WEBVTT 00:00.140 --> 00:05.120 Hey guys, this is Stowe Bishop with Radio Rothbard, and I want to let you guys know that we are doing our year-end 00:05.120 --> 00:13.760 fundraising drive. If you donate this week, your donation will actually be doubled, thanks to the generous support of Dr. Gary Schlarbaum, who has been a long time, 00:14.540 --> 00:19.360 benefactor of the Mises Institute. Donate $25 or more, even better, 00:19.500 --> 00:28.240 you'll get a copy of Tom DeLorenzo's newest booklet, The Axis of Evil America's Three Worse Presidents. Some honest history 00:28.240 --> 00:35.580 for this holiday season. Again, this fundraising drive is going through the end of the year and 00:35.980 --> 00:43.820 every donation is greatly appreciated. It allows us to do great work like our podcast that you are enjoying. You can donate today 00:43.820 --> 00:45.900 by visiting Mises.org 00:47.540 --> 00:48.140 radioRothbard24 00:48.140 --> 00:50.160 that's MISES.org 00:51.460 --> 00:52.060 radioRothbard24 00:52.060 --> 00:57.640 like the show you're listening to with the year at the end. We look forward to more content like this going into 2025 00:57.640 --> 00:59.040 Thank you for listening. 01:05.360 --> 01:13.720 Welcome back to Radio Rothbard. I'm Ryan McMakin with the Mises Institute, and with me today is my co-host, though, Bishop. 01:14.300 --> 01:21.120 And also with us is one of our economists, Jonathan Newman. Jonathan's with been with us many times before, 01:21.820 --> 01:28.080 also featured in our new documentary on the Federal Reserve called Playing with Fire. 01:28.620 --> 01:32.840 He's got lots of great insights in that. If you haven't seen that yet, go over to our YouTube channel 01:32.960 --> 01:39.020 and check that out. That's at YouTube, the Mises Media channel, or you can watch that 01:39.020 --> 01:42.240 on our website at Mises.org 01:44.540 --> 01:45.460 fire and 01:45.460 --> 01:51.800 check it out. And I just want to talk a little bit about some of those related issues with Jonathan today. Really, I want to talk about 01:51.800 --> 01:56.510 what how Trump has basically been handed a turd of an economy. I mean, I don't know that there's 01:57.220 --> 01:58.400 any other way to 01:58.400 --> 02:01.740 to say that. That is the technical economics term. 02:02.000 --> 02:09.580 Yeah, I think that really just communicates what what the story is here. Now, I know there's lots of 02:09.580 --> 02:13.140 lots of people who still believe in all the the Biden 02:13.800 --> 02:20.320 myths that have been put out in the past a couple of years about how it's just the most amazing economy of all time and 02:21.320 --> 02:24.280 they count every job that 02:25.060 --> 02:32.080 came back into existence after the government enforced lockdowns destroyed millions of jobs. 02:32.700 --> 02:40.980 And oh, look, look at how much employment has been created since 2020. Of course, that's all just a function of massive intervention on the part of the regime. 02:42.020 --> 02:48.840 So the reality is that what we're seeing is manufacturing indexes very weak. What we're seeing is 02:49.760 --> 02:59.260 total full time private sector job growth. Extremely weak. In fact, this is in the last report. We saw private sector jobs actually decline and then 03:00.440 --> 03:01.940 basically all three 03:02.820 --> 03:11.200 often used measures of price inflation. We're all up in the most recent data. We're looking at the core price inflation stuff. 03:11.400 --> 03:14.400 We're looking at just the regular CPI all inched upward 03:15.000 --> 03:18.380 after the Fed decided that it wasn't 03:18.960 --> 03:21.220 going to let interest rates 03:21.220 --> 03:29.740 stay put anymore and instead kept talking about forcing them down, had a mega cut back in September, and lo and behold, prices inched back up. 03:30.700 --> 03:32.020 And what this means is 03:32.600 --> 03:40.100 affordability problems for regular people. We continue to see more and more data showing that in the past five years the United States has 03:40.100 --> 03:40.780 experienced 03:41.400 --> 03:43.500 immense amounts of 03:43.500 --> 03:44.440 wealth creation 03:45.280 --> 03:49.400 for the upper classes. People who benefit 03:50.100 --> 03:50.580 from 03:51.340 --> 03:55.580 massive Fed-induced inflation, people who already own huge amounts of assets, 03:56.220 --> 04:00.820 they're doing very well. Why? Because money creation leads to asset price inflation. 04:02.620 --> 04:04.380 Now this has been covered 04:05.240 --> 04:11.720 many times by one of our great economists, Brendan Brown, and he's talked about how you can't just look at CPI 04:12.240 --> 04:15.780 inflation. That's one of the last places that you see 04:17.260 --> 04:24.680 evidence of monetary inflation show up. You see it much earlier and much more universally in asset price inflation. 04:25.120 --> 04:29.620 We see it in stock prices, clear correlation rates, stock prices, and 04:29.620 --> 04:36.760 monetary growth. That's a lot of work has been done on that by Thorson Polite on our website, and 04:36.760 --> 04:41.480 also, as Brendan Brown has pointed out, asset price inflation. We see that a lot in home prices. 04:41.720 --> 04:47.240 Heading upward, and that's something we can talk about a little bit today, how in spite of 04:47.240 --> 04:49.760 the Fed's 04:50.500 --> 04:53.480 attempt to force down interest rates again in September, 04:53.880 --> 05:00.820 we haven't seen that play out in terms of longer-term debt and certainly not in 30-year fixed mortgages. 05:01.300 --> 05:03.860 And yet, at the same time, prices have continued to 05:04.440 --> 05:09.180 go up in home prices, or at least have remained stable with 05:09.180 --> 05:14.380 only here and there have we seen any significant evidence of price cuts in 05:15.780 --> 05:21.200 single-family homes, and really just in four purchase homes in general. And what I see 05:21.840 --> 05:29.900 here recently in some data from the National Association of Realtors is that first-time buyers as a share of U.S. housing purchases 05:30.420 --> 05:33.780 is really now at a 40-year low. 05:33.780 --> 05:40.140 It's lower now, even then, where it was back in that initial surge of 05:40.140 --> 05:43.000 interest rates that occurred after the early 05:44.500 --> 05:50.020 1980s. If you talk to some of the old-timers, now in this case, I'm using that term affectionately. 05:50.640 --> 05:57.380 So if you talk to some of the people who remember selling homes or buying homes in the first half of the 1980s, 05:57.380 --> 06:00.420 man, they remember, right, the 12% or higher 06:00.920 --> 06:08.960 mortgage rates that many people were getting. The difference, of course, at the time was that prices reduced significantly to reflect that. 06:09.740 --> 06:16.120 That's not going on right now, what you're seeing is rising interest rates not reflected by any significant cuts, at least not so far, 06:16.700 --> 06:23.880 in prices. And so now you're getting down below 25% of first-time buyers as a share of U.S. housing purchases. 06:24.480 --> 06:28.620 So what this means is that as people who own a lot of assets 06:28.620 --> 06:32.400 continue to get richer, thanks to monetary creation, so 06:32.400 --> 06:39.460 billionaires have gotten massively richer over the last five years. Upper, middle-class people who are earning 06:39.460 --> 06:49.140 200,000, 300,000 and already own two houses, they're doing great. They've already got big stock portfolios, doing fantastically. 06:50.200 --> 06:57.600 However, if you're just some regular person who's trying to save up for a home, good luck. Good luck with that, unless, of course, your parents can help you a lot. 06:58.380 --> 07:01.600 And so we continue to see a decline in real 07:02.700 --> 07:09.360 in real wages for people who aren't already doing quite well, people who don't already own assets. 07:09.520 --> 07:16.800 So thanks to the central bank, we've created an economy where people who own assets will continue to buy more assets, continue to see their 07:16.800 --> 07:24.260 wealth increase significantly. People who don't already own assets, they're largely getting locked out of buying new assets. 07:24.760 --> 07:29.300 Unless, of course, you want to buy like one share of Berkshire Hathaway B-stock or something. 