If you examine the anatomy of a crisis, it seems like almost all of the big ones start with a completely false belief system.

“Two weeks to stop the spread”.

“Iraq has weapons of mass destruction.”

“We’ll be greeted as liberators.”

“The debt doesn’t matter because we owe it to ourselves.”

One of my favorites was the faulty premise that underpinned the 2008 Global Financial Crisis: “real estate only goes up in value.”

Nearly every “expert” believed it. The Fed. Major commercial banks. Wall Street analysts. Big hedge funds. Ratings agencies.

In retrospect it seems ludicrous. Of course real estate can lose value. It’s an asset. There’s risk. And that’s what happens after the crisis— people look back and wonder “how could anyone have believed something so stupid?”

Today, we’re in the midst of several other false belief systems. And one of those— as I wrote to you yesterday— is about the Federal Reserve.

In yesterday’s letter I explained that the Fed is THE most important central bank on the planet, because it is the primary custodian and issuer of the US dollar, i.e. the world’s primary reserve currency.

Yet at the same time, the Fed is hopelessly insolvent with over $800 BILLION in unrealized losses versus capital of just $44 billion. This makes the Fed the MOST insolvent bank that has ever existed in the history of the world.

Yet, so far, no one seems to care. The false premise is “It doesn’t matter that the most important institution to the global financial system is hopelessly insolvent. They can always just print more money…”

Future historians will not look kindly on this false logic. And people will wonder how anyone could have believed something so stupid.

This is the topic of today’s podcast.

We walk through the hilarious history of recent financial crises— how various entities failed, how the government responded… and how everyone keeps repeating the same mistakes over and over again.

It’s as if these banks are just begging to fail.

They’re literally now on the third iteration of repeating the same mistakes since 2008.

And you won’t want to miss the end, where we conclude with a great way to think about how to protect yourself from the fallout of this next brewing crisis.

We also talk about the way out— how high-speed economic growth could help the Fed (and the US government) out of its gargantuan financial problems. But in case this doesn’t happen, we walk through some very sensible strategies to deal with the potential fallout.

You can watch the video here, or listen to the audio here.

 

What does it really mean to have a Plan B— especially these days?

We’ve used the term Plan B for almost the entire 15 years since I started this business in 2009.

Back then the national debt was really starting to become a major problem. The Federal Reserve was printing trillions of dollars to bail out irresponsible bankers. The economy was on the ropes after the Global Financial Crisis.

Plus a guy who told business owners, “You didn’t build that,” had just become President of the United States— and then bizarrely awarded the Nobel Peace Prize.

So the need for a “Plan B” seemed pretty obvious.

Today there is a lot more reason to be optimistic. There’s people coming to power that want to take a wrecking ball to the rot, corruption, and inefficiency that has been plaguing the country for far too long.

Frankly, I’m rooting for them. I’m even willing to pitch in and help. To be frank, I’m not comfortable with a world where China is the dominant superpower.

And there certainly seems to be a real opportunity right now to get the country back on track.

Let’s not be naive though. There are still serious challenges ahead. And the people coming to power have a very narrow window to get things back on track.

But we haven’t had this much reason to be optimistic in quite a while.

This isn’t just about an election or single individual, but rather a clear sign from the entire country, sick and tired of being lectured by out of touch “experts.”

Voters practically demanded a return to sanity and prosperity, even if it means dismantling large chunks of a broken system.

In today’s podcast, we talk about what it really means to have a Plan B in this kind of environment, where there’s reason to be optimistic, yet major challenges remain.

This, after all, is the entire point of a Plan B; to put yourself in a position of strength, and take advantage of great opportunities, while hedging clear and obvious risks.

We talk about that a lot in today’s episode.

We actually start with our CEO Viktorija, fresh off of a Total Access trip to El Salvador, telling us about the VIP treatment our group received from senior levels in both the public and private sector.

Then we transition into things that America needs to get right in short order. And the consequences if this doesn’t happen.

We then discuss the concept of a Plan B, versus having a dangerous “bunker mentality”, and how to think about hedging those risks, both in terms of investments, as well as non-financial solutions.

https://youtu.be/HGNFy5IU7CM

One of the key ideas is taking steps that make sense, regardless of what might or might not happen int he future. And one example of this is building strong relationships with people who share your values. That’s the whole idea of what “community” is supposed to be.

And this is exactly the type of community that we have developed with our Total Access group.

There are incredible VIP trips, exclusive investment conferences, compelling private investment opportunities, in-depth research, world class discounts, and a whole lot more.

But ultimately, the thing we are most proud of is the community and camaraderie among members.

That is consistently what our Total Access members rate as the biggest benefit to our organization. Many say they have found their tribe.

We usually keep membership closed, and only open up enrollment a few times each year.

We are doing that right now, and you can check out more about Total Access here.

Right at the beginning of the year in early January, I wrote to you about one of the dumbest laws to hit the books in the Land of the Free in a VERY long time. It’s called the Corporate Transparency Act.

The article was called, “Get ready to spend two years in prison,” because, two years in prison is literally the penalty for noncompliance.

You see, the do-gooders in Washington decided that there is too much criminal money laundering taking place in the US banking system. Nevermind that these brainiacs have already passed countless other laws to combat money laundering… all of which seem to be dismal failures.

So they decided to pass yet another anti-money laundering law, which requires every company in America to file a special report to the federal government disclosing the names of its owners.

So if you own a Delaware LLC, for example, to own your family investments, then they wanted you to file this report… even though you ALREADY report the exact same information to the IRS each year.

Well that doesn’t matter. The government wants you to send the same info— but in a different format— to another agency within the Treasury Department. And if you don’t file the report, they threatened everyone with up to two years in prison.

Obviously “ignorance of the law is not an excuse”. They just expect you to keep up with the flood of new laws, plus agency rules, plus court decisions which might modify or nullify all the rules and laws.

Case in point: earlier this week, a VERY sensible federal judge thankfully issued a nationwide injunction on the Corporate Transparency Act, suspending compliance requirements until a final ruling.

This is great news; it means that, at least for now, you do not have to comply with the CTA. But it also illustrates how quickly the laws change. Like literally every single day.

It’s practically a full-time job to keep up with all the changes… and it’s virtually impossible to have a functioning society when the rules are so fluid.

This is the topic of this weekend’s podcast— we hope you enjoy and look forward to speaking with you again next week.

On November 20, 1945, an international tribunal first convened in the Bavarian city of Nuremberg to prosecute key leaders of Nazi Germany for crimes against humanity.

The Nuremberg Trials were a key aspect of holding individuals accountable for the brutal acts and genocide committed under Nazi rule.

High-ranking officials, including Hermann Göring and Rudolf Hess, faced charges, and they tended to grab most of the headlines.

But plenty of lower ranking officers, and even doctors, faced trial as well. Naturally they tried to defend themselves by claiming they were “only following orders”.

But the Nuremberg Trials established a clear precedent that moral responsibility falls on the individual who committed the crime. “Only following orders” is simply not a valid justification for blatant wrongdoing.

It’s always dangerous territory to bring up the Nazis in any intellectual argument because it’s just so sensational. But in this case the analogy is an important one because we’re ultimately talking about accountability.

Bureaucrats and politicians in the US government commit outrageous, egregious acts of wasteful mismanagement on a daily basis. A lot of it is even deliberate.

And yet no one is ever held accountable. The conservative writer Thomas Sowell once argued that “it is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.”

People in the private sector pay for their mistakes all the time. Businesses who don’t deliver value soon find themselves without customers. Employees who don’t do good work find themselves out of a job.

But government officials have squandered trillions of dollars. They locked down businesses, forced experimental vaccines on children, censored free speech, and violated just about every right imaginable.

How many have been truly held accountable?

At the moment the answer is precisely zero. Fauci retired to a multi-million dollar book deal. Joe Biden and Nancy Pelosi will be honored throughout the rest of their lives. Marty Gruenberg (head of the FDIC and worst human being in government) still has his job.

Even most of the worst Members of Congress won their reelections.

That’s where today’s discussion begins. We actually recorded a podcast talking about this idea of government accountability.

I’ve written a lot that America has, right now, a very narrow window of opportunity to fix its mountain of challenges, or at least get seriously on the right path.

Those challenges will be difficult to fix without fundamentally addressing the culture of failure, the standard of mediocrity, and the habit of waste in the federal government.

Even if the economy starts growing by leaps and bounds, the US government still won’t be able to fix its gargantuan fiscal crisis if an unaccountable bureaucracy is still there to suffocate progress.

This is a MUST FIX for America to have a real chance at success.

You can listen to the full discussion here.

At the center of Sovereign Man’s core ethos is the indisputable view that the United States is in decline.

I take absolutely zero pleasure in writing that statement. But it’s incredibly difficult, if not impossible, to objectively appraise the bountiful evidence at hand and not reach the same conclusion.

Consider the following:

US government finances are appallingly bad. The national debt exceeds 100% of GDP, annual deficits run into the trillions of dollars with no end in sight, and major trust funds for Social Security and Medicare will soon run out of money.

Political incompetence is mind-blowing; politicians fail to be able to even identify problems, let alone understand them, let alone reach compromises to solve them.

Ditto for central bank incompetence. These people simply cannot understand how, by keeping interest rates at zero for nearly a decade and conjuring trillions of dollars out of thin air, they engineered record high inflation. And they also fail to understand how their actions to ‘fix’ inflation are causing widespread havoc in the economy and financial system.

Social divisions across the country are extreme. Censorship and cancel culture prevail, and corporations now wag their fingers at their own customers to “be better”.

The education system is in pitiful shape, with many politicians and school board officials turning classrooms into activist training camps.

The population is terribly unhealthy. Obesity and drug addiction are epidemics. Plus there’s an obvious mental health crisis that drives far too many people to commit horrific acts of violence on innocent people, including children.

National security is in decline. Military readiness is down, yet top officials seem more concerned about diversity and inclusion rather than the ability to prevail in war.

The rule of law has been perverted, including for political purposes and self-aggrandizement. We just saw another example of this yesterday.

Even the national fertility rate continues plummeting– an indication of the rising cost of living and social apathy.

The Wall Street Journal recently published a series of polls indicating that most Americans doubt their children will have a better future; pessimism is strong.

They also found that certain values which once defined American culture, including a sense of community, hard work, and civility, are no longer important to the majority of people.

This is all happening at a time when adversaries are circling. And that includes China.

Now, usually whenever I bring up China, there are always people who are quick to assert that China cannot possibly replace the US as the dominant superpower because they have just as many problems.

And it’s true that China has a ton of problems. They have their own debt issues, financial system chaos, and economic problems. They have social challenges, a major demographic crisis, and even a serious issue with childhood obesity.

But no civilization or empire throughout history has ever been problem-free.

Ancient Rome, even during its early republic days, had enormous problems. They had to deal with constant revolts, civil war, the genocidal dictatorship of Sulla, famine, war, plague, and more.

Yet there’s an enormous difference between taking on challenges while you’re on the rise… versus succumbing to them while on the way down.

Rome was able to deal with its challenges and continue its rise to become the dominant superpower. China may be able to do the same.

The US finds itself in a precarious position where they have a mountain of compounding problems… and no ability to even slow them down, let alone solve them.

I’ve written before about what I call the “Four Forces of Decline”, which I define as

1) Forces of History– the inevitable, cyclical nature in the rise and fall of Empire. No empire, no civilization in human history has ever retained the top spot forever, and most tend to experience similar challenges on the way down.

2) Forces of Society– the vicious way in which a society eats itself from within, vanquishing the ability and inclination to solve complex problems.

3) Forces of Economy– the debilitating toll that enormous debts, deficits, and currency inflation take on a nation and its people.

4) Forces of Energy– when energy is cheap and abundant, prosperity reigns. When energy is expensive, prosperity wanes. The relationship couldn’t be more clear.

Today’s podcast puts all of these together, with a particular focus on #4, Forces of Energy.

Part of being the dominant superpower in our modern world means having access to abundant energy. Yet the US government has spent the last few years trying to destroy its energy (oil and gas) industry.

They’ve been pretty successful. The President of the United States hardly misses an opportunity to bash oil companies. Politicians pass new rules and taxes to punish them. The media beats up on them. Investors have pulled funding for them.

So it shouldn’t be a surprise that US oil production, while not in terminal decline, is failing to keep up with growing demand.

Shale oil is especially problematic given that most of the highest quality “tier 1” sites have already been drilled. Many are already in decline.

This is a big deal. Shale oil is the reason why the US achieved near energy independence. With shale in decline, the US will be forced to import a LOT more energy (which, again, is critical for prosperity) from places where they have an increasingly adversarial relationship.

Russian oil is obviously off the table. So is Iranian oil. Saudi Arabia is rapidly becoming cozy with China; in fact the Saudis are now publicly considering to sell their oil in Chinese currency, the renminbi.

This is an enormous threat to the US. Saudi Arabia has been selling oil in dollars for decades; they’ve even had their currency, the riyal, pegged to the US dollar since 1986.

This concept of selling oil in US dollars is known as the petrodollar, and it’s one of the key reasons why the US dollar is the global reserve currency.

Anyone who wants to buy oil needs to own US dollars. And that pretty much includes every country on the planet. So foreigners are forced to stockpile dollars, and by extension, US government bonds… simply because they need dollars to buy oil.

As a result the US government is able to get away with the fiscal equivalent of murder. They can run multi-trillion dollar deficits every year. They can wage expensive wars in foreign lands. They can go into debt to pay people to stay home and NOT work…

… and they’ve always had a bunch of suckers overseas– foreigners who have no choice but to buy US government bonds, simply because oil is priced in US dollars.

But what if Saudi Arabia started selling oil in renminbi?

Most likely a LOT of foreigners would dump at least some of their dollars and start holding renminbi as part of their official reserves.

America’s biggest privilege and benefit– its reserve currency– would vanish, practically overnight.

Suddenly the US government wouldn’t be able to run multi-trillion dollar deficits. It wouldn’t be able to go into debt to pay people to stay home and NOT work.

They’d have to be like almost every other country– act with some fiscal responsibility.

Think about it– if the President of Mexico shook hands with thin air, investors would be rightfully terrified and panic-sell Mexican government bonds. If South Korea ran a multi-trillion dollar deficit, its currency would probably plummet.

Back in September we saw the British pound and UK government bonds practically collapse… and the Prime Minister of one of the world’s largest democratically elected sovereign governments was forced to resign… simply because investors didn’t like her economic revival plan.

These issues are all linked. If the US continues to demonstrate incompetence and weakness… if they continue to subvert and destroy the energy industry… and if Saudi Arabia starts selling oil in renminbi…

… the consequences will be life-changing.

This is one of the biggest stories of our lives. It’s easy to miss because it’s playing out over a period of years. It gets lost in the day-to-day noise and the crisis du jour.

But rest assured this is happening in front of our very eyes; it’s a slow motion crash that’s already started.

The outcome isn’t inevitable yet. But nothing about these people’s actions demonstrate that they have the slightest clue what’s going on.

Join me in today’s podcast as we dive further into this… and I outline my “51st state” theory– a ‘solution’ that I wouldn’t be surprised to see in the near future.

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Today we're going to go back in time to September 24, 1599, to a place called Founders Hall, which at the time was located on Lothbury Road in the city of London. It had long time later burned down and they rebuilt it on, I believe it's on Cloth Fair Road today. But back in the late 15 hundreds, it was on Lothbury Road. That's in London City, basically very close to where the bank of England is today. If you're familiar with London, it's between Morgate and Bank Station.  

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This was, at the time, the headquarters of one of the Guilds in London. Now, Guilds were like unions in the medieval days. You think about all the people that were in a particular industry, leather makers or haberdashers or these people that would all the craftsmen, the artisans, they would get together and they would essentially unionize. They were all more or less self employed professionals, but they would get together and they would form these unions. They called them Guilds and the Guilds and the Guild leadership would go and negotiate with the city government.  

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And in exchange, the city government would essentially award the Guild a monopoly. And they would say, only people from the leather makers guild are allowed to sell leather goods in London. So if you were a leather worker but you weren't part of the Guild, basically you were out of a job. You couldn't make a living for yourself unless you joined the Guilds. The Guilds were very heavy handed.  

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They had a lot of political power, again, very much like unions today. And they would charge dues to all of their members. And the people that were at the Guild bosses, they would take those dues and a lot of them would enrich themselves. A lot of the Guilds would buy these very, very nice properties, build these very swanky places for the Guild bosses. And founders.  

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Hall was one of those. Founders hall was the headquarters of a guild of basically guys that were brass workers. They would make brass candlesticks and brass buckles and all these things. That's what Founders Hall was. And like a lot of these guild headquarters, founders hall was really swanky.  

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And we know this because their own records actually stayed, that the Guilds kept good records. And the records for Founders Hall in that guild show that they spent lavishly on. They built a penthouse in the inside of the Guild headquarters. They spent on artwork and furniture and all these really nice things that people would want in a nice place like chimneys and ovens and so forth to keep it warm. And in order to generate some positive cash flow on this investment, they used to rent it out from time to time for weddings and other private events.  

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And that's what was going on on September 20, 499. It was a private event. It was organized by a guy named Thomas Smyth. Smyth was an aristocrat, a very prominent guy. He'd made a lot of money, had been in and out of different government offices.  

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He'd been customs auditor at a certain point, all these different things. And Smyth invited a whole lot of people from all walks of life. If you had sort of walked into Founders Hall on September 24, 1599, and just looked around, you would have seen the mayor of London, right, the lord mayor of London, very prominent guy. You would have seen some of the richest nobles of the heir, some of the richest aristocrats. You would have seen merchants, people that had become very successful, not necessarily aristocrats, but people that had come up on their own, maybe certainly born into good families, but people had made a fortune in foreign trade on their own.  

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You would have seen pirates. Pirates were there. They were technically called privateers, but they were pirates. Guys that, according to the records, had sort of politely shoved their daggers into their pants so as not to offend everybody else that was there. But there were pirates that were there alongside the mayor, alongside these merchants.  

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There were also some of these artisans in Crescent. There were brass workers and leather workers and haberdashers and drapers and grocers and all these guys that were there alongside veterans and sailors from foreign conflicts. There were explorers who were there. There were travelers and adventurers. People this used to be a vocation to be an adventurer.  

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People would grow up and become adventurers where they would travel the world and do things. One of the guys that was in attendance was William Baffin, who's the namesake, if you know your geography, the namesake of Baffin Bay, which is the large body water between Canada and Greenland, that guy was there. And to top it all off, thomas Smyth hired the services of this sort of famous writer. His name was Richard Hacklett, who's a nonfiction writer, had been published extensively, had works on international travel and exploration and adventuring, basically. And Hacklett was there to sort of act as the group secretary to keep the minutes of the meeting, because Smyth had a feeling that what they were doing was historic.  

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And he wanted, basically hired this, like, best selling nonfiction writer to keep the minutes, to make it exciting so that people could understand. So again, just imagine walking into this very swanky, lavish place, opening the doors and seeing everybody around this big, beautiful wooden table, and you got the mayor, you've got pirates, you've got blue collar workers, you got this best selling writer, you've got William Baffin. What are these people doing here, right? What is such a bizarre group of people doing in the headquarters of the Brass Workers Guild? What is going on here?  

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Well, you got to remember, 1599 was sort of peak Elizabethan era. Shakespeare was at the top of his game. He had released Romeo and Juliet a couple of years prior. He was, at this point, probably working on Hamlet and so forth. And England in general was on an upswing.  

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Remember, if you think about where England had been centuries before, I mean, England had basically been an almost perpetual state of conflict and turmoil for a couple of hundred years. Go back to the 1300s. What happened then? They had the 100 Years War against France, which technically lasted for more than 100 years, during which time, by the way, the bubonic plague broke out, which was devastating loss of human life. Almost as soon as the 100 Years War was over, that gave rise to the War of Roses.  

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The War of the Roses, which was basically a civil war, which lasted into the mid to late 14 hundreds, lasted for decades. Right. Most of the 1500s up to that point had been consumed by internal rebellion, conflict, persecution, genocide, over religion, right? So you think about from the 1300s, basically, all the way to the, you know, well into the 15 hundreds, just conflict, conflict, conflict. Remember Henry VIII in the 15 hundreds broke away from the Catholic Church and he had a lot of people in England said, hell no, we're not following you.  

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We're good, loyal Catholics. And he had a lot of people say, yeah, sure, we'll be Anglican. We'll buy your new religion. That's fine. And that created a tremendous amount of conflict.  

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And you had laws that were passed and rebellions and literally murder and genocide that was taking place over all this. And on top of everything else, the English economy. Suddenly they were cut off from the rest of Europe. Suddenly people in Europe saying, you're not Catholic anymore. We can't do business with you.  

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The Pope's going to excommunicate us if we even talk to you. And you had some powers like Spain. Spain was the big dominant power at the time, and the Spanish were King of spain was a guy, Phil II. Phil II was a fanatic. He was a Catholic fanatic, and it was his life's mission to invade England and make England Catholic again.  

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And so this was all the stuff. Their economy was in turmoil, their society was in turmoil. They're fending off threats of invasion, and now you have the reign of Elizabeth. And Queen Elizabeth was a major turning point in all this turmoil. She came to power, and one of the first things she did relatively early on in her reign was to just sort of settle the religious dispute.  

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And she told everybody, said, look, just put down the pitchforks, people, and let's just everybody relax. Everybody chill out. You're going to believe what you're going to believe, he's going to believe what he's going to leave and let's just all get along. She took away the heresy laws and just basically had everybody bury the hatchet, and it settled the conflict for a while. She said, let's just stop killing each other already and focus on the fact that the Spanish Armada is coming and let's just prioritize people and so she settled this.  

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And there was a sort of temporary respite in these religious disputes and conflict. And then, of course, quite famously, in 1588, england had successfully fended off the Spanish Armada. The Spanish Armada came, and that's a whole, actually ridiculous story that we need to talk about some other time. Just a classic government bungling situation. But in 1588, England did defeat the Spanish Armada, and they also figured out ways to grow the economy.  

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England was going at it alone again. They'd been cut off from Europe due to this religious conflict, due to these issues, and they had to create new means of trade and transportation. It helped quite a bit that there are people like Francis Drake that had successfully circumnavigated the globe and figured out new trade routes and really arousing a lot of new possibilities. And quite fortunately for England at this time, in the late 15 hundreds, france was embroiled in its own religious civil wars. Italy had been impoverished by a series of wars between the Habsburgs and the French as well.  

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And so the Spanish were reeling from their losses. The French were busy. The Italians had kind of been vanquished in England. They sort of looked around a certain point and said, hey, we're doing okay. I think the worst is over.  

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We're on the rise. We're through this, and let's see what we can do. And so these guys that gathered in Founders Hall in September 1599, they knew this. They knew that England was on the rise. They were good, loyal Englishmen, english subjects to the Queen.  

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And they looked around and they saw what the Dutch were doing. And the Dutch were incredible business people. The Dutch were sophisticated. They had essentially created a brand new financial system and things that people never thought were possible before. I mean, the Dutch were really, really impressive.  

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And the Dutch had a stunning level of success in the spice trade. And they had set up a company and were doing these things in the spice trade. And the funny thing is, in many respects, the Dutch were going around the world and they were trading on their own, and they were using English sailors and in some respects, English ships. And so the English, these guys gathered in Founders Hall and they looked at the Dutch, they said, look at how successful these guys are. We could do that too.  

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They're using English sailors, they're using English ships. Why can't we do that? We could do that. Why should the Dutch have all the success? And of course, the big deal at the time was the spice trade.  

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We might think it's silly. Who cares about nutmeg? I mean, why is that such a big deal? But in many respects, it always had been right? If you can go back thousands of years, you can go back to ancient Mesopotamia.  

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Spices were always a big deal in the early fifth century. It's a great story. From the visigoths. The Visigoths came down to sack Rome, and the Romans paid a very hefty ransom to ward off the Visigoths. They just, please don't destroy our city.  

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And part of that ransom was £3000 of peppercorn, right? So this was spices were always a big deal. There was actually a time I mentioned nutmeg earlier, during the Black Death in the 13 hundreds, nutmeg literally became worth its weight in gold simply because there was this rumor going around that if you wore an amulet of nutmeg, that you would be able to ward off the infection of the Black Death. It was snake oil. But nutmeg became incredibly valuable.  

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So we can kind of look at and say, oh, my God, these people are so silly. But it's no sillier than our modern obsession with coffee, right, which is one of the most widely traded commodities in the world. The coffee trade is enormous. It's global. So many countries in the world are trading in coffee, and there may be a certain .1 thousand years from now where people don't drink coffee anymore.  

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And people look back and go, My God, how could those people have been so obsessed with coffee? But we are, and we accept it in the same way. Spice was a really big deal. It was the coffee, basically of the day. And at the time, really, for most of history up to that point, spices and the spice trade basically depended on traders, arabian and North African traders who came along the Silk Road.  

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They got spices from Asia or from Africa, and these merchants, they would charge outrageous markups, crazy markups, and they're making a killing off of it. But especially at the time, in the 15 hundreds, the Europeans couldn't go and do it themselves. They couldn't go over land along the Silk Road themselves, simply because the Ottoman Empire had taken Constantinople. The Ottoman Empire effectively blocked the Silk Road. The Ottoman Empire, in the 14 hundreds, took Constantinople, made it their headquarters, and it basically sat at the crossroads of the Silk Road.  

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And especially some of these sea trade routes, the Black Sea and the Mediterranean made it really, really difficult because the Ottoman Sultans, they were Muslims, and they charged exorbitant taxes to non Muslims and to foreigners. And so if you're an Englishman coming and you want to go across the Silk Road, forget it. It's going to be so expensive because the Ottoman Empire is going to charge you out the nose for this stuff. And so they start looking around and say, okay, what can we do? How do we cut out these middlemen merchants that are coming and charging us these crazy markups?  

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And ever since, you had people like Francis Drake, Vasco de Gama, other explorers who had developed new sea routes, they had discovered, like, oh, my God, we could sail around Africa, we could sail around these different places and go to the straits. We could go to asia. We go to Indonesia, some of these places today where you could get these things. Europeans started to realize it was actually possible to bypass the Silk Road. They could go directly to Asia, they could buy their spices directly from the producers.  

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And that's what the Dutch had started doing. And again, the Dutch were killing it. They were absolutely killing it. So we had these proud Englishmen gathered in Founders Hall in 1599. They said, we could do that too.  

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We can do what the Dutch are doing. And so they reached into their pockets and they agreed to invest a sum of money and form their own venture. And the concept behind it, which they wrote in their books, it said, quote, to voyage to the East Indies and other islands and countries thereabouts there to make trade. That was the whole point of it. And of course, this venture became known to history as the East India Company.  

[00:13:24.260]

Now, the East India Company was structured eventually as what's called a joint stock company. And this was a pretty radical concept at the time. This meant that investors would share in the profits of the company based on their proportion of how much they put in, right? And this was just to us, this is simple. If we start a company and everybody puts in $100,000, as ten people put in $100,000 each, there's a million dollars in capital.  

[00:13:49.660]

Everybody owns 10%, right? That's pretty basic concept for us. But to them, it was revolutionary. They didn't have that before. They didn't have this idea, say, well, wait a minute.  

[00:13:57.760]

I put in money and I get a share based on the proportion of my money to the total amount of money raised, and I can take my share and I can sell it to other people. I could buy other people's shares. That's incredible. That just didn't really it was a very, very new concept, this idea of a company. The word company comes from the Latin campanas, which means to share bread because it's ultimately what they were doing.  

[00:14:18.450]

They were sharing in the fruits of their labors. They were sharing in the prosperity of the business in accordance with how much they put in. There were early forms of this, this idea of a joint stock company going back to ancient China in the Arab world, there was this essentially limited partnership prototype. It spread to Italy in the early Renaissance and late medieval period, in the 11th century. And England had experimented with this before.  

[00:14:44.360]

They had something called the Muskavi Company, which did trade with Russia. So it wasn't entirely unprecedented, but it was still a very new concept. They didn't have corporate law, they didn't have Delaware bankruptcy courts. They didn't have established precedents. They didn't have limited liability.  

[00:14:57.890]

But even still, Smyth, he gets all these people in a room. He's got blue collar workers, best selling author, super wealthy aristocrats, and they all get together and everybody in total raises around £30,000. All these guys reach into their pockets. They put in money that's worth about $10 million today, right? Which is pretty good.  

[00:15:16.390]

You have a meeting and you say, all right, guys, let's go and do this. And they raise $10 million. Now, the next step is they had to go and petition the Queen because they didn't actually have a company. You couldn't just say, we have a company. You had to and get a royal charter, basically from the Queen.  

[00:15:27.750]

That took them over a year. They didn't get that until the following December. But over time, they used that time wisely and they started getting ready for their first expedition and so forth. And it was funny. They had to go out and get some labor.  

[00:15:42.840]

They had to get a ship. And the writings of this, again, the minutes of the meetings, it's actually kind of funny, honestly. They had trouble attracting any talent and labor whatsoever. Most of the people they were getting were all ex cons. They were people that came out of the lunatic asylum at Bedlam.  

[00:15:58.220]

If you think about the word bedlam, that's actually where it comes from, is this lunatic asylum that was called Bedlam. And these are the people that they were getting. I mean, people are saying, well, wait a minute, I got to go overseas in some place that most people never been before and risk life and limb for this society and this thing. I don't even understand what a joint stock company is. I'm not going to do that.  

[00:16:16.940]

So, sure, they were getting they're kind of scraping the bottom of the barrel here. At the same time, they also needed to buy a ship. They had to get a ship and something that fit within their budget. $10 million was a pretty good amount of money, but if you think about it today, you can't buy a big ship for $10 million, something that's going to be some huge cargo ship that's not really going to get it done for you. So they were working within a budget, right?  

[00:16:41.120]

And quite ironically, one of the first ships that they looked at for the first expedition was the Mayflower, which ended up taking the Pilgrims to the New World sometime later. But they ended up passing on the Mayflower. They didn't think it was right for them. They ended up acquiring another, bigger, heavier, sturdier armed ship and they got their royal charter and they set sail on their first expedition. There was just all kinds of problems.  

[00:17:03.270]

There was no wind in the English Channel. They're basically stuck. It was just a comedy of errors. And people weren't really too excited about their prospects for success. And especially at first, they were basically pirates.  

[00:17:15.350]

Again, they had pirates. They get all these ex cons. So rather than sailing all the way to these ports in Indonesia, they came across a Portuguese ship and they said, oh, well, we'll just take what they've got. So these guys are basically pirates at first. And their prospects for success were were quite modest.  

[00:17:33.800]

They had modest success. And it was just little by little by little, those first years, those first decades, really, it just went very, very, very slowly. The Dutch were oh, my God, the Dutch were so much more advanced financially. The Dutch had raised so much more capital. They were so much more sophisticated in their business practices.  

[00:17:49.570]

And again, the Dutch were killing it. And the poor English, they would have these board meetings, and they would realize, this is going to be tougher than we thought. I don't know if we're going to be able to crack the Dutch and their market share. But little by little, they'd established some footholds at Asian ports, and they had, again, limited success, but it was nothing compared to the Dutch and what they wanted it to be. And so finally, at a certain point, the East India Company, the directors began to realize initially, I think there were 1415 directors, something like that.  

[00:18:18.780]

I mean, there's a lot of people for a company, and they began to realize, they say, you know what? Maybe the spice trade has passed its prime. And in a way, especially now, we're in the 16 hundreds, mid 16 hundreds. It's sort of like would be today investing in a company that is just basically selling cars, internal combustion engines, right? You know, at this point, the industry is moving to electric vehicles, you know, the government regulation and maybe even some consumer taste and so forth.  

[00:18:44.690]

People kind of moving towards electric vehicles, and they realized, maybe we're investing in the past here. We're not doing something that's got a terribly bright future. And so they decided to shift their focus away from spices. They said, we're just not going to be able to crack the Dutch. We're not going to be able to crack the Spanish.  

[00:19:00.000]

And so let's get into something different. And they got into textiles. Textiles is an area in which Europe at the time was really quite underdeveloped. Most European countries, they're producing wool and things like that to them. Things like silk were obviously known to them, but not in major quantities.  

[00:19:15.300]

Weren't able to get it in huge quantities. But at the time, the East India Company, they did have some small bases in what was really the textile capital of the world, and that was India. India at the time, this was in the 16 hundreds. I mean, this is Taj Mahal days. India was under the rule of the Mughal Empire, which, along with the Ming dynasty in China, were basically the richest place in the world.  

[00:19:36.390]

Two richest place in the world by far were India and China in the 16 hundreds. I mean, the two of these together was way more than 50% of global GDP. India was almost a quarter of global GDP. England was like 1%. So England was like nothing.  

[00:19:52.160]

And the Mughals in India, they had you could just imagine these guys. They had fine clothes, finer palaces, they had incredible art, food, advanced music, public baths, sporting competitions and culture, strong rule of law. They had a very advanced, very civilized culture. By comparison, these Europeans showed up and the Mughals looked at these kind of weird looking, relatively impoverished, pale skinned people who didn't quite know how to wash themselves properly. They ate this bland, disgusting food and thought them backward and uncivilized and barbaric.  

[00:20:24.560]

And they kind of said, sure, we'll trade with you. Just don't sit at the table with us. You stink and we don't want to be around you. They really thought I mean, the Mughals thought they were really so much higher and more elevated. And in many respects, they were they really were.  

[00:20:36.650]

I mean, by comparison, the Europeans really were far, far, far behind the Indians and the Mughals at this time in history. And they started trade, they started trading with the Mughals, they started bringing textiles. It became very, very successful business for the East India Company. And this is a part where we don't want to get too deep in the details. We could be on and on about this, but it took more than a century.  

[00:21:02.680]

Basically, you get into the 17 hundreds. Now, the East India Company had become a very, very powerful force. They basically had their own army. And this is now nasty stuff. I mean, they're using slave labor, foreign mercenaries, they're bribing locals in India.  

[00:21:16.270]

And this is happening at a time where the Mughal dynasty was in clear decline. They were weakened, they had terrible leadership. I mean, their equivalent of guys who shake hands with thin air, overspending, they had all sorts of internal divisions and power struggles, breakaway republics and so forth. I mean, it was just a really terrible time for the Mughal empire. And simultaneously, there was this long period of very ambitious executives from the East Indian Company that were capitalizing on every opportunity, pitting all these various bickering factions in India against each other and just sort of sitting back and sort of pulling the strings and making conflict happen in India.  

[00:21:53.020]

And they were just capitalizing on all of that and getting wealthier and wealthier and more powerful in India every year. And it essentially resulted in the company basically taking over the entire subcontinent. They took over the entire country. And the East India Company basically became a state masquerading as a corporation within a state. But you had England, which technically ruled over the East India Company.  

[00:22:13.710]

And the East India Company became the rulers of India. And they plundered everything, everything. They just stole everything that there was in India. And remember, I said India. India.  

[00:22:24.450]

At the time, they were just wealthy beyond imagine. This is the Taj Mahal days. Everything is they got gold and jewels and everything everywhere. And there was a top executive from the east India Company. This guy named Robert Clive, who was one of the key figures in leading this India assault and taking over the country.  

[00:22:41.250]

This guy brought so much wealth back to Britain that he's basically hauled in front of Parliament to explain himself. And he told Parliament, he basically said, guys, if you had seen the amount of wealth that I had seen I was there, I saw it. If you had been there and seen it, you would be astonished at how little I took. He told him, he said, I was, quote, astonished at my own moderation. So that's how much wealth there was in India.  

[00:23:05.440]

And these guys basically stole everything, hauled it all back to England and took this country over. And once they did that, frankly, they weren't really very effective as administrators. They were quite effective at plundering, weren't very good at administrating, and it was very early on, and even in company rule, they managed to engineer a famine. It was just devastating for the locals and also almost bankrupted the East India Company. Everything was in the East India county was tied to their agriculture production, the textiles, the value of the land, and it almost bankrupted the company because these guys were so incompetent that they engineered this famine in India.  

[00:23:40.210]

But at the same time, a lot of politicians back in England, people in Parliament, I mean, these guys we think about it, the members of Parliament are all stockholders. They kind of turned a blind eye to all these practices. And bear in mind, this is like an enormous company today, by most estimates, would be way bigger than Apple, probably even bigger than Apple and Amazon combined. I mean, this is just an enormous, enormous business. And these Members of Parliament, they're all stockholders.  

[00:24:04.330]

Sure, they had an incentive to turn a blind eye and even be quite friendly, pass legislation that was in favor of these income, which actually happened when the company almost went bankrupt because they were stupid. The British government stepped in to bail them out. They did all sorts of things, including the Tea Act of 1773, which led to the Boston Tea Party and ended up being one of the direct causes of the American Revolution. This is tied directly to the East India Company. And even the East India Company's bungling and pitiful administration in India is directly linked to the American Revolution.  

[00:24:36.350]

Right? So the larger point in all this is that the company was eventually nationalized. Its holdings became British Crown territory. This is how you end up with British India and so forth. But I wanted to raise this today just simply to demonstrate the story and the historical precedent.  

[00:24:50.180]

It's not isolated, by the way. There's plenty of instances throughout history of foreign countries basically becoming a puppet state through private enterprise. I'll talk about one very briefly again at the end of this. But my point with all this is to say I think. There's a case to be made that this could happen again.  

[00:25:06.320]

And it's just a theory. It's one I mentioned before. I did a podcast actually about this about six months ago, but I wanted to explain it further here because it's so much that's happened over the last six months. If we look at what's happening right now in the United States, this is one of the primary themes of our organization at Sovereign Man is that the US. Is in indisputable decline.  

[00:25:29.150]

And I take no pleasure in saying that, but it's a rational conclusion based on an objective look at the facts. It's extremely difficult to make a case to the contrary, it's extremely difficult to make a rational, fact based case that the US. Is not in decline. And if you look at all these different facets government finances, you look at the national debt is outrageously high, way over 100% of the entire size of the US. Economy.  

[00:25:54.250]

The deficits. The guy that shakes hands with thin air released his budget for next year talking about these guys, three $4 trillion deficits, $5 trillion. It's nothing to them to have multi trillion dollar deficits. It's completely ridiculous. You got the insolvency of Social Security that's pending over the next several years.  

[00:26:13.900]

Medicare's insolvency is coming up very, very soon. Just around the corner. You got the political incompetence, probably best exemplified by this debt ceiling fiasco. You got both sides refusing to negotiate. You've got this thing that everybody knows sort of needs to happen, and neither side is willing to negotiate.  

[00:26:30.560]

Being very public about it, it's just childish. It's so childish. But this is sort of par for the course. Now. You got the mismanagement of the currency.  

[00:26:37.860]

You got a central bank that has no idea what it's doing. Managing to engineer super high inflation, has no clue to go, oh, gee, we kept interest rates at 0% for so long, we conjured trillions of dollars out of thin air. We can't possibly understand why there's inflation. They engineered a bank crisis on top of everything else. Totally mismanaged all this.  

[00:26:59.000]

You look at the basics of the economics recession, declining productivity. You have an entire generation where there's a lack of enthusiasm, even work anymore. Quiet, quitting, all these sorts of things. I mean, on top of that, you got a pitiful state of the education system, especially because of what happened during the pandemic, the massive pandemic gap. You've got teachers now that are basically social activists rather than educators.  

[00:27:22.390]

You've got a terribly unhealthy population. Obesity crisis, drug addiction, mental health crisis. People want to go into schools and go and shoot children now because of mental health in the United States is just so screwed up. Outrageous social divisions, extreme social divisions, people at each other's throats running around with protests. You just can't even go to Brunch anymore without protesters running around getting in your face.  

[00:27:47.510]

You got to put a fist in the air and all these ridiculous things. Crime waves, skyrocketing, murder rates. You've got city councils that go and decriminalize shoplifting demographic issues. They've got a crazy declining birth rate. You've got a perversion in the rule of law, especially for political purposes.  

[00:28:05.070]

We just saw this now, yesterday, go and indict a former president of the United States over something that state and federal prosecutors didn't want to touch with a ten foot pole because they knew they didn't have a case. But now, all of a sudden, you got a local prosecutor who's going to go some guy trying to make a name for himself. So let's go indict former president that'll get my name in the paper. Obvious declines in national security, military readiness. You've got adversaries now that are unintimidated by the United States anymore, that engage in cyber warfare within punity that go and basically kidnap US citizens with impunity.  

[00:28:35.610]

And all these things barely scratch the surface of the issues that we're talking about, leading to, to me, an undoubtable conclusion that the US. Is in decline. Again, I take no pleasure in that, but it is what it is. And I have spoken before in these podcasts about the four forces of decline things. I talk about the forces of history.  

[00:28:58.480]

This is the inevitable rise and fall of empire that we saw with the Romans and we saw with the Ottomans and we saw with the French and we saw with the Mesopotamia. I mean, this is sumerians. There's so many of these examples about the rise and fall of empire in history. The inevitability of the cyclicality of this rise and fall. These are the forces of history that every society succumbs to.  

[00:29:17.480]

We have the forces of economy. Again, the things that the debts and the deficits and the inflation, the currency and the debasement, all these things that we also see throughout history, over and over and over again, the forces of society where a society eats itself from within. They don't have any social cohesion, they don't have shared values anymore. These are forces of decline, forces of history, forces of society, forces of economy. But I said there are four forces of decline.  

[00:29:40.870]

The fourth one is energy. Energy is crucial to everything because without energy, you have no life, you have no economy, you have no military, you have no government, you have nothing without energy. And more importantly, there is a critical and obvious link between prosperity, individual and national prosperity, and the abundance and efficiency of energy. When energy is expensive, it's scarce. It's being inefficiently produced, prosperity wanes.  

[00:30:08.760]

When you have abundant energy, when you have cheap energy, prosperity. Soars there is a crystal clear relationship in this. And this has been the case. We can see this literally for thousands of years. Human civilization barely moved because they didn't have a good, cheap, efficient source of energy.  

[00:30:23.000]

Energy was basically very expensive. And this is why, if you look at day to day life in Spain, in, let's say the 1100s wasn't really so much different than day to day life in ancient Hispania in the days of the Romans, more than 1000 years before that right. And simply because they didn't have a cheap and abundant source of energy, that's what really made the difference. What made the difference was now all of a sudden you had this surge in human prosperity in the 17 hundreds because you had the Industrial Revolution. People developed machines that made the world so much more productive.  

[00:30:58.570]

And you had the availability of cheap and abundant energy to power those machines very cheaply. They discovered coal. They discovered eventually oil and natural gas and these sorts of things. Oh my God, we have machines and we could power them. And both of these went hand in hand.  

[00:31:15.010]

You could have the best, most productive machine in the world. But if energy is super expensive, you're not going to be able to afford to operate it. So you're not going to get the benefits out of it. And of course, you could have really great energy, but if you don't have anything to use the energy on, it's not going to matter. And so the two of those go hand in hand.  

[00:31:28.890]

They had the machinery in the Industrial Revolution and they had the energy to power it. And we have been as, as a species, enjoying the benefits of these cheap energy sources ever since. Oil is one of those cheap energy sources. And the US has been a major oil producer pretty much since oil became a thing. Now, oil production in the US began dwindling in the 1970s.  

[00:31:50.130]

It peaked at around 10 million barrels per day and had basically been steadily declining for decades. By the early 2000s, it was less than 5 million barrels per day. And bear in mind, from the 1970s to the early 2000s, demand had skyrocketed. You had more people in the United States demanding more energy per capita. You also had China and India and all these rapidly developing countries that were demanding oil.  

[00:32:12.970]

A lot of you guys probably remember oil popped in nearly $150 a barrel in 2007. It got to $147 a barrel. And there was a lot of fear. People were predicting $300 oil, $500 oil. It was kind of terrifying.  

[00:32:26.450]

But it was around this time that oil producers began developing these shale fields. Shale, of course, is a rock. You've got unconventional oil that's locked in these rocks and they had long before invented and then perfected the technology to extract and refine oil from these shale fields. And the shale fields brought so much oil production online in the United States, it was the equivalent of an entire Saudi Arabia's worth of oil production. Not even including gas, just the oil.  

[00:32:56.910]

It was like an entire Saudi Arabia being discovered in the United States from these shale fields. So this is the thing that brought oil production in the United States down from this very dwindling 5 million barrels today per day to a point where basically the US. Was practically energy independent. In fact, the Energy Department, at a certain point of release, press releases saying, oh, our production is exceeding net imports. And it was a really, really big deal for the US.  

[00:33:22.820]

And obviously one of the key factors that drove oil prices down so low for so many years in the sort of mid 20 teens, that it was all based on this shale production because there's so much shale oil that was being produced. But now things are changing. Things are changing rather significantly. A lot of that shale oil production seems to be peaking. Many of the highest quality wells in these shale fields in the Permian Basin, for example, these are mature, their outputs dwindling.  

[00:33:50.980]

And this is happening at a time when the entire oil and gas sector is facing this dearth of capital. Nobody wants to invest in this stuff anymore. And this is deliberate. This is deliberate. Oil companies require capital to produce more, right?  

[00:34:03.060]

Duh it takes money. It takes a lot of time and money to go out and find producing fields, to develop wells and produce more oil. It takes time and money to do that. So the industry needs the money. They need the capital to be able to do that.  

[00:34:16.630]

But the industry is now being starved of capital. They've got all these climate warriors who think that the industry is evil. It needs to be vanquished. And so you've got private equity funds and ETFs and banks, et cetera. They're all pulling their capital away.  

[00:34:29.190]

You've got people like Larry Fink, the crusader in chief, who goes around he runs almost, what, $10 trillion financial institution, and he's going around basically threatens banks and other institutions, say, if you give money to the oil companies, we're going to pull our money away from you. We're going to torpedo your stock price. Basically threatens everybody practically at gunpoint to not invest in oil and gas companies. Meanwhile, you've got the President of the United States, who dumps on the oil industry every chance he gets. He gets in front of a camera and he starts, he starts talking smack about ExxonMobil and all these companies, they're all evil.  

[00:35:01.860]

Wow, what a surprise that oil production seems to be dwindling. They've got limited capital. They get zero support from the government. They get constant interference, negative interference, new taxes, new permits, regulations, all these requirements. And on top of all that, even private industry isn't investing.  

