WEBVTT 1 00:00:00.280 --> 00:00:03.279 There's a new source waiting to bring you inside Ireland's 2 00:00:03.279 --> 00:00:07.120 most serious cases. At crimeworld dot com, we take you 3 00:00:07.240 --> 00:00:14.400 behind the headlines and dig deep into each case because 4 00:00:14.400 --> 00:00:19.679 we believe every crime has a story and while others 5 00:00:19.719 --> 00:00:23.600 tell you who, what and where I come down, our 6 00:00:23.640 --> 00:00:29.120 reporting exists to tell you why crime World get into crime. 7 00:00:30.760 --> 00:00:34.880 Because PwC understands your business, we provide you with AI 8 00:00:34.960 --> 00:00:39.039 solutions that deliver real impact Taylor AI for your business 9 00:00:39.200 --> 00:00:43.399 at PwC dot Ie PwC so. 10 00:00:43.439 --> 00:00:47.240 You can In Ireland, it can be hard to get 11 00:00:47.320 --> 00:00:49.399 enough vitamin D from the sun, but did you know 12 00:00:49.439 --> 00:00:51.960 that ninety percent of us also don't get enough vitamin 13 00:00:52.039 --> 00:00:54.640 D from the food we eat. 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Figures based on twenty twenty three f 20 00:01:13.959 --> 00:01:14.319 s a I. 21 00:01:14.400 --> 00:01:20.560 Report meaning a live man like this man letting butterfly 22 00:01:20.680 --> 00:01:22.879 flapping his wing, dig down in the forest Man, it 23 00:01:22.920 --> 00:01:26.079 gonna cause a tree fall, letting five thousand miles away. 24 00:01:26.120 --> 00:01:27.560 Man, nobody's seen. 25 00:01:27.439 --> 00:01:33.079 Nobody who. 26 00:01:33.200 --> 00:01:35.760 You don't need No, Man, we don't like you followed 27 00:01:35.799 --> 00:01:39.799 another story and you got ed like that. That's the win. Man, 28 00:01:40.200 --> 00:01:43.040 don't blackly down on the panel, man, Man don't matter. 29 00:01:43.120 --> 00:01:54.359 Man, you know the stormy. It is actually quite difficult 30 00:01:54.359 --> 00:01:58.560 to record with you, not necessarily because of your scheduling 31 00:01:59.319 --> 00:02:02.159 or you know, don't have anything interesting to say, because 32 00:02:02.159 --> 00:02:04.280 I swear every time we do this, we end up 33 00:02:04.319 --> 00:02:07.000 talking for like half an hour before even get rolling 34 00:02:07.159 --> 00:02:12.360 about just completely unrelated things like goy beams and literary 35 00:02:13.319 --> 00:02:14.759 literally release release. 36 00:02:21.400 --> 00:02:24.759 Oh man, it's all it's all true. It's good to 37 00:02:24.800 --> 00:02:27.919 be back. I wish one of these times we're gonna 38 00:02:27.960 --> 00:02:29.680 have to I'm gonna have to come on and talk 39 00:02:29.719 --> 00:02:31.840 about something positive. But today is not going to be 40 00:02:31.840 --> 00:02:33.680 that day. 41 00:02:34.199 --> 00:02:37.560 Yeah, today is most certainly not that day. 42 00:02:38.280 --> 00:02:38.759 Uh. 43 00:02:39.159 --> 00:02:43.319 So we're going to talk about a couple of things. 44 00:02:44.360 --> 00:02:52.240 Inflation for one, uh but more generally kind of the 45 00:02:52.280 --> 00:02:58.759 all of the compounding issues from uh basically the Federal 46 00:02:58.800 --> 00:03:04.159 Reserve and setting interest rates. Right, there's a really interesting 47 00:03:04.240 --> 00:03:07.680 discussion to be had about Canada. That you know, we 48 00:03:07.719 --> 00:03:10.680 can get into in a little bit, but I think 49 00:03:10.719 --> 00:03:15.919 it's important to talk about this because if you've really 50 00:03:16.360 --> 00:03:19.840 heard anyone talk about this, who's outside of the band 51 00:03:20.039 --> 00:03:25.319 of normal people, right who depend on something other than 52 00:03:26.000 --> 00:03:29.719 assets for their daily living expenses. Sort of hard to 53 00:03:29.759 --> 00:03:34.879 bridge that golf, because what really prompted this discussion was 54 00:03:34.919 --> 00:03:36.479 a comment, you know, when you and I were going 55 00:03:36.520 --> 00:03:38.400 back and forth about this, where I just asked an 56 00:03:38.439 --> 00:03:43.479 open question of how much of the growth in the 57 00:03:43.520 --> 00:03:48.479 market since eight plus or minus is actually due to 58 00:03:48.759 --> 00:03:51.400 the market growing and how much of it is just inflation. 