Latest / Words & Numbers / Episode 459: What the Fed?

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Episode 459: What the Fed? · Words & Numbers

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Today on words and numbers, fat people.
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Homelessness in Germany, hate speech and the Fed cuts interest
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rates. All this and more coming up next
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on Words and Numbers, a Civil original production.
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Check us out at civil.com. That's civl.com.
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Hi, I'm James. And I'm Anthony and.
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This is words and numbers. It's new and exciting in your
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world. This weekend I ran.
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Across some data on the homeless population in Germany, that was
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surprising. You know, people always say,
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well, it's so much. Better they didn't have any.
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Exactly. People say it's so much better
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in Europe and they don't have homeless problem and social
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things that we don't have and all this, it's actually quite
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astounding. The homeless population in the
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US is. And of course it's hard to
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measure these things. So I'm going to give the benefit
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of the doubt. And I went to a website whose
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name escapes me, but they actually, they're an advocacy
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group for the homeless. So they would have to overstate
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the numbers. They will overstate the numbers
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they claim. Yeah, they claim 770,000
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homeless in the US. I've seen numbers elsewhere as
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far as far down as 550,000. So the truth is probably
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somewhere in there. I got to say, that sounds
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plausible. Yeah, that seemed plausible to
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me as well. Now people who live in urban
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areas are going to immediately write back and say, Oh no, it's
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way higher than that. And I'll remind all of you of
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the observation bias that if you live in an urban area, you're
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seeing more of the homeless than everybody else.
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And conversely, for those of you in the rural areas, we're going
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to say no, we don't have a homeless problem at all.
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Yeah, you don't, but the people in the urban areas do.
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If it turns out everybody's right.
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Yeah, right. So anyway, the number for the US
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is somewhere between 550,770 thousand.
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Here's where life gets interesting.
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Germany's number is 860,000. No way.
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They have nowhere near our population.
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Ah yeah, and that's, that's Germany's 860,000 homeless out
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of 84,000,000 population. That's a 1% homeless rate 1.
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Percent. Oh my God.
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In the US, it's take the high #770,000 out of 340 million.
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We're .2%. So Germany actually had
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Germany's homelessness. Problem is 5 * 5 hours, yeah.
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Wow. That's shocking, isn't as
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astounding. Now the one of the articles I
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ran across said that the number is being inflated by immigrants
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who are coming in and they don't have jobs and all of this still.
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Homeless. And they're still.
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In Germany, Exactly. Yeah.
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So I I don't know what to say about that.
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But, you know, the homelessness rate is five times what it is
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here, which led me down a rabbit hole of I wanted to know what
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about poverty in Germany versus poverty here and immediately
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tripped over a problem in the US We measure, as I argue it should
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be measured. We measure poverty on an
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absolute scale. That is, we draw a line in the
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sand. And you can argue whether it's
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too high or too low, but we draw a line in the sand.
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And if your income is below that line, you live in poverty.
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If it's above that line, you don't.
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So we'll call that absolute poverty.
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Germany doesn't measure absolute poverty.
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It measures relative poverty, which irks me to no end that the
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concept of relative poverty because because it's going to
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capture, yes indeed, truly, truly poor people, but it's also
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going to capture people who aren't poor at all.
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They just don't have. They aren't as rich as some
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other guy. That's right.
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This is that's a, that's a statistic to to get to envy, not
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to get to answers. Right.
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It's a statistic. If you want to, if you want to
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argue that there's an ongoing systemic problem with
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inequality, you're going to point to relative poverty,
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because by definition, relative poverty never goes away.
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And but Warren. Buffett and Bill Gates in the
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same room. One of them is going to be
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relatively poor. And we point this out a lot,
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aunt, But, you know, as we talk about poverty in the United
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States, we're talking about people who live indoors, mostly,
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people who have enough money to buy the necessities of life.
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People have cell phones and cars and air conditioning.
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We're not talking about the kind of biting poverty that you see
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when you get to India right now. We, we do have pockets of biting
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poverty, don't get me wrong, But that that's not really what
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we're talking about when we're talking about poor people in the
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US. And, and we do have this envy of
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the, the wealthy, even though people have their needs being
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met, which I think is really the bright line distinction between
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a functional society and A and a non functional society.
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Are your needs being met? That's probably the very first
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question I would ask. And after that you get into
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quality of life and relative things.
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But that first question, there's no relativity about it.
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That's a binary thing. Yes or no?
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So I'm, I'm looking at the numbers, of course it's going to
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be difficult to compare these because the US tends not to
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measure relative poverty, we measure absolute and Germany
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tends not to measure absolute poverty than measure relative.
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But in the US, we have the official poverty measure, which
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is there's the poverty line and it's adjusted based on number of
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people in the household, but it's by that number, it's 11%,
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11% of Americans are living in poverty.
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Yeah, that sounds, that sounds about right.
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Yeah, and there's even that there's some problems with the
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poverty measure we had. We did maybe three years ago,
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maybe two years ago, an interview with Senator Phil
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Graham about his. He had a book on on inequality
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in America, and he pointed out in this book that when we
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concoct our poverty measures, we ignore all the things we do to
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alleviate poverty. So in other words, when we look
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at a household and we say how much income do you have?
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Because we want to know whether you're poor or not poor.
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They will ignore things like the earned income tax credit.
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They'll ignore income assistance or public housing or whatever it
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is. Not to not say those things
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aren't important, but rather you get a very different picture if
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you put those things in versus if you take them out.
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So the quality of life of somebody there is not at all
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represented by the straight up market income.
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That's right. That's exactly right.
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But this is a long way to get to my point.
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What? What other way do?
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What other way do you know? What brought all this to my
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attention is Germany was experimenting with what they
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call nests. These are little self-contained.
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Yeah. Oh, have you self-contained
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things? I I want one for my backyard.
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Well, apparently this is a thing now you can go online.
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I saw a number of companies that are selling these things.
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Yeah, no, the H the HOA would have something to say about.
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That yeah, they probably would. But the, the Nest is basically a
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sleeping pod. It's designed to be.
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It's insulated, It has the ones in Germany are solar powered.
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They have heat and air conditioning in the summer and
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you can get more the fancy ones you can plug in your phone to
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charge it, all of that stuff. But it's a it's, they put these
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things out in Germany or on this experimental basis for the
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homeless to, to use, you know, particularly when it gets too
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cold or too hot or something. And this reminded me of of
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something I've been dealing with with some of the nonprofits that
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I work with here. This it goes back to the concept
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of, of human respect. And some of the nonprofits I
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deal with ask the question, how do we get more people to come
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in? And what they mean is people
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that they're there to serve, whether it's food banks OR, or
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Catholic charities or whatnot, how do we get people to come in?
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That's the wrong question. It does not proceed from a
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vantage point of human respect. With human respect, it's not
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about me and what I've set up and how can I get you to come
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take advantage of it. It's about you and what do you
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need. And I should be going out to
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meet you where you are. And that's exactly what these
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nests do. You're not asking the homeless
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to come to some shelter that you have organized.
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Rather you're going to where they are and providing for their
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needs in their circumstances. And that, to me is is a much,
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much greater showing of human respect.
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I, I would like to keep an eye on this over time, right?
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Because my prediction, knowing human nature the way I do, is
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that it would run the very significant risk of ending up
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looking like Section 8 housing in the US, right?
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You know, subsidized housing brings with it all manner of
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trouble and problems that are generally unexpected, right?
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There are unintended consequences of of public
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housing, and they seem to be inescapable because it happens
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everywhere, every time somebody tries it.