[00:35:18.320]

So you've got the stock prices of these oil companies that trade at ridiculously low valuations because nobody wants to own them anymore. Nobody wants to own shares in some profitable oil company because Greta Thunberg doesn't like it. It's so completely ridiculous. But it actually gets worse because, like I said earlier, most of these Tier One locations and a lot of the key shale areas, places like the Permian Basin, they've already been drilled, they're already sort of peak, they're mature. And so they're dwindling in their production, dwindling in the numbers.  

[00:35:48.750]

And what you're left with essentially is a smaller number of lower quality sites where you can't get as much oil out of them. And so this is happening at a time where there's limited capital, negative criticism, zero support, total antagonism from climate fanatics. It makes it really, really hard for oil companies to produce at a time when they absolutely need to. This isn't an issue of peak oil, really, so much as potentially peak US shale. And this is something that a lot of the shale CEOs really echo this sentiment.  

[00:36:17.770]

In fact, I would encourage you to read. There's something called the quarterly energy survey. It's released by the Dallas Federal Reserve Bank. So this is the Federal Reserve Bank of Dallas Quarterly energy survey. And they basically interview all these different CEOs in the oil and gas sector, a lot of shale guys that are there.  

[00:36:36.750]

And honestly, some of the comments are hilarious spot on. I mean, there was one that was actually just released a couple of days ago, earlier this week, and one of the CEOs said, quote, the biggest threat to our business is the federal government. Or they say the biggest industry we have in our industry is the federal government, which advocates for our extinction. One of the things they talk about is their inability to bring on new talent. In a way, it's sort of like the East India Company, where all they were getting was lunatics and ex cons.  

[00:37:01.220]

And one of the CEOs said that, they said that the young talent from college, they've been brainwashed into believing that our industry is bad and evil and that our industry is disappearing and there's no future. And they also talk about the fact that shale producers have drilled most of their tier one quality, right? So this is a really big deal, because again, we're talking about energy is one of the most important things you can have in your economy without energy. And there's a very clear link between cheap and abundant energy and prosperity. So if you have energy that isn't efficient, isn't abundant, or is expensive, that's going to seriously damage your potential prosperity.  

[00:37:41.190]

That's what's happening right now. And it's deliberate because you've got politicians at the highest level that go and dump all over the energy companies every opportunity they get. You've got these big financial institutions that are masquerading as climate warriors going around trying to torpedo the energy companies and their prospects, starving them of capital. At the same time, you've got most of these wells that have been producing for 15 years or more that now all of a sudden they're starting to dry up. They're not producing in the way that they used to.  

[00:38:10.290]

So you've got Dwindling production at a time when demand is soaring. And this is happening at a time where you've got really serious geopolitical consequences. And that's kind of the point of all this that I want to get to now. This is all happening in an age where inflation is everywhere. Central bankers approved, they don't have a clue what they're doing.  

[00:38:28.450]

Conflict is everywhere. And paper currency can no longer be viewed as a measure of national wealth. China is sitting on trillions of dollars of US dollars, us government bonds, US dollar assets. They are not sitting there admiring their mountains of US dollars, really trying to figure out how do we get rid of this stuff? And they're doing that, and they've been doing this for years.  

[00:38:49.610]

They've been trading their US dollars for real assets. And again, they've been doing this for years. They've been spending US dollars on their Belt and Road initiative, which is basically like the Chinese version of the Marshall Plan, going and sprinkling dollars around Africa and Latin America and East Asia. They've been buying up massive quantities of agricultural property. And energy security is another one of these key pillars.  

[00:39:10.010]

Energy. These people understand this. They understand that controlling energy, controlling the energy trade is sort of like the spice trade was hundreds of years ago or the textile trade hundreds of years ago. It's a key requirement in being the global superpower. And this is a major problem for the US.  

[00:39:24.500]

Because the US went from being essentially energy independent to very quickly going to have to rely on a significant amount of imports once again, because they've got dwindling energy production. But this is a problem, right, because Russia is off the table, iran's off the table. Iran is one of the largest oil reserves in the world, but they won't trade with Iran, right? Everybody else is trading with Iran, but the US is not going to trade with Iran for its oil. Russia is obviously off the table.  

[00:39:48.820]

They got a lot of oil in Russia, but that's off the table. Russian oil, they won't take it. And you got Saudi Arabia. But Saudi Arabia is cozying up to the Chinese. And you can see this now.  

[00:39:57.550]

China was just brokered this peace deal between Saudi Arabia and Iran. Of course they're going around the world. They were in Honduras recently, got the Hondurans to flip from supporting Taiwan. Now they're very much, the Honduras is very much in Camp China. And so if you think about this scenario where you've got a government administration that's gone out of its way to destroy the oil companies, you've got an entire financial industry that's gone out of its way to destroy the oil companies, you got a media empire has gone out of their way to destroy the oil companies.  

[00:40:29.110]

Now all of a sudden, wow, what a surprise, oil company and oil production is dwindling in the United States at a time when the Chinese are going around essentially securing the supply for themselves, putting themselves in position to mop up all the supply from Saudi Arabia from Russia, from Iran. Where does that leave the US? It leaves the US in a much, much weaker position where it's dependent now not even on Saudi Arabia, but on China in order to get its energy. That's a big deal. The bigger problem with all this, as I pointed out before, is the US.  

[00:40:58.600]

Dollar. The US. Dollar at present is the global reserve currency. I've talked about this a lot of times. The reserve currency is the thing that everybody uses it.  

[00:41:06.790]

Central banks. Hold us. Dollars. Foreign governments hold us. Dollars.  

[00:41:10.090]

Foreign financial institutions, foreign banks hold US. Dollars. That's why China has trillions of us. Dollars. China is no friend to the United States, but they own trillions and trillions of US.  

[00:41:19.290]

Dollar and us. Dollar denominated assets. It's because the United States dollar is the world's reserve currency. It means that when foreign countries engage in trade with one another, they close that transaction, settle it in US. Dollars.  

[00:41:34.050]

Right? And this is a huge benefit for the United States. It's an enormous benefit for the United States because it means that the American government always has this willing pool of suckers from overseas to buy and accept their US. Dollars, to buy their pitiful US government bonds. And it puts the US financial system at the center of the universe.  

[00:41:51.900]

It means that all these Wall Street banks who essentially control the flow of US. Dollars, every central bank in the world, sorry, every commercial bank in the world, foreign institutions, big foreign corporations, they all have to have accounts in these big Wall Street banks to hold their US. Dollars. And because of this, essentially allows the United States, it keeps these big Wall Street banks flush with deposits. It keeps the US government in a position where they can get away with outrageous acts of fiscal financial responsibility.  

[00:42:20.240]

They can run multi trillion dollar deficits. They can have a 31 and a half trillion dollar national debt. They can go into debt to pay people to stay home and not work. They can get away with this ridiculous political incompetence and high inflation, all these things because foreigners have to keep buying US. Government bonds.  

[00:42:36.860]

They have to keep holding dollars. And US. Government bonds are the easiest and most liquid way to hold US. Dollars. But people are really starting to get sick of it.  

[00:42:48.150]

I mean, really, really sick of it. I talked about this last week, and the banking crisis is just the most recent. It's another brick in the wall of foreigners who are really starting to rethink the doll. They're looking this to go, okay, let's see. Gee, we've been dealing with your stupid inflation, your central bankers that have no idea what they're doing.  

[00:43:06.590]

And by the way, foreigners, these are the guys that bought US. Government bonds in 2000 and 22,021. They bought these bonds at 0% yields. You know, they're buying ten year charges at like eight basis points so that the federal government could pay people to stay home. And these foreigners, the ones that are footing the bill for this, they're buying these bonds.  

[00:43:26.710]

They're suffering basically 0% interest rates. They got paid eight basis points. They had to deal with inflation. They've lost a ton of money because of the decline in the value of the US dollar. Now they've lost a ton of money because the value of their bonds has gone down.  

[00:43:38.980]

Now the banks are going up in the US and they're going to look at this and go, jesus Christ, guys, just I'm sick of it. I'm so sick of it. Can you guys just get your shit together for once, please? But all this stuff and again, this barely scratches the surface of the issues that foreigners have with the US dollar. The US.  

[00:43:58.320]

Financial system. I've been talking about this for a long time. I said back in, I guess it was 2013, this is ten years ago, the US government passed a law called Fatka, the Foreign Account Tax Compliance Act. And this is something they basically put a gun to the heads of every bank in the world. Foreign banks, even banks that have no jurisdiction in the United States, they don't have a branch in the United States.  

[00:44:21.400]

They have no business in the United States. But all these foreign banks and institutions basically had a gun held to their head and said, you will comply with this US law or else we're going to excommunicate you from the US financial system. You won't be able to have dollars anymore. You won't be able to use US dollars. And of course, that's basically a death sentence for a bank, a bank overseas.  

[00:44:40.580]

If they don't have access to US dollars, they're finished because everybody needs to have access to the reserve currency. And so the US basically weaponized the dollar. They weaponized the financial system. They've done this so many times. And I wrote about this back then.  

[00:44:53.250]

I said this is just, again, another brick in the wall against the US dollar. It's going to cause people to have really bad feelings about the dollar, really bad feelings about the US government. It's going to make them look around, look for options. People have been looking for options for ten years at least. And now they've got the inflation, the low interest rates, the decline in value of the dollar.  

[00:45:11.370]

It's ridiculous. Debts and deficits. And now they've lost a ton of money. Now they got the banking crisis to contend with. They're sick of it.  

[00:45:17.890]

They are so sick of it. And they're like, why do we keep loaning you guys money? And now you can't even get your act together with the debt ceiling, right? I mean, now you're putting yourself in a position where you're going to default on all this debt that's owed to foreigners, and you can't even get it together to extend the debt ceiling. Why would anybody continue to invest in these complete idiots that are running the US government.  

[00:45:38.640]

You got a guy that shakes hands with thin air, for Christ's sake. That's not going to give anybody confidence. So the thing that's been a huge benefit to maintaining the US dollar and its status as the global reserve currency has been oil. And this is commonly referred to as the petrodollar. Oil is a major pillar in holding up the US dollar status.  

[00:45:56.460]

And that's really important because oil is really the most widely traded commodity in the world, and most of these oil contracts around the world are in US dollars. Saudi Arabia sells oil in US dollars. Saudi Arabia pegs its currency, the real, to the US dollar. It's done so since 1986, right? So this is something else, a really important thing that forces people to hold US dollars.  

[00:46:17.020]

Because if you want oil, you got to buy it in US dollars means you got to hold US dollars. And if you're going to hold US dollars, you got to go and buy these people's stupid US government debt, which you don't want to hold. You got to hold your nose to buy these US government bonds. But you need the bonds because you need dollars. And you need dollars to buy oil because oil is denominated in US dollars thanks to Saudi Arabia.  

[00:46:38.970]

But what if Saudi Arabia started selling oil in another currency? What if Saudi Arabia started selling oil in renminbi in Chinese currency? Right? Suddenly, all of a sudden, you got these foreign institutions go, oh my God, now we don't have to hold dollars anymore. Now we have an excuse.  

[00:46:52.460]

We can hold another currency, now we can hold renminbi. And a lot of them want to. They're desperate to because they're so sick of these US government shenanigans, the fiscal irresponsibility, just all the absurdities. They're so sick of it. But they just don't have an option.  

[00:47:07.750]

China has been rapidly building that option. China has been building an alternative to the US financial system, this international payment system, and now they're working very closely with Saudi Arabia. They've already visited the Saudis, they said last year they're working with the Saudis on making a renminbi denominated oil contract for Saudi to sell oil in Renminbi. They've been working on this even very recently. In fact, just earlier this week, I think, on Tuesday, the very first LNG trade in Renminbi, this is the liquefied natural gas took place on Tuesday between China's national oil company and France's total.  

[00:47:43.250]

So this is happening. This is happening. This is not some wild crazy. If you had said in 1995 that the Chinese are going to saudi Arabia is going to be selling oil in Renminbi, people thought that was ridiculous. But today it's so obvious.  

[00:47:59.300]

It's so obvious. China is all over the place, all over the world, making peace with Saudi and Iran and pretending to have a peace deal and Russia and Ukraine, all these different things and really improving their international stature. This is happening. I mean, this is already in the works. And you've got to acknowledge that.  

[00:48:16.830]

Sure, it's possible it doesn't happen, but it's very, very likely because we know it's already in the works. And sort of the obvious sign I talk about the canary in the coal mine, I've thought about this. I mean, the obvious sign that is sort of game over for the US. This is way past canary in the coal mine. The obvious sign that is game over would be the US.  

[00:48:34.330]

Having to buy oil from Saudi Arabia in Renmin. B right. That's the sign. When you see that headline that some US refiner or whatever has to buy oil from Saudi Arabia denominated in Renminbi, that's when you go, okay, that's done. Game over.  

[00:48:50.970]

And every time I talk about this, every time I raise up China, there's always people go, yeah, China has its problems. China has few problems. Yes, China has huge problems. China has huge demographic problems. China has huge debt problems.  

[00:49:02.500]

China has social stability problems. China has all sorts of problems. The difference is that China's problems are on the way up, not on the way down. No place, no country, no empire in history has ever been problem free. The Romans, even in their sort of idyllic republic days, were never sitting around going, man, we got no problems.  

[00:49:22.420]

Of course they had problems. They had so many problems. And they had to deal with in the course of rising into empire, and they had to deal with Sullen, they had to deal with internal rebellions. They had to do all sorts of things foreign invasions, all sorts of stuff. Rome always had problems.  

[00:49:36.030]

The issue is that they had problems on the way up and they had problems on the way down. When you have problems on the way up, you can deal with those problems. When you have problems on the way down, they're pretty much impossible to deal with. France had problems on the way up in the days of Louis XIV, going back to the late 16 hundreds. They also had problems on the way down.  

[00:49:53.840]

They were able to deal with the problems on the way up. They couldn't deal with the problems on the way down. This has been the same thing in the United States. Lots of problems on the way up, lots of problems on the way down. They're harder and harder and harder to deal with when you're on the way down.  

[00:50:05.250]

And that's really the issue here. And so if you look at this from a big picture perspective, again, depending on who's in charge, you got people right now that don't seem to have a clue about any of this. They have no clue that they're at risk of losing the petrodollar status. Which means in that case, the days are numbered for the US dollar as the global reserve currency, which is going to be catastrophic, catastrophic for the United States. Particularly for the US.  

[00:50:30.630]

Government. I don't think the people in charge right now have any clue that that's happening. I don't think the White House knows. I don't think Congress knows. I don't think the Central Bank gets it.  

[00:50:38.970]

But depending on who's in charge, at some point, there may be some movement to prevent this. There may be people that wake up and go, oh my God, we're about to destroy the golden egg here. And what are we going to do about it? Well, this is what I call the 51 1st state theory. And I have discussed this before.  

[00:50:53.430]

Again, I did a podcast about this about six months ago. When I call the 51st state, I'm not talking about Washington, DC. I'm not talking about Puerto Rico. I'm talking about a place that's not too far from the United States that has far more oil than Saudi Arabia. Frankly, I don't think anybody can trust the numbers that Saudi Arabia says.  

[00:51:10.010]

These are our oil reserves. Yeah, okay, whatever, buddy. I don't think anybody can really believe that credibly but even if we believe the numbers, there's a place pretty close to the US. That has way more oil than Saudi Arabia. But at the moment, they barely produce anything because they're so just backward and underdeveloped.  

[00:51:25.490]

In a way, this is like India and the Mughal Empire that was once this incredibly wealthy, well ordered, civilized place that just plunged into chaos and revolution. And of course, I'm talking about Venezuela. Venezuela has far and away the largest oil reserves in the world. And again, this is just a theory. That's why I called the 51st state theory.  

[00:51:46.140]

And I'm not advocating for this, but if you view the world through this sort of Dick Cheney, Henry Kissinger, machiavellian type, real politique, depending on who's in charge, people that get this, they figure out a way to make a grab for Venezuela. Amid all of this crisis that Venezuela is having, this revolution and turmoil and hyperinflation, all these things, you figure out how to make a grab for it. Now, they tried this before, obviously, during the Iraq invasion, where they just went and invaded. They invented reasons. I doubt anybody's going to believe that Venezuela has weapons of mass destruction or any of these sorts of things.  

[00:52:18.940]

There will be no coalition of the willing, so they can't just all outgo and do an armed invasion. And I've had six months to think about this. I said this before. I said, oh, maybe there'll be an invasion of Venezuela. But if you look at it through the text of the East India Company, in theory, you could actually do that with a private company.  

[00:52:34.210]

You have an East India Company type to go and basically commandeer the oil and take over. This is obviously not without precedent. I'm not even talking about the East India Company. The US did this well over 100 years ago now. They did this with Panama and the reason why is because the French were the first ones to come in.  

[00:52:53.050]

And they surveyed this and they said, oh, wow, this is a really skinny isthmus here. We could build a canal, and this will be great for global trade. And they tried and tried and tried, and the French failed. Not because they were bad engineers, they were wonderful engineers. They just weren't able to get the political support because the time Panama was part of what was known as grand Colombia, colombia had broken away from Spain, and Panama was basically a province within Colombia, and they couldn't get the Colombian government to go along with it.  

[00:53:18.820]

So what happened? Well, the Americans essentially sort of buy the rights to the canal, and the big banks are desperate to finance this. They look at this and go, wow, this is a great deal for us. We could go in, we could finance the canal, and we'll make an enormous amount of money from this, and this will just be great. And so this is, again, not a conspiracy theory.  

[00:53:35.900]

There's a couple of great books about this. J. P. Morgan, the guy and the bank, essentially engineered a revolution in Panama to break away from Colombia. They financed the revolution.  

[00:53:45.420]

They went and basically installed a guide to be the new president. And it was sort of like with the Afghanistan invasion back in 2001. The first thing that this new government of Panama does is they go and award the canal rights to the Americans and JP. Morgan. All these big banks come in and they finance the Panama Canal.  

[00:54:04.440]

And lo and behold, Panama became this independent place. The canal gets built, and the new government of Panama awards this canal zone to the United States. And for years, the Panama Canal was sovereign us. Territory. So this is not without precedent, even within US history.  

[00:54:19.560]

There's so many examples of this throughout history. And I think potentially Venezuela could be a similar approach. I think anybody that's paying attention is going to see this is a big deal. US oil production is dwindling, and there are some signs in the US. There are some chances.  

[00:54:35.550]

You've got green river shale and you've got other places you could go for. But Venezuela is this obvious target. You've got so much oil there, again, more than anywhere else in the world, and to make a grab for that in some capacity, to just secure the supply, basically, of oil, something that's friendly, something that can be sold in US dollars to continue to maintain and support in some capacity the petrodollar. It sort of kills two Chinese birds with 1 st. You're securing abundant and efficiently cheap energy supply, and you're supporting the petrodollar all in one fell swoop and doing it in a way that the government can kind of have plausible deniability, say, oh, that's not us.  

[00:55:13.350]

That's ExxonMobil doing that, or whichever they kind of establish as the new East India Company. Again, look, this is just a theory. This is I call this the 51st state theory in the same way that India effectively became a puppet state of Britain because of what the East India Company was doing. I call this the 51st state because it would be a way that Venezuela essentially becomes subordinate to the United States and selling all of its oil. And again, it's just a theory.  

[00:55:38.560]

I'm not advocating for an invasion of Venezuela, but I am definitely suggesting that we pay attention to the bigger story here, because there's so many things that are going on right now, especially now people are waking up and reading headlines about a former president being indicted and all that. I mean, there's just so many ridiculous things. You got war in Ukraine and all this. The really big story, I think something that's really going to dominate our time. I mean, I think particularly people in the United States have grown accustomed to the United States being the dominant superpower.  

[00:56:07.000]

This is going to be one of the biggest events of our lifetimes. And it's happening in many respects in slow motion, right? There are these individual snapshots. Somebody gets indicted or some country invades another country and there's a war in Ukraine, et cetera. And that dominates the headlines day to day, week to week, month to month.  

[00:56:21.880]

This is something that's taking place and unfolding over a period of years. And because it takes place over a period of years, it's easy to miss. But it is got to be at least one of the biggest, if not the biggest story of our lifetimes, because you're talking about this thing that is inextricably linked to prosperity, is energy production, energy abundance, cheap energy. And that's going away. It's going away because the people in power are literally driving to make it happen, right?  

[00:56:49.860]

And this creates a because you've got dwindling energy production, you got more expensive energy. This is a huge driver of inflation. It's a huge driver of the decline in global power and status, and most importantly, leads to a displacement of the US dollar as the dominant reserve currency. And again, this is a huge, huge event because it signifies a major reset. This is going to be Titanic for the US government, pun intended, I think, in this case, because you talk about losing the special status and privilege of the US government.  

[00:57:22.480]

You can't run debt, you can't run multi trillion dollar debts anymore. You can't have the fiscal responsibility, you can't have the incompetence. If you got a guy that shakes hands with thin air, that's going to trigger a collapse in the bond market. I mean, if you think about that, if the Italian Prime Minister gave a speech and then turned around and shook hands with thin air, italian bonds would plummet that very day because people go, oh my God, this place is screwed, and nobody wants to own that. If that happened in mexico.  

[00:57:48.640]

If that happened in the UK, there would be convulsions in financial markets because of that. But in the United States, nothing happens because the US is the dominant reserve currency. If that reserve status goes away, suddenly you're just like everybody else. You've got to live within your means. You've got to make deep, deep cuts.  

[00:58:06.580]

You've got to gut the military, you've got to gut Social Security, all these things. It's a major reset in the way the US government does business, and it's essentially going to destroy the global status, the global superpower status. And this is something, again, I think is going to be one of the biggest stories of our times. And it's unfolding right now. Again, the thing where, you know it's game over is when the US is going to have to start buying oil from Saudi Arabia in Renminbi.  

[00:58:32.490]

And this is the sort of thing that's already in the works. And I think in theory, this is solvable. In some ways, there are ways to do this right. You could look and say, oh, jeez, well, maybe we shouldn't completely torpedo the energy companies. Maybe we should treat the energy companies instead of like pariahs, but start treating them as vital to national security.  

[00:58:50.810]

Maybe we shouldn't be so stupid about nuclear and let's be somewhat supportive about obvious technology that could really move the needle for energy independence. So it's not inevitable, but they are in no way on a path to fix any of this. And time is quickly running out. I'm going to go ahead and leave it at that. I, as always, appreciate you guys listening.  

[00:59:10.100]

And I'm off next week, but we'll speak again soon. Thanks so much.   Close Podcast Transcription

In 1898, a Polish author named Jan Bloch published a 3,000+ page volume on modern warfare entitled Future War and its Economic Consequences.

Bloch had studied military technology and saw the rapid pace with which destructive new weapons and munitions were being developed. And he came to the conclusion that the next war would be absolutely devastating.

Bloch predicted, in fact, that the days of classical warfare– cavalry charges and large troop movements on an open battlefield– were over. And that the next war would entail long, bloody, pointless trench warfare that would be unimaginable in its destruction.

In short, he predicted World War I.

Bloch was even invited to speak at a diplomatic conference in the Hague in the following year in 1899, and he urgently warned the attendees to do everything they could to prevent war.

The experts listened politely… and then completely ignored him. 15 years later Bloch’s prediction came true when the Great War broke out. Millions died. Europe was destroyed.

And yet in retrospect it was all so obvious. The warning signs were there all along. But somehow the people in charge not only managed to NOT avoid war, they managed to steer directly into the path of destruction.

This is often the case with major world events, including wars and major economic catastrophes. They’re seldom accidents, nor do they sneak up without announcing themselves years in advance.

And after the crisis is over, it all seems so obvious in retrospect. Yet the people in charge failed to see it coming, and often contributed to the cause.

Another great example is the Global Financial Crisis of 2008, where banks and financial institutions engaged in high-risk behavior that nearly brought down the entire global economy.

Once again, the people in charge not only failed to notice, but they played a key role in engineering the crisis to begin with.

The Federal Reserve slashed rates to just 1% after 9/11 in the early 2000s, which led to a massive asset bubble. The Fed didn’t seem to notice.

Then when they started aggressively raising interest rates in 2005 (to help fight inflation), asset prices fell dramatically. The Fed failed to predict this too.

Banks lost billions of dollars as a result, and many banks failed entirely. This triggered a chain reaction in the financial system and the worst economic crisis since the Great Depression. And the Fed not only missed the warning signs, they steered directly into the disaster.

We’ve just seen a similar crisis unfold with this month’s bank runs.

The Fed slashed rates to zero, sparking yet another major asset bubble. The Fed failed to notice.

Banks paid record high prices to buy US government bonds using their depositors’ funds. The Fed failed to notice.

Then when the Fed aggressively raised rates, they failed to predict that asset prices (including bonds) would plummet in value, causing widespread solvency problems at banks.

Banks have even reported $600+ billion in unrealized bond losses to the Federal Reserve– one of the banks’ primary supervisors. And yet the Fed still failed to notice.

In fact just three days before Silicon Valley Bank went bust, the Fed insisted to Congress that everything was fine in the financial system.

These experts are consistently wrong. And it reminds me of World War I: the warning signs were obvious, yet the people in charge failed to notice… and steered directly into the path of disaster.

So in today’s podcast, I spend some time exploring an important question: what other key risks are lurking out there which the people in charge have failed to notice?

At this point, frankly, it would be stupid to assume that the government and central bank have everything under control. What are they missing?

I talk about five separate risks today– including further fallout from these aggressive interest rate hikes. We also discuss Social Security (which is a pretty obvious risk), war, energy challenges in the US, and– the biggest flashing red warning sign I see– fading dominance of the US dollar.

You can listen here.

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[00:00:00.650]

It's today. We're going to go back in time to May 18, 1899 to the Great Orange Hall of Western Boss Palace in the Hague, which is located in South Holland. May 18, 1899 was the 31st birthday of Tsar Nicholas II of Russia. And the tsar was really excited because on his birthday, world leaders and diplomats from all over the world were gathering in The Hague for the open of a peace conference, which was kind of his idea. There were dignitaries from all the great powers attending because Tsar Nicholas was one of the people who thought, you know what?  

[00:00:35.310]

This is starting to get intense. Decades of rising tensions across Europe, going back to the Crimean War, the Franco Prussian War, the Austrian Prussian War. So many more. There was a stunning rapid pace in the development of military technology, alliances, messy entanglements, and diplomacy. And Nicholas said, you know what?  

[00:00:57.430]

It would be a good idea if we just get together and talk. Let's impose some guardrails. Let's establish a framework to see if we can maintain some peace and, if nothing else, to create some kind of standards for warfare to make sure that we don't all obliterate each other with all this new technology that's out there. So there was at least one guy who saw what was going on and felt like, we need to do something about this. And so this happened on May 18, 1899, all these diplomats convened, and they opened this conference called the Hague Peace Conference, and they spent months hammering out all these different treaties and things.  

[00:01:33.070]

One of the things they did was they established something called the Permanent Court of Arbitration, which actually still exists today. The idea was to have an international court where nations could bring up disputes against each other as a diplomatic way of resolving their differences without resorting to military conflict. And they also made treaties and agreements to, for example, not use poison gas against each other, not use soft point bullets, which, once they enter human tissue, actually expand and make the devastation even worse inside of a human body. Now, there was a speaker that was there, and this is really important. It's a very interesting guy.  

[00:02:09.350]

He was a Polish guy named Jan Block. And Block had been a successful, very successful banker. He invested in railroads and had made a small fortune, and he turned to military history. He was fascinated by modern warfare. What was modern, obviously, at the time, in the 18 hundreds.  

[00:02:26.270]

And Block was particularly entranced by the results of the Franco Prussian War, the French and the Prussians, which are really kind of on their way to becoming Germany at that point, in the 1870s, early 1870s, they went to war. And Bloc was amazed at how quickly and decisively the Germans defeated the French. And he looked at it and he said, look, the Prussian victory was based on they had better technology, they had better munitions. They had better organization, they had better industrial capacity, which allowed them to produce all these munitions and ferry their people out into the field and invade more quickly and organize more quickly. And this was something everybody in Europe saw this.  

[00:03:05.950]

Everybody in Europe said, oh my God, look, those Prussians are brutal, lethal jeez. And everybody realized they had to catch up. Whatever the Prussians were doing, that's what we all need to do. And that's what was happening, is that everybody in Europe was basically catching up to the Prussians, getting their military technology up to stuff, basically created an arms race to see who could create the biggest, deadliest, most destructive munitions, things that could go boom bigger and harder than anybody else's. And so Block noticed this and he said, the next war is going to be absolutely devastating because everybody will have caught up, right?  

[00:03:41.370]

The Prussians aren't going to have this advantage anymore. Everybody's going to have caught up at this point. So everybody's going to be dealing from the same level. And he wrote about this. He wrote 3000 pages, this multivolume compendium of modern warfare, and basically predicting what the next war was going to look like.  

[00:03:58.270]

And he wrote all about this sort of future conflict. And he predicted total economic mobilization. He said the next war is going to be based on the industrial capacity of these countries and they're basically going to have to turn their entire economies into this war. Production, economy, all the factories, the agriculture, everything is going to have to go to war. Total economic mobilization.  

[00:04:21.500]

He predicted trench warfare. He said, there's all this classical warfare that's existed for thousands of years. Large volumes of troops moving on open ground, bayonet charges, cavalry charges, all these sorts of things. That classical warfare that's been waged for thousands of years, forget it. It's going to be a stalemate.  

[00:04:37.940]

It's going to be trench warfare, artillery barrages, poison gas, widespread devastation of entire nations. It's going to be these modernized industrialized nations. They'll have to commit huge armies, million people at a time, and basically dig in across an endless battlefront and wait each other out in the trenches. It's basically like a siege, a mutual siege, where the nation that wins, basically it's because they had superior industrial capabilities, but there would be countless soldiers dying not only of combat, but even more dying of disease and famine because they're going to be sitting in these trenches. This is coming to all the elements and exposure.  

[00:05:15.630]

There's going to be devastating psychological consequences, economic impacts. They're going to lead to social revolutions. Entire governments will be toppled. He predicted all of this and all the experts in attendance politely listened, gave him some polite applause, and then basically ignored his warnings because these people were from that classical era of war where they had brightly colored uniforms and the cavalry charges and soldiers maneuvering in the battlefield in an open battlefield accompanied by germer boys and bugles. Right?  

[00:05:45.740]

That's the warfare that they were accustomed to. And so all these people that were sitting in the audience, all these diplomats and dignitaries, they just didn't get it. They did not comprehend what block was telling. I'm sure some of them did, some of them did. Some people understood.  

[00:06:00.250]

Obviously, tsar Nicholas was one of the people who said this could be a big deal and we need to do something about it. But most of the people, especially the underlings that were there, the experts in diplomacy, they just didn't get it. And for his own part, John block was dejected. He was dejected after the conference. He was so dismayed, and he wrote shortly afterwards, that he said he was, quote, astonished.  

[00:06:21.520]

He was astonished, and he said these obvious risks of war, and he said, had, quote, passed almost unnoticed even by the professional watchmen who were paid to keep a sharp lookout. He just explained, they just didn't get it. They just didn't get it. He was telling them everything that was right in front of their face. It was so obvious, and they just didn't get it.  

[00:06:40.450]

He said, the facts at hand, the consequences, he said, go against, quote, the vested interest of the most powerful class. This was a big deal. And he lamented about the stubbornness of these people taking any real action and even distorting reality to reject the obvious conclusions that were right in front of their faces. And because of this, he said, he concluded there would be no real reform and there would be no peace. I've actually read and you can see this, there are the diplomatic reports from the delegates.  

[00:07:05.580]

The Yale university actually has all these, the writings back and forth, the reports from, for example, the US delegates who are in attendance, and there are a lot of these that exist. And obviously they speak in glowing terms about the important work that they're doing. They were really patting themselves on the back. They said, oh yeah, those pesky Germans, they were trying to get us to concede something here, but we didn't do it. And the French wanted this, and the British wanted this, but we didn't agree.  

[00:07:31.880]

For the US delegation, for example, they said, oh, well, we were able to not sign the treaty against not using poison gas for technical reasons and all these things. And they went on and on about all the great work they're doing. They said that the court of arbitration is so wonderful that there's a guy, I think his name was captain crozier, us military officer who was in attendance. He said that this arbitration court will, quote, be, will doubtless be found to be imperfect and require modification. But they went on and on about how great everything was.  

[00:08:03.660]

The US. Didn't even bother to sign a lot of the treaties. Like I said, they didn't sign the treaty against using gas. They didn't sign the treaty against using dumb, dumb bullets. They said these were for technical reasons.  

[00:08:11.950]

And in the end, of course, it was all useless. It was all useless. All these people that showed up, they had a guy telling, this is exactly look at the evidence, people. This is right in front of your face. Just open your eyes and you can see what's happening, what's going to happen.  

[00:08:25.970]

It's so obvious. Just do the right thing here, steer us away from this. But instead, all these people that were there basically continue to steer the world directly into the most unimaginable devastation ever. Block turned out to be right. It was a nasty protracted.  

[00:08:42.140]

Trench warfare required 100% economic mobilization. There were uprisings that broke out as a result, including, obviously, the Russian Revolution. Disease and famine were right, were widespread and again, just unimaginable devastation. It was so obvious. And I think anybody that looks at history, you got to ask the question, how did you not see this?  

[00:09:01.050]

And not just the people that were there in the delegation, but obviously all the experts, all the leaders I'm doing air quotes all the leaders that were in charge making these decisions, how do they not see this? How did they not prevent this? It was just so it was so clear. I mean, Europe was this giant mess of alliances and all the diplomatic entanglements and rising powers and declining powers. The Austro Hungarian Empire.  

[00:09:21.720]

The Ottoman Empire in decline. Places like Germany that are rising. The French were desperate to assert themselves. Britain wanted to maintain its status of the top position of the world. I mean, there was so many there were nationalist movements, Marxist movements, republican movements.  

[00:09:35.980]

There were so many things different strategic interests. It was so clear, so obvious. And you had this guy who shows up and tells everybody everything. And Block wasn't the only one. Again, there were even people like Zara Nicholas who understood.  

[00:09:49.770]

But once again, the experts failed to do anything about it. They failed to appreciate the consequences of what they were doing and they steered the world right into the war to end all wars. This is not uncommon. This is actually an incredibly common theme throughout history. You see these major events, wars, social revolutions, economic crises.  

[00:10:09.580]

They're not accidents. The warning signs are there and they're often ignored. And I'm not talking about cases where there's just some bad luck. There's a natural disaster, something that's just totally beyond people's control and they're just trying to figure it out and deal with it and do the best they can. This is something where, like Block said, the experts, they're paid to keep watch and prevent disaster.  

[00:10:29.590]

Not only they don't see the warning signs, they actually steer directly into the disaster. And World War I was an obvious example. It was an obvious example of total and complete failure on the part of the people that are being paid to prevent this from happening. I mean, it's ridiculous when you think about it. They literally had a conference to say, oh well, let's try and prevent a war.  

[00:10:52.290]

And then that's exactly what happened. And the guy who was there saying, there's going to be trench warfare, it's going to be total warfare, it's going to be brutal, it's going to be blood, it's going to be all these things. And they said, I don't think so, I don't think so. And we see this example over and over and over again, the same model, and we'll shift gears and talk about economic crises. Now because it's very similar in this case.  

[00:11:12.970]

Many of you probably remember very clearly, as I do, the global financial crisis. This is back in 2008, 2009. Again, not an accident. This is one of those things people go, oh, it's just bad luck. Sure, it's bad luck for everybody else.  

[00:11:24.970]

But the experts in charge of this steered directly into this crisis. They engineered it and made it happen. You had this crisis that the banks had spent years making no money down loans to risky borrowers with poor credit so they could purchase homes at record high prices, right? So the banks were basically taking 100% of the financial risk and saying, sure, you can buy a home at a record high price. Sure, you have a history of not paying your debts.  

[00:11:49.960]

Sure, you don't have a job, you don't have any income, you don't have any assets. They call that ninja. No job, no income, no assets. You were making these Ninja loans to people to buy homes at record high prices with no money down. Of course that was a dumb idea.  

[00:12:02.580]

Of course that was going to blow up. And it did, right? But everybody just sort of closed their eyes. All these experts in the financial system closed their eyes and pretended that that whole arrangement was literally risk free. The rating agencies that are literally risk free were slapping their their highest ratings, triple A ratings on pools of these risky mortgages pooled together into giant bonds.  

[00:12:23.620]

They said, oh, you're loaning money with no money, down 100% of the financial risk to a guy with no income, no job, no assets, who has a history of not paying his debts. Oh, sure, let's just pool all these together and pretend that it's risk free. And if we close our eyes and say it enough times, it'll be risk free. Totally ridiculous. And it was so obvious what would happen.  

[00:12:43.940]

Of course, real estate prices fell, borrowers defaulted on their mortgages. Banks lost billions, and a lot of banks went under, which because the financial system is so interconnected, it dragged down almost the entire banking system in 2008 and early 2009, which nearly dragged down the entire global economy. It was the worst financial crisis since the Great Depression. Wasn't an accident. It wasn't like just some hurricane comes out of nowhere, there's a giant earthquake.  

[00:13:10.510]

All of a sudden, this is something that the experts engineered. They created the people that were paid to keep watch. They not only missed it, but they actually helped engineer it, right? The warning signs were there. Everybody could see this.  

[00:13:23.310]

The credit markets were starting to break down a year before the crash. Home prices were declining more than two years before the crash, but everybody missed it. And you've got when you think about the people that were involved in this system, you got the banks, right? Supposedly the financial experts, we all trust the banks. The banks are risk free.  

[00:13:39.500]

They know what they're doing. These guys were engaged in the most reprehensible, irresponsible, unethical, probably illegal behavior, right? A lot of lies, lots of deceit. Then you have the rating agencies. These guys have a legal and ethical obligation to provide an honest risk rating.  

[00:13:54.960]

They're brought assets, and they're supposed to say this is a risky asset or it's not a risky asset, and they say it's B rating or an A rating or AAA rating. And so not only did they not they didn't provide an honest risk rating. They didn't notice that there was no risk, and they kept slapping these AAA ratings on all these risky loans and risky bonds. Just absolutely outrageous behavior. Then you have government watchdogs once again asleep at the wheel.  

[00:14:20.780]

They didn't notice. They didn't see any of this going on. They just closed their eyes and said, la la la. And they didn't notice any of this. My favorite one to beat up on, though, is the Federal Reserve.  

[00:14:31.520]

And the reason I say that I say that seriously, I actually think it's very important to beat up on the Federal Reserve because the Federal Reserve, the central bank in the United States, is the most cared for agency. Nobody says an unkind word about the Federal Reserve, right? If you look at all, you look at all these other government agencies, people beat up on the SEC. They beat up on the, on the you know, they beat up on the White House. They beat up on Congress.  

[00:14:58.100]

They beat up on everything else in government. They beat up on the national parks. They beat up everybody in government. But not the Federal Reserve, right? Technically, the Federal Reserve is independent from government, but it obviously has this huge role in the US.  

[00:15:10.600]

Economy, and there's a lot of overlap between the Fed and the government. But nobody says an unkind word. Nobody scrutinizes the Fed. Nobody criticizes the Fed. The press gets together.  

[00:15:20.360]

They have these press conferences, and everybody just sort of bows down to the Federal Reserve. The Federal Reserve says, let there be 0% rates, and it was good. And nobody questions the almighty Federal Reserve, partly because I think people afraid of looking stupid, because so many people, the reporters, these are the same people that cover they write stories about Justin Bieber and whatever. They don't understand central banking, so they're going to sit in a room with a guy who's the chairman of the Federal Reserve. This is the great and powerful Oz, and they're terrified of the man behind the curtain.  

[00:15:53.880]

So they don't want to look stupid, so they just go, okay, well, the Fed raised rates. The Fed cut rates. Nobody really questions any of this, but they should, because what the Federal Reserve does over and over and over again, they engineer these bubbles. They engineer huge consequences. They're totally asleep.  

[00:16:09.680]

They fail to notice. And we see this over and over again. In the 2008 financial crisis, it was the Federal Reserve that created the fuel and lit the match. To begin with, you probably recall there was a recession in 2000 followed by 911, right? That was pretty devastating for the US economy.  

[00:16:25.220]

The US. Economy was down. So what did the Federal Reserve do? They cut interest rates, right? This is what central banks do when the economies slow down.  

[00:16:32.460]

They cut interest rates. So the Federal Reserve slashed interest rates down to 1%, basically, which at the time was like people are like, oh my God, that's so low. Interest rates throughout the 90s have been quite high, in the 80s have been really high, in the 70s have been high. For the Fed to slash rates down to 1%, there was hardly anybody alive that even remembered rates being so low. And obviously, when rates are that low, borrowing was cheap.  

[00:16:55.660]

It was cheap to borrow. And so, of course, things like real estate boomed. Suddenly. People thought, oh my God, mortgage rates are so low. I can afford to pay more for my house if I'm in the market.  

[00:17:07.190]

And I used to think I could afford X, well now I can afford a whole lot more than that because rates are so low. Rates came down, it makes my monthly payment lower, so I'm just going to buy a bigger house, right? And so real estate boom. Real estate went through the roof, and it quickly became a bubble. Real estate, really, all asset prices, stocks went up, bonds went up, commodities went up.  

[00:17:26.770]

But real estate in particular, there was so much money, so much activity in the real estate market. And a lot of you guys probably remember this. I mean, it was like everybody was becoming a real estate agent. It was ridiculous. Every single person.  

[00:17:38.820]

People were quitting their jobs to become real estate agents because it was just so easy. People were going and signing up, flipping houses, off plan. Some developer would go and announce a project to say, oh, I'm going to develop some condos in Miami. And people would go clamoring to go and sign contracts to buy these condos. The same condo would be flipped four, five, six times before, in some cases before the building even broke ground.  

[00:18:05.190]

I mean, that's how the ridiculous amount of activity that was in the marketplace. Real estate agents were getting commissions, housing contractors, people that were in construction were making tons of money. Plumbers are making three, four $500,000 a year. They were in such high demand. It was such a boom that was clearly a major bubble.  

[00:18:25.950]

But the Fed didn't understand any of it. They didn't see, they didn't, they never stepped back and said, gee, wow, we we slash rates so low that made houses really cheap. So now this entire housing industry is just on fire. I guess we don't have anything to do with that. Well Corey, you created the conditions for that.  

[00:18:43.510]

You're completely responsible for it. They didn't see how what they were doing, that they were facilitating this outrageous and really dangerous lending practices. They didn't see real estate prices booming, housing activity is booming, and everybody's in on it. The banks are in on it, the rating agencies are in on it, the mortgage companies are on it, the mortgage brokers are in on it. Real estate, everybody is making so much money from this and it's leading to this outrageous and again, very dangerous conditions.  

[00:19:09.930]

Lending practices. People are saying, oh, normally 80% banks provide 80% of a home's purchase price. And they said, oh well, we'll provide 90%, we'll provide 100%, we'll provide 105%. I mean, it was getting so ridiculous and the Fed again just closed its eyes and said la la la, nothing to see here. And in the same time, not only did they not see how they sort of created this whole bubble to begin with, the Fed then in 2005 would say, oh wow, there's inflation now, right?  

[00:19:37.660]

Suddenly 20 03, 20 04, 20 05 inflation is rising. And they started raising interest rates in 2005 and they failed to see, they said, well, we slash rates to 1%, and failed to see how that would cause any problems, failed to see how that would cause a bubble in 2005. They quickly raised rates, failed to see how that would have any consequences. And this is where, again, the Fed, they really, I mean, there's some real doozies here. In February 2006, for example, actually go back in July 2005, chairman of Federal Reserve said we'd never had a decline in house prices on a nationwide basis.  

[00:20:12.710]

February 2006, he says house prices will probably continue to rise, right? This is an epically bad prediction because home prices started to fall two months later, right? So he says house prices will probably continue to rise two months later. They started to fall in November 2005, he says talk about financial derivatives, insisting that financial derivatives are safe. And he says derivatives with respect to the safety derivatives for the most part are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and use them properly.  

[00:20:45.770]

This is one of the things that nearly blew up the entire global economy two to three years later, in February 2007, he said delinquency rates on most consumer loans remain low. The next month, dozens of subprime lenders had gone under due to rising delinquencies in May 2007. He said, we don't expect any significant spillovers from the subprime market into the rest of the economy. Three months later, the entire financial system was frozen. Inner bank lending had ground to halt.  

[00:21:13.100]

Bank runs had started. And this was worldwide at this point. There was Northern Rock in the UK. Had a bankruptcy. It's a big bank in the UK.  

[00:21:20.340]

And people were queued up in line, standing outside to get their savings out of this bank. Banks across the world were reporting billions of dollars in losses on the subprime debt. But again, three months earlier, the guy said, oh no, there's nothing to see here. Everything's going to be fine. January 2008, the guy says, Fannie Mae and Freddie Mac, these big US federal housing agencies, fannie Mae and Freddie Mac will make it through the storm.  

[00:21:41.610]

They failed two months later and had to be nationalized by the federal government in June 2008, he said, the risk of recession appears to have diminished. Three months later was the worst economic crisis since the Great Depression. So these guys, they engineered this bubble by slashing interest rates to near record lows, right? In the early 2000s, after 911, they just slashed rates and they engineered this bubble. They failed to see it, right?  

[00:22:07.590]

They failed to see what they were doing. They failed to see the risk. They failed to look at jeez, that doesn't make any sense. They're loaning money to unemployed homeless people getting million dollar mortgages. There was a guy named Johnny Moon.  

[00:22:19.920]

That's his name, johnny Moon got a million dollars in home loans. He's a homeless guy, right, with no history of any credit whatsoever. Was able to go out and get all these no money down loans. No money down loans. This is absolutely ridiculous.  

[00:22:33.420]

And the Fed just didn't notice. And then they rapidly increased interest rates, caused that bubble to burst. Totally failed to anticipate any consequences whatsoever. And the whole time, three months before the worst financial crisis, the Great Depression says, oh no, everything's going to be fine. It's not going to be fannie Mae and Freddie Mac are going to be fine.  

[00:22:53.420]

Nationalized two months later. Risk of recession appears to have diminished. Worst crisis since the Great Depression. Three months later. I mean, these guys just it's just so it's just almost comical how much they get it wrong.  