59 00:03:52.199 --> 00:03:54.800 Because in that conversation we were talking about the fact that 60 00:03:55.840 --> 00:04:00.680 really we've been in a recession of some type pretty 61 00:04:00.719 --> 00:04:04.680 much off and on ever since that we never really recovered. 62 00:04:05.439 --> 00:04:08.240 And I saw this happen in real time as I 63 00:04:08.280 --> 00:04:12.840 finished up college, where the Biden admin just changed the 64 00:04:12.840 --> 00:04:16.000 definition of what a recession was, so we magically weren't 65 00:04:16.079 --> 00:04:20.079 in a recession. It's magic words theory of economic analysis. 66 00:04:20.839 --> 00:04:24.160 But once I did some digging, and people will know this, 67 00:04:24.160 --> 00:04:26.920 this isn't the most esoteric knowledge, I realized that well, 68 00:04:27.160 --> 00:04:31.079 that exact exact same thing happens to inflation, right The 69 00:04:31.120 --> 00:04:34.199 way that it is measured is completely and totally contrived. 70 00:04:34.639 --> 00:04:39.079 So that was really the genesis of this conversation. And yeah, man, 71 00:04:39.160 --> 00:04:40.360 I'll kick it to your story. 72 00:04:41.240 --> 00:04:48.279 All right. So if we take the SMP Composite Index, 73 00:04:48.680 --> 00:04:55.439 I have it up somewhere here, all right, the real return. 74 00:04:55.680 --> 00:04:59.680 So let's just say I think that what is the 75 00:05:00.160 --> 00:05:03.480 when you see what the overall adjusted or what the inflation? 76 00:05:03.480 --> 00:05:07.839 What the h we'll say the S and P andrew 77 00:05:09.319 --> 00:05:17.120 annual return for twenty twenty five, right, it was nine 78 00:05:17.160 --> 00:05:24.240 point three percent by year end, all right, so that's 79 00:05:24.279 --> 00:05:30.560 not great. But what's the actual rate of inflation? Well, 80 00:05:31.600 --> 00:05:35.680 I can tell you it's not two percent. You probably 81 00:05:35.720 --> 00:05:40.480 already know it's not two percent, right, so actual inflation? See, 82 00:05:40.519 --> 00:05:42.879 all right, it's just this is funny. This is funny. 83 00:05:43.639 --> 00:05:45.680 You know how you just said, like the Biden admin 84 00:05:46.519 --> 00:05:52.439 changed the definition of what a recession was, and everyone 85 00:05:52.439 --> 00:05:57.079 and we thought that was really funny. Everyone online joked 86 00:05:57.079 --> 00:06:05.040 about it. But what everyone didn't I guess didn't know 87 00:06:05.519 --> 00:06:09.439 or maybe knew a long time ago and forgot. The 88 00:06:09.519 --> 00:06:14.600 Federal Reserve has changed the rate at which it calculates 89 00:06:14.639 --> 00:06:19.160 inflation three or four times now since you've been born. 90 00:06:22.639 --> 00:06:27.839 So basically, when something is inconvenient, they just stop calculating it. 91 00:06:29.000 --> 00:06:35.399 So in nineteen eighty we used to factor things like 92 00:06:35.480 --> 00:06:45.120 housing costs, energy costs, healthcare into our inflation metric our CPI, 93 00:06:48.399 --> 00:06:51.639 and then in nineteen ninety we threw out two of 94 00:06:51.680 --> 00:06:59.800 those things, and in two thousand we threw out even 95 00:06:59.800 --> 00:07:05.800 more things. So now when we calculate inflation, the cost 96 00:07:05.839 --> 00:07:12.879 of housing is not included, the cost of houses not included, 97 00:07:14.879 --> 00:07:19.639 the cost of energy not included, the cost of health 98 00:07:19.639 --> 00:07:24.000 care not included, and they'll probably throw out groceries too, 99 00:07:24.680 --> 00:07:28.519 So maybe they'll just calculate inflation on, you know, the 100 00:07:28.680 --> 00:07:33.439 cost of streaming services. I don't fucking know. So if 101 00:07:33.439 --> 00:07:38.959 we were to calculate inflation on what inflation used to 102 00:07:39.000 --> 00:07:43.920 be calculated on, right, the nineteen eighty methodology is probably 103 00:07:43.959 --> 00:07:47.879 the most honest we've ever been. And if I look 104 00:07:47.920 --> 00:07:53.399 at that same inputs just calculated the way we used to, 105 00:07:57.000 --> 00:08:01.439 twenty twenty three was fifteen percent at sixteen percent inflation, 106 00:08:04.120 --> 00:08:11.800 twenty twenty four was twelve thirteen percent inflation. Right, it 107 00:08:11.839 --> 00:08:16.439 was at a steady ten percent a year from nineteen 108 00:08:16.519 --> 00:08:24.720 