Hour 1 - Fear of Financial Unknown Unknowns

The unknown unknowns of the banking crisis. Credit Suisse stock plummets. Facebook lays off 10K. Is this the calm before the storm? Shark Tank's Kevin O'Leary warns against bailing out banks. The dangers of Central Bank Digital Currency (CBDC). Buck takes calls.

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Episode Transcript

Speaker 1 (00:00):
Welcome to today's edition of the Clay Travis and Buck
Sexton Show podcast. Welcome in everybody to the Clay Travis
and Buck Sexton Show. Great to have you here with me.
Clay on vacation, and we have much to discussed today
here in the world of well, a lot of things,
but certainly banking, finance, the economy, the dollars in your

(00:24):
bank account, the dollars in your pocket. What is going
to happen. We've got the new inflation numbers. I'll break
that down for you. A little bit of a calm,
it seems right now a lot of the regional banks
that got smashed yesterday had a big rally, so it
seems like confidence in them has been at least four

(00:45):
now restored. We've also got a crisis with the NYPD
switching gears here to criminal justice and policing resigning at
a record breaking pace. So that's an we're going to
discuss later on in the program. More fallout from that
Stanford Dean and students who were shouting down Fifth Circuit

(01:10):
Federal Appeals Court Judge Duncan. We'll discuss that. And we've
also got more on the border and oh and Trump
has some words about DeSantis in a new video that
we'll discuss here on the program. Trump seems to be
of the mind that saying that Florida is not Rhnda

(01:35):
Santis's success story, that that is going to be a
worthwhile line of attack. We will discuss that here in
just a little bit. But you all remember Donald Rumsfeld, right,
Remember he was Secretary of Defense under George W. Bush.
Very much the first person I think for a lot

(01:55):
of people who comes to mind with the Iraq of
two thousand and three and a whole range of other
things from the War on Terror. And he had had
a bunch of prominent roles in the White House before that.
I mean, the guy had been in government for a
long time in different capacities. But that very famous little
moment where he was discussing known, known unknowns and unknown unknowns.

(02:24):
I am concerned right now in the financial sector and
about things that would affect all of us when it
comes to the unknown unknowns. I'm just gonna put a
few things out there, right because, as I always tell you,
nobody can predict the future, but we can at least
look at the odds, look at what's going on right now.
SVB bank, all the depositors Silicon Valley Bank, and the

(02:47):
people that were banking, they're thinking that they were just
putting money in a bank and not some version of
a very low yield hedge fund or a mutual fund
or something. They have been back stopped by this program
with the government, the FED, the FDIC, with you know,
the financial alchemy of it's not a bailout, but it

(03:09):
actually is a bailout, because if it wasn't a bailout,
the bank would have gone under. So it is a bailout.
But it seems like people have calmed down a bit,
and as I said, the regional banks have recovered. But
there are some issues right now that are also out there.
First of all, inflation, what are the newest numbers, slows
to six percent from six point four percent a month ago.

(03:33):
So the FED is now considering pausing its interest rate
hikes because of the banking crisis. But you see, this
all just takes us back to the basic problem. What
did I say yesterday? This all comes from a decision
to crush the bond market, destroy anyone's ability really to
get a pretty standard yield for savings accounts, treasury bonds,

(03:59):
you name it. Bonds from companies bonds in general, you
couldn't get any income on the money that you had saved,
whether you're an individual or an institution, unless you took
riskier pathways. And the government decided alongside this whole process
that they were going to keep printing money through quantitative

(04:19):
easing through QE, so interest rates were kept artificially low.
You can't get money from your savings account, and they
keep on pushing more money into the system. This has
caused inflation. How do you deal with the inflation? Well,
how do you bring it down? You have to let
interest rates normalize. The problem with letting interest rates normalize,

(04:42):
they say too quickly, is that there will be economic
pain associated with that. We started to see a little
bit of that with the bank failures that have just occurred,
the run on SVB, the banks that were on the brink,
it seemed, and now we're told, oh, don't worry, it'll
all be fine. But the fundamental problem remains, what is

(05:04):
the Fed going to do? Now? What does this mean
for inflation? For the cost of everything that you need
to feed yourself, your family, pay your rent, gas up
your car, buy the things you need, whether it's healthcare
or a dozen eggs, buy the things you need day
in and day Yeah, what does it mean for you?

