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Make the most of it at Best Western. Visit BestWestern.com for complete terms and conditions. I'm Tom Bilyeu, and this is Impact Theory. I believe we're standing in the brink of some serious economic upheaval, and that's not me trying to be negative, that is me trying to look at the way that history loops.
There is good news. With the right knowledge and strategies, we can navigate these turbulent times well. Today, we're tackling some of the most pressing issues that can shape the future of our economy and, quite frankly, our entire way of life. To help us understand what's really going on behind the scenes with power brokers and the structure of our economic system and what we can do about it, I've brought in a guest who isn't afraid to say the hard truths.
He's here to shine a light on everything from the risks of a collapsing dollar to the actionable strategies you can take to secure your financial future. This isn't just about opinions. This is about real practical advice that you can use to protect yourself and your loved ones. Unfortunately, the way our monetary system is structured, you are forced to become a gambler in order to beat inflation.
So, if you're ready to unravel the complexities of our current economic landscape and arm yourself with the useful insights you need to thrive, you do not want to miss this conversation. Help me in welcoming Peter Schiff. Inflation is a very simple concept. It's just the money supply expanded.
And so the more money there is, that's what you're inflating. That's where the word literally comes from. Over time, the government has been very successful in changing the definition of inflation to fool the public as to its source. Because if the public understood what inflation was, they would know that it's not caused by grocery stores.
You know, when Kamala Harris says it's greedy grocery stores that are causing inflation, if you understand that inflation is an increase in the money supply, well, you know it can't possibly beat the grocery stores because they don't have a pretty press. They can't expand the money supply. But if you think that inflation is rising prices, well, yeah, the grocery store keeps raising my prices, so they're causing inflation. They're raising prices because the government created inflation.
The prices are going up in response to the inflation that's been created. But by changing the definition of inflation, the government not only confuses the public as to who's creating it, but now they're able to blame it on other factors, like greedy corporations or Putin. You know, that was, you know, Biden kept talking about Putin and Putin was causing the inflation. There's only one source of inflation in America, and that's the Federal Reserve.
But the reason the Federal Reserve is creating all that inflation is because the government is running massive deficits. And so the Federal Reserve is financing those deficits by buying those bonds with the inflation it creates, the money that it prints. And so the best way to look at inflation is a tax. And inflation is what we pay for the government that we don't pay for with the income tax or the Social Security tax or a sales tax.
Basically, the deficits, the federal budget deficits, we end up funding them by inflation. And those deficits are about to skyrocket. They've been skyrocketing. And so the inflation tax is going to be much bigger in 2025 than it was this year, regardless of what the Fed is trying to tell us.
How do we look at the Fed signaling that they're going to bring rates down, which we know they do because inflation has come under control? That's the public messaging. How do we reconcile that that they're messaging out with you saying, no, no, this is them giving up. This is capitulation.
And what you're looking at is not what they're saying. How do we reconcile those two views? Well, the Fed is now focused on employment, the economy, which has clearly come under a lot of pressure recently, is very close to officially, I think, falling into recession. I think we've been in recession pretty much the whole time.
I just don't even believe the numbers, the way the government manufactures them. So I don't think we've ever had a strong economy. I just think that that's just been a statistical anomaly. And even if you look through the statistics, you can actually see a lot of the inherent weakness that is being masked by a lot of superficial numbers.
But when the Fed stopped hiking rates, it was because banks started to fail. You remember what happened with Signature Valley Bank or Signature Bank, Silicon Valley Bank, a few banks started to fail as a result of rising interest rates. And then the Fed really backed off. And of course, they had to have a big bailout program to prevent a lot more banks from suffering a similar fate.
But that's really when the rate hikes stopped. And so the Fed kind of kept rates where they were, but kept implying that, look, we're going to cut eventually. We just need enough proof that inflation is going back down to 2%. And they said, we're not going to wait for 2%.
We just have to believe that it's going there. Now, of course, the reason they're not going to wait for 2% is because it's never going to get to 2%. And they probably know that. But at this point, the jobs numbers are getting so bad, right?
The non-farm payroll report that we had, the most recent one was horrible. And now the government fessed up and came back and said, you know, 818,000 jobs that we claimed were created. We made a mistake. They're not actually there.
And I think they made a bigger mistake. I think there's actually a lot more jobs that they're pretending were created that aren't really there. And in fact, the only reason that we have more jobs now than when Biden was elected is because so many people have two or three jobs. That's where all the jobs are coming from.
It's moonlighting. And the people that now have two or three jobs, they don't want all these jobs. They'd like to be able to support their family on one job. But unfortunately, the rent's gone off so much, the grocery bill, the utility bill, the insurance, everything is now so expensive because of all this inflation that people have to work multiple jobs.
And now Joe Biden wants to claim credit for creating those jobs. But the public blames him for the fact that people are forced to work those jobs. But I think it's the weakness in the economy that is prompting the Fed to cut rates, which they're going to do here in September. They've now prepared the markets for these cuts.
And they're not going to just do one and done. This is going to be the beginning of as many rate cuts as they can get away with. And I think ultimately, they're going to return to QE. They've already reduced the size of their quantitative tightening program.
And I think that was the first step to reversing it and going back to QE, which is inflation creation. QE is just another word for inflation. It sounds like it's a euphemism, but that's really what it is. But the Fed has to pretend that it's finished the job on inflation.
