The Decline of the US Dollar & What It Means for Your Business & Investments

Episode Transcript
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Speaker 1 (00:00):
How does the decline of the US dollar affect your business?
How does it affect your investing? How does it affect
everything we do on a day to day basis. Today
on the Weltability Show, we're going to discuss just that
the decline of the dollar, both the decline of the
value of the dollar, but also the decline of the

(00:21):
dollar in its place in the world market. And we
have a singular expert here with us today, Ken Rogoff,
who is who wrote the book Our Dollar, Your Problem,
and Ken, it is such a delight having somebody of
your stature on the weal to Ability Show.

Speaker 2 (00:41):
It's great to be on a great podcast like this time.
So thank you for having me.

Speaker 1 (00:47):
Yeah, thank you. If you would, Ken, not everybody in
our audience knows you and knows who you are, would
you give us a little of your background? It's pretty impressive.

Speaker 2 (00:58):
Well, I'm a professor at Harvard University, which for the
moment still exists, and I've been here. I've been here
for a long time, but I've had other positions in
my career. I've taught at other universities, but I started
out as a very junior economist at the Federal Reserve
in Washington, and much later in my career I took

(01:19):
leave and was cheap economist at the IMF. My most
famous academic paper is I wrote the first paper more
than forty years ago on why it was a good
idea to have an independent central bank that focused on inflation,
which now sounds normal, but there was no one back then.

(01:39):
In fact, only a couple countries, the US and Germany,
had independent central banks, and that became very influential. And
I've done a lot of other things, but I will
mention I work on exchange rates. That's been a big topic.
And I had a before this recent book, Our Dollar
Year Problem. I had a book in two thousand nine

(02:00):
called This Time Is Different with Carmen Reinhardt on the
history of crises and financial crises over eight hundred years.
And it also had a lot of data and stuff
at the end. It was a very data driven book.
It improbably reached forth on Amazon of all books behind

(02:23):
the three Girl with the Dragon Tattoo novels. We did
not have sex and violence in that edition, but were
maybe we'll come out with another one later.

Speaker 1 (02:34):
You go, there, you go, that's awesome, So would you mind?
I always like to start with really the basics, make
sure everybody's on the same page. Would you explain what
it means that the dollar is the world's reserve currency.

Speaker 2 (02:50):
Yeah, I mean it's a kind of vague phrase. So
literally what it means is that most central banks in
the world governments have quite a store of cash. It's
literally cash, it's treasury bills. And they don't just have
it to protect their exchange rate, they have it to
protect their banking system whatever kind of crisis happens. And

(03:15):
you can say, well, you know, why doesn't say India
just hold the rupee, like, isn't that good enough? Well, no,
not if India is having a crisis of some problem.
They want something everyone can use. And so central banks
today hold trillions of dollars. In fact, foreign demand for

(03:40):
our currency constitutes in rangements from a quarter to a
third of our massive debt. So that's a literal sense
in which the reserve currency, it's in their reserves. But
there's a much more important sense in which the dollars
the lingua franca of global markets. It's like English. So,

(04:01):
as I think probably a lot of your listeners know,
a lot of financial assets are denominated in dollars. One
in Australia wants to borrow from, say Singapore. Singapore doesn't
want Australian dollars. I mean, they don't want to bother.
They want the debt to be in US dollars. When
Ethiopia trades with I don't know, Sri Lanka, they both

(04:27):
have their own currencies, but they do everything in dollars.
I mean, there are few countries that do things in
euro but it's usually in dollars. Oil is priced in dollars.
Everything's priced in dollars. It's just the universal currency, and
it is an incredible advantage. I mean, I've traveled a lot,

(04:48):
and it's wonderful that English is the universal language. By
no means does everybody speak English, And by no means
does everybody accept dollars. But you have a chance if
you're speaking English or using dollars. So that's the sense.
And I'll just finally say, there's a long history of