07:29.360 --> 07:32.360 You might be able to put together a few hundred bucks for that. 07:32.480 --> 07:38.520 But that's not going to help you nearly as much as a home purchase in terms of your lifestyle and your future wealth accumulation. 07:39.040 --> 07:39.200 So 07:40.160 --> 07:42.980 this is the economy that Trump is coming into. 07:43.720 --> 07:53.000 And we continue to see also just problems ahead, which is shown in, I think, the bond markets by the fact that longer term interest rates 07:53.000 --> 07:57.780 haven't been going down in spite of attempts by the Fed to get interest rates back down. 07:58.040 --> 08:07.560 And this is most likely reflects fears about ongoing spending in deficit spending, 08:07.560 --> 08:19.100 which is a significant problem because that causes yields to go up because the federal government continues to flood the economy with more and more debt. 08:19.940 --> 08:22.140 And so we look everywhere and where's the good news. 08:22.420 --> 08:32.740 And it seems that mostly what I'm hearing from the dogmatic Trump supporters is that, well, everything will be fine because Trump is Trump. 08:34.500 --> 08:37.800 That Trump loves America and that he's going to fix it somehow. 08:38.200 --> 08:42.680 I mean, this is how simpletons think, of course, is that if you have a positive attitude that everything will be fixed, 08:43.180 --> 08:44.960 what matters is your emotional state. 08:45.120 --> 08:46.920 What matters is how you feel about things. 08:47.680 --> 08:53.500 And I know that a lot of conservatives like to pretend that they're guided strictly by logic and facts, which is, of course, complete nonsense. 08:56.640 --> 08:57.740 Sorry, you're not. 08:58.580 --> 09:01.380 And you can see this back during the Bush administration. 09:01.720 --> 09:06.820 People basically said that if you don't agree with them, then you're in favor of terrorism and you hate America. 09:07.140 --> 09:09.800 I mean, that was a standard stock response among conservatives. 09:10.500 --> 09:12.160 Yes, no emotion there at all. 09:12.920 --> 09:19.620 And so this is, of course, always been a lie that they try to say because all these hopes that they're pinning on the Trump administration, 09:19.620 --> 09:25.340 it's all just pure fantasy and fluff based on Trump will fix it somehow. 09:25.820 --> 09:29.960 Well, you don't just fix things unless you make major changes. 09:30.200 --> 09:32.900 Major changes come from major cuts in spending. 09:33.400 --> 09:39.620 They come from massive cuts in regulation, which to its credit the Trump administration has. 09:39.800 --> 09:45.860 It's one of the few places where they've actually done some of the things they said they were going to do was in cutting regulation. 09:45.860 --> 09:50.460 Almost nowhere else has they ever done any of the things that they say they're going to do like cutting federal spending, 09:51.280 --> 09:52.700 rating in the central bank. 09:53.280 --> 09:59.280 None of that happened in the first term and I don't expect any of it to happen in the second term. 09:59.500 --> 10:06.360 So I just want to look at some of these things that are going on and get Jonathan's perspective because he has a more sophisticated view 10:07.260 --> 10:11.400 as a real economist, a real academic economist. 10:12.940 --> 10:20.400 Whereas my role as an economist when I was at the state of Colorado is really more as a number cruncher and doing some more basic analysis. 10:20.580 --> 10:27.620 But I like to go to Jonathan for some of the more sophisticated stuff on interest rates and where the economy is headed. 10:28.220 --> 10:35.980 So Jonathan, what would you say is your overall opinion of the state of the economy? 10:35.980 --> 10:45.860 When you look out there, what are some of the red flags you see that you think need to be addressed if this economy is not going to continue stagnating 10:45.860 --> 10:48.580 and possibly even slipping into recession in 2025? 10:50.020 --> 11:00.160 One thing that people were talking about earlier in the year but I haven't seen as many headlines lately is the commercial real estate problem. 11:00.160 --> 11:06.920 Now that was a huge red flag and people aren't really talking about it as much now but I think the problem is still there. 11:07.060 --> 11:13.020 There's a ton of empty office space, commercial real estate that's just sitting empty, not being used. 11:13.780 --> 11:22.400 And if it is being used then the businesses that occupy those spaces aren't earning enough revenue to pay their rents. 11:22.400 --> 11:27.080 And so we've seen massive discounts, massive decreases in the prices. 11:27.800 --> 11:36.500 I mean there's some huge headlines where multi-million dollar real estate was sold for pennies on the dollar or something like that. 11:36.660 --> 11:38.700 So there's some really crazy stories out there. 11:39.280 --> 11:43.960 But we haven't seen a crash in that sector. 11:45.200 --> 11:46.860 So that's one red flag. 11:46.860 --> 11:57.420 I mean a lot of the stuff that you were just talking about, it's very difficult for young families especially to buy their first home 11:57.420 --> 12:02.940 because prices are so high and also mortgage rates are high as well compared to where they were before. 12:04.160 --> 12:08.600 And so that makes it really difficult for families to get established. 12:09.220 --> 12:11.380 It makes it difficult for them to save. 12:12.340 --> 12:15.600 All of the price inflation as well makes it difficult for them to save. 12:15.600 --> 12:20.640 And so I mean those are just a couple things like the price inflation is really bad, 12:20.640 --> 12:24.300 especially for young families who don't own a lot of assets like you mentioned. 12:24.780 --> 12:27.880 And I do think that there's a lot of issues in commercial real estate. 12:28.500 --> 12:31.800 Now one thing, you were talking about movements of interest rates. 12:32.260 --> 12:35.700 I do think that inflation expectations are a part of that. 12:35.820 --> 12:44.600 So we've seen interest rates increasing, bond yields increasing even though the Fed is trying to push down interest rates. 12:45.380 --> 12:48.660 But you also see that in the mortgage rates as I mentioned. 12:49.180 --> 12:56.760 And I think while inflation expectations are part of that, another part of that could be default risk. 12:56.940 --> 13:06.560 It could be that lenders are worried about the increasing astronomical indebtedness of the United States population. 13:06.900 --> 13:12.420 Tons and tons of credit card debt, lots of delinquencies and defaults going on. 13:12.520 --> 13:14.300 So there's another red flag for you. 13:14.300 --> 13:19.820 It could be that we're due for a sort of debt crisis in the private sector. 13:20.620 --> 13:23.140 Now a debt crisis for the public sector, that's a different story. 13:23.240 --> 13:24.920 We've got other episodes on that. 13:25.320 --> 13:27.400 But I mean those are the sorts of things that I'm looking at. 13:28.180 --> 13:31.140 Well, yeah, it's a mentioning default risk. 13:31.440 --> 13:37.580 This applies back to our topic of commercial real estate too, right? 13:37.580 --> 13:45.840 Isn't there growing, when we look at what's going on with commercial real estate and the decline in sales prices 13:46.580 --> 13:53.600 and the ability I think to maybe pay off mortgages from sales as interest rates go up 13:53.600 --> 14:01.580 and as revenues from renters continues to go down, that's going to be an issue there too, right? 14:02.880 --> 14:06.780 How does commercial real estate, I just want to back up a step. 14:07.680 --> 14:13.400 Because as just a listener, I want somebody, explain to me like I'm a child, Jonathan, 14:13.860 --> 14:19.820 why commercial real estate is potentially a problem for the business cycle, right? 14:20.000 --> 14:30.060 How could commercial real estate translate into an event that could be truly problematic for the economy at large? 14:30.060 --> 14:32.640 Or isn't that just a problem for commercial real estate? 14:32.780 --> 14:37.340 Why should I care about commercial real estate in regards to the larger economy? 