ninety three to twenty nineteen, So if you had one 109 00:08:24.720 --> 00:08:32.480 thousand dollars, let's say in twenty twenty, right, So something 110 00:08:32.480 --> 00:08:36.480 costs one thousand dollars, that thing from twenty twenty to 111 00:08:36.519 --> 00:08:42.279 twenty twenty six is now nineteen hundred dollars, right, which 112 00:08:42.320 --> 00:08:50.159 is a actual rate of inflation. Because these are lagging indicators, 113 00:08:50.240 --> 00:09:01.639 I hadn't do it forward, all right, So about fifteen 114 00:09:01.679 --> 00:09:04.799 percent a year has been the actual rate of inflation 115 00:09:05.720 --> 00:09:12.200 since twenty twenty to now. And that compounds like compound interest. 116 00:09:12.480 --> 00:09:16.480 This is the thing that everybody Boomers don't understand about inflation. Oh, 117 00:09:16.519 --> 00:09:19.039 boomers were lied to about everything. So when they say 118 00:09:19.039 --> 00:09:23.919 on the news that, oh, inflation is coming down, it's down, 119 00:09:24.200 --> 00:09:29.279 you know, down one percent. Inflation's coming down. That'd be 120 00:09:29.399 --> 00:09:37.080 like saying you have a fifteen percent interest mortgage and 121 00:09:37.240 --> 00:09:45.039 for one year I charged you fourteen percent. That's basically 122 00:09:45.039 --> 00:09:51.879 what it's saying. Inflation compounds just like interest, and the 123 00:09:51.919 --> 00:09:55.600 cumulative effects are kind of what boomers can't see. So 124 00:09:55.960 --> 00:10:01.240 when you talk about stock market returns, you can adjust 125 00:10:01.279 --> 00:10:05.799 them downwards for the inflation each year, but that doesn't 126 00:10:05.879 --> 00:10:09.279 really factor in the cut of inflation You've already got 127 00:10:09.279 --> 00:10:13.039 in there. So actual stock market returns. Right for the 128 00:10:13.120 --> 00:10:16.720 last I don't know, f S and P five hundred 129 00:10:16.759 --> 00:10:22.799 is ranged somewhere in between ten to fifteen, ten to 130 00:10:22.840 --> 00:10:28.039 seventeen percent, and now let's minus twelve percent out of 131 00:10:28.039 --> 00:10:31.360 that conservatively, and then you're looking at your real rate 132 00:10:31.399 --> 00:10:34.320 of return. So all this big stock market bubbles, Trump 133 00:10:34.399 --> 00:10:37.000 is talking about how the S and P five hundred 134 00:10:37.039 --> 00:10:46.039 is going to be at new highs, it's not. We're 135 00:10:46.080 --> 00:10:52.039 at zero percent actual returns. Maybe two percent returns, three 136 00:10:52.039 --> 00:10:58.360 percent returns the highest. So that means if you were 137 00:10:58.399 --> 00:11:05.120 to like, let's say you're investing, you now need to like, 138 00:11:08.440 --> 00:11:11.399 if you did twenty five percent returns that year, you 139 00:11:11.440 --> 00:11:15.919 would be very very happy. But you didn't actually do 140 00:11:16.120 --> 00:11:20.759 twenty five percent. You did a little bit more than ten. 141 00:11:23.039 --> 00:11:28.000 So in order for you to keep up, you have 142 00:11:28.080 --> 00:11:33.240 to earn fifteen to twenty percent just to tread water. 143 00:11:36.000 --> 00:11:38.440 And no one's earning fifteen to twenty percent a year. 144 00:11:40.919 --> 00:11:45.879 So even boomers with their stock market returns, those are 145 00:11:45.919 --> 00:11:50.600 all fake, right, It's just happening slowly to where they 146 00:11:50.600 --> 00:11:53.720 don't notice. They see their four to one k going 147 00:11:53.799 --> 00:11:56.440 up and the value of their house going up, but 148 00:11:56.519 --> 00:12:00.960 they don't compare that to the purchasing power. Right. So, like, 149 00:12:01.039 --> 00:12:08.639 let's say you're a boomer whose house doubled from twenty 150 00:12:09.080 --> 00:12:14.480 twenty two to twenty twenty four, which most of them did, well, 151 00:12:15.240 --> 00:12:20.039 the cost of everything doubled, right, That thousand dollars thing 152 00:12:20.120 --> 00:12:25.519 now costs nineteen hundred dollars. So even the boomers who 153 00:12:25.559 --> 00:12:29.399 are so scared about their housing costs, like their value 154 00:12:29.440 --> 00:12:35.720 of their house, they don't know that the value of 155 00:12:35.759 --> 00:12:39.039 their house hasn't increased at all. It's actually gone down. 156 00:12:41.639 --> 00:12:51.320 So inflation is so ubiquitous, it's kind of baked into 157 00:12:51.399 --> 00:12:58.679 everything that people don't notice it, right, or they don't 158 00:12:58.720 --> 00:13:03.279 notice to look at all aspects of their life. Right, 159 00:13:03.399 --> 00:13:06.519 So they see their stock market returns as separate from 160 00:13:06.519 --> 00:13:08.639 what happens to the value of the dollar they see 161 00:13:08.759 --> 00:13:13.799 they're housing their house, you know, price, as separate, and 162 00:13:13.840 --> 00:13:16.879 they're really all a function of the same thing. Right. 