The whole banking system is completely insolvent and the FED hasn't even raised rates anywhere near high enough to get rid of inflation. We actually need much higher rates than than where the FED stopped. The media keeps saying there's a disconnect between the voters and the economy. No, the disconnect is between the data and the economy.

See, people think governments give them things. Government doesn't have anything. It has to take it first. It has to take it from somebody who produced it to give it to somebody who didn't But in the world of all powerful AI Everybody can have everything and you just put your goggles on and get your stimulus check and you don't need a stimulus check.

Your goggles give you whatever you want, right? The AI is so super intelligent that it's almost like a God Because of Finra, the little guy can't even get professional help. They end up having to do it themselves and they're more likely to get scammed. Mean: I Wish we had no Finra, wish we had no. SEC Eventually there's a collapse.

eventually inflation. Runs Out of Control I've been trying to help people protect themselves from this crisis for a long time. I'm investing to win the game I Don't have to get out of my stocks I own the right stocks I Have the winning hand. Welcome back to another episode of the Meet Kevin show.

Today we have the honor and privilege to once again be at Peter Schiff's home. Peter The last time we were here it's about 10 months ago. Bitcoin has since doubled and we had a big debate with your son about Bitcoin what's going on? Well I guess I should have bought some huh? What's the future? I mean FS Now is. Well, you know my son was trying to get me to invest in uh AI stocks back then I didn't even know what they were.

You know he should have told me Nvidia You know now he's been pushing me to Nvidia for some time. Uh, because he's really into AI now. not so much crypto anymore. He doesn't really talk about that.

Oh really, what happened? Well AI you know he's just. you know, that's his new thing. So what? And so what do you think? What? What's your position been I mean the ETFs Are these the next big thing for Bitcoin Much like uh, when gold had its ETF back in the early 2000s. Yeah, you know that's what the Bitcoin Community is is hoping for or is? you know that's the story they're telling.

But I don't think that's going to happen. I I I Don't think there's this huge penup demand for Bitcoin Bitcoin's been around for a while now and it's certainly been in the spotlight since 2017 when it had the initial big run. but then really? 2020 2021? You know, with all the Uh Super Bowl commercials and you know, just all the hype? Uh, and you know we. They had the Futures ETFs that came out a couple of years ago.

Uh, and a lot of stocks you know like Michael strategy came out coinbase you had you know uh um what's El Salvador Lots of stuff in the news about Crypto, all the the uh, celebrities and influencers that that jumped on the bandwagon. so I think that most of the people that wanted to buy bought I don't think they were just nah I can't buy. We don't have a spot Bitcoin ETF like I'm just waiting for that I don't think there's all this demand I mean they they think it's kind of like the Field of Dreams Well if we build an ETF then all these investors are going to come and they're going to buy it and I think the buying already happened I think it was. you know buy the rumors sell the fact for years.

um the rumor of these ETFs was a a major Catalyst to get people to buy because they wanted to buy before the ETFs so that they would already own it. and then when everybody else came to the party and bought the ETFs you would make a lot of money if you front ran it well I think that that trade was was already done. you know the the gold ETFs the the value. There was a lot of people didn't want to buy the physical gold, didn't want to store it.

they were worried about losing it and when you buy gold you you can't really buy it at the spot price. you have to buy it in some form. You got to buy a coin. You got to buy a bar.

so that adds to the cost. And so the ETFs took away some of that cost because now you're buying into 100 ounce bars which is a lot cheaper than you know coins. but you know you didn't have to worry about storing it. You can buy it very simply in your brokerage account.

So it did make it easier for a certain segment of the market to buy gold. But with Bitcoin anybody who wants Bitcoin can just go buy it. just set up a wallet. I Mean that's what everybody has done.

In fact, the whole point of Bitcoin is not to have a third party. Uh, it's your own Keys You don't have to trust somebody else. You don't have to pay storage fees. The only I think reason it might make sense for somebody to do an ETF is if it's in an IRA And of course they have Bitcoin IAS already.

Uh, but it is easier to buy the ETF than to set up one of these IAS But how much Ira money is really you know wanting to go into Bitcoin that's not already there I think people already bought Bitcoin in their taxable accounts. It's completely inappropriate for an IRA I Mean most of the big firms probably won't allow it. Certainly, they wouldn't allow it to be solicited in an IRA because the broker could get sued. uh, for putting something very speculative like that.

They're making the allocation decision so to speak. or even if they made a recommendation. you know, for cuz an IRA I mean it's supposed to be a retirement money supposed to be more conservative I mean not gambling with it? Uh, so I don't I Don't think there's a big uh case to be made for the ETF It was part of the hype and as you can see, you know, the day the ETF started Bitcoin almost hit 50,000 and it just got below 40,000 briefly a couple days ago. So it sold off and almost all the ETFs.

In fact all the ETFs dropped 20% or more from their Peak price on the day they started trading, which technically fits the Wall Street definition of bare markets. So we already got kind of an immediate sell. The sell, the F sell the news. But I think there's a lot more selling to come.

Even more so you? you don't think that I mean the idea is this institutional allocation might leave Bitcoin becoming this next1 trillion gold-like asset. So in other words, there should be at least a 10 plus X in it. And with the finite Supply Kathy Wood says we're going to 500,000 inner bease scenario: What's your bare case scenario? Well I mean first of all, I mean the idea that the institutions are going to come and be the bag holders here like the the little guy got in years ago and now that we built this ETF You're going to see Pension funds and endowments and you know all the big sophisticated money is now going to buy in to this. Mania right late in the game I I I I just I Don't see that happening I You know I mean could there be some money dumb enough to bite at it? You know, like oh, I'm going to just buy this because it's going up right the fomo? Um, it's possible and I'm sure some money has flowed in, but remember, there's a lot of money coming out, especially grayscale.

I mean people were buying Grayscale when it was at a 40 50% discount to nav to play. The eventual move to ETF which is now happened so and a lot of money is already coming out of a Grayscale and a lot more money is going to come out of grayscale. I Mean even if you want to stay in an ETF why would you stay in Grayscale at 150 basis points when other people are, you know a fraction of that. But you know Grayscale used to be a big buyer of Bitcoin and now they're a seller and it was a one-way street right? Bitcoin Checked in but they never checked out because it was a closed end fund.