(05:24):
And the answer is they don't really know. And this
is where I get into the unknown unknowns and also
the plans that may start to get a little bit
more attention out there. But first, let me put this
before we get into the possible plans, Let's look at
some things that are happening. So Credit Suisse has had
its shares a huge, a huge bank, has had its

(05:47):
shares fall to an all time low. It is the
seventh largest investment bank in the world, and it has
said it has material weakness. So that's not that's not
a good sign right now. Maybe that's just because of
a few specific things for Credit sweets. Okay, fine, you know,

(06:11):
but people will point out that there have been problems
there for a while Archagos. I believe it was called
the five point five billion dollars loss they took because
of this Arcagos fiasco. There going to get too deep
into the weeds on it, point being there are issues.

(06:32):
That's a really big bank, that's a really big problem.
You've also got the staff of Facebook finding out today.
The tech sector has already been in a big decline
staff of Facebook finding out that ten thousand jobs are
about to get cut thirteen percent of all Facebook staff.
And Mark Zuckerberg, like the AI robot he is made real,

(06:57):
is telling everybody to get ready for a quote new
economic reality that will continue for many years. As in
they are doing efficiency. I actually read the letter they
put out, not a particularly warm and fuzzy one about
the efficiency cuts Love be making at Facebook. This is
happening all over the place. Big tech companies that seem

(07:17):
like they were money printing machines and at the time
they were just a few years ago, are laying off
large numbers of people, a lot of the tech stocks
that were really drivers of the economy, and we're propping
up the stock market overall. So where most of the
games were coming from, they've gotten whacked pretty badly in
the last well last year, depends on which one you're

(07:40):
looking at. But things are rough right now. If you
also look at car Loan defaults, another indicator, not quite
housing defaults, but car Loan defaults, they are right now,
way up. They're the highest they have been in a
number of a number of decades I think at this point.

(08:02):
So this is higher than it's been in quite some time,
and that's obviously really disconcerting as well. So what are
they going to do about all of this now? I
brought up the unknown unknowns because look at how quickly
SVB turned into a financial crisis that required the entire
attention of the White House, the Fed, the Treasury, and

(08:26):
what was it a month ago? Jim Kramer was on
TV by SVB, you know whatever? Sure, I think there's
actually there are people that they trade based upon the opposite.
They actually manage money based on the opposite of what
Jim Kramer recommends on his TV show. It's pretty funny.
I think there's an index that someone's created where you
go in the opposite direction. But here you have here,

(08:51):
you have a series of major challenges to the economy,
and you have also a few things that have happened
in rapid succession that no one seemed to see coming.
And right right now it feels like, oh, maybe things
are getting a bit better. But those unknown unknowns they
linger out there, what would it take for us to

(09:14):
really go off the cliffire financially systemic weakness in a
major bank somewhere? Well, Credit Suista said they have that
but maybe that's not enough. Maybe they'll figure that out.
How many of these massive financial institutions have made a
similar bet to what SVB did, or have taken other
risky ventures onto their balance sheets that could really create enormous,

(09:38):
enormous problems down the line. So many of the people
you'll see on TV or economists and people in the
financial sector who don't actually manage money, and they've been
wrong many many times in the past, but because they
have a long and establish history of being wrong, it
seems they continue to go on TV and tell you
what's going to happen. They have no idea. I will

(10:00):
tell you they have no idea what's going on. You
know who looks really prescient right now would be Ron
Paul and the people that have said the FED which
was really created to avoid, isn't it supposed to avoid
the very situation we are in right now, all this inflation,
all this money printing and then trying to control the

(10:21):
recession that nobody wants there to be pain, But what
goes up must come down. I mean, there's some fundamental
realities here that a government structure is not really able
to manage. Right. We can't actually have people who decide
that we're just never going to have it. If we
could create a situation where we never have a painful
economic downturn, well of course we would want that. That's

(10:44):
not reality, that's not the way this is going to
shake out. And then that brings me to something else
that I wanted to spend a little more time on
today because I know people are are concerned about it,
and I think in the post COVID world of easy
authoritarianism that we fell into in this country, the notion

(11:04):
of a central bank digital currency a CBDC is something
we all have to take very seriously. Because here's how
you may be thinking about the situation right now of
the economy. You might be thinking, so the FED is
screwing things up once again. They're not a bunch of geniuses.