163 00:13:16.879 --> 00:13:19.720 The boomers really haven't made all that much money in 164 00:13:19.840 --> 00:13:25.679 real terms at all. So it makes the situation that 165 00:13:26.679 --> 00:13:35.200 the younger generation is put in significantly more damning because 166 00:13:35.240 --> 00:13:38.360 if you say, all right, boomer, you really actually haven't 167 00:13:38.360 --> 00:13:41.039 made that much money. All the money that you think 168 00:13:41.080 --> 00:13:47.600 you made has actually just been currency debasement. Okay, well, 169 00:13:48.679 --> 00:13:54.399 then what does that make the youngest generation, who's you know, 170 00:13:54.559 --> 00:13:58.080 quality of life has now you know, been admitted by everyone, 171 00:13:58.519 --> 00:14:05.399 it's going to be exponentially worse. Everyone thinks the boomers 172 00:14:05.399 --> 00:14:09.480 had it so much better. They did in certain aspects, 173 00:14:09.879 --> 00:14:14.000 but not since nineteen eighty they haven't. And most of 174 00:14:14.039 --> 00:14:19.440 the Boomer gains that we look at as gains happened 175 00:14:19.440 --> 00:14:23.919 after nineteen eighty. They've just been riding. They've basically been 176 00:14:24.000 --> 00:14:27.360 cheering on currency debasement, thinking they've been getting a pay raise. 177 00:14:29.480 --> 00:14:31.639 All of the cheap stuff that we talk about, like oh, 178 00:14:31.679 --> 00:14:34.759 you're able to buy a house at this price. You know, 179 00:14:34.960 --> 00:14:39.200 a single family could you know, be sustained off of 180 00:14:39.240 --> 00:14:43.600 one guy working a factory job. Not in nineteen eighty 181 00:14:44.440 --> 00:14:48.919 and certainly not since. So the time that people are 182 00:14:48.960 --> 00:14:55.679 really attributing to, like, you know, livable time was when 183 00:14:55.679 --> 00:15:00.320 the boomers were kids, right, like teenagers' early twenties like that. 184 00:15:02.120 --> 00:15:05.120 But what's gonna happen now, And this is what I 185 00:15:05.200 --> 00:15:11.960 kind of wanted to talk about is velocity of money, 186 00:15:13.000 --> 00:15:17.840 And no one really talks about velocity of money and 187 00:15:17.960 --> 00:15:21.279 velocity of money is probably just asn't. So when you 188 00:15:21.320 --> 00:15:25.080 ask a libertarian about inflation, he'll talk to you about 189 00:15:25.120 --> 00:15:27.960 the Federal Reserve and say a bunch of dumb shit. 190 00:15:28.039 --> 00:15:32.960 He doesn't understand. This is why Peter Shift is always wrong, right. 191 00:15:33.120 --> 00:15:35.279 He has no idea even now why the price of 192 00:15:35.320 --> 00:15:39.240 gold is going up because he's a fucking retard. Sorry, 193 00:15:39.399 --> 00:15:47.200 I really I shouldn't swear so much. But libertarians aren't 194 00:15:47.200 --> 00:15:50.919 factoring in velocity of money, right. They'll tell you how 195 00:15:51.000 --> 00:15:55.159 much money was printed, and oh, well, if you print 196 00:15:55.159 --> 00:15:59.000 this much money, of course this is you know, gonna 197 00:16:00.200 --> 00:16:03.720 is going to happen like inflation happens much much more 198 00:16:05.159 --> 00:16:11.120 from velocity of money. So the Trump government is going 199 00:16:11.200 --> 00:16:15.360 to try to tamp down inflation, even though he thinks 200 00:16:15.399 --> 00:16:18.000 he's going to be able to run it hot, just 201 00:16:18.120 --> 00:16:21.080 like he probably thought he could do everything for Israel 202 00:16:22.120 --> 00:16:26.279 and you know, win domestic politics. He's quickly finding out 203 00:16:26.320 --> 00:16:29.399 that's actually not the case. The admin is going to 204 00:16:29.399 --> 00:16:32.919 