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Which leads me to believe that this new approach may well yield
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new answers. But then again, it might not,
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and I I'd be interested in checking in on it in a year or
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two. Yeah.
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And and I think what the thing you identify is something we all
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need to pay very close attention to.
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Again, if you're concerned about human respect, you're going to
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ask this question. You see, homelessness, is that
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the problem or is it the symptom of a problem?
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Because if it's a symptom of the problem, no matter what you do,
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yeah, no matter what you do to serve the homelessness, you're
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not going to make the problem go away.
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And and I'll, I'll go a step further.
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It's, it's multiple symptoms. So you can't.
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If you figure out an answer that works for one person, it it's
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not transferable. Yeah.
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So this is a tough nut to crack. The fact that there are still
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homeless people in the United States, the richest country the
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world has ever seen, tells you that this is a difficult thing.
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Because if we could solve it without tremendous difficulty,
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we would have. It's it's persistent.
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It's a it's a difficult thing and it's not difficult because
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of resources. That's that's not the weak link
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here. We can't figure out why it
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people end up this way. We, we literally can't figure it
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out. We, we know broadly that there
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there's a mental illness problem, right?
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That that really works on this. We also know broadly that
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there's an addiction problem. We also know broadly that those
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two things overlap to some degree, right?
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And then we also know that there are these 85 other reasons and
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you can't solve this problem here in Arizona.
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I'll, I'll tell you in, in Tucson, very there was a, a row
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of old seedy no tell motels right where people where people
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would go during the afternoon lunch break and have a special
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visit with the secretary or some such thing.
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And they're all closed down now. They're on a street called the
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Miracle Mile. But you know, you can't make
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this this shit up. Anyway, the city has taken over
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one of the hotels, maybe more at this point, and they're going to
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start using them as shelters. Well, I mean, the buildings are
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already there. Not going to cost them anything.
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You might as well. No hotel wants to do business
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there anymore. OK, it's interesting enough.
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Let's see if it works, right? It's it's worth a shot, right?
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And and now we wait. Get words and numbers on
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civil.com and on Civil's TV and mobile apps.
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Regular episodes are free. Sign up for an annual membership
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to support our show and for access to member exclusive
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content. I want to talk, Aunt, about the
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hard time we've been given to fat people for the past, I don't
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know, 30-40, fifty years. Fat people get the worst of
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everything. Fat people are the last group of
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people that you can ridicule without getting any pushback
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whatsoever. You could be.
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Horrible. I'd say you today you get a
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little bit of pushback, but you 10 years ago.
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Look, you, you walk into any comedy show, if you weigh 400
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lbs, you're the topic of conversation, right?
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And, and, and then we had the body positivity movement.
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Remember that when we declared that, oh, you could be obese and
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healthy? No, you can't stop it right now.
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Making excuses for fat people isn't the way to go either,
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right? And I say this as a formerly
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almost gigantic man. You knew me.
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How much? No.
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You were heavier when I knew you.
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But I've seen pictures of you from before I knew you.
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You were twice the man you were even then.
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That's that's, that's almost literally true.
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I was, I was what? What's that word the doctor kept
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using? I was a fat ass and yeah, and
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look, I'm, I'm still not exactly thin, but it's a different
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universe than it once was. Losing weight is eminently
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possible. People don't do it because they
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don't want to, not because they can't.
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But anyway, that's just getting me a bit beyond the point
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because there's a, a new study that's that's come out and it's
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really quite fascinating. I found it on vice.com.
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So hey, you know, take everything with a grain of salt,
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but you should go look this one up because it turns out that
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yes, fat people, really fat people, people who are obese and
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beyond like the BMI of 40 and, and up, they, they do in fact
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have an increased risk of death. I think it's like 2.1 to which
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is significant. But here's the shocking part.
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The very, very, very skinny people have a higher risk.
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Really. How about that?
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Wow. And they're they're like at 3/3
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times more likely to die. Now when you say really skinny,
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do you mean like like medically this is a problem skinny like
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anorexic or just. BM is under 18.5.
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Under 18.5, OK. So you could be very exact about
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that. And they have and the
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corresponding obese people on the other side of the
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distribution are only two times more likely to die.
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So we should be giving a hard time to people whose pelvic
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bones show the show through their clothes.
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See. Now look at the interesting
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thing, though. We would feel uncomfortable
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doing that. You're not going to get a comic
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making fun of somebody, no, but being a little bit thin.
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But too much. Knowing being incredibly thin is
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also a choice. Now nature plays here.
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You have a body shape, right? And oh.
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In some cases, nature plays hard.
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Yeah, it plays hard and and I was never going to be a small
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man and you would have known that if you met my relatives
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right there. They're all big fat Italians,
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but I have control over a good deal of that.
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And that's about the best you can do, right?
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Your, your genetics play a significant role and you play a
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significant role. So are you fully responsible for
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your outcome? Well, not exactly, but yeah,
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kinda. And if you're too fat, you
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should probably drop some pounds.
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It, it, it's unpleasant. It's, it's the same thing I
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always say, you know, with things like this, it's
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incredibly simple, but it's really hard, right?
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Things can be simple and hard at the same time.
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As a matter of fact, almost everything in life is very
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simple and most things in life are pretty hard.
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So there you go. I'll tell you I prior to COVID,
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I guess it was over the course of maybe five years, I dropped
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like 50 lbs. Yeah, and you really thin.
16:48
You you thinned down. But it was because you and I
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were spending so much time on the road together and you were
16:55
fighting your your diabetes. So you were eating what, 00
17:00
carb? No carbs, Yeah, no.
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Carb, no carbs. So anyway, I figured, OK, well,
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James is doing this and he's not happy with it, but we're
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together, I should share in the misery.
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And I started doing it too, and before I knew it, I wasn't
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trying to lose weight. I was just eating with James.
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Try. Try not to try nothing.
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And and I'm I'm down like 75 lbs, right?
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It's that kind of difference. I don't think I've ever really
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publicly talked about this sort of thing because why the hell
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would you? But I feel better now than I did
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when I weighed 75 lbs more. Yeah, yeah.
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And I would guess that people who are incredibly underweight
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have their own set of problems that we don't know about, right?
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So, you know, I feel for them, but they are three times more
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likely to die than somebody with ABMI over 40.
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And that's amazing. And that's a giant person.
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Over 40 is a giant person. I think obesity starts around
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30, right? 2829, something like that.
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So there you go. And enough of that, though,
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because we have to have time for the foolishness of the we can't.
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And I want to get to our What's the correct adjective, boy?
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Adjectives are hard sometimes, aren't they?
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When you really want to. Usually.
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Usually when you say what's the correct word, you then let loose
18:27
with a string of expletives. Well, I, I want to be more
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respectful because it is the Attorney General of the United
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States of America. And, you know, we've, we've had
18:40
some idiots in that, in that post over time.
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Make no mistake. I remember, what was it?
18:47
Alberto Gonzales during the Bush administration.
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He, he really wasn't impressing anybody.
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And I only remember him because I was in DC and his motorcade
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held me up. You know how they shut down
19:02
streets when somebody important comes through?
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And I was close enough to his motorcade to indicate my opinion
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on a recent thing he had done which made me very happy.
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But see, that's just the thing. In the United States of America,
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IA mere commoner could look at the Attorney General of the
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United States and say, listen to me you fucking imbecile.
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Which is how I started my little tirade when he held me up in
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Washington, DC and he looked over at me and he looked
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genuinely concerned. And I thought.
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Ha ha, he will remember this at least for the next 4 minutes,
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which is probably the best you're going to do.
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But I want to get us to Pam Biondi Bondi, I guess.