[00:23:07.440]

And even though, again, the warning signs were there along the way they should have seen in 2007, said, oh my God, there's bank runs, there's banks reporting billions of dollars of losses. I mean, it was so obvious. They should have seen it. They could have seen real estate prices were declining in 2006, two and a half years before the real crisis started. What did they do about it?  

[00:23:26.210]

Nothing. Did they notice? No, they didn't do anything. They didn't do anything. They didn't even notice.  

[00:23:31.970]

They're so bad at what they do. And they were extremely intelligent people. It was like Jan Block all over again. They're extremely intelligent people, giving speeches, writing about it, warning about it, and some people even betting on a collapse of the financial system. But the fed was totally and completely clueless.  

[00:23:50.250]

Now, we've seen over the past few weeks, same thing, bank runs, right? It's the same issue again, shouldn't have been a surprise. The warning signs were there. In fact, a lot of people saw this. Readers of Sovereign Man probably saw this coming because we were writing about this.  

[00:24:04.210]

I was writing about this going back several years now. I actually wrote some time ago, I wrote, quote, it's just assumed that banks are stable, sound and conservative. Nothing could be further from the truth. Banks get to keep pretending that they're safe, but they're gearing up to take a huge bath as the values of their bond portfolios collapse. That's exactly what happened.  

[00:24:22.480]

That's exactly what happened a couple of weeks ago with Silicon Valley Bank and Signature and First Republic and all these it's basically the same situation as the GFC, right? As the global financial crisis. We go back to the early 2000s. Post 911, the Fed creates this giant asset bubble. They slashed interest rates down to 1%, which again, at the time was people thought, oh my God, 1%.  

[00:24:41.440]

That's crazy. The Fed slashes interest rates down to 1%. So asset prices boomed, stocks went up, real estate went through the roof, bonds, commodities, everything went up. But the fed didn't understand. They didn't see the risk that they were creating.  

[00:24:54.200]

And then they reversed it. They suddenly started ratcheting up interest rates because inflation was heating up. And they failed to anticipate that there would be any consequences of that. That's what we've been seeing here. The Fed after the GFC, the Fed basically just repeated the same mistake all over again.  

[00:25:09.600]

They slashed rates in the early 2000s. There were consequences. Failed to anticipate the consequences when they raised rates. So what do they do after the GFC? They slash rates again.  

[00:25:18.170]

Kept them. Instead of 1%, they said, oh, who needs 1%? I'm not going to be a coward and go down to 1%. I'm going to go down to 0%. So they kept rates at 0%.  

[00:25:27.900]

Over in Europe, they slashed rates down to below 0%. Europe and Japan rates were negative, right? It was insane. It was insane. And they kept them there for years.  

[00:25:38.590]

Completely failed to anticipate any consequences of that. Completely failed to notice any consequences of that. And it was silly stuff that you had governments. Argentina was able to sell a 100 year bond. You have a country that has defaulted so many times on its debt, was somehow able to go and raise money, billions and billions of dollars at 100 year bond.  

[00:26:01.820]

You had the famous case of the Art Basel banana duct taped to a wall that was considered art, sold for six figures. You. Had startups with no hope of ever turning a profit that were being valued at tens of billions of dollars. There was ten plus trillion dollars in government bonds with negative yields. It was just there were so many outrageous stories of this giant asset bubble.  

[00:26:22.240]

All these assets, bonds, stocks, real estate, everything trading at record high prices, the Fed didn't notice any of it. The Fed didn't notice any of it. There was nothing about this. Well, jeez, that's unusual. Banana duct taped to a wall, sold for more than $100,000.  

[00:26:35.900]

That's unusual. That seems like something drunk. Didn't notice any of it. And so, of course, because interest rates are so low, they slash rates down to zero on all of this, created an enormous asset bubble. Everything went up in value.  

[00:26:49.650]

The Fed didn't notice any of it. And then finally, the Fed started, after completely failing to see this, they started raising rates again, really aggressively raising rates last year, and also totally failed to anticipate the consequences of that. And this is what happened during the boom. Banks did what banks do. They take their customer deposits and they buy things.  

[00:27:13.120]

They buy assets. They buy bonds usually. They buy bonds, usually liquid, highly tradable bonds. And that's what these banks did. In this case, we're not even talking about some crazy super high risk bond.  

[00:27:25.130]

They bought Silicon Valley bank bought us. Treasuries, US. Government bonds. That's what they bought. There wasn't any toxic asset.  

[00:27:32.100]

It wasn't anything like that. It was US. Government bonds. But because they bought these bonds at record high prices during the boom, and then all of a sudden, the Fed started raising rates. And when they raise rates just in the same way that when they slash rates, asset prices go up.  

[00:27:46.260]

When the Fed aggressively raises rates, asset prices fall really quickly. And so the banks paid record high prices for their bonds. And then all of a sudden, interest rates are a lot higher, and those bond prices plummeted in value, and banks are sitting on huge losses. But the Fed didn't notice that either, which is really curious because the Fed is one of the primary bank supervisors in the country. But the Fed, even though they're supposed to be supervising these banks, they have an entire division devoted to bank supervision.  

[00:28:13.590]

They didn't notice. They didn't pay attention. People just looking at these reports, these monthly reports of banks seeing these huge losses, what do they do about it? Nothing. Nothing.  

[00:28:23.120]

And now there's this basically full blown banking crisis where there been bank runs and banks have gone under because exactly what the Fed has done. They slash rates to zero. They engineered this asset bubble. Banks loaded up on assets at record high prices. Now the Fed has aggressively raised rates.  

[00:28:40.300]

Asset prices have fallen. Banks are sitting on huge losses as a result. And the Feds goes, oh my God, how could this have happened? Wow, what a surprise. What a shock.  

[00:28:49.250]

No, it's not a surprise. It's not a surprise. The people, just like Yon Block said, the people paid to keep watch failed again. They failed to predict. They failed to acknowledge anything about it.  

[00:29:00.050]

They failed to acknowledge their complicity in creating this. They steered this again, not an accident. They steered the entire financial system directly into this disaster. I'm actually reminded of the Hague Convention in this case because remember all these guys got together and they created all these treaties and their institutions, their International Arbitration Court, it's the same thing. After the 2008 financial crisis, congress and the regulators, they all got together and said, we got to prevent another bank crisis from ever happening.  

[00:29:28.550]

And so they created all these institutions. They created the Consumer Financial Protection Bureau and watchdog agencies. Then they created all these rules and so forth, just like in The Hague. They did all these things that ended up doing absolutely no good. In the same way, all their watchdog agencies and all their new institutions and all their new banking regulations weren't able to prevent the banking crisis.  

[00:29:49.010]

The guys in the Hague weren't able to prevent World War I. The whole thing ended up being completely and totally useless. And then you look at the response. We talked about this before. The Federal Reserve has basically stepped forward and taken over.  

[00:30:01.810]

They said, oh well, oh banks, you bought an asset for a dollar, now it's worth fifty cents, and now you're about to go under. Tell you what, why don't you post your 50 cent asset as collateral, we'll loan you money against it as if it's still worth a dollar, essentially taking on 100% of the financial risk for all the bank's losses. It's over $600 billion. And they've basically taken that risk away from the banks. The banks have no risk now, and they pass that risk on to every single person alive who uses US.  

[00:30:31.200]

Dollars. It's not only unethical, I don't see how it's legal. There's nothing in the Federal Reserve legislation, the Federal Reserve Act, or any subsequent legislation that actually authorizes them to do this. But they did it anyways. They didn't ask Congress.  

[00:30:42.580]

They didn't have a hearing. They just went and did it on a Sunday afternoon. They came up with a half a page term sheet and just created this program. I don't know how that's even legal, but this is what they did. For her part, the Treasury Secretary has been hilarious.  

[00:30:55.980]

She stepped forward at first and said there's not going to be any blanket government guarantee of bank deposits. Then the next day she said, oh yeah, sure, we would definitely look at doing that, especially for smaller institutions. Then the next day she said, no, just kidding, we're not going to do that at all. They can't even stick to a policy. Just come up with something what is true and what is not true and just stick to it.  

[00:31:16.060]

But they can't even do that. What I want to do now is I think it's important to talk about what else is lurking out there. What are the other examples of this? We talked about World War One, we talked about the GFC, we talked about these bank runs that we've seen over the past few weeks. These were all obvious risks that the people, the watchdogs who were in charge, who should have seen coming, not only did they not see it coming, they actually steered everybody into these disasters.  

[00:31:43.240]

So what else is lurking out there where you've got the people in charge, the warning signs are there. The people in charge are clueless and they seem to be actively steering everybody into this disaster. What else is there? And there's a few that I want to talk about. Number one is still more fallout from these interest rate hikes, right?  

[00:32:00.250]

The Federal Reserve has been raising interest rates. That's what has caused I mean, among other things, that's what has caused these bank runs because banks lost a lot of money on their bond portfolios because of the interest rate hikes. They paid record high prices because interest rates were so low. Now the interest rates are a lot higher. They've lost billions of dollars in their bond portfolios and they need to be bailed out.  

[00:32:19.560]

They're crying about, oh well, we can't go under. And so the federal government and the Federal Reserve has stepped in. But what else is lurking out there with the interest rate hikes? Well, plenty, because if you think about it, this is going to affect so many heavily indebted corporations, businesses, governments, local governments, state governments, the federal government, anybody with a significant amount of debt. And if you think about it like this, let's look at the federal government.  

[00:32:42.400]

Every single year the federal government federal government has 30 plus $31 trillion in debt. And soon as they raise the debt ceiling, which they certainly will, that's going to go up significantly. The amount of us. Federal debt is frozen right now because they hit the debt ceiling. But that's only a matter of time before they raise that.  

[00:32:58.010]

So every year the government, a portion of the government's debt matures and it has to be in theory it's supposed to be repaid, right? So that they have if they issue ten year government federal treasury notes today, in ten years those notes are going to mature and will need to be repaid. But of course the federal government doesn't have any money to repay anybody. So what do they do whenever old bonds mature instead of repaying them with cash? All the government does, they go out and they sell new bonds to repay the old bonds.  

[00:33:25.810]

The key difference being is that whenever they sell the new bonds they have to pay whatever the current interest rates are. So think about it like that. Ten years ago there were some the government was selling debt or selling treasury securities, ten year, ten year treasury notes at basically 0%, they're getting eight basis points, 20 basis points, 30 basis points they were paying, now they're paying 400 basis points, right? So you're talking about 4% higher rates. When the debt that they issued ten years ago matures this year, the government's going to have to take out new debt and pay today's interest rates to pay off the old debt, right?  

[00:34:05.230]

And so when doing that, if they borrowed, you know, if they borrowed, you know, for example, they gotta pay. And again every year the government pays back $5 trillion on average five to $7 trillion of debt that matures. So if they have to repay $5 trillion of debt this year and the interest rate that they pay is let's say 4% higher, right? 4% higher than it was ten years ago, five years ago, three years ago, whatever. Well that $5 trillion now that they have to refinance is going to cost them 5 trillion times 4%, that's $200 billion a year in additional interest expense, right?  

[00:34:39.880]

So if you think about that, by the way, that's before. Now they're saying like, oh, we're going to spend $3 trillion, have a $3 trillion deficit this year, right? So you got to refinance, let's call it five to $7 trillion plus another $3 trillion on top of that. So a minimum of eight, maybe $10 trillion that you're going to have to take on with at, you know, 4%. So if it's $10 trillion at 4%, that's $400 billion in additional interest expense this year that they're going to start paying every year $400 billion, right?  

[00:35:09.990]

And now do it again next year and the year after that and the year after that, right? So in four years that's $1.6 trillion in additional interest above and beyond the interest expense they're already paying. You just can't do that. You just can't do that. It's going to get to the point here very quickly where the problem becomes exponentially worse.  

[00:35:29.970]

And if interest rates stay at this level, the federal government is very quickly going to be paying the vast majority of tax revenue just to pay interest on the debt. It is just not sustainable. And it's not just the federal government. State governments are going to be in this position. Local government is going to be in this position.  

[00:35:46.030]

Heavily indebted corporations are going to be in this position because it's the same with heavily indebted corporations. They issue bonds, the bonds have to be repaid. They repay those bonds by issuing new bonds, but they have to pay the current interest rates on those new bonds. All these companies that borrowed money at 0% basically ten years ago, well now when they refinance they're going to have to pay four, five, 6% or more. And that's going to be crushing for these companies.  

[00:36:08.920]

It's going to be bankruptcies, government bankruptcies, corporate bankruptcies. So this is one of these things that's important to watch out for and of course the biggest risk of all is this leading into the federal government. It's not going to be for the federal government. They can withstand this for a year, two years, but the longer they go, with interest rates being this high, it's very quickly going to be an absolutely horrendous problem that they cannot get out of. The first people to suffer this are going to be corporations, maybe local governments.  

[00:36:35.240]

And so those are sort of the canaries in the coal mine to see of the sort of the next. Not necessarily the next, but another shoe to drop in this crisis from the Federal Reserve has managed to engineer and been completely clueless about. That's another issue, a second one that's obviously worth discussing. We've talked about this a whole lot, is Social Security. Social Security and Medicare as well, by the way.  

[00:36:57.690]

Medicare's primary trust fund is expected to run out of money in three years. Social Security is in about ten years, right? This is another multitrillion dollar problem. The government is saying, the Social Security trust fund is saying, they themselves are saying this in their annual report. They're saying we will run out of money.  

[00:37:14.600]

This is going to happen and when we do, we're not going to be able to pay 100% of the benefits that we've been saying. Maybe we'll be able to pay 80%, 70, some odd percent, something like that. But there will have to be cuts and that's based on their estimates today, it could actually get much, much worse, especially if inflation continues to rain, make the problem much, much worse. And so if you look at this, you go, this is at a minimum a multitrillion dollar problem on top of everything else. That is a looming crisis.  

[00:37:44.070]

Again, this isn't a next year crisis, this is a three to probably six year crisis. But it's one of these things that's looming out there. It's lurking and people are going to pretend that it's a surprise. Suddenly the meeting is going to go, oh, how could anybody see this coming? It was so obvious.  

[00:37:59.400]

It was so obvious. The Social Security Board of Trustees puts out the report every single year. You can practically circle a date on your calendar for when this is going to run out of money. And so this is another one of these things that's lurking out there that people are going to pretend to be surprised about, but the people in charge not only fail to see it, but are actually engineering this problem and steering everybody directly into the disaster. What's another example?  

[00:38:21.810]

I hate to say it, but war is actually another potential risk. I don't think it's inevitable. I'd certainly like to hope that it's not inevitable, but let's be honest, the world is closer to a major war than it has been at any other time since really the end of World War II. We can argue about maybe the Cuban missile crisis and so forth, and what that really was. But if you look at all the tensions that are out there, and not just Russia and so forth, but you've got China now and so many others, this is a really big deal.  

[00:38:56.010]

And there's so many things that are completely obvious here. We could do an entire podcast again just on that, and perhaps we will one of these days. Again, it's not one of these things. I don't think this is a risk tomorrow, but I think it would be very foolish to close our eyes and go la la la. And there's nothing going on here.  

[00:39:13.250]

And there's absolutely no risk of war. There's clearly more risk of war than there has been in a really long time. And these risks are obvious. And what are the people in charge doing about it? They're actually steering us closer to war rather than away from war.  

[00:39:27.030]

And that's a huge problem. This is, again, the example that we see the people that are supposed to be responsible for preventing these things. They seem completely clueless, asleep at the wheel, and getting us closer, not farther away from a disaster like this. Another one that's worth pointing out is energy us. Oil production.  

[00:39:42.740]

This is especially in the US. But I think in many respects this is an international problem, not necessarily purely global, but Europe has already seen this. US. Oil production is starting to dwindle, and we see this particularly in the shale fields. It is impossible to overstate how important shale oil production has been to overall US.  

[00:40:03.280]

Oil production in the petroleum industry. And I'm really talking about oil, but I also should include gas in this as well. I mean, it's been absolutely enormous for natural gas in 20 06 20 05 20 06 you might remember oil prices really going through the roof and oil production in the US. Was dwindling as well. I mean, it was really kind of bottoming out.  

[00:40:21.370]

And this was about the time that shale producers got in and really started producing all this shale oil. Now, for a lot of people, shale oil is controversial. There's no reason to get into that right now. But it's just important to point out that this is single handedly the biggest factor in US. Oil production.  

[00:40:39.030]

Shale oil production essentially brought on the equivalent of an entire Saudi Arabia's worth of oil production into the United States. That's how big it was. It propelled the US. To being the dominant oil producer worldwide, so important in US. Energy independence.  

[00:40:54.670]

And that has now peaked. And there are a lot of reasons for that. Honestly. You've got an administration that has essentially been waging war on oil companies. They never miss it.  

[00:41:03.920]

The President of the United States never misses an opportunity to go out of his way to shame the oil companies. ExxonMobil. It's so ridiculous. This guy doesn't understand anything. It's one of my favorite sort of biden quotes.  

[00:41:17.580]

He goes around and says ExxonMobil is making all this money, as if that's somehow not okay. This is the guy who claims to be a capitalist, but is lamenting that ExxonMobil is making all this money. He says, I'm going to make sure that everybody knows how much money ExxonMobil is making. And it's like, Dude, this is a publicly traded company. They're supposed to let everybody know how much money they're making.  

[00:41:36.510]

They have to report their profits to the marketplace and to the whole world. I mean, he just doesn't understand anything. It's embarrassing. But he goes on and on and on. He refuses to lease federal land and make the oil concessions that he's supposed to is required by law.  

[00:41:50.980]

All these things constantly thwarting passing new taxes, passing new regulations, specifically to thwart the oil company. Oh, what a surprise. The oil companies aren't going out yet. You got all the high priests of oil. You got the Greta Thunbergs of the world and Klaus Schwabs and Larry Finks and all these guys that are withholding capital from oil companies.  

[00:42:09.500]

Oil companies need capital in order to explore for new oil. They need capital to make new discoveries. But all that capital is being withheld because the banks now they're not allowed to invest in oil companies because Greta Thunberg is going to be upset with them. And Larry Fink, a guy that runs trillions of dollars over at BlackRock, he's refusing to give money to oil companies. He's got these activists that have taken over the boards of oil companies.  

[00:42:31.780]

And so, wow, what a surprise. They're not investing in new discoveries. So therefore, oil production is starting to fall. Shale production in particular appears to have peaked. This is a huge deal.  

[00:42:43.000]

And one of these things that whether it's next year or the year after or the year after that, at most, it's going to be major declines in US. Oil production based on this trend right now. And the people in charge are going to go, oh my God, what a surprise, what a surprise. We weren't aware of this, of course. You should have seen this.  

[00:42:59.210]

It was so obvious. The oil companies report this information. They show that they're not investing. Their production is dwindling. Their best performing rigs are actually in decline.  

[00:43:08.590]

It's so obvious the information is out there, but the people in charge refusing to pay attention and continue to steer into this dwindling oil production. And they're absolutely to blame in this. The last one that I want to mention, I think is what is so completely obvious is decline in the US. Dollar. This is a really, really big deal.  

[00:43:29.090]

We've talked about this before. The US. Dollar is the global reserve currency, and this is not uncommon. Reserve currency basically means that other countries in the world use the US. Dollar in their transactions.  

[00:43:39.980]

They hold us. Dollar as their official foreign reserves. They transact in us. Dollars in global trade. When France buys oil from Saudi Arabia.  

[00:43:49.040]

They buy oil in us. Dollars. Every country in the world holds US. Dollars. Every central bank in the world holds US.  

[00:43:54.560]

Dollars. And that's a really big deal, because in order to hold US. Dollars, basically, I have to hold the biggest and most liquid US. Dollar asset in the world, which happens to be US. Government debt.  

[00:44:05.950]

And so this reserve currency status essentially enables the US. Government to get away with the most outrageous fiscal shenanigans imaginable. They can go and close their thumb and their index finger together and say, this multitrillion dollar spending package, quote, costs nothing. They can go out and have $3 trillion deficits every year and do that with a straight face and not have to ever suffer any consequences because the world just gives them a pass. Because it's the reserve currency.  

[00:44:33.040]

People say, well, we got to hold US. Dollars, so we just got to put up with it the reserve currency. The idea of reserve currency goes back a really long way. The Greek drachma in the ancient world, classical Greece, was the reserve currency. Around the Mediterranean, we had the Roman daenerys, the Byzantine gold solidus, the Spanish real de ocho, the British pound.  

[00:44:52.100]

Throughout history, there's always been some kind of reserve currency, and that reserve currency usually goes to the dominant superpower. But now you've got, with the United States a superpower. That's an obvious decline across the board. You've got social decline. You've got military decline.  

[00:45:06.810]

You have obvious fiscal decline, the decline of the currency itself. You got a central bank that's completely clueless, has managed to engineer inflation, managed to engineer a banking crisis. Completely clueless, has no idea how any of this could have possibly happened. It's a sleep of the wheel. I mean, it took them a year to realize that inflation was actually a thing.  

[00:45:24.470]

The whole time, they kept saying, it's transitory, it's transitory, it's transitory. And then finally we go, oh, my God, it's not transitory. And now it says, oh, my God, we've got to do whatever it takes to resolve inflation. So they've ratcheted interest rates up so fast, so high, that they caused a banking crisis. And if you're a foreigner looking at this, can you possibly have any confidence in any of these people?  

[00:45:44.260]

Can you have confidence in the White House? Can you have confidence in the Treasury Department that goes, yeah, we're going to guarantee bank deposits? No, we're not going to guarantee yes, we are. No, we're not. Every single day they change their mind.  

[00:45:55.000]

Can you have confidence in the Federal Reserve that doesn't have a clue what it's doing, and now went and signed up $600 billion in potential financial risk so that the banks wouldn't have to suffer any losses? I mean, can anybody possibly have any confidence in the US. They look at the military and they could see all the headlines, all the reports, all the analysis about a decline in military readiness and decline in training, a decline in the readiness of the equipment in the naval vessels and the fact that the Air force can't get enough flight training hours for their pilots and all these things. All this is all just publicly available information. You got to look at this.  

[00:46:32.690]

You got a decline in military power. You got all this just extreme social conflict that is just completely ridiculous an economy. You got people that just refuse to go to work anymore looking for bailouts, looking for just free money from the government. All these things. Could people really have the same level of confidence in the United States that they would have had ten years ago, 20 years ago, 30 years ago?  

[00:46:56.310]

And at a certain point now where people are foreigners are suffering their own losses, all the stuff with the interest rate hikes, they're foreign banks that have suffered losses as well. They're not going to get bailed out by the Fed but foreign banks that went and bought US government bonds, they're sitting on billions of dollars in losses. They're not particularly happy about it. Right? So you have all these foreign governments, foreign banks, foreign central banks, they're looking this going guys what are we doing?  

[00:47:19.610]

I'm sick of it. I'm sick of it. Meanwhile you got the Chinese, they're showcasing a very powerful military. They're going around the world. They say oh well we just negotiated peace between Saudi Arabia and Iran.  

[00:47:31.980]

They're going all over on goodwill missions across Africa, across the Middle East, across Latin America, Honduras, everywhere to Russia even supposedly to negotiate a peace. And they're showing the world that they are a dominant power to be taken seriously. And they are actively having conversations with Saudi Arabia to start selling oil in Renminbi in their own currency rather than in US dollars. Not to say that US dollar oil contracts would go away but that the US wouldn't have complete and total market share, that all oil contracts would be sold in US dollars. That there would actually be some oil contracts sold in Renminbi.  

[00:48:10.200]

This is a really really big deal because every country in the world needs to be able to buy and sell oil. And if oil, if the vast majority of oil contracts around the world are priced and sold and settled in US dollars it means that every country in the world has to have US dollars. But if all of a sudden there's an alternative right? And this is the largest market in the world to say most widely traded commodity in the world, one of the most important commodities in the world and if all of sudden a there's an alternative. If all of a sudden people say oh well I could actually also buy and sell oil in Renminbi, well jeez, I guess I'll start holding at least some of my reserves in Renminbi instead of US dollars.  

[00:48:47.980]

And so all of a sudden it starts chipping away at the US. Dollars, market share in terms of the global reserves. And suddenly, if that happens, suddenly the US government isn't able to get away with these things. Suddenly, when the US government remember I was talking about they have to refinance five to $7 trillion worth of their debt every single year. Well, suddenly now that $5 trillion comes due, and you got these foreign bondholders to say, you know what?  

[00:49:11.070]

I just want the cash. I don't want to refinance this. I don't want to repay this. Just give me my money back. Now the government's got to go and scramble, looking for somebody, please, somebody.  

[00:49:19.160]

1. Banks, US. Individuals, somebody, please. We need $5 trillion to pay back certain foreigners and so forth. I mean, this is potentially a really, really big deal.

 

[00:49:27.910]

And without that foreign support, the US government isn't going to be able to get away with all these things that they've been able to do for years, decades. The multi trillion dollars cost nothing. $3 trillion deficits. Nobody else in the world is able to get away with that. France can't get away with that.  

[00:49:45.290]

Spain can't get away with that. Singapore can't get away with that. The UK can't get away with it. And you got to bring up the UK, because we just saw this six months ago in September. The British government essentially had to resign because the Prime Minister and the Finance Minister, the Chancellor, stepped forward with an economic plan that involved cutting taxes and running small deficit.  

[00:50:07.390]

And investors freaked out. They said no. Absolutely not. We can't support this. And so investors started dumping British government bonds called gilts.  

[00:50:15.750]

1. Government bonds were dumped. The British pound got dumped, and the government had to resign. The Prime Minister of a sovereign nation, a major one of the top economies in the world, had to resign because the bond market didn't like her economic plan. This is the thing that's going to happen in the United States if the US.

 

[00:50:34.000]

Loses its reserve status, because what they do consistently is so fiscally irresponsible, outrageously irresponsible, that if they don't have that reserve status, at least in the same market share they do, they start losing market share to China. They're not going to be able to get away with this stuff anymore. And that is going to be life changing in the United States. I don't want to overstate it. And it's not the end of the world.  

[00:50:56.440]

It's not to say that the US. Ceases to exist or the government goes under any of these sorts of things, but my God, there's going to be serious cuts. Social Security is going to get cut, and they're going to say, hey, sorry, tough luck, everybody. We're not going to be able to fund this anymore. They're going to have to scale back on military spending.  

[00:51:13.770]

They're going to have to significantly raise taxes, going to have to do all these things, really cut government services, start paying down. The debt, all these things that they're going to have to do. They cannot live in this sort of fiscal fantasy land anymore. And that's going to definitely have an impact. It's going to have an impact, and it's going to happen sooner than later.  

[00:51:31.100]

They don't have ten years. The President of the United States, the guy who shakes hands with thin air, recently released a budget for next year. Talk about, again, multi trillion dollar deficit. And they said he actually had the audacity to look at the camera and say that this new budget will reduce the deficit in ten years. Over ten years it will reduce the deficit.  

[00:51:52.300]

And you go, Dude, you don't have ten years. This stuff is probably going to come to pass way before that. You don't have ten years because when they say we're going to reduce the deficit in ten years, that means you're still running a deficit ten years from now. You don't have ten years to balance your budget. You don't have ten years to get your shit together.  

[00:52:08.410]

You've got to do it now. You've got maybe a couple of years at most before this stuff starts happening, before foreigners, instead of buying dollars from you, start shipping those dollars back home, causing a serious, serious issue to the dollar, to confidence in the dollar, confident in the government, confidence in the treasury market. That's going to have major financial implications not only to the government, but in global financial markets, the stock market in the US. Everything. It's going to matter so much.  

[00:52:33.820]

They don't have ten years. They've got a couple of years at most. But they're la la la la. They're completely clueless to me. That is the number one most obvious threat.  

[00:52:43.630]

All the warning signs are there. And by the way, this is one. The canary in the coal mine here is Saudi Arabia does start selling oil to China in Renminbi and starts issuing renminbi denominated oil contracts. And that's almost a foregone conclusion at this point. Saudi Arabia has already been meeting with China to set this up.  

[00:53:04.590]

So this is already in progress. Another one might even be that Saudi Arabia decides to repeg its currency, right? So right now it has been for so long, kind of baked primarily on the US dollar. And we start seeing, oh well, maybe we should change this again and repeg this. So these are some of the canaries in the coal mine.  

[00:53:22.120]

And a lot of this is in some respects, almost a foregone conclusion. It's already happening. It's already in the works. They don't have ten years. They've got to dial it in now, get their fiscal house in order, be prepared for this.  

[00:53:33.350]

But they are totally clueless. The people in charge aren't paying attention, and they're steering directly into this financial disaster. So that one is a really, really big deal. This is why we talk so much about taking control back, why we talk about having a plan B pre made decisions. And I think we'll probably have to do a whole other discussion about that in the future.  

[00:53:51.040]

But I'm going to go ahead and stop for now. We've been at this for about an hour, so I want to, again, as always, appreciate you guys taking a listen to this, and we'll speak to you again soon.   Close Podcast Transcription

Throughout history, whenever there has been a major shift in the world, it has usually been accompanied by a single iconic event that is associated with that change.

For example, historians often point to 476 AD as the year that the Western Roman Empire fell, when Odoacer and his barbarians forced the abdication of the Emperor Romulus Augustus— even though it was obvious that Rome was in decline way before 476.

People also often associate the start of the Great Depression with the stock market crash of 1929 (even though there were many signs of economic distress well in advance of that).

But these clean, precise dates are only chosen in retrospect. People experiencing the events at the time rarely understand their significance.

I think it’s possible that future historians may look back at Silicon Valley Bank’s collapse as one of those iconic events that signals a major shift… potentially the end of American geopolitical and economic dominance.

I’m not making this assertion to be dramatic; rather I think that anyone who takes an objective look at the facts—

• the appalling $31+ trillion national debt
• the government’s addiction to spending and multi-trillion dollar deficits
• social dysfunction and “mostly peaceful” protests
• the decline in military strength
• rampant inflation and central bank folly
• extreme government incompetence
• insolvency in major programs like Social Security

— will reach the same conclusion that the United States is past its peak and in decline.

Now on top of everything else we can add a loss of confidence in the US banking system.

Obviously I take no pleasure in acknowledging the US is in decline. But that doesn’t make it any less true. And this has been Sovereign Man’s core ethos since inception back in 2009.

Back when I started this company it was considered extremely controversial when I said the US was in decline, or that there would be larger problems in the banking system, or that the breakdown of social cohesion would only get worse.

But today these challenges are so obvious that they’re impossible to deny.

You can never solve a problem until you first admit you have one.

And most of the corrupt sycophants masquerading as political leadership are incapable of admitting problems, nor discussing them rationally, let alone solving them.

But you and I do not have that disability. We are free to exercise the full range of human ingenuity and creativity with which we have been fortunately endowed.

So while the people in charge continue to never miss an opportunity to demonstrate their uselessness, we have a whole world of freedom and opportunity at our disposal.

This is the topic of today’s podcast.

First I review the huge issues with the Silicon Valley Bank collapse. Honestly when you look at it from a big picture perspective, it’s littered with mind-numbing incompetence.

The politicians who received donations from SVB’s Political Action Committee missed it. The Wall Street hot shots missed it. The credit ratings agencies missed it. The regulators missed it. The Federal Reserve missed it.

But now the Federal Reserve has launched a new program that exposes the US dollar— and everyone who uses it— to significant risk.

Think about this from the perspective of foreign governments and central banks.

Foreigners bought boatloads of US government debt over the past few years, especially in the early days of the pandemic.

In fact foreign ownership of US government debt has increased by $1 trillion since the start of the pandemic, and now amounts to more than $7.6 trillion.

But thanks to Fed policy, these foreign institutions are in the same boat as Silicon Valley Bank— they’re sitting on huge losses in their bond portfolios. They’ve also suffered from pitiful returns, high inflation, AND exchange rate losses.

In short, any foreign institution that bought US government bonds over the past few years is sitting on huge losses.

Plus now they’re watching with bewilderment as US politicians prove completely incapable of solving their debt crisis.

And on top of everything else they’ve just witnessed multiple bank runs in America, followed by the Federal Reserve’s pledge to put the dollar at further risk.

If you were a foreign government or central bank, would you want to continue buying US government debt? Would you want to continue holding your national savings in US dollars?

Probably not. Rather, they’re probably sick to death of all these histrionics.

We won’t know until years into the future, but SVB’s collapse (and the Fed’s response) may end up being the final nail in the coffin for the US dollar’s dominance.

You can listen to the podcast here.

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[00:00:00.970]

Today we're going to go back in time to Thursday, October 24, 1907, precisely 01:30 p.m.. It's a guy named Ransom Thomas. Great name ransom Thomas. He was the head of the New York Stock Exchange. And he's frantically rushing into the offices of JP.  

[00:00:17.720]

Morgan. And I'm not talking about he's rushing into the, like the bank, JP. Morgan. I'm talking about he's going into the office of the guy J. Morgan.  

[00:00:25.440]

1. P. Morgan is the banker of bankers. He is the head of the New York banking establishment. And ransom.

 

[00:00:31.630]

Thomas tells JP. Morgan there's about to be a massive financial catastrophe. Now this is one of these things. J. P.  

[00:00:38.750]

Morgan must have rolled his eyes and said, oh my God, here we go again. Because in this period of time, this is actually known as the Panic of 19 Seven. The Panic of 19 seven was a really big deal in US. Financial history. It had started just a couple of weeks before where some stock speculators, they were trying to get control of this copper company and they'd actually basically run the company in the ground.  

[00:01:00.220]

They shorted the stock all the way down where the stock collapsed. And when the price of this copper company stock collapsed, it actually brought down a bank, right, because there was this bank that had actually had been exposed to this copper company. And now with the copper company stock down, the bank said, oh my God, we've lost all our capital. And so the bank went under. Well, this is the way it works in the banking system.  

[00:01:22.410]

It very seldom does one bank, especially a fairly large bank, go under by itself. Sometimes banks, especially large banks, are so big that other banks have business with them, other banks are exposed to them. We saw this in 2008. You had these huge companies, these huge banks that went under and it caused this chain reaction. Lehman brothers went under.  

[00:01:41.090]

And then all of a sudden, everybody that was doing business with Lehman Brothers suddenly now they lost billions of dollars. And then they lost billions of dollars. They went bankrupt. And then when those secondary banks went bankrupt, everybody that was doing business with them went bankrupt. They started chain reaction.  

[00:01:55.240]

And this is what happened in 1907. There's a chain reaction. This one copper company goes under, the stock price collapse, one bank goes out of business, which meant another bank went out of business. And then another and another and another start a chain reaction. And JP.  

[00:02:08.960]

Morgan had actually stepped in to try and prevent that. It was a couple of weeks before, about a week before JPMorgan. Had stepped in. He said, okay, you know what, guys? We got to do something about this.  

[00:02:17.790]

So he calls up all of his wealthiest friends and said, let's start making deposits in these banks. Let's start trying to provide confidence. Let's start telling everybody that we're confident in the banking system and actually putting money in all these troubled banks. And they did that. Actually, JP.  

[00:02:30.680]

Morgan put lots of money in this case, actually a lot of his own money. He convinced his rich friends like John Rockefeller to go and put money in some of these struggling banks and calling reporters and giving press conferences saying, I'm going to pledge so much of my wealth to make sure that the banking system doesn't fail. Everything's fine. If I'm confident, then all these the little people out there should be confident as well. And so they thought that they had kind of gotten that under control.  

[00:02:55.720]

But now here, a couple of days later, thursday, October 24, now all of a sudden, the head of the New York Stock Exchange comes running into his office and he says, we got a problem. So imagine you just imagine JPMorg. Just the exasperation go, what is it now? Oh, my God, we just put so much money to shore up the banking system and restore confidence. What is the problem now?  

[00:03:15.600]

Well, now there's a problem on the stock exchange. Now there are all these brokerages and these broker houses that they were about to go under because they couldn't get financing from the banks, and it was going to be a total catastrophe. And so the head of the stock exchange, he says, we need $25 million. And that was a lot of money, obviously, back then. This is 130.  

[00:03:33.110]

And so Morgan, immediately he starts summoning all the other bank presidents on Wall Street, said, you guys need to come to my office right now. So everybody was running up when JP. Morgan said, you need to come to my office now. Everybody stopped what they're doing and they ran over to JPMorgan's office, and he got everybody together in a room. It's 02:16 p.m..  

[00:03:54.560]

He gets everybody together in a room, and he said, we've got to raise $25 million, like, now, like now, in a matter of minutes. And so they did. And by 230, about 2023, $24 million basically managed to reach the New York Stock Exchange. And they saved the day. And the stock exchange didn't have to close, and the markets were able to continue functioning because I think everybody knew that this was just going to be another thing, that if the stock market had to close early, the market failed.  

[00:04:23.660]

There was some kind of huge issue with the stock market that would again be one of these things that caused everybody to panic, and they'd start taking their money out of the banks, and it would have been a total disaster. And so this continued for quite some time, and eventually things calmed down. Eventually things calmed down. Took several weeks of I mean, it must have been incredibly tense. Incredibly tense.  

[00:04:43.780]

But finally everything calmed down. And the panic of 19 seven, as bad as it was total, full blown financial calamity was averted. And in the aftermath of all this, of course, politicians being politicians. There were hearings and committee meetings and all these things. And one of the things that they decided to come up with was they said, we need a central bank.  

[00:05:04.070]

We have to have a central bank, we have to have some lender of last resort, we have to have some function in there that somebody that's able to provide essentially limitless amounts of liquidity. So in the event that there is another financial panic, we've got this central bank that's able to go out and make emergency loans to prop up the financial system, emergency loans to prop up the market, emergency loans to prop up the banks. And this is essentially what ended up happening, that all these bankers got together in Jekyll Island later on, and in 1913, they passed the Federal Reserve Act and they created the Federal Reserve. Now, the story behind that is actually much, much longer. We could do an entire podcast just on that.  

[00:05:41.450]

Honestly, it's almost like a murder mystery. There's just so much intrigue in this and how that was actually passed and how it came to pass. But I want to focus on that. This is actually the birth of the Federal Reserve is now 110 years old, and the Panic of 19 Seven is like many events throughout history. It is the event, it signals a new era.  

[00:06:05.390]

It signals something so important. The Panic of 19 Seven was sort of the end of this, let's say, unregulated financial era. And it ushers in the era of the central bank, where now everything's regulated and all these rules and supervision and so forth. And this is the thing that happens so often throughout history, is that there is often some iconic event or series of events that essentially signal this major shift or transition. And we've seen this again over and over throughout history.  

[00:06:35.070]

An easy example, 476 Ad, you've got this barbarian king, Otoeser, comes down and deposes the Western Roman Emperor, this kid, Romulus Augustus. And this is the iconic event that historians circle and say, that was the end of the Western Roman Empire. Now, what's interesting is that at the time, if you were in the Western Roman Empire, if you were in Italy at the time, and you heard about this and say, oh, Ramos Augusta was deposed. Is it Tuesday again? Oh, wow, another Roman Emperor has been deposed.  

[00:07:03.250]

Big deal, big whoop, who cares? It happens all the time. It was kind of regarded as just a passing event. Nobody really cared. It wasn't a big deal.  

[00:07:10.640]

Nobody looked at that and said, ghastly event, that the Western Roman Empire has now fallen. Nobody viewed it that way. Things are already so bad in the Western Roman Empire. Nobody really cared, right? But historians view this.  

[00:07:23.790]

That's the iconic event that signals the transition and the end of the Western Roman Empire. In the same way the Panic of 19 Seven sort of signals this shift in US economic history, the stock market crash in October 1929. There's actually a series of crashes over a period of several days. But it's often what people think about the stock market crash in October 1929 as that iconic event that signaled the Great Depression. There are a lot of signs of the Great Depression really unfolding and really major economic crisis well before the stock market crash in October 1929.  

[00:07:57.180]

But the stock market crash is the thing that sort of that most people think of when they think about the Great Depression. We talked about last week. We did a whole podcast. We talked about the Reformation. We talked about Martin Luther.  

[00:08:08.800]

And even though there were plenty of signs of the Reformation in advance of Martin Luther, it's this iconic event of Martin Luther. The legend, the mythology of Martin Luther marching to the church door in Wittenberg and proudly nailing his 95 Theses to the door and sparking this major movement in human history. That's the iconic event. And I think if you go forward in time decades from now in the way that if you went forward in time decades after the Great Depression, high school students read about the Great Depression, they read about the stock market crash and all these things. I think if you go forward in time decades and decades from now, what will future historians circle about our own time?  

[00:08:52.200]

I think it's actually possible that one of the things that they circle is the Silicon Valley bank collapse from last week. They may, in fact, say March what was it been? March 10, 2023? Silicon Valley bank collapse. This might be one of those things that we read about, just like the stock market crash or Romulus Augustus or Martin Luther.  

[00:09:11.670]

This might be one of those iconic events that signifies this major it's that signal of this major trend. And God knows there's so many of them, but the major trend that we're talking about, so many signals, so many different events. We could go back and we could say, oh, well, there was the debacle in Afghanistan, the helicopters over the embassy in Kabul. We could look at, you know, we could look at COVID, we could look at the Pandemic. We could look at so many different things that might signal that.  

[00:09:37.390]

But the major trend is essentially the decline, the peak and decline of the United States, the dominant superpower. And you could say, really, the west in general, but specifically the US. Is the dominant superpower. And I don't think it's controversial anymore to say that the US. Is in decline.  

[00:09:57.890]

I started saying this when I started Sovereign Man back in 2009, and it was a very controversial thing to say back in 2009. But I was one of the people saying it in 2009, saying, look, this is not a pretty picture. You got a lot of debt, you got a lot of deficits, you got wars, you've got really funny stuff happening with the currency and the central bank and so many things that just don't make sense. This is obviously a place that's past its peak, and I don't take any pleasure in saying that, but I think it's important. Again, I went to West Point.  

[00:10:26.440]

I served in the military. I have absolutely no pleasure in saying that the United States has passed its peak. But I think any rational individual who's being intellectually honest has to take a very sobering appraisal of the facts, the actual objective facts, not the political spin, but the actual facts and data that are publicly available and out there for everybody to see and make an honest assessment. Because if you understand these trends and you understand again, throughout history, you could see there's never been a dominant superpower that's lasted forever. You can go back to the empire of Alexander the Great, the Romans, the Mesopotamians, the Assyrian Empire, the Ottoman Empire.  

[00:11:07.840]

I mean, there's just so many of these instances throughout history. Regional powers. What we can see is that power, great powers, rise and fall, reserve currencies, rise and fall. They come and go. These things happen over and over and over again.  

[00:11:20.200]

History is so cyclical. Rise and fall, rise and fall. And it's silly. Quite often, most dominant superpowers, the Romans and the French and everybody at a certain point just simply assume that their power and dominance would last forever. But it never does.  

[00:11:36.060]

It never does. And if you understand those cycles of history, you understand, you take really an intellectually honest approach to examine the facts and circumstances that are publicly available for anybody to see. I think any rational person would draw the same conclusion, saying, this is a place that's in decline, it's past its peak, and that doesn't mean the world is coming to an end. It doesn't mean that civilization and life as we know it is going to fundamentally disappear forever. No, of course not.  

[00:12:04.810]

That would be super dramatic. There are, of course, people out there talking about the collapse of this and the collapse of that and all this sort of stuff. But that's silly. That's silly. The world isn't coming to an end.  

[00:12:15.530]

Nobody's going to spontaneously combust. But a shift to transition away from US. Dominance, a shift in transition away from the dominance of the dollar as the main predominant reserve currency in the world, that's a really big deal. It means that people, I think, especially in the US. Or people that are really exposed to US.  

[00:12:36.050]

Dollars, have some thinking to do, have some planning to do, have some things that you really got to make some plans, and you got to take some steps to reduce the risk and your exposure to some of that, because it's a really, really big deal. Again, if you look to history and you see the economic effects of transition from being the dominant superpower to going in decline, it's usually a really big deal. The french and the British and the Romans and there's so many examples of this. Very seldom, if ever do we have an example of some dominant superpower that goes into a period of decline and everything's just fine. There's no economic consequences, there's no social consequences.  

[00:13:17.370]

That's a really rare feat. So this has been the ethos of sovereign of our organization really since inception. And again, to say these things back in 2009 was considered really quite radical or quite controversial. I think now it seems pretty clear. Most people could understand, yeah, this is a place that's in decline and if we go back, if we think about the future and we think how are future historians going to regard our time?  

[00:13:45.270]

There's going to be something that they circle on the calendar. It's going to be some iconic event that's going to say this is what really signaled the decline. What will that be? Will it be the withdrawal from Afghanistan? Will it be COVID-19?  

[00:13:58.000]

Will it be so many different things? I think they could point to, they could point to elections, they could point to whatever, they could point to so many different things. But to be fair, I think it's possible that the Silicon Valley Bank collapsed last week. Could be one of the things that they circle as that iconic event. I'm not trying to be dramatic in that but I think it's important to understand that the Silicon Valley Bank collapse and the subsequent consequences, this is a really really big deal and I think a lot of people don't fully appreciate how big of a deal this really is.  

[00:14:29.930]

And this is what I want to talk about. I've been writing about this a lot this week and what I want to do is kind of briefly summarize some of those points because the long term implications for this are really extraordinary. Number one, it's important to remember silicon Valley Bank did not go bust because they had bought some crazy high risk investment. This is banks notoriously take their customers money and they go and buy stuff with it. They go and buy assets, they make loans, they buy bonds, they do all sorts of stuff.  

[00:14:55.940]

Back in 2006, 2005, banks were going out and buying these ridiculous super high risk mortgage bonds. They were out making loans to unemployed homeless people and they were doing it with your money, with our money, with depositors money, taking these crazy risks and pretending like there was never going to be any consequence to that whatsoever. Obviously it was stupid. It almost brought down the entire US economy, the entire US financial system, the global financial system, which is why they called the global financial crisis the GFC. When it finally busted in 2008, silicon Valley Bank wasn't doing any of that.  

[00:15:29.880]

Silicon Valley Bank didn't go bust because they'd been making loans to unemployed homeless people. They went bust because they bought US government bonds. Supposedly the safest investment in the world but it turns out there's no such thing as completely and totally risk free. Even US government bonds which are supposed to be the safest investment in the world do carry risk. There is a risk that the government will not pay you back and I think the longer term bond you get if you get a 28 day T bill you're probably okay.  

