94. Trump’s Plan to Crash the Dollar? Inside the Mar-a-Lago Accord

Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
It's not one of those jokes. It's not.
It's not loading the dishwasher.
I told you guys that one, right?
Yeah, you told us that one.
Is it the moist? Is it the moist thing?
Now, this has nothing to do with moist.
How so? I'll ask JJ.
How do you make someone
with Trump Derangement Syndrome? Say how?
I don't know.
You got it.

(00:20):
Okay.
Can you play with it?
Welcome to Drunk Real Estate
Grab a drink and enjoy the show
here.
Welcome to episode
94 of Drunk Real Estate.

(00:41):
I am Kyle Wilson,
Ashley Wilson's
husband, and we're recording on Tuesday,
this week and Tuesday going forward.
Great.
Mauricio, that's that's,
that's how we're doing this. Oh.
How long are you guys going
to bust my balls for this?
That's what I want to know.
How long am
I going to have to deal with this?
Is it like, weeks? Months? Like how long?
Well, apparently he asked Jay first, but,

(01:03):
he checked with everybody.
Hey, can we do the podcast?
Wednesday
we all checked with all of our spouses
or kids schedules and stuff.
We're like, yeah, that works.
And he was like, just kidding.
Let's keep it Tuesday.
Well, I wasn't kidding.
I was legitimately,
you know, trying to restructure
my calendar.
And I just realized I had a conflict.
I didn't realize that a conflict
on my on the new date.
So you got Jay's wife all mad at him?

(01:25):
It was.
It was a whole thing, Mauricio.
So just just think about.
Think about us next time.
How. How's it going? No, man.
Dude, I'm almost done with my mckellen's.
That's how it's going.
Well, yeah. There you go.
Yeah, that's almost done.
I got my last.
I'm going to finish it off today.
And, Yeah, things are good.
Busy.
You're good.
You're just going to drink one
liquor the entire time for a podcast.

(01:45):
You should put one of those
little decanters next to your,
like, on the on the back,
right behind you.
And they can be like a showpiece.
That's a good. But I've actually been.
I must say,
I've been really enjoying the macarons.
It's, I'm usually a wine drinker.
We've been doing this
pseudo fitness challenge,
so I've been trying to lower the calories
and I figured,
I don't know if it's true or not,
but I figured I switched to Scotch
and I must say, I'm enjoying it.

(02:09):
Nice.
Jay. What's up man? How's it going?
It's going well.
Spent all day
rearranging my life to try and,
accommodate Maurizio and,
so lost today, but,
but other than that, everything is good.
You didn't go to Costco.
You didn't go to Costco.
Get it?
Someone's going to get some wine. Today.
I went to Costco, and God.
My God, was that.

(02:29):
Oh, Irish cream liqueur. Yeah, he's.
Putting in my coffee.
That looks like a cave man's club.
Like things massive.
It is, 1.75l.
You are definitely.
By the way, you are definitely not on a
on a on a cut.
You know.
Yeah, we.
Yeah. You guys are such divas.

(02:49):
You all had your own rules.
I couldn't put together one
something for everyone, so I just,
I, I'm back above what I weighed
at the beginning of that,
that weight loss challenge.
How about you, AJ? How's it going, man?
Heavier than when the weight
loss challenge started.
So right there. On.
But because, you know, we're on a diet,
I have my Diet Coke, of course.

(03:09):
Oh, nice.
My red cup.
Because I'm healthy.
Like,
you know how bad the aspartame
is for you?
AJ, do you have any idea
what the aspartame is doing to your body?
Preserving.
It. Right?
I
can't be any worse
with all the drugs that are,
like, just perpetually in his vein.
So that's. True.
It's a counter balancing. Act.
That could be that could be next to go.

(03:30):
I literally was just reading an article.
I think like an hour ago, RFK
Jr announced that they're they're
banning a whole bunch more food dyes.
So aspartame can be.
Dyes are going aspartame.
The, the imports of Mexican cola.
It's just going to go through the roof.
Yep. Real sugar stuff.
I'm, I'm drinking clear love this.
It's just so nice.

(03:50):
So easy.
Fun. All right.
AJ apparently
has to actually take care
of his kids today, I hear.
So we got to get out of here quickly.
Usually he's got Tessa
taking care of the kids.
He's an absentee father.
But no, just kidding.
I understand,
AJ, but having to
rearrange schedules
to go pick up your kids.
So let's get this show on the road.

(04:10):
Because we have to talk about Jerome Ono.
Get that Joe Jerome.
Know Jerome Powell
with everything going on j
j money
Powell is gone from the Daily News
last year to page
six in a matter of three months.
Well now he's finally back.
And after a couple of comments
he made during his last address
to the public,
he was doing
pretty good job of staying, you know,

(04:32):
staying out of the tariff discussion
and just kind of,
you know, floating along there,
no one really paying attention to him.
Inflation would go up a little bit,
but then you come down,
you kind of just did.
No one really cared what he was doing
until finally he was asked directly
and he admitted
that tariffs
will make inflation
and unemployment more challenging.
So of course, what happened after that?
This led to everything from name
calling, public shaming,

(04:54):
fired out
talks of him being fired as fed chair.
So, while most legal experts
believe there's no basis
for firing Powell,
it doesn't mean that
this administration won't try.
So, Mauricio,
this is
something investors
should be considering right now.
First of all, I'm shocked.
I'm absolutely shocked
that you came to me first and not to J.
This is like

(05:14):
it's unprecedented
that I'm leading off the episode.
I don't even know what to do.
Like I'm a little flustered right now.
Well, what
what was what caused this decision
to to finally,
finally what the audience wanted
is for me to go first.
What finally made you,
make that decision?
See, I figured usually you come
so unprepared
for these podcasts
that you were probably looking up
your segment during the first segment.

(05:35):
So I thought, I come to
you first in punishment
for putting us through
all that, rigamarole
and that you wouldn't be ready.
You just make yourself look like an ass.
So let's let's see you do it. All right?
This is actually him
just testing our listeners
to see how good they are
at fast forwarding, like to
to the second segment.
I think this is a fascinating topic,
because when I first heard

(05:55):
this whole idea
of Trump
or any president removing the federal,
you know, the fed chair, to me,
that's on a ridiculous level.
What what are you talking about?
It's like it's like suddenly
Trump wanted to get rid
of the Supreme Court.
I mean, it just made no sense to me
as I started digging into it more,
I realized that it's not a complete
out of whack argument.

(06:16):
Like, I'm not saying it's a argument.
It's going to win,
but it's not a
completely incoherent argument.
In fact, it's
got a lot of precedent,
especially in Supreme Court, decisions.
And so I wanted to walk through
kind of high level of, of what
the arguments are.
And, I don't know.
It's not it's not a complete,
complete out there.
So I was very, very surprised.
The first thing I was a very,
very surprised is like,

(06:38):
if you go to the Federal Reserve Act,
which is where all this starts,
there's actually a provision in there
that does allow for the president
to remove the fed chair for cause.
Now, the problem is
it doesn't say what four cause means,
of course, like why would we want clarity
on this kind of thing?
We want as much ambiguity.
Ambiguity as possible.
But, there is a provision
already in the Federal Reserve Act

(06:59):
that does allow the president
to remove for cause.
Now, at 111
years, it's never been litigated.
Right. So.
Well, that's not true.
So actually,
there's a couple of Supreme Court
decisions that I wanted to go through
really high level.
I want to bore everyone.
I want to give
the really high level stuff.
But these are
the arguments that are going to be made
when this thing comes to fruition.
One is this the first case you're
gonna hear is from 1935,

(07:20):
which is the Humphreys case,
which is where the president,
FDR, Frederick,
Roosevelt, decided to literally fire
the FTC commissioner,
federal Trade commissioner,
decided to fire him.
And the Supreme Court said, you can,
you can absolutely do that
in the sense that it's right
that you cannot do that.
And that was a unanimous decision.

(07:40):
But the the key
in that particular decision
was, hey,
the Federal Trade Commission
is a multi-member commission.
It's got actually five
commissioners, seven year terms.
And the language
of the Federal Trade Commission
Act specifically says
that you can only remove the Commissioner
for cause and the cause.
Specific list is where like, you know,
if you're neglect of duty,
inefficient malfeasance in office.

(08:03):
And so the president
was trying to make the argument, hey,
your values don't align with mine.
Kind of what Trump is saying.
Now, I want the FTC to do something.
The FTC wasn't doing it.
So they the, FDR ended up firing
the FTC commissioner, just without cause.
And again, the president argued, hey,
I have a constitutional
right under article two, section

(08:23):
one, which talks about
separation of powers. I can do that.
And one of the
one of the Supreme Court
decision that he relied on
was that he previously,
the president was able to fire
the postmaster
general, like the person
in charge of what we
what we call today, the post office.
He was able to to fire that person under,
you know, under the article two,
and the Supreme Court allowed that.

(08:44):
But in Humphrey's
I said, this is different
because the postmaster
is specifically
under the executive branch.
Like, that's what they do.
They they're doing executive stuff.
They report to the executive branch.
But when it comes to the FTC,
it's an independent commission.
It's got five commissioners.
So it's spread out.
They don't report or really
take any guidance
from the executive power.