That's why it was trading at a discount. Well, it's not going to trade at a discount. anymore because when people sell, they got to sell Bitcoin into the market. So I I think the Dynamics have have flipped I think you're going to have a lot more Sellers and then eventually I think the money that went into these ETFs I Don't believe these are the you know the the the Die Hard hoders even though one of them has the symbol hodal right one.

But but I think this is more trading money I think to the extent that people are going to be in the ETFs it may maybe people who were trading on coinbase which is why I've been saying it's negative for coinbase because I think some of the day trading is going to happen now. um in the ETFs versus uh, directly in you know, crypto exchanges. but I think a lot of the people that are buying now are you know, buying as a trade, buying to make money and if we start to break down Bitcoin um you know, maybe cracks 30,000 or whatever the key is going to be 20,000 I Think you could see a lot of people just getting out. In fact, people could put stops in on these ETFs you know, just Market orders like if it dumps, get me out at the market I Don't know how Bitcoin is going to handle that I Don't know what's going to happen when you get a bunch of sell orders that hit the market And one of the things that's happened in the past when you had a lot of sell orders with Bitcoin is all of a sudden there'd be more tether tether would just come out of thin air and buy up all that Bitcoin right? Well, if they're just counterfeiting tethers and they can expand a supply of tethers and kind of use it as a like a plunge protection and and and buy Bitcoin but if people start dumping um, the ETFs you can't There's no tether.

The ETFs need dollars When people redeem, the sellers need to get dollars. they can't take tether. So all of a sudden you could have a lot of Bitcoin dumping on the market and only actual dollars would be able to buy. So you think the ETF is a net negative for for Bitcoin I think it's going to be I Think the potential of the ETFs was the positive that was the Catalyst.

Hey, you got to buy it because the ETFs are coming. You got to get in before the ETFs because once the ETFs are here, you're going to have all this new buying. That's just like been sitting on the sidelines for years and it never made sense to me because first of all, there were Futures ETFs which pretty much the same thing I mean same exposure. There were lots of stocks that were Bitcoin proxies like micro strategy like coinbase like some of these other stock Michael Sailor's Company right? I mean it was essentially at one point I think he even called his company an ETF I mean obviously it's not.

No one even knows what software they do I mean who cares? You know you're not buy. You're not buying micro strategy because you like their software business right? All those guys have sold it. Anybody who is in micro strategy because they they like the company, they're gone. It's all you know Crypto people that are in it now, right? Um, plus there are and have been spot Bitcoin ETFs in Europe in Canada The institutions are not limited.

If you're managing money for a big institution, there's nothing that stops you from trading in Europe nothing that stops you from trading in Canada So if you wanted to buy a Bitcoin spot, ETF they were there. It's not like yeah, you know. So I think that now that you've got these there and there's 11 12 of them. Whatever.

All right, that's it. So now what now? what are you going to do? What's the next big thing that is going to happen that's going to sucker in more buers to keep the the Ponzi going. Um, that's it. I Think this.

This is the end of it. There's nothing left up your sleeve in Crypto now that you've got the ETFs and what I do think is going to happen and people are missing the point you know Gary Gansler did not want these ETFs but he kind of got backed into a legal corner but you know before they came out he was warning hey, this is risky, you know, don't buy I think they're getting ready to come out with some more regulation on crypto and Bitcoin not just from the SEC but the B Administration uh, you know, AML Kyc kind of stuff that's going to significantly increase the cost of trading in crypto. but I Also think they're going to issue some warnings to the broker dealer Community the Invest advisor Community like hey, we don't want you recommending this stuff and if you do recommend it and your customer loses and they take you to arbitration, you are going to lose. Wow so it's going to be like and I know how the arbitration and you're I got out of Fina I I've never liked this about this heads eye win tails, you lose mentality but it encourages uh customers to gamble knowing that they can get their money back if they lose.

And in fact one of the reasons that Wall Street a lot of the big firms won't take small investors, right? You try to open up an account for $10,000 $225,000 at Maril Lynch right? You know? Uh, Morgan Stanley they they won't let you take, open the account, they won't take you. And the reason is they say those small accounts come with a free put and what that means is if the investor loses money, you have to give it back because they'll file an arbitration. There's all these lawyers that'll take it on contingency and it costs you 50 100 grand every time someone sues you even if you win. So if a guy opens up a $10,000 account and loses it and sues you for the 10 grand, what are you going to do? Fight them? No, you write them a check so they just they won't take the accounts because they know it's like a casino where you're betting with the House's money.

But that you know. one of my big critic criticisms of of Finra, you know, cu the whole idea Finn was like oh, we want to, We want to help the little guy who's not sophisticated. he's going to get ripped off by these. you know, brokerage firms? Well, Thra has made it so expensive to be a broker dealer and to service the small customer that nobody will even work with them.

So because of Finra the little guy can't even get professional help. They end up having to do it themselves. you know, self-directed and they're more likely to get scammed. They're more likely to fall victim to fraudsters because the legitimate firms refuse to work with them.

because yeah, because of the because of the government, more people get ripped off. I mean I wish we had no Finra, wish we had no SEC You know the SEC and Fina bless Bernie maid off In fact, you know they said hey, you can trust me. Look, the government says I'm I'm okay I got the government's uh Good Housekeeping seal of approval you know I I'd rather have the free market if if broker dealers want to join a club. you know if finer was voluntary I would have been all in favor of it.

but it was like you want to be a stock broker, you you have to be a member. So a lot of folks say that regulation would help be a catalyst towards Bitcoin crypto. You actually think it's completely the opposite. Yeah, you know.

and and it's ironic to see the crypto. Community We need more regulation. We want more government. No, the whole point of it was like we don't want government.

We want to get away from that. But isn't that like an FTX where you have no supervision at all and then you get a collapse. Uh, like like uh, you know? Yeah, well look again. FTX collapsed.