(05:09):
who the big dog was in the currency world. Spain
in the fifteen hundreds, believe it or not, the Netherlands
was and the sixteen hundreds. I mean, that's hard to
get your head wrapped around because it's very small country.
But very clever people, and they did. And then for

(05:31):
really more than a century, the pound was the dominant currency.
The sun never set on the English, the British Empire.
But then, particularly after World War Two, it's been the dollar.
But the dollar has just grown. So after World War
Two we had this financial system that put the dollar

(05:52):
at the center. Literally everyone agreed the dollar is top
dog and we will pay our currency to the dollar.
But everyone was not everyone. Everyone was Europe, Japan, Canada,
a couple other countries. There was the whole Soviet block,
that Chinese and all these countries like India, parts of

(06:15):
Latin America that really hadn't entered the global economy. And
as they did over the last forty years, the dollar
colonized all of them and reached a peak that even
the British pound, the Spanish pieces of a never had.
And that's that's the really important sense in which the

(06:37):
dollar is the reserve currency.

Speaker 1 (06:39):
Ken, you used a really interesting term there, you use
the term colonized, that the dollar colonized. I love that
term because financially that is that's case. And let's go
back to Okay, so two countries they pegged their transaction
in dollars, they've effectively create dollars, right, So this is

(07:02):
the whole idea behind that. When people talk about the
euro dollar, these are dollars that aren't created by the
Federal Reserve. These are dollars that are being created because
your financial instruments is in terms of dollars, right.

Speaker 2 (07:14):
So that's that's right. But what gives us just such
incredible power in the world in controlling the flow of
global finances is that in a crisis, only our Federal
Reserve can print dollars. So if you've been out there,
you're in the UK, you're in China, you're in somewhere,

(07:37):
and you've been creating dollars and suddenly there's a liquidity
squeeze and people are having trouble finding these dollars that
you need to be able to do that. And for
that reason, and this is this is a little hard
to get your head wrapped around, and forgive me, but
the whole global financial system flows through the United States

(07:59):
because if you Europe tried to set up its own
clearing center to clear dollar checks, to clear dollar transactions,
it's very limited because in a crisis, they get blown out.
And so that has given us this control over the
global financial system. Also our military power, and that is

(08:21):
what lets us put on sanctions, That's what gives us information.
So on top of that, we pay lower interest rate
because everyone wants dollars. We have all these other privileges
and it's been a big I don't know even want
to call it perk of American power, source of American power,

(08:41):
very very important to our business model in the United States.

Speaker 1 (08:45):
Yeah, now you've been tyking recently about the decline of
the influence of the dollar. Can you kind of give
us some idea of why is that happening? I mean,
we saw it happen. It's happened with every empire, right,
it happened with Spain, it happened with a lens, has
happened with a pound. It appears to be happening with
a dollar. Why is it happening. What's the consequence of that?

Speaker 2 (09:08):
Well, part of the reason it's happening is even though
from an efficiency point of view, of course everyone should
speak English or everyone should use the dollar, we understand
why everyone doesn't speak English. And the reason why there's
some resistance to having everything go through the dollar is
it gives us so much power the Chinese obviously hate it,

(09:30):
and they've gotten very big. They have been a key
to how the dollar has grown because they, for the
longest time really peg their currency to the dollar, which
effectively dollarized all of Asia and even Latin America. In Africa,
you had the US, you had China. The two big countries,
they were both dollars. So what are you going to

(09:51):
do if you're in Africa or Latin America? But over time,
first of all, they're a big economy, and they get
bigger and bigger, or they have different business cycles. They're,
in my opinion, in a recession now for quite a while,
or at least what I would call a recession in China.
We're not. We might be, you know, we can come

(10:11):
to that. We might be, but we're not. And they
don't need the same interest rates as US. So that
reason's been there. But I think what's really given them
a kick in the butt to move away from the
dollar is they see how we use sanctions. They see
what we did to Russia. We prevented them from trading
in some ways, well.

