Episode Transcript
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Speaker 1 (00:00):
Hey, Mike, listen to your program this weekend. You were
talking about proxy voting and that you really didn't like
it except for that you did use it for being
a shareholder, like on iHeart where you don't work. But
then you corrected yourself and said you did work. When
did you start working there? I mean, I know you
(00:20):
go in and blow hot air, but I didn't know
you worked there.
Speaker 2 (00:28):
I'm crushed.
Speaker 3 (00:34):
Hmmm, I don't know. I don't know how to move forward.
Bubble soldier on, the soldier on, because now everybody's talking
about interesting famous in the federal government that are projected
to reach eight hundred and ninety two billion dollars or
(00:54):
more this year, obviously more than we spend on defense,
a third higher than what we spent on debt interest
payments in twenty twenty three, a third higher than twenty
twenty three. And it just keeps going up. So where
(01:16):
does it stop? What if, just what if there was
a grand plan to fix that problem? You know, on
my American financing spots, I talked about, you know, Americans
or some four trillion.
Speaker 2 (01:35):
Dollars in debt or what is it? How much is it?
Speaker 3 (01:38):
How much do we owe in debt. Oh no, I'm
talking about credit card debt for Americans. It's over Americans
collectively over a trillion dollars in credit card debt. Well,
that's not counting what you owe in federal government debt
and the interest that you're paying on that. What if
(01:59):
Trump had a plan, Because if if it was, where
was that?
Speaker 2 (02:07):
It was a.
Speaker 3 (02:11):
In twenty twenty four, interest was almost thirty percent higher
than it was in twenty twenty three. I haven't seen
the twenty twenty five numbers yet. So we spent eight
hundred and ninety two billion dollars, almost a trillion dollars
on interest in twenty twenty four, and that was a
third higher than what we paid in twenty twenty three.
(02:33):
You begin to realize that if you were to chart
this out, we're looking at al Gore's hockey stick, and
pretty soon interest payments, which are already a great, great
percentage of our GDP, will become even more. It's just
going straight up. Well, that national debt has become something
(02:55):
of kind of like a metaphysical object. It's it's all,
he's there, it's oppressive, and somehow we don't really have
a handle on it. Thirty seven thirty nine trillion dollars.
You can't come. I can't comprehend that number. What was
it dragon to take to pay it off? At a million.
Speaker 2 (03:17):
Dollars per second? It was over three thousand years, almost
four thousand.
Speaker 3 (03:22):
Almost four thousand years at a million dollars a second.
One Mississippi two, Mississippi three, Mississippi four, Mississippi five, Mississippi
five million dollars in those five seconds. And to pay
off that thirty seven thirty nine trillion dollars you're talking
about almost four thousand years to do so. It is
(03:43):
not sustainable. It's it's like you're you're under anesthesia and
you don't really you don't even really know what's going
on around you. Yeah, what do we do? We keep
borrowing more, we keep spending more, and we just shrug
our shoulders and we go on. And the damn politics
keep telling us, no, I'm going to I'm you vote
for me because I'm gonna go to DC and I'm
(04:04):
gonna balance the budget.
Speaker 2 (04:07):
It's laughable.
Speaker 3 (04:09):
You know, when we get to the midterm elections, if
anybody tells you that.
Speaker 2 (04:12):
Depending on how things go over between now and the
midterm elections.
Speaker 3 (04:15):
You should just spew your diet coke at on them,
just like really if and if it gets their shirt dirty,
you know, because you know, well, if it's Michael Bennett,
he'll have his sleeves rolled up, he'll have his fly
fishing gear on, He'll be standing out in the middle
of you know, the Blue River somewhere pretending to fly fish. Well,
you can walk out there and just splash him with
the water. But what Donald Trump understands that escapes both
(04:42):
Tunisian economics and the Biden Treasury is that that is
not just a numerical sum, but is a dynamic instrument,
and it's subject to all sorts of manipulation, policy, psychology, sovereignty.
(05:03):
The question in is not whether we can afford our debt,
but whether it can govern the terms under which that
debt is managed, rolled over, refinanced, and perhaps lower our costs,
(05:24):
or perhaps even have some of it, just imagine some
of it, because I've actually been in negotiations on Wall
Street where part of the negotiations was, hey, listen, we
will we'll pay you X y Z if you'll refinance
(05:46):
this part of the debt, and then if you're right
off this part of the debt Heart iHeart meeting the
company I'm sitting here, right here, working, working at right now,
kind of did that with our debt. So I heard
a couple of years goes through chapter eleven. Should have
done it earlier than that, but for whatever reason they
put it off. They finally go through chapter eleven, and
(06:10):
then once they get through chapter eleven, they realize, hmm,
still got a problem. We're having a hard time servicing
our debt.