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Sorry Miss Mispronouncing her name, it's not right.
19:56
I want to get us to Pam Bondi, our present attorney general, I
20:01
suspect not for much longer because she can't help herself,
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but from doing stupid ass things.
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And what did she do this time? And, and she's only been in this
20:14
job for eight or nine months, right?
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And and she comes up every other day for doing something
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remarkably stupid. And this time in an interview on
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the Katie Miller Podcast, which I have not paid much attention
20:33
to in the past, but I'm paying a lot of attention to it now,
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Bondy said. And this is an exact quote.
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I want you to remember that we're not making this up.
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These are the words that came tumbling out of the attorney
20:45
general's mouth. There's free speech and then
20:50
there's hate speech and there is no place, especially now after
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what happened to Charlie Kirk in our society, we will absolutely
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target you, go after you, if you are targeting anyone with hate
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speech. Wow, is she aware that the
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Supreme Court has ruled on this? Is she aware that there's a
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First Amendment to the Constitution of the United
21:13
States? Yeah, and this is the person
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who's supposed to be enforcing the law.
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Enforcing the law, we will absolutely target you, go after
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you if you are targeting anyone with hate speech 1st And I got,
21:29
I got some things to say here, but first, there is in the
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United States, in the eyes of the Constitution, no such
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fucking thing as hate speech. How many times do I have to say
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it? We've.
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Been saying this for years. There's no such thing as hate
21:47
speech in constitutional law, which means your political
21:52
speech is utterly protected. And if you're out in public
21:58
saying a bunch of dopey shit that no rational person would
22:01
say, you're nonetheless protected.
22:04
Freedom of speech only matters if we protect the speech we
22:10
don't care for. Yep.
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That's. There's a very and there's a
22:15
very good reason why there's no hate speech, because the minute
22:20
you open the door to hate speech, you invite all sorts of
22:24
people to define down what hate is as they've done.
22:28
And if you want an example, look at what people have done with
22:30
the word violence. All of a sudden, if you look at
22:32
somebody the wrong way on the street, you've committed
22:35
violence. It it the word violence has
22:38
almost no meaning. Anymore and the word hate would
22:42
come to have no meaning as well. You know, you and I have talked
22:45
recently about bullying and how that can be literally any damn
22:49
thing. Or if somebody looks at me
22:52
sideways, oh, I'm being bullied. You're being bullied.
22:54
If there's blood on the floor, that that's when you're being
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bullied. That that's violence.
23:00
When when I tell you I don't like you or some such thing,
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that is not violence. That's a that's an opinion.
23:08
Those are words. It doesn't mean you have to like
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it. Nope.
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As a matter of fact, I probably shouldn't, right?
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I don't like what most people say.
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Most of the time I I just don't. And I have no right to shut them
23:24
up. None whatsoever.
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Everybody has the right to speak their mind whenever they want,
23:30
and that's going to make people uncomfortable and that's fine.
23:33
And let me underline something we have said before just a
23:37
couple episodes ago. I think if you if you're only
23:42
protecting speech that you agree with, you are not in favor of
23:47
free speech. Not even a little.
23:49
You've got to protect the speech you don't agree with that you
23:52
don't like, then you're in favor of free speech.
23:55
I'm going to give you a quick quiz.
23:56
Are you willing? Sure.
23:59
How many words are contained in the 1st Amendment?
24:03
Oh, I don't know. Well, you've seen it.
24:06
I have seen it. Judging from the size, I'd say
24:10
25. 4545 simple words and that protects your right to speech,
24:16
your right to religion, your right to assemble, the right to
24:20
a Free Press. A lot is covered in 45 words.
24:24
It's a master class in getting to the point, which most people
24:28
can't do and and I'll admit is difficult.
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Pam Bondi, for her part, had no choice but to walk this back the
24:37
next day. And she said no.
24:39
She said, Oh no, that's not what I meant.
24:41
Her words are clear. And let me remind you, we will
24:44
absolutely target you, go after you, if you were targeting
24:47
anyone with hate speech, Pretty, pretty clear what that was and
24:51
that. But she said what I really meant
24:53
was that we will go after you if you're inciting violence.
24:57
Well. That doesn't make.
24:59
Me feel much? Better it it doesn't, but it's a
25:02
different story. And that that story you can
25:06
actually work with because and now I'm in an educational
25:11
context. So I could say just about
25:13
anything. But Aunt, if I said I'm coming
25:16
to where you are and I'm going to shoot you as soon as I get
25:20
there, that's different than saying I I don't like you, Aunt,
25:24
Right. What 1 is a 1 is a direct threat
25:26
to your safety. The other is an opinion about
25:29
you as a human being. Now these are very different.
25:32
Does the court allow the one to be regulated?
25:36
No. Yes, incitement is already
25:39
regulated. I say.
25:40
Fighting. It's the fighting words doctrine
25:43
largely right? If if, if I engage in what the
25:47
court is called fighting words, then I'm I'm on the hook for
25:51
whatever happens next. So.
25:54
So. So it's like it's literally
25:56
inciting something, Yeah. When you see somebody, and
26:00
you've seen this in the last couple of days, going right down
26:03
the middle of a Charlie Kirk memorial, saying horrible things
26:07
about him as other people, those are fighting words.
26:10
And, and I saw a guy, you know, riding a scooter saying horrible
26:14
things and they, they yanked him off the scooter and beat the
26:16
hell out of him. And, well, he, he had engaged in
26:20
fighting words. He bears some responsibility for
26:23
what happened. Not all of it, right, because
26:26
you can't assault somebody either.
26:28
But both sides now have a, a legitimate claim.
26:31
Pam Bondi had to walk it back because it was so profoundly
26:35
stupid that everybody right, left and center called her on
26:38
it. But that was her first
26:41
inclination, right? Your first inclination almost
26:44
always shows people who and what you are.
26:47
Look, plenty of people don't understand or misinterpret or
26:50
don't like the First Amendment. But the attorney general, the
26:54
highest office in the country, whose job it is to enforce the
26:59
law? Yeah, it's her job.
27:01
Any constitutional law professor at any Community College would
27:05
be better than her. Wow.
27:07
And that I mean, I've, I'm, I'm saying a mouthful there having
27:10
been a constitutional law Prof myself.
27:13
So there we go. Today we want to talk about
27:16
interest rates, which normally are a boring topic and so we'll
27:21
do our best to try and make it interesting.
27:24
It's going to be boring today, too.
27:26
But the Fed, the Fed cut interest rates today 25 Oh, and
27:31
I'll, I'll say this. Here's the words people use.
27:34
So you know this next time you're at a party and you want
27:37
to geek people out, the Fed cut interest rates by what we say,
27:42
what we call 25 basis points. A basis point is one 100th of a
27:47
percentage. So 25 basis points is 1/4 of a
27:50
percent. And the reason we say 25 basis
27:54
points is because of some mathematical strangeness that if
27:59
I were to say the Fed cut interest rates, for example, 1%,
28:05
that's very different than saying the Fed cut interest
28:09
rates one percentage point. And people make that error all
28:13
the time. And I used to be, I, I used to
28:17
be an editor at the American Institute for Economic Research.
28:22
Economists would send me their work and I would edit their
28:24
work. PhD level economists made that
28:29
mistake so often that I didn't know what to do with them
28:35
because the difference in saying 1% and one percentage point
28:40
could be very, very profound. I'll.
28:43
I'll give you an example. You go from think about going
28:47
from 2% to 1%. That's a one percentage point
28:52
reduction, but it. Is 50%.
28:55
A 50% reduction, you've gone from 2:00 to 1:00, Yeah.