It can't be honest and say, look, we still have high inflation and it's going to go up, but we don't care. So they have to pretend that the 3% inflation that we have now is going to go down to 2%. But we've been at 3% now for over a year. We went down from 9% to about 3%, but there's no indication that we're going from 3% to 2%.
In fact, if you look at the market indicators, on Friday, when Powell delivered his statements, his Jackson Hole speech, on that day, gold was at a new record high. The gold price was above 2,500. I mean, as we're speaking here, I think it's around 2,520. And the U.S.
dollar index on Friday sank to a 13-month low. So when you see a weak dollar and when you see surging gold prices, that's an indication that monetary policy is too easy and that inflation is going up, not down. In fact, the only reason that inflation came from 9% year over year to 3% was because we got a 24% rise in the value of the dollar. That happened.
And after that big rise in the value of the dollar, then prices started to come down because the dollar was so much more valuable relative to other currencies that brought down commodity prices and that brought down the CPI. But now the dollar has already fallen 10% from its peak, and it looks like it's going to fall a lot more. This weak dollar is going to be a huge tailwind for inflation and record high gold prices are telling you that that's exactly what's going to happen. Yeah, this is the part that I want people to understand is that if you are trying to track inflation yourself, if you're trying to understand how prices are going up, there's a lot of manipulation that's happening behind the scenes to control the public's perception of the CPI number, including that a rise or lower in the value of the dollar is going to have an impact on CPI, how they calculate CPI, which has changed over time.
That's also going to impact things. And what I want people to understand, and please correct me if you think that I'm delusional about this, is that the government is doing sleight of hand. They're manipulating the numbers, doing sleight of hand so that they can basically, I'll be aggressive here, and use the word steal money from the people, not have to get people to vote so that they can keep doing just absolutely outrageous amounts of spending because they can get your dollars from you without having to ask for them by simply driving pricing power down or purchasing power, excuse me, through inflation by printing the money. Now, the way politicians get elected is they promise to vote or something for nothing.
That's what people vote for. It's like, what are you going to give me? If I vote for you, what's in it for me? What do I get?
It's not like people are saying, leave me alone. I just want to be free. People want free stuff. If you're in office, what are you going to give me that I don't now have?
That's what people are voting for. They're voting for stuff, free stuff. And so that's inherently the problem with democracy. That's a whole different podcast.
We should be a republic and not a democracy. This is an inherent flaw in that type of system. And we're just demonstrating it all over again, not like we need to. History is littered with examples of failed democracies for the same reason that we're failing now.
But the politicians want to get elected, and so they want to give voters something for nothing. Well, how do they do that? Well, they create inflation. They give voters stuff that they don't make them pay for through taxes.
See, if the government said, okay, we're going to give you health care, education, and here's the bill. We're going to raise your taxes so that you can get this benefit. The people were like, well, I forgot I want that. I don't want my taxes to go up.
But when they say, look, we're going to give you this stuff and your taxes aren't going to go up, but you're getting it for free, then that sounds great. Or we'll just tax the rich to pay for it. Well, the problem is they can't get enough money from the rich to pay for all these promises. So where do they get the money?
Well, they just create it. So that's inflation. And so instead of taking your money, they just take your purchasing power. And so now everything you want to buy is more expensive.
And the difference between what prices would have been without all those government programs and how much higher they are as a result of those programs, that's your tax. But the people don't know that they're paying a tax. They just think they're paying prices and they blame the business. And the government, it's great for the government because now the government can say, you see, capitalism is bad.
See, these greedy businessmen are gouging you by jacking up your prices. When they're not, they're simply passing on the higher costs that they themselves have to pay to stay in business. And those costs are going up because of the inflation that the government is creating. But the government obviously too, since they create inflation, they want to lie about how bad it is.
They don't want to acknowledge it. So the way it's measured doesn't come close to capturing the true increase in the cost of living. They've changed the methodology for the CPI over the years to make the number smaller or littler. They did the same thing with unemployment.
Unemployment is only low because we changed how we measure it. There are lots of people today who are unemployed, who we don't count. But if you go back in the past, those people that we don't count today used to be counted. And so the main reason that unemployment is low now is because so many people that we used to count as unemployed in the past, we don't count them anymore.
In fact, we have a lot of those people now that, you know, if we still counted unemployment the way we counted it before 1994, we'd have unemployment above 10% right now. So there's no way anybody would be able to claim we've got low unemployment if it was 10%. So you take three quarters of the unemployed and you don't count them anymore. And no, it's only 4%.
And now Biden gets to brag about how low the unemployment is. Meanwhile, we've got a lot of people who are unemployed who are not in the statistics. And the same thing with inflation. Inflation is a lot higher than the CPI reveals.
And so even if we can get inflation down to 2%, it wouldn't be 2%. It'd be 4% or 5%. And right now they're saying it's 3% because it's probably 6%. So it's not even close to the 2% target that the Fed claims it has.
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TruMed is for qualified customers only. HSA, FSA, tax savings vary. Well, first of all, in order to really solve the inflation problem, it's going to take a much bigger increase in rates than what the Fed has delivered. But the problem is we have so much debt that that's impossible.