Speaker 1 (10:32):
We weaponized the dollar against Russia.

Speaker 2 (10:35):
We have we've weaponized against Russia. We actually have sanctions
against twenty countries. I ran North Korea, a whole bunch
of countries, and we took away the Russian Central Bank's money.
They had three hundred to three hundred and fifty billion dollars.
We say we didn't default, but we said, well, we're

(10:56):
not defaulting. It's your money. We're not taking away, but
you can't have it. And of course you know it's
a default. I mean, it's just we're getting into technicalities.
China has two trillion dollars. I mean, officially only one trillion,
but my book argues two trillion. They hold it indirectly
in other ways, and you think they didn't see this.

(11:19):
You think they don't realize that when they blockade Taiwan,
which a lot of people experts that I talk to
things a near certainty that there are certainly eighty ninety
percent chance they're going to do soonish you think they're
not worried about that. They are. You think they're not
worried about our sanctions. So they're moving and believe it

(11:41):
or not, a lot of our friends hate it too.
The Europeans don't like that we see so much more
about them than they see about us, because we're seeing
the transactions.

Speaker 1 (11:54):
Well and effectively. It seems like we it almost seems
like we've over spent our power, and it seems like
that's what President Trump is doing with the tariffs. He
is actually using that again as a as a weapon,
but this time an economic weapon.

Speaker 2 (12:12):
Yeah, I mean, we overused the sanctions. I mean, I
have to say, Uh, my book starts out talking our
dollar year problem, starting with talking about living in the
Soviet Block when I was a teenager, I was a
professional chess player. They were much better at chess. I mean,
the ISAA said the best player Bobby Fisher, but they

(12:34):
had a lot more tournaments. And I was living in
the in the UH, in the so in the Soviet Block,
and uh, you know, just seeing how influential the dollar
was even there. But they were, you know, they were
they were broken away from us. Anyway, I was living

(12:54):
as a teenager in the Soviet Block and Nixon got elected.
I'm not young, and I was a teenager about to
be a draft age and I'm thinking, I don't want
to go back to the United States. I mean, this
guy's a warmonger. Okay, I don't want to get into
the politics, but you're a teenager you're about to get drafted.
I had I had friends. I had friends who got

(13:16):
drafted a little older than me, who ruined their lives.
They went to Vietnam. I'm sure you you know have
relatives or friends who did there. They none of my
friends died, but two really close friends became heroin addicts
and they never recovered. They were just their lives were ruined.
So you know, it was in many ways we were

(13:42):
as uncomfortable about things Nixon was doing as people today
are about what Trump is doing. But certainly the uh,
the Trump, the Trump tariffs are I am. I teach
at Harvard. I'm guilty, but I would categorize myself this
among the three percent that identify as conservative, which means

(14:04):
centrist in my opinion. But I don't think everything Trump
does is wrong. But the tariffs is just the dumbest
policy ever. Not just putting on tariffs. I could live
with that. You want to put on a five percent
or ten percent, it's a tax. I don't like taxes.
You can cut a tax somewhere else. But this whole

(14:24):
idea of let's make a deal, let's bludgeon them over
the head, let's take it to one hundred and forty percent.
Let's take it, you know, take it down, Let's see
where are It's been very undermining the dollar. And I'm
glad you used the word empire because Rome, of course
famously rotted at the center. And if I ask where

(14:46):
the vulnerabilities, and I'm not going to blame it on Trump.
I think it's much deeper in our economic in our
political system, our debt situations unsustainable. It's not Biden's fault,
it's not Trump's fault. It's us. It's us. The voters
will throw out anyone we haven't become convinced. And so
that is also a vulnerability. Everyone else sees it. They

(15:09):
see it, believe me, and they're diversifying because of it.