[00:15:55.000]

If you buy a 30 year bond, you're really taking a lot of risk there. Because the US. Government finance is getting worse and worse. And now, obviously, they have this debt ceiling fiasco, so who knows what that looks like down the road? But US.  

[00:16:08.230]

Government bonds can also lose value in the same way that any other bond can lose value. Now most people understand the stock market pretty intuitively. You understand that companies have stock prices stock prices go up and down sometimes they have dividend yields and so forth. A lot of people don't fully understand bonds and bond prices. Well, the number one rule to understand is that bonds lose value when interest rates increase.  

[00:16:29.810]

And if you think about it really it actually makes a lot of sense. Bonds bonds are basically it's essentially usually considered fixed income. Sometimes bonds can be variable but for the most part you have this sort of fixed rate of return. You buy a bond and you get some certain yield and that yield lasts throughout the maturity of the bond. Again, every bond is different but this is the way, for example, most US government bonds work.  

[00:16:54.260]

There are some exceptions to this tips and things like that. But if you go out and buy like a ten year treasury for example, basically you're going to get this fixed rate of return for ten years and that's the way it works. And so ten year yields were basically nothing. If you go back to 2000 and 22,021 I think the all time low was like eight basis points that some poor bastard bid on US ten year Treasuries back at the very beginning of COVID And so if you think about eight basis points remember a basis point is one 100th of 1% so eight basis points means basically a yield of 0.8%.  

[00:17:35.810]

If you bought a government bond at an eight basis point yield that means that that's all you're going to make. Your rate of return is locked in for ten years that's all you're going to make is eight basis points. You're going to make an 8% yield every year. I mean obviously that's nothing that's horrible. Now interest rates are obviously significantly higher so you've got this bond that you bought now a couple of years ago that's making 0.8% the government's now issuing new bonds the new ten year Treasuries that the government's issuing are paying three and a half, four, four and a quarter percent.  

[00:18:08.890]

So if somebody can go out and buy a new bond that yields let's say 4% or 400 basis points right and you've got your bond that's stuck locked in at eight basis points. And now all of a sudden you decide, hey I want to sell my bond. Well why the hell would anybody want to buy your bond? It's only yielding eight basis points. Somebody could literally go out and get 500 times as much.  

[00:18:29.650]

They get 400 basis points or 4% from the new bonds. So why would anybody want to pay top dollar for your bond that's yielding eight basis points when they can go out and buy a new one for 400, right? It just doesn't make any sense. So if you want to sell your bond that's stuck at eight basis points locked in for the next several years at eight basis points, it means the only way you're going to be able to sell it is if you heavily discount the price. Your bond has lost value because interest rates have increased.  

[00:18:56.550]

Makes sense, right? So this is what happened with Silicon Valley Bank. These guys went out and it was stupid, but these guys went out and they bought all these long term government bonds and agency debt, et cetera. And they did so at a time when interest rates were basically nothing. So Silicon Valley Bank is now sitting on these long term Treasuries and US housing bonds and so forth and the rates are like nothing.  

[00:19:22.770]

And now all of a sudden interest rates have increased substantially. Well guess what? The value of their bond portfolio has declined significantly. Significantly. So this is a really interesting thing because back in 2007, 2008, when these banks started collapsing, 2009, the new lexicon emerged.  

[00:19:42.020]

People started calling them toxic assets, right? All these terrible the Ninja loans and the loans to homeless and unemployed people and all these things they call those, this became known as the toxic securities. Well the new toxic security now apparently is the US government bond because one of the largest banks in the country went bust buying these supposedly safe US. Government bonds. That's how extreme interest rate changes can be.  

[00:20:07.430]

It can wreck havoc in financial markets to the point that a bank can go under by buying US government bonds. Pretty crazy. But again the government here, I mean if you step back and you look at this, the government had spent years trying to prevent another crisis like this. The government spent years after the 2008 crash, the 2009 crisis, dozens and dozens of banks went under. The government steps in, they create these new laws, these new rules, these new regulations.  

[00:20:32.550]

And one of the things that came out of it was stress tests. They said banks, regulators need to, need to make sure that banks pass stress tests to make sure that these banks are going to be able to stay solvent in the event of some kind of economic adversity. Well guess what? Silicon Valley bank followed all the rules. They followed the regulations.  

[00:20:50.190]

There were some rules that they bent they went for a long time without a chief risk officer, which was, I mean, not only a bonehead thing to do, but this is something that the regulators totally missed and apparently we're fine with. I mean it was just another example of all these guys being asleep at the wheel. But Silicon Valley Bank, in its own financial report, they say, quote, this is the most recent financial report from December 31 of last year. They said, we conduct capital stress tests as part of our annual capital planning process. These stress tests allow us to assess the impact of adverse changes in the economy and interest rates on our capital adequacy position.  

[00:21:26.440]

So Silicon Valley Bank was in fact stress testing its entire portfolio to say, what's going to happen to our portfolio if interest rates rise? And it's not like they did this in a vacuum. They were being supervised by the regulators. So the regulators saw them taking these stress tests, undergoing these stress tests and said, oh great, you guys are good to go. So this is such a hilarious failure of the regulators.  

[00:21:54.110]

Once again, you got Congress, they went and passed all these laws, didn't do any good. The regulators supervising all this didn't do any good. The banks complying with this stuff didn't do any good. The mountain of regulation and scrutiny amounted to nothing. And one of the really ironic parts about this, of course, is that the guy that wrote the cornerstone banking legislation is called the DoddFrank Act, partly named after this guy, Barney Frank.  

[00:22:20.310]

Barney Frank was a hardcore left leaning, hated big businesses, hated big banks, loved high taxes, all that sort of stuff. He was the guy who was the architect behind the legislation that requires stress testing and deeper supervision and scrutiny of banks. Well wouldn't you know it? This guy, after he retired, suddenly discovers capitalism, embraces his newfound love for capitalism, goes and joins the board of, became a director on the board of directors of one of these banks that just went under. This is the guy that wrote the legislation, and a lot of good that did.  

[00:22:54.980]

And it's just another example of politicians just don't actually understand the problem. They might have had good intentions, but it doesn't matter because they go and they create these rules. Fast forward ten or 15 years and it turns out all the rules ended up doing absolutely no good whatsoever. What's going to happen now? They're going to come up with new rules, right?  

[00:23:14.170]

This is what they always do. They come up with new rules. They go, oh well, the old rules didn't work, so what do we need? We need new rules. So they come up with more rules and more rules and more rules and this ridiculous cycle never ends.  

[00:23:26.310]

Yes, Silicon Valley Bank was stupid about the way they did it. They bought $120,000,000,000, most of that in bonds. Most of that was long term bonds with maturities going ten to 2030 years at a time, 30 year maturity. I mean they were taking on huge interest rate risk. At some point somebody in that bank should have been like, hey guys, you realize if interest rates go up to like three 4%, we're going to be totally screwed.  

[00:23:52.900]

But apparently nobody realized that. So they just kept buying these ultra long term government bonds. And again the regulators saw it. It's not like the regulators didn't have access to that information. The regulators were supervising them the whole time and said, oh great job Silicon Valley Bank.  

[00:24:06.420]

Nothing to see here. You're doing a great job. So Silicon Valley Bank is not some innocent babe in this whole scenario. They were totally stupid. And obviously the fact that senior management was selling stock before the collapse, it looks really bad, but a lot of things they're doing look really bad.  

[00:24:24.710]

But you got to look at the government's role in all of this, passing all these rules that amounted to nothing. The regulator's rules. The regulators saw all of this information and not just a couple of months ago. It's going back two years. I mean the regulators should have seen in 2020, hey, you guys are loading up on a lot of long term debt that's going to expose you to interest rate risk.  

[00:24:44.240]

But they didn't. Nobody said a word. All the Wall Street analysts said nothing. In fact when Silicon Valley Bank released its earnings report in mid January about two months ago, and their earnings report said very clearly, hey, we're basically insolvent because our unrealized losses on our bond portfolio are so vast, our entire capital is wiped out. What happened to the stock price?  

[00:25:06.070]

It went through the roof within a matter of days of them announcing basically that they were insolvent. All these hotshot wall street traders and investors and analysts bid up the Silicon Valley Bank stock price from in a matter of days after announcing essentially that they were insolvent on a mark to market basis. So there's just so much head scratching, incompetence and stupidity. Go look at all the regulations you passed. The guy who wrote the regulations is on the board.  

[00:25:35.920]

Now discovered capitalism is on the board of one of these failed banks. The Wall Street guys didn't see it. The regulars were totally asleep with the wheel. And then of course now you've got the Federal Reserve. The Federal Reserve is another basically bank regulator.  

[00:25:49.140]

They supervise all of their member banks. So the Federal Reserve, the central bank in the US, which is the Federal Reserve, is what came out of the panic of 19 seven. They said we need a central bank. We need a bank that's going to be a lender of last resort. So when there's a crisis like this they can go out and make emergency loans.  

[00:26:05.830]

This is what the Fed does. The Fed is there in part to supervise the financial system. They have an entire. Department whose responsibility is to supervise banks across the US. Banking system.  

[00:26:16.260]

The Fed had access to this information months ago. What do they do about it? Nothing, right? They did nothing about it in advance, and now all of a sudden, Silicon Valley Bank went under. Bear in mind, the chairman of the Federal Reserve three days before Silicon Valley Bank went under, testified to the United States Senate Banking Committee that there was no risk.  

[00:26:35.060]

He says, quote, nothing in the data suggests that we've tightened too much nothing in the data suggests that we've raised interest rates too much too quickly. Nothing to see here, people. Everything's fine. Three days later, one of the largest banks in the United States went under because they had bought US. Government bonds, right?  

[00:26:52.320]

That's one of the reasons why I think if you step back and how future historians are going to look at this, this thing is just boiling over with incompetence in every step of the way. Where people think, future historians, you just got to look at this and go, how did you not see this? How did the regulators not see this? How did the politicians not see it? How did the bank not see it?  

[00:27:11.450]

How did all these people, how did the central bank, how do these key officials of the Federal Reserve, where the guy went and testified in front of the Senate and said, everything's fine, there's no risk in the financial system. I mean, talk about just mind bending incompetence. This is why this may be not guaranteed, but it may be the event that future historians circle and say, that's the iconic event that really signaled the decline of the United States. When you see, like, these are supposed to be the experts of experts of experts, the central bankers, the hotshot Wall Street guys, the financiers, all this, and nobody saw it coming. In an era where they're going and doing stress tests and following all the rules, how did this possibly happen?  

[00:27:55.660]

This is ridiculous. None of these guys saw it. And so how do they respond to it, right? How do they respond to it? Well, the first thing they did is they had to roll out the guy who shakes hands with thin air.  

[00:28:06.360]

They put him on camera to say, oh, the banking system is strong, and I have full confidence in the banking system. They sent out the Treasury Secretary to do the same thing. I have full confidence in the banking system. And then what happened, right? The FDIC stepped in and said, we're going to fully guarantee all bank deposits at Silicon Valley Bank.  

[00:28:24.470]

And that's a departure from what they usually do. They usually guarantee deposits up to $250,000. But in this case, we're going to make an exception. Or as I like to say, we're going to make an exception. Again, it's yet another exception from the FDIC.  

[00:28:38.530]

And so the FDIC then made an exception. We're going to guarantee all deposits, even if your deposit balance is above $250,000. So this sparked widespread controversy, said, oh, they're bailing out the depositors, and this is a taxpayer funded bailout. Again, we need to be intellectually honest. It's not a taxpayer funded bailout.  

[00:28:58.030]

I'm no fan of a lot of these parties involved, but the reality is being intellectually honest, the FDIC is funded by banks, right? The FDIC's got $128,000,000,000 insurance fund. And the real irony here is that where does the FDIC invest its insurance fund? They invest all the $128,000,000,000 in US government bonds, right? Which, by the way, have massive unrealized losses, just like Silicon Valley Bank.  

[00:29:23.660]

So maybe the FDIC needs a bailout now because these guys are underwater on their bond portfolio. But the FDIC gets this money, this $128,000,000,000, by charging fees to its member banks. So these big Wall Street banks pay fees to the FDIC. The FDIC then pools all that money together into an insurance fund, basically. And then when a bank goes under, they dip into that insurance fund to make depositors whole.  

[00:29:47.240]

In this particular case, instead of just smaller deposits with $250,000 or less, they decide to bail out everybody. So essentially, this is not a taxpayer funded bailout. This is a bailout where Wall Street banks are bailing out wealthy West Coast depositors in Silicon Valley bank. That's essentially what this is. It's not a taxpayer funded bailout.  

[00:30:05.930]

But the real bailout is not the FDIC. The real bailout is from the Federal Reserve. And the Federal Reserve. This is the extraordinary thing. And also one of the reasons why I think future historians, or even economic historians in particular, would look at this and circle this as the iconic event, because it's also about the response, not just the blundering incompetence of all the people that are involved, the Wall Street analysts, the bankers, the central bankers, all these people that are involved.  

[00:30:32.030]

It's the response. And so the Fed stepped in and they just created this new program. They invented a new program called the Bank Term Funding Facility. Sorry. Bank Term Funding program.  

[00:30:43.250]

Btfp. I think it's what it's called. Btfp or bank term facility program, something like that. Anyways, it doesn't matter because I say it's believe the fiction people. That's really to me what it actually stands for, when in my mind, Btfp stands for believe the fiction people.  

[00:30:56.930]

My friend Carl says, Believe the fake paper. I like that one, too, because the idea is they're just making it up. They're just making up everything. So the idea is, let's say you're Silicon Valley Bank, right? You spend $120,000,000,000 on bonds.  

[00:31:09.350]

You spend $120,000,000,000 on bonds. And by the way, you spend $120,000,000,000 of your customers money on bonds. And so this is your customers money. And $120,000,000,000 now, it's worth like $100 billion. At this point, their last financial disclosure, they had about $17 billion in losses.  

[00:31:27.520]

Maybe they're probably up to $20 billion in losses now. So let's say out of that $120,000,000,000 you've lost 20 billion. Now you're down to it. Your bonds are now worth $100 billion, no longer 120. Well, what does the Fed say?  

[00:31:39.200]

No problem, bro, no problem. We will loan you money based on the entire, the original $120,000,000,000, right? So this is the way this works. Remember the Federal Reserve was created out of the panic of 19 seven. It took them a few years.  

[00:31:53.750]

All the bankers had to again, it's like a murder mystery story, has all sorts of intrigue and secret trips and all these things. But they got this Federal Reserve Act passed in 1913 and part of the charter of the Federal Reserve, that part of the whole point of its existence. The reason it came into existence was to act as a financial stabilized, to act as a lender of last resort. So that if there is some problem in the banking system, banks are going under, markets are going under, financial players are going under. The bank's able to step in and just start putting liquidity in the system, say no problem, here's some money, here's some money, here's some money.  

[00:32:31.140]

They make loans, emergency loans to banks to stabilize the financial system. They think about how loans work. Well, when you and I go to the bank and get a loan, we've got to post some kind of collateral. People want a mortgage, right? They use their house as collateral and the bank loans the money using the house as collateral.  

[00:32:48.570]

When you get a car loan, you put your car up, the car is collateral, the automobile is collateral. You put down a down payment and the automobile is collateral. People get loans when they buy jets, when they buy businesses, buy factory equipment, all sorts of things, right? So a lot of times these loans that we make, consumer loans are often secured. They have collateral backing them up.  

[00:33:09.070]

It's the same thing when banks borrow money, commercial banks borrow money from the central bank. When a commercial bank's got to borrow money from a central bank, this is actually written into the law, the Federal Reserve Act. The bank is supposed to post some kind of collateral, right? So the bank says, oh well, here I've got this bond portfolio as collateral. I've got $120,000,000,000.  

[00:33:29.490]

I got a bond portfolio that I paid $120,000,000,000 for but is now worth 100. So I'll post that as collateral. So now, ordinarily a central bank would say, well if your bond portfolio is worth you bought it for 120, it's worth 100. But we need to reduce our risk as a central bank. So we'll loan you like 90 billion, we'll loan you 80 billion based on the market value of your bond portfolio.  

[00:33:55.060]

So we're going to get $100 billion in market value of assets. We're going to loan you $80 billion. So that way if you commercial bank default, then that way we still have some margin of safety and we're not going to take a loss. But that's not what the central bank is doing now, what the Federal Reserve is doing with this Btfp, believe the fake paper, believe the fiction, people is they're saying, oh, you've got $20 billion in losses. Well, we're just going to pretend that you don't.  

[00:34:20.150]

We're going to pretend that your bonds are worth more than they're actually worth right now. We're going to pretend they're worth as much as you paid. We're going to pretend that they're worth even more technically that you paid. Because actually, the program, I mean, this is actually so ridiculous. The part that's really offensive is that the Fed put so much thought into this that all they could come up with was a half page term sheet.  

[00:34:38.860]

There's a half a page, basically, of explanation on what this Btfp really is. It does most of these things, these bureaucracies that go on for hundreds of pages on what it is and the law and the regulations, all this stuff. It's half a page. Half a page basically saying, we'll give you 100 cents on the dollar of the face value of the bond. Most of the time when banks buy bonds, they don't actually pay full face value.  

[00:34:59.550]

They pay a little bit less than face value. So not only is the Federal Reserve going to loan more than the bond portfolios are worth, they're actually loaning more than the banks paid. They're loaning more than the banks paid. So this is total insanity. This is complete total insanity.  

[00:35:15.790]

This is as stupid as the subprime lending crisis back in 2006, 2007, when banks were going out loaning money to unemployed homeless people, right, what were banks doing? They were saying, oh, because banks are all in competition with each other, everybody wanted to write these mortgages. And so you had one bank saying, well, we'll give you a loan that's equal to 80% of the home's value. And the other bank would say, oh, well, we'll give you 90%. And the other bank said, we'll give you 100%.  

[00:35:40.060]

And it got so ridiculous. There were banks that were making loans for 100 and 510% of a home's value. A lot of times even it was they'd say, oh, I'm going to buy a house for $300,000. The purchase price was $300,000, but the home's value might be they say, oh, the value of the house. The appraiser would come in and say the house is actually worth $320,000, and the bank would go in and give somebody 105% of the value of the house, not even the purchase price.  

[00:36:07.580]

I mean, it was so stupid. It was so high risk. The bank is loaning more money than the house is worth more money than the buyer is actually supposed to pay, right? So who's on the hook in that scenario? If the buyer doesn't pay or the home declines in value, who's on the hook?  

[00:36:24.670]

Well, the bank is on the hook. But when you think about it. No, the bank's not on the hook. The bank is just some middleman in this whole scenario. Who's on the hook?  

[00:36:32.180]

The depositors are on the hook because the bank is making these insane loans with their depositors money, right. And so this is really the issue because what the Fed has done here is they've said, hey, no problem. We'll loan you just like the subprime crisis where people are loaning more money than the house, is worth more money than people are actually paying for the homes. The Fed's saying, hey, we'll loan you more money than your bonds are worth. We'll loan you more money than you paid for your bonds, even.  

[00:36:59.880]

That's how crazy we are. We're crazy fed right? So we're going to loan you more money than the bonds are worth. And bear in mind that the total potential losses in the banking system right now due to the total sort of lost bond value, according to the FDIC, is between 600 and $650,000,000,000. So that's how much risk the Fed is essentially taking on right now.  

[00:37:21.290]

The Fed is taking on almost $650,000,000,000 in potential losses that these commercial banks just are essentially just getting to pass on directly to the Federal Reserve, right? The Fed is taking on this financial risk, not the banks. The banks get a free pass, as always. The banks get a free pass. The banks get to pretend that they don't have any losses so the banks get to pretend they don't have any losses and pass all that risk directly on to the Fed.  

[00:37:46.760]

The Fed's giving them more money than the bonds are worth, more money than the banks actually paid. And you look at the I challenge anybody to go to the Federal Reserve Act or any of the subsequent legislation and find any part of the Federal Reserve Act that states expressly that they are allowed to just make up whatever value they want for the collateral. It doesn't say that in the Federal Reserve Act, does not give them the authority to do that. The Federal Reserve Act is actually very explicit in what it says because Federal Reserve Act, they knew when they, when they wrote that law, they knew that part of the whole reason why the Fed needs to exist, according to their thinking at the time, was they need a lender of last resort. And so they actually spelled out, this is how you will be a lender of last resort.  

[00:38:26.990]

You can make loans to financial institutions. Sure, that's your role as a central bank. You can loan money to banks, but you have to accept collateral. And they actually say, here's exactly the kind of collateral that you can accept. I mean, actually it says this right there in the law.  

[00:38:41.930]

Nothing in the law gives them the authority to just go and make up whatever value they want to do. So when you think about it, they're making up the value for the bonds. They're making up the authority to do that. To begin with, it's all just make believe values, make believe authorities. This is so full of pretend make believe nonsense.  

[00:38:59.970]

I fully expect the Fed Chairman, in his next press conference, is going to dress up as Big Bird in front of reporters because this is all about pretend and make believe. This is so ridiculous. Nothing about this is actually legal. Congress did not provide the authority for the Federal Reserve to do this. But the Federal Reserve, in the same way that when I explained when banks did this, they're going out making these risky loans, right?  

[00:39:22.790]

They're essentially passing that risk on to their depositors, which as a depositor, you're essentially a creditor of the bank. That's really what you are. You're a creditor of the bank. So the banks, when they're making loans to unemployed homeless people, 105% mortgages, loaning more money than the house is worth, loaning more money than the buyers are actually paying, they're passing that risk on to their deposits, to their creditors. Well, the Fed is doing the same thing, right?  

[00:39:46.170]

Because the Fed is again, they're just a middleman in this. That's just some organization who's ultimately on the hook. Who's ultimately on the hook. People say, oh, the taxpayers on the hook? No, the taxpayers aren't on the hook.  

[00:39:56.280]

It's not the taxpayers because the Feds, if you pull out a US dollar, right? What does it say? What does it say on the US dollar? It says Federal Reserve note. Now, I don't want to get into kind of an existential discussion about the dollar and get philosophical about all this, but realistically, US dollars are the liabilities of the Federal Reserve.  

[00:40:20.640]

The Federal Reserve, if you look at the Federal Reserve's balance sheet, right, it's got assets and it's got liabilities. The Federal Reserve's assets are things like government bonds and housing bonds and all these sorts of things. Its liabilities are US dollars, the money supply across the country. In fact, when the Fed prints money, essentially what they're doing is they're just creating more liabilities for themselves. And so what the Fed is basically doing is they're passing on all this financial risk, $650,000,000,000 to its creditors, which is essentially the US dollar, people that use the US dollar, which is every single man, woman and child in the United States of America, every single foreigner who holds US dollars.  

[00:40:57.940]

And I'll come back to that in a minute. But the Federal Reserve was able to do this, was able to pass on 600 plus billion dollars in potential risk and potential liabilities to make sure that the banks don't lose any money, right? So we're going to pass on all that risk from the banks through the Fed, to every single person in the world, including in the United States, that holds and uses US dollars. And they did it all without any approval from Congress. There was no vote, there was no committee meeting.  

[00:41:26.740]

There was no people on the floor of Congress arguing, debating whether or not the Fed should have this story. They just made up the authority to do it. They're making up the values of these bonds and again, doing this without any actual legal authority whatsoever. It's completely and totally ridiculous. I'm amazed that and this is not the first time the Fed has done this, by the way.  

[00:41:46.310]

The Fed routinely makes up authority to do this, to do all sorts of things. They just make up stuff that they shouldn't be allowed to do. But it's astonishing to me that nobody cares. I wrote about this the other day. I said that the Fed just hijacked American democracy.  

[00:41:59.180]

And yes, there were people always say it's a republic, yes, it's a republican democracy, representative democracy. But the point is, there's supposed to be a say that people, through their elected representatives, have a say in what these officials are allowed to do. But you've got a bunch of unelected people at the Federal Reserve who, by the way, have been wrong about virtually everything. These are the people that three days before Silicon Valley Bank collapse said, there's nothing to see here, there's no risk, everything's fine. Who last year, my favorite quote ever of the Federal Reserve was, now we finally understand how little we understand about inflation.  

[00:42:31.650]

The same people who the previous summer, in 2021 said inflation is transitory, it's going to be over in a couple of months, who a few months prior to that, in February 2021, said, Inflation. There's no inflation. There's not going to be any inflation. What are you talking about? You must be insane.  

[00:42:45.470]

They have been wrong and wrong and wrong and wrong, and now they've been raising rates. They can't get their arms around inflation. They still don't understand inflation. And now what are they going to do? They've just made up the authority they've made up the authority to give themselves the authority to make up whatever value they want to loan $650,000,000,000 and stick every single person in the country who uses US dollars, virtually everybody, with all the risk and all the consequences.  

[00:43:14.690]

It's utterly disgusting. And you can start to see why. I think if people take an honest assessment of this in the future, they're going to look at this and go, wow, this is a really big deal. This may be that iconic event. The longer term implications here, I think, are important to understand.  

[00:43:30.950]

Now, I want to talk about foreigners, right? This is just another sign of rust for the US dollar. And think about it's not just US banks. I was saying, kind of tongue in cheek, who's lost money on their US government bond portfolio. I got Silicon Valley Bank, but I wrote earlier this week, I said, look at Silicon Valley Bank has lost a ton of money.  

[00:43:51.740]

So has everybody else. So has everybody else, every other bank. And all you got to do is just look at their financial reports. Wells Fargo has lost $50 billion. They have $50 billion in unrealized losses according to their own financial statement.  

[00:44:04.040]

This isn't some conspiracy theory. Just look at their financial statement. You can see $50 billion in unrealized losses in their bond portfolio. Every bank, because interest rates have risen so quickly, is sitting on huge losses in their bond portfolios. The FDIC's Insurance fund is sitting on massive unrealized losses in this bond portfolio.  

[00:44:23.530]

The Federal Reserve has $300 billion in unrealized losses in its bond portfolio. Bear in mind, the Federal Reserve only has a few billion dollars in statutory capital. So the central bank of the United States is completely and totally insolvent. Is that a good thing? Probably not.  

[00:44:41.370]

Probably not, right? And so it's everybody in the financial system that holds these bonds, and there's so many of them. And that includes foreigners. It includes foreign banks, foreign governments, foreign central banks, foreign institutions, foreign corporations. These guys bought government, bought US government bonds as well.  

[00:44:58.400]

They bought US government bonds at eight basis points and they've lost their asses. And on top of that, they bought US government bonds at eight basis points. Now those government bonds are way down in value that they bought. So they've lost a lot of value in those government bonds. So basically now they're taking a loss on their investment.  

[00:45:16.670]

On top of that, these bonds are in US dollars. US dollar has lost seven, eight, nine. If you think about going back two years, I mean the rate of inflation over two years, they're down another 1215 percent just because of inflation. On top of that, they're sitting on a US dollar asset. Well, the US dollar has gotten weaker against their home currency, right?  

[00:45:38.590]

You think about something like the renminbi, since over the last couple of years, renminb is probably about 5% stronger than the US dollar. The Singapore dollar is about 8% stronger. Even the Mexican peso is stronger than it was against the US dollar a couple of years ago. So foreigners, they've lost because the bond has lost value. They've suffered inflation on top of that.  

[00:45:59.250]

They've suffered exchange rate risk on top of that. These guys are looking around, they're going, okay, I am so tired of this. Right. Think about a foreigner. It's like you've got all these issues, so many of these issues.  

[00:46:15.750]

Your central bank is insolvent hundreds of billions of dollars in unrealized losses. Now you've signed every holder of the US dollar up for 600 plus billion dollars in risk to backstop the banks, even though by the way, you're running around telling everybody the banks are strong. Well if the banks are so strong, why are you backstopping $600 billion worth of risk? You wouldn't have to do that if the banks are strong. But hey, we'll just move on from that.  

[00:46:36.430]

You got all these issues. You got 31 and a half trillion dollars of US government debt. These guys cannot get their act together. They can't fix anything. They can't stop the spending.  

[00:46:46.060]

They got multitrillion dollar deficits every single year. You got all this risk in the financial system, so many issues, the bickering, the inability for the federal government to do anything positive, to do anything, to actually solve any problem. They can't even acknowledge problems, let alone understand them, let alone discuss them rationally, let alone actually solve anything. And now they just want to spend trillions of dollars more every single year. Who wants to deal with that anymore?  

[00:47:13.680]

If you're a foreigner and you're looking at this going, god, are you kidding me? I don't want to deal with this anymore. I'm sick of it. I am so sick of it. I don't want to deal with this nonsense anymore.  

[00:47:24.500]

Who needs it? Who needs this US dollar, the inflation and the nonsense from the central bank, who needs it anymore? Right? Why would anybody want to keep doing this? And meanwhile you got the Chinese running around the world preaching the gospel of the renminbi, their own currency.  

[00:47:39.550]

They're going around doing deals, making peace between Saudi Arabia and Iran, going around saying, hey, we want to broker a peace in Russia and Ukraine. A lot of people are really starting to take them seriously. A lot of people saying, well, hey, they got a strong economy. They don't do all these crazy things. Maybe we should give their currency a try.  

[00:47:56.550]

I'm not saying that China is the answer or it's a good idea. My point is that people are so sick and tired if they look at you, step back and you look, if you're a foreign institution, you're a foreign central bank, you got to be so sick and tired of this just constant bullshit with the dollar and the US. Economy and the US. Government. Who needs it, right?  

[00:48:17.460]

Why would you keep doing this? Why would you keep taking these losses? It just doesn't make any sense. And the Chinese are going around. They're saying, hey, let's set up oil contracts.  

[00:48:27.500]

Right now most oil contracts are in US. Dollars. Let's start buying and selling oil. Let's start transacting oil markets in our currency in renminbi. Let's start transacting in other financial securities in renminbi.  

[00:48:39.200]

Let's start doing interest rate forwards in renminbi. Let's start doing all these other things in renminbi, actually give people a reason to buy and hold renminbi. And people are going to see, again, foreigners seeing this thing, this crisis in the US. Banking system, and they're going to say, yeah, maybe that's actually a good idea. Maybe we should actually diversify a little bit.  

[00:48:57.640]

We've got too much exposure to the US. Dollar and who needs it, Matt? Who needs this crazy level of just stupidity and incompetence? And this is why. This is why future historians, I think, may actually circle this Silicon Valley bank when they write the economic textbooks in the future.  

[00:49:14.030]

And the way that people look at the stock market crash in 1929, they may say Silicon Valley Bank collapsed 2023. Of course, there are plenty of warning signs of the Great Depression way before the stock market collapsed in October 1929. There were lots of signs of it before that. In the same way there were lots of signs of decline in the US. A decline in appetite for the US dollars, the world's reserve currency.  

[00:49:38.060]

Lots of signs before that. But maybe this becomes that iconic event. We don't really know. But this takes me back to the beginning again. I have written extensively about this.  

[00:49:47.740]

I recorded podcasts about this. We did one a few weeks ago talking about that the war in Ukraine may in fact end up shifting the tide away from the US dollar, because wars often do that throughout history. Wars often signal the changing of the guard from the dominant superpower. And when that happens, the change in the reserve currency isn't that far behind the changing the guard between one superpower and another. They don't even need to be opposing each other.  

[00:50:13.090]

They don't need to be even fighting against each other in the war. We saw this in World War II where the US. Sort of took the mantle of world leadership from the UK. They were on the same side in World War II, but it still happened because wars often do that. Major crises, financial crises often do that.  

[00:50:29.530]

We're seeing both of those at the same time in this whole period of turmoil. Again, the war, of course, the shameful Afghanistan withdrawal, the humiliating helicopters over Kabul, the guy that shakes hands with thin air, the debt ceiling fiasco, now this unraveling of the US banking system. Again, it's not that the US. Is just going to disappear into the night. The world isn't coming to an end.  

[00:50:50.190]

But it is time to acknowledge rationally that the dominant superpower has peaked. It's well past its peak, and we can go back and just take a rational approach of the data of the events that we've seen unfold, and realize, like, yeah, this is what's happening. And it doesn't mean that the world is coming to an end, nor does it mean that anything's going to happen tomorrow. And nothing goes up and down in a straight line. History is very cyclical, but it's not constant in that way.  

[00:51:17.420]

Nothing goes up or down a straight line. We did a couple of podcasts about this. There was a Roman emperor, Aurelian, who took Rome back from the brink and brought Rome back and made Rome reestablish Rome's dominance and power. There were periods of history. I did one about the UK coming into the early 18 hundreds in England.  

[00:51:39.140]

You got Napoleon's at the gate, and you got a guy, the King of England, the King of Britain at the time was a guy who was, like, literally crazy. A guy had lost his mind. I mean, there are all these incredible. Stories about King George supposedly shaking hands with an oak tree, believing that it was the King of Prussia. I mean, it's just ridiculous things.  

[00:51:57.190]

The economy was in the dumps, they had a currency crisis, and yet after that was the most powerful, the most prominent, the most prosperous time in the history of Britain in the 18 hundreds, the PAX Britannica. And there was so much prosperity. Nothing goes up or down in a straight line. So is this in some bleak picture where we've got to get our affairs in order because the world's coming to an end tomorrow afternoon? That's not at all what I'm saying.  

[00:52:21.240]

Nothing goes up or down a straight line. There will be good years and bad years and periods of recovery and periods of decline. But it is important to understand that the United States is very clearly past its peak. That has a lot of implications, lots and lots of implications. Decline ultimately is inevitable, because this has happened over.  

[00:52:39.640]

There has never been an instance in history where the dominant superpower has remained the superpower. If that were the case, then the ancient Sumerians would still be the dominant superpower today. The Romans would be the dominant superpower today. But it just doesn't happen. Superpowers always rise and fall.  

[00:52:54.170]

Reserve currencies rise and fall. And it doesn't mean the world is coming to an end. It does mean, however, that if you're not the superpower, if you don't have the reserve currency, then you can't get away with these ridiculous things that you're getting away with. If you think about all this stuff that's going on right now, the debt ceiling fiasco is a great example. The debt ceiling fiasco is a great example, because you got these people, they can't agree on the debt soon, they can't agree, like, they can't get spending under control, they can't do any of these things.  

[00:53:20.160]

Multitrillion dollar deficits and politicians that actually have the balls to look at the camera, close their thumb and their index finger together and say that it costs nothing. It's the most ridiculous things ever. No other country could get away with that. And we're not even talking about, yeah, Costa Rica is not going to be able to get away with that. But not only is small countries not going to be able to get away with that, big countries aren't going to be able to get away with it.  

[00:53:41.600]

The United Kingdom can't get away with that. The United Kingdom can't get away with endless multitrillion pound deficits. They can't get away with some massive, constantly rising, never falling government debt. They can't get away with it. And we know this to be true.  

[00:53:57.360]

This isn't some wild speculation. We saw this firsthand just six months ago, if you remember, the bond market. Bond investors completely crushed the UK. They caused the pound to go into freefall. They caused us British government debt, known as Gilts, to go into freefall.  

[00:54:14.290]

And the leader of a sovereign government, one of the largest, most powerful economies in the world. The Prime Minister had to resign. Had to resign because investors didn't like her economic plan, right? So this is the sort of thing, this is the reality, right? You don't get away with standing in front of the cameras saying that it costs nothing.  

[00:54:30.180]

You don't get away with trying to dress up multi trillion dollar deficits and 31 and a half trillion dollars in debt and say everything's going to be fine in ten years. They say we're going to cut the deficit by a few hundred billion dollars over a ten year period. Give me a break. Over ten years, cutting the deficit means you still have a deficit. You're saying that even in ten years you can't figure out how to balance your budget over a ten year period?  

[00:54:55.850]

That is disgusting. That is such a horrendous amount of incompetence. And you're just not going to get away with that anymore. That's the whole point. This is the sort of thing that's in store, is that the government is going to be forced to learn how to live within its means.  

[00:55:09.720]

Means there are going to be cuts. There's going to be cuts to Social Security, and we can see when they make cuts to these programs. Look what's happening in France right now. The whole country is on fire. People out in the streets torching cars, they got the garbage strike, all these things.  

[00:55:24.100]

This is the sort of thing that happens. You got strikes, people go on strike cutting essential services. People go out in the streets protesting these things. It creates a lot of social turmoil when you start cutting, start making just sensible modifications to social safety net programs. Same thing.  

[00:55:39.230]

Less spending on defense, which is essentially relinquishing just handing the keys to the castle. You're relinquishing global dominance to the Chinese. Less spending on just about everything, right? They're going to have to live within their means because nobody's going to loan them money anymore and say, oh sure, we'll keep buying your bonds at rates way below the rate of inflation. We'll keep getting killed because of inflation, because of exchange rate differences, because of these terrible yields that we're getting on your bonds.  

[00:56:08.030]

Sure, let's just keep doing that forever because hey, we like you so much, we're just going to keep losing money because we like America. That's just not going to happen. You can't continue to depend on that. And so this has got to change. That's ultimately what this means.  

[00:56:20.890]

It means there's going to be cuts, higher taxes, all these sorts of things. It's going to be a fundamental shift in US economic life. It doesn't mean the world's coming to an end. And by the way, I would add that there are plenty of reasons to be optimistic. I think that the US and the world could be looking at a massive energy renaissance, which I actually hope to discuss with you soon.  

[00:56:43.270]

And it's not the end of the world. They will eventually find the right balance of having strength with economic stability, but they're not there right now. Right now, it's nothing but weakness and it's instability. It's the debt ceiling fiasco. It's all sorts of crisis and uncertainty.  

[00:56:59.200]

And now on top of everything else is a banking crisis, which is why I think down the road, at some point, decades in the future, historians could look at this and circle this and say, march 10, 2023, silicon Valley Bank went bust. And that becomes the iconic event that defines signals the shift of US. Dominance in the world. This is a huge, huge story, and I think people need to be prepared for this. People need to understand the implications.  

[00:57:24.130]

It's not the end of the world, but we cannot continue to do the same things that we've always done, especially to our money, with respect to our investments, with respect to our businesses. It makes sense to really expand our horizons and think critically and differently about what this world is going to look like post US dominance. It is virtually a certainty. And again, future historians may look back and circle this as the moment. Thanks so much for listening, and we'll speak to you again soon.   Close Podcast Transcription

Last June, during the European Central Bank forum, the host asked the chairman of the Federal Reserve about inflation.

The Fed Chairman responded, “I think we now understand better how little we understand about inflation.”

“Uh, that’s not very reassuring,” the host chuckled.

Talk about an understatement. It’s downright terrifying.

This is the Fed Chairman— the High Priest of finance— who has the power to control virtually everything in the economy.

He can conjure trillions of dollars out of thin air practically at will, raise and lower interest rates, push businesses and banks into bankruptcy, and cause people to lose their jobs.

And here he is acknowledging that they didn’t have a clue about inflation.

Thank goodness that was 8 months ago! Certainly by now they’ve really learned everything they need to know.

Wrong. They still don’t have a clue.

This week Fed officials have been busy giving speeches in advance of their interest rate policy meeting later this month.

And they keep complaining that the unemployment rate is too low. Too many people have jobs!!

The Fed is trying to put more people out of work… under the assumption that if more people are unemployed, there will be less spending in the economy, and therefore inflation will fall.

But this is such idiotic thinking.

They may very well be successful in pushing millions of people into the unemployment line.

But everybody knows that as soon as this happens, the government will step in and bail those people out with generous unemployment benefits.

Think about it— the government did this in the 2008 recession, doling out luxurious unemployment benefits that lasted for YEARS.

And during COVID they paid people to NOT work and stay home.

So it’s practically a given that the government will dish out fresh new benefits to newly unemployed workers.

And where will the government get all that money from to pay unemployment benefits? From the FED! Duh. How do these Fed officials not understand this?!?!?

Another thing the Fed has totally missed is the ‘quality’ of the employment numbers. They fret that there’s too much job growth in the US— because they’re just looking at the QUANTITY.

But if you take even a casual look beyond the headline numbers, you’ll see that most of the job growth is for waiters and bartenders. The US labor market doesn’t have red hot job growth for software engineers, biomedical researchers, or senior investment analysts.

America is essentially becoming a bartender economy now.

This is going on in front of their very eyes, but the Fed can’t see it.

If you look at the official minutes and records from the Fed’s policy meetings, you can see what they actually discuss… and it becomes even more obvious they still don’t understand inflation.

They STILL blame inflation on Putin and the evil virus.

There is ZERO discussion about how the government destroyed the economy and labor market with lockdowns, or how oil companies are being chased out of town (leading to higher energy prices), or all the idiotic new rules penned by the woke capitalism mob.

And of course there’s zero discussion about the Fed’s own role in slashing interest rates to zero (and keeping them there for the better part of a decade), or printing more than $8 trillion since the 2008 recession.

There’s no discussion of the $31+ trillion government debt, or last year’s $4 trillion deficit, or the impact of idiotic legislation like the poorly named “Inflation Reduction Act”.

Ultimately they consistently prove that the people in charge of managing the US dollar have still learned absolutely nothing.

When you think about it, that goes for nearly every major institution.

The White House appears to have learned nothing, the media has learned nothing, the high priests of climate change have learned nothing.

The good news though, is that everyone else— who feel the impact of these destructive policies— is learning very quickly.

And people are finally starting to declare independence from the expert class.

This is the topic of our podcast today.

We start by going back in time more than 500 years ago to another period in history when people were under the thumb of the expert class… which routinely proved itself tone deaf and out of touch.

But a revolution took place. Historians call it the Reformation, and people stood up and declared their own independence from the expert class.

This is one of the reasons why I remain so optimistic… because it was from this independence movement that we saw the Age of Enlightenment, the Scientific Revolution, and more.

I think we’re on the cusp of a new movement… and one that will unfold MUCH faster.

Scientists have already successfully conducted nuclear fusion experiments, the most recent was back in December. It’s no longer a pipedream.

And just earlier this week, a group of researchers claimed they had created a superconductor that works at near-ambient temperature.

This is just the tip of the iceberg. There are real advances that are taking place which can actually solve so many of the problems that the political and media elite have gotten us into.

And in many ways, as more and more people realize this, it’s almost like we’re entering a New Reformation.

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Today we're going to go back in time to June 27, 1519 to a place called Pleysenburg Castle in Leipzig, Germany. Now, this is the air of the Holy Roman Empire. And the Emperor Maximilian I had died a few months prior, and there was to be a new emperor elected the following day. And there in Plysonburg Castle, all the workers were there. They were getting ready.  

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They were hanging tapestries and the great hall and putting up chairs and so forth, getting ready for this really big event. And you would think that that event would have something to do with the election of the new emperor. That would be the talk of the town. Oh, my God, who's going to be the new emperor? That's going to be the new emperor chosen?  

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Who's going to be nobody cared, at least not in Leipzig. Perhaps everywhere else across the whole room and empire. They were thinking about that, but not in Leipzig because something far bigger was happening in Leipzig the next day. It was, curiously enough, a debate, which sounds kind of boring. Who cares about a debate?  

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But for these guys, it was like the Super Bowl. It was a huge event because it was a battle between the world's most powerful institution and somebody who we would probably consider today essentially a celebrity influence, an up and coming celebrity influence. And somebody had recently shot to stardom. And they were going to debate together in the great hall of Pleysenberg Castle. And it was such a big deal.  

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Nobody cared about the election of the emperor and who was going to be chosen emperor because it was all about this debate. They were talking about things that up until that moment were basically taboo. You just didn't talk about these things. There was a fierce exchange over the nature of free will. You didn't talk about free will back then.  

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That was a taboo subject. You didn't talk about these things. And it was things that just had never been discussed in public before. And it was a big deal. It became known as the Leipzig debate.  

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And again, on one side, you have the most powerful institution in the world, the Catholic Church, which at that point basically controlled virtually everything. Controlled politics and even warfare and finances across Europe, controlled moral thinking, intellectual development, all these things. What you could and could not say, what you could and could not do. And the Catholic Church was represented by this scholar, this religious scholar named Johan Ek. On the other side, again, this new celebrity influencer who had shot to stardom.  

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He was an academic. He was a professor at the University of Wittenberg. He's a 36 year old guy. His name was Martin Luther. Of course you know the name.  

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And the two debated, and Luther destroyed Ek in this debate. Destroyed Ek. Luther was powerful. He was brilliant. He was insightful, he was funny.  

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And by comparison, eck. Looked just like a stooge compared to Martin Luther. But the thing is that winning the debate wasn't actually Johanneck's goal. Johanneck was really trying to trap Martin Luther into committing some sort of blasphemy. Martin Luther was a thorn in the side of the Catholic Church.  

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He was a problem. And they were trying to figure out a way to make him go away. At first, they thought like, oh, let's just excommunicate him. But they couldn't quite do that because Luther was so popular. So they needed to trap him.  

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They needed to get him to say something was so outrageous, so blasphemous, that the Pope could easily have grounds to excommunicate him. And so Eck was trying to lure Martin Luther into a trap. And they brought up another philosopher, a guy that had actually been burned to the stake by the Church, branded as a heretic. And so they said, Martin Luther, do you agree with this guy who was burned to the stake? And Lou said, well, yeah, actually, there are some things that he said that were completely plausible and reasonable and maybe we should consider them.  

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And so, of course, X, you know, thinking to himself, I got this guy, I got this guy. And so they go back to the Pope and, you know, he tells the Pope said, look, he agreed with this heretic. He agreed with the guy we burned at the stake, and he said it in public, and everybody heard him. So now we got him, right? Now we got him.  

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And he got to sort of pause. Now, we didn't talk about the Pope because the Pope is a the Pope is kind of a very interesting guy in this whole scenario. The Pope is a guy named Leo the 10th. Leo the 10th was born Giovanni Demetici and of course, these from the famous Medici family. And he was actually the son of the most famous Medici of all, lorenzo Dietici, who is known as Lorenzo the Magnificent.  

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Now, Lorenzo the Magnificent was one of the most powerful figures probably in the history of Europe, certainly at this time. And Lorenzo was I mean, he had his fingers in everything. He had been I mean, banking and government and warfare and everything. And of course, why not the Church, right? So he he goes and he has he has a very clear, long term plan about making his son Pope.  

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He pushes his son into religious service starting from the age of seven. And if you could even imagine this, I mean, Lorenzo was so powerful that when his son Giovanni is just 13 years old, he has giovanni made a cardinal. That's how powerful Lorenzo was, is that Giovanni was made a cardinal when he was just a kid, 13 year old cardinal. I mean, what do you think about it today? It's ridiculous, but that's how much power Lorenzo Medici had.  