Go back to Paul Volcker in the 1980s. I mean, we have a bigger inflation problem now than we had in the 70s. And to bring that inflation to an end required 20% interest rates. Now, what would happen if interest rates went to 20% now?
I mean, we got up to 5%, right? Imagine if they got up to 20%. Well, we've got a $35 trillion national debt that's financed with treasury bills. Even if we had to finance that at 10%, that's $3.5 trillion a year in interest on the debt.
So the US government only collects about $4 trillion a year in taxes in total. So we have so much debt. Imagine what would happen to all these corporate bonds if their debt matured and they had to refinance it at 20% or anywhere close to that. Or home mortgages, they got up 10% or 12% or something like that.
I mean, we now have so much debt that if you try to raise... interest rates high enough to get rid of inflation everything would collapse which is why they're not going to do it we are stuck with inflation because the alternative is a political non-starter because if the fed actually got rid of inflation you would have a financial crisis that would make a 2008 look like a sunday school picnic and you would really fast i just want to say something you can pick that back up because we use words like inflation and i think the that people get lost the what you're saying is we are dead so high the only option the government has is to take your money via inflation but but once people understand that yes you still have if you have a hundred dollars in your bank account it's still a hundred dollars i understand that but it buys ninety dollars worth of goods and eighty dollars worth of goods and so on and so forth and so when you say that the only option the government has i want to make sure people hear the only option the government has is to take your money uh because once you're like whoa wait a second that's not what i want then people start thinking the right way all right cool now that the audience has that but the point is that they they can't raise interest rates high enough to fight inflation without creating a financial crisis and so that's why they didn't do it that's why they stopped at you know five and a quarter because the only way that interest rates slow down inflation is by slowing down debt they have to get people to borrow less and save more but even though the fed raised interest rates nobody borrowed less you know the deficit spending at the federal level went up household debt went up credit card debt hit all-time record highs so the fed never actually got to restrictive monetary policy they never got to a situation where interest rates were so high that governments and individuals stopped borrowing and started saving but also if interest rates got to that level nobody could afford it we'd have a complete economic implosion and the government would have to default on its promises including its treasury bonds but it would have to tell people on social security that they're not going to get the money that they were promised and so none of this is politically viable so what the politicians are choosing is just to have endless inflation and that takes them off the hook because they don't have to cut social security they just give you the social security benefits and you just can't buy very much because everything costs money right they don't default on the bonds they pay everybody with money they print so instead of honestly telling people we don't have the money to pay you and so we're gonna have to pay you less than we promised they pay everybody off but the net effect is you get less because the money buys less so you lose through inflation instead of through an honest default but that is always the path that the politicians want to go down because they never have to accept responsibility for creating inflation they're always going to blame it on somebody else and that's why i know that price controls are coming and i talked about this long before kamala harris proposed it that we were going to get price controls because ultimately that's all the government's got is to blame the businesses and to pass laws to stop people from raising prices but that never stops the inflation it just causes the inflation to go underground into the black market because legally you can't buy anything because the prices are too low and so there's a shortage of everything that you need and in order to buy the things that you need you have to go and buy from a criminal because they're the only ones who will sell it to you but now you got to pay through the nose because you know the guy who's selling you illegal food at risk going to jail yeah uh this all gets crazy really fast let me ask you a super pointed question do people want to be lied to well you know maybe it's like like the matrix i mean people can't handle the truth or that's that was a uh a few good men they can't handle it but look nobody wants to tell the truth to the voters because you know shoot the messenger the truth is not pretty the truth is the government has over promised the government has made too many promises that the taxpayers can't keep and and so we need to come clean and be honest and we have to tell our creditors we borrow too much money we can't pay you back we got to tell people on government pensions on social security on medicare we don't have the money we can't give you what we promise but no politician wants to fess up because the minute you do that you're not getting the votes and so everybody wants to pretend that nothing's going to get cut and so everything gets cut through inflation uh but you know they have to try to say well they're going to fix it but you know even donald trump donald trump doesn't want to cut in fact he wants to increase social security benefits because he wants to eliminate the tax on social security which is like effectively raising social security benefits so he hasn't identified anything that he's going to cut or eliminate he talks about waste and abuse but everybody talks about that uh but nobody wants to cut anything donald trump talks about increasing the defense budget well where's that money gonna come from right so both candidates want more government and so they're gonna end up with more inflation regardless of what they're promising and of course you know donald trump is partially responsible for the inflation under biden because a lot of the money that is being used to bid up prices now was printed when trump was president because trump ran enormous deficits biden is just running even bigger deficits than trump trump set the record for the most amount of deficit spending by a president in a single term and biden is going to break that record when it by the time his term is over and before that barack obama he set the record for the most debt under any president but that's because he had eight years but now presidents are doing in four years what it took obama eight years to do but this thing is just spiraling that's why we've got all this inflation it's not a coincidence it's cause and effect and when the biden administration tries to say well you can't blame us for inflation because they've got inflation in europe well because they made the same mistakes in europe they did the same thing they printed a bunch of euros they had their own qe program they called it their asset purchase program they kept interest rates at zero in fact they even had interest rates negative so all these central banks uh were operating from