be forced to choose yet again, and by the person 205 00:16:32.960 --> 00:16:36.919 that he picked. All right, everyone is like kind of 206 00:16:36.960 --> 00:16:39.799 obsessed and like, oh, this guy is the son in 207 00:16:39.879 --> 00:16:43.200 law of the head of the world sign and his Council, Like, yes, 208 00:16:43.360 --> 00:16:48.399 this is also true, but he is a really big 209 00:16:48.480 --> 00:16:54.279 hawk as far as FED policy. So that means they're 210 00:16:54.279 --> 00:16:57.159 going to try and tamp down inflation, and they're going 211 00:16:57.240 --> 00:16:59.720 to do that with the only tool that they have, 212 00:17:00.519 --> 00:17:07.440 which is the interest rate, which generally works kind of Right, 213 00:17:08.240 --> 00:17:13.839 if I raise the interest rate, people borrow less money 214 00:17:13.920 --> 00:17:19.440 and they hold loans for less amount of time, and 215 00:17:19.559 --> 00:17:23.839 most of our money, right, most of the printing doesn't 216 00:17:23.839 --> 00:17:27.400 happen at the federal reserve. This is again why libertarians 217 00:17:27.400 --> 00:17:32.079 are fucking wrong about everything. All of the money printing 218 00:17:32.119 --> 00:17:37.039 happens in the banks because they're supposed to do that, right, 219 00:17:37.160 --> 00:17:41.680 So the treasure the Federals sells them treasury bonds at 220 00:17:41.720 --> 00:17:45.000 a certain rate, and then they take those treasury bonds 221 00:17:45.039 --> 00:17:47.759 and put them in their bank vaults, call them reserves, 222 00:17:47.759 --> 00:17:51.000 and they will lend against them, right, usually like ten 223 00:17:51.079 --> 00:17:55.279 to one. And it's the lending that they do, the 224 00:17:55.359 --> 00:18:01.440 issuing of mortgages things like that, that actually prints the money. Right. 225 00:18:01.519 --> 00:18:05.519 The money is printed by loans created off of those treasuries. 226 00:18:06.200 --> 00:18:08.960 The money isn't printed by the creation of treasuries. 227 00:18:09.960 --> 00:18:14.119 Well, and Stormy, as I'm sure you're aware, during COVID, 228 00:18:14.160 --> 00:18:16.839 and it might still be the case. I haven't checked. 229 00:18:17.680 --> 00:18:21.200 The reserve rate was dropped to zero, yes, yes, I 230 00:18:21.240 --> 00:18:25.799 was going to get to that even further, ridiculously increasing 231 00:18:25.839 --> 00:18:30.720 the amount of effective inflation. Yes. And then also this 232 00:18:30.759 --> 00:18:37.559 other thing happened, which are called non bank lenders, right, 233 00:18:37.640 --> 00:18:40.799 this is a new phenomenon. Like all of those like 234 00:18:40.920 --> 00:18:44.400 by now pay later apps that you've seen just explode everywhere. 235 00:18:45.799 --> 00:18:54.599 Those are lenders. They're printing money right like you're you know, 236 00:18:56.319 --> 00:18:58.480 I mean, let alone payment. 237 00:18:58.839 --> 00:19:04.119 The explosion of digital consumer looks, you know, that's any 238 00:19:04.200 --> 00:19:06.240 one of these other kind of give knockoffs. 239 00:19:06.720 --> 00:19:11.240 And also the sports betting people don't see sports betting 240 00:19:11.279 --> 00:19:16.319 as inflationary, and it very much is right because when 241 00:19:16.400 --> 00:19:20.480 someone is, you know, placing a bet at like ten 242 00:19:20.519 --> 00:19:26.759 to one odds, right, that's leverage because if you win, 243 00:19:27.200 --> 00:19:30.000 you expect to be paid that ten to one, don't you. 244 00:19:33.880 --> 00:19:38.599 It's no different than leverage. So the explosion of derivatives 245 00:19:39.400 --> 00:19:43.039 is another type of again lending. This is where the 246 00:19:43.039 --> 00:19:48.519 inflation actually comes from, that end velocity. So this new 247 00:19:48.559 --> 00:19:51.680 man is going to raise the interest rates very sharply, 248 00:19:53.759 --> 00:19:58.119 and I mean sharply. I don't think it'll be I 249 00:19:58.119 --> 00:20:01.039 don't think people give credit where credit is to Jerome Powell. 