(09:04):
And so, you know, the Congress in in
coming through with the act
with this Federal Trade Commission Act,
has the power to limit
whether you can fire or not
fire the individual.
And so the Supreme Court,
unanimously 9 to 0,
said the president could not
remove the FTC commissioner. Right.
So that's the president says can't do it.
Fast forward to four years ago.

(09:25):
Five years
ago, in 2020,
there was another case
that came up where,
it was actually
I think it was President Trump
was trying to fire the, the,
the director of the Consumer
Financial Protection Bureau.
Right.
And in that case, he was successful.
And that's why
people are starting to think, hey,
maybe this Supreme Court is a little bit
more amenable to removal of,

(09:46):
commissioners,
because in that case,
he was able to remove the,
the director of the Consumer
Financial Protection Bureau.
But the distinguishing factor
in that case
is that the director in
that case is a solo director.
There's no commission, there's no board.
It's just one director.
And, he can.
And because of that, and because he was,
you know,
he was directly under that particular

(10:07):
commission, was under
the executive power.
The Supreme Court felt that,
he could fire if it was a single,
single director
that performed
substantial executive powers.
What's really interesting
about that case,
which I think is where I think
the whole argument
is going to fall apart,
is that one of the justice,
one of the conservative justices,
Justice Kavanaugh

(10:29):
specifically had a footnote
distinguishing this case
from the Federal Reserve,
which is ultimate.
We're looking at I want to quote it
because I think it's great
critical justice Kavanaugh
saw the Federal Reserve Board structure
and role are distinct in numerous ways,
and this case does not involve
the Federal Reserve.
The court's opinion today,
therefore, does not address
the constitutionality

(10:49):
of the Federal Reserve structure.
So he thought.
He foreshadowed this,
this issue five years. Yeah.
And and I actually thought,
you know, so so the.
J just remember to back then
Trump was
talking about firing Powell as well
and like very seriously
to the point where
when he said that
like the market like if you work
the market went crazy for a little bit

(11:10):
worried about him getting fired.
Yeah.
Yeah.
So the it was A54 decision back in 2020.
But they allowed President Trump
to fire this director
of Consumer Financial Protection Bureau.
So they're kind of
they're kind of hanging
their hopes on that particular case
or at least looking at it.
And to your point, Jay,
I think you mentioned this earlier today.
There's actually two supreme
two two cases

(11:31):
in front of the Supreme Court
that also had to deal
with Trump's ability to remove certain
high level officials
of some commissioner.
And now it's
whatever it's Trump v Wilcox,
it's the National Labor Relations Board
and the
I don't know, the director
of this merit system protection Board.
And so
everybody's really paying attention
to these current cases in front of.
Those are already

(11:51):
in front of the Supreme Court now. Right?
Correct. There in front Supreme Court.
So the ruling of those cases
will shed more light
into the extent of what
the power of the president is to remove
these independent
commissioners or directors.
And so
we're kind of really looking
closely at these two cases.
Now, I don't know when these cases
are scheduled to be decided,
but that's kind of where

(12:12):
the Trump administration is hanging
their hat on is like, hey,
we went from a unanimous decision
that you can't remove
to a 5 to 4 decision
in favor of you can remove.
But again,
it was only because
it was a single director,
you know, squarely in the,
in the face of executive power,
the Federal Reserve System.
As Justice Kavanaugh said, it's
kind of a separate animal.
It's got a very unique, position

(12:34):
in our in our markets,
number one, it's a multi-member board.
So it's much more,
you know, much more analogous
to the Humphries case.
It's a multi-member board.
It really is more,
you know, monetary in nature.
It is a monetary nature.
And that's usually a reserve
for Congress
in the legislative department.
So it's kind of like a quasi legislative
branch versus an executive branch.

(12:54):
And so I, you know,
based on these case laws,
I mean, unless there's something
that comes out of these new two new cases
that are in front of Supreme Court
where people are flipping,
you already have one of the conservative
justices, Justice Kavanaugh,
saying you didn't say that
it wouldn't apply.
Just saying
these are completely different cases.
We're going to do an independent analysis
if this if this issue ever came
before the Supreme Court.

(13:14):
So I want to make a bet.
I want to bet bet you I'm
sure I bet all of you
I bet you that Trump will say
he has no intention.
I bet $1,000
that Trump says he has no intentions
and is not going to try to, to fire
Jerome Powell.
He already said that.
He said that this morning.
So yesterday he he basically said, I'm

(13:35):
going to fire him.
Yeah.
Yesterday betting money on it
or I would never bet money
that Trump would say something. Goes,
you know.
Yeah.
So yes.
Wait wait. Wait wait.
Hold on AJ
you said you would never about money
because Trump said something.
You don't think he would ever
change his mind.
The next day never happened.
Not it's never happened within the second
he said it.

(13:56):
Right.
And I think this is
this is why this whole
discussion is important.
So over the weekend,
yesterday morning, Monday morning,
Trump came out basically,
just eviscerating Powell, saying
how he's the worst fed
chairman we've ever had.
He's a loser.
He's being political.
All of those things.
And it spooked the market.

(14:17):
You wouldn't really think something like
that could spook the market.
But the reality is,
everybody knows that
if he fired Powell,
what he would do is
he would most likely put
somebody in
who is
going to do what he wants
that person to do.
And one of the
the things that we've been
able to say about the fed,
for a

(14:38):
century
is that it has, for the most part
been apolitical.
It's been independent,
not going to say that they
they haven't been accused
of doing things,
but certainly we haven't had fed
chairman's in the pocket
of any president for the last century.
And that could change.
And here's the crazy thing.
Even if the Supreme Court
says, no,
you can't fire Powell or Trump

(14:58):
says, I don't plan to fire Powell.
There's only a year left in Powells,
tenure.
So in a year, Trump
basically gets to appoint
the next fed chairperson.
And so it's very likely
that what we're talking about today,
even if it doesn't happen
in the next week
or two weeks or two months,
a year from now, it's going to happen.
Trump is going to put somebody

(15:19):
in charge of the fed
who is most likely going to be
there to carry out his wishes,
and so we're
going to see somebody who,
for the first time is clearly not.
And independent
representative of the Federal Reserve.
And as we saw yesterday when.
Trump you say that. Yeah.
What do you say that I mean,
just to remind everybody Trump

(15:40):
is the one that actually nominated.
And Powell on the on the fed.
He did.
And then he got he.
Also he also at the beginning
of his campaign
this year said he made a lot of mistakes
putting people who weren't loyal to him.
And he's going to fix
those mistakes this time.
So I think if you're a betting person
you would think he would.
Those was
those were one of the people

(16:01):
he was referring to.
I think it's even simple.
It's even simpler than that, though.
Yes, yes, we are speculating.
But Trump has come out and said,
I believe that the
the executive branch should have a say
in fiscal and monetary policy.
And so he's basically
come out
and said he should have control,
some control at least of the fed.
So it's not a stretch to believe

(16:23):
that he's
going to appoint
somebody that will take his opinion
into account.
I mean,
we've seen that with
with a number of other,
secretary positions,
in this administration.
And so there's
no reason to believe that's.
Not every president does.
They don't put somebody in that
they don't think
will carry out their wishes
that like, could you imagine like, yeah.
Did you imagine, like a Democrat

(16:43):
being like everything that I don't want
to have
happening at the fed,
but this Republican wants, I'm
going to put him in and so he'll do.
All theoretically, AJ,
they should just be picking
the person most qualified. But I guess.
And they all do. But Trump well.
We do have checks and balances though
because Congress number one,
even even when Trump nominates a new fed,
it's got to be with the advice

(17:04):
and consent of the Senate.
So the Senate has to approve
of the decision.
Number one and number two, Congress.
I'm sorry,
the fed is an animal of Congress.
I mean, Congress created this
this this monster,
created it
through the Federal Reserve Act.
And they can amend that.
They can change it. They can say.
Yeah, can you explain this.
To me?
Like, I thought they voted on policy,
don't they?

(17:24):
It's not like,
like I didn't know that the,
like just changing the, the the head
like, of the, would actually like it's
not like they could just do
the same thing as the president
and make executive orders. Right?
Don't
they always have to vote
on their policies?
Yeah, but it's like the chairman.
Just like in any corporation,
the chairman has such power
wielding power
because they get to set the agenda,

(17:46):
they get to determine
what they're going to vote on.
And and to be honest with
the chairman
is usually the one doing
most of the work.
And the other directors
just kind of show up
and they're like, yeah, that sounds like.
Look, here's, here's
the reality percent perception.
Like,
like most things
when we talk about politics and economy,
perception is at least
as powerful as reality.
And the perception yesterday

(18:06):
when power was
when Trump was talking
about firing Powell,
was that if he fired Powell,
there would be somebody
who was less independent and more,
let's say, in Trump's pocket.
And that was the only news
that came out yesterday morning.
And and the markets tanked.
That's why the market tanked.
I think it was
because he'd try to fire Powell.
Not that he was going to put
someone that was in his pocket.

(18:27):
Like, yeah,
I agree with actually AJ on this one
where where
I think it's like having independence
for the fed
is kind of a cornerstone
of like the American monetary system
and why we have the reserve
currency and why,
you know, the world
economy's based off of us.
So I think
taking that away spooks people more so

(18:50):
than just having
Trump put somebody in as like,
because if he
if he's
able to
like the idea of him
being able to fire the fed chair
means that any future president could.
Right.
And so that means that every single time
a new president comes in,
they're just going to put
in their own lackey.
And we're no longer to have independent.
It's just going to be a fed chair
every single time.