The government didn't do that. The the government didn't do anything about FTX until after it collapsed. You know the Ponzi was the original creator of the Ponzi scheme right? It wasn't It wasn't called Ponzi scheme until after Ponzi pulled it off. but there was no SEC There was no Finra when Ponzi was around his collapsed.

In less than a year, the free Market figured him out and and collapsed it. Bernie Midol pulled off his Ponzi scheme for a lot longer, right under the the nose of the SEC and and Finra. So the Free Market does a much better job of fiing out frauders than the government. The government actually comes in and then cozies up with the criminals you know and ends up helping perpetuate their their crimes because the industry captures The Regulators and then ends up using The Regulators to stifle competition which is what happened.

I mean the reason I initially sold my broker dealer that I started in the mid 90s was it was too expensive to continue it. I was spending millions and millions of dollars a year on compliance. and when I first started, compliance was a fraction of the cost. So I started my own broker dealer.

but could a young Peter Schiff start a broker dealer today? No way. impossible. So there are a lot fewer broker dealers, they've gone out of business, they've merged because they can't handle the regulation. I mean my bank before the government, you know, conspired with the media to shut it down.

you know? And ironically, I a media falsely accused me of using my bank to help people launder money and vade taxes. I spent millions of dollars a year making sure that nobody used my bank. That was the biggest cost. I had 65 employees of my bank.

30 of them worked in compliance. Wow! 30 I had one person in marketing one. So one person to get business 30 people to to shut it down right to prevent business from happening. We turn down um like 75% of the account applications and and we screened them.

Most people wouldn't even apply because we had such a a rigorous process. We said if you're doing this, you're doing this. don't even bother applying you know So we we we screened out who could apply and then we turned down 75% I mean what business wants to turn down 75% of its customers It's like but we did it um but yeah so I don't even have have that bank anymore you know I I sued the media in Australia for defamation in one uh but you know it doesn't come close to uh, recouping my losses I'm I'm filing more lawsuits over there I didn't sue the New York Times but the guy that wrote the article I don't know if it was defamation but they he definitely lied. he miss represented the facts in the article and and in because the the media wanted to create the false impression that my bank had lack a customer vetting or compliance when we actually had a stronger customer vetting than just about any.

Bank In fact one of the guys that the uh, the only guy that the the New York Times Reporter Matthew Goldstein cited as evidence that my bank had lacks compliance I just dug up a YouTube video from 2018 where he's actually talking about the very account that he opened at my bank that he never used. He only put in 425 and never even used the account. So it's not like you know he has any experience really. but it took over three weeks to get his account open.

but the guy was talking and I tweeted this out or not I posted it on X but I he he says you know I opened up the account and my God they asked me so many questions I wasn't expecting it, it was very rigorous. They needed all this information. they needed all these forms. They asked so many questions about the account about the the company.

He said it's a lot harder to open a bank account there than it was in the UK where it takes one day and you just give them like 12 pounds. I mean he even admitted in fact everybody that the reporters in Australia and New York interviewed about my bank all the former customers, former employees, referral agents everybody said oh my God their their compliance was like over the top I've never seen anything like it. I mean the main reason we lost accounts was because they couldn't handle the compliance because every time you wanted to send money out we we put you through the ringer. So as an entrepreneur, why why go into banking in the first place? A broker dealer? you know you shouldn't I learned that I mean I'll never do it again.

but you know I I saw a niche that I wanted to fill I me I was a 100% Reserve Bank didn't make any loans my bank was. you know no customers were at risk. All these Banks now are in solvant in the US because they they loaned out money for 30 years, they bought mortgages and government bonds I didn't do any of that I probably had the most solvent Bank in the country and of course when they shut it down The Regulators claimed they were doing so because it was insolvent even though I had no debt and millions more in cash than than my deposits. And you know when the the false allegations came out in the media in the New York Times and in Australia my bank at the time had about 270 million in deposits.

by the time they shut it down in June of 2022, there was only about 70 million left. So 7 34 of my deposits got withdrawn. because of all the problems that the media created, we sent them the money. How what bank could handle a 75% run right? Apparently none of them in March of 2023 when we had a banking crisis? Well, none of them can handle it now.

I mean they only. they don't even keep. they only keep a couple of percent. it's fractional.

Reserve So I was able to send back all the money. but then the government took over the bank. They've been in control for 19 18 months and since they took over, not a single dime has been returned. That's F receivership.

No, not. FDIC We didn't have any. FDIC Insurance The local Puerto Rican government took it over. Oh wow.

But the IRS I think is the reason that they closed it. They came down here because they wanted to send a message to the world that Puerto Rico wasn't going to tolerate money laundering or tax evasion because my bank got investigated by the US government for two years. They they they. They took hundreds of thousands of documents for thousands of accounts and they found nothing they found.

Not only did they find that the bank did nothing wrong, they've investigated thousands of customers and they haven't found a single customer that did anything wrong anywhere in the world yet. They made my bank was the target of the largest money laundering tax evasion investigation in the history of the world. Five governments investigated my tiny little bank. They probably spent more money investigating my bank than anybody else.

I Mean one of part of the irony of it is you know we mentioned FTX Sam Bankman Freed was running his giant fraud out of the Bahamas that's not too far from Puerto Rico right? They didn't do anything to him. They were spending all their time investigating me. Well, he was donating to everyone. Yeah, well, he was.

yeah I didn't give any money to any Democrats and he was out there. virtue signaling he was talking about how he didn't want any money for himself. He was just like I just have this one pair of tennis shoes and a T-shirt and I live with 14 roommates and here's my beat up old car right? like. Meanwhile, behind the scenes is like lifestyles of the Richard famous, right? But you know I'm honest about you know what I'm doing.

So are we going to have another banking crisis? I mean you've got a unique Insight Here you were in banking and I'm sure I mean the banking crisis happened within a month of the last time we were here. We had the bank term funding program that's coming to an end here on March 11 so they right right? We'll see I think that needs to be followed up by a rate cut right away to hopefully, uh, prop up, uh, some of those bonds again. otherwise we'll walk into another banking. What do you think they're probably going to go back to QE You think so? Look in March of last year we would have had a worse financial crisis than 2008 had the FED not stepped up.