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And so here there's this 13 year old kid who's made basically a senior executive within the bureaucracy of the church at 13 years old. I mean, the guy's still got pimples all over his face. He's a cardinal now. It's ridiculous. And it wasn't long after that Giovanni de Medici was made Pope Leo the 10th.  

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He was 37 years old. I mean, think about it today. That's incredibly young to be made pope. And he became Pope Leo the 10th. And as you would imagine, he used church resources.  

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He was a Medici, so he used Church resources to advance the interests of his family, to support all his different relatives in banking and government, et cetera. He waged ridiculous wars. There was a war. He waged war against France. There was no reason why they should have gone to war against France.  

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He started joining other wars and basically just shoving his fingers into European politics and completely destroyed Church finances to do so. And while at the same time this guy had extravagant taste, he was legendary for his extravagant this guy had a pet elephant. He had a pet elephant who would wander around Rome. The pet elephant's name was Hanno. I mean, this isn't some crazy story.  

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This is actually a real thing. The guy had a pet elephant. I mean, they were dining like kings, and there was spending so much money. And there was also a lot of rumors about this guy's unquenchable sexual appetite. Some historians debate that and say, well, there's not really any clear evidence, but it's not like they would have written that stuff down.  

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But Leo, he was a human being, right? He was a human being. This isn't about all these things that I'm saying, by the way. This is nothing about the Catholic faith. We're talking about human beings who are basically politicians running a very large institution, who the historical record shows very clearly, at a minimum, abuse their authority.  

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And Leo is no exception to that. There are a lot of people who came before him, a lot of people who came after. And the thing about Martin Luther is martin Luther knew it. Everybody knew it. Everything that Leo did, everything that previous popes did, everybody knew it.  

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And Luther was actually a bit of an apologist for Leo the 10th. He said, but he said, oh, the pope's a good guy, and he had a troubled childhood, sort of like Prince Harry. It's like, oh, boohoo, I'm a royal millionaire, and I've had a difficult life. And that's kind of the way people sort of apologize for Leo. And so Luther was kind of on his side, but where he had a real problem, where he had a real problem, at least at first, he was on his side.  

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But where Luther had a real problem was with the financial corruption. This thing you probably heard of this idea of the selling of indulgences. Now, in the Middle Ages, the concept of an indulgence was very different from what was today, 500 years ago. The indulgence, this in practice was essentially that you were trading eternal salvation in exchange for money. And there's actually a formal.  

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You'd get like a certificate. You get this piece of paper saying, we absolve you of these things. It basically became this snake oil industry. It got so ridiculous. You had a priests and bishops and the Pope himself going out selling these things.  

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There were professionals who would go out and basically broker these deals. There were professionals who would go out. They were called professional partners. And they would go out sometimes they would front run. They would go out and get a bunch of these certificates upfront.  

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They would go and pay the clergy for these certificates and then go out and resell the certificates. It was sort of like sort of like getting like a blank indulgence certificate and then go out and resell the stuff. These people were pardoners. They were professional partners. They go around to people and say, well, oh, are you a center here?  

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Come and give me some gold, and I'll give you this certificate. And everybody knew they were so sick of this stuff. It was so legendary. If you've ever read or at least heard of jeffrey Chaucer's Canterbury Tales in Canterbury, tails is actually one of the tales, is the partner's tale. And the partner actually goes and admits, like, oh, yeah, I totally fleece people.  

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It's so easy to fleece people when you're promising them eternal salvation. And this basically made its way into popular literature at the time. That's how outrageous it was. Everybody knew it. Everybody knew it was bullshit.  

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Everybody was sick and tired of it. And this is the thing that Luther again, this guy, he was a professor of moral theology at the University of Wittenberg. He had a huge problem with this because he thought, why are we lining the pockets of the clergy and these snake oil salesmen? We could do a lot better with that money. Hell, we could just give it to the poor.  

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Poor. If the whole idea is to do something good with this money, instead of giving it to the clergy, just give it to them directly to the poor. Cut out the middlemen, and maybe we'll do some good here. This was Luther's view, and he felt that this concept of selling, of indulgences was extremely immoral from his position as a professor of moral theology. But he viewed it almost as an academic lens.  

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Luther wasn't a revolutionary. He never intended to be a revolutionary. The big story in 1517, Luther writes the 95 Theses, and he goes to the church door in Vittenberg, and he nails the church door, and there's sort of this historical story, like he's marching to the church door with hammer in hand, ready to start a revolution. But that's not what it was at all. Luther was an academic, and his 95 Theses was essentially an academic paper.  

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It was just written almost as something to say, oh, here's some discussion points that maybe we can talk about at some point. And he puts it on the door or the church door in Vinberg because the church door was essentially like a bulletin board. That's where you say, hey, I lost my dog because anybody's seen my dog? And you nailed that to the church door. It was just this community bulletin board.  

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And it wasn't this thing to say, I'm starting a revolution. It was really just this very harmless, innocent sort of event. But what ended up happening was he touched a nerve. Luther touched a nerve. He wasn't the only one.  

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There was somebody he had actually a colleague, a guy named Carlstatt who just a few months prior wrote 152 theses against indulgences. It didn't really catch on because 95 theses was the right number. It was a catchier title or something like that. But, you know, Carl status didn't really catch on. Martin Luther's did.  

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Martin Luther's did. It touched a nerve. There was this there was this, you know, relatively new technology. The printing press. It had been around for a while, but but it was getting more and more popular.  

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And Luther's work was copied and copied and widely circulated. And people were reading this, going, yes, yes, this is exactly what it is. This guy, he nailed it. No pun intended. He nailed it.  

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Luther really touched a nerve. Everybody knew what was going on. Everybody knew the selling of indulgences was a really terrible practice. Everybody knew. It was immoral.  

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It was unethical. These guys are on the take. They're basically stealing money from poor people and living high off the hog. They got an elephant running around Rome. They're eating feasting like kings at the expense of the poor.  

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And everybody knew it. And Luther was one of the guys that said something about it. Again, not intending to be a revolutionary, but he was really talking about it from an academic perspective. But it was the public that got hold of this and the public said, yes, Martin Luther, you are our champion. And the thing about Martin Luther that separated him from other people again, people like Carl Stat and others that were also saying this martin Luther became the champion of the cause partly because he was brilliant.  

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Carlstadt was at that debate as well. But Carlstatt got destroyed. But Luther was brilliant. He was eloquent. The other thing about Martin Luther, though and this is something that a lot of people, I think, don't really appreciate about Martin Luther this guy loved to fight.  

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He loved to fight, and he had huge balls. He didn't care. He would he would go up against the Catholic Church. He went he went and poked his eye, you know, poked his finger right in the eye. The Pope, right in the eye of the Catholic Church.  

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Did not care. Love to fight. Love to fight. Everybody else is a little bit no, we shouldn't ruffle their feathers. Let's not rock the boat.  

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Everybody just wanted to kind of placate, maybe reach a compromise. Luther didn't care. Luther wanted to fight. And that's something I think a lot of people don't really know or really appreciate. Luther really loved to fight because of that, and he was brilliant and he was eloquent.  

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He became the champion of this cause. So the thing that really kicks off the revolution at first, Luther again, he tried to say, well, look, the Pope, he had a tough time, he had a tough childhood, all this Prince Harry stuff, right? It was really silly, but it was the way that the Pope responded. And this is the thing that really people just furious. The first thing that the Pope's, they communicate, they issue these things called bulls, right?  

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The papal bull. It's this sort of official proclamation, and the Pope issues this bull, and he says, I haven't done anything wrong. Everything I've done is completely right, and there's nothing to see here. There's no improper selling of indulgences. There's no financial corruption, and nobody has done anything wrong here, and there's nothing to see.  

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And that made people furious because it's like, don't insult my intelligence. We all know what's going on. But he followed that up with yet another one. This was now after the the great debate in Leipzig. And again, Johanne Eck had lured Martin Luther into committing blasphemy, said, Ah, he agreed with that guy that heretic that we burned at the stake.  

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And so they he goes back to Pope Leo. Now, Johanneck, he said, hey, we got Martin Luther. We got him. We nailed him. He's he's he's committed blasphemy.  

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He agreed with that guy. We burned the stake. He agreed with the heretic, so let's excommunicate him. So Pope Leo issues another bull, and this other bull comes out on June 15, 1520. Things moved a little bit slower back then, right?  

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So they had the debate in 1519, and now it's 1520, things move a little bit slower. So Populous issues this other bull, and they actually name the bull the Bull. I love this name. Ex sergey dominate means arise, O Lord. And in this papal bull, excerjay dominate.  

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He condemns exactly, precisely 41 of Martin Luther's statements. And as a result of this heresy that Martin Luther had committed in these 41 statements, he orders the public burning of all of Martin Luther's works. And he gives Lutheran ultimate and he says you have 60 days to come to Rome and publicly recant your 41 condemned heretical statements or else we will excommunicate you and you will burn in hell forever and ever until the end of time. And you will be shunned as a heretic by all the faithful and civil authorities will take you into custody and deliver you to Rome and all these things. And again, people were furious.  

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People were furious. That was really a breaking point, because, again, rather than to admit to say, yeah, you know, what? We've made some mistakes. Martin Luther. You're right.  

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You're actually right about a lot of things. And we should have a discussion, and maybe we bring you into the fold here and help us, help advise us on how to clean this up. And we're working on cleaning it up, and we want to clean it up, but hey, you know what? We're just humans, and it's not about us. It's about our faith.  

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And let's focus on that, and we'll try and do better. Instead of doing that, they double down on the lie. They have this completely tone deaf response and say, the guy who says the things that everybody knows are true, they say, you're a heretic. We're going to excommunicate you. You have to publicly recant.  

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And they double down on this lie and prove they have learned absolutely nothing. And that was the final straw. That was the final straw. And that story ends with Martin Luther. He actually so he's given 60 days to come to Rome.  

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He waits 60 days. And on the 60th day, he knew that he had tremendously popular support from the people, people who understood the truth, and especially younger people, people that were studying academics, and they were reading this stuff, and they go, Come on, we all know. But I mean, even the lowliest peasant, they all knew what was going on. They all know. They're giving their money to the clergy.  

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And the clergy, wow, they sure do have nice lives. You see this today? Well, those guys sure do. They sure do have nice cars. They sure do have nice houses, even though they're men of the cloth.  

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That's a little bit strange. Luther publishes this open letter. It's written in German instead of Latin. Latin was the academic vernacular at the time, but he writes this letter in German to German people, right? And it's an open letter.  

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And he basically says, you know what? Forget about these experts. We can't we can't leave our own, you know, personal and moral philosophy to the expert class. Every person has the right to interpret, you know, the Scriptures and the Bibles in his or her own views. And number two, by the way, there ought to be an investigation and examine.  

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Why do all these big shots in Rome? Why do so many members of the clergy live better than the richest kings in the world? Doesn't that seem strange? Why should we, as Germans, continue to support this theft? Why should we keep sending our money to these people in Rome who are going to live high off the hog and have these luxurious lifestyles and so forth?  

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I mean, again, this is what you see. You still see a lot of this stuff today, not necessarily in the Catholic Church so much, but a lot of these other denominations. You gotta a lot of very wealthy people in religion with extremely nice houses, extremely nice cars. They go out and get money from poor people. This stuff still exists today, and it's the same thing everybody sees today, says, well, that's so obvious.  

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It was obvious in the 1005 hundreds. It just happened to be the Catholic Church back then. And Luther raised a big red flag about that and said, we should have an investigation about this. And he went on and actually blasted the Pope specifically and said, Why do you keep burning heretics? Basically saying, if you have to burn somebody alive because they disagree with you, then your argument clearly has no merit.  

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Luther said, quote, we should vanquish heretics with books, not with burning, which is a very powerful statement back then. Again, these are still the days of the Inquisition, and they would just resort to violence. And Luther said, no, that's stupid. If you have to resort to violence, your argument has no merit. The last thing he said, and this is when it was on, this was when it was clearly war, is he said, There should be no special treatment for the clergy.  

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We're all human beings. We all fall into the same sky, and there should be the same rules governing the clergy as the rest of society. There should be no special legal treatment. They should have to follow the same rules as all the rest of us. The Pope saw this and said, oh, no, you can't say that.  

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Of course we get special treatment. And you can't say that we don't get special treatment. You can't say that we should be investigated. And so, of course, that's pretty much the end. Now Luther, the whole thing just spirals out of control and begins really what history calls the Reformation.  

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Martin Luther is credited with starting this Reformation, but it was essentially a revolution. You got to think about the Catholic Church at the time. It was basically a supranational authority, a supranational theocracy. Yes, there were kings and queens. You had monarchy in Spain and monarchy in France and monarchy in England and the Holy Roman Emperor and all these things, but essentially, the Pope was there over everybody.  

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The Pope had the ability to wage wars and make pieces and so forth, and really could meddle in all over European politics. And that's one of the things people were rejecting. They said, no, it was almost sort of like a proto European Union headed by a religious leader, right? And people said, no, we don't want that. We want our own sort of sovereign independence.  

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And at the same time, we think that we don't need this powerful institution to tell us every single thing how we can live and what we can do and what we can say and what we can read and so forth. Like, no, we're tired of that. We're tired of this expert class telling us how to live our lives. And it was, in that respect, a revolution. It was almost a political revolution against the supranational authority.  

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It was an intellectual revolution, that it was through this intellectual revolution that we got things like the Age of Enlightenment and the Age of Discovery and all the different scientific advance and so forth that came from that. It was from the Reformation, this intellectual revolution. And Martin Luther, again, is credited with starting it. But you got to also look especially at the Pope and realize they just didn't get it. They had learned nothing.  

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They knew their credibility was declining, had been declining for centuries. They knew this, but they did nothing about it. And their response to this whole thing, again, instead of saying, yeah, we've made mistakes. We shouldn't be doing it. It wasn't just Poplio.  

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Everybody had come before him was selling indulgences instead of actually admitting it and admitting mistakes and saying, we got to get better, and let's figure out how to do that, their response was totally tone deaf, and they proved to everybody that they had learned nothing. And that's what leads me to today, curiously enough, this is what leads me to none other than Woody Harrelson, the actor who you might have seen recently went on Saturday Night Live. He told a joke. This is a comedy show. He told a joke about COVID-19.  

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He made this joke. He said that his agent gave him a movie script, and Woody Harrelson saying basically he said the movie script is the biggest drug cartels in the world. Get together and buy up all the media and all the politicians and people around the world basically forced to stay locked up in their homes and can only come out if they take the cartels drugs and keep taking them over and over again. It was a joke, obviously, about COVID-19 essentially telling the story of what happened during the Pandemic. And so almost on cue, you had the usual, you know, the Washington Post and Newsweek and all these countless others coming out and saying, he's a conspiracy theorist, and you got to look at it.  

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They called him an antivaxxer. And you go like, wait a minute. He didn't even say the word vaccine. There was nothing about vaccines and the monologue at all. He didn't say anything about vaccines.  

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He didn't say, don't take them. He didn't say that they're unhealthy. He didn't say that people shouldn't use them. He didn't say anything about it, didn't even use the word vaccine. But these activists who masquerade as journalists are so sensitive, they're so tightly wound.  

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You say anything at all, they just jump on antivaxx, antivaxx. He's an antivaxxer, even though he didn't say anything about it. And then, of course, the other one they roll out is conspiracy theorist. You go, well, hold on. I would love to find out which exactly which part is conspiracy theory, because he talks about the biggest drug cartels in the world.  

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You go, okay, maybe you could have said oligopoly rather than cartel, but cartel is actually you look at the American American heritage dictionary definition of cartel. Quote, a group of parties united in a common cause certainly seems applicable to the major drug companies during the pandemic. As a group of parties united in a common cause. There are drug cartels, there are the banking cartels. It's not a conspiracy theory to use the word cartel.  

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Sure, okay, maybe you could use oligopoly. But this is hardly a conspiracy to say that the drug cartel certainly meets the definition they say, oh, they bought up all the media. How is this not true? Check out the university of Texas school of media. Actually has a really great review of top advertisers on cable and network news.  

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Guess who consistently ranks as number one? The drug companies. And we know this. And you watch turn on the CBS nightly news. What do you see at every commercial break?  

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Talk to your doctor to find out blah blah blah is right for you. It's all the drug companies. It's ridiculous. Any foreigner that comes and turns on American television and sees all these drug commercials got to think that the United States is the sickest country in the world. And maybe it is, right?  

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Then he has this comment about buying up all the politicians. Really? Is this a conspiracy theory? Big pharma. You can see this yourself.  

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You go to opensecrets.org and check out lobby groups by industry, and you can see that big pharma is far and away the number one industry among lobby groups, completely dwarfing the number two industry by almost 70%. Number two, you may not be surprised to find out the number two industry lobbying washington is, wait for it big tech. Big tech. But big pharma spends 70% more money than big tech, right? Then, of course, there's the incredibly well documented revolving door between the pharmaceuticals industry and key politicians and bureaucrats.  

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These people that go in the most senior positions, CDC and the FDA, and even in congress, they go back and forth. They go, oh, you just left the FDA. Come and join our board of directors. Oh, we have somebody who's a senior executive in our drug company. Oh, now you're going to be on this board of commissioners.  

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It goes and approves drugs from our very company. So how is this a conspiracy theory? What else? They say people were forced to stay in their homes. I'm sorry, that's a conspiracy theory?  

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Did you sleep through it like that's? Literally what happened? And that people would only come out if they take these drugs. Well, this is what Tony fauci said. He kept being asked, when are the lockdowns going to end?  

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When are the mask mandates going to be lifted? When can we go back to normal? And he would always say it was a function of uptake. He said, oh, it depends on how many people take, which got 50% of people got to take the vaccines 70% of people got he kept moving the goalpost, but that was literally. The things that he was saying is that we can go back to normal and we can end the lockdowns and end the mandates as soon as enough people take the drugs.  

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So exactly which part is the conspiracy theory? So all these people go antivaxxer conspiracy theory. And to me, it just reminds me of Pope Leo. It reminds me that these people who over the last three years I mean, these are the guys if you think back three years ago, they were the cheerleaders, this whole thing, they were responsible. It's just so much of the destruction.  

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What do we know now, three years later? We know the lockdowns were totally destructive. They were a very prominent, courageous scientist that stepped up early in the pandemic and said, no, we can't do this. These lockdowns are dangerous. They're going to have terrible consequences.  

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We can't do this. We have to protect the most vulnerable population and let everybody else go out and live their lives. And those people were destroyed. They were canceled. Zero apologies have been issued.  

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Zero retractions have been made. But we know this now. We know the lockdowns were destructive. We can see the mental health toll. We can see the destruction of an entire generation of young people that got left behind in school that didn't learn.  

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We can see the alcoholism and the drug abuse and the economic devastation. We can see all these things now, right? The media was there the whole time saying, we got to lock down. We got to do all these things. Zero polygy tissue, zero retractions.  

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Remember back in the days where they canceled anybody who said, oh, I think it was a Wuhan lab leak. Canceled. Canceled. This is now not only mainstream idea, the government is even saying this. They canceled anybody who dared to say that a vaccinated person could still get COVID.  

[00:26:47.190]

Do you remember those days early on, somebody dared to say, well, you could actually still get COVID if you're vaccinated canceled. But this is obviously everybody knows this now. You could get 10,000 vaccines and you could still get COVID in the same way you can still get all sorts of things if you get vaccinated, because no vaccine is 100%. That's not misinformation. That's just true.  

[00:27:06.840]

Right? They canceled all these people for all these things, and it was the media leading the charge. And now we know that all these things are wrong. We know all these things that they were saying were wrong. Have they learned anything?  

[00:27:18.320]

No, because as soon as somebody comes out and even says it as a joke, they jump all over this guy who says things that are actually all true, says it as a joke, and rather than go, okay, yeah, that was funny. Oh, yeah, hey, we were wrong. Jeez, we're not going to do that again. We're going to try and do better. Oh, no.  

[00:27:35.300]

They jump all over this guy and say, conspiracy theorist. He's an antivaxxer, proving that they have learned absolutely nothing. Now, we could do that all day, right? I mean, you could look at I love to look at the Federal Reserve, right? Federal Reserve central bank that responsible for the Federal Reserve of the United States, largest central bank of the world, managing the largest currency in the world, got totally off caught off guard by inflation 2021.  

[00:28:01.050]

We started seeing some inflation, and they started off just rejected it outright. It was March, April of 2021, and people were saying, like, hey, what about this inflation? They say inflation. What are you talking about, inflation? I mean, just gaslighting people.  

[00:28:14.460]

You're crazy. You think there's inflation? You're stupid. You don't understand anything if you think there's inflation. Finally, they sort of say, all right, there's inflation, but it's transitory, right?  

[00:28:23.300]

And then they finally said, okay, maybe it's not transitory. And now they they started this like, oh, my God, we have to do something about this. We have to cause widespread unemployment to fix this. What's incredible is the Federal Reserve gets together, and they meet from time to time. They take dozens of people in the room, all these very smart people, all these experts, PhDs and so forth, and they get together in a room, and they actually I mean, they they release the minutes of these meetings.  

[00:28:47.040]

You can actually see what they talk about, and it's, you know, talk about people that have learned nothing. I love reading these minutes. It's sad, but kind of hilarious, because they talk about inflation, and what are they blaming inflation on? Putin and the virus and all these things. And it's like, oh, my God, it's so just face palm.  

[00:29:06.790]

How do you not get it? How do you still not understand? Even a high school economics student knows that price levels are basically the result of supply and demand, where supply and demand intersect. And what did they do during the pandemic? They destroyed supply.  

[00:29:19.910]

They paid people to stay home and not go to work. They paid people literally to not work. Gee, what a surprise. The supply of goods and services absolutely cratered. The supply of goods and services declined because they paid people to stay home and not work, to not produce goods and services.  

[00:29:37.500]

So what a surprise. There weren't enough goods and services. There were shortages of things. Duh. And those lingering effects still exist today.  

[00:29:45.050]

You had people that because of COVID they just exited the labor market entirely, said, I'm out. I'm not going to work anymore. I'm retired. Whatever. And so, of course, when things started to open back up again, there were fewer employees available to hire.  

[00:29:57.880]

And so then all of a sudden, business is like, oh, we can't find employees anymore. Because it's not like those people just disappeared. They are still there, but they just don't want to work anymore. They just fell out of the labor market entirely. And all these things, they just don't understand.  

[00:30:10.880]

They don't understand the impact of all these anti capitalist, anti productive regulations. I mean, all these ridiculous things. You got an administration that goes and appoints these hardcore woke activists to key positions. You get the head of the Federal Trade Commission, which is basically one of the government's chief divisions to regulate large corporations. The person they appointed to be the head of the FTC is somebody that absolutely despises large corporations.  

[00:30:34.530]

And so everything they do is they're constantly going and suing big businesses. I mean, now you got the Justice Department. Why is it the Justice Department's role? They got the Justice Department going and suing, trying to stop a merger between two discount airlines. We can't let two private companies merge together that for some reason the government's got to get involved in all these things that are so anti capitalist, anti productive.  

[00:31:00.220]

They got this horrendous energy policy. They've declared war on oil companies. Every time he has the opportunity, the President, United States aviator, sunglasses in chief, goes and shits all over the energy company, says, oh, they're horrible people. They're making too much money. We don't like them drilling.  

[00:31:14.460]

We think what they do is evil. He goes and denies them federal land leases to go and drill for more oil. Oh, wow, what a surprise. Oil production in the United States is dwindling. Gee, who could have possibly predicted that?  

[00:31:29.230]

When you constantly dump on the energy companies and you do everything you can to prevent them from producing, who could have possibly predicted that oil supplies, oil production in the US would start dwindling? Who could have possibly seen that coming? These are the sorts of things that never show up in the Fed minutes. They never talk about any of this stuff. It's they say, inflation, Putin and the virus.  

[00:31:50.770]

You just have to look at this. Go, have you not learned any of this? They don't understand how they destroyed supply. They don't understand how at the same time, while destroying supply, they artificially boosted to band. They say, oh, let's cut interest rates to zero.  

[00:32:03.130]

Let's print trillions of dollars and shovel all that money into the economy. Let's actually enable and facilitate the government paying people to stay home and give this endless stimulus and all this stuff to people and states and so forth. And obviously, when you shovel that much money in the economy, what are you doing? You're artificially boosting demand. You're just putting money in people's pockets.  

[00:32:23.030]

They're going to go out and spend it, but now there's fewer goods and services to spend the money on because you destroyed supply. So, gee, what's going to happen? We destroy supply. We increase demand by shoveling money into the economy. What do you expect is going to happen?  

[00:32:36.120]

Lower supply, higher demand. You're going to create inflation. A 15 year old economics student in high school is going to understand that not the Federal Reserve, that all these PhDs, they can't possibly understand. A lot of people predicted this. I was one of the guys that predicted this.  

[00:32:50.040]

Even as early as April 2020, early in the pandemic, I wrote something, said, hey, look, we're going to see, quote, significant price inflation in the coming years. Explained all this stuff, about trillions of dollars being printed and so forth. And I was not even anywhere near the only one. A lot of people figured this out. Nobody at the Fed could figure this out.  

[00:33:06.570]

Nobody could see this coming. It's all about Putin. It's about the virus. And now, of course, their only solution. So, oh, well, how do we fix inflation that we help facilitate?  

[00:33:15.010]

We are there every step of the way to help facilitate is to cause a recession. Their view is if fewer people have jobs, there will be less spending. And if there's less spending, there will be less demand. And that's going to bring down inflation, which is actually totally stupid. And the reason it's stupid is because their solution I'm doing air quotes focuses only on the demand side.  

[00:33:34.720]

In no way are they addressing the supply side of things, which is really crucially important. They destroyed supply, and it hasn't come back. They're only focused on demand. And the thing is, they fail to realize that the government is going to bail those people out anyhow. If your whole thesis is, we got to, we got to, we got to increase unemployment so there will be less spending, the government is just going to step in and bail those people out.  

[00:33:57.050]

The government's going to step in with unemployment benefits. So it's like, those people aren't going to get money. Instead of getting money from their job, they're going to get money from the government. The government's just going to give them money. And where is the government going to get that money from?  

[00:34:07.850]

They're going to borrow it from the Fed. So that the Fed doesn't even understand. It's like, dude, you're going to be in this anyways. You're going to be printing money. Give it to the government.  

[00:34:16.260]

The government is going to give it to the people anyhow that you that you've just put out of work. So what is the point? What is the point? But they just don't understand any of this. They don't even understand the unemployment statistic.  

[00:34:25.900]

It's hilarious. We can see white collar jobs are dwindling, high paying jobs dwindling. We see a lot of layoffs, et cetera. But they say, oh, the unemployment rate is still low. They're furious that the unemployment rate is low.  

[00:34:36.630]

They want more people need to be out of work. Then they're furious that the unemployment rate is low. But they only look at the quantity of jobs. They look at the quantity of the unemployment rate. They never look at the quality.  

[00:34:48.160]

They don't actually look at the numbers and realize, oh, wow, all those new jobs that are being created, it's all for waiters and bartenders. That's what's surging. It's jobs for waiters and bartenders. It's not software engineers. It's waiters and bartenders.  

[00:35:00.840]

America is becoming a bartender economy. But the Fed hasn't figured this out. What a surprise. They've learned nothing. Just like the media, they've learned nothing.  

[00:35:09.440]

And again, we can do this all day. We can look at all these institutions. The White House, the administration of aviator sunglasses in chief learned nothing. They keep doing the same destructive things. Again, they've declared war on the oil companies.  

[00:35:21.700]

Oil production is dwindling. Wow. Who could have possibly predicted so what do they keep doing? They keep dumping on the oil companies. They've learned nothing.  

[00:35:29.200]

They helped create inflation by spending too much money. So what do they do? Just yesterday, aviator sunglasses in chief, the guy that shakes hands with thin air, just released a new budget for $7 trillion. $7 trillion. It's such a staggering amount of money.  

[00:35:46.740]

And you just look at this. Go have men. Have you learned nothing? Have you learned nothing? Of course he's learned nothing.  

[00:35:52.850]

Guy's been in government for 50 freaking years. He's learned nothing that entire time. If you spend $7 trillion, that's going to be inflationary duh duh. How do we know that? Because they spent almost 7 trillion.  

[00:36:06.700]

They actually spent less than that during COVID-19 and created tons of inflation. Now they want to spend even more money and think that that's not going to cause inflation. They've learned nothing. These woke corporations have learned nothing. These woke corporations go and alienate their customers.  

[00:36:20.720]

They wag their finger. Their customers say, you're a terrible person, right? And they take these idiotic sort of woke ideological positions that only appeal to a small handful of very silly crybabies on Twitter. But they just keep doing it over and over again. They keep wagging their fingers and alienating their customers, and they've learned nothing.  

[00:36:39.470]

The progressives learn nothing. They keep losing elections. These progressive prosecutors keep turning violent criminals out on the street. They keep getting recalled even in places like San Francisco. But they continue to insist on their terrible policies.  

[00:36:53.310]

Again, these terrible policies that only appeal to a handful of very silly crybabies on Twitter. But they keep doing the same things. They've learned nothing.  

[00:37:03.110]

The high priests of climate change, the John Kerry's of the world, have learned nothing. They completely ignore willfully, I'm convinced, ignore the abundance of obvious solutions. Are they even talking about nuclear power? Absolutely not. All these things that are out there, they go, no.  

[00:37:22.930]

What is John Kerry talking about? And I quote, money, money, money. I think we'll have to do a whole podcast just about this. And, oh, we got to keep all the peasants from using gas stoves. They're so out of touch, they fly into Davos on their private jets to talk about keeping the peasants from using Gaste, talking about money, money, money.  

[00:37:41.970]

They've learned absolutely nothing. So tone deaf. They've learned absolutely nothing. And again, we can keep doing this all day, wiggling all these institutions, all these people, and just show they just haven't learned anything from their own stupidity, from their own mistakes. They keep making the same mistakes over and over and over again.  

[00:37:59.660]

In a way, it's kind of textbook insanity. Now, if we go back to 1520 again, this is Pope Leo issues that tone deaf Papple Bowl of his own. This is at that point, the Reformation roars to life. People declared their independence. People declared their intellectual independence and realized they could take more control over their lives from an institution that up till that point had controlled virtually every aspect of their lives.  

[00:38:22.500]

What you can do, where you can go, what you can believe, all these things. And it was a big deal because, again, it was from that movement we got the age of enlightenment. We got the scientific revolution. We got so many things that really propelled humanity forward. And frankly, I see the same elements today.  

[00:38:40.550]

People are sick to death, these institutions who control their lives. And we see this. We see the numbers of the polls. The trust levels are at all time lows for all these institutions that tell us to stay at home and cower and fear in our basements, to tell us what we have to put in our bodies, to tell us that we aren't allowed to have an opinion about how our children are educated while they go and they teach five year old kids to embrace victimhood and work towards the, quote, disruption of Western nuclear family dynamics. And you think I'm kidding.  

[00:39:07.060]

That's actually a direct quote from the Virginia Teachers Union, something that just actually came out very recently. These are the people that create inflation with their own idiotic and short sighted policies. And then when inflation comes around, they reject it. Then they say it's transitory, and then they say the only way to fix it is for you to lose your job. They go and they spend trillions of dollars these people call a press conference and they stare at the camera and actually have the audacity to close their thumb and their index finger together and say that trillions of dollars of this legislation will, quote, cost nothing.  

[00:39:40.220]

They tell us what we're allowed to believe. They try and control what we're allowed to say, that if you have an opinion about something, they'll call you the worst things in the world, including now, even a domestic terrorist. These are the people that tell us that violent criminals should be turned back out onto the streets in the name of social justice. And yet, over and over again, despite the complete and total abject failure of their policies and their ideas, they prove time and time again that they've learned absolutely nothing. But the good news here is that people are finally starting to reject these idiots.  

[00:40:13.260]

We're starting to see it in little ways again. They have recall elections in San Francisco to throw out progressive prosecutors. People fired the mayor of Chicago. We're starting to see these signs, and not just in politics, but again, we see the trust in institutions at all time blow. We see this just as it was in the 1000 hundreds, in the 1005 hundreds.  

[00:40:34.020]

Their big institution trust was at an all time lowe. People were sick of it. And people stood up and said, you know what, I'm capable of forming my own opinion, thank you very much. I'm taking back control over my own life. And this is what's happening.  

[00:40:45.310]

What a surprise. News media is seeing like record lows. I mean, their viewership has just dropped off a cliff. Nobody's watching CNN anymore. Nobody cares.  

[00:40:55.580]

Nobody's watching MSNBC anymore. Nobody cares. They burn through all of their credibility. Nobody listens to what they have to say. Nobody cares.  

[00:41:03.130]

And we realize that we have options. If you don't like what the media has to say, you just got to turn off the TV. And there's plenty of other alternatives. In independent media, it's not hard to find other sources of news. If we don't like big tech, great.  

[00:41:16.620]

Delete the app, delete the TikTok, stop using Gmail. There's plenty of other alternatives out there, including even going and hanging out with people in person. Or plenty of other email alternatives that don't actually involve somebody that's going to constantly spy on you. If we don't like silly woke corporations, great. We just stop using their products.  

[00:41:36.400]

Plenty of alternatives. Plenty of small businesses out there. If you don't like McDonald's because they got silly and they got woke and they put bizarro pink fluid in their hamburgers and also there's plenty of small businesses out there that could make you a hamburger. It's not hard to find alternatives to things like that. If we don't have confidence in our central bankers, right?  

[00:41:57.720]

We look at these people and go, oh my God, they are clueless. They don't have, they don't have the foggiest idea what they're doing. Great. We're not constrained by our central bankers. We can do whatever we want.  

[00:42:08.750]

We can take a portion of our savings and we can put it in other instruments. There are a lot of options out there. If you're looking for better stores of value, you've got one of the oldest currencies in the world, like gold, some of the newest currency in the world, like crypto. They've got a lot of options in between. They're fantastic investments out there.  

[00:42:23.550]

Income generating opportunities, really great businesses that are trading at steep discounts to intrinsic value. There are so many different options out there. Better stores of value, all these things to counteract all their foolhardy ideas. All those things are out there. We have options.  

[00:42:37.380]

We have options to educate our kids. We even have options in terms of other places to live if we really want to, even just if need be as a plan B. There are plenty of options out there. All these things that we can do to take control over our lives. We really do have tremendous control, and we can start to see the early stages of people beginning to exercise that control.  

[00:42:59.050]

Obviously, all these people, the media keeps howling. They think people are actually paying attention to them. It's hilarious. They're not. The expert class keeps howling.  

[00:43:07.710]

Fewer and fewer people are paying attention. This is basically a new reformation. It's like the 1005 hundreds all over again. We might not be at 1520 or 1530 yet. Maybe we're still at 1510 15.  

[00:43:20.850]

But the seeds of a new revolution have already been planted. It's here. We can already start to see it coming. And this is actually a very exciting time because it's ultimately how our society is finally going to start moving forward again. Thanks very much for listening, and we'll speak again next week. 20230310-B_podcast Close Podcast Transcription

Two weeks ago, I told you that the US government had just published its annual financial report.

The government by its own admission lost $4.1 TRILLION in FY 2022. And this is 34% worse than the the previous year’s $3.1 trillion loss.

And the rest of the financial report only gets worse from there…

They describe Social Security’s extreme insolvency, projecting total unfunded liabilities of the program to be $76 trillion.

And they forecast that US government debt will one day reach 566% of GDP.

I’ve written about this extensively over the years, because history tells us that the consequences of this type of financial mismanagement are severe.

This is not the first time that a country has had a lot of debt, nor the first time incompetent leadership has consistently failed to recognize and solve big problems.

So in today’s podcast episode we go back in time thousands of years to heed the lessons of one of history’s biggest scumbag rulers.

Unsurprisingly, he raised taxes, debased the currency, violated the rule of law, confiscated property, eliminated dissent, vastly expanded the government, and created all sorts of idiotic and destructive laws.

BUT, this is fixable.

And today we actually discuss some common sense ideas to demonstrate how easy it should be, at least conceptually, to take giant leaps in the right direction once again.

Unfortunately, the people in charge seem to have zero interest in doing any of that.

So I wouldn’t hold my breath waiting for politicians and bureaucrats to ride to the rescue.

But at the same time, as I often point out, this is not a bad news story.

The world is not coming to an end.

In fact, I believe the world is still full of abundant and incredible opportunities, despite the trajectory of its largest superpower.

And we close this episode with the core central message of this organization: we have control over our own lives.

Regardless of what they do or how badly they screw up, you do not have to go down with a sinking ship. You have the power to solve these problems for yourself.

You can listen to today’s podcast here.

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[00:00:00.810]

Today we're going to go back in time to the 26 September in the year 480 BC to a very critical island in the Mediterranean. Now, if you know your history, you might be thinking, I know what he's going to talk about, because 480 is a very famous year. 40 BC is a year where Greece, which I'm going to do Greece and air quotes for right now. I'll explain why in a moment. Greece and Persia, they're at war with each other in a in a war that historians is often described as this epic battle between eastern civilization and western civilization.  

[00:00:28.900]

If Greece loses against Persia, there is no Socrates, there is no Plato, there is no Western civilization. So it's a really important year. 480 BC was the famous battle of thermopole 300 Spartans fending off the Persian. There are other people there as well. There's 700 Thespians and some others as well.  

[00:00:44.910]

But this very small number of people in this, like the battle of the Alamo, fighting off the whole army so that everybody else can live and regroup and defeat the Persians, this is followed by the Battle of Salamis, this famous naval battle. Salamis was a very important island in the Mediterranean. And this battle of Salamis where the Greeks vanquished this much larger Persian fleet and embarrassed Xerxes, and it was the turning point in the war, again, supposedly took place on September 26, 480 BC. I say supposedly took place. This is according to very painstaking astronomical calculations.  

[00:01:16.970]

It's not like the Greeks tell us, oh, it was September 26. There was no such thing as September in 480 BC. So the people have gone back and done these astronomical calculations to figure out the date of this based on information that we know. And they said, well, we think the Battle of Solomon's took place on September 26, 480 BC. But that's actually not what I wanted to talk about.  

[00:01:37.630]

There was something else going on on September 26, 480 BC, also in Greece. But what I mean by Greece remember a lot a lot of people say Greece talk about ancient Greece, and ancient Greece is really just a catch all word that we use today to really lump together dozens of these independent city states. You know, the Athens and Sparta, Corinth, thebes Ithaca, Argos, Troy. These are all different city states, but they're all totally independent from one another, right? Just because Athens is doing something doesn't mean that Ithaca or Argos is doing it as well.  

[00:02:08.730]

These Greek city states typically shared a common language, common religion, common heritage, et cetera. But they're vastly different from one another. They don't share the same internal politics. One might be democratic, the other might be might have a monarchy, right? They have different systems of government, they have different economies, different everything, and they're all independent.  

[00:02:26.420]

Saying Greece in the ancient world is like saying Latin America today. Again, there are things that are common. Typically a shared language and typically, maybe shared religions and culture and so forth. But Panama is totally different than Bolivia in the same way that Athens is totally different than Ithaca. And just because Athens and Sparta were at war with Persia again, doesn't mean that all of Greece big, g greeks, all of greek civilization was at war with Persia.  

[00:02:53.520]

And this is where I want to talk about, because far to the west of the Greek mainland, there's another island. And I talked about this as this important, critical island in 40 BC. Well, there's another island that wasn't salamis. There's another island that was part of greek civilization. This island was Sicily.  

[00:03:09.450]

Sicily had been the greeks been coming in since 735 BC. But there were a lot of people that had come before. There's a neolithic civilization, early bronze age civilization, even in the 2000s BC. The phoenicians. We talked about the phoenicians before this really great seafaring trading culture set up outposts all over the Mediterranean.  

[00:03:27.630]

They had been coming into Sicily. The carthaginians were really interested in it. Everybody loved Sicily. Why? Because Sicily was a paradise.  

[00:03:37.100]

It was everything that the mainland greeks wished that they had had, especially in athens. The Athenians are like, oh, my god, this place is incredible. In athens, the soil was terrible. It was rocky, it was hot, it was very little nutrients. It was really hard to make it work in athens.  

[00:03:50.560]

In Sicily, they had incredible soil. They had a lot of rain. They had the agricultural production was off the charts. They had fruit orchards just bursting with trees, vineyards, beehives flowers, huge grassy plains where they had plenty of carrying capacity for livestock. They got a cattle and sheep and everything they wanted.  

[00:04:08.510]

They had endless forests with timber in the hillside. They could build anything they want. They had fish everywhere, and the fish reproduced faster than anybody could fish them, anybody could eat them, and it created a lot of wealth. There are people that were, I mean, almost perplexed by the level of well, Plato was disgusted. Plato went to Sicily.  

[00:04:25.820]

It was almost disgusted by just the level of wealth that was there. There's another philosopher, a guy named empedocles, and empedocles remarked he went to a city in Sicily called accra GENTO, and he said, these people here, quote, devote themselves to luxury as if they were going to die tomorrow. But they furnish their houses as if they're going to live forever, basically saying, there's just no end of the spending here. They just go out and gorge themselves every single night, the banquets, the wine, the liquor, everything. And then they go and they just have the most incredible extravagance in their homes.  

[00:05:00.100]

And for people, it was perplexing, but as a result, this was the big prize. Sicily was just this this big prize. It was this big paradise. And the ultimate prize in this was the city of syracuse. Syracuse was started off as just a tiny village.  

[00:05:15.340]

The Corinthian Greeks had come there and they start, they started this little outpost, this tiny village, but relatively soon it become this major center of wealth and trade. And people there were incredibly rich, just the richest of the rich. There was one story, a guy that supposedly had a clothing collection worth 120 talents, which would be worth basically $15 million in today's money, right? Again, Plato wrote about this. He said, yeah, there's just women everywhere, people looking for rich husbands, constant banquets, performances, nightlife, and this was the envy of the region.  

[00:05:51.400]

Everybody wanted who wouldn't want that, right? Everybody wanted to be Syracuse, and everybody wanted to control Syracuse, wanted to control Sicily. And most of all, that desire was coming from the Carthaginians. We've talked about Carthage before, we're talking about them a little bit again today. Carthage at this time was the dominant power in the western Mediterranean.  

[00:06:11.210]

Again. This is before Rome and even the Roman Republic. And Roman Empire. Rome was just really getting started at this point. And Carthage was the dominant power in the western Mediterranean.  

[00:06:24.230]

And they had been working for quite some time. They've been thinking about Sicily, they've been thinking about Syracuse, making overtures and setting up little outposts. And finally, 480 BC, they got their shot, right? You got the Greeks in the east, Sparta and Athens, they're fighting Zerksis and the Persians, and Socarth says, now we got our chance. So they go and they invade Sicily to take the island once and for all.  

[00:06:46.340]

And this is where we opened in the podcast on September 26, 480 BC. This was literally, according to Herodotus, a story. And Herodotus literally on the same day as the Battle of Salamis, just as the Greeks in the east were thrashing the Persians in the west, there was this big battle called the Battle of Umara and the Battle of Amara. The Sicilian Greeks, led by the king of Syracuse. His name was Galon.  

[00:07:11.210]

They thrashed the Carthaginians, they humiliated the Carthaginians. And we know to this day it was a big deal because archaeologists actually found the remains, these mass graves of 10,000 plus buried soldiers that date back to this area. We know this was a really big deal. And again, according to Herodotus, literally on the same day, you have all of Greece basically being saved on the same day in the east from Persia and the west from Carthage on the 26 September, 480 BC. Now, this is really the start right in the east.  

[00:07:40.330]

The war with with the Persians didn't end immediately, but it was really the turning point. And this is the start of the classical era, the golden age of Greece, and particularly Athens, where you have Socrates and Plato and Sophocles and the construction of the Parthenon and all these sorts of things. And again, the general consensus among historians you see this say, well, none of that would have happened without the victory over persia, right? So this is a really important period of time for Western civilization that allowed Athens and democracy and all these things to flourish. And this was also a really important time for Syracuse, because frankly, it actually wouldn't be that long.  

[00:08:16.430]

Now with the Persians in the rearview, they said, oh, we vanquished the Persians. Well, Athens and Sparta ended up going to war with each other. And as Athens and Sparta were going to war with each other in the famous Peloponnesian Wars, syracuse was over here, way out to the west, sitting on its beautiful island with all of its wealth and all of its abundance and all of its banquets. And they said, you know what, this is great for us. And Syracuse became one of the biggest and wealthiest Greek cities at half a million people.  

[00:08:41.910]

People were super rich, and life was pretty great for decades after 40 BC, life was pretty great. But finally, 71 years later in 409 BC, athens and Sparta, they're still at war with each other, duking it out over who's going to be the big cheese, over all the Greeks, the Sicilians, the Syracusans are sitting there off in Sicily. The carthaginians came again. The Carthaginians decided, you know what, we're going back. Athens and Sparta are caught up with each other, so we're going to go back, we're going to invade Sicily again.  

[00:09:11.630]

We're coming after Syracuse. We're pissed. We haven't forgotten our loss. We haven't forgotten that humiliation 71 years before at the hands of the King of Syracuse, and we're coming. And they invaded.  

[00:09:21.340]

They brought this massive armada, 1500 ships, 20,000 men, and they started capturing Sicilian cities down the coastline, slaughtering survivors. And it was barbaric. It was barbaric. The Sicilian, Greeks were shocked. They said, oh my God, these people are coming to kill us all.  

[00:09:36.730]

This is crazy. And the Syracusans caught word of this. They actually interrupted their banquets for a change, and they turned to a guy. And just to give you an idea of how committed the Carthaginians were, they were very briefly stopped in their invasion because they got hit by a plague. And again, this was not terribly uncommon in the ancient world.  

[00:09:54.160]

Military history is full of plagues and so forth. We talked about the plague of Antonine from the Romans recently. So in this plague, even the commanding general, the Carthaginians, died. And the Greeks thought like, oh, thank goodness, maybe they're going to go away. Well, it didn't happen, actually.  