28:59
So yeah, you got to use these things, right?
29:02
Yeah, we use the term basis point.
29:04
Basis point is like the percentage point thing, but it's
29:08
1100, so 25 basis points is is 1/4 of a percentage point and
29:11
and when. The Fed cuts, or when the Fed
29:14
cuts or raises, it's almost always by 25 basis points.
29:19
Yeah, it tends to go in multiple times.
29:22
Sometimes it's 50, but it's almost always 25.
29:26
And if it's going to be, if 25 isn't enough, it'll be 25
29:31
quarter after quarter or month after month.
29:33
You're right if they'll do it serially, but only by by 25
29:37
basis points at a time. Yeah.
29:39
An exception was when they cut rates for the first time toward
29:44
the end of last year. They did 2 cuts.
29:46
Their first one was a 50 basis point and then they did 25 basis
29:50
points the month after that. And we should stop here because
29:54
people are their eyes are already glossing over and
29:56
they're saying what the hell do I care?
29:59
Oh yeah, OK, there's a reason you're a lot.
30:03
Yeah, you care a lot. There's a reason you should
30:06
care, and there's a reason you should not care.
30:09
And the reason that you should not care is probably the reason
30:13
why you think you should care, but you shouldn't.
30:15
And that is when the Fed cuts rates like that, everybody says,
30:19
oh, good, my mortgage rate is going to go down or I can take a
30:23
car loan. It's going to be less.
30:26
And the answer there is for a whole bunch of technical
30:30
reasons, no, the Fed made a a major change in, or I should say
30:35
Congress and the Fed together made a major change in the
30:37
banking system that that was implemented between 2008 and
30:41
2020. But the long and short of it is
30:44
ever since roughly 2020 when the Fed changes interest rates, it
30:51
has an effect on the very short term rates it does.
30:54
It has almost no effect at all on the longer term rates.
30:57
So your five year car loan, not going to see much difference
31:00
there. 30 year mortgage probably aren't going to see any
31:04
difference there. The feds just messing with short
31:06
term rates. But.
31:08
Oh, why you should care. OK, so that story is a little
31:13
more interesting and a little more complicated.
31:16
Let's start with why the Fed is doing this at all.
31:21
And frankly, I think this is nonsense.
31:24
And let me just. Buckling to the Fed is buckling
31:27
to political pressure. Well, no.
31:29
I think the Fed is nonsense. Its existence is nonsense.
31:33
I'm with you. I'm with you there, brother.
31:35
We I didn't think we were going to go down.
31:36
That road. But we yes.
31:38
We make people make jokes about the old Soviet Politburo where a
31:44
bunch of guys got together around a table and decided, what
31:47
is the price of steel going to be this month?
31:50
And they make, they set the price of steel and ends up being
31:52
the wrong price. Either they set it too high and
31:55
there's, you know, not enough Steelers said too low, there's
31:58
too whatever it is. But we understand that you can't
32:02
do that with prices. Prices have to respond to market
32:05
forces, demand and supply. But then we turn around and we
32:08
say, Oh yeah, well, the feds going to set rates.
32:11
No, setting rates is the exact same thing as setting the price
32:15
of steel. Now you're setting it's a
32:17
different product as loanable funds, but it's the same idea.
32:21
The interest rates should be left to the markets.
32:24
Money is a commodity just like everything else.
32:27
It is. And what happens when you have
32:30
something like the Fed setting the interest rate?
32:33
You run the very real risk of it setting it at the wrong level.
32:37
If it sets it too high, there won't be enough consumption
32:41
because we're all going to be saving, taking advantage of
32:43
those high rates. If it sets it too low, we're not
32:47
going to have any savings because every it's not worth it
32:49
to save, so we're just going to consume everything.
32:51
Now there's some proper level. Let the market figure that out.
32:55
Now. Thankfully, thankfully, since
32:58
2020, all these changes have meant that the markets are
33:02
figuring out the longer term rates.
33:04
The Fed's only messing with the short term rate and that's what
33:07
it cut today. This, this, it's technically
33:10
called the Fed funds rate, but it's this, this short term rate.
33:13
Now, here's why the Fed exists. It was founded for the purpose
33:20
of doing two things, keeping the economy growing, so we say
33:25
keeping full employment and keeping prices stable.
33:29
Those were its two charges. Yeah.
33:32
Control inflation and keep keep unemployment at at the lowest
33:36
possible level. The problem is those two goals
33:41
are mutually contradictory. That's right, you're going to
33:44
have to find a point that you're comfortable with because you
33:48
can't have zero on both sides. Yeah, yeah.
33:53
If you have no unemployment, then what's happening?
33:56
Businesses now are fighting for workers because there isn't,
33:59
there's isn't a pool of available workers.
34:02
And how do they do that? By raising prices, raising the
34:04
wages. But that raises prices, you
34:06
start getting inflation. On the other hand, if you if you
34:09
want to keep the inflation low, we're going to we're going to
34:14
contract the money supply, but that's going to drive up
34:17
interest rates. And so you put people on the
34:20
higher interest rates are, the less businesses will borrow and
34:23
the economy starts to slow. Yep.
34:26
And so you, you have to, you have to find a level that you're
34:29
comfortable with and. There's a balance.
34:31
For years, I think decades even 2% inflation was the goal of the
34:36
Fed, the stated goal, right? And we were all, they did a
34:40
pretty good job of keeping it at 2%, which meant that a certain
34:44
number of us were going to be unemployed as a result.
34:48
But they kept the unemployment numbers at acceptable levels
34:52
within acceptable tolerances, and we all kind of moved on with
34:56
our business. And and before people start
35:00
getting bent out of shape and saying, well, see, this is
35:02
capitalism, it can only work if you have the unemployed.
35:05
It's not the same pool of unemployed people.
35:08
It's people coming in and out. So think, think of the pool of
35:11
unemployed as a buffer. That is, if demand for labor
35:15
goes up, there's a, there's some people there, businesses can
35:17
draw from it, demand for labor goes down, more people go in,
35:20
but it's not the same people. People are passing through,
35:24
getting jobs and losing jobs, so forth.
35:26
But this is what the the Fed is supposed to do is to is to
35:29
adjust the interest rate so that we get that balance between
35:33
inflation and unemployment. There's a little tiny bit more.
35:37
The Fed was set up to be independent of political
35:40
influence. Yes, that's really important.
35:43
It is really important because people in Congress or people in
35:48
the executive branch could lean all over the Fed to move
35:52
interest rates one way or the other to suit their ends and
35:56
needs. Their ends and needs might not
35:58
be the same as our ends and needs.
36:02
And one of the big needs that the federal government has right
36:05
now is for low interest rates, because when your debt is $37
36:10
trillion, 25 basis points is about I think $100 billion a
36:18
year. The my quick math tells me it's
36:20
in the neighborhood of 100 billion.
36:22
Yeah, so, OK, so, so let's put this in context.
36:25
Elon Musk purportedly cut $100 billion from the federal budget.
36:32
Dropping the 25 basis point drop we had today gives us an Elon
36:36
Musk. Every year hereafter, every,
36:39
every year that's right. And A50 basis point double S it
36:43
right, etcetera, etcetera. So the executive branch and
36:48
Congress, the legislative branch, they all have a vested
36:52
interest, every one of them. Yeah, they've got a vested
36:55
interest in. Low interest rates driving that
36:58
interest rate down, and the Fed was designed not to have to take
37:02
that into account. Yeah, the feds not supposed to
37:05
think about the the political issues and in fact the although
37:09
the president appoints the feds, I believe.
37:13
They served so long. They served so long.