the same flawed playbook they all created massive inflation in the aftermath of the 2008 financial crisis and then up the ante with covid and now the whole world is is reaping a whirlwind as all those inflation chickens come home to roost does inflation matter if every government in the world is doing it of course it matters i mean on a relative basis that's what's keeping you know the dollar from collapsing against the euro or against the yen or against the pound because all central banks are inflating but that doesn't mean we're off the hook that means we're all suffering together right everybody's experiencing rising prices even if the exchange rates don't fluctuate very much because they're all sinking at the same rate but it means everybody is getting poor you need more dollars you need more euros you need more pounds to buy you know a basket of goods all right so raul paul when we did the debate between you and him uh said that inflation was preferable to default because it happens more slowly and that was what i had in the back of my mind when i said people want to be lied to it seems like um there might be some truth to yes dear government please lie to me take my money slowly don't tell me you're doing it so that this plays out over a long enough time frame that everybody gets used to all the money that they've lost um do you agree that that's a better strategy or do you think that in reality default is a better strategy well the best strategy is not to get into that predicament in the first place and that's you know one of the reasons to be on the gold standard so governments can't run up that kind of debt but if the idea is well we'll just inflate the debt away slowly the problem is that you know it speeds up it's like you know well we'll just get a little bit pregnant you know it doesn't work that way it's you know it starts off slow until it's fast right once you start going down that road it's ultimately going to be a disaster but i always think at any point being honest and having a legitimate restructuring of debt is better than constantly creating inflation to try to repudiate it you know you know in secret i just try well let's you know because every time the government creates inflation they wipe out a good chunk of the debt we have 35 trillion in debt if they create 10 inflation that eliminates three and a half trillion of the debt but the problem is by the time they do that the actual size of the national debt has gone up by more than the three and a half trillion because of how much debt we're adding to it every year and eventually the higher inflation causes an increase in interest rates and that is a problem because all that debt has to be refinanced constantly because much most of the debt is short term it's not like the government borrowed money for 30 years or 50 years if they borrowed money for 30 days 90 days a year and so they have to constantly refinance it and as rates go up because inflation pushes rates up even though you're wiping out some of your debt through inflation you're accumulating so much more because the government is borrowing the money to pay the interest on the debt but i just think that an honest default is preferable and at least with a default who loses money in a default well if the government defaults on the bonds the losers are the people who own the bonds and a lot of u.s government bonds are owned by you know very wealthy individuals who are clipping coupons and have money invested in in treasuries the average america doesn't own any treasuries um but wealthier people do and so they're going to lose they're not going to get back um 100 cents on the dollar but if we just decide to create inflation so that the people who own treasury bonds don't lose anything well then everybody suffers yes the people who own treasury bonds they still lose something because inflation is you know reducing the value of the principal that they get eventually and it's reducing the value of a coupon but now you hit everybody now you hit the poor you hit the middle class you hit people that don't own any treasuries that never loaned anybody to the government um but what's fair about that i mean the people who should take the losses are the people who made the loans to a government that was too broke to pay them back right that's the people and you know as far as um government commitments yes if the government has to cut social security benefits okay yes people that were going to get those benefits are going to lose those benefits or have less benefits but you know that's necessarily better because a lot of wealthy people that get social security i mean i qualify for social security i mean i'm 61 i'm not taking it yet but i think i'd be able to start getting it a couple years but you know it's better for me to lose a lot of my social security than some young kid who's struggling to get by inflation so i could i could get my social security benefits so the government should have a way of reducing social security benefits so that the people who you know who are going to get the benefits uh they get the loss as opposed to just spreading the loss on everybody well there is a way to reduce entitlements without needing to vote for it and that cpi manipulation which is almost certainly happening um so okay you're you're making a what i'll call values based argument there may be a moral argument in there as well but for me to know if this is just values just the way you see the world or if you have a objective moral standard what what is your north star when you lay out your argument well i think i think that is the moral way to go you know but anchored by what human flourishing uh least number of people get wrecked like what what is the metric by which you say that's a moral argument to do default well it's the honest way to do it right you know the government can't so be honest at all times no matter what that means we're going to be honest well it's honest and you know the people that took the risk bear the consequences of that risk you know people who loan money are the ones that don't get fully repaid right the people that lent out the money but they're going to lose i mean if there's inflation they still lose right it's not like they're getting out scot-free but inflation just spreads the losses among a broader population but in many cases it hits hardest the people that could least afford it so why do we want to create inflation if it's going to create a real hardship for a lot of poor or middle-class people just so we can avoid wealthy people taking a bigger hit you know i mean you know i'm just trying to map totally understand i'm trying to map how you think through this argument so uh because uh when i look at it the way i would think through this is for me the moral way to look at life is what leads to the largest amount of human flourishing for the largest amount of people i can define human flourishing but for now let's just all assume that it's roughly well-being uh and if you look at this from a well-being perspective i have a hypothesis that if you were to default that you would have an uprising that there would be literal bloodshed that there would be a real problem it would be way more violent way more abrupt whereas doing it the way they're doing it now which which i hate and i think the government has a moral obligation not to do this but when you compare the two things i have a feeling that slow and steady theft from everybody actually ends up with a um