<iframe width=”560″ height=”315″ src=”https://www.youtube.com/embed/tuR7CqPwqB4″ frameborder=”0″ allow=”accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture” allowfullscreen></iframe>08:12so the opposite of what everybodyexpected happened when we elected GeorgeBush because the bubble burst under Bushbut here’s a problem when the bubbleburst Bush did not blame that recessionthat we had in 2001 he did not say heywe had a bubble under Bill Clinton and
now we have to deal with the
consequences we have all these
malinvestments because of the stockmarket bubble and we’re gonna have to gothrough a recession as we work our wayout of these imbalances no he made themistake of trying to use Keynesianstimulus budget deficits and AlanGreenspan slashed interest ratesto 1% and we were able to mitigate theseverity of that recession it was theshallowest recession in US history andwe replaced the stock market bubble with
a housing bubble and that housing bubble
created enough phony wealth and enough
phony prosperity to buy George Bush’s
second term but the consequence of thatbubble blew up in 2008 while built whileGeorge Bush was still in office and soultimately that bubble collapsed andthat’s what paved a way for Barack Obamabut this time I don’t think GeorgeDonald Trump is going to be so luckybecause I think when the bubble burstsnow and it’s all the same bubble it’sall a continuation of the same policybecause when the housing bubble burstinstead of lowering interest rates to 1%the Fed didn’t stop at 1% days passedwhen and went all the way to zero andthey stayed there for like 7 years andnow despite all this talk about howthey’re gonna normalize rates and raiserates they’ve only raised them twicethey’ve raised them by 50 basis pointsthere’s still half of where greenspanslashed the middlee you know in 2002 andso now it’s not just that we reflate
‘add the real estate bubble or reef
lated the stock market bubble because we
have both but now we have a massive bondmarket bubble we have us we have arepeat of the dollar bubble we have thesame dollar bubble we had in the late1990s we pretty much have a bubble in
everything where we had a bubble in autoloans a bubble in student loans we havenow so much debt the national debt is 20trillion right the national debt doubledunder under Bush from 5 trillion to 10trillion it doubled under Obama from 10trillion to 20 trillion I mean is iteven within the scope of possibilitythat we can go from 20 trillion to 40trillion assuming that you know Trumpwas in office for eight yearsbut I think at this point and interest11:08rates are already starting to rise this11:10is going to be the problem this is the11:12pin that pricks this debt bubble is11:14rising interest rates11:16I mean why has the Fed kept rates so low11:18for so long because they can’t raise11:20them that’s why I mean they want to11:23pretend that well you know we’re we’re11:25just trying to make sure everything is11:26okay look if everything was okay when we11:29raise rates it’s because they can’t11:31raise rates because the debt is too high11:33what would happen to the budget if11:38interest rates went up right now we’ve11:40got a twenty trillion dollar national11:41debt yet we pay less interest on the11:43national debt than we paid when Ronald11:45Reagan was president and the national11:47debt was one trillion so all of this is11:51possible because interest rates are so11:53low if interest rates went back to 5%11:56which is still not high 5% you’d be12:01talking about an extra trillion dollars12:03a year or an interest on the national12:05that every year12:07where’d that money come from what if12:10interest rates went to 10% oh it’s I12:12mean they went higher than that under12:15under Paul Volcker but even some of12:18between five and ten and then what about12:19the housing market where would work12:22mortgage rates have been averaging the12:24last you know a few years mortgage rates12:25three and a half four percent yet12:28homeownership in America is at a 60-year12:30low what would happen into the12:31real-estate market if mortgage rates12:33went to 6 or 7% or 8% I mean that’s12:36normal for a mortgage nobody could12:39afford a house now how the market would12:41implode what about the corporate12:43corporate sector corporate America why12:45do you think the Dow is flirting with12:4620,000 it’s not because US companies are12:49earning all this money it’s because they12:51levered up during the era of cheap money12:53and they bought back a bunch of stock12:55you know and so we have this gigantic12:57bubble and Donald Trump is right you12:59know the last eight years have been a13:00disaster right our our country is13:03littered with closed out factories that13:05are like tombstones right people have13:08lost good jobs we’ve had massive debt13:10but there is no quick fix to all this I13:13mean Donald Trump talks as if all we13:15have to do is renegotiate NAFTA13:17right all we have to do is have smarter13:19bureaucrats negotiating and the trade13:22deficits