37:16
They turned out they held years or something, yeah.
37:18
It's ridiculously long, but when you see Donald Trump trying to
37:21
fire one of them, you know what's going on.
37:26
Yeah. I mean, everybody with the brain
37:28
knows what's going on. Did did she commit mortgage
37:31
fraud? I have no idea.
37:34
Maybe. I mean, maybe we've all
37:36
committed crimes that we're wholly unaware of, and many of
37:39
us have committed crimes that we are very aware of.
37:43
Did she commit that crime? I don't know if she did.
37:46
Is it a fireable offense? I don't know who has the
37:52
authority to fire her exactly. I don't know who wants to fire
37:59
her that I know. Yep.
38:01
Why does he want to fire her? I know that.
38:02
And that we know too, right? I know that too, so you know I'm
38:06
dubious about the whole thing. Yep, as I would be under any
38:11
similar circumstance. Yeah.
38:13
And you do not want the political influence because the
38:17
Fed is is in, is having impact, real impact on our lives as it
38:23
makes this choice between inflation and unemployment.
38:26
You want the Fed making those decisions based on what it
38:30
perceives as best for us, not what it perceives as best or
38:35
more expedient for politicians. Right, because those are often,
38:39
if not always, going to be very, very different things.
38:43
Yeah, I submit that what's been happening is the the Fed has
38:50
been coming under pressure and I the big pressure I don't think
38:55
is business about Donald Trump firing Fed chairs or this sort
39:01
of thing. That's not what worries me.
39:03
What worries me is a different kind of pressure that the Fed is
39:07
not going to be able to ignore, and that's the following As the
39:12
government borrows more and more money and the interest on the
39:17
debt becomes gargantuan, it's now $1.2 trillion trillion
39:23
dollars. The.
39:24
Interest on our debt is larger than most economies on the
39:28
planet. That's right, most, most big
39:32
economies. Yeah, yeah, $1.2 trillion.
39:36
I'm not talking about Somalia here.
39:38
Yeah, right. It, Yeah.
39:41
And it's every. It's every damn year.
39:45
Yes, you get that every year, yeah.
39:47
And it only. Gets bigger.
39:49
The bigger it gets, and the larger the interest becomes, the
39:52
more the Fed is going to have to face an unspoken third goal.
39:58
On top of keeping unemployment low and keeping inflation under
40:03
control, there's this third unstated goal of keeping the
40:07
federal government solvent. And for a while that will be
40:11
possible. For a while, it'll be possible.
40:13
I claim that we're quickly coming to the point where it's
40:16
not possible. And I I say that you start to
40:18
see the beginnings of it now with the Fed unable to get
40:24
inflation back to where it was prior to COVID.
40:27
Right now it's running about a percentage point higher than it
40:31
was percentage of COVID. And one percentage point higher
40:35
is 50% higher. Yeah, right.
40:37
Yeah, one percentage point on top of it was like 1.
40:41
I think that it was like 2% or 1% or something.
40:44
Yeah, 2%, two to three, two to three is, is way more impactful
40:50
than going from 10:50. That's right.
40:53
It's gigantic. Yeah.
40:55
And, and, and everybody knows it because, you know, the price
40:58
levels never went down after we had the the giant COVID bump,
41:04
right? We saw prices spike and then
41:06
they stayed high. And now from that spike, they're
41:10
getting higher again. And that's some shit.
41:13
Ain't that some shit? And we all have to live with it.
41:17
And there are certain things that the politicians could do to
41:20
make it better. And they refused to do that.
41:25
I mean, not having all these idiotic tariffs, for example,
41:29
would bring prices down. Consider.
41:31
Yeah, if you're not going to make it better, at least don't
41:33
make it worse. Stop making it worse, because
41:36
honestly, you're, and I say this so often, you're either making
41:40
it better or you're making it worse.
41:42
And politicians almost never make anything any better.
41:46
Well, let me go back to the to the government borrowing.
41:49
Now, the, the government borrows an amount each year that is
41:55
about, and it's hard to measure these things, right?
41:58
But I've looked at various measures and it ends up being
42:01
approximately 10% of all the money that's borrowed on the
42:05
planet in a year. The government will borrow that
42:08
annually. So when I say all the money
42:11
borrowed on the planet, I mean all the other governments, all
42:15
the businesses, all the people inside the US, outside the US,
42:20
all those cars, all those homes, all of that borrowing is going
42:23
on. The amount the federal
42:25
government borrows is about 110th that size.
42:29
You wouldn't expect it. That's huge.
42:32
It is absolutely huge. Now.
42:36
Ask yourself, Oh my God, Anthony, Oh my God.
42:39
Isn't it gargantuan? Yeah, yeah.
42:41
Yeah. Now ask yourself, where would
42:44
the government go to borrow a chunk of money that large?
42:48
And there's only two places it can go.
42:51
The first is markets that it, it goes out onto the market and
42:54
other governments or businesses or us will will lend the
42:58
government money. You do that when you purchase
43:00
Treasury bills or savings bonds. You're you're lending the
43:03
government money. There's a catch to that.
43:06
The catch is that it drives up interest rates because who else
43:10
wants to borrow your money? IBM, because they're building a
43:14
new something. Or, you know, some startup, it's
43:16
doing some R&D, they want to borrow money.
43:19
Or some kid who's going to college wants to borrow money.
43:22
Of course he borrows from the government, but that doesn't
43:24
count. You want to borrow money to buy
43:26
a car, you go to the bank, but that the bank's money actually
43:29
doesn't belong to the bank. It belongs to people who save
43:31
the money there. So what?
43:33
Your hat. What's happening is as the
43:34
government steps in to borrow a huge chunk of money, it's
43:37
competing with all those other people who are looking to borrow
43:40
money. Any time you get competition
43:42
drives up the price. What's the price?
43:44
The interest rate. Yeah, but there's really, really
43:46
bad news and. Oh yeah, because.
43:49
Because. With no with #2 There's really
43:53
bad news with #2 because of the two, but that first one is
43:58
absolutely the one you want them to be doing if they're going to
44:01
do it at all. Because #2 involves force and
44:05
fraud. Well, the other option, apart
44:09
from going to markets to borrow and there you're going to drive
44:11
up interest rates, is to borrow from the Fed.
44:14
Now I say borrow from the Fed. Technically the Fed has to make
44:17
the choice to loan the money. But regardless choices, the end
44:21
result is you're borrowing from the Fed.
44:23
When the government borrows from the Fed, something new happens.
44:27
Money enters the system that wasn't there before.
44:30
Because the Fed is not part of the monetary system.
44:32
It's it's separate from the economy when the Fed.
44:36
Loans. The fraud.
44:36
This is the fraud part. Yeah, and the fraud part?
44:39
And now you get inflation. Now you get inflation.
44:43
And that's the force part. Yeah, because when when you get
44:48
inflation, what's happening? New dollars have entered the
44:51
system. When prices are low, who gets to
44:53
spend those dollars? Well, the government, they're
44:55
the ones who just borrowed it. They spend it as they spend it,
44:58
they create inflation. Prices go up.
45:01
And now when you, James, go to buy your beloved Diet Coke, it
45:06
cost 10% more than it did before.
45:09
Every dollar in your pocket is diminished in value by every
45:14
dollar the government creates. Yep, Yep.
45:18
It's literally that simple there.
45:20
There's no esoterica, there's no magic here.
45:24
Your money is worth X. When the government puts more
45:28
money into the system, now your your money is worth.
45:31
Point something X. Yeah, or, or think of it this
45:35
way, there's a certain amount of purchasing power in the country.