Speaker 1 (15:12):
Yeah, so the Trump doctrine actually seems to be deal making.
If you look at the new tax bill, it's deal making.
There's so my wife is also a CPA, and we
were talking yesterday. I'm going, wouldn't it be nice to
actually sit down with somebody and talk about what what
actually good tax policy would be as opposed to what

(15:34):
deals should we make here? Right? I mean that there
are parts of this bill there I think really good
tax policy. I think expensing, equipment, research and development expensing.
Those are really good tax policy. And of all things
that should be made permanent, should be those two things.
Of course, so they're temporary, right, but they should be
made permanent. And and I think, you know, lower tax

(15:56):
rates generally speaking, good tax policy. But giving special deductions
to certain groups like people who work overtime or people
who get tips, not a big fan of that. It's
a political it's a political buy your vote type of
a thing.

Speaker 2 (16:15):
To me.

Speaker 1 (16:16):
Exactly, it's let's make a deal. And the salt deduction,
the dumbest idea ever is that we ever had it
in the first place. Okay, there should be a zero
state and local tax deduction, zero, not ten, not twenty,
not forty, not fifty zero. But those are policy decisions.
So it seems to be a let's make a deal.
So if the dollar okay, so we seem to be

(16:41):
overspinning our influence. So we've got this huge bank account,
say it this way. We've got a huge bank account,
and we've kind of been I think binding over did
it with the sanction. Now Trump's talking about more sanctions
in Russia. Can't possibly work, and you know, trying to
flex that muscle. It's it seems like we're in danger,

(17:02):
or we could be in danger of losing that power,
just the way Great Britain lost that power. Do you
think that's coming and if so, what's the consequence to
the average business owner.

Speaker 2 (17:17):
So the dollars influence was eroding before Trump. The problem
of our unsustainable fiscal policy was coming before Trump. He
may lash out at the Federal Reserve, which is I
think very I mentioned, you know, I'm talking my book
because I not my recent book, but I wrote the

(17:39):
first paper on central bank independence. Of course I think
it's a great idea, but the Democrats were lashing out
at it too. There are a lot of ideas among
progressives to take it away. He didn't invent everything, but
there are these problems at our core that are undermining
our long run strength of the dollar. We're not going

(18:01):
to be suddenly have your clients paying in renemby and
probably not even a euro. But I mentioned we colonized everywhere.
That's part of why our interest rates are so low.
So I think that's going to get less and so
one effect is interest rates will go up. But I

(18:22):
think where people will really see it, where it will
really be painful if this keeps going. Will be when
we have another crisis, and we will. I don't know
what It'll be, A pandemic, a cyber crisis. I just
have no idea, but I think we will. I mean,
we see, you know, we have them frequently, and if

(18:43):
we last five more years without one, I think it
will be very good luck. Indeed, And when it happens,
we want to borrow a lot. We borrow more than
anybody else. I know my progressive friends think we need
to borrow three times as much, but we all borrow
twice as much as anybody else. Everybody looks at us, Oh,

(19:04):
I can't believe you're borrowing so much. We're able to
do it because a quarter a third of our debt
is held by foreigners. We're able to borrow that much more.
We're not able to borrow three times as much as everybody.
They are limits, and our debt's gotten very high. We
feel it because interest rates have gone up and we

(19:26):
have to pay more in interest payments, and in my opinion,
interest rates will probably continue to rise at the long end.
I don't think we're going back to these really low
interest rates for a lot of reasons. So when we
get that shock and we go out there and try
to do the same thing, the buond markets are going
to react a lot faster as we're doing it, and

(19:48):
it's going to you'll feel it. We won't. You'll feel
like you're in a normal country. And for Americans that'll
be a big disappointment. So we'll certainly feel that. And
I mentioned the national security, which is more subtle, so
I don't want to get into that, but it'll affect
your taxes, it will affect your national security. So there
are a lot of ways you'll feel it, but are

(20:08):
the most direct ways. And your loans, your mortgages, where
everyone pays between half a percent and a percent less
than they would if the dollar was not on top,
is so high on top.