14:38.120 --> 14:44.460 Well, the reason it could spread is because the same lenders in commercial real estate 14:44.880 --> 14:52.140 are also making residential mortgages and doing other financial services for the public. 14:52.720 --> 14:58.280 So if they take a huge hit in their commercial real estate part of their balance sheet, 14:58.280 --> 15:00.860 so like if the stuff that they're owning is decreasing in value, 15:01.080 --> 15:04.260 if the people that they're renting to aren't paying back, 15:04.780 --> 15:08.120 then that means that they have to take those huge losses 15:08.120 --> 15:13.180 and those huge losses could translate into credit completely drying up for other things as well. 15:13.320 --> 15:17.480 So if my balance sheet is deteriorating because of that thing, 15:17.520 --> 15:22.260 then that means I've got to pick up the slack in other parts of my balance sheet 15:22.260 --> 15:30.100 including lending for mortgages, credit cards, auto loans, everything under the sun. 15:30.580 --> 15:34.740 And that's where who owns commercial real estate is also important 15:34.740 --> 15:40.180 because it's not as if every bank has a similar style sort of balance sheet 15:40.180 --> 15:42.200 and so you've got X amount of commercial bank exposure, 15:42.400 --> 15:45.920 you've got X amount of mortgage rates and this is kind of pretty uniform across, 15:46.200 --> 15:49.500 larger bundles for larger banks, whatever. 15:49.500 --> 15:55.460 But regional banks in particular have the largest percentage of their investment portfolio 15:55.460 --> 16:00.500 within commercial real estate itself and so that's where some of these broader sort of structural problems 16:00.500 --> 16:04.080 that have been created particularly in the post-2008 world, 16:04.600 --> 16:09.760 various aspects of the regulatory structure, the Dodd-Frank sort of style requirements, 16:09.920 --> 16:15.500 that pushed regional banks to be one of the heaviest lenders in the commercial real estate market itself 16:15.500 --> 16:19.560 and so if you think about it, if those are the banks that are the most vulnerable 16:19.560 --> 16:23.660 with that kind of particularly toxic form of debt out there, 16:24.000 --> 16:29.160 then that can help skid the ways for even further consolidation within the banking sector, 16:29.420 --> 16:33.440 which has even broader amplifications when you consider the relationship between banks in the state 16:33.440 --> 16:37.180 and et cetera, et cetera, et cetera and that's why that commercial real estate time bomb is kind of, 16:37.420 --> 16:40.780 it's not only that it's bad, it can create a bank crisis, 16:40.780 --> 16:44.900 but it's particular type of bank crisis could even have a different sort of fallout 16:46.740 --> 16:49.480 that has an impact on kind of the day-to-day average American. 16:50.140 --> 16:53.700 One of the most amazing graphs you'll ever see is just a count. 16:54.000 --> 16:56.780 It's a time series, count of the number of banks over time. 16:57.240 --> 16:59.620 So we used to have tons and tons of banks back in the day, 16:59.980 --> 17:02.000 but then you just see that number come down and down, 17:02.100 --> 17:05.840 and the decline becomes steeper with the financial crisis 17:05.840 --> 17:09.180 to the point where it looks like we're trending towards like one bank, 17:09.180 --> 17:10.880 so I wonder what that could mean. 17:12.020 --> 17:16.360 So it looks like exactly what Thoe is mentioning is that there's just further consolidation 17:16.360 --> 17:18.620 and the big banks cobble up the small banks, 17:18.860 --> 17:25.900 and one reason for that is big banks like in 2008-2009 got this nice big bailout, 17:26.020 --> 17:27.340 the smaller banks, not so much. 17:28.000 --> 17:31.980 The smaller banks have to take on these extra risks. 17:32.980 --> 17:41.080 It's more costly for them to follow all of the new guidelines and all the regulations 17:41.080 --> 17:45.660 that many times are actually designed by people from the larger banks. 17:46.060 --> 17:50.680 So that's sort of competitive, using the apparatus of government 17:50.680 --> 17:57.820 to harm your competition by designing regulations that your large firm can follow, 17:57.820 --> 18:03.180 and it's not so costly, but it's incredibly costly for your smaller competitors, 18:03.440 --> 18:06.900 and so that's just another way that we've seen tons and tons of bank consolidation, 18:07.240 --> 18:10.800 means less choices for consumers, it means more control. 18:10.940 --> 18:14.200 It's easier for the federal government, federal reserve to control 18:14.200 --> 18:16.140 a smaller number of banks than a large number. 18:17.060 --> 18:19.900 Yeah, terrible trend that we're seeing there. 18:20.060 --> 18:22.800 Just to piggyback off of that, going on tangent, 18:22.880 --> 18:24.440 I'll bring it back to commercial real estate though, 18:24.440 --> 18:26.740 it's that going back to the way that Ryan started the show, 18:26.820 --> 18:31.400 talking about the extent to which this financial environment that we found ourselves in 18:31.400 --> 18:34.200 that it has been good for billionaires, it's been bad for the working class. 18:35.000 --> 18:40.580 There's an additional element to that by which there's been some fascinating stuff coming out here lately. 18:40.760 --> 18:44.740 It's a problem that we've talked about on Mises.org for quite some time as well, 18:44.860 --> 18:48.580 but I think it's getting more publicity right now with people going on Joe Rogan, 18:48.940 --> 18:52.840 Mark Andreessen had a very good episode on there, talking about the extent to which, 18:52.840 --> 18:57.540 so we've got this financialized economy, it rewards large investors, 18:57.700 --> 19:00.860 it penalizes consumers, but then also who are those billionaire, 19:01.060 --> 19:04.200 what part of that billionaire class has benefited the most from it? 19:04.520 --> 19:07.560 And this is where kind of the regulatory regime has been kind of beating up, 19:07.720 --> 19:12.880 debanking, kind of making threats essentially to certain type of interest groups 19:12.880 --> 19:16.660 that either force them into compliance with the regime 19:16.660 --> 19:18.760 or punish them if they don't fall into compliance. 19:18.760 --> 19:23.380 The crypto industry in particular has been under attack from Gary Ginsler and SEC 19:23.380 --> 19:27.520 and that played, I think there was some political fallback that came in the 2024 election. 19:28.060 --> 19:31.480 So that's where these combination of these things where it is, 19:31.680 --> 19:34.820 we've opened up the spigot, but then where that spigot has been directed, 19:35.720 --> 19:40.800 regional banks have been affected more than big banks because of 2008 regulations, CFPB, 19:41.220 --> 19:43.500 the Consumer Financial Protection Bureau created new weapons, 19:43.640 --> 19:46.500 that kind of guided source stuff, and so it's kind of the worst of both worlds 19:46.500 --> 19:50.180 where we have flooded the markets, we've benefited the top, 19:50.360 --> 19:52.900 but then those in the top that have been the biggest benefactors 19:52.900 --> 19:55.800 have tend to be those that are either loyal to the regime 19:55.800 --> 19:57.620 or have been coerced into being loyal to the regime. 19:58.760 --> 20:02.940 And just one back on the commercial real estate aspect of it is that, 20:03.040 --> 20:05.280 I know at times, we've been talking about that, 20:05.320 --> 20:07.340 we've been raising this red flag for a while, 20:07.780 --> 20:10.560 and why has it still continued going on and on? 20:11.060 --> 20:13.900 I just want to provide one more data point there to that conversation, 20:14.340 --> 20:17.480 which is that at this point, from the Fed's own data, 20:17.940 --> 20:22.280 the latency rates on commercial real estate is at its highest point in 10 years. 20:22.420 --> 20:25.740 Now, if you look at it in a chart, it doesn't look that big compared to where it was in 2008. 20:26.480 --> 20:29.060 But I did see a Financial Times report, and I love this line, 20:29.640 --> 20:34.440 that basically the step that we're in in terms of the banks handling of that 20:34.440 --> 20:36.300 is a process of extending and pretending. 