45:40
The more dollars you have, the less purchasing power each of
45:43
those dollars has. This is what shrink flation
45:46
comes from, right? Because the companies have every
45:50
motivation to keep you buying their bottles of mustard, right?
45:55
And hope you don't notice when it goes from 12 to 11.5 ounces.
45:59
Yeah, they're hoping you'll be less mad about losing the half
46:02
an ounce than you would be about them tacking on 10% more of the
46:05
price, but it's the same thing either way.
46:08
It's inflation either way. That's right.
46:10
And it's inflation all the way down.
46:12
Every single thing becomes more expensive because your dollars
46:17
are worth less. Economists call call inflation a
46:21
tax, and that's not they're not playing with words.
46:27
It really is a tax. It's absolutely a tax.
46:30
Although whereas a a regular tax is the government taking away
46:36
dollars from you, inflation is a tax that doesn't take away your
46:40
dollars, it takes away their purchasing power.
46:43
But that's the only. Reason dollars are valuable.
46:46
It's the same exact thing. Yeah, yeah, yeah.
46:49
And it's a. Lot of people can't put that
46:51
together and I've never understood why.
46:54
It's really strange because, you know, every other tax goes up
46:58
for a vote and we could argue about it and we can tell our
47:02
congressmen we're not happy. This one flies under the radar.
47:06
People aren't aware it's a tax. Yeah, it's pernicious, right?
47:10
It comes in the night and takes your money.
47:12
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48:23
You started off by talking about political influence over the Fed
48:27
and what a bad idea it is. And I claim that that that
48:31
political influence is coming and it's going to be
48:34
insurmountable. And the way it's coming is
48:37
because the bigger the debt gets, the more the Fed has to
48:41
think about what's good for the federal government.
48:43
And that means that we're going to reach a point here where we,
48:48
in effect, don't have monetary policy anymore.
48:51
The Fed has just relatively becomes an ATM of necessity for
48:56
the federal. Government and And when that
48:58
happens, inflation is officially out of control for the rest of
49:01
our history. Right.
49:03
By definition, it's out of control because the Fed's got to
49:05
print whatever it is the government.
49:06
Needs, yeah. And and and look, listen to the
49:09
words for the rest of our history.
49:12
It will never go down again. And there's no way around that.
49:17
So, you know, these are the the unseen forces that work on us as
49:22
citizens. We we don't perceive them until
49:26
the flashpoint hits. Right.
49:29
And then and then it's obvious. And then it's obvious, but we've
49:32
been predicting these things for years because if you know where
49:36
to look, you can predict these things.
49:38
It's not that hard actually. So now what's the prediction?
49:41
Well, the prediction is we've got a lot of pain in store and
49:45
that pain is going to get progressively worse over time.
49:48
We're going to 1st end up living like Europeans.
49:52
Europeans don't have nearly the standard of living that we do
49:55
here in the US. No, they don't.
49:57
And, and we're going to end up living like them for a while,
50:01
and then we're going to live like South Americans for a
50:03
while. And because the standard of
50:05
living is much lower there. And then our money will be
50:08
absolutely worthless. Yeah.
50:10
And when you say the store just like the Venezuelans do.
50:13
When you say the Europeans don't have our standard of living,
50:16
it's as I was looking at these numbers the other day, it's like
50:20
1/2. Half.
50:21
Or the the better countries have. 3/4 Yep, and these are
50:26
perfectly reasonable countries that I'd be perfectly happy
50:29
living it right there. These are good places.
50:33
They they just don't have the standard of living we have.
50:35
And and where the rubber meets the road on this where people
50:38
don't really think about it, it means their houses are smaller.
50:42
They have one car or no cars right?
50:46
Most Europeans don't have clothes dryers, things like
50:50
that. Air conditioning is a rarity,
50:54
right? These sorts of things, they're
50:56
not poor. We're not saying they're poor.
50:58
We're not even saying they're defective.
51:00
But the standard of living is lower and we will have that
51:05
standard of living and then it will get worse, not better,
51:09
because this is a one way train. Let's talk about the end game
51:13
because as you as you're talking about this, it occurred to me,
51:16
every country, to my knowledge, every country that has had this
51:20
problem of runaway debt, followed by the necessities of
51:24
the printing money and then the subsequent inflation, Every
51:28
country has has ended up in one or two, maybe both places.
51:35
And that is somebody comes along or somebody's come along and
51:40
make the drastic cuts. Think about Malay now in
51:44
Argentina. Yeah, they make the drastic,
51:47
drastic cuts that should have been made a long time ago.
51:49
Thatcher in England when when she came to power, selling off
51:54
all these industries that the government had nationalized.
51:58
And the kids called their Margaret Thatcher milk snatcher
52:01
because she took away school milk.
52:03
Really. But but you get to the point
52:08
that that you have to do this and it's painful.
52:12
And the economists say, but if you had done this 20 years
52:15
earlier, it still would have been painful, but not, not
52:18
nearly as painful as it is now. It would have been painful for
52:21
20 minutes. Now you got a way of life right.
52:25
There's a radical difference here.
52:27
So that's, that's one of the endpoints, the other endpoint.
52:30
And I, and my guess is that most countries have done both of
52:34
these, the cutting of the of the spending and the other one is
52:39
coming up with a new currency. So they issue a new currency and
52:43
the game here, this is a sleight of hand.
52:46
It actually doesn't solve any well, it doesn't solve our
52:50
problem. It solves the government's
52:51
problem. They'll come out with a the new
52:54
dollar, and they'll be all sorts of fanfare about how they're
52:58
going to restore the value of the dollar back, like when your
53:01
grandfather used to buy a newspaper for 10.
53:03
Cents. We're going to have those days
53:05
all over again. That's that's.
53:06
Yeah. And the way we're going to do it
53:08
is we're going to have this new dollar and you got to turn in
53:10
your old dollars. You have a certain period of
53:12
time and you'll get new dollars in exchange and new dollars are
53:15
going to be more valuable. Yet what they're doing is hiding
53:19
A1 shot massive inflation. So you'll turn in your old
53:22
dollars, two for one to get the new dollars.
53:26
And look, I'll tell you straight up, if you think this is about
53:30
to happen, you have to get out of dollars before the
53:33
announcement. Yeah.
53:35
You go and you buy as much gold and silver as you can get your
53:37
hands on. Well, this is where I was very
53:40
happy with the invention of Bitcoin and had been kind of
53:43
sad. That's kind of gone back into
53:45
the background over the years because I I often thought if
53:50
well, well, you can't buy anything.
53:53
If you could just buy shit right?
53:55
If I go to 711 and pay with Bitcoin, I know it's a viable
54:00
alternative to any currency. Yeah.
54:03
You know, I claim that when we start to get to the point that's
54:07
obvious that the dollar is losing significant value, all of
54:11
a sudden, I bet you find businesses willing to accept
54:14
Bitcoin maybe, and then it's going to become a viable
54:17
currency. And the beautiful thing about
54:19
Bitcoin is a currency. It's outside the control.
54:23
Here's here's the deal, and this is a it's a philosophical point
54:27
and it's in the philosophical literature for hundreds and
54:31
hundreds of years. John Locke talked about it in
54:33
the 17th century. You can find it before that in
54:36
in other ways. Money is anything we agree has
54:42
value. Right.
54:43
And it's only the agreement that matters.
54:48
And the example, the perfect example is gold.
54:50
Why on earth would gold be worth anything?
54:52
It's a rock, who cares, Go dig it up.
54:56
But we all agree that it has value.
54:59
And John Locke referred to it as a a shiny yellow metal.
55:05
That's all it is. Diamonds.
