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08:12
so the opposite of what everybody
expected happened when we elected George
Bush because the bubble burst under Bush
but here’s a problem when the bubble
burst Bush did not blame that recession
that we had in 2001 he did not say hey
we had a bubble under Bill Clinton and
now we have to deal with the
consequences we have all these
malinvestments because of the stock
market bubble and we’re gonna have to go
through a recession as we work our way
out of these imbalances no he made the
mistake of trying to use Keynesian
stimulus budget deficits and Alan
Greenspan slashed interest rates
to 1% and we were able to mitigate the
severity of that recession it was the
shallowest recession in US history and
we 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 that
bubble blew up in 2008 while built while
George Bush was still in office and so
ultimately that bubble collapsed and
that’s what paved a way for Barack Obama
but this time I don’t think George
Donald Trump is going to be so lucky
because I think when the bubble bursts
now and it’s all the same bubble it’s
all a continuation of the same policy
because when the housing bubble burst
instead of lowering interest rates to 1%
the Fed didn’t stop at 1% days passed
when and went all the way to zero and
they stayed there for like 7 years and
now despite all this talk about how
they’re gonna normalize rates and raise
rates they’ve only raised them twice
they’ve raised them by 50 basis points
there’s still half of where greenspan
slashed the middlee you know in 2002 and
so 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 bond
market bubble we have us we have a
repeat of the dollar bubble we have the
same dollar bubble we had in the late
1990s we pretty much have a bubble in
everything where we had a bubble in auto
loans a bubble in student loans we have
now so much debt the national debt is 20
trillion right the national debt doubled
under under Bush from 5 trillion to 10
trillion it doubled under Obama from 10
trillion to 20 trillion I mean is it
even within the scope of possibility
that we can go from 20 trillion to 40
trillion assuming that you know Trump
was in office for eight years
but I think at this point and interest
11:08
rates are already starting to rise this
11:10
is going to be the problem this is the
11:12
pin that pricks this debt bubble is
11:16
I mean why has the Fed kept rates so low
11:18
for so long because they can’t raise
11:20
them that’s why I mean they want to
11:23
pretend that well you know we’re we’re
11:25
just trying to make sure everything is
11:26
okay look if everything was okay when we
11:29
raise rates it’s because they can’t
11:31
raise rates because the debt is too high
11:33
what would happen to the budget if
11:38
interest rates went up right now we’ve
11:40
got a twenty trillion dollar national
11:41
debt yet we pay less interest on the
11:43
national debt than we paid when Ronald
11:45
Reagan was president and the national
11:47
debt was one trillion so all of this is
11:51
possible because interest rates are so
11:53
low if interest rates went back to 5%
11:56
which is still not high 5% you’d be
12:01
talking about an extra trillion dollars
12:03
a year or an interest on the national
12:07
where’d that money come from what if
12:10
interest rates went to 10% oh it’s I
12:12
mean they went higher than that under
12:15
under Paul Volcker but even some of
12:18
between five and ten and then what about
12:19
the housing market where would work
12:22
mortgage rates have been averaging the
12:24
last you know a few years mortgage rates
12:25
three and a half four percent yet
12:28
homeownership in America is at a 60-year
12:30
low what would happen into the
12:31
real-estate market if mortgage rates
12:33
went to 6 or 7% or 8% I mean that’s
12:36
normal for a mortgage nobody could
12:39
afford a house now how the market would
12:41
implode what about the corporate
12:43
corporate sector corporate America why
12:45
do you think the Dow is flirting with
12:46
20,000 it’s not because US companies are
12:49
earning all this money it’s because they
12:51
levered up during the era of cheap money
12:53
and they bought back a bunch of stock
12:55
you know and so we have this gigantic
12:57
bubble and Donald Trump is right you
12:59
know the last eight years have been a
13:00
disaster right our our country is
13:03
littered with closed out factories that
13:05
are like tombstones right people have
13:08
lost good jobs we’ve had massive debt
13:10
but there is no quick fix to all this I
13:13
mean Donald Trump talks as if all we
13:15
have to do is renegotiate NAFTA
13:17
right all we have to do is have smarter
13:19
bureaucrats negotiating and the trade
13:22
deficits are gonna go away no they’re
13:23
not you know and Donald Trump talks
13:26
about how you know the world has been
13:27
taking advantage of America no we’ve
13:30
been taking advantage of the world
13:31
that’s what he doesn’t understand right
13:33