Now that doesn't mean they did the right thing. They did the wrong thing. They They should have allowed the crisis because a worse crisis is going to result from the delay and and what another worse crisis is ahead of us. 2008 Yes And worse than what March would have been last year had we had it in March of last year, right? They they always kicked a can down the road because they'd rather have a problem tomorrow, even if it's a bigger problem tomorrow than a smaller problem today because then it's somebody else's problem, right? Uh, but I think the banking system is completely insolvent in the United States I Think it is much in much worse shape than it was in 2008 when it collapsed and usually people will say well, yeah, there's problems, but it's not not like 2008.

But they think it's not like 2008 because it's not as bad. It's actually not like 2008 because it's much worse, you know? So there there there. there's two big real estate problems or problems the bank has in 2008. The problem was mortgage loans that went into default.

people stopped paying their mortgage and the reason this was a problem for the banks is because when somebody doesn't pay their mortgage, well, you got to sell the house. that's the collateral for the loan. But if you remember back then, people were making zero down loans. Um, and so they didn't have much and real estate prices went down.

So I Loan somebody 500 Grand to buy a house. Um, now the house is worth 300 Grand The fact that that's happened in and of itself is an incentive for the borrower not to pay, of course, walk away. Yeah, and especially if they had a teaser rate on their mortgage. So their mortgage started out and the guy was paying maybe 2,000 a month, but now he's paying 3,000 a month.

but he only makes you know 2,000 a whatever he was, he was paying a lot of money for his mortgage because he thought he was going to get rich owning a house. When it turns out that he went broke, he's not going to make that payment. Why? Why? Why? why make payments when you're so underwater? That sounds worse than it is today where you've got people locked in at 2 and a half% mortgages 30-year No, it's not worse. it's it's worse for the borrower.

Although the borrower just walked away. if they put it down payment, they lost it in 2008, they just walked. But you know you could go and rent a place or do something else. So the problem was when the loan defaulted, the bank lost.

and you know when I was a CR critical of the Um, you know, adjustable rate mortgages and nothing down and things like that. I Never criticized it from the point of the borrower. I Always said the borrow was smart to put nothing down because then you got nothing to lose. I Mean if somebody is dumb enough to let you freeroll right? Putting A down payment was the mistake that the problem with a zero down or low down no dock arms was the lender.

The lender was giving somebody you know a free BET on real estate. Hey I'm buy this real estate if heads I Win tails. The bank loses. Well, it was tails.

The banks lost and and so they lost money. And you know a lot of banks should have failed. And unfortunately they got bailed out by by the government. But most mortgages did not default.

It was still a small percentage, but that was enough to wipe out the bank. Capital Because they didn't have a lot of capital, it was big pyramid. Well today it's the opposite problem. The problem isn't the mortgages that default, it's the ones that are current that keep paying.

Because this time real estate prices haven't crashed, the mortgage prices have crashed. H So the bond market essentially has crashed. So the the the homeowner doesn't own the mortgage, he owes the mortgage, he owns the asset, The bank owns the mortgage, The mortgage has crashed. So if I loan somebody $500,000 at 3% and they don't have to pay me back for 30 years, what's the present value of that mortgage? Oh, maybe you know, 30 40% half.

So the banks are underwater. not on the real estate, but on the mortgages. Now the borrowers. they're going to pay.

They're not going to stop paying on these, Sweetheart. Deals They got 3% right? They're going to, They're going to. They're going to take that mortgage to the grave. And um, it's the only thing that's not going up right.

Everything. The price is if everything is going up except your mortgage, right? So it's the. The mortgage is the homeowner's biggest asset. It's the bank's biggest liability.

So the banks are losing money on every mortgage and the homeowners aren't going anywhere. Um, and they they. even if they wanted to, they can't. They can't sell because they can't buy anything else because they can't get that mortgage.

The mortgage is ortable. They can't take the mortgage from one house and move it to another house. and the buyer of their house can't even assume that mortgage. So they're stuck there, right? So the real estate Market's not moving houses aren't for sale, so home prices are still high.

No one could afford to buy because the price is structured for 3% mortgages and they're 7% So the housing market is dead. But so, the banks have lost a ton of money. But it's not just mortgages they bought. They bought treasuries and things like that so they're way underwater.

That's why the banks can't afford to pay interest. Go to your bank and say, hey, how much interest can I get Well I can't get anything Oh then I want my money I'm taking my money out of your bank I'm going to put it in a money market where I can get 5% right? That's the crowding out. Everybody's loaning money to the government. the banks don't have any money.

That's why the banks had to go to the FED. Why did the banks need money? Because the Depo depositors wanted their money and the banks didn't have it. Well they still don't have it because they gave it to the customers. How are they going to repay these loans in March All Any that's why I think they're going to extend this program so you think uh, this, uh this the only way essentially the Ponzi keeps going is If the Fed extends the bank term funding program and if they don't and they call these $160 billion of loans due will have banking crisis 2.0 What does that do for the consumer Exactly exactly and but also depositors.

If the if the FED doesn't extend this, that's going to create a bigger run on the banks because you're going to have to take your money out of a bank if you're worried it's going to fail because the FDIC only goes to what 100 250,000 Now what is it You know. So if you've got a lot of money to bank, you're not going to leave it there. you're going to take it out and put it in one of the two big to fail Banks. So any bank that's not too big to fail is going to fail.

That's another example of where the government comes in and and distorts the market because they give a comparative advantage to the bigger Banks Uh. But the other thing I Wanted to point out about why the banks are insolvent, particularly a lot of the regional Banks It's not just a Residential Mortgage book, it's commercial and Commercial is a different problem. Commercial is more like 2008 where it's the default problem and the collapse of commercial real estate values because when people bought a lot of this commercial real estate, interest rates are at zero and Commercial Real Estate is like a bond. It trades at a cap rate and the lower interest rates are the more commercial real estate is worth.

