled. And we know where essentially controlled things go. They become manipulated and distorted. A decentralized technology that is not able to be manipulated, inflated, distorted, whatever is different. And I

always think about fa hiak. He said that there will never be a sound money again until we take the thing out of the hands of the government, and it can be done in a forceful way, has to be done in a slide round about way. He said that like in the eighties and so forth, telling because that's kind of where we're at. Um. So, as a bitcoin person, we believe that, Um, we want to opt out. We're opting out of the system, right, getting our money out

of the financial system. All right, forget the Fed, forget this, uh, this whole thing. We're just gonna take our money. We're gonna vote with our money, right, Uh, and we're opting out. Gold is a way is opting out as well. Um, do you think if enough people opt out with their money, it makes a big difference to the fed. Are we gonna win that war opting out? Oh? I think if you, I mean, if you have enough adoption of anything, then it will win. I mean, that's that's a rhetorical question.

It works as long as everybody agrees to it working. Um. Yeah, that's a bigger battle to fight. Yeah. I don't see you know, I don't see a government ever saying hey, let's just forget the dollar and move to bitcoin. Like. Of course not, they're gonna want to control it, manipulate it. But it's like the people's money, you know, and and again in Venezuela, like and they say, well, you know, they have the army, they can force you to use their currency. Will know they can't. Like, if people don't

trust the money, they're not going to use it. I'd rather just trade you water for bread. Right. Uh. So it's like, hey, you can have the government money over here, and we'll have our our own money over here. Maybe, but you're talking about kind of the ultimate endgame, right, because people in Venezuela who had money, they got it out of Venezuela and put it in dollars. Uh. And and that's kind of what capital flight has always looked like. If you're talking about the end of the dollar, I

mean these are it's a much bigger discussion. Yeah. Um, so we'll we'll tease into that just a little bit. And I know we won't. We don't have time. We're gonna wrap it up here in a couple minutes. But so talk about the endgame. So we're in a situation now where we have this massive debt bubble. I don't know, three trillion whatever it is, one point to quadrillion derivatives. Who knows how big that is? Um, And it's constantly

trying to deflate, and the FED keeps trying to inflate it. Right, and it seems like, uh, each each correction that we've had is uh is the market trying to correct and the FED just keeps trying to pump it up. Um. We're at a point now where I think you said earlier like the Fed's kind of between a rock and a hard place. They have to continue to print. If they quit, it's over. So what does the endgame looks like? I'm thinking that they go until they blow, meaning uh,

it's having diminishing returns. Right, it's already having less and less effect. But they have no choice, and they're gonna just go and tell it doesn't work anymore. Is that what you see? Or what do you think they're gonna wake up and be They're gonna wake up and pass

austerity tomorrow, Like, how does that work? Look? J Powell's first eleven months in office, he tried desperately and he was serious about it, about shrinking the balance sheet, about quantitative tightening, about normalizing interest rates, getting interest rates up to higher levels. I mean, he he was our last great hope because he had the stones to actually try and do it. And he failed and so well he tried, right,

he tried, but I don't know. He tried his again before the credit market instructed him that if he kept about the business of tightening it was going to blow up to Kingdom come and that he better back off. He was really making an effort to take us to a better place. And what he learned was that had we stopped after the housing crisis, had we not ventured off into quantitative easy, had we not gone down that rabbit hole, there might have been a way to normalize

monetary policy but there's not there's not anymore. And in theory because again the three trillion dollar figure that we're throwing about, that's a global number you have to have for the endgame to work, which is a debt jubilee theoretically of all sovereign debts. You have to have all the countries agreed, and at last check, not all countries in the world are our allies. And that is really the discussion. I think that brings us to what the

endgame might or might not look like. And you recall from history that every time a reserve currency status has been lost, there's been a war involved. And that is that is really my greatest fear. It's that we keep the money printing going. The genesis of every world war and history has always been economical in nature and triggered

by something debt related. So again, if if the Kumbai Yah happy ending is a debt jubilee and all the countries in the world are going to agree to expunge all of their sovereign debts, wipe the slates clean, forgive everything, forget everything, in order for that to work, you have to have every single country agree with the United States,

which I would agree would be almost an impossible task. However, after seeing what's happened with COVID, with every country in the world locking down all of a sudden, I think maybe it could happen. But um, I guess if we are the debt you beilie, that's that's a big thing. But also like mom and Pop's own treasuries, do they want that wiped out as well? No? No, look, there's there is nothing. Um it's a there's a good reason