people don't revolt as much they like being lied to it just works and so it's why i think the government does it this way and i still think it's horrendous well until it gets out of hand because it only works for so long well then let me ask the question really fast that you can be very pointed with this uh do you believe that the um is there a conceivable way for productivity to rise so much that we can eventually pay for the debt before inflation eats us alive or is this a runaway feedback loop and there is no conceivable way for anything to happen other than collapse at the end of this well it's more likely the the latter i mean it's more likely that it's going to run out of control just because of the you know the nature of what we're dealing with just the the size of the debt the exponential growth and what happens to interest on on the debt see the problem with this you know well let's just have a little inflation every year is that it allows the government to continue to compound the problem because it's able to you know hide the consequences and so it keeps getting bigger and bigger and so ultimately you have to default to avoid hyperinflation and if you don't default then you get hyperinflation you destroy the currency and if you think uh people are going to revolt from default it's going to be worse when the money is completely worthless right so that's an even more dangerous way to go and that's inevitably where you end up if you continuously inflate inflate instead of dealing with the underlying problem because if you actually default that basically you know brings it to an end okay we can't do this anymore it's like you're in this giant hole and if you can keep on inflating you can keep on digging the hole deeper if you have to default that's the end of the whole thing right okay the game is over right everybody everybody knows now what's been going on you've had to be honest you've had to confess the problems and now we can we can move on but that never happens when you paper it all over by creating inflation now is it possible that there's some kind of get out of jail free card that's waiting in the wings that is going to grow productivity so dramatically in such a short period of time that we can actually grow our way out of the deck and i would assign a non-zero probability to that so it's possible and the only thing that is on the horizon that potentially could do it would maybe be artificial intelligence if it could be uh you know implemented if it if it has the ability and we can effectively do it somehow fast enough that we can now automate so much of the production process and the ai could come up with because it's more intelligent than we are could come up with even better more efficient ways of doing things and we could maybe create enough you know robots that were intelligent that could do a lot of work um that maybe we could produce so much stuff that the economy can grow so fast that we can actually reduce the debt relative to the economy and we can service it and repay it i mean i suppose that that's possible but i don't think that's the most likely scenario i mean i do think that that there's a lot of potential there in enhanced productivity coming from artificial intelligence and robotics and more automation. I think this is all good stuff that is going to increase the standard of living of humanity over time. But I don't know that it can lead to the results that we would need fast enough to deal with this, to mean that we don't have a crisis, that we don't have to deal with it.
Because the numbers are just too staggeringly big at this point, I think, to grow your way out of it, even with incredible growth. Yeah, so the AI revolution, I think, is a very interesting thing that people are holding on to. It's probably part of why some very smart people are not sounding the alarm bell as hard as I think they should. But walk me through what will happen if the government starts raising rates again?
Will inflation come down? I've heard you put forth that even if you raise rates, inflation will go up, which is, you're the only person I've heard say that. Well, if you just raise rates the way they did, yes, because those higher rates are part of the cost structure of businesses. I'm a business and I have all sorts of costs.
I have long raw materials, I have rent, I have labor costs, and I have interest. Maybe I borrowed some money to build out the business, to buy some capital equipment. And so I have debt. And the interest on that debt is what are my costs?
And if my interest goes up, well, my costs have gone up. So that's something I'm going to pass on to the consumer with higher prices. And that's especially true for real estate. If I own some rental property, most people who own rental property have a mortgage on the rental property.
And as their mortgage rates go up, because if you own a bunch of rental property, you probably didn't have a 30-year fixed rate mortgage. You probably had a mortgage with a five or seven-year term and they reset and you have to get a higher rate. So if I'm a landlord and my interest expense has gone up, well, how do I recover that? I raise my rent and I get it from my tenant.
So higher interest rates are just another cost, just like raw materials and latent wages that get built into pricing structure. So higher rates end up being higher inflation and that's going to happen. I mean, rates are higher now than they were when they were zero and so that's going to affect prices. But also the U.S.
government has this massive amount of debt that has to be financed at higher interest rates and the higher interest rates are the bigger the deficits are because all the money that goes to pay the interest is borrowed. And so as interest rates go up, the deficits go up and that means there's more debt and now you're going to have to print more money to monetize it and so there's going to be more inflation. And also those rising deficits are going to put downward pressure on the dollar which we're now finally seeing. For a while, higher rates were supporting the dollar but now that's not the case anymore as the low yielding debt matures, even if the Fed is cutting a bit, you're still getting debt that was borrowed at 25 basis points maturing and now has to be rolled over at 300 or 400 basis points.
So the debt is exploding because of higher interest rates which is putting more downward pressure on the dollar which puts upward pressure on consumer prices. But if they raise interest rates high enough to really cause a decline in aggregate demand because people stopped borrowing money and if we had an increase in our savings rate if people actually were like, hey, interest is so high I'm going to earn some interest I'm going to put my money in the bank I'm not going to go spend it I'm going to earn some of this high interest then that would help fight inflation but we never even got close to that point because the savings rate is near an all-time record low and debt is at an all-time record high so what does that tell you? That interest rates are too low and so when Powell comes and said we've had this tight money for a long time money never got tight it was less loose but it was never tight that's why the debt kept growing and that's why the inflation problem is going to get a whole lot worse. Is there enough money enough runway for inflation that they could just keep grinding inflation grinding inflation grinding inflation until they have paid off the debt?