250 00:20:01.480 --> 00:20:09.119 Jerome Powell's a saint. The world economy existed on basically 251 00:20:09.240 --> 00:20:12.359 zero percent interest rates. The US had a negative interest 252 00:20:12.440 --> 00:20:16.039 rate for like ten years, right, because if the interest 253 00:20:16.119 --> 00:20:21.079 rate is two percent, but inflation is like a lot 254 00:20:21.119 --> 00:20:24.839 more than two percent, that means the interest rate is 255 00:20:24.839 --> 00:20:29.920 effectively negative. So the US has had negative interest rates 256 00:20:29.960 --> 00:20:34.000 for a very long time, which again created the explosion 257 00:20:34.279 --> 00:20:38.839 in lending, which is explosion in the monetary supply, which 258 00:20:38.920 --> 00:20:41.279 is why boomers think that they were getting rich but 259 00:20:41.440 --> 00:20:47.359 were actually just treading water themselves. They're easily fooled, those boomers. 260 00:20:49.680 --> 00:20:55.000 But he raised the interest rates from effectively negative interest 261 00:20:55.079 --> 00:21:04.519 rates to five percent during a fucking pandemic, all without 262 00:21:04.519 --> 00:21:09.880 a market crash, a credit where credit is due. Jerome 263 00:21:09.920 --> 00:21:15.279 Powell knows how to do his fucking job. And this 264 00:21:15.359 --> 00:21:18.920 guy is probably going to be as aggressive, if not 265 00:21:19.000 --> 00:21:22.359 more aggressive. So what happens when interest rates go up? 266 00:21:22.400 --> 00:21:26.759 People borrow less money, right, So that's how they that's 267 00:21:26.759 --> 00:21:29.119 how they're going to bring down inflation. Because don't get 268 00:21:29.119 --> 00:21:32.400 me wrong, Jerome Powell, over the course of raising those 269 00:21:32.400 --> 00:21:40.720 interest rates he basically zapped five trillion dollars with a 270 00:21:40.759 --> 00:21:46.680 goybeam and disintegrated it. Right, five trillion dollars disappeared by 271 00:21:46.720 --> 00:21:51.920 him raising interest rates. That's going to happen this time. 272 00:21:53.119 --> 00:21:56.240 Except what's also going to happen is the velocity of 273 00:21:56.279 --> 00:21:59.759 money is going to tank. We're already seeing it now. 274 00:22:00.680 --> 00:22:06.359 Every single person listening to this is probably agonizing over 275 00:22:06.480 --> 00:22:11.319 each and every expense that they have to make, and 276 00:22:11.359 --> 00:22:14.960 that means people are scared to spend money. And when 277 00:22:15.000 --> 00:22:20.440 people are desperate to save money and to spend as 278 00:22:20.480 --> 00:22:25.920 little as possible, the velocity of money goes down and 279 00:22:25.960 --> 00:22:33.440 the inflation goes up rapidly. Right, So, if velocity of 280 00:22:33.480 --> 00:22:36.960 money is high and money is changing hands and moving 281 00:22:37.000 --> 00:22:46.000 all around, its inflationary value is effectively zero. But if 282 00:22:46.079 --> 00:22:49.279 everyone yanks all the money out of the system right 283 00:22:49.319 --> 00:22:52.400 and tries to stuff it away and there's less money 284 00:22:52.400 --> 00:22:59.920 going around, counterintuitively, it makes things more expensive. It's just 285 00:23:00.079 --> 00:23:02.440 coming from it's just a demand side problem instead is 286 00:23:02.519 --> 00:23:07.960 a supply side problem. So they're going to create a 287 00:23:08.119 --> 00:23:12.440 demand side problem at the time when they go about 288 00:23:12.480 --> 00:23:17.960 trying to solve the supply side problem, and unfortunately they 289 00:23:18.000 --> 00:23:21.279 are taking They're using the one lever that is in 290 00:23:21.319 --> 00:23:25.640 their control to solve a problem and then create a 291 00:23:25.640 --> 00:23:27.680 problem that is in a domain where they do not 292 00:23:27.759 --> 00:23:32.440 have control. Because velocity of money is entirely psychological and 293 00:23:32.519 --> 00:23:36.839 macro effects based, right, So, like I say macro effects 294 00:23:37.440 --> 00:23:45.359 because if you are, you know, trying to agonize over 295 00:23:45.440 --> 00:23:47.559 all of your spending, trying to spend as little money 296 00:23:47.599 --> 00:23:51.240 as possible, you are reducing the amount of velocity of money. 