20:37.340 --> 20:40.800 So that is what the banking industry is doing with commercial real estate loans 20:40.800 --> 20:44.700 while we're still dealing with the kind of macro consequences of 10 years, 20:45.340 --> 20:50.520 12 years of back and forth in particular of particularly hostile regulatory environments. 20:51.360 --> 20:53.420 Well, I'm glad you mentioned extend and pretend, 20:53.560 --> 20:58.280 because that brings us back to the issue of if your interest rates are going up, 20:58.980 --> 21:01.420 it's a lot harder to extend and pretend. 21:02.580 --> 21:07.720 And that's something that I think also affects smaller organizations 21:07.720 --> 21:12.360 more than larger for a lot of the reason that Jonathan mentioned. 21:12.620 --> 21:15.140 Also, it's just when you're some huge mega-corp, 21:16.020 --> 21:20.100 it's easier to get loans at a lower interest rate. 21:20.980 --> 21:25.900 But if you're some small local bank extending and pretending 21:25.900 --> 21:28.760 that is getting another loan at a lower interest rate 21:28.760 --> 21:33.860 so you can cover your old debts and avoid bankruptcy, that gets harder and harder. 21:33.860 --> 21:40.420 And it's important to remember if we look at a chart of interest rates over the last 35 years, 21:40.700 --> 21:43.360 it's just been a long march downward. 21:43.780 --> 21:50.420 So it's been real easy for all of these companies that were never really earning much money 21:50.420 --> 21:53.540 and we call them often zombie companies 21:53.540 --> 21:57.500 because really they weren't even doing well based on earnings or revenues. 21:57.840 --> 22:02.000 They were doing well because whenever they failed to meet revenue targets 22:02.000 --> 22:04.940 or failed to pay their bills, they could just refinance 22:04.940 --> 22:09.020 and work on solving the problem later. 22:09.860 --> 22:14.820 But it seems that if the Fed loses control of interest rates, 22:14.920 --> 22:17.600 the Fed never has total control of interest rates. 22:17.800 --> 22:20.080 The Fed is a major player in the markets, 22:20.320 --> 22:27.160 but of course interest rates are determined by huge factors beyond the direct control of the Fed. 22:27.160 --> 22:32.240 And just as a side note, we have detractors out there say that 22:32.240 --> 22:35.160 any time we talk about how the Fed is manipulating interest rates 22:35.160 --> 22:41.520 that the Mises Institute is wrong because the Fed has virtually no effect on interest rates, 22:41.820 --> 22:44.640 to them I always say, okay well then you won't have a problem then 22:44.640 --> 22:48.900 if the Fed just simply dumps all of its assets into the market 22:48.900 --> 22:51.880 and stops participating in interest rate manipulation altogether. 22:52.620 --> 22:53.000 Right? 22:53.000 --> 22:57.060 Well, just get rid of all open market operations of the Fed 22:57.060 --> 22:58.680 since the Fed has no effect on interest rates. 22:59.140 --> 23:01.860 I have yet to get one of those people saying yes, fine, 23:02.060 --> 23:03.720 just get rid of open market operations. 23:04.020 --> 23:07.120 Just let the market, just let interest rates go, whatever. 23:07.260 --> 23:12.160 No, of course they always tacitly admit that they want the Fed involved 23:12.160 --> 23:15.260 in the markets to affect interest rates 23:15.260 --> 23:18.280 because they know it has an effect at some level. 23:18.280 --> 23:20.140 And so that's where we are. 23:20.220 --> 23:23.880 However, the Fed can progressively lose more and more control 23:24.560 --> 23:27.820 of interest rate markets and I think we're seeing some of that now 23:27.820 --> 23:34.120 in how in spite of the Fed's efforts, the 10 year, the 30 year, 23:35.880 --> 23:38.420 they're slowly continuing to march upward 23:38.420 --> 23:41.480 which is very different from what we saw the last 35 years 23:41.480 --> 23:43.740 as it was all just this bull market and bonds 23:43.740 --> 23:49.360 and yields were just going down, down, down as prices increased in bonds. 23:49.900 --> 23:54.200 But if that situation persists, right, Jonathan, 23:54.780 --> 23:58.400 these zombie companies, these companies that were relying heavily 23:58.400 --> 24:01.940 on refinancing, that these smaller companies that need to be able 24:01.940 --> 24:04.960 to get loans to stay afloat, it's going to go right back 24:04.960 --> 24:06.220 to what you were talking about, right? 24:06.700 --> 24:08.460 They're not going to be able to survive 24:08.460 --> 24:12.940 whereas larger banks, larger entities that can rely on bailouts 24:12.940 --> 24:14.140 and such, they'll be okay. 24:14.360 --> 24:18.120 So this will just be another step in the destruction of competition 24:18.120 --> 24:20.440 and the destruction of the entrepreneurial economy. 24:20.920 --> 24:22.200 Or am I reading that wrong? 24:22.920 --> 24:23.640 No, no, that's right. 24:23.800 --> 24:28.360 So there are many, I mean, not just firms but whole industries, 24:28.640 --> 24:35.140 whole sectors that are very dependent on consistently low 24:35.140 --> 24:38.840 interest rates or decreasing interest rates for the very reason 24:38.840 --> 24:42.200 that you just described that if they get into any sort of trouble, 24:42.200 --> 24:46.240 they can refinance, they can borrow more money more cheaply 24:46.240 --> 24:47.700 if interest rates are decreasing. 24:48.420 --> 24:51.680 One little bit of nuance that I can add to the discussion 24:51.680 --> 24:54.340 about the Fed's control over interest rates. 24:54.800 --> 24:58.280 I think the right way to think about it is the Fed is a leader 24:58.280 --> 25:00.420 when they're pushing interest rates down 25:00.420 --> 25:02.620 but they're a follower when interest rates are coming back up. 25:03.360 --> 25:08.060 So like you said, the Fed has, they have a lot of control 25:08.060 --> 25:09.960 over interest rates and they can lose control. 25:09.960 --> 25:13.320 The times where they lose control, it's when, you know, 25:13.380 --> 25:17.580 to use Rothbardian language, it's when the market is reasserting itself. 25:18.180 --> 25:21.400 And what that usually looks like from our perspective 25:21.960 --> 25:24.860 is that inflation has become politically unpopular. 25:25.580 --> 25:28.560 So like everybody's asking or blaming the Fed, 25:28.820 --> 25:30.140 blaming the government for inflation 25:30.140 --> 25:35.540 in the way that the Fed is, you know, somewhat not forced 25:35.540 --> 25:40.820 but the way that they respond to that is they allow interest rates to rise. 25:41.240 --> 25:43.180 The key word allow, right? 25:43.300 --> 25:45.120 So they just let the market go back up to, 25:45.840 --> 25:49.480 we're closer to where interest rates would have been or would be 25:49.480 --> 25:52.140 if they didn't have that manipulation from the central bank. 25:52.900 --> 25:55.180 But obviously, like especially during a crisis, 25:55.340 --> 25:57.300 you see short-term interest rates, you know, plunged. 25:57.380 --> 25:58.040 They go way, way down. 25:58.260 --> 26:00.940 And that's obviously the work of the Fed. 26:01.180 --> 26:03.460 That's the central bank that's, you know, pushing interest rates 26:03.460 --> 26:07.360 down to the floor, like we saw for many years, 26:07.680 --> 26:08.480 close to zero. 26:08.780 --> 26:10.600 Like that's not something that would ever happen on the market. 26:10.780 --> 26:14.280 And so that's clearly a central bank manipulation that's doing that. 26:15.980 --> 26:19.600 Well, and I think this brings us back to the issue then of, right, 26:19.720 --> 26:23.140 there are large things going on in the economy that are not just, 26:23.380 --> 26:26.440 that can't be cured with positive attitudes 26:26.440 --> 26:31.120 and Trump saying nice things about how America is the greatest country ever 26:31.120 --> 26:32.520 and all that stuff. 26:32.520 --> 26:33.100 This does not. 26:33.360 --> 26:34.460 Not with that attitude, Rhymes. 26:34.600 --> 26:37.200 All the bad attitude is on, it seems to be coming from your end. 26:38.420 --> 26:40.400 If you truly love America, 26:40.680 --> 26:43.480 you will never say anything negative about its economy. 26:44.580 --> 26:47.480 And that demonstrates just how truly ignorant people are, right? 26:47.580 --> 26:50.820 They think that economies are determined, 26:51.040 --> 26:54.540 that business cycles are determined by how you feel about the economy, 26:55.080 --> 26:57.560 right, that it's all about just expectations. 