that debt jubilees are in the Bible. Uh, it's not really a feasible modern I mean, you would have to have a debt jubilee just for the sovereign, and that would be tricky enough given the fact that mom and Pops do own treasuries. And again the reason I bring up other countries, it's because other countries own a ton of treasuries. Again, everybody would have to agree, and you still wouldn't be able to have a debt jubilee in

the private debt markets that could. It's impossible. So I'm only talking about one sliver of the pie and not talking about household debt and not talking about corporate debt, not talking about financial debt. Yeah, yeah, so the sovereigns all get off the hook, but we still have all the debt. Great, so we're saying there's no elegant out. No, no, there's not. All right, So last question, um, and we'll wrap it up. So, Um, the question is inflation or deflation.

So we have this massive debt bubble and it's continually trying to deflate. Um, the Feds trying to reinflate. It seems like defaulting on a billion dollars is very easy and the and the money's gone to put a billion dollars back into a lot harder. However, we see you know, the Green New Deal, and they want to spend thirty to ninety trillion. Where is that going to come from? Whatever?

So do you think the Fed is able to inflate the balloon faster than it's deflating or do we are they gonna are they gonna be able to inflate it for a while and then lose, or we're gonna go into a deflationary period, Like how do you see that playing out? Maybe over the next couple of years or whatever. So I think right now that the FED is trying

really really hard to engineer inflation. In fact, the FET is trying so hard to engineer inflation that it's it's gotten into the business of buying treasury inflation protected securities to push up inflation expectations like by force. So they're

they're trying as hard as they possibly can. However, a million new filers of initial claims every week dictates that you're going to have deflation eventually take cold if there's not some kind of a magnificent economic recovery in the offing, which is going to be very difficult to do given the fact that debt got us in this situation in the first place, and debt by definition is a drag on economic activity and a drag on the ability of

the economy to achieve exit velocity. So I think that that deflation can, in the media term, rear its ugly head. I see the possibility of their being negative nominal rates dictated by the market, as we've seen in France, Germany, Holland, Switzerland, the UK. So and that would be very daunting for the FED because it would it would obviously reveal that

they had lost the battle, the inflation deflation battle. So but again, you can only take so many people out of the workforce which kills pricing power and hold off deflation for so long. So which one is it going to be? I think we have deflation first, and I think if we try and keep printing printing, printing. It

depends on who's going to be in Washington. If they ever change the FED mandate and allow the FED, instead of buying treasuries in the secondary market, to actually buy treasuries at auctions such that the FED is basically um the feds liabilities are legal tender. Then you can flip the mother of all inflation switches. Okay, you're as goodbye. So you think deflation and then inflation. It depends on what Washington does or doesn't do. If somebody draws the

line and prevents the FED. I mean, opening the Federal Reserve Act is a big deal, um so, and it's a can of worms. But if if the FED it, but look at what they've done with treasury and special purpose vehicles and off balance sheet and corporate bonds and municipal bonds and junk bonds. So clearly they can expand the Fed's footprint if they want. The politicians in Washington, let's see what they do next. Yeah, and that's a great answer, and we'll wrap it up with that answer.

And just for everybody listening, you know, nobody has a crystal ball. I always say it would be so much easier if we did um, and so nobody myself. I never give predictions, and obviously Danielle is trying to stay away from it as well. And what we do is we look at probabilities, right like, hey, this is probably it's not a very high probability, but if these things happen, then it could, right. And so for everybody listening, just try to always think about things in that in that framework,

and and and pay attention watch for the signs. Uh, inflation and deflation are both probable, and then we'll watch the signs to know which ones are coming and we'll have to react accordingly. Right, you've got you've you've got ten of the workforce, depending on what agent, what statistical agencies is telling you what the date is out of the workforce. I'm sorry, but a monkey could tell you that that's disinflationary. Yeah, exactly. Money printing eventually is inflationary.

And and you're right, you just have to assign odds. Yeah, great, Okay, we're gonna wrap it up with that, Daniel, I appreciate you so much. Now we went maybe a little bit over, so I appreciate that. Um. Now, of course you're all over all over the internet with all your interviews, but maybe do you want to direct people to where they can go follow you for more? Sure of you can always follow me at de Martino Booth. I'm the most

active by far on Twitter. Um, come on over to my YouTube channel as well, and if you really want a great education in good entertainment every day, then become a subscriber at Quill Intelligence. We're happy to have you great and I'll link to all that in the show description so everybody can go find that. And with that we're going to wrap it up. Daniel, thanks so much for joining. Thank you. Take care,