You don't pay it off you wipe it out you make it so eliminate the debt so it's not a burden anymore it doesn't go away but I don't see how they do that without impoverishing the whole country in the process because they'd have to create so much inflation in order to do that because the debt is now so big and it's rising so rapidly it's rising by maybe $3 trillion a year so even if you had 10% inflation the debt would just stay the same in theory but it wouldn't stay the same because the budget deficits are going to go up but you just have to create so much inflation that the public is not going to be able to survive the amount of inflation that they would have to create to wipe that debt out in any kind of meaningful way. Is there any reason why I understand that this would draw a lot of ire people would get weird but I've seen people get over amazingly bizarre stuff is there a fundamental mechanism that would stop the Fed from saying we're going to give the U.S. government loans at one rate and we're going to give everybody else loans at a different rate? Well if they're buying treasuries the only way the Fed can monetize debt it has to go into the market and buy treasuries so I don't see how it could it could buy them from the government because it doesn't actually buy them directly from the government because it's not allowed to do that in its charter because they didn't want the Fed Reserve to be able to directly monetize debt so they were afraid of that in fact when the Fed Reserve Act was initially passed it wasn't even legal for the Fed Reserve to hold U.S.
treasuries even if they bought them in the secondary market they couldn't do it they were prohibited from holding them because they didn't want the Fed to be able to help the government go into debt they changed that soon after the Fed Reserve Act was created to help the government finance the first world war they gave the Fed Reserve the ability to hold treasuries and so then the Fed Reserve goes into the market and it works through primary dealers it goes through Goldman Sachs or JP Morgan and Morgan Stanley to buy its treasuries it doesn't go treasury direct it has to go through these middlemen so I don't see how it's possible because they can't differentiate whose bond is whose they're just buying in the market so this is probably just my I don't understand something but it seems pretty trivial for the government to go hey everybody guess what we're going to default just kidding the Fed's going to buy from you one and a quarter but we are going to buy it and if I'm listening to this podcast and I'm a government agent I'm like that is a great idea that seems inevitable because that is far more powerful than people even though the Fed Reserve the U.S. government pays interest to the Fed Reserve it gets the money back because the Fed Reserve has to pay its profits back to the U.S. government in tax 100% the Fed is allowed to earn a certain return on its capital and then everything it earns in excess of that is given to the U.S. government now the problem is now yes they're earning interest but the Fed is also losing a fortune on its bond portfolio right now so the Fed is not making money anymore to pay the U.S.
Treasury like they used to but they do get the interest back just like when the Fed Reserve pays interest to the so-called Social Security trust funds it just takes the interest right back it just yanks it right out of the trust funds and spends it so it's a much bigger burden in the short run when the public owns the Treasuries because now that's a net drain on the current expenses of the government because they actually have to pay the interest to a third party that they don't get it back but the real problem though is going to be the dollar status as a reserve currency because as the rest of the world wakes up to the reality of endless inflation and endless money printing and knowing that the government is not going to honestly deal with the debt we're never going to cut back government spending we're just going to keep creating inflation then there is no justification for the dollar to be the reserve currency and it won't it will lose that status and that is going to accelerate the spiraling of inflation out of control because one of the reasons that we've been able to print so much money create inflation and haven't had an even bigger impact on our prices is because a lot of that money has been exported you know we have a trillion dollar a year trade deficit so these are goods that we didn't have to produce that come into the country every year and we send our money out we take dollars that we print and we send them to China we send them to Japan we send them all around the world and they send us back real stuff so that keeps the supply of goods up and the price of goods down because we get the goods and the rest of the world gets the inflation they get our money but now what are they doing that money they loan it back to us they buy bonds they buy treasury bonds they buy corporate bonds or they buy real estate they buy stocks or they buy these financial assets but that's helped keep asset prices high that's helped keep interest rates low but when they don't want these dollars anymore because they're not the reserve currency then all those dollars are going to come back and they're going to be bidding up consumer good prices people are going to try to buy what they can take home but more importantly too all the goods stop coming in so if we can no longer import a trillion dollars worth of stuff every year what's going to happen to prices prices are going to skyrocket because we're not going to have stuff and so there's going to be a lot less stuff yet everybody's going to be trying to buy stuff that's not there so the prices of the stuff is going to go way up yeah maybe temporarily because then we bring manufacturing back but I don't want to derail on that that's going to take a long time you just can't bring manufacturing back snapping a finger it's going to take years maybe decades because you have to rebuild the factories rebuild the supply chains train the workers where's the money going to come from to do this and if we already have a huge government with lots of regulation and lots of taxes it's going to be very difficult I mean that's where the AI could really come in and be helpful if we had to start over again and rebuild our industrial base but again this is going to be a very difficult process that is going to take time and in the meantime a lot of people are going to lose a lot of money and that's going to put a lot of pressure on a lot of politicians to do things that are going to be very harmful and very destructive to that recovery yeah I just think that the way that this will probably play out is something like this we keep inflating we're just going to gobble up as much money as we can by lying to you you're going to feel that something is wrong but you won't know exactly what it is despite all these podcasts where I'm trying to walk people through exactly what is happening is going to turn to trash for reasons we are going to get into great detail on in a minute and people are going to revolt there is going to be if like this all goes well there will simply be massive tribal divisions between the left and the right and we'll see saw the government back and forth until people do slowly get away from the