(11:24):
They're they're not you know, the wizard behind the curtain
making everything run and look great. They're actually creating a
lot of these dislocations and a lot of these distortions
in the market by FED policy. And now they're telling us, well,
they're going to fix it, but they're they're riding the

(11:45):
tiger or riding the dragon on this one. They're not
really determining how this thing goes. They're just doing their
best to make it less bad than it would otherwise be.
You would be thinking, well, we have to figure out
a way to lessen the power of some of these
institutions going forward, right, But you have to remember for
government failure, failure never is met with we shouldn't do

(12:08):
this next time, it's we need more power and more resources.
So how do you get that? You might be thinking, well,
we need to look more at I mean, the whole
range of things, right, and go back, go and listen
to all the old Ron Paul lectures. He's still giving lectures,
but go go and listen to the things that that
he said about what the fed, the boom bust cycles,
and all the rest of it, what it does. And

(12:31):
people are talking about cryptocurrencies now and all the rest
ways of getting outside of this centralized government control. But
that's if you think the answer here is less central
government control. The people in charge, you know what they think.
The answer is more more government control, more ability to

(12:52):
determine exactly what you can do with the money that
you have. And that brings us to a central bank
digital currency, which is something that I do want to
speak to you about a little bit, because it's already
happening in places. There are different kinds of CBDCs out there,

(13:13):
but major economies, you know, like China, India, they already
have this. As you know, China has gotten rid of cryptocurrencies.
So centralization, top down, centralization of money through a digital
currency is happening elsewhere in the world, and there are
arguments underway right now about how to do this in America.

(13:36):
They've been happening for a while. This is not a
conspiracy theory. This is off the front pages of the
Wall Street Journal. It's just a question of how deep
into this we go and what we actually do with it.
It's going to happen at some level. So I want
to talk to you about that because right now it
feels to me like that come before the storm. I

(13:58):
don't think we are out of the storm. We've just
we had a squall, but the big one is still coming.
That is the sense that I have. And when you
look at the options that the people in charge have
at this point, if they have one shock from an
unknown unknown, this whole thing all of a sudden gets

(14:19):
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(14:39):
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(15:03):
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get refunds dot com. Sanity in an Insane World The
Clay Travis and Buck Sexton show. I don't care what
bank we're talking about anymore. You, as a depositor, have

(15:26):
no risk whatsoever, So what stops the idiot bank? Manager
going forward from doing anything they want, taking as much
risk as possible to get the stock price of that
bank up. This is going to create some very perverse
acts by bank managers, and in the end it's not
a long term solution whatsoever, because either you decide to

(15:49):
nationalize the banks or you let the private sector be
the private sector, and within that you have collapses by
idiot managers like the Silicon Valley Bank. We shouldn't have
done this, and now we have the world jeopardy ahead
of us of idiot bank managers everywhere doing crazy behavior.
There's anybody in the Biden administration, at the Fed Treasury Department,

(16:13):
you name it, do any of them have an answer
to mister Wonderful's question there, you know, Kevin O'Leary from
Shark Tank. You know, people are saying that this has
effectively de facto nationalized banks, as in the expectation that
people have is that the FDIIC. Now people can tell me, oh,
but that's not no, no, this is the expectation clearly

(16:36):
that the two hundred and fifty thousand dollars limit for
maybe it's per person and so two people. But you know,
generally we talk of the two hundred and fifty K
limit or per account, right, so you can have multiple
accounts in a bank. But whatever the limit is, it
isn't the limit because whatever you deposit into a bank,
the federal government now just guarantees. That is the expectation

(16:57):
that has been created. Well, given that expectation, and given
that we have artificially low interest rates, right, and so
that means that banks who have been lending out money
in the past up until now haven't been able to
charge you know, the rates have been lower all across
the board, right, they haven't been able to get the

(17:19):
money on the money they lend based on a real,
real market value. What's to stop them from deciding, you know, okay,
let's just lever up and do crazy stuff and make
as much money as we can. Because if the bank depositors,
you know, everybody you know, Sally, Sue, Bob, Sarah, Mike
getting their money. Folks, this is a big problem. Okay,