297 00:23:52.359 --> 00:23:58.599 But if I also ship your job to India, I've 298 00:23:58.640 --> 00:24:03.440 effectively done the same thing. Well, and I've pulled your 299 00:24:03.440 --> 00:24:07.599 whole salary out of the money supply have to decrease 300 00:24:08.079 --> 00:24:10.799 the velocity of money by however much you used to 301 00:24:10.799 --> 00:24:12.480 make well. 302 00:24:12.440 --> 00:24:19.079 And to that point, look, you know, I was never 303 00:24:19.519 --> 00:24:25.640 a highly compensated employee, right in the grand scheme of. 304 00:24:25.599 --> 00:24:29.119 Things, incredibly undervalued, thank you. 305 00:24:29.160 --> 00:24:34.440 That's a nice way to say perpetually unemployed. But what 306 00:24:34.480 --> 00:24:38.039 you would have is that jobs like that would have 307 00:24:38.119 --> 00:24:41.920 been a way to outpace or at the very least 308 00:24:42.000 --> 00:24:48.160 keep pace with inflation, relatively high compensation text advantaged ways 309 00:24:48.200 --> 00:24:51.599 to dump that money into the market. You don't need 310 00:24:51.640 --> 00:24:53.279 to get into that. That's a discussion for another day. 311 00:24:55.119 --> 00:24:58.440 And now obviously that's quite expensive for the firm, which 312 00:24:58.440 --> 00:25:02.720 is why they are they are offloading. But a problem 313 00:25:02.799 --> 00:25:07.400 which historically has been reserved for a working class and 314 00:25:07.440 --> 00:25:12.160 for young people, it's coming for your laptop job. Right 315 00:25:13.400 --> 00:25:16.359 you can't, I mean not everyone. I'm sure someone will, 316 00:25:16.440 --> 00:25:19.640 but the ability to out earn this is sort of 317 00:25:19.640 --> 00:25:25.759 going away. And unless you already have assets, because again, 318 00:25:26.079 --> 00:25:31.160 when you know, monetary velocity goes down, if you're a seller, 319 00:25:31.279 --> 00:25:35.240 you have to deeply, deeply discount whatever you're selling because 320 00:25:35.279 --> 00:25:37.599 people are you know, generally it's like, well I don't 321 00:25:37.599 --> 00:25:39.640 want to be giving up money, but this is such 322 00:25:39.680 --> 00:25:42.519 a good deal I can't say no to it. Well, 323 00:25:42.880 --> 00:25:45.279 even people who do have assets, well, sure they have 324 00:25:45.319 --> 00:25:50.480 an asset, that's good, they own that thing, But if 325 00:25:50.480 --> 00:25:53.319 they don't have the income to service that, to make 326 00:25:53.359 --> 00:25:56.640 their mortgage payment, they're going to get blown out of 327 00:25:56.720 --> 00:26:01.000 the water because the market for or most things is 328 00:26:01.039 --> 00:26:05.720 going to crash. And there are leading indicators of this, 329 00:26:06.279 --> 00:26:10.599 right yep. Buying in you know, assets like cars is 330 00:26:10.720 --> 00:26:13.960 way way down. Cars have been hit by inflation like crazy. 331 00:26:14.400 --> 00:26:17.960 This is actually the perfect example. I'm glad you hate this. 332 00:26:17.960 --> 00:26:19.200 This is a perfect. 333 00:26:18.799 --> 00:26:23.400 Example of how demand can collapse but prices can still increase. 334 00:26:25.119 --> 00:26:28.799 Exactly because you know, demand for new cars is, you know, 335 00:26:28.880 --> 00:26:32.359 way down. You've been reading stories about this really sense 336 00:26:32.880 --> 00:26:35.519 around twenty two to twenty three, but it sort of 337 00:26:35.559 --> 00:26:40.920 continued to pace. But one, well, the interest rates up, 338 00:26:41.000 --> 00:26:45.079 so your cost of lending is proportionally quite high. But 339 00:26:45.200 --> 00:26:49.559 also people are unlikely to dump something for more of 340 00:26:49.599 --> 00:26:52.119 a loss than they're comfortable with. So you just have 341 00:26:52.279 --> 00:26:57.200 in general incredibly low velocity of both money and of assets. 342 00:26:59.039 --> 00:27:07.720 Bingo. This is why. SO housing is another thing I 343 00:27:07.720 --> 00:27:17.160 think we should talk about because the so I think 344 00:27:17.160 --> 00:27:20.960 I made a prediction a long time ago on maybe 345 00:27:21.000 --> 00:27:23.920 this show or others right, that the demand for housing 346 00:27:24.000 --> 00:27:30.799 was going to collapse just from demography and overall, you know, 347 00:27:30.880 --> 00:27:36.079 prevailing financial conditions. And I think we've seen a pullback 348 00:27:37.240 --> 00:27:41.119 in every major housing market in the country, and things 349 00:27:41.160 --> 00:27:48.799 still aren't selling, like literally nothing is selling. All of 350 00:27:48.839 --> 00:27:54.400 the boom states, right, Colorado, Texas, Florida