Speaker 1 (20:22):
So uh, So you're not suggesting that I think you
mentioned this that you're not suggesting that there's going to
be some other reserve currency. Do you think that there
will just be less, it will be more distributed so
or or or will people gravitate to a bitcoin, for example,

(20:43):
which you know certainly has seen enormous price increases in
the last in the last year, more than gold. What
do you what do you think the practical consequences are
from a pricing standpoint.

Speaker 2 (20:57):
Well, I think the dollar is very high right now.
And you very carefully when you introduced it said there's
the value of the dollar and there's the use of
the dollar. They're both very high. The use has been
coming down, but the value is very high. And I
have a certain amount of conviction. I talked about it
in the book that when you hit these peaks, it's

(21:19):
very hard to predict exchange rates, but when they're way
out of line in a purchasing power parody sense, it's
probably going to come down. So I think that's something.
It's an argument for diversification. For example, I think, I actually,
I know this sounds crazy, but think European stocks will

(21:40):
outperform US stocks and dollars. And it's partly just reversion
to me, they've fallen so far behind, so you know,
and I mentioned we'll probably face ever higher interest rates.

Speaker 1 (21:56):
Of course, there's an argument that the.

Speaker 2 (21:58):
Lower I'm sorry I didn't answer about bitcoin, and i'm
Bitcoin is a competitor for the dollar in the underground economy.
I mean, Trump's trying to bring it into the legal economy,
and I think that that'll get undone that's going to
lead to a crisis, and that's part of what's betting
up the price because it's not just bitcoin, but the

(22:19):
whole infrastructure around bitcoin. And he gets goes deregulated, which
by the way, is the opposite of what he said
in twenty twenty one. But I won't go there. And
bitcoin competes in the underground economy, for you're a CPA, correct,
so you're not auditing people in the underground economy and

(22:40):
people doing illegal activity and arms, you know, arms dealing
and human trafficking and trugs. But bitcoin's used in that world.
The dollar is too, but cryptocurrencies have been rising and
rising in that world. Russia and China are probably using
it's a stable coin to do a lot of their

(23:02):
trade to get around sanctions. So and that gives a
fundamental value. I take issue in the book with all
these people like Warren Buffett and Jamie Diamond, Nouriel Rabini
and Paul Krugman, many who say bitcoin's useless, its value
is nothing. Well, you know, if everybody's obeying every law

(23:25):
and we control everything, that's true, but we don't. And
so I think cryptocurrencies have a market there there's a
question about how we should be regulating it, but at
least for the next four years, we're not going to
be so probably going to continue to do well.

Speaker 1 (23:43):
Yeah, it's it's an interesting question to me because you know,
the value of the value of anything that is fiat
is based on confidence. So the value of the dollar
is based on confidence. I mean, there's there's no there
there that it's not like it's backed by something.

Speaker 2 (23:59):
I'm going to push push back on that a way.

Speaker 1 (24:00):
But but but bitcoin, same thing. I mean gold, same thing.
Gold has no practical uses. But so that the value
is somewhat while it's a real tangible asset, the value
is based on well, you know, how does it compare
to other assets. That's where the value comes from.

Speaker 2 (24:18):
I got to push back on that a little bit.
So there's there's a famous couple chapters and Juvil Noah
Harari's famous book Sapiens that are most famous chapters saying
kind of what you said, and it's you know, true,
but it's not true. The government has a lot of
levers to make you use its currency. It can require

(24:42):
you pay taxes in its currency. It can require it
can pay its suppliers, it can pay its employees, it
can make banks honor it. That creates network effects that
give just an enormous advantage to its currency. It can
go farther than that, but probably typically doesn't need to.