26:57.900 --> 27:00.700 If you expect the economy to improve, the economy will improve. 27:00.700 --> 27:04.140 If you expect the economy to do poorly, the economy will do poorly, 27:04.220 --> 27:07.600 as if it has nothing to do with capital investment, 27:07.980 --> 27:10.160 it has nothing to do with spending, it has nothing to do with debt, 27:10.300 --> 27:13.600 none of these things, it has nothing to do with monetary inflation. 27:14.520 --> 27:18.620 But the reality is that these things exist in the real world 27:18.620 --> 27:22.380 and the real determinants of business cycles are not how you feel about them. 27:23.540 --> 27:26.800 And so these, this is what's going on in the economy 27:26.800 --> 27:29.700 and Trump is going to have to face this 27:29.700 --> 27:33.960 and what we've seen, of course, is he, of course, has none of the tools, right? 27:34.000 --> 27:35.520 He doesn't understand how things work 27:35.520 --> 27:39.280 and his response is to use government threats and government power 27:39.280 --> 27:46.460 to assert some sort of, I don't know, control over the economy. 27:46.920 --> 27:52.700 What I'm speaking of is this is reflected in Trump's plan 27:52.700 --> 27:58.180 to get rid of the BRICS efforts to create a new currency 27:58.920 --> 28:04.460 and he basically said, hey, you BRICS countries that are plotting to create a new currency 28:04.460 --> 28:10.180 to compete with the dollar, I'm going to slap 100% tariff on all of you countries 28:10.180 --> 28:13.040 if you persist with your attempts to circumvent the dollar. 28:13.880 --> 28:18.660 Now, first of all, note that, no, I don't think that the BRICS countries 28:18.660 --> 28:23.280 are about to create any sort of currency that will directly compete with the dollar. 28:23.580 --> 28:26.420 These countries are mostly basket cases 28:26.420 --> 28:30.900 and I think BRICS is mostly a geopolitical alliance 28:31.420 --> 28:36.380 in attempt to just draw away and reduce, to some extent, 28:36.840 --> 28:39.560 U.S. hegemonic control in the world. 28:39.760 --> 28:40.240 Okay, fine. 28:40.780 --> 28:44.680 And a part of that I think is just to create some sort of alternative to the dollar 28:44.680 --> 28:47.600 which is unlikely to actually compete with the dollar. 28:47.720 --> 28:52.460 But I think it's kind of funny that Trump is basically saying, yep, 28:52.460 --> 28:57.020 we can't expect people to voluntarily use the dollar. 28:58.000 --> 29:02.120 So we'll just start threatening people with ruinous tariffs 29:02.780 --> 29:05.160 because they talk about not using the dollar. 29:05.420 --> 29:08.020 I mean, what an admission that is. 29:08.500 --> 29:14.440 I don't think the dollar is as weak as Trump maybe fears it is 29:14.440 --> 29:16.640 and it could all just be posturing, I don't know. 29:16.680 --> 29:19.420 But the idea that the United States is going around threatening people 29:19.420 --> 29:23.960 for not using the dollar just shows how absurd the situation has become 29:24.600 --> 29:29.620 in terms of U.S. attempts to impose global control on people 29:29.620 --> 29:30.900 by forcing them to use the dollar. 29:31.000 --> 29:32.300 This has been going on, of course, for years, 29:32.400 --> 29:34.600 especially with the Russia sanctions and things like that. 29:35.040 --> 29:37.500 But the whole thing should be regarded as absurd. 29:37.640 --> 29:39.700 What you should be trying to do is strengthen the dollar, 29:39.720 --> 29:42.120 not threatening other people who don't want to use the dollar. 29:42.640 --> 29:45.120 But that would require reigning and deficit spending and such 29:45.120 --> 29:47.000 and obviously this administration is no interest in that. 29:47.780 --> 29:52.360 Yeah, what you just said is right before you mentioned deficit spending 29:52.360 --> 29:53.880 is exactly what I was going to respond. 29:54.120 --> 29:58.180 So if you try to use force, if you try to use tariffs, 29:58.800 --> 30:01.140 any sort of barrier to trade, economic sanctions, 30:02.020 --> 30:07.200 and your goal is to increase the use of the dollar in international trade, 30:07.920 --> 30:09.860 then you're actually going to get the opposite result. 30:10.100 --> 30:12.440 You're actually going to drive people further away from the dollar. 30:12.600 --> 30:14.680 So if you want more people to use the dollar, 30:14.680 --> 30:19.840 then you don't threaten something that would decrease international trade 30:19.840 --> 30:21.400 using dollars, right? 30:22.220 --> 30:27.300 And like the biggest headlines that people around the world were looking at 30:27.300 --> 30:30.920 when they were, when they're contemplating the future of the dollar 30:30.920 --> 30:36.440 is like, well, look, the U.S. seems comfortable to basically use the dollar as a weapon. 30:36.880 --> 30:42.020 So like we'll remove your ability to use dollars and dollar-denominated assets. 30:42.020 --> 30:44.740 In fact, we'll even confiscate from them if we don't like you. 30:45.600 --> 30:49.620 And so that has actually caused people to, because of that threat, 30:50.180 --> 30:54.740 because if I think that the U.S. might do that against me and my country, 30:54.880 --> 30:58.700 then maybe I'll start using or looking at different currencies besides the dollar. 30:59.480 --> 31:06.000 And so, I mean, it's just a great example of, I guess we'd call it unintended consequence. 31:06.740 --> 31:08.940 But like you said, it could just be posturing. 31:10.140 --> 31:13.460 A lot of people have been talking about tariffs lately. 31:14.580 --> 31:18.720 And it's sort of, it's hard for me to comment on it, 31:18.720 --> 31:22.880 because a lot of the proposals for tariffs and the rationale behind them, 31:23.600 --> 31:26.420 while some of it is economic, a lot of it is not economic. 31:26.640 --> 31:29.620 And really like what economics can say about tariffs is very different 31:29.620 --> 31:35.380 than what political science can say about tariffs or in other arenas. 31:35.900 --> 31:40.280 So like if you're using the threat of a tariff to try to get a country to do a certain thing 31:40.280 --> 31:42.420 and act a certain policy or remove a certain policy, 31:42.800 --> 31:45.380 that's totally different than the economic analysis of tariffs 31:45.380 --> 31:47.500 and you're talking about specialization between countries, 31:47.600 --> 31:49.240 comparative advantage and all that sort of thing. 31:50.100 --> 31:53.980 And so it could be like a similar situation here where you're right, 31:54.000 --> 31:56.740 maybe it is just posturing, maybe Trump is just trying to, you know, 31:57.300 --> 32:00.820 force their hand, but it could be a bluff. Who knows? 32:01.140 --> 32:03.240 Well, and I'm going to kind of push back a little bit on that, 32:03.240 --> 32:07.320 because I think that one of the dynamics of this I think needs to, you know, 32:07.360 --> 32:08.540 it's kind of interesting, right? 32:08.660 --> 32:13.380 Because what essentially, that sort of Trump threat about the BRICS is, right, 32:13.560 --> 32:17.320 is he is calling essentially for normalization of trade relations 32:18.240 --> 32:21.800 with countries that there's been foreign policy escalation, right? 32:22.480 --> 32:25.840 And yet the projection of Trump and he leaned into it heavily on the trail, right? 32:25.920 --> 32:28.700 He's like, oh, there's no better word than the English language than tariffs, right? 32:29.080 --> 32:31.820 Well, like if you actually believe that, right, if that is your economic policy, 32:32.660 --> 32:35.240 then you would have subscribed that to protectionism, 32:35.280 --> 32:38.540 but if you are a protectionist, then why is, you know, 32:38.600 --> 32:42.360 then why are you projecting a desire essentially for more trade with BRICS countries? 32:43.100 --> 32:46.280 And I think this is where kind of that tariff as a negotiation point. 32:46.400 --> 32:49.880 I mean, we saw this with, I think, the, you know, him tweeting about Canada 32:49.880 --> 32:52.660 and Mexico and, right, wanting to get Mexicans, 32:53.600 --> 32:56.000 Mexico's cooperation with immigration policy or if not, 32:56.100 --> 32:57.040 we're going to raise your tariffs, right? 