(19:11):
Who is a puppet of
whoever has the presidency.
So I think that's
what people are scared more so that
then someone has a.
I will
push back on,
you know, again, you've got midterms
coming up in 18 months or whatever.
And so
if that ends up being the case, Congress
can always amend the Federal Reserve Act.
They can change the rules.
They can they can they
they have control over that.

(19:32):
Plus they obviously have to approve
and consent to the nomination.
But I think the main thing
the markets don't like is, yes,
part of it's in the independents.
But the other part is
I just don't like uncertainty.
So at least with Powell,
you know what you're getting.
If suddenly Powell is out of there
and you don't know who
the new fed chair is,
and you don't know
whether they're going
to be influenced by Trump,
there's just more uncertainty.
And the markets generally

(19:52):
don't like uncertainty.
Like give me the
you can give me the worst
fed chair in the world.
As long as I know who
you or he
or she is, I'm good because I can
then, you know, trade the way and.
Say, what are the rules?
What are the rules?
Were that was
that was the best argument
for voting for Harris
over Trump in during
the election was at least Harris.
You knew what you were going to get.
You wouldn't be happy with it.
But you least
you know exactly what she Trump.

(20:13):
You had no idea.
You had no idea what was coming.
You were just hoping
that it was going to be better.
I think one of the big things
that we've talked about,
I don't know if we've talked about
on the show,
but definitely amongst us
and, and in conversations that we've had
is that the fed could end up
in a very difficult position
in a few months.
The fed has two mandates.

(20:34):
They have two jobs essentially.
One is
they need to ensure
that the economy keeps chugging along
and we have full employment.
Basically, they need to make sure
we don't go into recession.
And they do that
when when things get bad,
when we start to see higher unemployment
and recession, they lower interest rates.
And then their other job
is to make sure
that we have some level

(20:54):
of price control, that
we don't see too much inflation.
And so if we start to see inflation,
what the fed will do
is they'll raise interest rates.
And so depending on where the economy is,
if things are going downhill
as they lower interest rates,
if things are like chugging along
and we see inflation,
they raise interest rates.
If we end up in a situation
of stagflation
where we see at the same time

(21:16):
recessionary indicators
like high unemployment and inflation,
the fed is now in a position
where they need to decide
which of these they want to tackle.
Do they want to lower interest
rates to fix the recession,
or do they want to raise interest rates
to fix the to fix inflation?
And whichever one they choose to do
is likely to make the other one worse.
And so this is a really

(21:38):
I mean,
this is going to be a pivotal decision
moving forward.
Again, you guys can disagree with me
and and pretend like,
that, that, that it's 5050.
But the reality is Trump
has made it clear
that he thinks lower rates
is the most important thing.
And so it's it's highly likely
that whoever he puts

(21:58):
in charge of the fed, he's
going to make sure
that that person has an inclination
if they have to choose
between low rates and high rates,
they're going to choose lower rates.
And if that's the case, the big risk,
if we're in a position
of stagflation at the time,
the big risk is that it forces or it
drives inflation even higher. Yeah.

(22:18):
But I think
I mean,
I think
what Trump's position, has been
is that he, he feels
whether he's right or wrong
is that inflation.
We don't have an inflation
problem anymore.
We're already at that two, 2.5%
or it's under control.
So why like close enough.
And the question is going to be
even if he brings in
somebody else to lower rates
and they do lower rates and suddenly
inflation spikes to five,

(22:39):
six, seven, ten,
I mean, you and I have a bet going on.
I don't know what I don't know
what the terms are,
but like I still think you're going to
beat that 9%.
Transitory, baby. It's transitory.
Morrissey out of the decade
before the end of the decade.
You're going to test that number.
And so
yeah so the new fed comes in lowers
rates artificially too much.
And now interest
now inflation's at 789 10%.

(23:00):
Is the fed going to just be like
oh well you know
we'd rather have lower rates.
But that was
that was Kyle's argument
literally last fall.
He's like we're going down.
We'll track it
that the fed acts too late, right.
That it's like,
you wait until the problem's here,
then you try to correct it
instead of saying
inflation has been going

(23:20):
down, down, down, we're on that trend.
You're going to wait till it's a problem
and then try to fix it.
And, you know,
because the fed is notorious about that.
Right.
They Trump called it brands transitory.
They do.
They're always too late though.
They're always too late.
That's that's it's
that's the way they react.
Let me defend the fed here for a second.
The fed

(23:41):
we they're always late
because we say that that we
we see what happens
and we say
it was obvious that was going to happen
and they should have taken
action earlier.
Let me ask you guys a question.
We've been pretty with you.
I 100% agree with you.
I think they shouldn't
do anything until it happens.
Right.
And so,
I mean, we've made prediction
episodes for the last two years now,
and have we been anywhere

(24:02):
close on our call of a recession
for two years?
Every time, like we are 100% correct
at predicting a future recession
that will happen.
The timing may not be right.
All right.
But that's the whole point.
That's the whole point with the fed.
I mean,
if the if, if Mauricio
had been in charge
of the fed two years ago
when he was calling

(24:22):
for a major recession,
don't get me wrong where we all were,
but I think you
had the biggest recession.
You're the earliest.
You were the earliest in big or at.
Least in the biggest.
So if you were in charge of the fed
at that point,
you might have been lowering rates,
and here we'd be two years later
and it'd be like that.
So I actually,
I only disagree with you
on one thing about Powells
job being hard.

(24:43):
I think it was harder before tariffs
because at least he's got an out now
like it before.
I think Powell coming into this
this whole thing was kind of
in a no win situation.
And there was a real risk of stagflation.
There was
like of acting too early, too late,
all of these things and I didn't
I don't think he knew what to do.

(25:04):
And then all of a sudden Trump
comes in with his tariffs
and now he held off for long enough,
basically calling it off.
And now he he had to step out saying
like he had to protect himself.
He had to say,
okay,
these tariffs are going
to be a real problem for me,
keeping inflation down
and keeping employment in check.
And he's planting the seed

(25:25):
that months from now
all of a sudden inflation spikes
employment unemployment spikes.
He's going to be like it's tariffs man.
It's nothing.
It's not like we're doing
everything we can.
If you look at the trends
the trends were all going down
and point was holding steady.
We were doing a good job.
And then somebody came in.
I'm not going to mention who
and did all these tariffs.
And that's going to be inflation.
So it's not my problem.

(25:46):
Trump's doing the same thing.
He's I think that's
what he's really doing.
He's laying the foundation to say
hey when we have this thing
fall apart because of his tariffs,
because I know he's got an agenda
that he wants to do,
and there's going to Trump's.
Always good at that.
Powell didn't have that before.
And now he. Does. He does.
But he's going to be like dude
the reason we have inflation
is because this
this loser guy
didn't lower rates
when he was supposed to.
Had he done that,
we would have been just fine.

(26:07):
So I'm going to blame him.
He's going to
they're they're going to be blaming each.
Trust me,
six months from now
there's going to be a crossfire of blame.
And everybody's be like, hey,
it wasn't my fault.
It was this guy's fault.
At least.
At least,
I guess now
at least Powell
has someone to blame it on,
because before it was just him.
Right. Every.
And that was my point in the intro
where the back end of last year, like

(26:29):
every single news
article, every single week
for the whole week
leading up to the fed meeting,
for the whole week after the fed
meeting was all like, oh,
that's way for the fed.
No, it's all that's.
And it was all pictures of Powell
Powell Powell Powell.
And now
he's got this kind of
plausible deniability.
His picture's not up on the on the news
every day.
And he's kind of like probably
he's probably sleeping

(26:50):
the best he's ever slept.
So let's
can I come back to the original premise
because I mean, obviously
I unlike you guys, I actually have,
you know, real work
and I'm busy and stuff like that.
You guys are just,
you know, twiddling your thumbs says.
The only guy here doesn't have a job.
Jeez.
But but,
I mean, I can see that Trump
today came out saying, I have no.
And I quote,
I have no intention of firing
the Federal Reserve chair.

(27:10):
Powell.
But,
do you think he's going to change, Mike?
Because as of last week,
the white House was
confirmed that the Justice Department
was looking into
and maybe they looked into and said, hey,
we don't have a chance.
Maybe that's what's going on.
But do you guys still think
that he's just it's all rhetoric
so that he can eventually blame someone?
Or do you think he's still looking
into that possibility of

(27:32):
of of seeing if you can get
get rid of the same.
Thing it was last time, same playbook?
Or is it just
possible he was getting some bad press
then this was a distraction.
Or the market dropped a thousand points
yesterday after he said he was
he said all those bad. Things.
Yeah but AJ
AJ has been telling us that
that's the plan all along
because he wants to get interest
rates down.

(27:52):
So if we can crash the economy
we've got to restructure our debts.
Right. We got all this debt coming.
Do we want lower interest rates.
So hey, let's let's,
let's crash the market.
And like it's the same thing.
He's done. That.
But that was the crazy thing yesterday.
We, we we had a thousand point
drop in the Dow and the ten year was up.
It's not doing what he wants it to.
That's why he started to.