(25:02):
And uh so, you know their their advantage is that
the fiat currency. And to say that it doesn't do anything, well,
you know, it's useful. It's we need a medium of exchange.
But the reason the government's medium of exchange tends to
win over history is because it controls things like the
first paper currency was Kubla khans and he was the

(25:24):
grandson of Geangkhis Khan. Marco Polo wrote about this and okay,
he had a paper currency. Marco Polo's maybe most famous
chapter is about alchemy. He's somehow turning tree bark into gold.
But the emperor would execute you if you didn't accept it,
and payment it was punishable by death. So I I mean,

(25:46):
I don't think, I don't think it's right.

Speaker 1 (25:49):
Well, there's certainly regular for sure, there's there's power because
of the regulatory I mean, in fact, i've I've said
for a long time that the real power of the
dollar is that the government does require you to pay
your tax is absolutely. I don't think it's a coincidence
that the sixteenth Amendment and the Federal Reserve came in
to play the same year.

Speaker 2 (26:08):
One hundred percent, one hundred percent, I completely agree with
what you're saying, and but that also gives it network
effects once everyone's having to.

Speaker 1 (26:17):
Use it well, and the network affects it that much
bigger because we've colonized the world, and.

Speaker 2 (26:22):
They're that much bigger because we've colonized the world. And
what's unwinding about the dollar is some of the colonies
are breaking free. The one that really matters because it's
so big in the global economies Asia and as China
breaks free, it sucks part of Asia with it. They're
about half the dollar block, and so that that's a

(26:43):
big deal, and a lot of people don't realized that's
been going on.

Speaker 1 (26:47):
One of the things you mentioned is previously was that
oil is sold in dollars, and yet there's there's been
some pushback on that by China and Russia, and there's
question will Saudi Arabia continue to use the dollar. That
seems like that's a big deal since all of our

(27:08):
worst in the last hundred years have revolved around oil
what do you think about that? Do you think that
we will lose that? Are we endangered that? Because that
seems like a big deal.

Speaker 2 (27:20):
You're absolutely right, it is a big deal. And of course,
the part of the world that's most quote unquote free
of the dollars of the Europe. Europe has the single currency,
the Euro. Well, if you go back to the nineteen set,
go back to the nineteen sixties, before our fixed exchange
rate system broke up in the early seventies, they were

(27:42):
already thinking about going to something different. They were starting
to price in the German Deutsche March, they were starting
to have loans in the German Deutsche March. They were
laying the groundwork for what you know eventually happened. And
China's doing the same thing. It's pricing, it's creating very
innovative financial systems and financial structures to make payments. They're

(28:07):
laying the groundwork to be able to have more freedom
from the dollar. And uh, that's that's been going on
for quite a while, and again accelerated by the sanctions
against Russia where they see the handwriting on the wall.

Speaker 1 (28:24):
Yeah, so it seems like the dollar hegemony is seeming
to be splintered now and so now you're gonna have
more transactions done in the remember the one. You're gonna
have more transactions done in the Euro and and you're
gonna have more transactions done in bitcoin. I mean, it's
you know, it's even even if bitcoin we're regulated to
the extent that there was reporting requirements, that just means

(28:47):
there's you know, basically tax reporting requirements doesn't mean it
can't be used. And it has the advantage of not
being not being controlled in the size of the amount
of bitcoin that that we have. You know, with the dollar,
where we can print dollar, we can't print bitcoin.

Speaker 2 (29:05):
But bitcoin and cryptocurrencies in general, they're the underground economy.
But that's big. My book gives estimates of twenty percent
of global worldwide y. Worldwide, it's pretty big. In the
advanced countries actually it's fifteen percent, and it places like
Italy thirty percent. And bitcoin can be used in those

(29:28):
and so that that's a twenty five trillion dollar economy,
So that gives it real value. I don't think bitcoin
is going to conquer the major country. They will mean
so much sense, they have so much incentive to restrict it.
If that all it starts replacing the dollar, it creates
a lot of problems.