(17:43):
this is not and they have no answers to this yet.
And we haven't even gotten into central bank digital currency,
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(18:46):
That's m A n tisx dot com. So cobblem with bailouts? Right?
Is that supposed that you're a bank right now and
you're not really doing so good. You took some bad bets,
the bets are down. Well, if your depositors are going
to be out no matter what you do, then you
should swing for the fences, right. You should take the
biggest risks that you can to try to double down
and get yourself out of trouble. And so what usually

(19:09):
happens when regulators come in and try to outsmart the
market and provide backstops is that risk goes up and
eventually something really horrible happens. Eventually, something really horrible happens
in the economy, right, you bail them out, You bail
them out, and then finally a collapse happens, a crisis
that isn't just a forty eight hour or seventy two

(19:32):
hour thing. It's a people losing their homes, their jobs,
their life savings, their retirements kind of thing. So this
is what we're talking about when we're looking at the
stakes of this. And also it reminds me of the Charlie.
You know, Charlie Mungery is Warren Buffet's right hand man.
Many people would argue Warren Buffett is the most legendary

(19:52):
investor of all time. Charlie Munger is right alongside him
and is a source of a lot of wisdom, and
he says, show me the incentive, and I'll show you
the outcome. What is the incentive right now? What is
the incentive for banks? Is it to change their behavior

(20:13):
dramatically so that they are being more responsible stewards of
the funds that are put in bank accounts with them,
or is it they just know that push comes to shove,
you make a lot of noise. You say, if you
don't prop us up, all the banks go down simultaneously,
or they'll be a run on all the banks and
they'll all collapse, and so the bailout is built in

(20:35):
for them. This is a very important question for us
to as a society, honestly as a country, as a nation,
to grapple with, because on the one hand, it does
seem really unfair to people who are putting money in
accounts that they just think they're putting the money in
a bank. It's fdic in short, and people say, well

(20:56):
they should be backstop to the two fifty or whatever
it is that the but that's not really what we expect,
is it. You know, people who say that. I would
ask them, Okay, so if you have, if you have
your life savings, you have five hundred thousand dollars in
the bank, And as someone turned to you and said, sorry,
your bank failed, we'll get you that two hundred your
backstop the two fifty, a lot of people would say

(21:18):
that's not fair. They'd say that's not fair, even when
we're saying that they wanted SVB bank to fail. So
this is where there's the tension. There's another huge point
of tension though, with central bank digital currency. And I
thought it was worth it because we're gonna be talking
about this. I'm you know, Clay is having a great
time right now. It on even he comes back. We're
gonna certainly be focusing in on a lot of what

(21:40):
is happening with this economy, because I think we're just
seeing the early stages. You know, the first artillery rounds
from the enemy have landed in our proximity. There's a
whole lot more coming for this economy. Okay, this is
not about to just go oh it's all fine. Despite
Elizabeth Warren. You know, I'm so glad Biden's in charge. No, no, no,

(22:01):
we don't really believe that, but let's talk about I mean,
we don't believe it. She might central bank digital currency.
Here's what you need to know. You've got over a
hundred countries that are already exploring it officially in some
capacity a lot of places, and those countries are representative
of over ninety five percent of global GDP. And this

(22:23):
is according to the Atlantic Council Central Bank Digital Currency Tracker.
As I mentioned, China, India are already using digital a
digital currency. Sweden and Japan are thinking about a rollout
of a digital currency. Although this is all being done
and talked about before this most recent bank failure. So
it's not like, oh now, all of a sudden people

(22:45):
are thinking about central bank digital currency. This has been
going on. This has been a longstanding effort, and Jerome Powell,
the FED Chair, has said that the US Central Bank
is not yet is not yet going to create one
without direction from Congress. Okay, so let's just keep it,

(23:06):
keep this very clear. As we're talking about it, they're
open to it. The US government, or at least the
FED Chair, i should say, is putting out there you
know maybe now here's what is so important to separate
out there is the possibility of CBDC. That would just

(23:26):
be for the banks too, I'm sorry, from the Fed
to the banks, and it would use blockchain and the
technology really the technology that has been adopted by crypto
like bitcoin, blockchain technology to have a central ledger where
they can efficiently, easily and with total trackability move money

(23:48):
to your bank, to Bank of America, to Chase to
you know, regional bank, SunTrust, Bank, Santander, whatever right, they
can move the money to different banks for lending purposes.
That's not that that may just be actually more efficient.
And I know a lot of people who I would
say I'm politically aligned with who don't see that as