(28:13):
That's why he started to lash out
at the fed. So that's what happened.
Markets were crashing.
The yields didn't come down.
And guess who he turned on.
How my plan should be working.
It's your fault Powell.
But two
this is we've
we've seen this with Trump already.
So he went after Powell in the last term.

(28:33):
It's your fault you got to do this.
You're an idiot.
You're a moron. I'm gonna fire you.
And then
he blamed Powell for the next year
and still does.
And so it's the same playbook.
He's going to do the same thing.
Anything happens,
it's going to be Powell's fault.
Hey, by the way,
I'll take I'll take exception to
the markets are crashing.
I mean, gold is going berserk.

(28:55):
The gold is not crashing.
Let's put it that way.
In intraday it hit the spot.
Almost hit 3500. The futures hit 3500.
But the intraday hit just shy of 3500
today or yesterday.
Yeah a couple of weeks ago
I was talking to
you guys about like offloading
some of my gold positions
when it was at 3200.
So I appreciate you
talking me out of that.
Well,
I don't give investing advice

(29:15):
on the show, but note that the,
the gold to silver price ratio,
is about 40% higher than than average.
So, so some some people would might argue
that gold is is is is is priced too high.
Others might argue that silver is priced
way too low.
I'm here more so that silver's too low.
Not to mention
silver is an actual like commodity.

(29:37):
Like usable, right?
Like gold. Gold's just for the store.
Once you of stops buying gold,
it's going to hurt
because they're gobbling up.
I mean AJ you're you're $100,000 watch.
Is that is that gold or is that silver?
This is
I don't know how much for this app.
It's an Apple. Watch. So.

(29:58):
It was
a cheap knockoff from China,
but with tariffs,
it was actually pretty expensive.
Exactly.
I keep trying to.
Knockoff is now like $1,000.
Yeah.
All right.
Well,
so it sounds like we might be able to
to put this off until the next time that,
there's some bad press
about a different policy, and we can,
he bring up Powell again,

(30:18):
and then we could shout
about that, distract the media, and then,
then not do anything about it.
Are you telling me that
I just spent all this time
researching whether
Trump can remove the fed
chair,
and I was reviewing
Supreme Court decisions
and the Constitution,
and now you're telling me
like it's all for naught?
Hey, he said it.
He said it as of this week.

(30:39):
Today.
Yeah, like
I think I think we got a week reprieve.
We'll come back to it, say
next, next week.
We keep.
In mind
we're recording this one Tuesday evening.
So by the time you're listening
to this on Thursday or Friday,
don't don't trust anything we're saying.
It could all have changed.
Well, usually what happens,
it'll be something like
Powell has his next fed meeting. Right.
And he has to stand in front.

(30:59):
And the reporters
are just going to poke at him.
They're going to poke
try and say something.
Try and say something.
And if he says something, then
it's going to come all up again
and he's going to get pissed off at them.
But for now, I think we can move on.
Any you get, Mauricio? Yeah, whatever.
Well, let's,
I'm I want to
get to our main segment of the night

(31:21):
because it's by AJ, not Mauricio.
We talked last week
about the possible endgames for tariffs
basically enacted.
AJ yeah, this is me.
I'm sorry. Jay.
Jay. They didn't tell you that?
They switched it to me.
Now it's right in I'm sorry.
I'm sorry. Jay.
This is this is about Trump.
So I just assumed
AJ was going to be the one that when.

(31:42):
I heard
maybe when I heard main segment,
I just assumed me.
But okay.
For you.
Intro of before you intro this
this topic though,
can we just
please make sure this does not turn
into a TedTalk dissertation?
Like, like, can
we put a timer on it or can we.
Put in brackets?
Just one minute.
This one needs a little bit of

(32:03):
of of time. It's not going to be.
I'd rather
AJ I'd rather
be than introduce the topic.
If it's going to take.
It's only
we don't want Ted talks
only when it's not Jay.
Other than that it's okay.
I don't
always give Ted talks,
but when I do, it's Jay.
At the end of the day,
Jay is going to talk

(32:23):
about a hypothetical accord
that we don't even know
is going to happen.
But can you let me do the intro.
Even though. It is.
It's made by Honda and the
and the tariffs
just went through the roof on,
we talked last week about the
what the possible endgames
are for tariffs
currently enacted worldwide.
But it's been difficult

(32:43):
since things seem
so tumultuous
and changing from day to day.
Although most people believe that tariffs
are being used to address
multiple agendas,
there are some who believe
that this is all leading
towards a single end goal.
And one of the prevailing
theories of this
is something called
the moral Lago accord,
which is in the spirit
of the Plaza Accord

(33:03):
and the Bretton Woods agreement
that came before it.
So, Jay, why don't you break down
briefly
what a Mar-A-Lago accord would look like?
And we emphasize the word
briefly, please.
But so I'm going to talk
and you can cut me off in.
The listeners will be pissed off
because they want to understand this.
And so I need to wait.

(33:24):
Say that again.
You think our listeners aren't
smart enough to understand
the wisdom of Jay Z? Is Jay Scott.
I you're cutting into my time.
Okay, so there's this guy.
His name is Steven Miron.
He's the head of Trump's
Council of Economic Advisers,
which is some.
So it's going to be a while guys.
Think tank at the white House.
Anyway. You guys need to.
Go to the restroom.

(33:44):
This might be a good chat.
It's a good time.
AJ will summarize the next 20 minutes
that Jay's going to go in.
I'm going to say I'm going to summarize.
Here we go.
So but actually
Stephen
and I think
we should point out that he actually is
pretty well credentialed.
He is 100%.
And he's he's an economist guy.
He's not just some he's he's not

(34:04):
Peter Navarro, who.
Is not head of the WWE and given to.
Peter Navarro, who wrote papers
and that admitted that he made up,
fake names to, to use as sources
because that
that was more credible
than using his own name.
So anyway, Stephen Myron wrote this 41
page paper.
I don't remember the exact name here.
If anybody wants to look it
up, we'll link to it.

(34:25):
A User's Guide to Restructuring
the Global Trading System,
is what it's called.
And it's a 41 page paper
that tries to solve or talks
about how to solve
three specific problems
that we have in the U.S.
Number one,
bringing manufacturing back to
to the country.
Number two,
getting the rest of the world
to share in the cost of trade
and defense.
It's no
surprise that the U.S

(34:46):
spends a whole lot more money
defending the world and defending
trading channels
and basically spending money
just protecting the world. And so,
number
two is trying to figure out
how to get the rest of the world
to participate
and contribute
more to, to, to, to that cost.
And then number three
is fixing our debt issue,
which we all know is

(35:06):
is way out of control
and needs to be fixed.
So he wrote this paper
that kind of was geared towards
how do we do those three things.
And his argument
was that the global
trading and currency system
is fundamentally broken
for one specific reason,
and that's because the US
dollar is too strong
relative to other currencies.
And if you don't understand
what that means, go

(35:27):
listen to our episode last week
where we talked about the dollar.
But basically,
he argues the US
dollar is too strong
against other currencies.
And the reason it's too strong
is because we have the World's
Reserve currency.
We we can make the rules
when it comes to currencies.
And for that reason,
people and governments,
they want lots of U.S.
dollars. US dollars are safe.
They're valuable.

(35:47):
And so people like to collect U.S.
dollars, and they use those U.S.
dollars to buy U.S.
debt, U.S. Treasury bonds.
What's the best way to get U.S.
dollars?
It's to sell stuff to us.
You sell stuff to us,
and we hand you lots of U.S. dollars.
And so the more stuff other countries
sell us, the more dollars they get.
And so there's a huge incentive
for other countries to export stuff

(36:08):
to the U.S in exchange for dollars.
The more dollars that,
the more stuff they sell us,
the more dollars
we send them, the more dollars
we send them, the stronger
the US dollar gets.
Okay, so all good so far. Now
we like the fact
that the US dollar is strong.
A strong dollar
means that there's confidence
in our currency,
there's confidence in our economy,
and we're going to be
the reserve currency

(36:29):
for as long as the US dollar is strong.
But there's also bad sides to the US
dollar being strong.
And the heart of
of Stephen Mirren's
paper is that we need to weaken
the US dollar.
That is the way
we solve all our all of our problems.
And he proposes that we do this
with aggressive tariffs.

(36:49):
The exact same thing that Trump's doing,
that we implement aggressive tariffs
to basically
take some confidence out of the sales
of of of other countries
to reduce imports, at least for a while,
and reduce the value of the dollar.
And when you reduce
the value of the dollar,
a couple things happens.
First,
it makes imports
more expensive into the US,

(37:10):
so we import less stuff
and it makes exports less expensive.
So other countries
can buy more of our stuff
because their currency
is worth more compared to our currency.
So this accomplishes the first goal.
We can reduce the value of the dollar.
We accomplish the first goal,
which is we bring manufacturing
back to the US
because again,
it's cheaper to
to make stuff here
and export it than to import it.