are now the 351 00:27:54.440 --> 00:27:59.160 lowest transaction volume states in the country. The amount of 352 00:27:59.279 --> 00:28:05.880 real estate actions that have happened this year are half 353 00:28:07.039 --> 00:28:11.400 of what they were the year prior. Right, So fifty 354 00:28:11.440 --> 00:28:18.400 percent of demand just disappeared, and that's going to steadily increase, 355 00:28:19.400 --> 00:28:24.160 and the prices with those are going to go down briefly, 356 00:28:25.160 --> 00:28:27.000 and then the thing that Jay and I are talking 357 00:28:27.000 --> 00:28:31.559 about is going to go up. Right, So you're going 358 00:28:31.599 --> 00:28:34.400 to basically shake a bunch of people out of assets, 359 00:28:36.200 --> 00:28:38.720 and then those prices of those assets are going to balloon. 360 00:28:42.319 --> 00:28:47.119 It if you didn't want to set up a permanent 361 00:28:47.200 --> 00:28:52.680 underclass and you just happen to do it by accident, 362 00:28:53.440 --> 00:28:55.319 I don't think you could have come up with a 363 00:28:55.359 --> 00:28:59.720 better ide way of going about it. That you really 364 00:28:59.759 --> 00:29:07.799 can't it because the boomers they're going You're going to 365 00:29:07.839 --> 00:29:14.240 see a lot of properties literally rotting away because the 366 00:29:14.319 --> 00:29:18.920 boomers that lived in them died and their kids can't 367 00:29:18.960 --> 00:29:23.119 sell it because no one wants to buy it, and 368 00:29:23.160 --> 00:29:26.880 then no one can afford to buy it to move 369 00:29:26.920 --> 00:29:33.039 in it. Right, So you're going to have a housing 370 00:29:33.160 --> 00:29:36.279 problem at the same like you're going to have a 371 00:29:36.359 --> 00:29:40.039 housing problems in like cost of housing at the same 372 00:29:40.119 --> 00:29:44.680 time as you're going to have basically a ton of 373 00:29:44.720 --> 00:29:52.119 inventory empty everywhere, which you're starting to see now, so 374 00:29:52.160 --> 00:29:59.039 that there's very few things that that administratively can fix 375 00:29:59.119 --> 00:30:03.279 this without really like a total crash out, and I 376 00:30:03.319 --> 00:30:05.319 don't think that's what people are bracketing for. 377 00:30:06.359 --> 00:30:08.880 Well, and this is the point that uh Mark Mitchell 378 00:30:09.160 --> 00:30:13.640 of Rasmussen, who's on my show not too long ago made, 379 00:30:14.799 --> 00:30:17.640 oh thank you. He made a really interesting post to Twitter. 380 00:30:18.640 --> 00:30:23.519 It was today or yesterday, relatively recently. Ree basically was 381 00:30:23.519 --> 00:30:26.519 was talking about a recent meeting he'd had with the 382 00:30:26.559 --> 00:30:30.039 President where he said, I went in there and I said, 383 00:30:30.359 --> 00:30:34.319 mister President, you need to crash the housing market. H 384 00:30:35.359 --> 00:30:39.559 That's that's an option. And he was basically saying He's 385 00:30:39.559 --> 00:30:41.000 like yeah, and I could tell no one had ever 386 00:30:41.039 --> 00:30:43.200 told him that before. And you see that in the 387 00:30:43.200 --> 00:30:46.160 messaging from the administration, right, He's he said, you know, 388 00:30:46.200 --> 00:30:49.079 I will do nothing that allows the value of housing 389 00:30:49.119 --> 00:30:49.680 to decrease. 390 00:30:50.759 --> 00:30:55.279 Uh. Well, so we're not foreclosures are now hitting the 391 00:30:55.319 --> 00:31:01.640 full time. The foreclosers are now coming close in in commercial. 392 00:31:01.119 --> 00:31:04.960 Real estate, right, this is like, I mean commercial real 393 00:31:05.039 --> 00:31:07.640 it's been screwed for six years. 394 00:31:07.440 --> 00:31:09.480 Yes, but so has our housing market. 395 00:31:10.160 --> 00:31:13.559 Well, and that's my point, right that you know, you 396 00:31:13.599 --> 00:31:17.440 could look at the situation and in uh you know, 397 00:31:19.440 --> 00:31:22.880 not corporate point is in kind of like business and 398 00:31:23.279 --> 00:31:26.480 real estate in twenty twenty and say this is never 399 00:31:26.559 --> 00:31:30.880 coming back, this is screwed. But it's taken more than 400 00:31:30.920 --> 00:31:34.680 half a decade for that to actually shake out. And yeah, sure, 401 00:31:34.680 --> 00:31:37.160