Because what investors just do is they look at the income right and they compare it well. I can buy this piece of property and collect rent or I can buy this Bond and and clip coupons so it's you know it's the interest rate determines the value of the commercial real estate. So when interest rates were at zero um and and you had rental streams from property, commercial property prices went way up. And that was also helpful because in 2008 when the banks were losing money on on their uh, residential loans, they weren't losing any money on their commercial loans because commercial real estate went up and everybody paid.

But now what's happened? Well, you had Covid and that started the work from home craze. so a lot of office space is empty. You also had the bankruptcy of um, what's that company? um the the banks. Sorry no no, no.

the the company that that rented out all this office space. Oh We work again for the second time we work. Yeah so now you have all this. we work space right? We work didn't That was my joke.

Always always about it. But uh, but now you have all that space on the market, right? They were some of the biggest tenants in the major major markets in the country. Uh, that space is up for up for sale. Interest rates have risen a lot.

so that's also brought down real estate. But the rents have collapsed because the properties are offices are vacant. Then you also have, uh, shopping centers. malls that are half empty.

Why? Well not only are people working from home, they're shopping from home. Uh, and they're shopping less because they're spending all their money on food on, on rent on utilities, on a healthcare. they don't have as much money left over for. You know, things that you know, restaurants or or you know or or or stores.

You know that they would just go and and buy buy things that they don't really need, just stuff that they you know they like liked. So you have all these vacancies that have collapsed the income. So commercial real estate prices. You look at most markets, they're down 30% 40% 50% and in some cities you know where the crime has exploded ever since.

Uh, you know we had the Black Lives Matter protest with um um uh uh chovin and George Floyd and all that stuff. When you know all the police just stopped enforcing the laws and they stopped lock lock up. The shoplifters, um, insurance rates have gone through the roof losses due to theft. so stores are shutting down and a lot of uh uh employers don't even want their workers coming to work.

They're afraid. So what do you think? How does this manifest like? well this? So this: This: These are huge losses for the banks because the owners of this commercial real estate when you borrowed, let's say you borrowed $200 million from a bank to buy a piece of property and and that property is now worth $100 million and your loan was 7 years and now it comes due And when you borrowed the money you were paying, you know, 4% and now they want 10. I Mean what's the odds that you're going to, you know, even want to stay in. No, you're going to mail in the keys, You're going to give the bank back the building better give them a $100 million building than a $200 million cash.

So the banks are looking at massive losses on their commercial real estate. At the same time, they have massive losses on all their Residential Mortgages and and government bonds. So the whole banking system is completely insolvent and the FED hasn't even raised rates anywhere near high enough to get rid of inflation. We we actually need much higher rates than than where the FED stopped.

And not only do we need the FED to tighten more oh, I forgot, I had my phone. It's all right. Turn that off. So how let me finish this? But not only not only do we need the FED, not only do we need the FED to tighten more, we need the government to tighten because you need contractionary fiscal policy as well as monetary policy, right? You can't have one without the other, because the engine of inflation is the government spending more than it collects in taxes.

Because you're you're you're putting artificial into the economy. now. It's worse when it's monetized by the FED when the FED is printing the money to buy the bonds that facilitates this extra spending. But budget deficits are still 2 trillion plus per year.

That's stimulative policy. And also, look at the credit markets. Consumer Debt is at an all-time record high. Credit card debt is at an all-time record high household debt.

The savings rate continues to plunge every everybody keeps spending. Well, that's the fuel for the inflation. What the FED needs to do to put this inflation Genie that it let out of the bottle on purpose, right? It's not like this happened out of left field. Not only do they have to contract a money supply which is growing again rather rapidly, but they have to contract credit.

and they have to change uh, people's behavior. They have to increase savings and reduce consumption and spending. That's how you fight inflation, but we haven't done that at all. And if you go back to the very definition of inflation, which is an expansion of the supply of money, it also includes credit.

Inflation is an expansion of the supply of money and the supply of credit. So credit expansion is inflationary and we've had credit expanding the entire time that the Fed was fighting inflation. Which means the fight has been inadequate. Now, why is inflation come down the way they measure it? It was 9% Now it's 3% Well again, nothing goes in a straight line, right? So maybe it goes nine, then it goes three and the next move is 12.

right? It's just in a wave up. The trend is is higher, right? You'd want to buy the dip in inflation right if you're looking at that. But the main reason inflation came down was the market anticipated all the rate hikes and that strengthened the dollar. The dollar Index Rose about 30% and uh, in that environment brought down oil prices, commodity prices, and the strong dollar put a l on import prices so that helped.

We also had a small contraction in the money supply after a major expansion, but through QT, then eh, quantitative tightening? yeah, which is now pretty much ending. The Fed's rate hikes are over. So now the markets are starting to look at the Great Cuts which is going to weaken the dollar. So ironically, the FED says Hey We've won our inflation fight.

We can cut rates by indicating that inflation is going to come roaring back because that brings down the the dollar right. It's actually loosening the financial conditions. But I think the dollar is turning I think it's top. It's getting ready to fall.

Commodities have bottomed oil is bottomed? Uh, we're going to start to see a a big move up and the FED is in a box now because it's promised the market rate cuts, it. can't you know, pull the rug out from under it. But when inflation really surprises, the thing that's going to be a big problem is we're going to be in a recession. Fact, We're probably in a recession right now.

now. You know that I Know the economic data Doesn't say that. You know we just got this. You know, big GDP number, right? 3.3% Unemployment is really low.

But they were saying the same thing in the summer of 2008. They were saying we're not going to have a recession even though they were in one. It's just that the government data didn't recognize the Great Recession that started in December of 2007. They didn't recognize it until December of 2008.

So the government in December of 2008 came out and said, you know what, All the economic data we released for the last year was wrong. All the good data was actually bad data. We've been in a recession the whole time and they went and revised down everything so they could just as easily do the same thing. Now they could come back and say, you know what, You know, all those good numbers that we gave you.

all those jobs that we said were created. They actually weren't created. We actually lost millions of jobs. And you know all that economic growth that we said was there.