(37:30):
Next, the paper says
we need to leave those tariffs in place
for ever to some degree.
And we basically what we
we create
what's called a tiered tariff system.
So for those countries
that play nicely with us,
there's those countries
that say we're going to be US
friendly,
we're going to do what you guys want.
We're going to
we're going to do what you say.
You're going to have low tariffs

(37:51):
for those countries
that don't want to play by our rules,
that don't want to play nicely with us.
There's going to be more tariffs.
And so this kind of accomplishes
that second goal.
We can basically tell
the rest of the world
you want lower tariffs.
Well you need to share
in the cost of defense.
You need to share in monitoring trade.
You need to do all those things
that we've been doing before.
You need to contribute more.

(38:11):
And if you do it and you're nice to us
and you contribute your share,
we're going to lower tariffs for you.
If you don't do it,
if you don't contribute
your share, you're not nice to us.
We're going to
keep giving you high tariffs.
So that gets the second piece
which is it
gets the rest of the world
presumably and theoretically
to share in
in all of this responsibility.

(38:33):
Finally,
the third goal is to fix our debt issue.
And what he argues
is that once we have all these countries
that are basically clamoring
to buy our debt
because we've reduced
the value of the dollar,
we're exporting less stuff.
So there's less scholars out there,
to buy our debt.
And these countries,
they're desperate to buy our debt,
but they have fewer dollars to do it.

(38:54):
So there's a much higher demand
to buy our debt.
That gives us a ton of leverage
to basically reshape
all the terms under
which foreign countries buy our debt.
And specifically,
we can do things
like going to China for example,
and we can say, China,
you've got $800
billion in five
and seven and ten year bonds.

(39:14):
Well, we don't want you to have five
and seven and ten year bonds
because those are expensive for us.
We want you to trade those five
and seven
and ten year bonds for 30 year bonds
or 100 year bonds that pay 0% interest.
And the theory is that
if we have enough leverage over China,
if we say, look,
you don't want high taxes,
you want to be able
to export to the U.S.,

(39:35):
you're going to have to accept this deal
where you trade
in your ten year bonds
for 100 year bonds at 0%.
And Marin believes that China, if we
we use the carrot
and the stick
the right way
and we put enough pressure on them,
they're going to be willing
to trade their bonds
that we're paying high interest
on for 100 year bonds
that we pay essentially no interest on.
And now our interest payments

(39:56):
for the next 100 years go.
Why wouldn't they just buy gold
if they're going to get 100 years? Zero.
I'm just telling you what the paper says.
So. So that's that's what the paper says.
Well, Mauricio,
they would do it to appease us.
They would do it to appease us
because the alternative is worse,
I guess is the thing.
I'm sorry.
I didn't realize
this was still part of the Ted talk.
Go ahead. Yeah. And but that's it.
And so that those are the three goals.

(40:17):
And that's how he believes
those three goals can be accomplished.
Interesting thing is
that it seems like Trump
kind of latched on to the tariffs.
He's always been a fan of tariffs.
But it seems like
he really latched on to tariffs.
So at the beginning
of this whole tariff thing,
a lot of people said
Trump's carrying out this playbook,
myron's playbook of high tariffs.
And also Jay didn't didn't Besson

(40:37):
his other like his
Treasury secretary did a similar thing.
Right. Wrote his own paper.
And he's been
right up
until he kind of
became part of the administration.
He was really talking about this.
And then all of a sudden
he became part of the administration.
He was kind of like,
oh, he's he's
going to do what he wants to do.
I don't know.
And then that's kind of what Myron said
the last couple weeks,

(40:58):
which is basically you had
this isn't quite the way
I would have done this.
This isn't quite what my paper says.
If he changes a bunch of things,
he could probably accomplish
some of the things I've written.
But but the way things are playing out
now is not what I suggested.
And so,
while it may look like
we're taking steps towards
carrying out this, this missive of, of

(41:19):
of high tariffs to restructure currencies
and the global
trade and,
and our debt and all of those things in
I it.
Does say something that
that basically the two
most well qualified financial advisors
in his administration
have both talked about this
as a possible solution,
as or even their preferred solution

(41:43):
for getting out of this.
And it's mirroring
pretty closely
what they were saying right now.
And just
and just to defend Jay before
he gets all this hate mail
that he usually gets
after every episode of Drunk real estate.
A we we.
This is not a like a conspiracy or an
unprecedented thing.
I mean,
we have the the
if for those of you who haven't heard,
we had the Plaza Accord

(42:04):
back in the mid 80s,
that basically was addressing
similar issues.
It was when the US dollar
was extremely,
extremely strong
and there was a coordinated effort
with all of the major
economic players back then,
which is different from the who
they are now.
Even West Germany was part of that deal,
which doesn't even exist anymore.
But they had an accord, an arrangement
where they were going
to have a coordinated effort

(42:24):
to devalue the dollar.
Because the dollar had gotten so strong,
it was causing all kinds of issues.
So this is not something
that is, president
actually something that happens
every 40, 50 years, right? Yeah.
The one before that was a Bretton
Woods was a similar agreement.
Yeah.
There's always these agreements
that that just kind of like
we need to reset the system.
The system,
the way it's working
isn't really working.

(42:44):
Let's all get together in a room.
This one just happens to be
the Mar-A-Lago accord.
But you know,
last time it was interesting.
It was the Plaza Court,
which is which I think Trump owned
at some point in New York.
But yeah,
that's is where everybody gets together.
Said, look, the system is not working.
We need to rearrange the system.
And here are the
here are the terms of the agreement.
And we all agreed to that.
So this is not something
that's completely out of whack.

(43:05):
No, it's not completely out of whack.
And I think I mean, these are smart
guys who have have
I think if, if they were able
to actually write the tactical playbook
and carry this out
exactly
the way they wanted, there'd
probably be more likelihood that that
this could be successful
in, in one or more ways.

(43:26):
But it seems like
Trump has kind of latched
on to one piece. Big tariffs.
But he's doing that
with very little nuance.
And there are issues with this plan.
I mean, a couple things.
One, that last thing I talked about,
which we basically try and strongarm him,
Japan and China and Canada
and all the other big holders of our debt
to trade in their

(43:47):
their short term bonds
for 100 year bonds and 0%.
The world is going to look at that
as a default on our debt.
They're going to look at that
as the US
is defaulting on the debt
by strong arming
everybody
into not taking the payments
that they're that they're owed.
And my my take
is that that perception of a default
is going to be

(44:07):
almost as bad as a default,
and that would crush our economy.
So I think
for me, that one's off the table. First.
Yeah,
I this is a good chance
for me to talk about one of my we've
talked about
a little bit on the pod before,
but this is one of my,
one of my favorite economic
subjects, actually, which is,
this there's
this paradox out there
or this, this dilemma
that's called the Griffin's dilemma.

(44:27):
Griffin's paradox,
which was something that a
I think it was a British
and some economist
back in the 50s and 60s came up,
which basically is in
my view, is actually predicting
what this what's going on right now,
which the Griffin's dilemma
basically says something to the effect,
when you have the world's,
reserve currency,
you have to supply the world
with your currency,
because that's how if everybody's

(44:48):
going to be
using the currency
to buy and sell
and to get debt and to repay debt,
you need to supply your obligation
as the reserve currency.
If we all agree that the dollar is
what's everybody going?
You've got to provide that dollar
to the world.
And the main mechanism,
at least back in the 50s
and 60s that you do
that is through trade deficits,
meaning you export more,
that you export less than you import.

(45:09):
So more dollars
are going out to the world,
and that's
how you actually supply
the rest of the world with dollars
and triffids dilemmas.
Basically states
the problem we're having today, which is,
hey, at some point
the interest of the United States
is going to conflict
with that necessity to export dollars
and provide the world
with the US dollars, specifically
when it comes to manufacturing.

(45:30):
In order to export all these dollars,
you have to have a trade deficit.
And the trade deficit basically
puts a hole
into your manufacturing businesses,
which is exactly what's going on.
And with exactly what Trump is trying to
reverse is trying
to get more manufacturing in.
So on the one hand, yes, the U.S interest
is let's bring all these jobs
back to the US, let's
bring the manufacturing back to the US.
But the flip side of

(45:50):
that is that
if there's less of a deficit,
of a trade deficit,
less dollars
are going out into the world
that people need to go buy stuff
and to more importantly, repay
all those debts that they have
that are denominated in dollars.
When people borrow money abroad,
they borrow in US dollars,
which means their repayments
are in US dollars,

(46:10):
which means they need US dollars.
I think you said something, Jay, that,
we don't something about needing U.S.
dollars you don't want.
I'm sorry. Not wanting us.
Do people want us dollars?
They don't want US dollars.
They need US dollars in order to repay
the debts that they've taken out
over the last decades or two decades,
because there's a whole system out there

(46:31):
where banks are lending money to people
and they're lending in US dollars,
which means they've got to get repaid in
what, US dollars, which
which kind of keeps this demand going.
Here's a crazy, crazy paradox.
If we want to bring U.S.
manufacturing back to the US,
or if we want to bring the manufacturing
back to the US,
it is going to cost trillion

(46:52):
upon trillions of dollars.
We don't have liquid,
most businesses,
trillions and trillions of dollars.
So what they're going to do
is they're going to borrow that money.
The government's
going to help finance that.
But but
spending trillions
and trillions of dollars
to bring manufacturing back to
the US is going to require US
financing trillions

(47:13):
and trillions dollars.
How are we going to finance
trillions and trillions of dollars?
We're going to sell debt.
And who's going to buy that debt?
Sure, we'll sell a lot of it internally,
but we're also going
to rely on other countries
to buy that debt that we will
then use
to finance the domestic manufacturing.
The more debt
we sell to other countries to finance

(47:33):
domestic manufacturing,
the stronger
our dollar is going to become
as they buy that debt.
Why is our country spending the money
on the manufacturing?
So if you want to build a
factory in the US,
where are you getting that money from?
Yeah, but why is the government doing it?
Why isn't corporations?
I think I think he's saying

(47:54):
they're going to have to in order,
like we have such a big gap to fill
that it's going to
we're going to have to subsidize it
somehow.
Companies like Apple and Tesla and Ford,
they can build factories
because they're billion dollar companies.
But but let's say
you want to build a factory to to
you sell toothbrushes
and tariffs
on toothbrushes are ridiculous.