what is the relationship that America
13:36
has with the rest of the world
13:37
well we consume in the world produces
13:40
well I mean well obviously we’re the
13:42
beneficiaries of that we we get to
13:44
consume all sorts of products yes the
13:46
factories are all gone but the consumer
13:49
goods that the factories used to produce
13:52
how are we getting all these goods that
13:54
we don’t produce because people in other
13:56
countries are dumb enough to give them
13:58
to us now they don’t think they’re
14:00
giving them to us they think they’re
14:01
selling them but they’re not because
14:03
we’re borrowing the money to buy it and
14:04
we’re never gonna pay it back I mean we
14:07
don’t have the capacity to pay it back
14:09
we don’t have the intention of paying it
14:10
back so the world has been conned into
14:13
supporting this this relationship so
14:15
Donald Trump has that backwards the
14:17
world loans us the money to buy their
14:20
products so in order to make America
14:23
great again and Donald Trump talks with
14:24
us all the time we’re gonna have to go
14:26
through a massive recession and the
14:31
scary part is Donald Trump is not
14:32
preparing any Americans for any of the
14:35
pain that is necessary if we’re going to
14:38
write this economic ship if we’re going
14:40
to have real production in America again
14:43
Americans have to stop spending we have
14:46
to start saving we have to start
14:49
investing in plant and equipment you
14:51
know Donald Trump wants to deliver tax
14:53
relief to the middle class how we have
14:56
20 trillion in debt the middle class is
14:58
on the hook for that we have a massive
15:00
government that the middle class has to
15:02
support the only way to deliver tax
15:04
relief is to slash government but Donald
15:07
Trump is talking about more spending on
15:09
the military more spending on
15:10
infrastructure more spending on the
15:12
border we’re not going to make any cuts
15:14
to Social Security we’re not gonna make
15:15
any cuts to Medicare and he’s gonna
15:17
replace Obamacare with Trump care what’s
15:19
that gonna cost I don’t know
15:21
yes he’s talking about some kind of cuts
15:23
to discretionary spending but they’re
15:25
gonna be tiny compared to all these
15:27
increases so none of this is possible it
15:31
that all that all Trump is trying to do
15:33
is make the bubble bigger right he’s
15:35
saying you know we want to I want to I
15:37
want to change it right now right you
15:38
have all this quantitative easing that
15:40
has benefited the 1% benefited the rich
15:43
benefit of Wall Street maybe he wants to
15:45
target monetary policy or fiscal policy
15:47
to somehow benefit the middle class what
15:49
would actually benefit the middle class
15:51
is going to be to free up the economy
15:54
from the burden of government
15:55
unshackle the middle class from
15:57
government but in order to have this
15:59
transition we can’t go from a consumer
16:02
credit bubble economy to a real savings
16:05
base productive economy without
16:08
collapsing the asset markets stock
16:10
prices have to come down a lot real
16:12
estate prices have to come down a lot
16:14
bond prices have to come down a lot
16:16
interest rates have to go way up and
16:18
when that happens a lot of companies go
16:20
bankrupt a lot of banks fail a lot of
16:23
people lose money a lot of people lose
16:25
jobs this has to happen it should have
16:28
happened in 2001 but it didn’t it should
16:31
have happened in 2008 but it didn’t
16:33
because they kept you know blowing the
16:35
bubble up with more and more air and now
16:38
it is just so big it’s just so ignore
16:40
that it can’t possibly not pop and I
16:43
don’t think there is there’s another
16:46
bubble that the Fed has up and sleeve
16:47
and you know Donald Trump of course you
16:49
know he criticized the Fed when he was a
16:51
candidate I don’t think he’s gonna do
16:53
that as president in fact when Donald
16:54
Trump ran for office he talked about the
16:57
stock market he said it was a big fat
16:59
ugly bubble well it’s bigger fatter and
17:03
uglier now but he never mentions it as a
17:04
bubble because now it’s his bubble he
17:07
doesn’t want it to deflate he wants it
17:09
to keep going up he doesn’t want to get
17:11
blamed for all the bad things that are
17:14
about to happen and he’s I think setting
17:16
himself up for a disappointment because
17:18
he’s promising so much everything is
17:20
gonna be so great it’s not and and he is
17:23
appointing a lot of business people
17:26
smart people to the cabinet but they
17:28
have no idea what they just bit off and
17:31
I think the markets and I’ll talk more
17:35
but I think we have a real opportunity
17:36
here because this dollar bubble it is as
17:39
big as the dollar bubble that popped
17:41
when Bush took over because
17:45
when this market when the economy ends
17:47
up being a lot weaker then people
17:50
believe because the economy has been
17:52