55:07
Who cares? I mean, who cares?
55:09
But if you could get your life savings converted to diamonds,
55:15
you could put it almost anybody, maybe not Elon Musk, but almost
55:20
anybody could put it in his pocket and go to any other
55:22
country in the world and convert it to that cash there, right?
55:26
Real transportable, real easy. But only because we all agree.
55:31
We all agree that those things are valuable.
55:34
Right. Yeah.
55:35
And you might say to yourself, well, I never agreed to such a
55:38
thing, but you agreed. You agreed tacitly because if I
55:43
offered you a handful of diamonds in exchange for your
55:47
car, and you thought about it, well, that's you're agreeing
55:50
that these things have value. Yeah.
55:53
And and look, I don't agree about any number of things that
55:58
people think have value, so I don't buy them.
56:02
Right, right. Nice and simple, right?
56:05
It, there's a market for everything.
56:08
Water's a really good example. When I'm really thirsty and I'm
56:13
alone in the desert, water is worth everything in the world.
56:17
When I'm at my house in the desert, water comes from a pipe
56:21
in the kitchen. I can even make it hot if I
56:24
want, right? It's just not that valuable.
56:26
And when I moved to, I, when I moved to Iraq, I was walking
56:29
around the first day I got there and it was 118° and I'm wearing
56:35
long pants and long sleeve shirt because that's the, that was the
56:40
local custom. And I had to, and I said, my
56:44
God, I, I need some water. And I bet, I said, I bet I'm
56:46
going to have to pay through the nose for this.
56:49
So I bought a bottle of water like we would buy here, exactly
56:53
the same, exactly the same size, exactly the same quality, the
56:56
whole bit. And it cost me 18 United States
56:59
cents. Really.
57:01
Yep, that was the price. That was what water cost.
57:06
They had figured out how to get it there.
57:08
It was easy. It cost $0.18 right under
57:12
certain circumstances and economists right about diamonds
57:15
versus water and in in some circumstances water worth more,
57:19
a lot more than diamonds, but not many.
57:22
And really I think it's a poor it in some sense we, our
57:26
interpretation of it is poor because we're used to seeing the
57:30
bottle of water for like $1.20 or whatever it is.
57:32
What's astounding isn't so much your 18 cent bottle, it's the
57:37
buck 20 bog. You know how much that water
57:40
cost that's in there? Like fractions of a penny
57:43
fractions. What are you paying for here?
57:45
The the packaging cost so much more than the product, right,
57:48
right. It it it turns out in the
57:50
bottled water market, the packaging is the product.
57:54
Yeah, yeah, you get free water with the when you pay for the.
57:57
Packaging with a with a Fiji bottle, right?
57:59
Because it looks so pretty and you know.
58:01
Now there's going to come a warning shot and may already
58:04
have been fired, but pay attention to this when there's a
58:09
serious push at the federal level for the digital dollar.
58:14
You've heard them talking about it already.
58:15
The the idea is a real danger. This is a real danger.
58:19
This isn't a signpost that you should be paying very close
58:23
attention to. And, and they'll make the
58:25
argument as they have that, well, you know, Bitcoin, it's a
58:28
good idea and it's secure and all of that.
58:31
But really you want the government backing the thing.
58:34
So let's have the digital dollar, which is Bitcoin but
58:38
under control of the government. Yeah, I don't want that at all.
58:41
Here's the problem. If our current, our currencies
58:44
are already digitized in the sense that most of our monies
58:49
sits on computers, but it's but the government doesn't control
58:52
it, it's decentralized. If you give the government
58:56
centralized control over the currency like that, over a
58:59
digital currency like that, this business about the new dollar,
59:02
it's never going to announce the new dollar.
59:04
It can just flip a switch, flip a switch.
59:07
All the money you had is now something different.
59:10
And, and there are further difficulties with this from a
59:15
human rights or a civil rights perspective.
59:19
The government will now know every single transaction you
59:23
ever make. Yep, all all of them.
59:26
You will have literally no economic privacy.
59:30
And, and make no mistake, when they pull come full force with
59:34
this digital dollar, they will make it illegal to use cash.
59:38
In fact, they're already starting to do that.
59:40
It's using cash is illegal in certain circumstances or or at
59:44
least they'll give you a big problem with it.
59:46
And you, you can't transport it under certain circumstances and
59:50
and amounts and etcetera, etcetera, etcetera.
59:52
It's very difficult. If you don't believe us, next
59:55
time you buy a car, try and pay in cash and see how quickly the
59:59
FBI comes knocking on your. Door.
1:00:01
Yeah, that, that's right there. There is mandatory reporting
1:00:05
from certain industries of large transactions paid off in cash.
1:00:10
People don't realize this. And this was another thing that
1:00:13
came up when, when I lived out of the country in Iraq.
1:00:16
You've got to somehow get your money back home that you earn
1:00:20
there, right? Because you have a mortgage back
1:00:22
home, you have a family back home.
1:00:24
They need the money to survive. And every time you go home and
1:00:30
people fly home from time to time when that, when they're
1:00:32
expats, you stuff your, your pockets full of the money that
1:00:36
you've got to bring it home. But there's a limit of $10,000
1:00:40
and if you have $10,000 and they find 1/4 at the bottom of your
1:00:44
briefcase, you lose it all. Oh wow, wow.
1:00:51
And boy, do they have incentive to look for that.
1:00:52
Quarter, yes they do. You might even say they have
1:00:55
incentive to keep a stack quarters laying around.
1:00:58
Yeah. And that is the level of control
1:01:03
the government's going to have over you buying a tomato, right?
1:01:08
Every single thing you buy is is going to be seen.
1:01:12
Do you really want to live in that world?
1:01:14
Because that's the world that the American founders stood
1:01:19
astride and said, no, we don't want to live in that world.
1:01:25
And technology makes it a million, a billion, an
1:01:29
unquantifiable number of times worse, right?
1:01:34
So we right now should be standing up saying stop it, but
1:01:41
we won't, not until it's far, far too late.
1:01:46
So the people listening to us, I think we've given them a road
1:01:50
map of, of how they might behave, what they might do,
1:01:54
knowing what's undoubtedly coming.
1:01:57
And I think every single word we said today is a prediction that
1:02:01
I would stand behind 100%. Yeah, what we're talking.
1:02:05
About is is not a question of if it's going to happen if, it's
1:02:07
very much a question of when. That's a when question.
1:02:10
Yeah. And and it might be in the next
1:02:13
few years, right. It it's not, this isn't
1:02:17
necessarily 20 years away. It could be 20 years away, but
1:02:20
it's not necessarily 20 years away.
1:02:22
The the big there's there's a line in the sand financially
1:02:26
that I've been watching for decades and it's coming up now
1:02:30
in about 5 to 7 years, and that's when Social Security
1:02:34
becomes insolvent. And.
1:02:37
The question is what? What happens then?
1:02:39
We're going to print more money. I think we end up printing more
1:02:42
money and we end up living with higher inflation.
1:02:45
We're not going to see 100% inflation, but I could easily
1:02:49
see 5 to 10% on an ongoing basis that that just becomes the new
1:02:54
normal. And let's stop right there for a
1:02:57
second because I'm going to, I'm going to dig into that autistic
1:03:01
economist brain of yours. And I want, I want to explain to
1:03:04
people because I don't think they know, at least not in large
1:03:08
part. And I remember the time I found
1:03:10
out about what compounding interest actually looked like.
1:03:14
Think about 5% on a $10 product and tell me what happens in the
1:03:19
space of 10 years to the price of that product.
1:03:22
Oh yeah, $1010.00 product at 5% interest or 5% inflation.