are gonna go away no they’re13:23not you know and Donald Trump talks13:26about how you know the world has been13:27taking advantage of America no we’ve13:30been taking advantage of the world13:31that’s what he doesn’t understand right13:33what is the relationship that America13:36has with the rest of the world13:37well we consume in the world produces13:40well I mean well obviously we’re the13:42beneficiaries of that we we get to13:44consume all sorts of products yes the13:46factories are all gone but the consumer13:49goods that the factories used to produce13:50they’re still here13:52how are we getting all these goods that13:54we don’t produce because people in other13:56countries are dumb enough to give them13:58to us now they don’t think they’re14:00giving them to us they think they’re14:01selling them but they’re not because14:03we’re borrowing the money to buy it and14:04we’re never gonna pay it back I mean we14:07don’t have the capacity to pay it back14:09we don’t have the intention of paying it14:10back so the world has been conned into14:13supporting this this relationship so14:15Donald Trump has that backwards the14:17world loans us the money to buy their14:20products so in order to make America14:23great again and Donald Trump talks with14:24us all the time we’re gonna have to go14:26through a massive recession and the14:31scary part is Donald Trump is not14:32preparing any Americans for any of the14:35pain that is necessary if we’re going to14:38write this economic ship if we’re going14:40to have real production in America again14:43Americans have to stop spending we have14:46to start saving we have to start14:49investing in plant and equipment you14:51know Donald Trump wants to deliver tax14:53relief to the middle class how we have14:5620 trillion in debt the middle class is14:58on the hook for that we have a massive15:00government that the middle class has to15:02support the only way to deliver tax15:04relief is to slash government but Donald15:07Trump is talking about more spending on15:09the military more spending on15:10infrastructure more spending on the15:12border we’re not going to make any cuts15:14to Social Security we’re not gonna make15:15any cuts to Medicare and he’s gonna15:17replace Obamacare with Trump care what’s15:19that gonna cost I don’t know15:21yes he’s talking about some kind of cuts15:23to discretionary spending but they’re15:25gonna be tiny compared to all these15:27increases so none of this is possible it15:30seems to me15:31that all that all Trump is trying to do15:33is make the bubble bigger right he’s15:35saying you know we want to I want to I15:37want to change it right now right you15:38have all this quantitative easing that15:40has benefited the 1% benefited the rich15:43benefit of Wall Street maybe he wants to15:45target monetary policy or fiscal policy15:47to somehow benefit the middle class what15:49would actually benefit the middle class15:51is going to be to free up the economy15:54from the burden of government15:55unshackle the middle class from15:57government but in order to have this15:59transition we can’t go from a consumer16:02credit bubble economy to a real savings16:05base productive economy without16:08collapsing the asset markets stock16:10prices have to come down a lot real16:12estate prices have to come down a lot16:14bond prices have to come down a lot16:16interest rates have to go way up and16:18when that happens a lot of companies go16:20bankrupt a lot of banks fail a lot of16:23people lose money a lot of people lose16:25jobs this has to happen it should have16:28happened in 2001 but it didn’t it should16:31have happened in 2008 but it didn’t16:33because they kept you know blowing the16:35bubble up with more and more air and now16:38it is just so big it’s just so ignore16:40that it can’t possibly not pop and I16:43don’t think there is there’s another16:46bubble that the Fed has up and sleeve16:47and you know Donald Trump of course you16:49know he criticized the Fed when he was a16:51candidate I don’t think he’s gonna do16:53that as president in fact when Donald16:54Trump ran for office he talked about the16:57stock market he said it was a big fat16:59ugly bubble well it’s bigger fatter and17:03uglier now but he never mentions it as a17:04bubble because now it’s his bubble he17:07doesn’t want it to deflate he wants it17:09to keep going up he doesn’t want to get17:11blamed for all the bad things that are17:14about to happen and he’s I think setting17:16himself up for a disappointment because17:18he’s promising so much everything is17:20gonna be so great it’s not and and he is17:23appointing a lot of business people17:26smart people to the cabinet but they17:28have no idea what they just bit off and17:31I think the markets and I’ll talk more17:33about this tomorrow17:35but I think we have a real opportunity17:36here because this dollar bubble it is as17:39big as the dollar bubble that popped17:41when Bush took over because17:45when this market when the economy