[00:10:10.850]

A new general took over. A new general assumed command and assumed that, well, the reason we got this plague is because the gods are angry with us. So this guy, this Carthaginian general, sacrificed his own son in order to placate the gods and said, all right, guys, I killed my own kid to placate the gods. Let's go back to war and kick their asses. And the Syracusans are freaking out.  

[00:10:29.550]

The Syracusans find out again, they stop their banquets and they turn to a guy, and they said, deliver us from this. And this is a guy who had started his career in government as a humble scribe, had risen through the ranks and become actually quite a capable general. And his name was Daunesius. And Daunisius was given by the people of Syracuse absolute power. Go and dispose of the Carthaginian threat.  

[00:10:51.800]

We trust you. They basically made this guy a tyrant. Now, that was actually not unusual. In Greece today, the word tyrant carries a very negative meaning. You call somebody a tyrant, basically, it's like calling them an evil dictator.  

[00:11:03.100]

And this has been the case for quite some time. John Wilkes Booth, when he assassinated Abraham Lincoln, jumps from the balcony in Forge theater. He screams out sick semper tyrannis. Basically because he thought that Lincoln was a tyrant, it carried that negative connotation. But thousands of years ago in the ancient world, in 40 BC.  

[00:11:21.270]

409 BC. It did not have a negative connotation, right? Tyranny was normal for the Greeks. They often, when confronted with an emergency, whether it was some kind of climate disaster, agricultural emergency, military invasion, they would invest all absolute authority in a tyrant and say, Go and deal with this. The tyrant was neither good nor bad.  

[00:11:40.590]

It was somebody that was necessary at the time. And then, of course, when the emergency subsided, then the tyrant was supposed to relinquish absolute power, and some people actually did. Dagonesius did not. Now, nobody knows entirely exactly what happened. Dionysius, as soon as he gets this absolute power, he goes and he has a meeting with the Carthaginians.  

[00:11:59.420]

Nobody knows what he said, but somehow he managed to convince them to just go away. He said, look, you got some land here in the south. We don't care about that land. That's not ours anyways. Just fine, keep it, but don't come after us.  

[00:12:11.070]

Nobody knows exactly what he said, what words he used, but the Carthaginian said, okay, fine. Remember, they were out for blood specifically for Syracuse. And yet after this conversation, this one meeting with Dionysus, they said, all right, we won't come for Syracuse anymore. And so Dionysus goes back to Syracuse, said, yeah, hey, guys, I saved us. We're fine.  

[00:12:28.720]

They're not going to come for us. And people are like, oh, my God, this guy's a hero. And of course, he's enjoying this. Hero status does not relinquish power. In fact, according to the historical record, he actually seems to have faked some sort of attempt on his life.  

[00:12:41.010]

You know, he shows up and says, oh, my God, somebody's trying to kill me. And so the Syracusans go and they give this guy, you know, he says, oh, you're, you're a hero. You're so important to us. We have to protect you. So they gave him hundreds of men as a personal guard, which he then, of course, uses these goons to go and secure power for himself and maintain his dictatorship.  

[00:12:57.680]

And this guy down east has gone down in history as one of the most villainous, horrendous rulers ever. One of the first things that he did was, of course, A, not relinquish power and B, double the pay of his soldiers just so that he could command their loyalty. He gave premium real estate to his military officers. And the whole point being that they were no longer there to serve and protect the people, but they were there to serve and protect Dionysius from the people. And they were also there to carry out his decrees, whatever he said.  

[00:13:23.580]

Now he had all these goons to go around and enforce his decrees under threat of violence. So again, we had significant expansion in the state specifically to protect the leadership and impose the government's will on the people by force. We also know that Downesis was incredibly intolerant. He did not tolerate any dissent. He ridiculed, imprisoned, exiled people, engaged in censorship.  

[00:13:44.080]

And there were rumors as even stories about Downesis trying to sell Plato into slavery. Plato, it didn't last very long. Plato was apparently soon ransomed by a very wealthy patron and admirer. But and we know these things because they were written about people wrote about Dionysus extensively, including Plato, including Aristotle, including so many. You can look at the works of Plato.  

[00:14:03.800]

He has a work called The Letters. And you can look at letter seven where Aristotle wrote a lot about Dionysus. And we'll get to Aristotle here in a minute. We also know that Dionysus was incredibly arrogant. This is guy.  

[00:14:14.900]

He he thought he was a he thought he was an intellectual. He thought he was a scientist. He thought he was a writer and a poet and just was obsessed with these things. He is rumored to have purchased the writing desk of Escalates and the tablets of Euripides, all these famous Greek playwrights. But apparently everything he did sucked.  

[00:14:33.280]

His plays sucked, his poetry sucked. And there was one famous writer who was in his court, a guy named Philoxinus. And Philoxinus was called to Dionysus in one story. And he said, philosophy, I'm going to read you this poem. Tell me what you think.  

[00:14:44.970]

And Philosophis gave an honest opinion and he said, you know, it sucks. So Dionysus had him in prison, and Philoxinus is in prison, and people go later and they convinced Dionysus, hey, you should really let this guy out of prison. So Dionysis lets him out of prison, and the next time he calls him back to Courtney, says, I have a new poem I want to read. Tell me what you think of this one. This is a new poem.  

[00:15:04.590]

So Dionysus reads Philoxinus's new poem. He says, what do you think? And Philosophy says, Take me back to prison. This is actually a real story that has been passed down to us from the ancients. And this is just sort of typical of this guy, just really arrogant, really petty, surrounding himself with all these individuals again, including people like Plato, thought himself to be so smart, so brilliant.  

[00:15:27.370]

Apparently none of the intellect has rubbed off. But on top of that, we also know that he had this steadfast belief. He was so out of touch. He had the steadfast belief that he was just and he was righteous. And he wrote about this extensively.  

[00:15:39.240]

He actually wrote dionysius himself wrote that Tyranny is naturally the mother of justice. And he was constantly complaining about all the stress of my job. Oh, I work so hard. I and I alone can manage this for all these little people that can't take care of themselves. And I and I alone can do this.  

[00:15:58.310]

And I work so hard and I'm so tired and I'm so exhausted. In many respects, he wrote about death as like the ultimate, like, finally you die and you can rest because I work so hard and oh, I can't wait to die because then I can finally rest for all this hard work. If you heard the parable of the sort of Damocles, it actually comes from this era. Damocles was an attendant to the son of Dionysus. And according to the story, Damocles shows up and and says, wow, wouldn't it great to be king?  

[00:16:24.500]

Look at all this wealth and luxury you have. And the story is that, you know, the king is so offended by this. Don't you know how hard I work? I'm so stressed out taking care of all these little people that can't take care of themselves. And the story is that Dionysius dangles the sword.  

[00:16:38.580]

He says, Go and sit on my throne. Down Mcclese. And Sant Demicles sits on the throne and has this sword dangled over his head that's just suspended from a single horsehair. And of course, democracy is freaking out because he thinks the horsehair is going to break at any second. He's going to be impaled by the sword until he's screaming, please, please, I don't want to be king anymore.  

[00:16:55.340]

Just give me the humility of a normal life and that'll be fine for me. And again, it's this sense of like, oh, look at me. I work so hard. It's so hard being king, sitting on this throne and stealing and plundering all this wealth from people. And this guy really believed that he had this honorable burden.  

[00:17:11.830]

He was doing it on behalf of the people and that he was just and righteous in his cause. The guy was also super paranoid. He was convinced that even though he was sort of in many respects saying like, oh, death is going to be such a vacation for me, he was actually terrified that people were going to assassinate him constantly had him surrounded with himself, with security. He spent a great deal of public money on erecting this impenetrable fortress. And I even actually read that he is said to have slept in a bed surrounded by a moat, that he had to cross a little bridge every night before going to sleep and then pull his little bridge up into his bed because he was so terrified that somebody was going to steal into his room and assassinate him in the evening.  

[00:17:47.840]

But what I really wanted to talk about this guy down east was how domineering he was. He stole everything and anything that he wanted. He had all of his goons and he wasn't afraid to use it. And this is where Aristotle comes in. If you want to look at yourself.  

[00:18:00.380]

Some of these stories Aristotle writes, he has a work called Economics. Some people think it wasn't Aristotle. It's at least attributed to Aristotle. Book two of economics. He talks about this.  

[00:18:11.570]

He talks about Dionysis jacked up tax rates and Syracuse essentially just a great way to steal money from people spending on things that benefited himself personally. But the lengths that he went to, this is where it gets really ridiculous. One day, this is according to Aristotle, downesis calls a public assembly. He gets all the people together and he says, the goddess Demeter has appeared to me. The goddess Demeter has appeared to me and bade me to collect all the jewels and all the adornments and so forth and bring it into her temple.  

[00:18:39.340]

So everybody has to do this. And he said, look at me, I'm doing it too. I've gone into my own home. I've collected all my fancy ornaments and all of my fancy jewels, and I'm bringing it into the temple of Demeter. And anybody that doesn't comply is a heretic and you'll be damned to Hades forever and ever until the end of time.  

[00:18:53.580]

So everybody went home. They were terrified of this guy. And they gathered all their jewels and they put them in the temple of Demeter. But then, you know what? The Dionysus comes the next day.  

[00:19:03.090]

He says, hey, Demeter has appeared to me again. And she's decided that instead of her taking all of these nice fancy jewels that I should have them all, so I'm just going to go ahead and take them. And he sends his goons to the temple and he takes everybody's, everybody's wealth. So basically lies to them, tricks them into this, forces them to do this, and then goes and steals everybody's property. Totally ridiculous.  

[00:19:23.910]

There's another instance in which he decided that the state needed money. And so he goes into his palace. He brings out all of his furniture and fancy items and things like that, and he takes it out to be sold, almost like having a yard sale, you could imagine. Like Joe Biden goes out and brings his collection of aviator sunglasses and his Corvette, whatever, and brings it out to the south long of the White House and puts a for sale sign on there. And people just get to go and mill around and buy all of all of his stuff, right?  

[00:19:51.710]

So he collects all the money for everybody. But then he makes a note. He has all his goons there, making note of who's purchasing what. And then as soon as the yard sale is over, he has his goons go over to everybody's house, knock on the door and said, oh, I see you took the President's Corvette, give it back, and basically confiscates all the assets that everybody just bought from him, fair and square. Naturally, though, he kept the money.  

[00:20:13.250]

There's another instance of debasement, lots of instances of debasement. There's one instance where he goes and he mints these new coins that he makes them of cheaper materials, tin, iron, et cetera. And this is a time in the Greek world where the primary coin, the drachma, was made of silver. And the drachma was sort of like a reserve currency. Everybody in the ancient world knew about the drachma.  

[00:20:33.010]

It was a very well respected currency. The Greeks didn't mess around very much for their currency, and it was a silver coin. But he says, no, I'm going to make this of this new cheap material. But he went and had gathered another assembly and basically said, look, we have these new coins. You should accept them just as if they were silver, and basically forced everybody to do that as if they were silver.  

[00:20:55.660]

Forced everybody to do that under threat of penalty and imprisonment and violence, et cetera, and basically debased the currency by creating his own money. There's another instance where he actually forced everybody to loan him money. And one of the ways that he did that, he actually went and had everybody again under a penalty of death. He threatened everybody under a penalty of death. Go and bring me whatever silver coins you have in your home.  

[00:21:19.050]

Not the new crappy coins that he just minted, but real silver coins. And so people went and brought in the silver coin, and he basically restamped every coin with a face value of two, double the face value. So in the same way, it's like somebody brings you $1,000 in $100 bills, they bring you ten hundred dollars bills, and you take a magic marker and you scribble out 100 and you write $200. And then you give them back five of these new $200 bills and say, hey, I gave you back $1,000. You gave me $1,000, I'm giving you back $1,000.  

[00:21:47.490]

Right? So he just basically stole everybody's money, debased it, and then repaid them with his debased money and kept the rest for himself. This is typical debasement tactics. Dionysus was very, very famous for this. He was also famous for being a liar.  

[00:22:02.220]

This guy defaulted constantly on his promises. There was one I mean, think about these people. He conquered this city called Reggie. Today. It's Reggio di Calabria.  

[00:22:10.020]

This is in southern Italy, just off the just across from Sicily. And he conquered this city. And he tells the inhabitants, he said, hey, everybody, it's my right. I'm your conqueror. I can sell you all the slavery if I want to.  

[00:22:21.470]

I can enslave every last one of you. I won't do it if you just pay me this really hefty bounty. So of course people paid the bounty. They went back home, they said, oh my god, let's get our money. They pulled their money money and they paid off their new conqueror.  

[00:22:34.070]

And Dionysis went and sold them off as slaves. Anyhow totally lied through his teeth, took the money, sold them as slaves. There's another instance actually, where they conquered another town and the soldiers went in and after the successful military campaign, the soldiers plundered the local town, they plundered the temple. And down NiSi's caught wind of this and he said, oh jeez, all by soldiers made all this money. I didn't get any of that.  

[00:22:55.420]

So he goes and he tells the soldiers, he says, men, I understand that you took all this money, you took all this loot. I'll tell you what, bring me half of it, and you can keep the other half, but just bring me half. I mean, this is all free money for you anyhow, right? So just give me half and we'll leave well enough alone. And so the men said, okay, and you probably know this is going.  

[00:23:13.530]

So they bring him the first half, he gets the money, he counts as well. This is a lot. Now he says, now bring me the second half. That basically lied, stole from his own troops. What's amazing is that Downesis actually did not die.  

[00:23:25.650]

He wasn't assassinated. He actually drank himself to death. He won a poetry contest, if you can believe it. It was his shitty poetry won a contest. And he was so excited that he celebrated and partied so hard, he actually drank himself to death and died.  

[00:23:39.770]

So that's the end of Dauneesius. But we can see the key themes here. We can see taxation, confiscation, default, lying, no rule of law whatsoever. This guy, he taxed people, he confused their property, he defaulted on his promises. He did whatever he wanted with no rule of law.  

[00:23:56.330]

He debased the currency. He imposed all sorts of stupid, silly regulations. He imposed people controls. He expanded the state, and he did everything under constant threats of violence. If any of this sounds familiar, it probably should, because these are the same tactics that a lot of governments still rely on today, especially when they're bankrupt.  

[00:24:14.830]

And we've already seen so many examples of this. We talk about Dionysius tax people. Well, these people, the politicians, they are constantly howling for higher taxes. They just passed this dividend buyback tax that went into effect on January 1. Literally days later, they started saying, we want to quadruple it.  

[00:24:30.520]

They're never satisfied. They're always whining about wealth taxes, higher capital gains taxes, higher income taxes. So just like Downesis, we have this constant howling for higher taxes today. Just like down nicely is complicated property. We've talked about.  

[00:24:42.320]

At length the rise of civil asset forfeiture, where government goons come in, including state and local people, and just take whatever they want. There's no due process. There's no innocent until proven guilty. They just take, they seize property. It is a completely legal thing when the government steals from you.  

[00:24:57.100]

It's called civil asset forfeiture. Just like Dionysius confiscated people's property, just like Dionysius lied and defaulted on its promises, politicians today, they lie and they default on their promises. They default on their promise to maintain a fiscally sound Social Security program, to maintain a financially responsible government, to maintain a modest national debt, to do all these things. They completely default on their promises. Just like Downesis didn't follow the rule of law, they never follow the rule of law anymore.  

[00:25:22.620]

They don't follow the Constitution. They say, oh, the CDC is going to take over all of the US housing market, because that's just what we feel like doing. Sorry, that's not part of the law. Most recently, this idea of like, oh, well, we decided we're going to forgive student debt. You can't do that.  

[00:25:38.330]

The law doesn't say you can do that, but they just do it anyways. That was just in the Supreme Court earlier this week. So this is the sort of thing we see, just a decline in the rule of law. Just like downesis. Just like Downesis, we see the currency debasement, unprecedented inflation of the currency, unprecedented monetary expansion, 40 year highs in inflation a day.  

[00:25:55.460]

Same thing. Just like Downesias with all those stupid regulations. The same thing today. It's just countless instances of this stupidity. We talked about one very recently where the FTC has decided that they're going to fix the economy.  

[00:26:08.150]

And they decided that the thing that the Federal Trade Commission is going to do to fix the economy. The reason why the economy is SPutting right now is because there's too many non compete clauses in private labor contracts. So we're going to get rid of non compete clauses. You did it, right? You figured it out.  

[00:26:23.100]

You cracked the code. Non compete clauses are what's dragging the economy down. No, it's not the war against the energy company. It's not the insanely stupid regulations. It's non compete clauses, right?  

[00:26:34.110]

So this is the stuff that they do. They ban non compete clauses. The Labor Department imposes rules to encourage vote capitalism, all this sort of stuff. Just like downesis people controls. This guy had people, crazy people controls.  

[00:26:45.750]

We saw this during COVID-19, where you can go, what you can do, what you have to put in your body, what you have to wear on your body, how you can live, whether you can go outside, what you're allowed to say, what you're allowed to think. Just like Downesius, the expansion of the state, 80,000 new IRS agents, anybody, right? The expansion of the state. And just like Downesius, everything under constant threats of violence. You can't even apply for a passport in the United States of America without being in threat, without being threatened with fines and imprisonment.  

[00:27:11.680]

If you don't believe me, go and check out the application for U. S. Passport form DS eleven from the State Department. Go down to page four and read the text. You are being threatened with penalties, fines, and imprisonment for passport application.  

[00:27:25.650]

Like, why can't these people just chill out already? Like, Jesus, it's a passport application. Just relax. Good God. But everything has got to be under these constant threats of violence.  

[00:27:36.590]

And again, you also lose the sense that the people that are supposed to be providing security, they're not there for your benefit. Sure, it's perfectly fine. For countless people to stream across the border and whatever, that's all fine. But God forbid an angry parent shows up to a school board meeting. Those people need to be investigated by the federal government, right?  

[00:27:56.500]

So this is a familiar story. Dionysis wasn't the first guy. He was one of the more famous tyrants throughout history. But these tactics, they haven't gone anywhere. I mean, they're still very, very prevalent, very front and center.  

[00:28:08.960]

And financial insolvency makes this worse. Countries that are heavily in debt and have trouble making ends meet do tend to double down on this stuff. We've seen this so many times before. You don't have to be a PhD in economics to figure out where this goes. You just crack a history book and see what Rome did during its crisis period, what the French monarchy did in the late 17 hundreds during its crisis period.  

[00:28:28.440]

You see higher taxes, more currency to basement, more money printing, more expansion of the state, more goons, more bureaucracy. They just make everything worse. And this is important because, as we've covered before, the US government, specifically the west in general, but specifically the US. Government, which we covered for, are really in dire straits financially. I think it was last week or the week before we did a podcast talk about the financial report of the US.  

[00:28:52.330]

Government, which was recently released for FY 22, showed their really true budget deficit. What they call the net operating cost was minus $4.2 trillion. That was worse than $3.1 trillion. So Joe Biden likes to say, like, oh, I brought down the budget deficit. No, you didn't.  

[00:29:10.200]

That's a complete lie. It got worse by $1.1 trillion on top of that the government's net worth. Basically is -30 $4 trillion. That's all their assets, every tank, every bullet, every acre of National Parkland put together all their assets minus the liabilities, including the national debt et cetera is -30 $4 trillion and on top of that is another $76 trillion in unfunded Social Security and Medicare long term liabilities, it's $110,000,000,000,000 negative net worth. That is extremely unhealthy.  

[00:29:43.050]

Now we talked about before.  

[00:29:46.730]

This is escapable. This is not terminal. There are ways around this. If you are a turnaround specialist, it's not hard to sort of look at this and go, okay, Jeez, first thing first. Throw all the bums out.  

[00:29:57.490]

Get rid of these people in Congress, the Federal Reserve, the White House, put in actual responsible leadership, professional managers who have experience in things like operational and financial efficiency in large organizations. Wow, jeez, what a concept. And scale down the size of government. You got to make it really fast and easy to terminate underperforming government employees. There are some really smart, really wonderful people who work for the federal government and there are a lot of dirt bags.  

[00:30:23.890]

You got to make it easy. No organization can survive if there's just dirt bags and lazy people and underperforming people. You got to make it easy to get rid of those guys. You got to drastically cut spending. You got to slash entire departments.  

[00:30:35.520]

Why do we have why is there even a Commerce Department or Housing Department? Why does the Defense Department need $800 billion in think about this. Ten years ago, in 2013, the Defense Department had a 500 billion dollar budget which is even with inflation, let's call it 600, $650,000,000,000. Today it's 25% higher than it was after adjusting for inflation than ten years ago. Bearing in mind ten years ago they were fighting a war in Afghanistan and Iraq at the same time.  

[00:31:03.880]

They're not doing either of those now, but the budget is 25% greater even after adjusting for inflation. It doesn't make any sense. You're telling me that you can't find leadership that can somehow prioritize national security over wokeness and can maintain a strong fighting for us while just scaling back to what it used to be ten years ago when we're actually fighting two wars at the same time. We're not fighting any wars today. It just seems so obvious with all the savings that you could actually you do that you get rid of some of these departments, et cetera, and some of these other basic things.  

[00:31:35.920]

Say you look at Social Security, it's not rocket science. You're going to have to raise the minimum age of Social Security. Security, it can't be 62, 63, 65 anymore. It's going to have to be 68, 70 in order to get benefits. But one of the biggest things is did you know Social Security, the trust funds, when you pay taxes and Social Security, it goes into these trust funds.  

[00:31:53.930]

The trust funds are extremely limited in what they can invest. In fact, the trust funds take that money and they invest it in exactly one thing. Guess what? US. Government debt, how much does that government debt pay?  

[00:32:04.630]

How much does Social Security actually earn in his trust funds investing US. Government debt? Less than 3%. Gee, why don't we take there's a lot of really brilliant asset managers in the United States. Why don't we unleash those asset managers?  

[00:32:18.750]

You can privatize the management of Social Security and let some of these really smart asset managers go instead of making 3% go and make I don't know, 8%, just like a normal pension fund. It makes a huge difference. It really moves the needle. If you go from making 2.6% to making 8.2% and makes a really, really big difference, it's so offensive that Social Security makes less than 3%. Anyhow, when you look at bond yields, even Treasuries right now, you can make 4%, 5% in Treasuries.  

[00:32:48.830]

So if I buy Treasuries today, I can make 5%. If Social Security buys Treasuries, they make 3%. I mean, it's disgusting, honestly. So disgusting when you look at it. Go, jeez, guys, in theory, this should be a pretty easy fix, right?  

[00:33:03.580]

There's so many of these things you can do, obviously. You got to fix things to help with productivity. You got to create the right economic incentives to create productivity, to help very talented people, frankly, from all over the world, to be able to come legally, start businesses, work, invest, contribute to overall prosperity, help people be able to start businesses, work hard, save their money, create the right kind of incentives to do that. You get rid of all these regulations that you know, and then there's almost 200,000 pages in the code of federal regulations in the United States state. Almost 200,000 pages of regulations.  

[00:33:36.450]

In the mid 1990s, there was about 100,000 pages. Now, somebody explained to me what has gone so wrong with the world over the last 30 years that we need to double the size of our regulation. I mean, were we just on the verge of chaos and anarchy in the 1990s and mid 1990s when we only had 100,000 pages of regulation? Can we not go back to 100,000 pages? Can we slash the code of federal regulations by half or even just a third?  

[00:34:02.490]

And somehow the world not come to it? It seems to me that you should be able to do that. It seems to me that if you go, well, jeez, we used to be fine with this low, lower level regulation, why can't we go back to that? I mean, this isn't rocket science. This is very simple, common sense stuff.  

[00:34:17.520]

It's the same thing with the tax code, where you go, these people are constantly saying, we need more taxes. More taxes. Well, that's a stupid idea. And this isn't like some sort of libertarian theory that's just the idea is very simple. If you look at the data in the modern history of the United States, tax rates have been all over the board.  

[00:34:35.370]

They've had tax rates at 28%, they've had tax rates at 90%. And yet, as a percentage of GDP, the government's slice of the economic pie, government tax return has basically been 18, 19% of GDP. That's it. They can raise tax rates to 90%, and you're still going to get 1718, 19% of GDP. That's it.  

[00:34:56.100]

It's not like you raise tax rates and suddenly you're getting 30% of GDP. Or if you slash tax rates, it goes down to 5% of GDP. It's always the same. The government's slice of the overall tax revenue slice. The economy is very, very constant.  

[00:35:09.480]

So wouldn't you just say, jeez, why don't we focus on what do we need to do to increase the size of the pie? If we want a bigger slice, then we need to increase the size of the pie. That way everybody wins. Duh do a win win deal. What does it take to increase a slice of pie?  

[00:35:24.310]

Well, having 200,000 pages regulation probably doesn't increase the slice of the pie. Having all these new taxes and threatening quadruple taxes doesn't increase the slice of the pie. Going to energy companies and treating them like they're the, you know, like, like they're some kind of evil force in the world that's destroying us all, like that's probably not going to increase the size of the pie. So this is all relatively common sense stuff. Are they going to do any of this?  

[00:35:48.160]

Probably not. What are they really going to do? Most likely the same thing that the Romans did. The same thing that the French did. The same thing the downesis did.  

[00:35:55.490]

Higher taxes, more regulation, more disunification. If you disagree with them, they call you all these terrible names. They try and silence you. They try and censor you. They call you antiscience.  

[00:36:05.650]

More government, more goons. These are the sorts of things that are just common. We can see this over and over and over again throughout history. Now, I'm not saying all this is some kind of bad news story. It's not.  

[00:36:18.310]

You can't rely on politicians to get it right. Maybe they do. But you can't rely on that. You can't hold your breath. You can't hold your breath for your fellow citizen to figure out priorities.  

[00:36:27.850]

There's people out there that are still convinced that the number one problem in the United States is which bathroom people can use. And look, sure, for certain people that's a dramatic part of their lives, fine, but we have bigger problems, right? The country has much, much bigger problems. And you'll notice, by the way, I didn't actually say anything about climate, climate change. A lot of people think that's the number one problem.  

[00:36:50.950]

I would say very briefly, I could do a whole podcast about this, honestly. But I don't lie. Wake and I worry about climate change. And the reason why is because those solutions already exist. Nuclear power is a real thing.  

[00:37:02.790]

It already exists. Nuclear fusion has actually already happened. Last year, nuclear fusion actually became no longer some like crazy scientific pipe dream. Nuclear fusion actually happened. Nuclear fusion has been around for decades.  

[00:37:15.280]

Nuclear has a very bright future. These solutions already exist. You want to talk about a clean energy source, low CO2 emissions, all these things, it already exists. Right now you've got a bunch of idiots. You get the Greta Thunbergs of the world that apparently get to decide what everybody is going to do.  

[00:37:28.640]

You know, they they said, no, we don't like nuclear, and they scowl the camera and tell us that we're all bad people. But the reality is all the solutions for the environment already exist. I like a clean environment. Personally. I'm sitting a place right now.  

[00:37:40.070]

I've got solar panels on my roof. I've invested a ton of my own money in planting trees, in carbon credits and all sorts of things, right? So, I mean, I like clean air. I like clean water. I like these things.  

[00:37:51.400]

I don't lie, wait at night, worry about it, because I know those solutions exist. I know it's up to the private sector to get it going. And I know because it's up to the private sector, sooner or later it's going to happen, right? The problem is all these economic issues, they rely on these crooks in the public sector. They rely on these incompetent buffoons, the guys who shake hands with thin air.  

[00:38:10.030]

That's who the economic issues come down to. And there's very little momentum in the right direction. In fact, most of them is in the wrong direction. And so you can't rely on these guys to get it right. You can't rely on your fellow citizen to figure out the priorities, because there's still people that are saying, our number one priority has got to be bathrooms.  

[00:38:27.070]

Our number one priority has got to be whatever, all these things. But those aren't really existential risks, the economic problems. Social Security goes bankrupt. That's an existential risk. The currency, we have a currency crisis.  

[00:38:41.090]

We default on our debt. Those are existential risks, right? So this is something that it's a big deal. But I don't want to cast this as a bad news story, because the reality is you actually do have an enormous amount of control. We can go back and look at all these consequences and say, okay, jeez, look at what happened in Rome.  

[00:38:57.140]

Look what happened in Downesis. Look at what happened to the French. Look at what happened all throughout history. Every time governments got into dire straits, what do they do? They raise taxes.  

[00:39:06.120]

They inflated, they defaulted. They did all these things. Well, guess what? You have so much control over your life, you can take steps. They're going to raise taxes.  

[00:39:13.880]

You can take steps to reduce what you owe completely, legal steps. Social Security is going to have problems. It's going to raise the age. They might have to default. They might have to reduce benefits.  

[00:39:23.330]

You have all the control in the world. You can take steps to reduce that impact on your life. They're going to inflate the currency. Great. You can take steps to reduce that.  

[00:39:31.210]

You can make money from that, right? You can make money from that. That actually creates opportunity. And this is really the message, is that it's up to us how we view these things. We can view it through the lens of panic and chaos and oh my God, the world's coming to an end.  

[00:39:45.200]

The world's not coming to an end. We have control. They don't like us to feel like we have control, but we have control. We have control over our health. We have control over our children's education.  

[00:39:52.940]

We have control over our finances. We have control over how we view the opportunities in front of us. Even the economic chaos has created a lot of investment opportunities, business opportunities. I mean, you look at this. I've written about this.  

[00:40:05.730]

I've talked about this. I mean, there are really good quality, well managed energy companies that are selling for nothing. Very low multiples of their earnings, very low multiples of their book value. Agriculture, businesses that you have really strong prospects that are selling for, very low multiples of their book value. These are excellent investment opportunities.  

[00:40:24.090]

We did a whole podcast about, for example, making money from carbon credits. People have a fanatical idea of coming up with solutions, and so they're pushing carbon credits. It's becoming a really, really big thing. And it's something that right now is a very nascent market. We did a whole podcast about this, and this is something that, frankly, is an opportunity.  

[00:40:43.120]

People can make a ton of money speculating in carbon credit. So there are just so many opportunities, and we can look at it through this again, this lens of panic, and go, oh my God, all these problems and so forth. And yes, there are a lot of problems. We can hold out hope and say, maybe they're going to fix it. But the reality is that we have control over our lives.  

[00:41:01.320]

We have control over how we view these problems and how we respond to them. They have control over how they respond to problems. Their response to problems is to do nothing. Their response to problems is to make things worse. Our response to problems can be to make things better at a minimum, at least in our own lives, and set ourselves up to be in a position of strength.  

[00:41:18.730]

We started this podcast in 480 BC. 480 BC. We talked about again the battles salamis the Greeks, in the east, fighting against the Persians, and in the west fighting against the Carthaginians. We started in Sicily. And 480 BC again, turns out this is one of the most important years in history for the rise of Western civilization.  

[00:41:40.910]

If we're being intellectually honest, future historians may look back and look at the 2020s so far seem to be shaving up to be among the most important years in the decline of Western civilization. I'm not saying that to be dramatic, nor am I thinking that the world is going to come to an end. I don't think that at all. I'm actually an optimist. I'm incredibly optimistic about the future of the world.  

[00:42:00.310]

But we need to be honest in our assessment about the circumstances under which we live. It is difficult. It's difficult to stomach all this. It's difficult to see. It's difficult to see the news, read the headlines and see the debt and this fiasco, the insolvency, the constant bickering back and forth, but just their inability to solve a problem.  

[00:42:18.560]

It's this obvious problem, the debt is too large, can you solve this problem? No, they can't solve the problem. They have this sort of brinksmanship approach. Instead of actually cooperating, rating and compromising saying, jeez, let's all agree we have a big problem, let's figure out what we want to do to solve it. It's brinksmanship.  

[00:42:35.580]

It's no, I'm not going to do anything. I'm going to dare you to do it. We're going to go all the way to the edge. To me, this is a criminal level of incompetence. Their failure to be able to solve problems in a way without resorting to this kind of brinksmanship, without resorting to this total catastrophe.  

[00:42:52.350]

It is a criminal way. And it's difficult to see it, it's difficult to stomach the debt. It's difficult to stomach their inability to solve problems, the political incompetence. It's difficult to see and stomach a society eating itself from within, people at each other's throats, the, the disunity, all those things. And look, you know, maybe we catch a break, maybe we get lucky and things turn around.  

[00:43:12.500]

It has happened before and we talked about like, it's not rocket science to turn things around economically and you turn things around economically, it shouldn't be that difficult to turn things around even socially. There are plenty of avenues for that, there are plenty of historical examples for that. But even if not, there will always be plenty of opportunities for you to take back control over your own life. That is my constant message to you. We cannot control what happens in the world.  

[00:43:36.120]

We cannot control what happens in our country. We can absolutely control what happens in our own lives. Thanks very much for listening and we'll speak again next week.   Close Podcast Transcription

Imagine if Elon Musk stood up one day and told the world, “My #1 goal is for Tesla stock to lose 2% of its value every year.”

First of all, people would probably rightfully conclude that Elon had finally lost his mind.

And second, everyone would dump the stock. Who would possibly want to own an asset where the management is TRYING to lose 2% every year?

Yet that’s precisely the stated goal of the people who manage our currencies. They tell us flat out that they WANT 2% inflation, i.e. they WANT the dollar, euro, etc. to lose 2% every year.

Obviously these ‘experts’ have completely failed to achieve their goal lately… but the larger point is that incentives are clearly not aligned.

In the case of businesses, managers generally have the same incentives as their shareholders. Elon’s wealth only increases if his stockholders’ wealth increases.

But the people who manage currencies (politicians and central bankers) do not share the same incentives as the people who own the currency (i.e. responsible individuals who save money).

Savers want the currency to be stable. Politicians want it to lose value. It’s a totally perverse incentive structure… but it may get a lot worse– at least for the United States.

And it has a lot to do with the war in Ukraine.

History is full of examples of former superpowers who lose their dominance. Egypt. Greece. Rome. France. The Ottoman Empire. Mongolia.

And quite often there’s a ‘changing of the guard’, a reshuffling of the world order, when a rising power and declining power are involved in a war.

Carthage was once the dominant power in the western Mediterranean. But after losing the Punic Wars, Rome asserted its dominance over the region.

Spain was once the dominant power in Europe. But after the Thirty Years War, it became clear that France was the new superpower on the continent.

The two powers don’t even need to be fighting each other; after World War II, for example, it was clear that the US had surpassed Britain as the dominant superpower, even though both nations were on the same side during the war.

Today we see the same ingredients that may result in another reshuffling of the world order: a declining power (US), rising power (China), and a war.

Today is the first and hopefully only anniversary of the war in Ukraine. And I spend some time in today’s podcast episode exploring the larger implications, specifically focusing on the US dollar.

I think it’s very probable that, whenever this war finally ends, China will emerge as a clear superpower.

That doesn’t mean America will vanish. But it would mark the start of a new era in which the US can no longer do whatever it wants… and quite possibly share the dollar’s ‘reserve status’ with China.

For decades now, the US has enjoyed the exorbitant privilege of being the primary issuer of the world’s reserve currency.

This gives the US the luxury of having endless demand from foreign investors who have to own US dollar assets, and specifically US government debt.

Because of this endless demand from foreigners, the US government has been able to get away with the fiscal equivalent of double-homicide: multi-trillion dollar deficits, a $31.5 trillion national debt, etc.

Yet despite such irresponsible spending, foreigners STILL buy US government bonds… simply because the US dollar is the world’s reserve currency.

Anyone who wants to participate in global trade, buy oil from Saudi Arabia, etc. HAS to own US dollars… and hence hold their noses every time Nancy Pelosi said “it costs nothing”.

But imagine a world where the US dollar is no longer king. Sure, the dollar would still be relevant. But not king. Maybe a duke or viscount.

Without its status as the undisputed king of currencies, suddenly the US government wouldn’t be able to get away with outrageous deficits anymore. The Federal Reserve wouldn’t be able to get away with printing trillions of dollars, or slashing interest rates to zero, while expecting absolutely no consequences.

Suddenly all the debt and all the money printing would trigger inflation… and even a loss of sovereignty.

We may be closer to this reality than anyone realizes.

Again, history is full of examples of global power reshuffling because of a war. History is also clear that reserve currencies tend to change when global power is reshuffled.

So we have all the key ingredients right now for some pretty big implications for the US dollar… and that ridiculous “2%” inflation goal.

I talk about all of this in today’s episode, starting with the story of one of the biggest parties in world history that took place in 864 BC. The dominant superpower at the time was celebrating itself. And they thought their supremacy would last forever.

It didn’t. It never does.

I also walk you through the rise and fall of empires and reserve currencies, and I explain how even a minor decline in reserve status will be really bad for US inflation and sovereignty.

But this is not a gloomy podcast. Remember the words of Marcus Aurelius: focus on the things that you can control. And we can control a LOT.

We talk about simple ways to think about the future, why diversification is so important, and why real assets make so much sense.

It’s not a question of “which is the best currency”. ALL currencies are bad. Remember the perverse incentive structure I talked about at the beginning of this letter?

It’s really a question of which are the right assets to hold that can stand the test of time… including a reshuffling of power.

You can listen to today’s episode here, I hope you enjoy.

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[00:00:00.970]

Today, we're going to go back in time to the year 864 BC, where one of the largest parties ever to be held in the history of the world was taking place, especially given world population. At that time, there were 69,574 people. I'll get back to that number in a minute. 69,574 people from all over the region, all over the known world, had to descended upon this city, this new city called Kala, located in what is today northern Iraq's Nineveh province. It's not far from the city of Mosul, if you know the region.  

[00:00:35.070]

And they were there to celebrate the opening of this city. Kala had become the brand new capital of the Assyrian Empire, what historian is technically referred to as the Neo Assyrian Empire. Now, the guy who was king, his name was Asher Nasirpal. Now. Asher NASA.  

[00:00:48.850]

Paul II technically. Now, he had ordered this new capital city to be built in 879. So it's about 15 years prior, and workers had actually managed to complete it in just 15 years. And when you think about it, that's really fast. Even by modern standards, kala had been a very small settlement a few hundred years prior.  

[00:01:07.180]

It had been sort of somewhat abandoned and in disrepair. And Nashvill NASA. Paul said, you know what? I want a new capital. The Assyrian empire had grown.  

[00:01:17.040]

It become the dominant power. I want a new capital. So they built this new capital, and it was really nice. They had very nice buildings, temples, luxurious palace, 8 walls around the city, botanical gardens. And this is Kala, a little bit south of Mosul.  

[00:01:34.180]

It's very close to the banks of the Tigris River. And so this is actually we think about a lot of people have never been to Iraq. If you've never been a lot of people think about it as it's just desert and whatever, but Iraq is actually this is one of the more picturesque areas. It's very lush. It's a very fertile river valley here.  

[00:01:51.750]

And this was a very, very nice city. And it was famous. It was referred to frequently in the Bible. I mean, this was a very, very famous place. And when it was complete, Asher Nasapal said, we're going to have the celebration to end all celebrations.  

[00:02:07.990]

And they invited 69,574 people to have this raging party to celebrate the opening of his capital. By comparison, Burning Man last year had about 66,000 people. And obviously there's a whole lot more people in the world, and it's a lot easier to, you know, have transportation and travel to places. So you can just imagine that number, 69,574 people. We know this is the case because they actually chiseled this on their stone tablet.  

[00:02:33.430]

They call these things steelies. And they wrote about the celebration, this long tablet, talking about the banquet and the celebration, and they said, we have 69,574 people there. According to the ancient Assyrian scribes chiseling this into their tablet. They went on and on about all the incredible food and the drink and just the big party that they were having to celebrate this new capital in the Assyrian Empire. Obviously, this was the peak that was the peak of the Assyrian Empire.  

[00:03:00.100]

Assyrian was the dominant superpower in the world, or at least their known world, what they consider the world. They couldn't imagine a world bigger than what they had conquered. They had subjugated nearly everybody in the region babylonia, Egypt, the Hittites, the Kingdom of Israel. And it was, at that point in history, was the largest empire that had ever existed up to that point in history, right? I mean, if you compare it to later empires, the Roman Empire, the British Empire, Mongolia, the Spanish Empire, assyria was like nothing.  

[00:03:32.580]

It was quaint. I mean, in total land mass, it was about twice the size of Texas, half the size of India. But thousands of years ago, that was unimaginably vast. I mean, people thought this was and this king thought himself king of the universe. I mean, nobody could imagine a world beyond what they had conquered.  

[00:03:53.780]

You know how royals they have often these long titles. If you think about if you watched Game of Thrones years ago, they would have Joffrey, first of his Name, king of the andals Lord Protector of the Seven Kingdom, blah, blah, all that sort of stuff's. Titles went out for hundreds of words, entire paragraphs. King of the world, no rival among rulers, heroic warrior, legitimate king. It's kind of funny.  

[00:04:18.630]

They felt it necessary to actually say that. Legitimate king. One of my favorites. They called them shepherd of all mortals, just on and on and on with all these names. And you got to feel bad for this poor Assyrian scribe that's got to chisel all these silly titles into the stone tablet just to placate this guy's ego.  

[00:04:36.730]

It reminds me of that great scene in Rocky Four where Apollo Creed is about to fight the the Soviet Beth fight Ivan Drago, the Russian boxer. And then they're introducing Apollo Creed. They've got all these nicknames. The Dancing Destroyer, the King of Sting, the Master Disaster, and of course, my favorite, the Count of Monte Fisto. And it's just all these names.  

[00:04:56.770]

This was Ashur, Nasirpal, and this is the sort of thing that happens at the Top. The rulers, they just, oh, they think they're so great. They are gods with no equal and whatever they've conquered, that's the world. And there's nothing else that could possibly exist in the world that's the top. And Assyria rode that crest for for quite some time.  

[00:05:14.550]

They actually remained at the top for, you know, really a couple hundred years, which is not unusual for dominant superpowers to last even a couple of centuries. But little by little, the cracks started emerging. They started losing territory. They had internal rebellion. Egypt, Babylon.  

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It was a big deal when they lost Babylon. Smaller kingdoms started to form. These these loose alliances and standing together against Assyrian expansion and directly challenging the empire. And it was obvious that, you know, once Syria had been able to bend the world to its will and go around the region and say, you will do what I say. But now it had to ask, it had to plead, it had to negotiate with all these smaller powers.  

[00:05:53.080]

It didn't have the power and the authority that it once did to bend everybody, bring everybody to heal and bend the world to its will. And now, by the mid 600, 200 years or so after the party to end all parties, the Assyrian Empire was in full blown decline again. They had sort of ridden at the top, they'd had their ups and downs, but still were the dominant power. But at that point, by 200 years later, in the mid 600, they were in full blown decline. We could do a whole other podcast about that.  

[00:06:21.870]

But they had just the normal things, the weak leadership, the incompetence, the corruption, the bureaucracy, the inability to have a peaceful transition of power, the assassinations and the court intrigue and the suffering, humiliating defeat after humiliating defeat. And as well, there was a rising power, a rising power from the east. There was a people known of the as the Medeans, and the Medeaans were growing quickly and becoming their own empire. And eventually this Medean king, his name is Siaxares, who allied with the Babylonians and just literally wiped Assyria off the map in 609 BC. They just ceased to exist anymore.  

[00:06:59.850]

Poof. No more Assyrian. Syria is no longer the dominant superpower and is actually very quickly after that, that this guy, Cyrus, very famous historical figure, Cyrus the Great, who led the Achaemenid Empire, the Persian Empire, it's often referred to to completely dominate the region. Cyrus the Great of the Achaemenid Persians, came in and he defeated the Medeans, he defeated the Babylonians, the Achaemenids took Egypt, they took India, and the Persian Empire became the dominant superpower in the region in what they consider at least the known world. And they too refer to themselves as king of kings and gods among men and all these things.  

[00:07:36.240]

But the Persians themselves also, they rose and they peaked and they declined. We know the story. Xerxes, Darius actually in Xerxes, who famously fought and lost against the Greeks and ultimately got themselves wiped out by Alexander the Great. Poof. No more Achaemenid empire.  

[00:07:55.100]

This is the thing that happens over and over again throughout history. We see the same story, very familiar story. You've got a declining power and a rising power, and they sort of meet in the middle and they have a changing of the guard, and there's a reshuffling of the regional order, the world order, the power of of things. And this happens quite often as a consequence of war. And we've seen this again over and over again.  

[00:08:17.150]

There was a time where Carthage was the dominant power in the Western Mediterranean. We had did a podcast about that with the rise of Carthage, and Carthage was this dominant power in the Western Mediterranean, but they went to war against at the time, this sort of up and coming power named Rome. Rome was still a republic at the time, and Rome and Carthage went to war with each other. The Punic wars. Rome won, Carthage lost.  

[00:08:39.660]

Guess what? Rome's now the power. Carthage is no longer the power, and it was a consequence of war. Carthage out Rome in so many other examples of this, the 30 Years War, in the 16 hundreds in Europe, spain was the dominant power. France was the rising power.  

[00:08:52.730]

Spain was in decline. France was on the rise. The two went to war, spain was out, France was in. This ushered in a new era that made it possible for Louis XIV and all these things that was a result of the 30 Years War is one of the consequences. And what we also see throughout history is that war is a major factor in this.  

[00:09:10.580]

But sometimes the two powers don't even need to be at war with one another. World War II is actually a great example of this. Britain going into World War II was still the dominant power, clearly a power in decline, the US clearly a power on the rise. But US and the UK were on the same side in World War II. But after the war, it was just obvious the US.  

[00:09:30.380]

Was the dominant superpower. The UK was no longer the power. And this makes sense because wars are incredibly expensive. In money and manpower, in morale, public opinion, all these things. Wars are very, very expensive and declining powers have a really hard time footing that bill.  

[00:09:49.450]

Rising powers can handle it, it's expensive. And sometimes they struggle, sometimes they don't struggle at all. Sometimes they just, I mean, it's nothing. If you think to the Spanish American War, the United States waging war, a very aggressive war the United States waged against Spain in 1898. Spain was, spain wasn't the dominant superpower.  

[00:10:06.300]

Spain wasn't a superpower at all. But the US. Was clearly the rising power in 1898. I mean, Spain, spain did not want to go to war with the United States. They said, listen, we had nothing to do with sinking that bow.  

[00:10:17.050]

We don't know anything about it. They had to sell the royal jewels, practically. I mean, they were not in a position where they could afford to go to war. The US just wrote a check deck and beat the pants off of the Spanish in really just a couple of months. I mean, this was a clear showcase to the world that the US.  