dollar but I think this will all be a feeling and it won't be a thing that the logical brain will engage in to your point about an honest default that's never going to happen that's logic everyone's going to steer by emotion and it's going to manifest this political violence that's how I think this will actually play out because people can feel something is wrong but it is way too hard to wrap their head around things like Yeah the politicians and a lot of the people in the financial media who still don't get it they look at these phony statistics and accept them on face value and then they look at the public and the public is so pessimistic Biden's approval rating is so low people are pessimistic and they don't understand why don't they understand how great everything is why aren't they giving credit to the Biden administration for this great economy and that's because the economy is not great they're blaming Biden for the lousy economy because the economy actually is lousy the statistics don't tell the truth if you just accept them on face value which is why you shouldn't do that you always have to look beneath the surface to find out what's actually happening and if you take the time to do that and you don't just accept what amounts to propaganda but you actually look at it then you understand why the public is so upset because we have high unemployment we have high inflation and we don't even have any economic growth we actually have a contracting economy if you actually counted GDP and we're going to get more GDP data later this week but if you honestly reported the economy it would be contracting it is not growing that is the problem Yeah nonetheless people think emotionally they do not think logically and because of that it becomes a question of who's going to better steer their emotions so people are upset with Biden but they have pulled a flip on the American people that is unreal to behold moving everybody over to Kamala Harris and everybody's like yeah word like I can feel the enthusiasm now coming out of that camp people are excited they're revitalized they believe it and I'm looking at the words that she's saying and the economic policies that she is proposing they are terrifying and people are here for it they are super excited by it and so my thing is okay hold on as somebody who actually wants to see people go somewhere that leads to human flourishing I'm just like wait there's a lot of excitement for policies that will not lead to in my estimation human flourishing and it was very easy for the government to the DNC very specifically to pull a fast one like to just be hey here's a new shiny object so what do you make of that to me that is the most human story ever I think all this has been manufactured by the media I can't believe that Harris is really as popular as everybody claims I mean she was the most unpopular vice president in history before she got the nomination and so I don't see how she can go from being so unpopular to being popular the reason that Biden was unpopular was because the economy was lousy well I mean she's a big part of that the economy is just as lousy as it was and so how they could just think aha this is great we got Harris and in fact Harris is simultaneously claiming that Bidenomics is a huge success but now we need to elect her because she's going to solve all these problems well what problems if Bidenomics was such a success there should be nothing to solve she's talking about all the things that she's going to do if she's elected well why aren't they doing those things right now why didn't Biden do those things I don't know how you could fool the public I mean the voters are dumb but are they really that dumb that she's going to somehow be an agent of change that we have great policies but vote for me because I'm going to save you from all the problems that you now have without accepting responsibility for having created those problems in the first place so I don't see how she's as popular I mean I think these polls I don't know I don't know how they're running these polls who they're polling who they're not polling I mean I know the media wants Kamala Harris so that they just jump on the bandwagon and so maybe they found a way to create these polls so that they're skewed more towards a Harris you know I don't know it just seems hard that Biden would be so far behind and then all they do is flip it to Harris and now all of a sudden she's got a lead or a big lead and Trump's behind especially given the assassination attempt which I think really elevated Trump to almost like a living folk hero and I think a lot of people that maybe didn't like Trump have got to at least be impressed with the way he handled that situation and so I think that would have turned people and now that you've got Robert Kennedy Jr. throwing his support behind him him. I mean, that's got to deliver some voters to Trump that, you know, he didn't even have before. And now he's got those voters.
So, you know, I would think that Trump would have a big lead over Harris, especially given, you know, how bad the economy is and how much they want change. I don't think that they're really going to be dumb enough to believe that voting for four more years of what they've got now is change. And in fact, if anything, it's going to be worse because Harris is likely to be even more to the left of Biden. And just look at, you know, the guy she picked for vice president.
I mean, about the most liberal guy that she could have found from the most liberal state. It wasn't even like the Democrats needed Minnesota. I mean, they had that one in the bag. But Minnesota, you know, that's, you know, some, you know, the governor was from Minnesota Mondale.
I mean, a lot of real left wing politicians have hailed from from Minnesota. So I think that the Harris Walsh, you know, duo is even worse than Biden Harris. So, you know, things are just going to get worse if the public votes for more of that. Now, you know, I think the problems are going to blow up under Trump, too.
But Trump, Trump's got a better chance of workable solutions in the aftermath, because at least he may be advised by people who believe in capitalism and believe in the free market and want to try to restore it. Harris is gonna be surrounded by socialists who are going to use the crisis as an excuse to blame it on capitalism, to tell the people that capitalism doesn't work. And we need to reinvent the country under a socialist economic model, because this proves that capitalism doesn't work. So I don't want people running the country who don't even believe in capitalism, right?
Which, and obviously, Harris doesn't. You know, that's why she wants price controls. But she was raised by communists. I mean, you know, the apple doesn't fall far from the tree.
And plus, she was taught communism since she was a little kid. You know, so she never, she never grew out of it. Yeah, I think that the important thing for anybody trying to predict the future here is to understand that humans are an animal designed to use emotions to steer in an incredibly complicated world. And I don't think it's a matter of the public being dumb.
I think it's a matter of we are emotional creatures. If you selectively damage the region of the brain that generates emotions, people cannot make decisions. It's not like they have a hard time making decisions. They can't do it.