1:03:29
Over the course of ten years, it's gone up by 60%.
1:03:32
Sixty percent, 60%, ten years. Yeah, Ouch.
1:03:39
Yeah. And it's not just that.
1:03:40
It's everything. Everything is up 60%.
1:03:42
Everything. That's right.
1:03:42
It's an imaginary $10 product, which means if you buy an
1:03:46
imaginary car, it's the same 60% increase, right?
1:03:50
60%, Yeah. So from 40,000 to 75,000, give
1:03:56
or take. Yeah.
1:03:57
Good God. And that might be the, the world
1:04:00
we're moving towards. I, I suspect it is as well.
1:04:02
And I suspect you're going to start hearing politicians talk
1:04:07
about inflation differently, because they're going to have
1:04:10
to. Yeah.
1:04:11
And I think what you're going to hear a lot of it's going to go
1:04:14
on for a long time, is politicians blaming.
1:04:17
They're going to blame the greedy corporations for raising
1:04:20
prices. They're going to blame the.
1:04:23
Bank billionaires they're. Going to blame, billionaires are
1:04:25
going to blame, they'll end up blaming the Fed as people start
1:04:29
to figure out what's going on. And that's when you know that
1:04:33
they've reached the end of their rope, when they blame the Fed,
1:04:36
because that's going to require some explaining to do.
1:04:39
But then once, once you're done blaming all those, the only
1:04:42
person left is the politicians. There's one more person.
1:04:47
That's the people that voted for them because you and I and
1:04:50
everybody listening to this and everybody else in the country
1:04:53
could stop this right now. If we can't, if we kicked, well,
1:04:58
we could. When the guy comes up for
1:04:59
election, vote for the other guy.
1:05:02
Yeah, and then he's replaced by the other guy who has all the
1:05:05
same incentives. This is a problem of misaligned
1:05:08
incentives. Yeah, yeah.
1:05:10
And as an economist, you know where that goes.
1:05:13
Misaligned incentives over the long term destroy everything
1:05:17
they get a hold of. Yeah, and by misaligned
1:05:20
incentives, what James is pointing to is the fact that the
1:05:23
politician can benefit from his decision and foist the cost of
1:05:28
the decision on to the rest of us.
1:05:30
And so that's exactly what he'll do.
1:05:32
And when people say, and they say it more and more lately,
1:05:36
which gives me some hope that there's no difference between
1:05:40
the Republicans and the Democrats, they're right.
1:05:43
Because of this, they all have the same incentives.
1:05:47
So their behavior, while different, is only marginally
1:05:51
different. And This is why this is the
1:05:53
brilliance of the founders when they set up a limited
1:05:56
government, which we've all, we've broken the limits by the
1:05:59
way, but the point of limited government is to prevent all
1:06:02
this happening because the government's not allowed to do.
1:06:04
These things, that's right. And if you read The Federalist,
1:06:08
seriously, some people call it The Federalist Papers.
1:06:11
I hate it when they do that. If you read The Federalist, this
1:06:15
is the point that you you first have to have a government that
1:06:21
can control the governed, and 2nd, you have to oblige it to
1:06:27
control itself. And we were really good at that
1:06:31
first thing and really bad at the second overtime.
1:06:36
And there we are. Unless we get better at that
1:06:39
second thing, controlling the government, it's not going to
1:06:42
happen. And you don't control the
1:06:43
government by voting one guy out and another guy in under exactly
1:06:47
the same circumstances. Yeah.
1:06:50
And that's kind of the obvious and the sad part of it.
1:06:54
And it's been how many decades now?
1:06:57
We've tried the one party, we've tried the other party, we've
1:06:59
gone back to the first, we've gone back to the second.
1:07:01
Nothing ever changes. Well changed in 1860.
1:07:06
That was the first Republican president.
1:07:09
Yeah, yeah, we got a new party. Got a new party.
1:07:12
They they ran a candidate in 1854 or 1856, but I don't know
1:07:21
who it was. I can't tell you off the top of
1:07:24
my head. Abe Lincoln wins.
1:07:26
He's the first Republican president and and since then,
1:07:29
the Republicans have done well, kind of pretty well over time.
1:07:34
They're clearly one of the two parties.
1:07:36
I think both parties are an abject mess right now.
1:07:39
Neither seems to be able to figure out what it is.
1:07:42
But this is a long way afield, though, related to the Fed's
1:07:47
recent cut. Yeah.
1:07:48
And, and I think we're going to see more cuts.
1:07:50
Yeah, the the numbers right now are indicating 2 more 25 basis
1:07:55
point cuts this year and one possibly one more in January.
1:07:58
Yeah, early next year. And you know that that's a big
1:08:01
deal. That's a lot of cuts.
1:08:03
Expect two things from that. One, the economy is going to
1:08:05
pick up. Two, inflation is going to get
1:08:08
hotter. Yep.
1:08:10
And both of those things are going to happen if, if you get
1:08:15
these series of cuts under the present circumstances.
1:08:18
OK, there we are. It is kind of good news for
1:08:21
Donald Trump in a way that he'll be able to blame the inflation
1:08:25
on the cuts instead of the tariffs.
1:08:28
That that's right and he's he's likely to get four of them,
1:08:32
which will knock down the interest payment quite a lot.
1:08:35
Yeah, yeah. It's 5 all the more.
1:08:38
You would think that's a good thing.
1:08:39
We'll cut down the interest payment so that then we, you
1:08:42
know, we come closer to balancing the budget.
1:08:44
No, because what are the politicians going to do?
1:08:47
They're going to go turn around and spend all that money that we
1:08:50
just saved by having the lower interest rate.
1:08:53
That's right. Oh boy, more money.
1:08:54
That's all the politician ever thinks.
1:08:56
Yeah. No politician ever says wow, we
1:09:00
should save this for when things get rough.
1:09:02
Right. That's just crazy drug talk that
1:09:06
I'm doing right now, as my father used to say when I was a
1:09:09
boy. He's out listening right now
1:09:11
thinking I never said that, but you did.
1:09:14
Anyway, that's about the end of it, right?
1:09:17
This has been a little depressing, but economics often
1:09:21
is right. It's there's a certain precision
1:09:25
in the knowing of what's going to happen and people don't
1:09:29
believe that there's a precision and they think that you're just
1:09:32
full of hot air. The only joy, the only joy left
1:09:36
in economics is that we get to say I told you so.
1:09:39
Yeah, that's right. And and and look, that that's
1:09:41
where we're at. And well, I mean, that's too
1:09:44
bad. But but so it often goes, right?
1:09:47
No place is perfect and wonderful all the time and every
1:09:50
country has its problems and this one is ours and we own that
1:09:56
and that's how life is. So Ant until next time you have
1:10:02
a a wonderful time of it. And, and I'll remind everybody,
1:10:05
as I often do at exactly this moment, to be nice to each
1:10:09
other. I know it's hard.
1:10:11
I know it's hard for me to and and I point out often that I try
1:10:16
and fail at being nice to people every day.
1:10:19
I'll attest to that. I fail.
1:10:22
Fuck off, I, I fail every day. But it's not a, it's not the
1:10:28
failing that matters. It's the trying that matters
1:10:33
because keep right on trying even though I know I'm a
1:10:35
failure. But succeeding is.
1:10:36
Good. And that's kind of what life is
1:10:39
like more broadly, right? You get almost, you screw up
1:10:42
over and over and over again, but you keep trying to get
1:10:46
things right, and then sooner or later you do.
1:10:49
So keep trying. Be nice to each other.
1:10:51
See you next time, man. See you next time, James.
1:10:53
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