(24:11):
as a big issue that is not from the FED
to the banks themselves, and to effectively make that a
more streamlined and more efficient system, that doesn't strike me
as big brother, oh my gosh, we're heading into a dystopia.
But then there's the creation of individual accounts with a

(24:36):
central bank digital currency, whereby the FED effectively is going
to deposit money into your account or that you will
set up individual There will be individual accounts that the
government will put money into this digital currency and it
will be one hundred percent trackable. The government will have
a direct pipeline if you will, not through a bank

(24:58):
and through any other levers and levels, but this will
be directly to you to your computer, your computer screen,
your account, which means that they have total control of
it too. They can put the money in, they can
take the money out, They know what you're spending that
money on. The government would have full transparency and full

(25:19):
view with this method of central bank digital currency. Why
do you think the Chinese like this? The Chinese Communist
Party likes this so much so with a central bank
digital currency and its adoption in this model, do you
think that how hard do you think it would be
for a Democrat administration to come along and say you're

(25:40):
not allowed to We're going to say you're not allowed
to buy any more guns with this. We're going to
use some executive authority so this money can't go toward
gun purchases. You know they would want to do that.
I mean, they're already trying to d bank. This is
happening all over the country. Banks are getting pressured by
the federal government, by administration and also their own woke

(26:01):
executives to debank people that have anything to do with
the firearms, industry. Yeah, what you're doing is totally legal
and lawful and fine and even constituency protected. You're no
longer will you're no longer willing to hold your deposits
or engage any transactions with you because you're affiliated with
the firearms industry. That's happening. It's happened to friends of mine,
happened to people I know. So that's one component of this.

(26:24):
But also with COVID, what we saw is they would
have the ability to tell you, well, this money can
only go for the following things. Oh, sorry, we're an emergency,
or you know what, Actually, we're going to create a
special tax for carbon purposes. We want carbon neutrality, so
you can spend money on the following technologies or with

(26:46):
the following companies, but not these. The government would have
the ability to do all of that. It would have
effectively total control, the ability to track every transaction that
you would make, no matter how small. They would know
exactly what it is, who it's going to, and the
ability to perhaps block it in real time, to say no, no,

(27:08):
you can't actually donate, or you're gonna give that money
or spend that money there. This is people are going
to argue, well, it's great because you know you won't
be able to use this money to break the law
with Yeah, but Democrats want to do a whole lot
more than just stop illegal transactions from happening. They want
to use this as a tool of social engineering. We
all know that. I think that's obvious. I would find

(27:31):
it laughable if anyone tried to argue you otherwise. Everything
that they have shown us and COVID was perhaps the
biggest window into this. Everything the Democrats have shown us
is that when they have the ability because and decrease
and diminish your liberties and your freedom, and a central
bank digital currency would be an enormously, enormously useful tool

(27:52):
to those ends. So it would be effectively creating a
basis for a social credit score system. You know, what
are you spending your money on? How much does the
government approve of it? It would be the basis. And
I know this sounds like brave New world stuff, that

(28:14):
sounds dystopian, futuristic nightmare that's supposed to be so efficient
with the experts in charge, And that's because it would be.
It would be these things. There are a lot of
ways you can see that this would be used for
social engineering and for absolute control universal basic income. By
the way, think about how easy that would be. Set
up your account. The government gets to just put the

(28:35):
money in the account, but it also gets to tell
you how you spend the money, figures out what you're
spending all the money on. All the time. You think
the irs is scary. Now, by the way, wait till
you get a central bank digital currency. So it hasn't
happened yet, but you're going to see more and more
people calling for it. I think, especially if a crisis
happens and it feels like the banking system fractional banking

(28:59):
has been you're gonna hear very loud calls for this.
Look at how quickly they went to shut up peasant,
stay in your house, mask up outside, and get shots
number seven to eight to nine, or else you're a
bad person. You don't think those same people, that same
apparatus would say, Okay, you now have to use the

(29:19):
money the way we tell you to use it, and
you can only use the money that we're putting into
your account directly, and we see where every penny goes.
Oh no, they don't want they don't want that much power, right, Sure,
you know they do. Look when I see stories like this,
I just get mad. Cyber hackers are filing bogus tax
returns ahead of real tax abiding citizens and stealing their refunds.