Speaker 1 (29:48):
Well, we've always seen this in China, right, they already
restrict it, and so you know, it does make sense.
They don't really, it's not in their interest for it
to go completely mainstream, which I think is the point here.
So what are some things that you think that business
owners can do and what should we as business owners

(30:08):
be looking at in order to kind of prepare for
this because it's clearly declining clearly I mean not just
the not just the exchange rate of the dollar, which
means hurry up and take that European vacation because that's
that's going to cost more. But what can we do
from a business standpoint? Do you think or do we
need to do to counterbalance that change in the in

(30:32):
the use of the dollar.

Speaker 2 (30:36):
Well you're much more expert than I am, but I
would say things like it's going to be a more
volatile period. It's going to be more like the seventies
than it was like the twenty tens. That's what we're facing,
and that's that's tough when things are more volatile. But
I would just be get used to it. It's going
to be part of things. I say that, I would

(30:59):
not count on interest rates collapsing back to zero. That's
a controversy, that's my opinion. But you know, I have
quite a bit of conviction that longer term interest rates
right now, the tenure rates around as we speak this moment,
the tenure rates around four and a half and the
thirty year rates around five. I expect those to drift

(31:22):
up another percent in the next couple of years because
there's debts pouring up, there's militarization going on all over
the world. AI is sucking up a lot of investment.
The fracturing of trade, so if you're closing yourself off
to trade, that's what Trump wants to do. He wants
to have less better trade bounce. That means less money

(31:46):
coming into the country to pay for that trade. That's
been keeping our interest rates down. So there are a
number of things pushing up interest rates. And I mean
that's probably almost no one listening wants to hear that,
And I'm sorry, but for it. You know, like, if
you're thinking of taking a two year loan or a
ten year loan, I would take the ten year loane

(32:06):
right now. Maybe I'm wrong. I understand they're very volatile.
Many people with great expertise on this, but I mean
I think I expect to see this upward drift, and
I would think about protecting yourself again, how to protect
yourself against inflation. I expect that all this volatility, this
budget unsustainability, which is magnified by the decline in the dollar,

(32:31):
which raises our interest rates, which makes it even harder
to balance our budget. I think it's not going to
end well. I think we're going to end up with
a burst of inflation, not because Trump is not managing
things well, not because of Biden or whoever's next, Because
the American people are not prepared to accept anything until

(32:54):
we have a crisis. Any politician who tries to do others.
For example, we haven't really raise the retirement age compared
to other countries. We're France, we think we're France, and
I don't know who France thinks they are. They're in
a lot of trouble every other country, even Denmark.

Speaker 1 (33:11):
Yeah, I mean lay that Denmark went to seventy.

Speaker 2 (33:14):
Denmark went to seventy.

Speaker 1 (33:15):
Why why don't we why don't we peg our retirement
to our life expectancy? I mean, that makes no sense.
To me, why we would somehow get to have more
life expendency and the same amount of money for longer
periods of time without without higher birth rates. I mean,
it's a Ponzi scheme to begin with, by definition, and

(33:36):
so that does seem seem odd to me as well.
But it sounds to me like what I'm hearing you
say is we've got to really reprice our expectations. We
even may need to reprice our assets when you may
need to, you know, because if people are thinking asset
interest rates are coming down because we always want, you
always need our earnings rate to be higher than our
interest rate. Okay, if our earnings rate is lower than

(33:58):
an interest rate, we're in trouble. We cannot sustain that
for very long. So it makes sense to me what
you're saying, because if your inflation rate is three percent,
your interest rate has to be higher than your inflation
rate by definition, and then your earning rate needs to
be higher than your interest rate. So it's it's this repricing.

(34:19):
We have to think, Okay, what are we going to
do so that we can we can reprice whether it's
our goods, whether it's our real estate, whether it's our
business assets, whatever that is. But we have to keep
this whole pricing mechanism in mind. And if if and
I think you're right, I think the politics of it
are such that, hey, people aren't going to accept it.