Actually, we we were in recession the whole time. They could easily come back and do that. and I think it's it's likely that they will. And I think that the reason that Joe Biden is so unpopular I mean it's unprecedented.

How unpopular. But nobody has ever been less popular. And the same thing with KLA Harris she's the most unpopular vice President ever. Why what does she do? I mean I I Don't know.

I Could you name anything she stands for Anything she's done that would would justify this degree of unpopularity. I Think it's just the voters taking out their frustration on how bad the economy is. The economy stinks and the American electorate tends to either blame or credit. So if the economy is bad, the White House gets credit.

I Mean if the economy is good, the White House gets credit. If the economy is bad, they get to blame whether it's their fault or not. The voters are just going to vote their pocketbooks. Remember Henry Uh Carville It's the economy Stupid.

Well, if you want to know why Biden is so unpopular, it's the economy stupid, right? So the econom is bad. So the media keeps saying there's a disconnect between the the voters and the economy. No, the disconnect is between the data and the economy. The voters have got it right.

The economy is awful. Wow. So why not keep uh or potentially as the fed? the the Ponzi going so to speak. If The Fed starts lowering rates or at least signaling that rates come down now.

Losses at Banks start evaporating, Start reducing the cost of borrowing. Maybe start reducing some of those credit defaults which you mentioned debt and and delinquencies are higher now than where they were before Covid. So it does seem like there's some unsustainability with the spending. Even just this morning, we saw once again Lower inflation and Pce numbers yet? uh, higher spending.

So it seems like the FED should be in this position of cutting. Is it just your position that that will create substantial inflation again? Or uh, can we? uh, can we bail out the banks that way? And remember that spending was financed in large part by a depletion of savings which are already low. So it's more debt, it's more credit. But there's a reason that Ponzi schemes are illegal.

and and and that's because they can't continue indefinitely. They always fall apart. so there's always people holding the bag that end up losing money. Uh, and so no, they can't keep the Ponzi going indefinitely because it's a Ponzi by definition.

Now, Governments can generally get away with it a lot longer than you and I could. Uh, because they they protect themselves. They kind of write the rules, but they can't, you know, suspend the rules indefinitely. Uh, and and the reason I think they can't really get away with it anymore is the way they've gotten away with it in the past is by creating inflation.

That's how they they do it right. Quantitative Easing is inflation. By definition. it's just a better name.

It's a Euphan. ISM Because if the government said our policy is to create inflation, people would, well, I don't like that I don't like inflation that makes prices go up. So if they just call it quantitative easing, they don't get a lot of enemies. Although in Europe they were even more abrupt.

They kept saying you know or even here, we need more inflation. You know that was they actually told us that they said the problem is, we don't have enough inflation like we have a lot of problems That was not one of them. Lack of inflation is not your problem, but the government said it was and they had to solve it by creating more inflation. So that's what they did.

Every time we had a problem, they created inflation to solve it But they've created so much inflation at this point that inflation is now the biggest problem. And how do you solve the inflation problem with more inflation? You don't. So when we get the next economic downturn, when it's going to happen in an environment where you still have high inflation, right? it's not going to be 2% or any you know, close to it. Now let's you know.

inflation is. Let's say four 5% Whatever it is, and unemployment really spikes, the banks start to fail and they print a bunch more money. and now you take that inflation rate and send it right into the double digits. That's it.

I Mean you're the dollar crashes. I mean the bonds crash. You know, cuz the bond market. Remember, you look at that chart of the bond market all the time.

The FED has been doing these policies. We've been in this secular bull market for bonds which started in 1980 81 and ended in 2020. So you had a 40-year bull market in bonds which is now the beginning of a bare Market Which, who knows how long it's going to last. It's going to be brutal.

It's going to be around for a long time. So now if the FED is going to try QE in a bond bear I don't think it's going to work. I Think the next time the FED prints money to buy bonds, bonds are going to go down and not. And of course, what are really going to go down are not just treasuries, but the bonds that the FED is not buying because treasury buying of.

You know, the FED buying of treasuries will will offset some of the decline. It should pump up prices, right? But but they're not going to buy all the treasury so other people would be selling. But what about the Mun bonds? Who's going to buy them? What about corporate bonds? You know, as you know, rates are going to Surge across the Spectrum but nobody could afford to pay. I Mean just look at the national debt.

This is where it's It screams at you. The national debt is 34 trillion. It's growing by a trillion a quarter in calendar 2024. Something like 12 trillion of that shes has to be rolled over.

In addition to the 4 trillion of new bar that's 16 trillion. Who's going to buy that right now? The FED is selling. Fed's adding to the problem. You know who else is selling Social Security They were one of the biggest buyers of treasuries during that bull market.

They're now one of the biggest sellers because Social Security Because so many people have dropped out of the labor force or retired, Social Security doesn't collect enough money in payroll tax taxes to cover the cost of the benefits of the people who are already retired. Not to mention the ones who are going to retire next week or next month. So they're selling treasuries. The other big buyer of treasuries were foreigners.

Japan China You know they're not buying I Mean that they're selling too. Uh, so this is a huge problem there. a It's a huge bond market. B You think there'll be a lack of buyers and as they return to QE and increase the supply substantially of bonds, there won't be enough Bond Buyers there already isn't enough Bond Buyers That's why.

Skyrocket Again, that's why they're going to go back to QE And again, the other point: Interest on the national debt is about now the same as National Defense A year ago, it was nothing. It was two or 300 billion a year. Now it's almost a trillion in another year or two interest on the national debt. If interest rates just stay where they are right, don't go higher which they could do, they just stay where they are.

Interest will be more than Social Security or Medicare. It'll be the single biggest expense in a couple of years. About 50% of every dollar the US government collects in taxes income taxes. Social Security Taxes 50 cents of every dollar will be needed just to pay the interest on the debt, not pay back any of the debt.

just the interest on the debt. And before the end of this decade, assuming that we can get there without a crisis which I I don't think is possible, do you think it's imminent? Oh yeah, well, it's it's been imminent for a while. But before the end of the decade which is not that far away, 100% of government tax revenues will be for interest on the dead. Now obviously that circumstances can't exist.