32:57.340 --> 32:58.740 You know, there's definitely a big aspect of it. 32:58.740 --> 33:02.300 We saw this play out in a big time with the Trump first administration, right, 33:02.400 --> 33:04.360 was tariffs essentially as a negotiation ploy, 33:04.620 --> 33:11.000 an escalation for negotiations, sort of tactics that we saw in a number of aspects there. 33:12.000 --> 33:17.800 But I think that's an interesting, you know, there's an interesting tension 33:17.800 --> 33:22.220 between a desire to normalize trade relations with the BRICS 33:22.220 --> 33:26.520 as a way of getting them to abandon dollar rivalries there 33:26.520 --> 33:30.740 and with this notion of Trump as trying to establish a protectionist regime. 33:31.380 --> 33:35.680 And I think if you actually look at, you know, to the extent that personnel's policy 33:35.680 --> 33:39.480 is worth mentioning as well, is that one of the biggest proponents 33:39.480 --> 33:44.540 for protectionist-style policies in Trump's campaign orbit 33:44.540 --> 33:49.060 was Robert Lighthizer, who was part of the Trump campaign first time around. 33:49.160 --> 33:52.720 He's kind of one of the true believers on the tariff side of things 33:52.720 --> 33:56.800 pushing back against, you know, his minutiae and kind of the more status quo 33:56.800 --> 33:58.380 sort of folks that he had. 34:00.060 --> 34:04.260 Goldman Sachs guy was chairman of National Economic Council and things like that, right? 34:05.020 --> 34:05.820 He is not in the administration. 34:06.540 --> 34:09.520 Like, he wanted commerce, he wanted treasury, he got neither of those positions. 34:10.040 --> 34:17.320 Instead, you do have, I can't remember his name at the top of his head, 34:17.380 --> 34:20.800 but you have the transition guy that is at commerce who's a little more aggressive. 34:20.800 --> 34:22.580 He's talked a little bit about the tariff issue more, 34:22.660 --> 34:27.800 but some of the true trade hawks are not in this administration as it stands right now. 34:27.920 --> 34:30.660 You have a little bit more of a status quo, I don't say status quo necessarily, 34:31.020 --> 34:34.000 but kind of conventional wisdom sort of crowd there. 34:34.120 --> 34:38.300 I mean, these are not people that, you know, his chair of National Economic Council 34:38.300 --> 34:40.740 was, you know, a Bush guy, which, you know, kind of, you know, 34:40.960 --> 34:42.040 you can snark at that a little bit. 34:42.500 --> 34:46.920 But I think it's that aspect of international trade normalization 34:46.920 --> 34:51.300 as a goal in trying to extract certain aspects of policy, 34:51.440 --> 34:53.700 whether it's foreign policy angles, right? 34:53.860 --> 34:58.420 Is that a carrot, essentially, for negotiations with Russia and Ukraine and things like that? 34:58.760 --> 35:01.740 I think that has to be acknowledged as an aspect of that equation 35:01.740 --> 35:05.080 because, again, there is an inherent tension between a protectionist Trump 35:05.080 --> 35:08.000 and a, you know, I'm going to threaten your trade, Trump, 35:08.180 --> 35:10.460 as a negotiations tool when it comes to the BRICS. 35:10.880 --> 35:12.920 And when it comes to the spending side of it, though, like, it's, 35:12.920 --> 35:16.940 to me, like, if we're going to measure the long term, you know, the success of Trump in four years, 35:17.540 --> 35:20.100 it's going to come down to the measure that we started the show with, right? 35:20.280 --> 35:24.480 Is it easier to buy a house in 2008 than it was in 2024? 35:25.140 --> 35:26.480 And the Fed can't do that. 35:27.280 --> 35:29.220 It's all going to come down to the spending side of things. 35:29.700 --> 35:32.940 And so basically, the entire success is, is there genuine, you know, 35:33.040 --> 35:37.880 is there an actual concerted effort with political buy-in to cut spending? 35:37.880 --> 35:42.280 Is Doge, is Elon Musk, is Vivek Ramaswamy, is, you know, 35:42.320 --> 35:47.540 Russ Vaughn, the OBM guy, are they successful at cutting spending? 35:47.640 --> 35:48.640 That's the entire equation. 35:48.780 --> 35:51.200 Is the U.S. capable of cutting spending? 35:51.340 --> 35:54.120 And I feel like if we can't do it right now with this political, 35:54.400 --> 35:56.500 if we can't do, if we can't cut spending in the next four years, 35:56.660 --> 35:59.880 our political system is incapable, fundamentally, 36:00.080 --> 36:02.560 systemically incapable of cutting spending. 36:02.860 --> 36:04.700 And that's where everything comes down to is, is there, 36:04.700 --> 36:07.700 is there any ability using every single tool, 36:08.180 --> 36:10.360 these new billionaires that are in the Trump orbit, 36:10.700 --> 36:11.240 all this sort of stuff? 36:11.360 --> 36:14.560 Is that the ability to cut spending in the next four years? 36:14.660 --> 36:16.240 And if we can't, then we're on the road to ruin. 36:16.860 --> 36:18.440 But like that's where everything comes down to, 36:18.480 --> 36:22.520 that's where all these, everything comes down to that single question. 36:22.860 --> 36:25.100 And it's going to be very interesting to see how that project plays out. 36:25.580 --> 36:27.640 Yeah, all the talking about bricks and everything, 36:27.800 --> 36:29.980 it all just strikes so much of what's coming out, 36:30.080 --> 36:32.620 like all this obsession about how we're going to fire federal workers 36:32.620 --> 36:33.360 and all this stuff. 36:33.360 --> 36:35.360 There's more government, there's more federal contractors 36:35.360 --> 36:36.460 than there are federal employees. 36:36.880 --> 36:39.080 That's just kind of dancing around the issue of this, 36:39.180 --> 36:41.040 all this stuff about, oh, we can't, 36:41.040 --> 36:42.580 they're already setting us up for failure. 36:42.660 --> 36:44.960 They're already preparing us for failure by talking about 36:44.960 --> 36:47.000 how it's going to be so hard to fire federal employees. 36:47.300 --> 36:50.520 They could get rid of more federal workers 36:50.520 --> 36:52.620 by just firing all the contractors 36:52.620 --> 36:55.000 and you would be left with a small shell 36:55.000 --> 36:56.740 and none of those people are protected by civil service. 36:57.020 --> 37:00.200 So the whole, so that's just one way to distract away 37:00.200 --> 37:01.920 from the real issue, which is cutting spending. 37:01.920 --> 37:03.900 And the whole bricks thing strikes me, 37:03.920 --> 37:06.560 it's just a distraction from the easy, lazy, fair way 37:06.560 --> 37:08.360 to get more people to use the dollar. 37:08.720 --> 37:09.820 How do you get more people to use the dollar? 37:09.980 --> 37:14.380 Stop inflating the money supply, stop deficit spending. 37:14.740 --> 37:17.060 You don't have to even abolish the Fed or anything, right? 37:17.300 --> 37:19.480 And I think you've talked about this before, Jonathan. 37:19.700 --> 37:22.520 It's right, just stop the Fed's ability to buy assets. 37:22.980 --> 37:26.020 Just have the Fed stop buying up trillions 37:26.660 --> 37:28.360 in mortgage-backed securities, 37:28.360 --> 37:31.420 in government treasuries. 37:31.740 --> 37:33.720 And you better believe that the next time 37:33.720 --> 37:35.840 there's any sort of financial crisis or recession, 37:36.100 --> 37:37.780 the Fed's going to be right back to that. 37:38.200 --> 37:40.200 It's going to be doing it all over again. 37:40.980 --> 37:43.700 And then you're going to have to start to see real doubts 37:43.700 --> 37:45.100 about the dollar again. 37:45.500 --> 37:46.820 So, yeah, I don't know. 37:46.900 --> 37:51.020 My attitude is spare me all of the gestures 37:51.020 --> 37:53.920 about international relations and stuff. 37:54.620 --> 37:56.420 Just stop doing things. 37:58.020 --> 37:59.360 Stop printing money. 38:00.600 --> 38:02.880 Stop engaging in runaway spending. 38:03.540 --> 38:05.440 This isn't rocket science. 38:06.980 --> 38:10.880 And also, all of this other stuff, 38:11.040 --> 38:12.740 talking about what other countries are doing, everything, 38:13.020 --> 38:15.640 that expends capital, political capital as well, right? 