(48:14):
And you want to build a factory
to sell toothbrushes.
You might have a $10 million
a year business selling toothbrushes.
You can't build a factory
for $10 million.
You're going to have to get some more.
Or more like like relevant
right now is like a steel plant, right?
Like if you want to
if you want to put in a steel plant,
he's trying to get steel plants
coming back.
Like those things aren't cheap.
So they get.
This is where it comes in.

(48:35):
And I actually made this.
So if you look at the actual current.
Infrastructure, what does that
what what are you showing us your age.
And come on that's fancy stuff.
What do you got.
What do you got.
The slide.
Projector with the lamp on it I got this
I want to see that. Stuff.
The technology on the screen is hard.
So the thing though, with manufacturing
in the United States,
we've lost completely infrastructure

(48:56):
in some industries, like gone
like not only the infrastructure,
we have no skilled workers
to do those things.
The infrastructures here are people like,
I don't know, what do you want me to do?
But that's not true to every industry.
So the steel and aluminum
are still in aluminum
plants are not at
near capacity,

(49:16):
and we have infrastructure there.
Auto, auto, auto
parts, aerospace,
defense, industrial equipment.
We have ready infrastructure there
for them.
When you get into things
like semiconductors,
consumer electronics, solar
panels, batteries and mass apparel.
No, we don't got anything like
that is something that you can't

(49:38):
bring in to the United States.
And not only that, the whole supply chain
for that [...] overseas, too.
It doesn't exist anymore.
So there's certain things
in the United States
that we can incentivize
to not only continue but expand
in in a big, big way
that we already have infrastructure for.
We have
but there's other pieces that we don't.

(50:00):
We don't have the supply chain,
we don't have the workers
and we don't have the infrastructure.
And I think that's why
a lot of this conversation gets it's
it's not so much like you can
or can't do it.
That's not actually how it works. Right?
There's some things that
I think the United States
we have to spend on.
The Chips act
was one of the best things
that I think we did.

(50:20):
And the, the, Biden administration
starting that, doing the Chips act,
that is a necessity.
Like we have to have that.
There's so many pieces of our
functioning in our military
and our government
and our daily lives that we outsourced
to make it cheaper.

(50:40):
And we outsource it not to our allies.
That's crazy.
Like we are our largest adversary.
We gave control over main
critical infrastructure of our economy
and our security as Americans.
That is totally wild to think about that.

(51:03):
But but here's the alternative.
The alternative is,
to some degree, socialism. Why?
No, no one can.
Look at farmers.
So how are farmers?
How farmers survived
for the last two decades.
They subsidize
and they subsidize the government.
So the government hands them money.
That's socialism.
The government
is basically

(51:24):
controlling those industries.
But the reason you subsidy,
that's the issue
is that we are addicted to cheap stuff.
Right.
And so it's like, yes,
we've outsourced the manufacture.
If we bring back manufacturing
to the U.S.,
we've got to pay $15 an hour minimum wage
versus $3 an hour
minimum wage in another country.
So the
so the answer to your question,
AJ, would be like, well, yes,

(51:45):
we shouldn't have outsourced it
to our enemies.
Let's shift
that and outsource it to our friends.
Maybe it goes to Taiwan
or it goes to whoever we consider
to be our friends,
but bringing it back to the United States
wouldn't would mean,
by definition, higher prices,
which would mean 1 or 2 things,
either one.
The US consumer just has to suck it up
and just just live

(52:05):
with 20% higher prices,
or the government can come in.
That's where they have to sell debt
and treasuries to subsidize
that industry in order
for them to compete.
Well, I think this is
this is actually a good
a good roll
back to the Mar-A-Lago accord them
because the Mar-A-Lago
accord, in essence would have
would have people.
If you sign on to this

(52:26):
and I will get the military in a sack.
If you sign on to this, you're basically
declaring out an ally of the US, right?
Like if you come in
and you can have I've heard two versions.
Jake kind of described two
as kind of your inner you're out.
But I've also heard
they're like kind of green,
yellow, red buckets cured. Right.
So like green is like
someone who signs in fully.

(52:47):
They get all the benefits of the US
military banking systems,
no tariffs, all that stuff.
If you're green dollar swaps.
Yeah. Yeah.
Yellow is kind of your friendly.
But you you negotiate
your own terms
with the U.S
you kind of
have your own trade agreements with U.S
and then red is adversaries,
which at the moment is clearly
just China at the moment where,

(53:08):
you know,
there's only one country
who's getting 100 and billion in tariffs.
So
so that
that's a good,
good jumping off point to say, okay, hey,
like there are some things
that makes no sense
for us to try and on shore,
but we would want these in the hands
of our allies.
And let's, let's draw
clear lines of who our allies are.

(53:29):
Who do we have clear
cut trade agreements with?
Who do we have clear cut
military agreements with?
And therefore
we could keep a little bit more,
have a more secure borders.
You know,
but the immediate challenge
with the allies,
the challenge with the allies,
though, is that, you know,
these countries have different,
different leaders.
So one minute
they're an ally because it's
a, you know, whatever.
Some president's there.

(53:49):
And then,
then suddenly a new president comes in
and suddenly it's
a completely different thing.
Yeah.
But Canada,
Canada was until two months ago.
When you could have somebody
you could have some,
you know, random
president who just goes crazy
and withdraws
from the World Health Organization
and the players climate accords.
And you could just have,
you know, wild card
presidents do stuff like that.

(54:10):
Like you don't have,
like there's still allies.
China was never not.
I mean, we've threat
we've threatened to annex Canada.
I mean, I'm
not sure they consider us
an ally right now.
If you threaten,
if you threaten,
if you threaten to come
take over my house,
militarily, I'm
pretty sure I wouldn't call you an ally.
Well, they're laws do.
So go. Go to Canada today.

(54:31):
How's that work?
Right.
Go do trade with Canada
besides tariff stuff. How's that work?
We're still infused
with their government, everything else.
So we're confusing the signal
with the noise here.
And the problem is that we have is
global is Zation
did not play out
and play out all the promises
that it was meant to.
At the end of the day,

(54:51):
we are a nation
that consumes more than we produce.
That production was offshored
to other countries
and made them stronger and more powerful.
This production hollowed out America,
which was supposed to lead to everyone
just getting paid higher jobs.
But the more that we hollowed out

(55:13):
America, our jobs,
our means of production,
we actually saw the lower
quartile wages flatten for decades
like we've never seen the upper incomes.
As we financialized
our industry, sold off
America, collateralized everything else.
It worked for the wealthy.
This works for the rich.

(55:33):
While the lower house
that aren't owners and asset owners,
they don't get anything from it.
Why? Because there's no production.
All we have is assets.
Well, the other countries we are now,
our companies are investing
infrastructure of production.
So we don't produce.
We borrow more than we spend.

(55:54):
We financially manipulate
and we collateralize assets together.
All financial products.
The wealthy get richer
and the government props up assets.
So there is a problem
when it stops working.
And America has universally
said over the last ten years
it's not working anymore.
Like that's Obama and Trump.

(56:15):
They're both change.
We want change. We need it.
The system doesn't work for us anymore.
I love that quote.
AJ confusing the signal with the noise.
I love that one.
Well, and I do want to bring one thing,
one thing back to this to in that
we talked about the first two prongs.
But the third prong are

(56:35):
you can't
you absolutely can't separate it
when you're talking about this.
And it came up in the plaza
according to came in
the Bretton Woods agreement.
And so it would come up in any Mar-A-Lago
agreement to.
And that's military spending, right.
Military protections.
We basically agreed in those accords
that we would protect,
like the trade of goods militarily wise.