(34:40):
I mean, you know, why do we have Why aren't
we doing something like you said about social security? You know,
why are we dealing with this when we're gonna we're
headed towards a twenty one percent cut in a very
short period of time. Why not deal with that? Why
why are we waiting till the crisis? And so I
think that's a I think that's a really important thing.
And I think your book Our Dollar, Your Problem by

(35:02):
Ken Rogov, I think that is such understanding how this
is working is going to allow us to kind of
that macro thought process you're talking about, then we can
apply it into our micro type of a business. It
sounds like to.

Speaker 2 (35:17):
Me, well you say not surprisingly much better than I could.
I should mention, of course there's AI and who knows,
but I watch previous generations of inventions. I take a
long time to kick in. I know they're all the enthusiasts,
but you could have heard that about the steam engine

(35:39):
and the railroads and containerships and it's all airplanes. It's
all true, but it takes longer than you think. And
I mentioned I was a professional chess player. I followed
AI my whole life, and it's a miracle what it's done.
But it just takes longer than you think in order

(35:59):
to to.

Speaker 1 (36:00):
Come well, there's actually construction projects that have to have
But here's the thing about AI. It takes power, right. Yeah,
and you might have seen that Trump is like doubled
down on nuclear. Actually Biden did. He started it with
the two for them. Yeah, I think so, because but
those those projects take years to build. That years, Yeah,

(36:24):
the infrastructure while the while the technology self may multiply rapidly,
the infrastructure to support it can't move as fast.

Speaker 2 (36:34):
That's that's that's very well, But I mean I didn't
think of saying it quite that clearly. But you're absolutely right.
If nothing else, the energy is just not there to
do what we want to do, and that is not
something we're going to be able to solve quickly. And
I do think nuclear has to be a big piece
of it. And I maybe I'll get my classes get

(36:56):
boycotted for saying that, but I don't I don't see
another solution, and that's I can't imagine how long that's
going to take, and so therefore that that has to
be a constraint on how fast a I can grow.

Speaker 1 (37:11):
Well, thank you, Ken, the book again, is our dollar
your problem? Ken? For more information about what you're doing,
where can people find you?

Speaker 2 (37:22):
Well, I have a sub stack which is just developing.
I have a Harvard web page which gives my writings
I write on Project syndic Head once a month that's available.
And you know I'm in have op eds and newspapers.
You can just google my name and a lot of
stuff comes up.

Speaker 1 (37:42):
Well, that's great, Ken, It's been absolutely delightful to learn
from you today and to talk about what you know.
I think the average business owner we're so caught up
in our day to day business that we forget to
sometimes step back and take a look at the bigger
picture and what happens with the dollar, because it does
affect things now, you know, on the one end, it

(38:02):
may make our goods cheaper, so mate, if we're selling overseas,
may make it easier for us to sell overseas. If
we import, it's going to make it more expensive. Certainly,
the average consumer is going to see price increases as
a result of this that I don't see any option there.
And like you say, interest rates, I think that's a
really fascinating thought because that is that's something we deal

(38:24):
with on a day day basis in business.

Speaker 2 (38:27):
Just to support what you're saying, this is a moment
where you don't normally think about these things. Macroeconomic issues
don't affect your business. You don't really care. This is
a turning point. This is a big one of things
happening where I think you need most people probably should
inform themselves and they'll regret if they did. And it's

(38:50):
you know, you may be always hearing that, but this
is a moment with a lot of change on the horizon.

Speaker 1 (38:56):
I love that Ken Rogoffs again came out. Check out
all of his works, his previous books as well. And
remember when we do get this kind of an understanding,
we're always going to make way more money and pay
way less tax. We'll see you next time on the
wealth Ability Show. This podcast is a presentation of rich
Dad Media Network

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.css-r6mb8g{margin:0;word-break:break-word;display:-webkit-box;-webkit-box-orient:vertical;box-orient:vertical;-webkit-line-clamp:1;overflow:hidden;}My Favorite Murder with Karen Kilgariff and Georgia Hardstark

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The Decline of the US Dollar & What It Means for Your Business & Investments

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