38:15.700 --> 38:16.940 There's only so many hours in the day. 38:17.020 --> 38:18.180 You can talk about cutting spending, 38:18.380 --> 38:21.580 or you can talk about making Brazil do what you want. 38:22.200 --> 38:24.540 They have chosen to threaten Brazil 38:24.540 --> 38:27.520 and talk about making Brazil use the dollar, et cetera, et cetera, 38:27.540 --> 38:28.380 as how it's being framed. 38:29.560 --> 38:33.320 That's fine, but they're just trying to distract 38:33.320 --> 38:35.020 from the real issue of cutting spending. 38:35.120 --> 38:36.540 And I completely agree, of course, though, 38:36.620 --> 38:37.880 that if they can't cut spending now, 38:38.020 --> 38:39.000 it ain't going to ever happen. 38:40.420 --> 38:42.020 And I don't think it's going to happen. 38:42.260 --> 38:44.940 I think the United States has locked into a downward spiral 38:44.940 --> 38:46.820 just like the Soviet Union was in the 80s. 38:46.920 --> 38:48.320 With all those attempts at reform, 38:48.760 --> 38:50.400 it all led to the same place. 38:51.280 --> 38:54.540 Ultimate disillusion, political disillusion. 38:56.820 --> 38:58.300 And economic chaos. 38:58.820 --> 39:01.120 And ultimately, hyperinflation, 39:01.280 --> 39:05.100 which is what occurred at the end days of the Soviet Union. 39:05.620 --> 39:08.800 So that's what... 39:08.800 --> 39:10.980 America's just going to split up into smaller pieces. 39:11.280 --> 39:14.500 It's going to go through a period of extreme economic trial 39:14.500 --> 39:16.300 because I just don't see how they're going to be cutting 39:16.300 --> 39:17.060 a trillion dollars. 39:17.140 --> 39:18.980 There's nothing about the Trump administration 39:18.980 --> 39:20.620 that would lead us to believe any willingness 39:21.200 --> 39:22.700 to do any of this. 39:23.100 --> 39:25.060 It was under the Trump administration that we started 39:25.060 --> 39:29.240 to see trillion-dollar peacetime deficits 39:29.240 --> 39:31.040 during an economic expansion. 39:31.460 --> 39:33.960 They were running like 900 billion deficits. 39:34.360 --> 39:36.440 Well, we were told everything was great. 39:36.920 --> 39:38.860 The Fed told us in 2018, 2019, 39:38.860 --> 39:39.900 the economy's great. 39:40.360 --> 39:42.380 It's peacetime, theoretically. 39:43.160 --> 39:46.900 And there's no reason to run deficits that size. 39:46.980 --> 39:47.660 And yet they did. 39:47.660 --> 39:49.820 And then, of course, for 2020, 39:50.160 --> 39:52.620 everything went through the roof in the Trump administration, 39:53.180 --> 39:53.360 right? 39:53.620 --> 39:57.140 He wanted to ram through massive new spending bills during COVID. 39:57.780 --> 40:01.640 That's when he tried to get Thomas Massey thrown out 40:01.640 --> 40:02.520 of the House of Representatives 40:02.520 --> 40:05.500 because Thomas Massey dared give a damn about the U.S. Constitution 40:05.500 --> 40:07.040 and Trump said, screw that. 40:07.280 --> 40:09.000 No, we have no time for the Constitution. 40:09.280 --> 40:10.820 We have to spend a trillion dollars. 40:11.640 --> 40:14.520 And I mean, that's the real dynamic of this administration. 40:14.520 --> 40:20.800 And yeah, I'm predicting no meaningful cuts to spending 40:20.800 --> 40:23.980 and it's just going to continue going where it's going. 40:24.080 --> 40:29.360 I see the Trump administration is kind of the early birth pangs. 40:30.040 --> 40:36.020 These are the early contractions in a process 40:36.020 --> 40:37.940 that brings about a new political system. 40:38.020 --> 40:42.600 But we're so far from any sort of real meaningful reform 40:42.600 --> 40:46.680 because no one's willing to do what it takes to actually change anything. 40:47.100 --> 40:53.820 So it's going to be lots of talk about the administration is going to come up 40:53.820 --> 40:59.980 with a dozen different ways to preserve the U.S. economic system 40:59.980 --> 41:04.700 and the dollar without actually doing the thing that would preserve the dollar 41:04.700 --> 41:06.260 and the American economic system, 41:06.260 --> 41:10.880 which is reducing the role of the U.S. federal government in the economy. 41:10.880 --> 41:15.900 They just have no interest in doing that outside of some deregulation, 41:16.000 --> 41:17.740 which would be great and will help. 41:17.960 --> 41:24.060 But it's just nothing compared to the monetary and the spending issue, 41:24.100 --> 41:28.860 which is so far out of control, so wild, so insane by historical standards 41:28.860 --> 41:32.880 that that's where the real problem lies 41:32.880 --> 41:35.020 and I just don't see any willingness to do anything about that. 41:36.220 --> 41:38.180 Well, Merry Christmas everyone. 41:38.180 --> 41:43.200 If that doesn't put you in a cheery Christmas spirit, then I don't know what will. 41:43.680 --> 41:45.060 But I completely agree. 41:45.420 --> 41:50.240 It looks like there's some political will to decrease regulations. 41:50.960 --> 41:56.240 Like you see Elon and Vivek on Twitter and they're chomping at the bit 41:56.240 --> 42:01.280 to take apart some agencies, take apart some regulations. 42:01.900 --> 42:05.040 But one thing that we haven't mentioned in this episode 42:05.040 --> 42:11.120 is that a huge chunk of government spending is stuff that would be untouchable by the doge, 42:11.200 --> 42:13.160 which is like social security, Medicare, Medicaid. 42:14.700 --> 42:18.780 I mean, they might be able to do something with defense spending, 42:18.780 --> 42:20.080 but even that is a stretch. 42:20.560 --> 42:26.180 I don't think that there's not enough political will to touch the defense side of things. 42:26.520 --> 42:32.620 So, yeah, it's, I mean, to use an overuse analogy, 42:32.620 --> 42:35.660 a lot of it might just be rearranging the deck chairs in the Titanic. 42:36.000 --> 42:37.900 Well, and going to the question of political will, 42:38.180 --> 42:42.860 this is I think the larger issue is that it really doesn't matter what the administration is. 42:44.300 --> 42:49.500 If you were to look back and you look at pre-COVID, COVID being what it is, 42:50.400 --> 42:54.040 if you look at the budgets that the Trump administration put out regularly, 42:54.300 --> 42:55.380 there were spending cuts. 42:55.460 --> 42:57.220 They weren't significant, but there were spending cuts. 42:57.580 --> 43:00.300 The problem is the budget process is controlled by the legislature 43:00.300 --> 43:04.500 and the legislature has no interest in getting rid of studies 43:04.500 --> 43:07.440 studying the cocaine habits of quails in their sex drive, right? 43:07.800 --> 43:11.440 Because somebody, some congressional district, benefits from that money. 43:12.160 --> 43:16.680 And so that's what's going to be interesting is what is the stick that is, 43:17.200 --> 43:20.660 so let's say that Elon and Vivek, 43:20.880 --> 43:23.760 let's say that there's genuine desire within the Trump administration itself, 43:23.880 --> 43:25.560 within the White House to do spending cuts. 43:25.560 --> 43:30.780 Then the question is what tools do they have to browbeat Congress, 43:30.960 --> 43:33.220 to browbeat the legislature into following through? 43:34.060 --> 43:36.560 And that's going to be the interesting question. 43:36.660 --> 43:39.900 And that's where Elon on the board is the most interesting player here, 43:40.480 --> 43:44.680 because his politics is as new-refound as his interest in all of this. 43:45.080 --> 43:48.480 Is this a hobby or is this something he's actually going to dedicate the next couple of years to? 43:48.720 --> 43:52.020 Because this guy is seven times wealthier than George Soros. 43:52.020 --> 43:54.660 And we've seen the ability of George Soros to shake up things, 43:54.820 --> 43:56.460 the little niches that he wants within the political process. 43:56.760 --> 43:59.800 Is he going to go out there and threaten every single Republican congressman 43:59.800 --> 44:01.100 that doesn't go along with spending cuts? 44:01.740 --> 44:03.560 Is there anything procedurally, right? 44:03.760 --> 44:10.580 Like the one area where you actually see government programs shut down 44:11.120 --> 44:15.340 is when they do sort of, when they close down military bases. 44:15.780 --> 44:17.960 And you have to have buy-up up front because you know whenever, 44:18.100 --> 44:20.060 whenever you actually know what bases are going to be shut down, 44:20.060 --> 44:21.220 there's going to be a move to protect it, right? 