[00:10:33.680]

Is an extremely powerful nation. And that leads us to today. Today is the 24 February. This is the one year anniversary of it's kind of bizarre to think about the anniversary of a war, but this has been a year now since the war in Ukraine started, and I think hopefully a lot of people probably agree that the start off is this completely idiotic, immoral, misguided, pointless invasion by Russia. But we're here to talk about the big picture, and this isn't about justice or righteousness or morality.  

[00:11:08.940]

I think it's again pretty clear that invading another country is not okay. But this isn't even about if you look at the really big picture, it's not about Russia or Ukraine or even Russian United States. It's really about the US. Versus China, because what has started off again is this pointless invasion sort of turned into this battle of who is the dominant superpower, because we're focusing on the big picture, and it's obvious in this scenario, we've got a rising power, a declining power, and a war. These are the ingredients that we've seen over and over again throughout history.  

[00:11:41.140]

So if we step back and look at that big picture, we can see well, in one corner, we have the United States, which has suffered humiliation after humiliation. You got a guy that shakes hands with thin air, who inspires confidence, and nobody you have the disgraceful embarrassment in Afghanistan from 2021 would say, oh, let's give $100 billion of military equipment to our sworn enemy, the Taliban, while we have people dangling from the landing gear of aircraft as we run away from this plan. It's just what a humiliating, horrible, horrible, shameful embarrassment all the way through today, which is the debt ceiling fiasco that they're desperately the Treasury Department has already said, hey, we're running out of options here. And, you know, they can't get their act together. They can't figure out how could we possibly live with them means, gee, we only we only collect $5 trillion in in tax revenue.  

[00:12:35.100]

How could we possibly manage to get by on a piddly $5 trillion? Never mind that that was an incomprehensible amount of money even just a couple of years ago, but now we can't possibly imagine how do we possibly get by with $5 trillion a year? It's just so completely ridiculous the way these people do business. And the other thing, I think we could also look at it let's call it the America Last Policy. You know, you got this guy who goes to Kiev.  

[00:13:01.730]

He says, we will not leave you, whatever it takes. Whatever it takes mentality. This whatever it takes. Sure, that applies to Ukraine, but it doesn't apply to people that are suffering through one of the worst environmental disasters in the history of the United States in Ohio. You got a guy that can travel to Kiev, but we can't do anything to those people in Ohio.  

[00:13:23.610]

But we can barely say a word about the people in Ohio that are suffering one of the worst community environmental disasters in history. And just to make sure they're very clear, the White House press secretary, the incredibly astute Kareem Jean Pierre, even announced yesterday that the President has absolutely no plans to visit Ohio, just to make sure there's no doubt that he doesn't give a shit about what's happening in his own country. They don't care about the border. They don't care about all this stuff, but hey, whatever it takes in Ukraine, because it seems pretty obvious to them that they know this is about superpower status. You got this guy who goes and shows up and gives this speech, all these speeches, speech in Kiev, speech in Poland, and it might as well have been him jumping him down, waving his hands, saying, we're still the dominant superpower.  

[00:14:13.130]

That's basically the message that he's trying to send. We're still the dominant superpower, according to me. According to the guy that shakes hands with thin air. We're still the dominant superpower. Meanwhile, in the other corner, you've got China.  

[00:14:24.680]

China is, I think, pretty clearly a rising power. It has risen so much, they are supremely confident in themselves to be able to do whatever the hell they want. They don't care. Oh, the US has imposed sanctions. We don't give a shit.  

[00:14:40.610]

We'll do whatever we want. We're not you're not the boss of us. We're not going to follow your your protocols, your rules, your policies. And just imagine your Chinese leadership and you kind of look back and you realize, you know, wow, we brought the world's dominant superpower to its knees over a virus. Widespread economic damage that happened in a lot of places.  

[00:15:02.040]

But when you think about some of the other consequences, it would say, like, wow, we caused you to completely vanquish an entire generation of young people who fell behind in their education, to cause people to be at each other's throats, screaming at each other over masks and vaccines and all these sorts of things because of a virus. The amount of chaos that was injected because this virus and they're sitting back like this going, oh my God, I can't believe that this is how these people react to this. You've also hacked your way across countless government and corporate networks with absolute impunity, no consequences whatsoever, showcasing some of those despicable incompetence. It was actually just a couple of days ago. The Defense Department acknowledged this week that they had an email server that wasn't even password protected that has been leaking terabytes of sensitive emails just out to the Internet.  

[00:15:50.420]

And you're the Chinese look at this, going, are you kidding me? How stupid are these people? Then you had all the other examples, the solar winds hack in 2020 and all there's so many different examples of this. And then you've got all these other things. You're spies who have slept their way to the top of the political elite in the United States.  

[00:16:08.410]

You got these female spies that are going around literally just having sex with high ranking politicians in California and whatever, and just stealing all sorts of secrets, and nothing happens. Nobody's held accountable nobody loses a job over this. Then you think about from the Chinese leadership perspective, you own a whole generation of young people who have become clinically addicted to TikTok, which might as well be published by the Chinese government. You had all these executives who can't even they hauled in front of US. Congress and can't even pledge, oh, no, we're not going to give any information to Chinese government.  

[00:16:47.570]

Of course they're going to give all this information to the Chinese government. The TikTok algorithms have figured everybody out. They know how you think. They know how you feel. They know what you want.  

[00:16:55.420]

They know what you want before you know what you want. And they're able to I mean, this is full blown psychological warfare, hardcore psychological warfare in terms of how they're able to get in the heads of young people and the things they're able to make people do and make people think and make people feel depressed and anxious and nervous and so forth. They have totally weaponized social media, and they're in complete control of it. They're also in the president's head, they've got this guy so paranoid that he scrambles fighter jets and launches $500,000 missiles every time there's a balloon in the air. And they go out and they say, look at these people.  

[00:17:28.910]

The US. Is hysterical and absurd and all these sorts of things, and they make this guy feel desperate to reassert his dominance, which is how we ended up with this Ukraine visit. The phony theatrics he puts on his aviator sunglasses and goes walking through Kiev, and all of a sudden, the fake air raid sirens go off. And the whole thing is so staged and so theatrical that even CNN called bullshit. Even CNN.  

[00:17:53.630]

The guy was like, I've been here for days. There hasn't been a rocket attack. There hasn't been so much as a gunshot. There's no air raid sirens. All of a sudden, Biden shows up and the air raid sirens go off, and it's kind of convenient.  

[00:18:04.000]

And of course, he's walking tall and isn't he's not afraid of the air raid sirens? I mean, it's just such bullshit. If it was actually real and the air raid sirens went off and they actually thought there was an imminent rocket attack, I mean, everybody knows the Secret Service would have been all over that guy in a second, and they would have taken him away to some undisclosed bunker somewhere. But instead, the air sirens going off, and nobody does anything about it because everybody knows that it's fake. It's just fake.  

[00:18:33.340]

It's this stage theatrical nonsense to make this guy look like he's still a strong leader. Nobody believes it. Everybody knows it's insulting that people like, they really think that we're that stupid, that we can't figure it out. It's really offensive that they think that we're that stupid. So where does all this go?  

[00:18:51.610]

You got the US. On one side, you got China on the other. You got a declining power and a rising power, and you've got a war. Where does this go? Who knows?  

[00:19:00.890]

It's impossible to make a prediction of that. These guys are when that guy win? I mean, who knows? That's not really the point. The point is that you got the Chinese saying they're working on a peace plan and all this sort of stuff.  

[00:19:12.350]

But the larger point is that this is very costly. Obviously, it's extremely costly for Ukraine. It's very costly for Russia. You can see a lot of the reports about morale of Russian troops and so forth. I mean, just really horrible for everybody.  

[00:19:28.630]

It's very expensive for Europe. It's extremely expensive for the United States. The United States, by the way, has given way more aid, military aid, financial aid, than anybody, including all these European nations. I mean, you look at the military aid the United States has given to Ukraine. I mean, it's multiples and multiples.  

[00:19:44.470]

It's like ten times more than what Germany and France have given. I mean, it's a joke. So it's very costly for the US. But this is not even a blip for the Chinese. It barely registers.  

[00:19:57.560]

They've barely had to lift a finger. They barely had to put a penny into this. And so based on that, if you just look at sort of cost benefit, there's a very good chance that the Chinese come out of this again. Rising power, declining power, very expensive war, very costly war in the Chinese. They might even come out and be the peacemakers.  

[00:20:16.390]

They actually have the ability to convince the Russians. I mean, Putin gave this speech the other day, and he said, we will never lose on the battlefield. He didn't say that. There's no end to this war. The Chinese could quite possibly say, hey, man, just stop.  

[00:20:31.630]

Let's figure it out. Have a peace, whatever. The Chinese come out of this looking like they're the peacemakers, or at least they put a peace plan on the table and dare the US. To say, okay, we've got the Russians willing to do a deal, willing to end this whole thing. Let's see what you're willing to do.  

[00:20:46.740]

And make the US. Look like the idiots, make the US. Look like the aggressors. I mean, there's a lot of permutations here and it's silly to sort of say this is what's going to happen, but at a minimum, you could probably imagine there's a good chance, there's no guarantee of anything, but there's a good chance that the Chinese come out of this possibly looking like the Peacemakers, clearly looking like a very dominant power. At a minimum, a power that can't be ignored, a power that has the power to create peace after a year of war.  

[00:21:13.720]

The US. Couldn't make a peace. All these other the Europeans couldn't make a peace. Who could make a peace? The Chinese.  

[00:21:19.350]

That's a real possibility. And that the Chinese come out of this looking like a major power, more so than they even are now, and really signals the end of an era where the US. Is just able to do whatever it wants, to whomever it wants, whenever it wants, however it wants. Those days are over, and it ushers in a new era where there's at least a multilateral influence. China has major influence, even veto power over the United States.  

[00:21:47.330]

Now, I've got to pause and say, every time I talk about China, there's always somebody friends of mine who give me the yeah, but, yeah, okay, yeah, but China's got this problem, and that problem. China isn't perfect. China has plenty of its own problems. Yeah, of course China has plenty of its own problems. People go, yeah, but China has lots of debt, and China has this, China has that.  

[00:22:06.170]

Yeah, I got it. The Roman Republic, when it was a rising power, had lots of problems. The Ottoman Empire, when it was rising, had a lot of problems. France, when it was rising, had a lot of problems. The British Empire had a lot of problems as they were rising.  

[00:22:19.700]

There's no place in history that's ever been, we're perfect. We have zero problems whatsoever. That's not a requirement. Being perfect is not a requirement for a nation or an empire to be on its way to being the dominant power, or at least being a major power or major superpower. That is not a requirement.  

[00:22:39.490]

I think with respect to China, if I'm honest, sure, they've got a big debt problem, their shadow financial system, all these things. I think a lot of those are are workable. The one that I used to think was just not workable was their demographic problem. I mean, there's just decades of the idiotic one child policy. Now they got too many old people, not enough young people.  

[00:23:02.240]

That is cancerous for a society. It turns everything upside down. You go, It's really hard to work your way out of that one, because you can't just create new people to fill that gap. But then you think about it, well, who are we dealing with here? We're dealing with the Chinese.  

[00:23:17.990]

There's actually nothing that says the Chinese can't create new people. Maybe they go out and just start cloning people. You have this whole sort of Star Wars clone army of Chinese people just to sort of fill in that demographic period. I mean, I'm just throwing it out there. Just think about who you're dealing with.  

[00:23:33.780]

All options are on the table here. But again, I'm not suggesting that even China becomes the superpower, the sole superpower, and everybody else shrinks to it. I think there's a lot of possibilities here. We did a whole podcast, actually, about something I call this Barbarian Kingdom Thesis. After the fall of Rome, there was a power vacuum.  

[00:23:51.310]

There was no dominant superpower. You had all these barbarian kingdoms, and you had Byzantium in the east, and so all these people that sort of shared power. There's nothing that says you have to have a single dominant superpower. What I am suggesting is that throughout history, there's always been instances where you have a declining power and a rising power, and quite often war is the signal that this rising power has to be taken very seriously and gets a seat at the table. Those are all the ingredients that we see right now.  

[00:24:20.150]

And the reason this matters, this is stuff that PhDs at the State Department write papers that get published in Foreign Affairs. That's not what we're talking about. I'm talking about this from the financial consequences, from the economic consequences. Because if the US. Loses its status as the superpower, which it has been for so long, really so long as the sole dominant superpower, the economic and financial implications are vast simply because if you lose your sole superpower status, the primacy of the US.  

[00:24:52.580]

Dollar cannot be far behind. This is a really big deal. The US. Dollar, and I've written about this before, I've talked about this before. The US dollar is known as the reserve currency.  

[00:25:03.570]

It's not the only, but the primary reserve currency in the world. What is the reserve currency? It's the currency of international trade. It's the lingua franca of economics that around the world. In the same way that if you got a company in Nicaragua and a company in Botswana and they do business with each other, they're going to settle that deal in US dollars.  

[00:25:24.200]

It's the reason why the price of gold traded in London is in US dollars. Oil in Saudi Arabia is priced and sold in US dollars. All these things, coffee contracts in Latin America, all these things. Rice contracts in Asia, all these things. There's so many of these contracts around the world, finance around the world.  

[00:25:43.390]

I mean, that gets traded, settled, closed in US dollars. Sovereign governments hold US dollars. Central banks hold US dollars. Commercial banks in Singapore and Australia and large corporations, they hold US dollars. Sometimes it's ridiculous, actually, the impact of this, a great example and one that's actually been pointed out by the French government, french Finance minister a couple of years back.  

[00:26:10.380]

You look at Airbus, right, which is a European aircraft manufacturer that sells planes to Air France. So you got a European manufacturer, European airline, and they price that deal in US dollars. Nothing about that deal takes place in the United States. Nothing has anything to do with the United States. But you got two European companies doing a deal in US dollars.  

[00:26:29.760]

So it gets actually, the concept of the reserve currency gets borderline ridiculous. There's this this concept has been around for a long time. Reserve currency has been around for a long time. You can go back to the ancient world. You know, the the Greek drachma, right?  

[00:26:43.380]

The currency in ancient Greece, coins that they had, I mean, they traded extensively around the region. And when you think about. It, it made sense. You've got some smaller kingdom somewhere. And they do business with the Greeks and another smaller, smaller kingdom, a does business with the Greek smaller kingdom.  

[00:26:59.260]

B does business with the Greeks, and A and B, then both they accept drachma because they do so much business with the Greeks. And the Greeks have this very large economy. And so they say, yeah, sure, we'll take your coin. We like your coin. And then you look at these A and B.  

[00:27:12.010]

They do business with each other. They do trade with each other. They say, well, you have drachma. I have drachma? So let's just trade our goods and settle in drachma.  

[00:27:20.000]

And this is the way things went for a very, very long time. The Byzantine Empire had this coin called the Solidus. And this Solidus became a major reserve currency around the world. Again, you had all these smaller kingdoms that were doing business with the Byzantine Empire. They were accepting and trading in gold solidus coins.  

[00:27:37.740]

And so they went. So all these other smaller kingdoms just started doing business with each other in solidus coins. But these things change in the same way that dominant superpowers change throughout history. They always have these reserve currencies change. And so why do they change?  

[00:27:54.380]

Well, when you think about it, throughout history with these reserve currencies in general, there's no formal rule. Nobody gotten together in a room and said, we're all going to decide to use the Byzantine Gold Solidus or the Greek Drachma or whatever as our coin. It just sort of happened organically. Again, people realize, well, hey, I'm sitting on a bunch of these solidi and you're sitting on a bunch of solidi. So let's get together and just trade our Solidi.  

[00:28:21.080]

Even though none of this has anything to do. Neither one of us is in the Byzantine Empire. We're not trading in the Byzantine Empire. Well, we'll just trade this coin because both of us have it right. It happens organically over time, and it follows logically that it would be the currency of the dominant superpower because they have the largest economy.  

[00:28:38.590]

Everybody has a lot of trust and confidence, and usually it means that the coin has good value. They're not playing funny games of the coins, but over time, the coin loses its stability. This happened with the Byzantine Empire. They started in the early 11th century. They started chipping away and debasing the coins and so forth.  

[00:29:00.670]

And so people get sick of that. It's a thing with the dominant power. The dominant powers always think that their position will last forever. There's always a level of arrogance. The dominant power say, you know what?  

[00:29:12.690]

We're the dominant superpower. We can do whatever the hell we want. We can debase our coins, we can inflate. And people will still accept our coins because we're the big boss in the region. Everybody's going to do what we say.  

[00:29:25.430]

And they think that that status is going to last forever, but eventually people get sick of it. And that's what happened in the case of Byzantium, is that all of a sudden their coins had been inflated and inflated and inflated, and people said, you know what? I'm tired of this. And wouldn't you know it, venice had come along and said, well, we have a coin. Florence had come along and said, we have a coin.  

[00:29:43.270]

And suddenly you start seeing trade in Venetian duckets and Florentine, Florence, and eventually Dutch gilders and Spanish pieces of eight, the real deoco, and eventually the British pound. The rise and fall of reserve currencies often coincides with the rise and fall of the dominant power. The reserve currency is often tied to the strength of the dominant power, and it changes when there's that reshuffling, that reordering of power, often not right away, right? I mean, the Byzantine Empire was by the 11th century, 12th century, 13th century was an obvious decline, but people were still using Byzantine coins until the Venetians and the Florentine said, okay, we're going to introduce our new coin. So it's not right away, right?  

[00:30:25.560]

History shows that there's sometimes a lag between when the reserve currency changes and the power changes. But both of these things happen. It's inevitable. It's there's never been a case where there's been some dominant superpower and some reserve currency that's lasted forever. Now, world War Two is an interesting example.  

[00:30:42.250]

World War Two people actually did get together in a room in 1944. They actually got together in a room at the Mount Washington Hotel in Bretton Woods, New Hampshire, and they signed an agreement that's known as the Bretton Woods Agreement in 1944 that basically made the US. Dollar the center of the financial universe. They said, everything is going to be pegged. There's going to be this fixed exchange rate between, you know, whatever the British pound in the US.  

[00:31:04.630]

Dollar. The Swiss franc in the US. Dollar, the French franc and the US. Dollar. Every currency is going to be is going to have a fixed rate to the US.  

[00:31:11.240]

Dollar, and the US. Dollar is going to be fixed to gold. So at any given time, the US. Dollar is going to be fully redeemable to gold. If you have dollars, you can exchange it for gold and vice versa.  

[00:31:20.790]

And because of that, there's a lot of trust and confidence in the dollar. There's a lot of trust and confidence in the United States because, like we said, after World War II, it was obvious the US. Was the dominant power. They're the only clear the dominant power, largest economy in the world, largest military in the world, the only country left standing, hadn't been completely decimated from World War II, the only nuclear power in the world. If they hadn't dropped the bomb yet in 1944.  

[00:31:42.770]

But they had. I mean, this was it was natural that the reserve currency went to the dominant sewer power. That was the US. And so it was the US. Dollar and it's been that way for decades.  

[00:31:53.750]

The thing about the reserve currency is that it provides and has provided, continues to provide the US. With an unparalleled financial advantage. The whole point is that, remember, the idea is that everybody's got to hold US. Dollars. Foreign governments, foreign institutions, foreign central banks, big corporations, commercial banks, they've all got to hold US.  

[00:32:12.940]

Dollars. And in order to hold US. Dollars they need some sort of liquid asset. Liquid US. Dollar asset.  

[00:32:19.790]

Right. We're talking about they need a way to hold dollars. Now as an individual, if you could say like, well, I've got €100,000 and I want to hold dollars, you just open a US. Dollar account at a bank and fine, they'll hold your dollars for you at a bank. But we're not talking about individuals with 100,000 or a million.  

[00:32:37.120]

We're talking about institutions with hundreds of billions of dollars. Central banks, governments, huge commercial banks, huge corporations. They're not going to put that money in a bank account. And even if they do, well, what is the bank going to do with that money? The bank's got to find some asset, us.  

[00:32:53.480]

Dollar asset to park that money. Right. So what do you do? Well, I guess, you know, you could buy apartment buildings in the US. You could buy whatever industrial warehouses and land, et cetera, beachfront property in Florida.  

[00:33:07.750]

But real estate is very illiquid. What do you do when you actually need that money for something? You got to go and sell the property. Real estate is very illiquid. It's expensive to sell.  

[00:33:16.670]

What else do you do? You put it in the stock market. Well stocks are extremely volatile. You need a way to hold that money. You hold those dollars that's really stable.  

[00:33:25.450]

Right. That you can get in and out of very quickly. That's stable. You can't put it in a collective. You're going to buy baseball cards.  

[00:33:33.900]

You're going to say, oh, we got all we're going to buy all these Mickey Mantle cards, right? Well that's a really small market. That's a really, really small market. You can't put hundreds of billions of dollars, trillions of dollars into the baseball card market. So you need an asset that's stable, that's risk free, that's not volatile, that's highly liquid and really big.  

[00:33:51.550]

So big that you can deploy trillions of dollars quickly and efficiently at very minimal cost. So what market is there? What asset is there? Government bonds. U.  

[00:34:01.180]

1. Government bonds. It's a huge market. How big? 31 and a half trillion dollars as of this morning, which is right at the debt ceiling.

 

[00:34:09.330]

Literally. The market for us. Government bonds is the size of the US. National debt. U.  

[00:34:14.450]

1. Government bonds are considered risk free. It's considered the ultimate risk free asset because it's backed by the dominant superpower in the world. They're generally stable. They're extremely liquid.

 

[00:34:25.580]

No one in the last several decades has ever been sitting on a bunch of ten year treasuries going, how am I going to get rid of these Treasuries, right? I mean, it's, it's one of the most liquid assets in the world. You can sell it in a heartbeat, pretty much in any major financial exchange anywhere in the world. So it's liquid, it's huge. It's risk free, it's stable.  

[00:34:44.080]

I'm doing risk free and error quotes, by the way. Risk free and stable. And so this is the asset that all these institutions around the world tend to hold. They hold us. Dollar, US government debt because it's a US dollar, liquid, safe, stable, non volatile asset.  

[00:35:01.000]

So again, think about it. You got all these foreign governments, all these foreigners, all these banks, all these central banks, all these big companies overseas. They literally have to own US. Dollars. If they want to participate in global trade, they have to own US.  

[00:35:15.270]

Dollars. And the only way for them to really own it is by having debt, buying US. Government debt. And that basically gives the US. Government this captive group of hostages.  

[00:35:28.160]

Really, the people that have to buy its debt, they have no option. They have to buy us. Government debt because it's the only solution they have if they want to participate in global trade and commerce. That's the advantage. The US.  

[00:35:41.780]

Is able to do the most ridiculous things. They can run multi trillion dollar deficits. They can go ten years with 0% interest rates. They can go forever with bond yields that are way below the rate of inflation. They can have complete and total government dysfunction.  

[00:35:57.560]

They can have a record high trade deficit. They can have this absurd debt ceiling, government shutdown, Mexican standoff. They can have inflation at multi decade highs, and foreigners will still buy US. Debt because they have to. They have to.  

[00:36:14.890]

They have no other choice. The US. Is still their major trading partner. I mean, everybody grumbles about it. People are like, this is ridiculous.  

[00:36:21.710]

Why would anybody do this? Well, because they have to. They said, well, we still trade with the US. Everybody else still trades with the US. And so they have a reasonable expectation that not only do they have to hold dollars, but everybody else has to hold dollars.  

[00:36:35.230]

And as long as everybody has to do it, then shit, I guess we'll just keep doing it. We still have to buy oil in US. Dollars, all these things. And so they have to do it. They just keep doing it because they have to, because they don't have another choice.  

[00:36:49.370]

But that is starting to change. The Chinese have been extremely active in campaigning for an alternative. They've been very, very active in setting up their internal currency, the renminbi, or the yuan, for internationalization. This is actually called the internationalization of the renminbi. Big institutions track this very closely, and you can see this.  

[00:37:13.130]

It's so obvious. In 2021, they did this huge deal with iran, where they said, we'll invest a bunch of money in Iran, which Iran has one of the largest oil reserves in the world after Venezuela. And this resulted in a lot of Iranian and Chinese trade directly trading with each other in renminbi, in China's currency. Not in US dollars, but in China's currency. Iran can't even get US dollars because they're under sanction from the US.  

[00:37:38.370]

Treasury Department, from the United States government. So they can't even get ahold of US dollars. So of course they have to trade with the Chinese in renminbi. China was recently in Saudi Arabia pushing for the Saudis to sell oil in renminbi. Saudi Arabia was like, yeah, that actually sounds like a good idea.  

[00:37:52.890]

That helps us diversify a little bit. I mean, you cannot overstate the impact of this, in particular, this oil issue, because oil is the most widely traded commodity in the world. Everybody in the world needs oil. Oil is energy. Everybody needs energy.  

[00:38:08.040]

So the fact that oil virtually everywhere has been priced and traded in US dollars is one of the single biggest things that pushes people to continue to hold US dollars. If you want oil and you don't have a choice, you need oil, which means you need US dollars. You're buying oil from Saudi. Guess what? Saudi requires us.  

[00:38:29.560]

Dollars. So if you want to buy oil from Saudi Arabia, you got to pay in US dollars. You want to buy oil from all these other countries, you got to pay in US dollars, which means you have to have US dollars, which means you have to buy this shitty US government debt in order to have US dollars. It's so weird when you really sort of sit back and understand it. It's so weird.  

[00:38:49.050]

And so the impact of this, if all of a sudden Saudi Arabia and Iran, all these people are able to start doing business and say, well actually I'll accept renminbi, sudden people go, wow, I can actually pay you in another currency. I don't have to hold as many dollars as it used to. It's not to say we'll go from owning a bunch of dollars to owning $0, but suddenly say, oh well, I guess I'll, you know, know, I do a lot of trade with China as well, so why wouldn't I have renminbi? And if I could take that renminbi and I can trade that, china can pay me in renminbi for the trade, and then I can take my renminbi and I can buy oil with it, and Saudi Arabia will accept that renminbi, then sure, I'll do that. I don't have to do everything in US dollars now.  

[00:39:28.600]

I can diversify a little bit, right? What a concept. And so we started to see this, and honestly, I mean, this is already happening. Global trade and renminbi has been rising. Swift, which is the Society for Worldwide Interbank Financial Telecommunications.  

[00:39:44.250]

This is basically the international banking boss that tracks all of the international bank transfers around the world. They report significant increases in renminbi, denominated A transactions. The Chinese financial system has been making obvious advances, technological advances, to make it easier to handle these foreign inflows and outflows of capital. And so this is where we are right now. If you step back and look at the big picture again, us.  

[00:40:09.720]

Power is waning. That is clearly on display worldwide. That is not a controversial statement. I don't take pleasure in saying that. But it's obvious.  

[00:40:16.900]

You've got China. That's clearly in ascendance, right? Those two things are pretty obvious. And you've got war. Those ingredients rising power.  

[00:40:24.630]

Declining power and war have often signaled a change in the guard, a reshuffling of world power. There's a lot of different permutations about how that might play out. But it's possible that this war may end up being that reshuffling, that China now has a clear and obvious seat at the table, and that generally, if you look to history, tends to coincide with a reshuffling of the reserve currency. This is the thing when we're starting to see a lot of these signs, it's already happening. Chipping away at the US.  

[00:40:54.290]

Dollars dominance, this selling oil and renminbi all these things. That's a really, really big deal. And so when you have that, it's not to say that the dollar, again just is no longer the reserve currency. Nobody deals with the US. Dollars.  

[00:41:08.700]

No. That's crazy. But what happens is you start chipping away at that market share. You have fewer and fewer foreigners. You don't have those captive hostages anymore that have to buy your bonds.  

[00:41:19.430]

Right? Now, instead of having the market share that you have, you have less demand overseas. And so because of that, you have less demand for dollars. The US. Starts to lose that really important financial advantage.  

[00:41:34.030]

One of the implications of this is inflation, right? In the past. The US. Could just print as much money as it wanted, and that money always able to find a home. UX had print money, and they basically ship that money overseas to all their foreign hostages, all their financial hostages who had to buy US.  

[00:41:52.120]

Dollars. Right? They had to hold us. Dollars, print all this money. So they get all the benefit of printing money, right?  

[00:41:58.150]

They get to jump start the economy, and they get to boost economic growth, and the stock market goes through the roof. But they didn't have any of the consequences. They didn't have any of the inflation that came from that other countries. If Costa Rica goes and prints a lot of money, costa Rica is going to have a ton of inflation. Costa Rica doesn't get to take all of its currency and shift all that stuff overseas.  

[00:42:20.640]

Right? But the US. Government, they get to print all this money. They get to have the benefit of, like, oh, look, the stock market is having a bonanza. The economy is having a bonanza.  

[00:42:27.940]

But they haven't had the inflation for years. 20, 15, 20, 16, 20, 17. I mean, everything was going so well. They're printing so much money, but they got to export all those dollars overseas. Well, suddenly they won't be able to do that.  

[00:42:40.210]

Suddenly those dollars will actually come home. You don't have the same number of foreigners buying the same amount of dollars anymore, and so you can't get away with printing all that money and expecting there will never be any consequences. Of course, now there's going to be consequences. It's not going to be any different than if New Zealand prints a ton of money, because New Zealand doesn't have the luxury of being able to ship all of its New Zealand dollars to a bunch of hostages overseas. Another major example, major implication, is a loss of sovereignty.  

[00:43:10.030]

And this is a real thing. And we saw this very recently in the United Kingdom. You might remember this. A couple of months ago, he had a brand new Prime Minister, the Prime Minister and Finance Minister, they come out, the Chancellor, and they say, here's what we're going to do, here's our economic plan, here's our financial plan. We want to do this, we want to do this, we want to cut these programs, we're going to cut these taxes, we're going to blah, blah blah.  

[00:43:30.510]

And the bond market just had a fit. The bond market went berserk and they said, no, we don't like this. You can't cut taxes when your debt is rising and blah, blah, blah. You can't do those things. The bond market, all these investors started dumping British government bonds called gilts.  

[00:43:48.180]

They started dumping gilts, they started dumping the British pound, started dumping the currency. The British pound went into freefall, right? And so the Chancellor, the Prime Minister had to resign. And they totally backed down from their plan and said, okay, just kidding. All that stuff we said literally a couple of weeks ago, we're not going to do that anymore.  

[00:44:05.460]

They had to capitulate to the bond market. They had to capitulate. Suddenly the UK found itself at the mercy of bond vigilantes, of investors who said, we're not going to go along with that plan. This wasn't some tiny country that we're not talking about Costa Rica or even New Zealand. The UK is one of the largest economies in the world, even to this day.  

[00:44:26.070]

And yet the bond market was able to squash the head of government of one of the largest economies in the world, force her resignation, force them to back off of this plant. So you talk about this is a loss of sovereignty. Suddenly you don't have the ability to do the things you want to do. Suddenly you've got to actually do what the market wants and not what you want. So the US government does not have the ability to say, okay, we're just going to print all this money and we can ship all the dollars overseas.  

[00:44:53.880]

And we won't have inflation, and we can run all these crazy, outrageous deficits, and we can do all these things, and there will never be any consequences. No, those days are over. Suddenly you're at the mercy of the bond market, you're at the mercy of the forces of inflation, all these things just like every other country has to deal with. If you've ever read the book The Sun Also Rises, there's a great quote. Hemingway writes one of the characters and says, how did you go bankrupt?  

[00:45:17.810]

And the answer is, gradually. Then suddenly that's kind of the way to look at this. This is not something that will happen overnight until it does. And a great example of that is Richard Nixon took the US dollar off the gold standard. He sort of just walked away from the Bretton Woods system in 1971, and in a televised address, he told the American people, he said, oh, this is all very technical.  

[00:45:38.980]

You're too stupid to understand. This is all very technical. And he promised everybody. He said, you're going to wake up tomorrow and everything's going to be the same. Nothing's going to change.  

[00:45:45.620]

And he was right. The next day, nothing changed. Actually, the stock market went through the roof, had the single biggest gain that had ever, I think, up to that point in financial history had ever seen. And in the short term, nothing really changed. Not like prices went through the roof the next day.  

[00:46:02.770]

But if you fast forward a couple of years, gradually they started getting more and more and more inflation until they started having these events like the oil embargo and so forth. And then things just got horrible, right? It was gradual then, very sudden. And that's the way that this could really go down. In terms of the Renminbi internationalization, it's something that's gradual.  

[00:46:25.780]

It's been gradual. We've been seeing a lot of these things, and we probably continue to see a lot of these things. Some of the canaries in the coal mine, large corporations that start trading with each other in Renminbi, foreign governments issuing bonds in Renminbi, foreign governments and central banks increasing Renminbi reserves, all those things have actually already been happening. I think one of the other things that we might see is people start talking about openly, you know what? We should create a new financial system.  

[00:46:53.750]

Let's get together. Let's have a summit. Let's have a new Bretton Woods conference. When you start seeing people talking very, very seriously about that, when you start hearing the Germans and the British and the Chinese and India and so forth, and people start talking about this, let's really get together and have a conference and hash this out and see what it looks like, that's the sudden part, right? Everything else is gradual.  

[00:47:15.680]

The gradual introduction of the Renminbi, the gradual internationalization of the Renminbi. That's the gradual part. The sudden part would be this game changing international conference that they get together and have a certain new Bretton Woods system. They say, well, we're going to hash this out, and here's what it looks like. Again, there's so many different permutations of how this could play out, and it's possible that there will be no conference ever.  

[00:47:37.700]

There's so many different ways. It's impossible to predict. The whole process could take a year, it could take a decade. It's impossible to predict. But what's obvious is that the Chinese are not stupid, and they understand very well the incredible advantage of having reserve status for their currency, even in a limited capacity.  

[00:47:56.290]

Even being one of the reserve currency of the world, they understand how important that is. And I'm not sure the United States, the people in charge in the United States, whether they be at the Central Bank or in the Treasury Department or in the White House, fully grasp that the US dollar's dominance is in doubt. It is not something that lasts forever. There is no guarantee. All these dominant superpowers throughout history have always assumed that their power will last, that the reserve status of their currency will last forever, because they're the dominant superpower.  

[00:48:28.830]

And they're blinded by that arrogance. They don't see that, you know, this is actually, this can come to an end. And in many respects, the things that we do, the inflation and the debts and the deficits, you're driving it to the end. You're causing people to lose confidence. You're begging people to go find an alternative.  

[00:48:46.480]

And I don't think they get that. I just don't think they get that, because if they got it, they would be doing things differently. If they understood how precious this privilege is, how important it is, you would think that they would do everything they could to safeguard it, but they're doing the opposite. They're doing everything they can to destroy it. It's completely nonsensical.  

[00:49:06.690]

It's borderline crazy, clinically insane, but it is what it is. And if you go back to we actually talked about this last week, the writings of Marcus Aurelius, the stoic philosopher and slash emperor of Rome, don't stress out about the things that you cannot control, and neither you nor I can control any of this. There's a handful of people in the world who have any say. Joe Biden, Z, Z, Zelensky, Putin, handful of central bankers, handful of chancellors and finance ministers. That's who is in control of this.  

[00:49:35.210]

Nobody else is in control of this. The other part about this is that even those guys aren't in control of these forces of decline, the natural cycle, the rise and fall of empire, the four I call it the forces of history, this natural cycle and rise and fall of empire, these are sort of things it this it's inevitable. This has always happened throughout history with 100% certainty. Superpowers rise and fall. Reserve currencies rise and fall.  

[00:50:00.030]

They are displaced. They come and go. This is 100% certain throughout history. So it's not worth stressing about. Instead, it's a lot more beneficial.  

[00:50:09.910]

As Marcus Aurelius wrote, focus on the things that you can control, and you can easily take steps to really reduce the impact that this has in your life. First, I think most importantly is to understand what's happening right. There's no way to predict how this is going to play out. The Internet is full of guys, including, honestly, some good friends of mine who shall remain nameless, talking about they say the dollar is going to collapse, and they jump up and down and wave their hands, say the dollar is going to collapse. And that's quite simplistic and honestly, a little bit silly because I always challenge these guys when we're together, and I'm like, come on, man.  

[00:50:43.060]

What does collapse even mean? What does that mean? The dollar just goes away. It vanishes. They just yank the dollar.  

[00:50:49.160]

It's no longer the currency of the United States. Does it mean hyperinflation? They default. They add a bunch of zeroes to I mean, what exactly does that even mean? To say it's going to collapse is overly simplistic.  

[00:51:02.430]

Again, there are so many permutations. Sure, every possibility is on the table. Will there be hyperinflation possible? Will they yank the dollar and discontinue it as the national currency and create something else possible? I guess.  

[00:51:16.940]

But there's also a pretty good chance the dollar doesn't disappear at all. And it becomes one of several reserve currencies, including the renminbi, including the Euro, including some supranational currencies like the Imfsdrs Special Drawing Rights. There's so many different permutations. And so I think for anybody to think that they've got it figured out, they know what's going to happen. Now, that's nuts because history is a guide, but it's by no stretch of the imagination, a guarantee of this is exactly what's going to happen.  

[00:51:48.370]

The key idea, and again, what history shows us in a lot of these trends is that it is very likely that the dollar loses its dominance, that the US. Can't get away with printing endless amounts of money. The US. Can't get away with multi trillion dollar deficit. They can't get away with just pawning off all these dollars onto a bunch of sucker, hostage, foreigners overseas.  

[00:52:08.530]

They can't do that anymore. And more than that, that a lot of the dollars they've already printed in the past start making their way back home, and that creates implications. You got this flood of dollars now in the US. That creates inflation, creates a loss of sovereignty. Now you're at the mercy of the bond market, et cetera.  

[00:52:22.970]

And again, history has never been wrong about this. The rising power, declining power dynamic is on display. The war is on display. It's not a guarantee, right? But we've seen these ingredients so many times before.  

[00:52:35.320]

It makes sense to really explore and understand this stuff. Marcus Aurelius focus on what you can control. So what can we control? We can control what we do. About it.  

[00:52:44.690]

And number one is don't panic. Don't buy into the end of the world. Is not the end of the world. This is not the end of the world. This is something that's happened over and over again throughout history.  

[00:52:54.730]

And what do we learn from history? A little bit of diversification goes a long way, right? Remember, I'm saying a little bit of diversification. I'm not saying you got to change upend your entire life and do all these things. We're talking about thinking about it in the right way and realizing that over time things are going to change.  

[00:53:12.750]

And so I can't continue to do exactly what I'm doing now and expect the same outcome. That's common sense, right? So one way to view this is not to ask the question and go, okay, fine. If the dollar is going to decline and lose its door staff, what's the right currency to hold? Do we hold renminbi?  

[00:53:30.290]

I'm not actually suggesting that at all. What I would say is it's not even about what's the right currency. Whoever said you had to hold a currency that diversification from the dollar meant holding any currency at all? I think currency is actually a horrible asset. It's a terrible asset.  

[00:53:48.080]

And if you think about it, it's all about incentives. Think about stocks, right? If we own shares of some stock, right? We own shares of Apple. Let's just say we own shares of Apple.  

[00:54:00.590]

Well, who else owns shares of Apple? The CEO. So the CEO has the same incentives as we do. The CEO of Apple wants to see the stock price go up. We want to see the stock price go up.  

[00:54:11.470]

The CEO wants the company to be successful. We want the company to be successful. So we have the same incentives. That makes sense as an investment where you have the shared incentives, shared incentives between the stakeholders and the people that are managing the asset. In a currency, it's completely different.  

[00:54:27.500]

The incentives are not aligned. If you hold a currency, if you're a saver, right? Your incentive is for the currency to maintain value, or at least maintain value, even increase in value. But the people that manage the currency, that's not their incentive at all. The people that manage the currency want, want to devalue the currency, right?  

[00:54:45.310]

They want the currency to lose value. Central bankers, politicians, they want the currency to lose value. Politicians want to lose value because they have so much debt, and it's beneficial for them if the currency loses value. Central bankers explicitly say, we want 2% inflation. Now imagine if Tim Cook, CEO of Apple, or Elon Musk showed up and said, I want my stock to lose 2% every single year, right?  

[00:55:07.330]

Who who wants to own that, right? But that's, that's the deal with currency. When you own currency, when you're holding currency, you are holding an asset where the people who manage that asset are jumping up and down waving their hand saying we want this asset to lose value every single year. It's just the wrong incentive structure. Right?  

[00:55:26.730]

Our incentives and their incentives are not aligned. And so the idea is to think about well, what are assets that oh jeez, might actually hold their value? Where if there's people managing it we have the same incentives or maybe there's not even anybody managing it at all, right? And so that's the point. That's the way to think about it.  

[00:55:44.590]

Don't ask the question what's the right currency? The question is what's the asset? I can hold where the incentives are aligned to where there's actually we don't have to worry about incentive structure. And this is where I think it's worth looking at. Real assets, real assets tend to rank very highly here in contrast to paper assets, financial assets like bonds, a real asset, a lot of people have different definitions of real assets.  

[00:56:09.440]

For me a real asset is something that really conveys scarcity, universally recognized value. It's not something that's controlled or manipulated by a single government. And there are a lot of things that qualify gold and precious metals. This is something again, where there's not even really much of an incentive structure. There's no single person that manages gold, right?  

[00:56:29.530]

In the same way that there's a group of central bankers that manages the US dollar. Nobody's managing gold. Sure there's gold miners and there's refiners and there's people in the industry but nobody's managing gold as an asset class, right? And so that's something that makes it interesting. This is an asset with 5000 years of universally recognized value.  

[00:56:48.480]

There's built in scarcity, et cetera. But it's like that with a lot of things, energy as well. Agriculture, technology I would say actually very specifically productive technology. Not consumer technology, not things that make people scroll and swipe and turn 14 year olds into automatons and zombies, but productive technology. Things that make people better, faster, better at their jobs.  

[00:57:10.500]

All these things, real productive technology. And to me these are all real assets. Productive real estate, et cetera. These are all real assets. Scarce, universally recognized value, quality businesses as well.  

[00:57:24.380]

A lot of people think stocks are paper assets, financial assets. I actually don't agree with that. I think that great businesses managed by talented and honest people, especially those that are in industries and sectors that have to do with real assets, those make a lot of sense. Could be stocks, could be public companies trade on a stock exchange, could be private businesses. I love private businesses.  

[00:57:46.460]

I think private businesses are great as an asset class because you don't have that noise of the stock market. You don't have this constant ticker going up and down. It was basically just noise of other people telling you what they think an asset is worth. I don't care what other people think an asset is worth. I care what I think it's worth.  

[00:58:01.630]

And when you have a private business, all that goes away, right? You don't have that noise. You can just focus on the production of the growth and profitability. I think all these make sense as a way to look at this where you have aligned incentives, or sometimes even no incentives at all. These make a lot of sense.  

[00:58:20.160]

I would also consider this concept of diversification. Clearly, international diversification makes a lot of sense. Most people in the world have to think about international diversification. If you're from a small country, you have to think about international diversification. You can't do everything in your single economy.  

[00:58:36.600]

It just doesn't make sense. It's too small. You've got to look outside of your country. You've got to look outside of your economy. Most people have to think about this.  

[00:58:43.980]

People from the dominant superpower don't. They don't because they haven't had to. But they should start now. I want to close by saying again, this is a way of thinking about the future. I'm not here trying to say in fact, I'm explicitly saying this is not going to happen tomorrow.  

[00:59:03.060]

This is a gradual, then sudden approach. Could take a year, it could take years, could take ten years, who knows? But it certainly seems like we have all the ingredients. We look to history, we see rising powers, declining powers, war. We see all these things.  

[00:59:16.850]

It's happening now. And we see that when that order, that order of power is reshuffled, we see changes in the reserve currency. And that has major implications for the United States because they can't get away with multi trillion dollar deficits and all these just ridiculous things they've been able to get away with financially for so long. And that creates implications like inflation, like a loss of sovereignty. And yet there are ways to plan for it.  

[00:59:41.930]

There's no reason to panic, there's no reason to buy into the dollar is going to collapse or anything like that. But it is important to think about these things rationally and look to real solutions. There is time to plan for this, right? It's a way of thinking about the future and there is time to plan for this. Things are still fine, but it's in a way, it's like 864 BC, you know, everybody's partying celebrating the peak of the Assyrian Empire.  

[01:00:06.730]

Have a great time. Enjoy the party while it lasts, but keep an eye on the exit. Thanks so much for joining me and we'll speak to you again next week.   Close Podcast Transcription

There’s hardly anything that POTUS loves to brag about more than his ‘economic success’. He is, after all, a self-proclaimed “capitalist”.

Even in last week’s State of the Union address, he boldly claimed that he “cut the deficit by more than $1.7 trillion– the largest deficit reduction in American history.” And he’s made that same assertion over and over and over again.

Unfortunately it’s a complete lie. And just yesterday the Treasury Department released financial documents proving it.

Every year the federal government publishes an annual financial report; it’s sort of like what big public company like Apple does. The annual report contains financial statements, plus hundreds of pages of discussion, details, and footnotes.

And yesterday afternoon they released the annual financial report for Fiscal Year 2022, which just ended a few months ago.

It goes without saying that the government’s financial condition is completely atrocious.

Their “net financial position”, which is sort of like the net worth of the federal government, fell to MINUS $34.0 trillion… which is worse than the MINUS $29.9 trillion in FY21.

The projected social security funding deficit also got worse… from $71 trillion to $75.9 trillion.

The real headline to me, though, is the budget deficit lie. The President claims that deficit last fiscal year was $1.4 trillion, and that he (and he alone?) brought it down by $1.7 trillion. But that’s not true at all.

It turns out that the “budget deficit” is actually an inaccurate figure that can easily be manipulated. If you’re a finance or accounting type, you might be surprised to learn that the budget deficit is determined on a ‘cash basis’ and not ‘accrual basis’.

This means that officials can easily accelerate certain revenues and push off certain expenses to massage the data and make the budget deficit appear better than it really is.

Businesses aren’t allowed to do this. Nearly every other organization in the country of any reasonable size has to follow strict accounting rules, booking revenue when it’s earned, and accruing expenses when they’re incurred.

This provides a more honest, transparent, and standardized way of reporting financial results.

So whenever they talk about the ‘budget deficit’, this is really just a manipulated number that doesn’t conform to proper accounting standards.