ends17:47up being a lot weaker then people17:50believe because the economy has been17:52decelerate and you know we’re far as I’m17:54concerned the only reason we’re not in a17:56recession is because the government17:58isn’t honest about the inflation rate17:59because they take the nominal GDP and18:02and they deflate it but a lot of people18:05are thinking hey if we’re gonna get this18:07fiscal stimulus we don’t need the Fed18:09anymore right that’s what’s been that’s18:11what helped the dollar and hurt gold18:13hey the feds gonna raise rates because18:15now they’re not the only game in town18:17right before we couldn’t get any fiscal18:19stimulus because we had gridlock but now18:22that we have Republicans in Congress and18:24we have a Republican president we’re18:26finally gonna get the fiscal stimulus so18:29now the Fed can back off and let rates18:31go up they got it wrong the only way we18:34can have so-called fiscal stimulus is if18:37we get an even bigger dose of monetary18:39stimulus to make it possible because if18:41the Fed is gonna be letting interest18:43rates go up and they’re not going to be18:44monetizing debt with QE and we’re gonna18:47take the budget deficits and increase18:50them dramatically to finance tax cuts18:52and more government spending who’s gonna18:54buy all those bonds the Chinese aren’t18:57gonna buy them they’re selling the18:59Japanese aren’t buying them the Russians19:00aren’t gonna buy them a Saudis or19:01everybody is selling everybody is19:03selling Treasuries in fact the bond19:05bubble the bull market that started in19:081981 is pretty much over the whole world19:10wants out of Treasuries how are we going19:13to finance massive deficits in a bond19:15bear market where nobody wants to buy19:17our debt and if interest rates go up the19:20the depressing effect on the bubble19:22economy of rising rates will more than19:25offset the stimulus of the tax cuts I19:27mean just what people are gonna have to19:29pay an extra debt service costs are19:31gonna destroy whatever benefits they get19:33from whatever tax cuts and the tax cuts19:36are talking about our minimal they’re19:37not even as big as bush they’re nowhere19:39near like Reagan there are people19:40comparing Trump to Reagan I mean it’s19:43just it’s night and day I mean when19:44Reagan came in the debt to GDP was 30%19:48now it’s over a hundred percent when19:50Reagan came in interest rates on 30-year19:52bonds were 14% they had nowhere to go19:55but down19:55short-term rates were 20%19:58the stock market was at a p/e of seven20:00so we had cheap stocks we had expensive20:05money and they cut rates dramatically20:07Reagan’s rate cuts the marginal rate20:09went from what 70 percent down to 30 son20:11was a huge cut in marginal tax rates and20:13yes Reagan ran up the deficits but we20:16were able to finance him because we were20:18a wealthy country when Reagan was20:20elected we had trade surpluses in20:21America when Reagan was elected we were20:24still the world’s wealthiest creditor20:25nation not the world’s biggest debtor so20:28Trump is coming in at a time that’s why20:30I say it’s not morning in America it’s20:32midnight in America but people are as20:34optimistic now as they were then they20:36actually believed that all these20:37problems can be solved just because20:40Donald Trump is the first person to have20:41the courage to actually you know call20:44the problems out right to actually say20:47what a lot of Americans were thinking it20:49didn’t all didn’t buy all this hype and20:50all this propaganda about how good20:52things were but as the air comes out of20:55this bubble when the Fed has to come20:56back with more QE when they have to cut20:59rates have I gone over oh it’s kind of21:03yeah hello it’s counting up I must have21:05gone over all right so when the event21:08when the Fed has to has to cut rates and21:10they have to do QE four and I think this21:12next round of quantitative easing is21:14going to be bigger than the last three21:16combined and what’s gonna really21:17surprise people is just as the Fed is21:20easing the ECB is gonna be tightening21:22because inflation is picking up all over21:24the world21:25inflation in Europe is picking up it’s21:28gonna be above 2% sometime this year21:30they can’t have that the Bundesbank is21:32not gonna allow they’re gonna have to21:34start taping their QE they’re gonna have21:36to start raising interest rates so it’s21:38gonna be the exact opposite instead of21:40the world you know ECB easing and the21:43Fed tightening it’s gonna be the reverse21:45and I think the dollar is gonna fall21:46through the floor and eventually this is21:49going to end in a currency crisis21:50there’s no way around that that we’re21:52gonna have a dollar crisis and we almost21:55had a dollar crisis in 200821:58but it was saved by the financial crisis22:00we’re not gonna get that lucky next time22:02anyway I’ll be at my booth thank you22:06[Applause]22:17you
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