(56:57):
And we've continued to do that.
And you've seen it,
you know,
there have been little snippets like,
just like we're looking back
at, Trump's two advisors,
how they used to say things
about the Mar-A-Lago court.
We've seen snippets
about Trump's not happy
about how much we are spending
military wise compared to our allies.
You can see when he did his address,
when he was first elected at NATO,

(57:19):
he basically came right up and said,
like NATO back in 2014, said,
we want to get everyone spending
2% of their GDP on defense,
in each country.
None of that. Right.
Some of them have stepped up
and done that,
but there's still quite a few countries
that aren't spending 2%, even 2%.
And America

(57:39):
currently is at 3.4
ish percent of their GDP.
And if you just look at the numbers like,
if you want to be,
you know,
Fox News side of this,
you could just take the side where
the U.S.
spends 750 or 55,
basically billion dollars on defense
a year, and the all rest of NATO combined

(58:00):
spends 353 the whole NATO combined.
Yeah.
Is it like 1.5%?
I think they're just trying
to get to 1.7. Right.
And and so his his point is,
is that basically
when we made these agreements
back in the day,
that we
were going to police
like we have to restructure

(58:20):
this because we are now world police
right now,
and we are paying much more
than our share to be world police.
And we're not getting all the benefits.
We're
I guess the argument,
kind of the crux of
this is us
having the world reserve currency.
Is that a privilege or a burden
because it's kind of gotten
into the territory
where it's becoming a bit of,
we have to hold it.
Other people

(58:40):
don't pay their fair share
and hold to their deals.
Heck yeah, it's a burden.
What it becomes is we're getting used.
If everybody would actually do
what they should be doing
and pay how much they should be paying,
then of course it's.
There's no there's no way it's a burden.
Can you imagine if if the US

(59:01):
economy was like Venezuela,
where every time we printed a dollar,
it would just stay here
and the amount of inflation
that we would have
if we were not the reserve
currency would be obscene.
We would know it. Is a burden.
It is a burden
like the rest of the world.
It may be beneficial to us.
I don't want a difference
that doesn't mean that it's not a burden.
No benefit and a burden is not the same.

(59:23):
We are subsidizing.
Yeah, but the best in the world.
But the benefit ridiculously outpaces
the burden.
So that's
that's the argument though, Mauricio.
The argument is Mauricio
that it does it outweigh
every single country
because some countries
it benefits that country more than it
benefits us.
Like you just brought up Canada.
You know, I love Canada,

(59:43):
but they only spent 1.4%
of their GDP on defense
because they don't have to they.
Like so you're saying they. Have.
Protection, have much rather
the Canadian dollar
be the reserve currency.
So we get that burden off of us.
That's not what I'm saying.
What I'm saying is the benefit
that they're getting from our defense
spending is outsized to another country
like Poland, who spends 4.4.

(01:00:05):
1% of their GDP.
So they're getting more benefits.
So the calculus on those two
two arguments of what the benefit
we are getting,
you have to take it all in
as an entire whole.
There's no
mathematical equation
where the benefit of being the reserve
currency doesn't
always outweigh as a whole.
Mauricio, you see,
what you're saying
is just absolutely ridiculous.

(01:00:26):
I'm I'm kidding.
If you had no said that,
I was going to say the exact same thing.
They'd be they'd be attacking me now.
Thank you. Thank you for stepping up.
How many reserve currencies of lasted.
Not long and how. Long?
And you know why?
Because the system got so abusive
and the debt
and the offshoring got so bad
it collapsed them.
It's only a burden

(01:00:48):
if we're not playing by the rules.
We make the rules.
The idea
that other people get to abuse us
because we are the world
currency is not right.
So they should be paying their fair share
or they should be penalized for it.
That's crazy.
The have to see them paying their fair
share is a different statement
than the being

(01:01:08):
the reserve currency
is more of a burden than a benefit,
that's all.
We never said that you stepped in
and said that that you
you made the argument.
You basically created an argument
and won it like.
You. That's what I excel at.
That's what I excel at here.
Here's here's what I
here's what I think worries.
Your point is, it's very obvious to us

(01:01:28):
when there's downsides
when we're getting I'm
not going to use the word
taken advantage of.
Maybe we're getting taken advantage of.
But there very it's very obvious to us
what the downsides
of having the reserve currency are.
Because most of them are pretty clearly
focused on our debt and our deficit.
It's focused on
on our ability to to balance our budget.

(01:01:51):
What we don't realize,
because it's more complicated
and you have to understand,
and I know you guys do, but
but a lot of people out there
who are listening,
or people out there
who don't listen to the show,
the ones that do are smart enough
to realize.
I'm about to correct you again, Jay.
Our listeners know.
Our listeners
absolutely understand this,
but the ones that don't listen to this
don't understand the tremendous value

(01:02:14):
of having the reserve currency
and how it basically gives
it puts us on a pedestal
that no other country
we control the currency
essentially, of every other country
on the planet, every.
And for the.
Record, Trump recognizes this.
He's come straight out.
And he
I think his quote was saying,
if you want to go
that fast ticket
down to third world status,

(01:02:36):
you lose your reserve currency.
So he recognizes. It.
And I'm not arguing that.
Get aren't abused leads us.
That's what I'm saying.
The way we get abused leads
you to end your holdings
of the reserve currency.
This is what happens.
You leverage, you don't produce.
Other countries take advantage
as they build up.
They're in a better spot.
And that actual benefit

(01:02:58):
turns to be your demise.
It doesn't have to be that way.
But when you have people that say,
we're supposed to be committing
2 to 3% of our GDP to this,
and none of us are doing it,
we're like half of that
or less in America.
It's okay
because you'll just make up the
the difference here.
We get the benefits from it, right?

(01:03:19):
Everybody gets the benefits.
You have to play by these rules.
We play by different rules
and we just take it on the chin time
and time and time again
and don't do anything about it
that ends up to be a sin.
And and Mauricio, before you jump in,
like when he says, take it on the chin
like it doesn't, that doesn't mean
we're saying
it's outweighing the benefits
of having a reserve currency.

(01:03:40):
What we're saying is certain
countries are getting trying to get it.
Like I would much rather I look like.
Let me give you a ridiculous example,
but I would much
rather have the reserve currency
and have China abuses up the wazoo
than China playing fair.
Why not have the charity?
Mauricio? That's crazy.
We're the reserve currency.
Why do you have to choose?

(01:04:01):
You don't have to choose.
You realize that, guys?
Well, but that's all
but the Griffin's paradox.
But the argument that is we
like the reserve currency,
so we have to be abused.
That is the dumbest argument ever.
We don't need to be abused
and we can keep the reserve currency.
In the park we were trying to make.
Mauricio is certain

(01:04:21):
countries are getting more benefits
than others.
And to even the
to say
that we want to even the playing field
and make it
so everybody is playing even
and paying their fair share.
I don't think that's wrong.
And and just to point out,
as you brought up
like these rules were made in 1973
or whatever,
like we're still working on rules from

(01:04:41):
it was much different.
The U.S.
was a 40% GDP,
our debt to GDP at the time.
And like there was
it was a much different world.
At the time.
We got
the countries
that were in the Plaza Accord,
Japan, West Germany, anybody remember it?
Germany, France and the UK?
Let let me let me point something.
I and I just want to clear something up
because I think we,
we get a little bit lost in assuming what

(01:05:04):
we've seen over the last 100 years
of globalization
actually held before
then, most reserve currencies.
And there's arguments over
whether reserve currencies
really even existed
in the same sense that they do now,
because we didn't have
globalization, people in Spain
weren't necessarily spending.
We weren't going to Australia
and spending money.

(01:05:25):
But for the most part,
the things that we kind of
call reserve currencies,
one of the big reasons they get lost
over time is war.
Countries that have the reserve currency
get conquered,
and some other country
takes over the reserve currency.
We saw that with,
with, the, the that's how.
Every empire gets trade over by war.

(01:05:46):
But it's the economic part
that gets to it.
The only reason no one invaded Spain
is because the US polices them.
Because Spain
only spends 1.3% of their GDP on defense.
But, but
but that's my point,
is that one of the things we need to do
if we want to preserve our status as as
the world's
reserve currency is
we need to be willing to step up.

(01:06:07):
I'm not saying it's fair.
I'm not saying it's right.
But at the end of the day,
we're going to do it. We have to do it.
And yeah, can we punish other countries
for not doing their fair share?
Absolutely.
But but we can't just sit back and yeah,
we can't sit back and say
we're not paying anymore.
We're we're cutting our defense budget
to, to to zero.
And if Spain doesn't pay well,

(01:06:29):
they don't get the benefit of us
because we're not
we're not going to spend any money
either.
No, we're still spending the money.
Maybe we'll keep getting screwed,
but we're going to
keep spending the money because they.
Could fall into a different bucket
as far as what they get in return,
I think.
And that can be renegotiated,
like since 1973.
Those were the old rules.
So I think first of all,
I don't know about your opinion,

(01:06:50):
but if he if
if he could pull this off
and do a good job of it,
first of all, the arguments for why
I think it might happen, first of all,
it would be called the accord.
And we all know Trump loves Mar-A-Lago,
and that would just absolutely solidify
the name Mar-A-Lago in history
for the for the rest of time. Right.
We still talk about Bretton Woods
agreement from 100 years ago,

(01:07:11):
the name Mar-A-Lago
for the rest of time be in history.
So that's a huge plus for him
to just follow alone to get to do this.
But the idea if we just step back
and we think the idea there's two
there's two options.
If this is actually his plan,
the two options are basically one that
he everybody in his administration

(01:07:31):
know this is going on
and they're all on the same page,
and they're just all playing coy,
and they're just doing
a really good job of being coy about it.
And or two,
only a few people in the administration
actually know about it,
and they're playing dumb
and they're acting like it's
not going to happen
and they're just going to throw it
on everybody,
including the rest of the administration.
And to, to, to me to have the

(01:07:52):
that's
that's the way the government works.
First of all, the first
that everyone's in on this
and they're they're playing coy.
That idea to me,
like the government's
just not that functional, right.
Like there would be leaks.
Like we're living in an internet age.
There's no way that this is the end plan
and it hasn't come out
if everyone knows it.
Yeah.
I was just going to say,
I think what we're seeing here is

(01:08:13):
Trump
heard some snippets about there's
this paper and or maybe mirroring came in
and gave him a three hour overview of
this is how it works.
And what Trump heard was massive tariffs
and was like, okay,
there's other stuff
that I heard massive tariffs.
There was no more.
Right.
And here's here's a part of the problem.
And this is.