You can't have a government that simply transfers money to bond holders and has nothing left over for anything else. I'm not talking about I Mean not even to pay the salaries of the the people that that that clean the toilets in the capital I Mean nothing. No money for anything except interest on the debt. So this is how much this thing is ballooned out of proportion.

You know, even? Janet Yellen You know, a year ago or a year and a half ago when she was asked if she was worried about the $30 trillion debt, she said no. The debt didn't matter as long as the interest payments were low. That's what she said. I Remember at the time saying well, doesn't she realize that those interest payments aren't fixed? The FED is going to be raising rates.

you know? I'm only worried about it when interest rates go up. Well, then you should worry about it now because interest rates are going to go up. But this is why the FED is going to stop cutting rates. It's not because it's one, it's battle against inflation.

It's lost. It's going to surrender. It's cutting rates because nobody can afford to pay. It's going to cut rates to prevent default insolvency, right? But that's going to lead to Runaway inflation.

Could your Sun be right where artificial intelligence expands GDP So much that that our debt just doesn't matter anymore And everything's great. And there's no recession? What? What are the odds of us being able to escape massive pain And you mentioned it yourself. Layoffs and unemployment which is obviously a lagging indicator? Yeah, I mean obviously I mean my son thinks the odds are High um I don't know why he's he's that confident. but I think the odds are very low I mean look, obviously if if AI you know leads to such an enormous uh increase in productivity I mean in theory, right? if I everybody can have their own a AI that was so super intelligent that it can conjure up anything you need almost like you remember Barbara Eden from I dream e genie, right? Whatever.

Tony Nelson wanted. She just blinked and he could have it right. Well, if AI could do that. Oh I'd like a brand new car and the AI just creates it from the molecules in the air.

You know it creates your food. it. it gives you everything you need and you don't nobody have? Well, sure no one. No one needs anything.

I Mean we don't need money, right? The problem isn't money. It's stuff. We need things right. We need food, We need shelter, We need clothing, We need entertainment.

Um, um, you know there are a lot of things that we need and we can't have them unless we produce them right. We don't have to produce them ourselves. Somebody has to produce them. and we have to do something of value to exchange with the productive people so that we can have things.

But if nobody needed to work, if we could, if we could just have all the things without having to do the work, well, then the problems are over. right? We? We don't need anything. Uh, and then it doesn't matter about you know any of this right? You just put your goggles on and get your stimulus check. And you don't need a stimulus check.

You, You know, your goggles give you whatever you want, right? you? The AI is so super intelligent that it's almost like a god. It has harnessed the the powers of the universe. The force, right? I Mean this is like the ultimate where it can just give you what you want. You don't have to work to earn something.

And of course government. See people think governments give them things. Government doesn't have anything. It has to take it first.

It has to take it from somebody who produced it to give it to somebody who didn't But in the world of you know, all powerful AI Everybody can have everything you know because you're every AI So obviously you know we're not going to be there. But to the extent that look if if if a if a factory can you know get rid of a 100 workers and replace it with you know an AI chip or whatever it's a computer chip an Elon robot um then you know we. You know production productivity goes up. You know if if if we could have a much more efficient Health Care system because all the doctors are robots and they diagnose you immediately or they they figure out a cure so you don't even need an operation.

They're so super smart that they just here take this pill. It'll cure everything that you have right? All our health care costs go down. You know I mean so yes I mean you could say that we could get a get out of jail free card from this productivity. Miracle Um, but look you know I Think that there is a lot of potential in Ai and it may take many more years or decades for it to fully, uh, develop.

And in the meantime, you know to the extent that AI does, uh, eliminate, uh, the need for workers. the way governments are set up today, those workers just might immediately start getting government money. It's not like they're going to do something else that's valuable. they're just going to start collecting government money.

uh and that's more inflation. And also you know the these programs like Social Security and Medicare they depend on people working for a paycheck. If I replace my workers with a robot, there's no more FICA right? Because you know. And so the government loses a lot of that tax revenue.

And if they start spending money because they're they're giving everybody like a stimulus check because they no longer have a job. So in the short run, there could be a a a negative to the AI not because of capitalism, but because of government because of because of socialism. Um, but you know the other thing is that AI is not just in the America. it's all over the world and you know to the extent that the world is a lot better off then you know that could be a negative for the Us because we kind of depend on everybody else being in trouble because they buy the dollar like as as a safe haven.

People are worried about Europe they're worried about Japan and when they they buy the dollar. So we're the best of the worst so to speak. So people buy the doar perception of that right? So if things get better hey, they don't need they don't need it. But also you know America is uniquely vulnerable because of the Dollar's status.

I Mean we? It's like you know you live by the sword, you die by the sword. I Mean the dollar status is the source of our standard of living, right? So right now we we benefit from the doar being the reserve currency because we don't have to work as hard as everybody else. We don't have to produce because we could print money instead, and we can exchange that money with for the stuff everybody else produces because everybody wants our dollars because they're the reserve currency, not because you could do anything with them. Um, you know we have huge trade deficits.

you know, trillion dollars a year. so the source of our strength is actually going to be our undoing. Uh, because once we lose that privilege, the whole economy collapses because we've built it on the foundation of that privilege. Being there, we have this service sector economy right where everybody is in the service sector.

Well, that's only possible because we don't have to manufacture as much because we can rely on China or other countries to manufacture for us because they need our paper money. But if they don't need it anymore because the dollar has been demonetized as a reserve currency because we've created too many of them, we've created too much inflation because we have too much debt. Now we can't import anymore without exporting. and so now the economy doesn't work.

I Mean imagine a Walmart with no with no nothing on the shelves. I Mean so all those workers at the store are going to lose their jobs if there's nothing to buy, right? Those jobs are predicated on their being stuff on the shelves and and a lot of the service sector economy is is predicated on you already having stuff you know that you bought. But if you don't have the manufacturing, if you don't have the actual Goods then you can't afford the services and the whole thing is going to just implode. So the economies on the verg collapse, the dollar crashes.