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(30:46):
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Welcome back. Play in Buck and this is Buck today.
Plays out for the week on vacation. If the family
having a great time in Italy, he sends his regards

(31:07):
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please give us give us a call. Here on the show,
we have Christie in Gettysburg, Pennsylvania. What's going on? CHRISTI Hi?
I was just wondering why the CVB bank executives aren't

(31:28):
guilty of insider trading for selling off their stock right
before the Failum. That's a great question. As far as
I understand the way the law works, it could very
well be insider trading. I think from what we've seen. Look,
the thing about insider trading is. People will always try

(31:48):
to argue, oh, there there were other reasons for the trade,
or there was I think they called the mosaic defense theory.
There was a little bit of this, a little bit
of that, a lot. These were bank insiders who they
were heading for a heading for the edge of the
cliff and decided to start taking millions off the table
while not only people that were doing any kind of

(32:08):
venture business with them were at risk, but depositors were
at risk. So Christy, it's a great question. There is
an SEC and Justice Department investigation under way right now.
They're in the preliminary phases, is what the report is.
But it certainly looks like it certainly looks like you
might have had some insider trading going on here. And

(32:31):
it's just a reminder of the people running these institutions.
They are often greedy and don't really care about their customers.
Thank you for calling in. Let's see Steve in Akron, Ohio.
What's going on, Steve? Yeah, I just wanted to say buck,
these big corporate layoffs, they've always been damaging to economies,

(32:58):
but not to Wall Street. And that's where you know,
people never separate those two beasts. But you're saying like
Facebook will help its stock price. Facebook helps its stock
price by having them, you know, massive. I think they're
ten thousand people whatever they're they're laying off. Well that's
what I'm inferring. Yes, it's it's helping out the markets

(33:20):
even today to keep everybody wondering what's really the damage
you know from the banking system debacles. Well yeah, well
thanks for calling and Steve the cutting back expenses. You know, ultimately,
Facebook is not making as much money as as it
wanted to and as it planned to. And the AI

(33:41):
artificial intelligence h spending that meta the parent company of Facebook,
so it's really a meta issue has done is a
big part of that. But you know, Facebook is also
it's fascinating me. Very few people that I know on
the right really use Facebook very much anymore. Um, it's
a very it's very difficult to share content effectively on

(34:05):
there's all. They've really ruined it. I mean Facebook five
six years ago, even you could spend money and get
get a realistic return as a content creator, and some
people did that very effectively if they had the money
to do it. Now it's just it doesn't really work
for people the same way, and as a social media platform,

(34:27):
I think it's losing ground with each passing day. But
as for you know, whether it's good for the stock
or good for the overall economy, I just when you're
having companies that are the uh, the drivers of a
lot of the stock members. Stock market isn't just oh,
wealthy investors, it's your four oh one K. Stock market
is an indicator of economic health well beyond people that

(34:50):
are doing speculation and trading to either day trading or
people who are hedge fund managers and all the private
equity all the rest of that at the stock market
very much affects the hiring that companies will do. Right,
their stock price will determine what kind of investing they
can do. And so it's more of an indicator because

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it is actually a market that functions instead of just
government press releases of where things may be going. And
when you have major major layoffs happening at companies that are,
as I said, used to being effectively money printing presses,
that's an indicator of bad times ahead. I mean, I
just try to take this to the most fundamental level.

(35:32):
First of all, it's funny because on the one hand,
you can sit here and say like, well, you know,
I mean, I'm not an economist. A lot of people
talking about this aren't economists. Economists are wrong all the time.
So start with that. Just putting that out there. Okay,
I'm not sitting here talking to you about doing some
kind of complicated regression analysis either. We're talking about very
basic forces that are driving well trillions of dollars in

(35:54):
one direction or another economically. And what you got to
figure out at some point is how is it possible
that they shut down sectors of the economy spent trillions
of dollars and we're not gonna have some really rough
times through inflation and through a market reset. Right, just

(36:15):
started the most base. If you start with the most
basic questions that everybody understands and everybody can think through
on their own, you come to wow, the people in charge,
I don't think they're gonna be able to fix this,
and I think things are going to get rough. So
hopefully that's not the case. Maybe we get lucky, but
I wouldn't count on luck with this administration.