Naturally this raises an important question: how much would the federal government’s annual budget deficit be if they conformed to those proper accounting standards? i.e. the same ones that every major corporation has to follow?

Well, lucky for us, we don’t have have to guess. Because the government actually publishes that number too.

They call it their “Net Operating Cost”. And it essentially represents the REAL budget deficit.

It turns out that the FY22 Net Operating Cost of the federal government was MINUS $4.1 trillion. And that figure was MUCH worse than FY21’s Net Operating Cost of $3.1 trillion.

So this guy did not, in fact, “cut the deficit”. The real deficit, as determined by Net Operating Cost, INCREASED by a trillion dollars.

There’s so much more in this report, though.

One of the other interesting points, in fact, is that the government actually failed its audit. Again. The Comptroller-General states very plainly that there are numerous “material misstatements” in the government’s financial reporting and internal controls.

There are actually laws that are supposed to prevent this from happening. Twenty years ago Congress passed something called the Sarbannes-Oxley Act, which imposed CRIMINAL penalties for company executives who fail their audits.

If the federal government were held to the same standard as the private sector, dozens of officials should be facing jail time right now. Instead they’ll retire to their generous, fully-funded pensions and receive lavish board seats and prestigious awards. They will never be held accountable.

You, on the other hand, will have to bear the costs of their incompetence, in the form of higher taxes, inflation, reduced Social Security, and other broken promises.

Personally I find it extremely unethical and unjust that the irresponsible, criminally incompetent decisions of politicians and bureaucrats should be paid exclusively by the citizens.

It’s just like all the destructive decisions they made during the pandemic. They will never be held accountable for the mental health crisis, the suicides, the substance abuse, the entire generation of children who fell behind.

Nope. There will never be so much as an inquiry. Instead they’ll make millions from their memoirs where they cast themselves as heroic saints who saved the world.

This is the topic of our podcast today.

We start off with another historical example showing that, even though our problems are gargantuan, they are fixable. Good leadership works wonders, and it is possible to put the government’s finances back on the right track.

Unfortunately there is a dearth of real leadership. Instead we have people who are incapable of telling the truth or even recognizing real problems, let alone solving them.

So don’t hold your breath that they’re suddenly going to turn things around.

The Roman Emperor Marcus Aurelius used to write in his works on stoic philosophy that we shouldn’t stress about the things we cannot control… but instead to put our energy into the things that we can.

That’s great advice, and it’s an excellent way to think about these national and global problems.

And in today’s episode, I walk you through a few specific strategies to really move the needle in the right direction for yourself, in ways that you absolutely control.

You can listen in here.

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[00:00:00.570]

Today we're going to go back in time to the year 165 Ad. To ancient mesopotamia, essentially, where modern day baghdad is located in Iraq. At the time there was a city there named Salucia, and salusia, though originally part of mesopotamia, was a very old city, but it had been conquered by a group known as the parthian Empire. A lot of people haven't heard of the parthian Empire, but at the time they were pretty big deal if you look at it on a map, the Part Empire, they were essentially iranians, early iranians. And the parthian Empire would have taken over all of Iran, all of Iraq, most of Turkey, parts of Afghanistan, Pakistan.  

[00:00:34.630]

It was a pretty big deal. And it would have been, should have been probably one of the most feared and most powerful in the world, except for one thing, of course. Their next door neighbor happened to be the Roman Empire. And not just the Roman Empire, the Roman Empire in its golden age, in its sort of peak tax romana. This, of course, is the time from the age of augustus in the late first century BC.  

[00:00:57.180]

Through the next nearly two centuries, through the first century Ad. Through the second century Ad. This is the time period in history where if you ever sort of play the thought game, if I could go back in time, this is sort of the error that might be really high on your list. rome's golden age. I mean, life was really good by comparison in other places in the ancient world, throughout history, the romans lived such a great life, it would be virtually unparalleled for, I mean, more than a thousand years afterwards.  

[00:01:26.560]

I mean, it was really, really good. They had a boundlessly, prosperous economy, global trade all over the world. I mean, they, they brought in goods and services from all over the world. There was a greco Roman writer, a guy named aristidis, who wrote, quote, whoever wishes to see all the goods of the world must either journey throughout the world or visit Rome. Basically saying everything in the world is right here in Rome.  

[00:01:49.110]

It was incomprehensible to most people. I mean, whatever animals and exotic fruits and nuts and silks and robes and spices and everything, it was all in Rome. They brought in everything. And they had, of course, all the famous engineering works the aqueduct and the plumbing and the roads and the bath, which, when you think about it's, actually another good reason why if you got to go back in time, this might be a good era to go because they have really good hygiene, they have toilets and all these sorts of things that were conveniences, that were unheard of in most of the places in the world. They had honestly really great nightlife and theatrical performances and literature, travel, and people were able to travel across the empire and, and it was relatively low crime relative.  

[00:02:33.750]

There was no crime but there's relatively low crime, relative peace and stability. And the thing about this era, 165, this is also the era that later on in history became known as the era of the Five Good Emperors. These are guys like hadrian and trajan and Marcus aurelius, Marcus raelis, who actually was emperor or co emperor here at the time in 165. Now, I said it was an era of relative peace. And of course, it wasn't to say that there was never any war.  

[00:02:59.870]

In fact, in 165, there was a war because Rome was at war with this parthian Empire. And that was not unusual. It was sort of like the relationship between Rome and the parthian Empire was like Rome and carthage, which is sort of like, in a way, the Us. And Russia. There was like a traditional adversarial relationship there.  

[00:03:18.270]

They never trust each other. They never got along. And in the case with the parthian Empire, with good reason, the parthian Empire had made incursions into Rome. There was a really nasty tradition going back to you might have heard of this guy, myth or deedes, back in the second century BC. There was a lot of war between the two back then, and the parthian Empire sat right on these Silk Road trade routes to the east, blocking some of rome's path to the east.  

[00:03:44.730]

And so they had different reasons to go to war. And they had been at war a couple of times already in the past. And so now it's 165 Ad. They're at war again. And there's this Roman general's name is Evidence cassius, and he takes the city of Salutia, where we started this podcast.  

[00:03:59.220]

Salutia, even though it was really mesopotamian in origin, it at that point had been conquered by the parthian Empire, had become a major city in the parthian Empire. And a video cast, he takes the city and says, you know what? I'm tired of this. I'm just going to burn this thing to the ground. I'm not playing around anymore.  

[00:04:14.210]

I'm just going to burn it to the ground. So they destroy the city. Now, according to A very famous legend that's handed down to us by the romans during the destruction of the city, there were some Roman soldiers. And according to one version of this legend, even a general named lucius Virus, who go into the in the city of Solution, they go into the Temple of apollo and they disturb the Golden Casket. The golden casket in the temple of apollo, which is they're offending the gods.  

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And the next thing you know, soldiers start getting sick. Now, that wasn't terribly uncommon if you understand the nature of warfare and the history of warfare all throughout history. So many soldiers died in some wars, it's even more common. People, more commonly people die of disease on the front lines than in actual combat. And that's because conditions are harsh and soldiers are packed together tightly like sardines.  

[00:05:03.800]

It's easy for disease to spread. This is the case even in World War I, world War II, we saw just rampant disease ravaging the front lines, and it was not that unusual. He said, oh, soldiers are getting sick. People are dying. It happens, right?  

[00:05:17.700]

But you think about obviously, we know a lot more about how diseases spread. These guys are marching back all the way to Rome. Remember, solution was basically where modern day baghdad is. Think about how long that journey is, how many places they stop, all the local provinces and peoples they meet along the way. They're spreading that disease everywhere.  

[00:05:34.420]

And by the following year, this was basically a full blown pandemic. They called this the antonine Plague, and we have substantial sources about this people that describe conditions, and it was nasty. The modern historical consensus is that it was smallpox, and people think might have been something else, but smallpox is sort of the consensus. And again, the death toll varies. You have some of these ancient there's a lot of hyperbole in the ancient world.  

[00:05:57.650]

People go 90%, 100% of the population was wiped out. Come on, that's ridiculous. But a good estimate, probably at least 10% of the population wiped out from this disease at quite a high, dangerously high mortality rate. In fact, this guy mentioned earlier, aristides, that greco Roman writer, who said, you know, all the goods in the world, you know, being here in Rome, this guy got it. But he didn't die.  

[00:06:17.360]

He actually survived. He was one of the lucky ones who survived. Now, there was a there was a doctor. I want to just pause for a minute and talk about the leadership at the time. There was a doctor, this guy who his name was Galen, and he was a famous guy.  

[00:06:33.650]

He's probably one of the most famous physicians in ancient history. And he had been physician to the gladiators at a certain point, sort of like the team doctor for the Dallas Cowboys or something. So he was sort of a big deal. And he was summoned by Marcus aurelius, who was co emperor at the time, and he said, Listen, Marcus aurelius, he's with his troops camped in northern Italy and is this mysterious plague. And he goes to gayle and said, you figure it out.  

[00:07:00.760]

And Galen to his credit, even though there's a bunch of voodoo belief and medicine at the time, galen kind of realized, well, this seems to be an airborne virus. He got sort of on the path to realizing that. He wrote in his works about how these people are sort of spraying pestilence in the air, and you got to stay away from that. So he was really sort of on track to realizing that it was an airborne virus. But the way that they dealt with this, they didn't tell everybody to cower in fear, hide in your basements.  

[00:07:29.060]

They didn't say, we got to shut down the empire.  

[00:07:33.390]

They didn't suppress origin stories. This is actually kind of funny that Christians at the time were the social outcast. accords are people that blamed Christians. There are people that blamed you offended the gods by opening the casket in the temple of apollo. Other people thought that it came from China.  

[00:07:48.400]

Nobody got canceled for saying that. They didn't suppress these opinions. They didn't suppress information that people had. There are a lot of people that were experimenting, trying different treatments, things like that, and people wrote about it. The word spread.  

[00:08:01.700]

They didn't try and suppress information. People had differing opinions. People they didn't try and force treatments. They didn't try and prevent certain treatments. You're not allowed to use this particular route in treating this plague.  

[00:08:13.720]

Nobody ever did that. Everybody was sort of free to figure it out for themselves and share information and figure out their own cures. And of course, there are plenty of cuckoos running around. There was one guy, he called himself a prophet. His name was Alexander, this prophet Alexander, he went around, told everybody, you need to put this icon of a snake above your door, and that's going to save you from the plague.  

[00:08:34.230]

The guy probably made a fortune going around selling these snake icons to people, and some people believed it. But even that, they didn't suppress that. They didn't censor, they didn't cancel anybody. Galen himself, this guy who was essentially who became the official court physician, he was basically fauchy, right? Except he was actually really big on galen was big on mental health.  

[00:08:54.320]

Galen did not think that you should sacrifice the mind or the soul in order to save the body. In fact, Galen was also really big on fundamentals. He said, you know what? Everybody get outside, get fresh air, get exercise, eat a healthy diet, don't cower in fear. And for his own part, Marcus aurelius was also pretty relaxed about it.  

[00:09:12.530]

He understood, as romans understood, that, you know what? This stuff happens. This wasn't like it was the first time there was a plague in Rome, that these things happened quite frequently. This was the first time, at least in their memory, that it was this big. This was a really, really big deal.  

[00:09:29.510]

It was dangerous, it was virulent, it spread rapidly, a really high mortality rate. But they had seen plagues before, lesser plagues before, so this was just a worse version of what they'd already seen. And Marcus Raylis was pretty stoic about it. In fact, he was quite famously a stoic philosopher who wrote extensively about stoic philosophy and life and all these things. And one of the things that he wrote in his book, and I actually really encourage you to read some of the works of Marcus aurelius.  

[00:09:53.830]

And he wrote, I think this is great advice, really. He said, you got to focus on the things that you can control. Don't stress about the things that you can't. And in this particular case, you can't control the Pandemic, you can't control. It's like they all sort of realize this thing has just got to run its course.  

[00:10:09.760]

The pandemic's got to run its course. It's going to rip through our empire. A lot of people are going to die. That sucks. There's nothing we can do about it.  

[00:10:16.070]

Try not to stress about it. Focus on you. Focus on the things that you can control. And really that makes a lot of sense. Now, Rome did get through it again, it became known as the antonine Plague, sometimes in honor of this guy Galen, the physician who wrote really extensively about it.  

[00:10:31.470]

Sometimes it's known as the Plague of Galen. But it lasted for a long time. It lasted for years. A lot of people did die, but life went on. This was important, though, to understand, because up until this point, life was pretty good in Rome.  

[00:10:46.280]

Of course, they'd had their share of idiotic emperors in the past. They had nero and all of this. That was in the past. But they were still in their golden age. And Marcus aurelius.  

[00:10:55.180]

Things were good. Peace, prosperity, all these things. But this plague kind of starts to mark the beginning of the downward spiral for Rome. Because after Marcus aurelius, quite famously, he succeeded by commodus. Now, if you ever seen the movie gladiator, I think it was from the year 2000, I think it was at least nominated for an Academy Award, but not even one best picture.  

[00:11:15.200]

I don't remember this a long time ago, but comedy was actually this is actually one of the rare instances where Hollywood doesn't overdo it. commodus is played by the actor joaquin Phoenix, and he comes off in this movie as this pompous, arrogant, dangerous psychopath. And they were probably being actually kind to communist was combust, was insane and he was so cruel. He was terrible. This is guy he really used to go he was so enamored with himself.  

[00:11:40.340]

He thought it was so handsome and so buff and muscular. He would go into the gladiator arena, go into the coliseum, and rip his shirt off and flex his muscles and slay beasts. And then he would go and slay his opponents and steal from people and plunder and the taxes. It was just a terrible, terrible, terrible, terrible person. But even worse leader and ruler.  

[00:12:03.600]

But obviously things got worse and they had comedy. This guy lasts for more than a decade. They get two emperors after that who lasted combined only a few months. I mean, we start getting the murder and intrigue. Everybody emperor is getting assassinated.  

[00:12:17.430]

They end up with a guy named septimus severus, who was a hardcore, hardcore warmonger spendaholic. Another guy who used to go around and execute his political opponents. He debased the currency, he raised taxes, he vastly increased the size of the state. He created this. He made the Roman government so big primarily because of the military, because he essentially turned Rome into a proto fascist military dictatorship.  

[00:12:43.530]

Rome had basically, under septimus severus, sort of become almost like a little bit like Nazi Germany under the Third reich. And that created this really unsustainable fiscal burden. It was so expensive to maintain this huge military and the bureaucracy. And of course, his son Carrakala was even worse. carica is the guy who famously they say, oh, the treasure is empty.  

[00:13:04.580]

We don't have any money. And he's having this conversation supposedly, I believe, with his mother, and he sort of jingles his sword and he says, as long as we have this, we shall never run out of money, which really tells you everything you need to know. I think you kind of get the idea here. It's a terrible situation. They get to the point where taxes become outrageously high, inflation is rampant, trade plummets, both internal trade and external trade.  

[00:13:29.900]

We start getting into this period that historians call the crisis of the third century, and it's so bad that the empire almost vanished. I mean, really just broke up, started to disintegrate. caracalla's success was a guy named macronus. macronus macris had the Parthians knocking on his door on the Eastern Front. He had barbarian tribes making incursions into Roman territory.  

[00:13:52.790]

The treasury is totally depleted. And this poor guy, he probably knew that taking the emperor position, he was going to be executed. Sure enough, he was. There were rebels that basically came in and executed this guy in like a year. He was followed by ella Gabolis.  

[00:14:06.820]

And elle Gabalus was to be honest, it was a transgender ruler who was supposedly said to have offered half of the empire to a physician who could turn him into a woman, which again, I don't care. I have zero issues with anybody's personal choices. But you don't get to pony up state assets for your own personal choice. That's just not okay. It's just not okay.  

[00:14:27.320]

You don't get to do that. And again, this sort of sets the tone for the next several decades, the empire would basically collapse. It really, actually did break apart. They ended up in this thing called the Ted sharky. They had competing things that used to be part of Rome, broke up into their own sort of spin off breakaway republics and breakaway empires.  

[00:14:47.600]

They had another plague as well. They had something the plague of cyprian, it was called, which a lot of historians some historians believe might actually been ebola, originating from Africa. And if you guys remember ebola, this is something that popped up in the was terrifying. You just sort of just implode from within. Like all your organs just melt and practically you just burst into flames.  

[00:15:09.480]

All it just really nasty, nasty thing. And some stearns believe that this plague of cypriot might have actually been ebola. We're also talking about in addition to this plague, the breaking apart of Rome collapse of trade. No no price stability, no confidence in the currency, no confidence in government, anybody with any wealth hit it away. They hit it from they hit it from each other.  

[00:15:28.890]

They hit it from from corrupt tax officials. They hit it from corrupt politicians. They hit it from corrupt soldiers. And people would just go around. I mean, the Roman just become just this criminal organization.  

[00:15:39.550]

At that point, there was intense social conflict, rebellion, and of course, you had these completely incompetent bureaucrats and continued just tidal waves of migrants coming across the border. You can just imagine again, you have to imagine just being back in history. Just imagine living in that time. And if the TV news was available back then, you could read the stuff on if the Internet was there, you could read this and you could see politicians putting up, we've been to the border. We've been to the border.  

[00:16:09.890]

The border is secure. No, it's not. You could just imagine just the lunacy, their idiotic ancient Roman word salads of trying to convince people that everything's okay. But people knew. They knew.  

[00:16:21.520]

The Empire is broken apart, everything is terrible. And again, things are going pretty okay. Things are going pretty okay. In 165 Ad, then they had a plague, then terrible leadership, and then the empire literally broke apart and was about to collapse forever. But then there was one guy, it almost sounds like one of these movie trips, but one man, but this is actually the case.  

[00:16:45.960]

This is what happened. There was one man. His name was lucius Dumitius Aurelianis. He's known to history as aralian and arrayan, was no saint. There's plenty of reasons to criticize everybody, plenty of reason to criticize a rally, but this is a guy who became emperor and reformed everything, the coinage, the military, government finances.  

[00:17:06.270]

There were welfare programs. There was one called the alimente, I believe it's called, and he just said, no, we're going to get rid of that stuff. I mean, all these things, people are on the dole. We're creating incentives for people to be unproductive. That doesn't make any sense.  

[00:17:19.180]

Too many corrupt politicians, too many corrupt officials. I'm going to get rid of these people. I'll even execute them if I have to. I'm going to put down these foreign incursions. I'm going to do the things that need to be done.  

[00:17:28.540]

And again, he's no saint. Plenty of reasons to criticize this guy, but he almost single handedly turned things around. He put Rome back on the right path. He actually reconstituted the empire. He went to all these breakaway empires, said, no, you're part of Rome.  

[00:17:45.350]

And for this reason, they actually called him the restorer of the world. Because Rome was considered really, especially by romans, consider themselves like, this is basically the known world, and this is the guy that pieced it back together and put us back on the right path. Restore of the world, that's actually pretty high praise. The city of Orleone in France, and by extension, New Orleans in the United States actually named after Oralian orLeon Oralian, that became sort of the French aurelian orLeon is actually named New Orleans, named after this guy Oralian, who was again, almost single handedly put Rome back on the right track. Now, we did a podcast about this a couple of weeks ago.  

[00:18:21.710]

I told you about Britain, I told you about the failures of all these British kings. We sort of ended with George III. This is a guy who notably lost his mind. I mean, he was bona fide crazy dementia. People sort of talk about like, what exactly did he have?  

[00:18:36.390]

But I mean, this guy had really lost his mind. He was all these stories. He was supposedly to have shaken hands with a tree thinking it was the King of prussia. You know, stop me when this sounds familiar, but, you know, but, but yet, even though they had and you think about Britain in the early 18 hundreds, you got this guy shaking hands with a tree thinking it's the King of prussia, totally lost his mind. The king has completely lost his mind.  

[00:19:00.930]

You got napoleon knocking on your door about to invade. You've got inflation, you've got a currency crisis, your treasury is depleted. Things look really bad for Britain in the 18 hundreds, and yet they too got on the right path and they grew their way out of trouble. Now, you obviously get the parallel. We've talked about this before.  

[00:19:19.280]

Like Rome in the third century, today's dominant superpower. In the 18 hundreds, the dominant superpower was the UK. Today's dominant superpower, the United States also beset by similar circumstances. We see the inflation and the economic decline, all the issues related to the pandemic social conflict, the border incursions, external conflict with major powers, the internal conflict that we have with ourselves that nobody can compromise, nobody can have a discussion, everybody's canceling everybody. And there's a lot of things on this list you could add to this list all day long.  

[00:19:52.910]

You could add climate issues to this list if you wanted to. You could add all sorts of social issues to this list. Some of these are really existential issues. And I have to say among these existential issues really, is this enormous fiscal hole. It is an enormous fiscal hole because not fixing this will create catastrophic problems in the future.  

[00:20:13.220]

And I'm not talking decades and decades from now, we're talking the relatively near future. And to explain this a little bit more, I want to tell you, hot off the presses, just came out yesterday, February 16. Today is February, Friday, February 17. So yesterday, February 16, they just came out with the annual financial report. It's called the financial Report of the Us government.  

[00:20:32.800]

And you can actually pause for a minute and go, and I'm not going to say Google this because I don't use Google, I use Brave. I think anybody that cares about privacy shouldn't use Google. But whatever your favorite search engine is go and just find financial Report of the Us. Government and the fy 22 fiscal year. 22.  

[00:20:51.010]

Remember the Us? Government runs in a fiscal year that starts on October 1 and ends on September 30. So fy 22 went from October 1, 2021 to September 30, 2022. And they put out this essentially annual report like it's a publicly traded corporation, like it's Apple or jpmorgan or something like this. They have this annual financial report just like any other big company or big organization that has financial statements and management discussion and analysis and so forth about what's going on and why.  

[00:21:21.130]

And the financial statements, as you can imagine, are absolutely atrocious. Now, the President of the United States loves, loves, loves to brag about he said he brags about how he's a capitalist, and he loves to brag about the fact that he brought down the deficit, you know, by more than any other president in history. And he brags about how the deficit, you know, the fy 22 deficit was, quote, only $1.4 trillion. Even in the State of the Union address just recently, he was bragged about this, I brought down the deficit, and blah, blah, blah. So first of all, I don't know how somebody could brag about how the deficit is only $1.4 trillion.  

[00:22:00.540]

But second of all, everything that he's saying is a lie. It's a lie. It's a lie. He lies. And the financial statements prove it.  

[00:22:09.360]

The government's own financial statements prove that this guy lies. And it's very easy to understand. It's very easy to see because it's right there literally in their own financial statement. Page 17 of the report, if you're following along with me, page 17 of the report actually explains this. They actually have two metrics for how they measure this.  

[00:22:27.200]

One is they talk about the budget deficit on a cash basis. Now, cash basis means that you can actually massage the numbers. You can massage the budget deficits because it's based on literally like, cash in and cash out at the time. And so you can accelerate certain revenues. You can push off certain obligations in order to massage the numbers and sort of make up a little bit of number, which is amazing.  

[00:22:50.200]

It's like, really? $1.4 trillion? That was the best number you could make up. But the same way, you can imagine, let's say you incur, like, some big spending bonanza at the very end of the fiscal year, but you go, we're going to push that into next year, right? So we don't actually incur any of those expenses this year.  

[00:23:08.880]

Well, that's not actually how accounting works, right? The real accounting system that every company in the world, any sizeable business of any real size, uses something called accrual accounting. Accrual accounting basically says, will you incur an expense really at the time that the obligation is undergone all these different rules? But it's basically, if you get an invoice, right, that's an expense the expense isn't recognized when you actually write the check. The expense is recognized when you get the invoice or when the invoice is due.  

[00:23:40.030]

So There are very specific rules about this, and you don't have the option of doing what they do on this cash basis budget deficit, pushing out Expenses and accelerating revenues. And So We don't actually have to Wonder if You Go, well, if the federal government followed its own accounting Rules, right, these generally Agreed Accounting principles gap, Us. Gap rules, the same rules that they require, by law, all These Big corporations follow. If they follow the same accounting rules that everybody else has to follow, what would their Actual deficit be? Well, we don't have to Guess because they calculate it for us, right?  

[00:24:13.170]

And So the actual true budget deficit, which they call in their versions, they call the Net operating Cost was actually not 1.31.4 Trillion. It was $4.1 trillion, negative $4.1 trillion. And in case you're wondering, this is also the part where this is a complete lie. Because they said, he brought the deficit down. No, you didn't, bro.  

[00:24:36.890]

No, you didn't. Because, as A matter of fact, the previous Fiscal year was terrible, but it was, quote, unquote only -3.1 trillion. So it got a trillion dollars worse the net operating cost went from -3.1 trillion to -4.1 trillion. It got a trillion dollars worse. So this guy is going around town telling everybody going on camera, go, I Brought down the budget.  

[00:24:57.560]

I said. No, you didn't. It's a lie. It is a lie. And your own financial statements prove it.  

[00:25:03.760]

Your own financial statements say right there in black and white. You can read it for yourself. The net operating costs of the federal government went from -3.1 trillion to -4.1 trillion but wait, there's more. Because in addition to that, and In calculating their Net Operating costs and actually putting the real numbers, they also put out a balance Sheet, right? The balance sheet, just like Any human being, any business, we all have assets and liabilities.  

[00:25:29.470]

We have Cash in the bank and we have whatever cryptocurrency and Real estate and stocks and Bonds, all Whatever it is we have. And we have liabilities, maybe a home Mortgage or a car loan or whatever. The government has that as well. Their assets are things like tanks and Bullets and Acres of national parks, the Strategic Petroleum Reserve, monuments and buildings and all this sort of stuff, minus Liabilities. Things like the national debt, et cetera.  

[00:25:54.280]

And the difference between those two is the government's net Worth, right? Obviously, we'd like to see a net worth. It's Positive. Most people want a positive net worth. When they say elon Musk is worth whatever.  

[00:26:05.490]

$100 billion. $200 billion. They're talking about his net worth, the value of his assets, minus his liabilities. Well, the government's net worth is really bad. It's -30 $4 trillion.  

[00:26:18.650]

This is not my calculation. This is right there in the. Government's own financial report -30 $4 trillion by the way the year before it was -29.8 trillion so they went from -29.8 trillion to -30 $4 trillion It's absolutely Insane and yet there's still more because on Top of that on Top Of this -30 $4 Trillion sort of Negative Net Worth they also have the Social Security funding gap we talk about this a lot, so I don't need to hash this too much. But this is the idea that they made promises to taxpayers. They made promises to their citizens.  

[00:27:01.850]

You can retire at this age. You get this much money? blah, blah, blah. Well, guess what? That requires that they have a certain amount of cash.  

[00:27:07.960]

And that cash means that they have to have this cash set aside and these trust funds in order to meet those needs. And they don't have that cash. They don't have the cash. So the difference between those two is they call that the Social Security funding gap. And the funding gap again, these are their own calculations is $75.9 trillion.  

[00:27:27.570]

$75.9 Trillion. That is an enormous funding gap. That's basically the difference between how much they owe over the long run to Social security beneficiaries current and future and the amount of money that they project they'll have set aside for that program. It's a $75.9 trillion gap. And by the way, the number last year was $71 trillion.  

[00:27:47.810]

So they went from 71 trillion to $75.9 trillion. And you put the two of these together? They're negative net worth. The Social Security funding gap, we're talking about $110,000,000,000,000 in negative net worth. That's more than four times the size of the entire Us.  

[00:28:02.400]

Economy, even by their own projections. This gets worse. You can look at this on page 28. They have a little section headline that says an unsustainable fiscal path. Yeah.  

[00:28:14.380]

You think so? You think so? Maybe. That's probably an unsustainable fiscal path. That's an extremely polite way to put it.  

[00:28:21.230]

And in there again, their own analysis. They got a neat little chart. You scroll down to page 31. Page 31. It shows their projection of the United States public debt, which this is a little economic nuance, but there's actually a difference between the public debt and the national debt.  

[00:28:37.590]

The public debt is sort of a portion of the national debt. It's not even the entire national debt. It's just a portion of the national debt. Right? So the actual number is much worse.  

[00:28:46.550]

Over the next, they think about this stuff over decades. They always project. They use 75 years in their projections. So they project the national debt or, sorry, the public debt, which is just a portion of the national debt over the next 75 years. And they show it reaching nearly 600% of GDP over the next 75 years.  

[00:29:02.750]

It's basically just this sort of straight line going up and to the right. This is completely insane. And you got to look at it and say, does anybody actually think they have they can keep doing this for 75 years. Does anybody think that anybody, any reasonable investor in the world can be like, oh sure, you're 600% GDP in debt. Let me keep loaning you money.  

[00:29:24.600]

That makes sense. That sounds like a reasonable investment to make. No, of course not. This is totally this is completely insane. They don't have 75 years.  

[00:29:32.390]

They don't have seven decades. It's hard to say how long they have, but it sure as hell isn't seven decades. It's not five decades. Not four decades, not three decades. Is it two decades?  

[00:29:42.070]

Who know? We don't really know for sure what the timeline is, but it's not that long. It's really not that long. Now, there's a little bit of a little bit of humor in this. One of the things you might also find in the report, if you scroll down to page 43.  

[00:29:55.360]

Page 43. Remember, the government these are, these are audited financial statements. The government has an auditor. It's actually, this it's, it's a government office. It's called the Government Accounting Office.  

[00:30:03.880]

The Government Accountability Office and the gao audits the federal government. And the federal government, if you're familiar, if you've ever read audit reports before, the whole point of an audit is they don't prepare necessarily the financial statements. The auditor goes in and looks at the financial statements, and they perform certain their responsibility is to say, these financial statements that have been provided to us by management, we believe that these are, in fact, an accurate representation of the financial condition of the business or of the organization. That's what the auditors are supposed to do. And the auditors the government failed its audit.  

[00:30:38.270]

That's the bottom line. The government failed its audit. Again, this happens almost every year. The government fails its own audit. It's totally ridiculous.  

[00:30:44.690]

And you could see this on page 43 that the gao cites, quote, certain material weaknesses in internal controls, which is a very polite way of saying that the level of financial mismanagement is absolutely insane here. And they go on to say that they said, look, we looked at the federal government's assets, and again, we're talking about that balance sheet. These are the tanks and the bullets and the parkland and the monuments. They said 49% of the assets were reported to us by agencies, federal agencies, whose financial management could not be relied on. Right.  

[00:31:21.740]

This is hilarious. And the reason why is because all those people should be in jail. And that's not even hyperbole. Back in I think it was 2003, maybe 2004, 2003, I think the Congress passed a law. This is in the wake of their bunch of financial scandals, most notably enron.  

[00:31:39.000]

We had all these corporate executives that were cooking the books and misleading investors by just literally just making up numbers. I mean, putting out publishing numbers every quarter. Oh, our earnings are, you know, we're making resilience of dollars. And it was all it was all a lie. They just completely made up everything.  

[00:31:53.060]

It was just, it was a fraud. It was a scam. And Congress, of course, what they do, they passed laws. I mean, there were already laws on the books saying you're not allowed to do that. But what, they just went and passed another law and this time this law was called the sarbanes oxley Act.  

[00:32:05.030]

And they passed this law and, and they actually created criminal penalties for executives that essentially fail their audits. And that if you don't, this is, you know, section 404 and 302 compliance. You know, if you go in and, and as an executive, if you preside over an organization that fails its audit, you can be held criminally liable, personally thrown in jail because you fail your audit. Right? And so here you have the government not just failing its audit, I mean, just completely blowing it to a level that is literally a level of financial mismanagement that rises to the level of criminality.  

[00:32:39.740]

And any, any corporate executive, any publicly traded company that had an audit that bad, where the auditors came out and said 49% of the assets can't be relied upon, those people would be in jail. But the government does it pretty much every year, right? So it's just a way to show that the situation is so bad. But it's even worse because even though you can't even rely on the data, it's so bad because the financial management is so piss poor, you can't even actually have any reliance on the data that they provide. That's how ridiculous it is.  

[00:33:12.810]

And it doesn't take a rocket scientist to see where this goes on current trajectory. realistically. This is why I was saying, like, who knows how long they have? It's not 75 years, is it? 20 years, 15 years, ten years?  

[00:33:26.640]

We don't really know for sure. Right? We don't know for sure. And it's quite a gamble to just sort of roll die. Well, I'm going to assume it's going to last for another 50 years.  

[00:33:36.310]

That's a very dangerous and risky position to take on current trajectory where they are right now. The only realistic solution is to default. And what does that really mean? Well, they can default on the debt. They could default on the, on their external debt to all the, you know, to, to the, the Chinese and the Japanese and the europeans, et cetera.  

[00:33:52.750]

Well, that's going to cause a massive currency crisis. That's a bad news ending. They could default on their internal debt to, for example, Social Security, the Social Security trust funds on a lot of Us. Debt. So what are you going to do?  

[00:34:06.060]

You're going to default on Social Security trust funds and now you completely screw over all Social security beneficiaries. You're going to default on the Federal Reserve, cause another massive currency crisis. You're going to default on the banks, Us. Banks, cause all deposits to get wiped out. I mean, there's no good solution there by defaulting on the debt.  

[00:34:22.220]

And that kind of leads to defaulting on promises that they've made to their citizens and their taxpayers, like, you know, paying social security or maintaining a stable currency with, you know, supposedly 2% inflation, or the promise to maintain a strong national defense, or the promise to not completely plunder their citizens'wealth through confiscatory taxation and all these sorts of things. Well, guess what? All those promises are probably going out the window now. Again, we talked about this a few weeks ago that Britain was in a terrible position. It's the early 18 hundreds got George the Third shaking hands with trees, napoleon's at the gate, the treasury's depleted, inflation is getting out of control, and yet they grew out of it.  

[00:35:01.410]

They had a little bit of luck on their side. They had the Industrial Revolution, technology and a lot of economic growth and they did what was necessary to sort of liberate the economy and free things up and they grew their way out of it. This is similar, right? But we talked about Rome. We talked about a rally.  

[00:35:19.570]

This is a case where you had literally one guy turning everything around. A Raleighan had the authority to go and impose his will and make all the reforms that were necessary. And in the case of Rome, obviously the emperors that came after Iralin weren't so sound. But Iranians'reforms meant that the empire, the Western Empire, lasted another 200 years, basically because of what this guy did. So it's a really, really big deal.  

[00:35:43.840]

He was able to extend the life of the Western Roman Empire, reconstitute it, put it back together and put it back on a path where it lasted another 200 years. So that was quite an accomplishment. The Us. Is more complicated than Rome. Again.  

[00:35:56.530]

In Rome, it only took one emperor. In the United States, you need a whole lot of stuff. You need a president who's actually sentient who knows who he is, where he is, who he's shaking hands with, et cetera. You need a filibuster proof majority in the Senate. You need a super majority in the House.  

[00:36:12.460]

You need all three of these bodies that have total alignment in philosophy and priorities, et cetera. And this is, of course, a huge problem because there is no alignment. There is no alignment in priorities and this is reflected in voters. Voters have no alignment in their priorities. And you can see this based on the people that they put in office.  

[00:36:32.140]

They elect complete and total buffoons over and over and over again. They elect people. It's amazing. You got to look at some of these districts and you go, how do you keep electing this person who's clearly corrupt and competent, narcissistic like, why do you keep putting these same people for decades and decades in the same position? Is there really such a dearth of leadership?  

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There's nobody who can step up in that jurisdiction who can be possibly better than this complete idiot? But this is what you end up with, is because I can't explain it. I wish I knew why people keep taking these same essentially criminals and putting them in office over and over again. I wish I could understand it. It just seems so counterintuitive.  

[00:37:14.180]

It seems so illogical. But they just keep doing it, right? And because there is no alignment, we can see this reflected again in voters choices. We can see this as well in the leadership that has no capacity to solve problems whatsoever. In most cases, no capacity to even not only they can't solve the problems, they can't even acknowledge the problem.  

[00:37:34.990]

They can't even address the problems. You guys are probably aware of this. I mean you might not be aware, I mean, that the media has been strangely silent on potentially one of the biggest environmental disasters of our time, where you had this train derailment in Ohio and they spewed all these chemicals and they just went, oh let's go light them on fire. And all these chemicals ended up in the air. The EPA was looking on, all these state officials were looking on and said, okay yeah, sure, let's light them on fire.  

[00:37:59.020]

And they killed off all this life, plant life and animal life in the community. And the EPA, of course, is totally downplaying. It. The Secretary of Transportation, Pete buttigieg the other day, though this was just a couple of days ago. I mean this has been going on for what, week, week and a half.  

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Pete buttigieg is out making public remarks, did not once even bother to mention the Ohio train derailment. Bear in mind, train derailment kind of falls under the Secretary of Transportation, right? This is sort of his thing. And yet no word about train derailment, no word about toxic chemicals killing off life in the community. But he did have time to complain that there's too many white people working construction jobs in federal infrastructure projects because that's the priority, right?  

[00:38:42.710]

We can't acknowledge the obvious problem, the clear priority. You have plenty of conversation about racial disparity in the infrastructure and construction industry. Fine. Is that really the priority or is the priority toxic fumes in Ohio killing off plant and animal life and probably extremely harmful to human beings? But again, that's just apparently not the priority.  

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And when you see situations like that where there's a clear difference in what the obvious priority should be and they're not even close. They're not even close. And so with all that, I think you could hope that maybe there's going to be some major crisis, that they get really close to the edge. They go, oh well, Social Security is out of money and now we're in this major financial crisis. Maybe some major crisis knocks some sense into people, right?  

[00:39:39.370]

Make them realize, I got to stop electing these criminals. I got to stop putting the same criminals over and over again the same people, and I don't want to keep using the word criminal. I'm sure there's some very nice, very well meaning people and there's a lot of people that are just completely incompetent. We know the names. I don't need to get into this.  

[00:39:55.550]

But I mean, they realize maybe, jeez, we need different leadership. It hasn't happened yet, right? I mean, there have been crises in the past and it hasn't happened yet, so I'm not holding my breath. We can hope, but I don't think it makes sense to hold your breath for this. And that's why, again, I think it makes sense to think about the future, think about some of these risks, think about I mean, these are really existential issues.  

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You've got to really consider what happens at the point where the Us really does get to the point where the debt is so high, their financial obligations are so high, there's no room to cut anything, right? They have to do away with the military. They've got to completely eliminate Social Security. I mean, we're talking about major radical issues. These are clearly existential issues to the way that the United States is and exists right now.  

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And it's important to think about these things because they're not that far off. They're really not that far off. I've been writing about these sorts of things for a really long time, and now if I go back and I look at things that I wrote ten years ago and I look at where we are now and go, oh my God, this stuff is really happening. It's really happening, all these things. We look at the social conflict and the decline in power and all the fiscal issues and the inflation, all these things.  

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I've been right about this for a really long time, and it's important to think about the future because it's happening. All these things are actually happening. I don't have this end of the world is nigh mentality. I do not believe that at all. I'm incredibly optimistic about the future of the world, the future of humanity.  

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I think everybody has control and power over their lives and can take back control and can take that power and do a lot of things with it. But it's important to think about risks. You've got to think about risks in life, and there's some pretty obvious risks here. If you look at some of this fiscal hole and you think these guys become these fiscal challenges become so great, they become more and more desperate and they're starting to get it. You can see these guys talking about the debt ceiling and so forth, and it's starting to actually cause a lot of concern among politicians going, jeez, we really got to get this under control.  

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Unfortunately, that's a pretty small number of politicians that think we need to get this under control. Other people saying, no, you've got to keep raising the debt ceiling. But this is going to be a situation where they're going to get desperate, taxes are going to rise. That's pretty much a given. I've got to say, at face value, I don't have this issue with taxes per se.  

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I don't think anybody really loves paying taxes, but it's not tax in and of itself. It's it's how they waste the money. If you look at all the money that they collect, trillions and trillions of dollars, and then you look at the stuff they do with $2 billion on a website, paying people to stay home, all this all this all this crazy stuff that they just waste, constantly waste money. That's not their money. That's our money.  

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That's our money that they waste on the most made, the most offensive, insulting waste of money. And you're sitting there arguing about the debt selling, and there's no that there's, like, no discussion about, jeez, maybe we shouldn't pay people to stay home. Maybe we shouldn't waste all this money and all this silly stuff and just feel like we can just spend whatever we want on whatever we want, and there will never be any consequences forever and ever until the end of time. That's a terrible attitude to have. But of course these people go and waste all this money.  

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They will never be held accountable. They will never be held accountable. They of course they go. They'll be awarded the Presidential Medal of Freedom, and they'll have elementary schools named after them and get honorary doctorates from universities and get very lucrative gigs on CNN and Netflix and all this sort of stuff. You'll be forced to pay for it.  

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They will never be held accountable, but you'll be forced to pay for it. And this is the problem that I have with taxes, especially higher taxes, is because this is essentially a remedy to fix their own stupidity, their own corruption, their own idiocy, their own bad decisions. And you think about the pandemic is an obvious example, right? You think about all the decisions that people made and the lockdowns and et cetera, and the consequences, the mental health consequences, the consequences on children's development, children's education and learning, the massive increase to the debt, the supply chain issues, the inflation, all these things. These are all decisions that they made.  

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You pay the price, they don't pay the price. They retire, and they get all their fancy awards and speaking gigs and their book tours and all this sort of stuff. You pay the price. It's your responsibility to pay for their mistakes. And I think that this is extremely unethical.  

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I think it is extremely unjust to force citizens to pay for the literally criminal level of incompetence of their political leaders. And I do not use that word lightly. I don't use that word as hyperbole, literally criminal level of incompetence. Again, go back to the financial statements. 49% of the assets can't be relied upon because of the complete and total financial mismanagement of the government, of the leaders, of the bureaucrats and the politicians, that's a level of criminal incompetence as defined by the Sarmains oxley Act of 2003.  

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This is not I'm not being excessive here in my vocabulary. This is criminal level incompetence. And I think it is extremely unethical to force people, to force citizens, hardworking people, to pay for criminal incompetence of their political leaders. And so, you know, my view on this, I think it makes all I never advocate violating the law, but fortunately, a tax code that's so vast that it takes an entire football stadium to fill it up, there's plenty of room. There's plenty of ways you can take absolutely legitimate steps to reduce what you owe.  

[00:45:26.790]

And again, just simply following the law, simply taking legitimately, legally allowable deductions and setting up perfectly legal structures and so forth to reduce what you owe following the law makes total sense, right? It makes total sense because, again, if you can see, if you look forward and you see this trajectory towards they're going to they're going to have to default. They're going to have to default on their promises. They're going to have to default on their promise to maintain a stable currency. That means inflation, which we're already experiencing.  

[00:45:55.380]

I mean, they said, oh, inflation fell to whatever, six something percent. I mean, get used to it. Hey, it's better than nine, right? And I think that's going to be sort of thing going forward. They're going to get it down to five and go, job well done.  

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It's only 5% now. It's hard to imagine that they're able to, again, over this long period of time going over, if we think about 10, 15, 20 years, to think you're going to be able to maintain an average 2% inflation over that time when this is their financial condition, that just seems ludicrous to me. And so if you think about this and you think about this trajectory towards inflation, for example, you think about this trajectory towards default. So higher taxes, take steps to reduce your taxes, take steps to reduce the impact of inflation. And there are ways to do that as well.  

[00:46:39.980]

It's not rocket science. I mean, there's plenty of historical precedent for that. We're not reinventing the wheel. We say, oh, what works well during inflation? Well, maybe diversification into real assets, businesses that are exposed to real assets.  

[00:46:50.760]

These are things like energy, metals, agriculture, productive technology, not swipe and scroll, but actual productive technology that makes people better, faster, swifter, more productive real technology. All these things are out there, and especially right now, to be honest, there are really great, well managed real asset businesses out there, both public and private, that are trading for absurd discounts. There's companies in the energy space that are trading. Natural gas companies trading two to three times earnings while gas is at $2.30 right now. Even though they want to do all this LNG to europe, which is probably going to make the gas price go up, and they're trading at two to three times earnings at $2 and 30 cent natural gas.  

[00:47:31.270]

I mean, there there's a lot of really good deals out there. There's technology, productive technology, companies that are traded really on the cheap, agriculture, businesses, fertilizer business. There's so many of these opportunities that are available. And so if you think about inflation hedges, go, jeez, I hate paying, you know, $12 for, you know, $15 for a dozen eggs. Well, guess what?  

[00:47:49.830]

There are plenty of these inflation hedges out there. And what I'm ultimately sort of outlining is that these politicians are making your cost of living go up, and so why not use their own laws to give them less money, right? Use their own laws to say, here's the taxi go. Great. I'm going to follow the tax code.  

[00:48:07.610]

And by following the tax code, I'm going to give you less money because I shouldn't have to pay for your criminality I should not have to pay for your criminal level of incompetence. That's one way to help ease the burden of inflation. And then you can take that savings and put it in things that do very well and can make a lot of money in an inflationary environment, and especially in different investments right now that have very attractive entry points, right? So this is just sort of one way. I'm not here giving anybody investment advice.  

[00:48:36.040]

I'm just giving you a way to think about all this because there are things that you do have under your control. Remember, it closes as I'm going on. It's 48 minutes now. I want to stop here, but I want to go back to ancient Rome. And again, think about that.  

[00:48:51.630]

Things are pretty great in 165. They were in their golden age. Sure, they'd had troubles in the past. They had idiots like nero in the past, but things were pretty great in 165. They had a nasty pandemic, and that was sort of, again, the start of this downward spiral that led to an inflation crisis and a migration crisis and financial crisis until the empire actually did break apart.  

[00:49:11.670]

One guy put it together, one guy put it together, and we can hope that that happens. But again, I wouldn't hold my breath. I'm certainly not holding my breath, because it turns out there are plenty of things that you can do. While we maintained hope and optimism, there are plenty of things that you can do. You cannot control how tens of millions of people vote.  

[00:49:29.640]

You can't control the stupidity of leadership, the gigantic fiscal problems, the inflation, the tax increases, all the things to talk about. Just the crazy woke mobs and all this silly stuff. But remember the words of Marcus aurelius. Remember Marcus aurelius saying, you know what? Don't stress about the things that you cannot control.  

[00:49:45.840]

Focus on the things that you can. And it turns out there are really a lot of things that you can control to really move the needle in your own life. Thanks so much for listening, and we'll speak to you again next week.   Close Podcast Transcription