Speaker 2 (06:20):
So what do they do?
Speaker 3 (06:21):
Well, they start before they reach the point I'm going
to get to. They start by trimming everything they can.
They cut us to the bone. They actually cut us
to the marrow, in my opinion in some places. So
they just cut cut, cut, cut, cut, cut cut. Then
when it comes time for guys like me and others
(06:42):
to negotiate our contracts, well it turns out there really
wasn't much negotiation. Here's our contract. Oh well that's not
good enough. Well that's what we're doing this year. Okay. Now,
I wasn't surprised by that, because I'm a shareholder of iHeart.
I knew what they were doing because the analysts are
(07:03):
always reporting about what the sea sweet's talking about, So
I knew that they were going to go They were
going to go to the bondholders, the debt holders, and
they were going to say to the to the bondholders, look,
we have slashed our costs, our expenses, and now we
have frozen our costs just like mine. Okay, here's your contract,
(07:26):
same as last you know, same same as your you know.
Speaker 2 (07:28):
Here, here's your new three four year.
Speaker 3 (07:31):
Contract, same as your old three four year contract. Well
that's not good enough for me, so we got to
find some other ways. Okay, well we can maybe work
on some benefits over here. But they were able to
now go to the bondholders, to the debt to people
hold the debt and say, look, for the next three years,
we have locked in our costs. Now they still have
(07:53):
they have to take in inflation, and they have to
take in obviously things happened that are emergencies, like you know,
tower goes down somewhere, and they said, in exchange for
us doing that, we want to put off our payments
for three years so we can build up some reserves
so we can expand in some areas we'd like to
(08:13):
expand in.
Speaker 2 (08:14):
Would you do that? And the bondholders, knowing that, well,
we can either throw them into a chapter seven and
liquid them and not come out with except pennies on
the dollars. Or we can roll the dice with them
and go along with the Sea suite and see what
they can do. So they chose the latter.
Speaker 3 (08:32):
Trump understands exactly the same thing. So this is not
a hypothetical idea. As of last month, we hold thirty
six point two to two trillion in gross national debt,
of which twenty eight point nine trillion is held by
(08:53):
the public. Fully one third of that public held debt,
some nine trillion dollars will mature in the next twelve months.
Speaker 2 (09:06):
That's not a that's not an inconvenience.
Speaker 3 (09:13):
That's a problem of arithmetic, because bonds don't self renew.
You have to go back to the marketplace. You've got
to go back with that debt and say these bonds
have matured, and now we want to replace those maturing
notes with new notes. Then you start the negotiations at
(09:38):
what price, what's the cost, what's the rate? And here's
where I think Trump may actually be playing the markets correctly.
And it's kind of genius when you think about it.
So Biden saddles the treasury with trillions three and five
(10:00):
year bonds at rates that have now proven to be
short sighted. And Trump sees the trap for what it is.
It's a force refinancing at higher rates. And when you
do a forced refinancing at a higher rate, that does what.
That doesn't help you solve your problem. That compounds the burden,
that transform transforms debt from a tool of leverage into
(10:25):
a runaway liability. And it gets back to my question.
I asked you at the very beginning of this program,
what's your alternative? Because right now we have runaway liabilities.
We're solely at at the at the mercy of anybody
that wants to buy our debt, they can demand any
price they want to because we can't.
Speaker 2 (10:47):
Afford to default.
Speaker 3 (10:50):
The average interest rate on US debt five years ago
was two point three percent, give or take today, because
of Biden's borrowing, three point three five percent. Now, you
might think that the difference between two point three to
two and three point three five, which is one point
(11:13):
zero three percentage points, may seem like immaterial. That doesn't
really make any difference until you take it to scale.
That represents a forty four percent increase in the cost
of borrowing across the entire debt, of all debt that
we owe, a forty four percent increase. In other words,
we've reached the physical cliff.
Speaker 2 (11:35):
In dollar terms alone.
Speaker 3 (11:38):
The interest payments now rival and will soon exceed the
entire budget of the Pentagon. So interest is no longer
a budget line item. Interest has become the budget itself.
So here's what's Trump. Here's here's what Trump is trying
to do. Reduce federal outlays, reduce our spending, waste, fraud,
(12:03):
and abuse, bureaucratic inertia. That's the first place to start.
And then you start trying to pressure foreign governments to
reduce their tariffs, so that would open new markets for
our goods, for our businesses. And when you do that,
you attract an unprecedented influx of foreign capital. Right now,
(12:27):
he's got three trillion dollars and more coming into this country.