(01:08:34):
Not tariffs say no more no.
Step two and three.
Step one tariffs
I heard everything you got.
This isn't this.
This isn't a knock on Trump.
But the reality is that to pull this off
requires a ton of nuance.
Basically what they would need to do is
they would need to weaken the dollar

(01:08:54):
to the point
where it's just barely still holding on
as the reserve currency,
but not quite any weaker,
because any weaker,
we lose a reserve currency,
any stronger and.
Unless unless there was an agreement
to kind of peg it to the US dollar,
because that's
what previous agreements had as well.
Now we had the gold reserve to back it
and everything.
But I think that's a
I think that's all right.
I'm going to channel

(01:09:15):
my channel, my inner,
Brant Johnson here on I mean,
eventually we're going
to have some kind of eventually
if we talk about the Dollar
milkshake theory on the podcast
a couple times,
the ultimate result of that
is that at some point,
the dollar's going to strengthen
so much
that it's going to cause
these massive problems worldwide,
and we're going to have to
come back and renegotiate
and do some kind of an accord,

(01:09:36):
or whether it's a Mar-A-Lago accord
or the Marechal Palace accord,
like whatever we want to call it.
But the reality is right
now we're not there like, we're, we're
we're below 100 on the DXY.
It's not like we're at like 200.
But you can't just use the DXY too though
because the DXY was made back in 73
when the Europe was like
our only trade partner.

(01:09:56):
So now if you
but if you look at the
trade weighted U.S.
index dollar
index, it's much different
than just the U.S but.
Is it
I is know
is it is at an all time high
right now where this is
unprecedented territory,
where the dollar's
so strong that it's causing
all these kind of issues
around the world.
But moreso your point is true.
There's and Ray
Dalio talks about this a lot.

(01:10:17):
Either this will happen
not on our terms
or it will happen on our terms.
And the problem with it
not on our terms, is
we don't know when or how.
And once
that starts to unravel,
we won't have control anymore of it.
So we can be proactive
and we can say, this isn't working.

(01:10:39):
And over the last few years, it's
representative everything in our
in our social orders in America,
everything that's going on
in the United States,
we could either be proactive
and tackle this on our terms,
or this whole thing can unwind
and it's out of control that.
Hey, that's a great argument.
Well, when was the last time

(01:11:00):
you saw the US government say, hey,
you know what, we have a problem
that's going to be happening in ten,
15 years.
Like, I don't know, Social Security.
But let's tackle the problem now
because let's get ahead of it
on our terms.
When was the last time
you saw that happen?
Never.
So it's nice that we're actually saying
this is an issue. Let's tackle it.
And and even if we pulled this off,
even Jay I think would be impressed.

(01:11:21):
And he would say, hey, good job Trump.
100%.
Good I will that will have to be a Dr.
Swag.
Jay Scott saying Trump.
Well done Jay.
Jay promised me
that he'd get a tattoo of Trump.
But it would never be.
Jay do one of those
like Al-Qaeda hostage videos
where he'd stand in front of the camera?
He'd have to be like

(01:11:42):
he'd stand up for the camera
and he'd just be steady, be like,
I my Nate.
Hi, my name is Jay Scott.
He's reading The tick, the page that.
That should have been
our fitness challenge thing
a Jay if Jay lost,
he should have gotten a tattoo or two.
Or from.
That would be great.
I mean, I don't
I don't even need incentive.
I mean, if that's if that's
what the terms are.

(01:12:03):
I mean, Biden left office
with a ridiculous $2 trillion deficit.
If Trump can leave office
with less than $8
trillion in additional debt,
which is that $2
trillion of deficit for four years,
I will give him props.
Fair enough. All right.
That was good.
I like that guy.
So that was an interesting discussion.

(01:12:25):
Let's do, let's do a top ten.
Actually, I'm going to do. Okay.
That was Jay's idea.
We put off two weeks.
Good discussion.
Jay, that was great.
I'm only going to do top eight this time
because there's only eight of them,
so that's why
I'm going to do a top eight.
Because I wanted to
point out,
I did make this point a couple times
because I thought it was important,
the percentage of GDP

(01:12:47):
that NATO countries
are paying into defense.
NATO is supposed
to be kind of world police,
but it's kind of
become a little bit more out
sized in certain people's favors.
Back in 2014,
they made a pact that they were all going
to get to 2% of their GDP.
A lot of people stepped up and did it.
A lot of other countries did not.

(01:13:08):
And so I'm
going to point out the people's
I think I'm going to shame them.
I'm going to shame those countries
right now.
As far as people, that's not much.
How much sleep
do you think they're going to lose over
the fact that you are shaming them?
I mean.
These guys are going to resign.
The president of Luxembourg,
who is bottom of the list at 1.3%,
is going to listen to this tomorrow.

(01:13:29):
And he might going,
yeah, he might go
and just
they have to do a press conference
and say, we're going to do better.
Him and him, Slovenia and Belgium
and Spain
all of them,
they're going to get together
and they're all going to be like,
we're the lowest in NATO.
We're all doing 1.3% of our GDP.
We've we've ridden on the coattails of us

(01:13:50):
too long. We're going to step up.
We're going to make changes.
They're all at 1.3%.
And they're the ones screaming,
take care of the Russia
Ukraine situation.
J don't say anything.
AJ already chimed in
before Canada 1.4%,
kind of
makes a little bit
more sense to me, considering

(01:14:12):
they don't have any borders
with anyone other than the US versus
those other countries.
They're kind of in the thick of it.
Like,
it doesn't really make a lot of sense
for me, for them
not to be spending on defense.
They're at 1.4%, Italy, 1.5%.
I guess they got a lot of water
around them.
Maybe that's their argument
for for not having to spend.
But they're at 1.5%,

(01:14:33):
Portugal, 1.6%.
And then finally Croatia, 1.8%.
Everybody else has stepped
up, gone above 2.2%.
Poland.
Actually, probably even
even Ukraine is spending more than 2%.
Ukraine is not part of NATO.
They're spending 50% of their GDP.
It's just with our money.
Yeah, I think it was 40 some,

(01:14:54):
but it's pretty close to 50.
And also you notice
Russia isn't on here, but Russia,
I'm the last I read
they're only spending
like 6% of their GDP on
on defense and military,
which is doesn't seem like that
high considering what's going on.
Okay. China's taking care of the rest.
Yeah.
Shout out, to a couple countries.
First of all, Poland,
there are more than the U.S

(01:15:14):
34.1% of their GDP. So shout out to them.
Oh, they're also kind of
in the thick of it right now too.
They share a border with a war.
They just, it's big time this year.
Yeah, yeah, yeah, exactly.
And Estonia
right in there,
right in line with,
with the U.S, 3.4% there.
So, yeah. Props to those people.
Everyone else, step up your game.

(01:15:36):
J you got any, hypotheticals for us?
$5 million.
You know,
if you never talk
to your best friend again.
J would you give up talking to me
ever again?
I was I was literally about to make that.
That joke about you.
Not not a joke.
I was literally about to point that out
about you, Kyle and I, I would
I would not give you up for five minutes.

(01:15:57):
I go, so like.
Yeah, you're gone. You're gone.
It's funny when you say never again.
That's tough.
But at the same time,
like best man at my wedding,
like he's, he's lives back in Canada
and I will regularly go a month,
sometimes two months,
without even talking to him.
And then when you see him
and you talk to him, it's just like

(01:16:17):
you never missed a beat.
So it's
I think it's it's a bit
different discussion for some
people than, than others.
Mauricio I know doesn't
have friends,
so it's really hypothetical.
Yeah.
I don't have any best friend
unless, I mean, isn't your spouse
your best friend?
Ooh, that
that can't be obviously included.
That doesn't work.
Well,
you think she would stop talking to you
for 5 million?
Mauricio, she's not talking to me

(01:16:39):
for, like, ten grand.
That's a perfect marriage, right?
There's no talking.
And you got 5 million bucks.
I
can't say no if you can't talk.
All right, let's wrap this up.
Are we so next week,
are we recording on Tuesday?

(01:16:59):
Rico.
We're going to record on Saturday
at 3 p.m..
You do have.
Kids, don't you, Mauricio?
I thought I saw
there's somewhere in the show notes.
All right.
Good up.
So, guys,
AJ, we kept it under the,
the hour and a half mark.
So, you guys are.
I think. You're good.
You can actually pick up your kids.

(01:17:19):
They're not going to be sitting out
in the cold waiting for you.
So.
Yeah. Good effort, guys.
So as far as I know,
until Mauricio tries
to change his mind again,
my drink's gone. Gotta go.
Hit the head.
So I will see you next Thursday.
And I guess we get no plugs this week.
Yeah, guess not
so, you know. See you guys.

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