decelerate and you know we’re far as I’m
17:54
concerned the only reason we’re not in a
17:56
recession is because the government
17:58
isn’t honest about the inflation rate
17:59
because they take the nominal GDP and
18:02
and they deflate it but a lot of people
18:05
are thinking hey if we’re gonna get this
18:07
fiscal stimulus we don’t need the Fed
18:09
anymore right that’s what’s been that’s
18:11
what helped the dollar and hurt gold
18:13
hey the feds gonna raise rates because
18:15
now they’re not the only game in town
18:17
right before we couldn’t get any fiscal
18:19
stimulus because we had gridlock but now
18:22
that we have Republicans in Congress and
18:24
we have a Republican president we’re
18:26
finally gonna get the fiscal stimulus so
18:29
now the Fed can back off and let rates
18:31
go up they got it wrong the only way we
18:34
can have so-called fiscal stimulus is if
18:37
we get an even bigger dose of monetary
18:39
stimulus to make it possible because if
18:41
the Fed is gonna be letting interest
18:43
rates go up and they’re not going to be
18:44
monetizing debt with QE and we’re gonna
18:47
take the budget deficits and increase
18:50
them dramatically to finance tax cuts
18:52
and more government spending who’s gonna
18:54
buy all those bonds the Chinese aren’t
18:57
gonna buy them they’re selling the
18:59
Japanese aren’t buying them the Russians
19:00
aren’t gonna buy them a Saudis or
19:01
everybody is selling everybody is
19:03
selling Treasuries in fact the bond
19:05
bubble the bull market that started in
19:08
1981 is pretty much over the whole world
19:10
wants out of Treasuries how are we going
19:13
to finance massive deficits in a bond
19:15
bear market where nobody wants to buy
19:17
our debt and if interest rates go up the
19:20
the depressing effect on the bubble
19:22
economy of rising rates will more than
19:25
offset the stimulus of the tax cuts I
19:27
mean just what people are gonna have to
19:29
pay an extra debt service costs are
19:31
gonna destroy whatever benefits they get
19:33
from whatever tax cuts and the tax cuts
19:36
are talking about our minimal they’re
19:37
not even as big as bush they’re nowhere
19:39
near like Reagan there are people
19:40
comparing Trump to Reagan I mean it’s
19:43
just it’s night and day I mean when
19:44
Reagan came in the debt to GDP was 30%
19:48
now it’s over a hundred percent when
19:50
Reagan came in interest rates on 30-year
19:52
bonds were 14% they had nowhere to go
19:55
short-term rates were 20%
19:58
the stock market was at a p/e of seven
20:00
so we had cheap stocks we had expensive
20:05
money and they cut rates dramatically
20:07
Reagan’s rate cuts the marginal rate
20:09
went from what 70 percent down to 30 son
20:11
was a huge cut in marginal tax rates and
20:13
yes Reagan ran up the deficits but we
20:16
were able to finance him because we were
20:18
a wealthy country when Reagan was
20:20
elected we had trade surpluses in
20:21
America when Reagan was elected we were
20:24
still the world’s wealthiest creditor
20:25
nation not the world’s biggest debtor so
20:28
Trump is coming in at a time that’s why
20:30
I say it’s not morning in America it’s
20:32
midnight in America but people are as
20:34
optimistic now as they were then they
20:36
actually believed that all these
20:37
problems can be solved just because
20:40
Donald Trump is the first person to have
20:41
the courage to actually you know call
20:44
the problems out right to actually say
20:47
what a lot of Americans were thinking it
20:49
didn’t all didn’t buy all this hype and
20:50
all this propaganda about how good
20:52
things were but as the air comes out of
20:55
this bubble when the Fed has to come
20:56
back with more QE when they have to cut
20:59
rates have I gone over oh it’s kind of
21:03
yeah hello it’s counting up I must have
21:05
gone over all right so when the event
21:08
when the Fed has to has to cut rates and
21:10
they have to do QE four and I think this
21:12
next round of quantitative easing is
21:14
going to be bigger than the last three
21:16
combined and what’s gonna really
21:17
surprise people is just as the Fed is
21:20
easing the ECB is gonna be tightening
21:22
because inflation is picking up all over
21:25
inflation in Europe is picking up it’s
21:28
gonna be above 2% sometime this year
21:30
they can’t have that the Bundesbank is
21:32
not gonna allow they’re gonna have to
21:34
start taping their QE they’re gonna have
21:36
to start raising interest rates so it’s
21:38
gonna be the exact opposite instead of
21:40
the world you know ECB easing and the
21:43
Fed tightening it’s gonna be the reverse
21:45
and I think the dollar is gonna fall
21:46
through the floor and eventually this is
21:49
going to end in a currency crisis
21:50
there’s no way around that that we’re
21:52
gonna have a dollar crisis and we almost
21:55
had a dollar crisis in 2008
21:58
but it was saved by the financial crisis
22:00
we’re not gonna get that lucky next time
22:02
anyway I’ll be at my booth thank you