That three trillion dollars will be invested in American assets,
in our infrastructure, and in our businesses. So you get
reduce spending, get foreign governments to reduce their tariffs, and
(12:53):
then open up our markets to get more investment into
this country. So what does that do? This is where
I have a hard time putting my head around this,
but it makes sense. You start bending the yield curve downward.
What that does is that reduces the effective rate at
(13:16):
which any new debt is issued. So let's walk through
each of those spending. It's not merely cutting fat. That
dose is actually torture. They're burning the fat off, duplicative
grant programs, misallocated welfare programs, all the climate bull crap,
(13:41):
and they're moving with incredible speed. Every dollar cut from
future outlays from future spending lowers expected deficits. Every dollar
cut from future spending lowers the expected deficits. And a
lower deficit means there's less upward pressure on the yields
(14:04):
on the bonds that we have to buy to pay
for to cover that debt. So less pressure means lower rates. Now,
the same is true with regulations. The more you free
up and increase revenues, not by increasing taxes, but by
(14:26):
increasing economic activity, it has the same effect. It's my theory.
It's what I talk about all the time about we
need more taxpayers, or we need more companies or individuals
making more money so that they end up paying more
taxes by what and still keep the same rates. The
(14:47):
same brackets. So that's the first thing. It's about spending
and taxes. Then you can get to the second point,
and that's about the trade. Now, I don't care what
Collins and anybody else keeps talking about with respect to tariffs.
They are not mere taxes on consumers, because when you
(15:11):
use a tariff as a strategic maneuver, it becomes a
bargaining ship. And that's what Trump is doing. By threatening
retaliatory tariffs or by choosing very selectively decoupling our tariff relationships.
Speaker 2 (15:29):
What is he doing.
Speaker 3 (15:30):
He's forcing, he's compelling, He's requiring our trading partners to
reduce their own barriers. Now, when they reduce their barriers,
if just take Germany for example, they haven't done anything yet.
But if when Germany or the EU does something that
means that, oh, American made cars, you can actually start
(15:50):
selling those American made goods, you can actually start selling those.
As someone who's traveled through Europe extensively, I can tell
you it's hard to find much of any American made
in Europe because of the tariffs. Now I've not been
to China, but I assume the same thing is even
worse in China. I had been all through Southeast Asia.
(16:11):
I've been all through Japan, I've been through all South Korea,
and I can tell you in those countries you can't
find really anything that's American made. But once they trying
to avoid our tariffs start to negotiate to lower their tariffs,
that opens up new markets. And again, once you start
(16:32):
boosting American exports, those exports are taxable. More exports, more revenue,
more revenue, you decrease the pressure to borrow more money.
And then there's the investment. You get the arrival of
trillions of foreign capital into the American economy, which is
(16:55):
their preferred place to invest anyway, because we're the largest
economy in the world. So whether it's investing in equities,
investing in our market, whether it's purchasing real estate, or
it's building out their industrial base here in this country
instead of their own country.
Speaker 2 (17:14):
That's a vote of confidence.
Speaker 3 (17:16):
Capital always goes, remember, money flows where where it's most
likely to be used to its best highest use. Capital
goes where it's treated the best. And under Trump, that
foreign capital is going to find a low regulatory drag,
high expected returns, and a government that is actually courting
(17:38):
We want your money here, So foreign demand for our
assets is going to demand increase demand for the dollar,
for our treasuries and for long term Americans to bilits.
Speaker 4 (17:49):
Michael, it seems to me that what's really going on
with people freaking out over what Trump is doing with
Paris and everything else in the stock market, dropping, et cetera,
et cetera, is that we have the memory of a
that and the attention span of ant. We were just
focused on what's right in front of Holy crap, my
(18:10):
four lots, one hundred thousand dollars, did you sell? No,
But you're freaking out because you just keep looking at
what's writing for you.
Speaker 3 (18:19):
That's so true, and there's no historical perspective at all.
October whatever it was, nineteen eighty seven. Remember that you
go look at any chart of the Dow Jones industrial
averages over a fifty year period, there is a trend
(18:43):
line that goes up, and on that trend line there
are depths all up and down the trend line. And
then somebody asked on the text line, which I was
the point I was trying to make, But I guess
I didn't do it very well.
Speaker 2 (18:59):
Mike.
Speaker 3 (18:59):
If the interest rates go down, shouldn't we refinance the debt? Well,
we in essence do refinance the debt. Every time a
group of bonds mature. We go back to the market
and we say, look, we've got, you know, these bonds
that are maturing in such and such weak and we'll
offer treasuries at this and we'll and we'll negotiate, and
people will bid, and we'll in essence refinance that debt
(19:23):
every time those bonds mature. So we do that all
the time. The point is that now what Trump is
trying to do is to depress the yield curve so
that the the overall rates on those bonds continue to drop.