I Guess Two things to ask is what can I as an individual do to protect myself? And then beyond that Beyond just me covering my ass. Like what can we as a society do to kind of remove ourselves from this centralized government and this impending doom? Yeah, well. I've been trying to help people protect themselves from this crisis for a long time. And because we haven't had the crisis, people think, well, shift's wrong, right? he's preparing for.

you know, this crisis that's never going to happen. No, I'm preparing for a crisis that is going to happen. It's just happening later. Um, but all of the the things that make the crisis inevitable.

All those problems not only still exist, but they're They're bigger. So the crisis looms even larger than it did a decade ago. You know? Um, we've just blown a bigger bubble. But while we've you know, kicked a can down the road.

All these problems have gotten so much worse. And so what this means is that we have the crisis. It's going to be much deeper because we've dug ourselves into a bigger hole. Now again, maybe AI could soften the blow.

You know anything that that that the Free Market could do uh to counteract the damage that government does I Mean that's basically the dance that we do. Capitalism is a positive. Force For good? Uh, the free market which is constantly finding ways to increase abundance. Uh, make things better, make things cheaper, increase living standards.

And then you have governments that are working at the exact opposite purp purpose. They're trying to undermine productivity, they're trying to add unnecessary burdens and regulations and red type. They're trying to counteract the benevolent forces of the free market that want to allocate resources and labor to their highest and best use. Politicians want to allocate them to their friends.

Sure, whoever's going to give them the the most donations. So FTX Yeah, so government government is acting and then you have the free Market that is trying to lower prices and the government that creates inflation to push them up. Uh, you know. So whatever the government the the Free Market can do to undo the damage of government.

But you can only imagine the world that we would live in today if Government had stayed at the same size it was in 1900. you know? had we never had an income tax, Have we never had a social security? Have we never had a Federal Reserve Had the government stayed the same size it was in 1900 which was less than 5% of our GDP Had we had no government borrowing right? Imagine imagine the world that we would live in would even recogn I Mean would we have less control of domestic policies? Uh International policies. Uh, you know the idea of government is they're here to protect us. Peter Who would protect us if the government wasn't as massively large as it is like I said with my bank, you know every customer could have taken out all their money and then the government came in to protect them and now no one gets any money for almost two years.

no one's gotten their money now that they have government protection. When when I was protecting them in the free market, everybody had access to all their money at all the time. but no, what the world would look like look I I think that had the government not get involv gotten involved I think that you know the typical family today. um would have one bread winner most likely the man, but it could be the woman.

but you wouldn't have a husband and wife both having jobs. Uh, people wouldn't be Moonlighting You wouldn't have people with two or three jobs. My guess is by now we'd probably be down to maybe three or four days a week working. so the weekends would probably be maybe four.

four days long. Five days long. Uh, we'd be so much more productive. We'd have a much higher standard of living.

God Knows what inventions we would have come up with. Uh, what drugs we would have come up with. you know, without the FDA you know, uh, you know, screwing all that up I mean we maybe we would have cancer by now. Who knows right where we maybe we would have developed AI a decade two ago I don't know but I know I used to watch The Jetsons when I was a kid.

did you ever see that show? So yeah they The Jetsons came out in the 60s and they just assumed that you know we would just keep expanding the way we were back then you know? um but I think George Jetson worked two days a week. he was complaining about these two-day work weeks are killing me and he was say look at my button pushing I had to push the button four times yesterday like that's all he did right. it was his job. um he worked at this place spacely sprockets, right? They made sprocket so who the hell knows what a sprocket is, right? It's was like a widget.

a sprocket. uh but I think it would be something like that I mean maybe we wouldn't be flying around in you know, the flying cars but we would all be working a lot less. We would have a much higher standard of living uh than we do now you know. and if you look at you know America relative to the rest of the world.

Americans had a standard of living in 1940 1950 that was unrivaled. There was nothing like America we I mean American capitalism created the middle class which didn't exist in Europe I mean Americans used to go to Europe and there was an expression the Ugly American and the reason that we were ugly is because Americans would go there and all of a sudden they'd be rich because everything was so cheap there and so we would act kind of arrogant when we were there. just you know, not on purpose. Um, but you know I mean everybody was rich when they went to Europe because it was, they were poor in comparison to America's middle class.

Uh, but today Americans don't live that much better than the rest of the world. In fact, there are a lot of countries that have higher standard of livings than America. Uh and and the only reason our standard living isn't much lower is because of all this debt. but that just means that in the future it's you know our standard of living is is going to come way down when this bubble bursts and we can't uh, live beyond our means anymore.

Do you think the wealth Gap is just going to widen? or will there be some great reset that gives everybody that opportunity to you know, help reduce the size of government and get back to a normal playing field. Yeah, I mean the wealth Gap I Think is going to continue to widen as a result of the Fed and government policy. Remember, the biggest wealth Gap is in Socialism or Communism, right? You have a few people who work for the government that have all the wealth and everybody else else is in abject poverty, right? And yeah, there are a few people that are connected to the government that that manage to get some get something. Capitalism is the great equalizer.

You know that's what. Uh, Narrows the Gap And it creates a lot of wealth. Now you're going to have some very rich people in capitalism. but they earn it because in capitalism you're rewarded in proportion to your contribution.

The more you benefit Society the more money you earn Because that's what profit is. Profit is the gain that's derived from doing good right. If if you're able to, uh, combine the the resources in the economy that are scarce, right? Everybody, The resources are scarce. So if you're going to use these resources, you need to use them efficiently.

And if you can take these resources and create products and and services that people value more than the resources it took to create them. You get rich because people buy what you have to sell, But a capitalist can't force somebody to buy anything. They have to voluntarily do it. People make a choice.

I Want to own that I Want to buy that because it's going to make my life better. and I'm going to give money to the company that made my life better. So the more money you collect, the more people's lives that you've improved. That's the Invisible Hand of capitalism and that's that's the beauty of