So emotions are fundamental to our ability to make a decision. Now you have this incredibly clean narrative with Kamala Harris with she's not Joe Biden. And so it's new, it's changed. No one's going to think about, oh, she's been there for a long time because it's not even her.
It's the party on the DNC that really does things, whatever that lobby sense of party is. And so they have the narrative they need to trigger the emotions. And this is the reason that I think they both Trump and Harris have doubled down on their VP being like core to their base is that's where we are going. Meaning the tribal split is becoming extreme because people can feel something is wrong.
And this is you and I and other very successful capitalists have got to accept the system as it is today is broken for the average person. Young people feel completely alienated. They're not even engaging. They're not even seeking romantic partners.
Like it's just a level of apathy that is utterly terrifying. And so you have the split in these camps. They're doubling down. The economy isn't working in the way that it should because of the debt, way overspending, money printing is a problem.
It's not the free market. The free market, in my estimation, is not the issue. But we have an economy that we call capitalism that is leaving a lot of people out in the cold. And because of the manipulations, it is so complicated that the average person who is steering by emotions is not going to be able to identify how the magic trick is even being done.
So they can just tell something is wrong. Fuck you guys. Burn it down. Whatever normal is.
Gotta go. And so I'm going to go with Harris. And if she's saying that she's going to stop you from gouging me, which is clearly happening because of what I see at the pump, what I see in the grocery stores, then great. I'm here for that.
That is what's going to happen. And so if she wins or loses, or Trump wins or loses, I think it will be by a razor thin margin because the country is effectively split now. Well, I think if Harris wins, it's the votes that are going to put her over the top are the immigrants, particularly the illegals that are here that are able to vote. Because remember, Donald Trump is promising to deport the illegal immigrants.
And Harris wants to, you know, not only give asylum, but, you know, give them all kinds of freebies. So if you're an illegal alien and you're in this country, you're voting for Harris. Now, of course, you're not even supposed to vote, right? The whole thing is if you're not an American citizen, legally, you can't vote, but they're voting anyway.
So I think that Harris is going to win the overwhelming number of the illegal votes. And so if she wins, that's going to be the only reason. I just can't see an honest election where just American citizens are able to vote. I can't see how Harris wins that election because, you know, Trump is not actually promising to cut any government programs.
He should be, right? That's what we need to do, but he's not promising to cut anything, right? And so he shouldn't be alienating anybody. You know, if he was running an honest campaign, look, we got to cut social security, he may risk losing some votes of people who are getting social security, but he's not, he's not promising that at all.
He's promising to raise social security. He's not saying we're going to cut, you know, Medicare. No, you know, he's talking about, you know, no tax on tips, which is a tax cut for a lot of people. So Trump is not saying vote for me.
I'm going to take away any government benefits. So he's promising more government also. It's just that at least he's different. Everybody now, the economy is so bad.
People are struggling. Everybody is going to vote to throw the bums out. Who are the bums? It's Harris and it's Biden.
And so Biden's taking himself out of the game, but Harris is still there. They got to throw her out. She's got to be fired. And so the electorate is going to get rid of Harris if it's a fair election, if it's an honest election.
So the question is, if she doesn't win this, you know, it's because you've had these illegals voting where they somehow rigged the system and, you know, they found some votes, you know, and she was able to win. Because I don't see how she would win given the realities of how bad things are. And a lot of people could just remember what things were like when Trump was president. It wasn't that long ago.
He was president four years ago. Everybody knows things are a lot worse today than they were four years ago. So if it's a litmus test on, are you better off today than you were four years ago? Very few people could say yes.
Most people are going to say, no, I was better off four years ago. And so I'm voting Trump. Right. And so that's what's going on.
That's what should happen, you know, in a fair, honest election. And not that, you know, things are going to get better under Trump. Things are going to get worse regardless of who wins the election. But the voters don't know that.
They're not smart enough to realize. Trump says, I'm going to get rid of inflation on day one. The voters might believe him, even though he can't do it. He's not going to do it with the policies he's proposing.
But it sounds more believable than Harris doing it. How is Harris going to get rid of it? She was there when it happened. I mean, Trump could say, look, when I was president, inflation was one percent, right?
Technically, you know, according to the CPI, right, that's where it was. And so now it's much higher. And so it's easier to hang out on Biden and Harris. So, you know, he should win.
But again, the problem is nobody would win an election. Tell the truth. If Donald Trump says, look, I'm going to solve the problems that we're going to have massive cuts of government spending and people were getting checks from the government, you're going to get smaller checks. I got to cut Social Security.
I got to cut government pensions. I got to cut defense. I don't think you win on that ticket on that. Things have to get really, really bad.
See, Malay in Argentina, he was able to win on that because things have been so bad for so long. The public finally decided that, you know what, let's try that. We've tried everything else. We've tried all these government solutions and none of them have worked.
So maybe let's try capitalism, right? Let's get rid of all this government because it can't get any worse. And let's try it this way. Let's try cutting government instead of expanding government.
And let's try freedom instead of socialism. And, you know, and so they're trying it and hopefully they stick with it because it's going to work. But Americans, we haven't had enough socialism yet to be sick of it. You know, we still don't get it.
We still think the government can solve our problems and don't recognize that all the problems we want the government to solve, the government created. Let's talk about a pattern that is guaranteed to be killing your progress. You know what you need to do. You need consistent nutrition.
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