44:21.280 --> 44:23.640 So you have to get buy-up up front to let the process play out. 44:24.340 --> 44:29.580 And that's where it's kind of small potato-y sort of like C-span level politics, right? 44:29.820 --> 44:33.280 But like, there was an opportunity, very small, 44:34.020 --> 44:36.460 when like the Republican House caucus was like creating their rules, 44:36.640 --> 44:38.440 where like if you vote against, like they could have put it in that, 44:38.500 --> 44:42.280 if you vote against those recommendations and you lose all your perks, right? 44:42.340 --> 44:43.520 You can't go to the gym or something like that, right? 44:44.180 --> 44:47.120 There's little elements in terms of the procedure up front 44:47.120 --> 44:51.020 to force Congress to go along with any proposals that come out from this force. 44:51.440 --> 44:52.780 And so far they haven't done that yet. 44:53.300 --> 44:54.600 Now, are they? Well, we'll see. 44:55.020 --> 44:56.620 But like that's where everything's going to come down to 44:56.620 --> 45:00.160 is can they browbeat Congress into following through on cuts 45:00.900 --> 45:03.320 presuming that the administration is serious about those cuts. 45:03.760 --> 45:05.220 And those are two variables there. 45:05.360 --> 45:08.300 I think the first variable is even a bigger question mark than the second one. 45:08.800 --> 45:10.260 But like that, that's the problem though, 45:10.340 --> 45:12.480 is that it doesn't matter who you elect as president 45:12.480 --> 45:16.300 when the entire system of government is built upon 45:16.300 --> 45:18.320 bringing bacon back home to your district 45:18.320 --> 45:20.340 so you don't lose elections 45:20.780 --> 45:23.440 or even worse, lose the respect of your local Chamber of Commerce 45:23.440 --> 45:25.960 and whatever, you know, specific donors that are unique to you. 45:26.300 --> 45:29.820 And that is the problem, is that we are systemically structurally built 45:29.820 --> 45:31.940 to have the government budget go up and up and up 45:31.940 --> 45:35.220 until something radical changes there, everything else is rhetoric. 45:36.900 --> 45:39.840 Well, on that, there is one thing that the president can do. 45:40.020 --> 45:44.300 I recently, or possibly, I was listening to Rand Paul 45:45.280 --> 45:48.580 he was on Larry Kudlow's show and he had this interesting idea 45:48.580 --> 45:53.520 for Trump to actually renew, propose to renew 45:53.820 --> 45:55.500 all these regulations and programs 45:55.500 --> 45:58.820 and that would actually force a vote on those things in Congress. 45:59.100 --> 46:03.040 So a lot of these programs and regulations are built with 46:03.040 --> 46:07.040 like specific, you know, time horizons where they have to exist 46:07.040 --> 46:10.500 and like you can't vote on it until you actually 46:11.380 --> 46:13.460 like get to the end of one of those time horizons 46:13.460 --> 46:16.100 but the way that Trump can actually force Congress's hand 46:16.100 --> 46:18.000 to actually do some voting on all these things 46:18.000 --> 46:21.460 is counterintuitively to renew them today. 46:21.820 --> 46:27.840 Like basically say, okay, yes, we are going to do this program. 46:28.580 --> 46:30.860 I don't know all the politics of it, 46:31.540 --> 46:34.320 but if he goes in and he renews all of these regulations 46:34.320 --> 46:36.460 and programs and agencies, then that would actually 46:36.460 --> 46:38.740 force Congress to go in and do an up or down vote 46:38.740 --> 46:40.400 on all these things, which, I mean, 46:40.400 --> 46:42.320 that would be a circus I would love to watch. 46:43.440 --> 46:46.800 Well, yeah, God forbid Congress be involved in anything 46:46.800 --> 46:48.940 that actually affects your daily life. 46:49.140 --> 46:51.440 I mean, that's basically the federal government's on autopilot, 46:51.440 --> 46:54.880 right, is they passed all of these new laws 46:54.880 --> 46:58.440 creating regulatory bodies and then it just becomes 46:58.440 --> 47:00.040 the domain of the administrative state, 47:00.080 --> 47:03.120 which determines what all the regulations are. 47:03.320 --> 47:04.960 They have their own internal judge, 47:05.200 --> 47:08.780 their own internal legal system that determines all of that 47:08.780 --> 47:10.680 and some progress has been made on that, 47:10.740 --> 47:13.180 like with the Chevron decision being overturned 47:13.180 --> 47:13.940 and that sort of thing. 47:14.660 --> 47:16.760 And we do have yet to see that play out. 47:16.940 --> 47:21.020 I think maybe there's some good stuff from the administration 47:21.020 --> 47:23.740 on that in terms of the regulatory state 47:23.740 --> 47:25.080 and again, that will help. 47:25.400 --> 47:27.740 That will be a move in the right direction, 47:28.500 --> 47:31.620 but it's not going to fix the business cycle issue. 47:31.760 --> 47:33.500 It's not going to fix the monetary inflation. 47:33.820 --> 47:35.020 It's not really going to make, 47:35.040 --> 47:36.960 it's going to make life marginally more affordable, 47:36.960 --> 47:39.220 but it's not really going to solve any fundamental problems. 47:40.780 --> 47:42.320 One thing that will be interesting too, 47:42.400 --> 47:44.560 and this will be something we can monitor for the next month, 47:45.120 --> 47:48.000 is what does the Biden administration do 47:48.000 --> 47:53.460 to proactively harden some of these aspects 47:54.120 --> 47:58.860 of the administrative state of civil service rules 47:58.860 --> 47:59.880 and things like that. 47:59.900 --> 48:01.880 I already saw that I think it's the Social Security 48:01.880 --> 48:05.920 Administration Union was able to extend their remote work package 48:05.920 --> 48:08.000 going through 2029. 48:08.260 --> 48:09.200 Funny how that day comes up. 48:10.400 --> 48:11.560 There was a project. 48:11.880 --> 48:15.900 I think it was kind of a James O'Keefe's group, 48:16.140 --> 48:19.780 of EPA people talking about just pushing grant money out 48:19.780 --> 48:22.460 into their kind of special NGO classes. 48:22.940 --> 48:25.220 They're basically just looting in the Treasury mode right now, 48:25.380 --> 48:29.920 just taking the gold outside of the actual administration itself 48:29.920 --> 48:31.820 because you don't want Trump people putting it 48:31.820 --> 48:34.760 in the hands of allies right now before getting it done. 48:34.760 --> 48:36.560 I think the next month is going to be very interesting 48:36.560 --> 48:38.160 because for all of our cynicism, 48:38.760 --> 48:40.660 I think that there are people in D.C. 48:41.260 --> 48:43.480 who have gotten rich and fat off these things 48:43.480 --> 48:46.800 that at the very least they recognize the next four years 48:47.720 --> 48:49.660 expands the level of possibilities 48:49.660 --> 48:51.400 than perhaps in the past. 48:51.800 --> 48:53.980 I think they are taking these threats very seriously 48:53.980 --> 48:57.760 and so their kind of proactive attempts to counteract 48:58.280 --> 49:01.340 or to protect against any attempts at serious reform 49:01.340 --> 49:03.040 are themselves going to be very interesting 49:03.040 --> 49:04.920 and telling in its own right. 49:05.380 --> 49:06.960 That's without even getting into the pardon issue 49:06.960 --> 49:09.200 and how many deep state crooks are going to end up getting 49:09.200 --> 49:10.680 pardons before Biden lays office. 49:10.860 --> 49:12.740 But I think that's going to be a very interesting story 49:12.740 --> 49:14.960 for the next six weeks or so until we get to the Trump 49:16.200 --> 49:19.340 inauguration because what is the deep state's reaction 49:19.340 --> 49:22.600 to the possibility of change going forward 49:22.600 --> 49:23.960 is going to be very, very telling 49:23.960 --> 49:25.600 on how they view things going forward. 49:26.820 --> 49:27.480 All right. 49:27.580 --> 49:29.440 Well, we'll go ahead and wrap up with that then 49:29.440 --> 49:31.720 for this episode of Radio Rothbard. 49:31.720 --> 49:33.040 Thank you everyone for listening. 49:33.300 --> 49:35.240 Thank you, Jonathan, for joining us today 49:35.900 --> 49:37.760 and we'll be back next week with more. 49:38.020 --> 49:38.880 We'll see you next time.