(19:44):
And I think that's part of the master plan. I'm
not ready to go There's something in the back of
my head that in terms of our privates of billion
life terms of refinancing debt that I think he may
(20:04):
be thinking about, but I'm not ready to get there
yet because I don't have enough data points to really
substantiate it. But there may be part of that going
on too, and that.
Speaker 2 (20:18):
Has to do with just revaluing the dollar and everything else.
Speaker 3 (20:22):
But let's don't let's don't get off track of that,
because I think instead when you think about the three
pillars here, spending, cutting, spending, trade and using trades so
that we can boost American exports, and then the arrival
of foreign capital into this country by making this country
(20:46):
even more Look people still would people rather invest in
the United States or in Vietnam in the United States.
But as we get further and from others that physical cliff,
people start hedging their bets. So yeah, instead of putting
all of our one hundred dollars in the US, we'll
(21:08):
put seventy five dollars in the US, and we'll put
twenty five dollars spread around five other countries, five dollars
in five other countries. When you think about obviously there's
risk and reward and everything and everything that you do,
everything that we do, involves risk and reward.
Speaker 2 (21:30):
And this is a big gamble.
Speaker 3 (21:34):
But I think to put it in perspective, you have
to look beyond what's right in front of us. This
is intentionally structured to reverse the long term erosion that
was brought on by NAFTA, the North American Free Trade Agreement,
(21:55):
which remember when Ross Perrot was running for president back
in nineteen and was it eighty eight, and he was
screaming about that big, giant sucking sound. He was so
opposed to NAFTA, but the Cabald at the time was
so enamored with NAFTA because it was gonna it was
gonna it was gonna open up free trade, it was
(22:16):
going to lower the cost of all these goods and services,
and so it was sold to Americans as, look, if
you put the North America Free Trade Agreement in place, way,
our cars will be cheaper and all you know, our
guacamoleia will be cheaper. Everything will be cheaper. Our our
tequila is gonna be cheaper. Yeah, and all that went
south or north, and that giant sucking sound that ross
(22:38):
Perot predicted came to bear.
Speaker 2 (22:42):
Well.
Speaker 3 (22:42):
So now Trump is trying to intentionally restructure that long
term erosion that was brought on by not just NAFTA,
but by globalization itself. So when you implement very specific
reciprocal tarots, he's applying strategic pressure to try to restore
(23:06):
some sort of equilibrium among all of our trading relationships,
not just China. You know this is this would not
work if he just said China, I'm going to do
this to you and nobody else because we sold the
same problem in Europe.
Speaker 2 (23:24):
Do you know.
Speaker 3 (23:26):
I still go back to the one time that I
that I had some uh London firefighters here. I'd spoken
a conference in London and then they came here for
a seminar and they were I was driving another Jeep
Grand Cherokee at the time. They all wanted to do
(23:48):
our meetings. Weren't called out of springs. Now they're used
to driving on the left side, and they're not actually,
except for the autobond, they're not really accustomed. Particularly when
you live in the London metropolitan area, you're not really
accustomed to driving it, you know, eighty five ninety five
miles an hour, and they're not accustomed driving, you know,
left handed in the right lane and blah blah blah.
(24:11):
But they wanted to drive that Jeep so badly they
couldn't see straight. And it wasn't just the size of it,
it was the uniqueness of it. Because we don't sell
jeeps Europe, we don't sell American autos in Europe, and
they and they wanted to drive an American automobile. So
(24:32):
by opening ourselves up to oh, if you guys don't
like the tariffs, we're imposing on you. Then what you
ought to do is drop your tariffs so we can
actually start engaging in some trade, and that's going to
benefit everyone. And that's exactly what he's doing. Let's think
about commodities. Right now, the price of most commodities are
(24:54):
beginning to fall, and I think that decline will probably continue. Now,
whether tariffs will adequately compensate for what's really deflationary pressure,
I just have no crystal ball.
Speaker 2 (25:11):
I don't know.
Speaker 3 (25:12):
But in the short term, falling oil and real estate
prices might bring some relief to consumers because it will
lower your living costs. It'll undermine the inflation panic of
the past three years. But and here's the butt asset
deflation could expose the fragility of the post COVID paper
(25:34):
millionaire class because all of their wealth is tied to
inflated valuations. It's not tied to productive output. I am
full disclosure. I'm doing a.
Speaker 2 (25:58):
Although I don't I don't. It's not really a home
equity loans. I don't.
Speaker 3 (26:01):
I have one hundred percent equity in my house. But
I'm doing a mortgage with American Finance Finance, and I'm
doing it obviously because Obviously I get a good deal
with them because they're one of my sponsors. But we
want to do some remodeling and some renovations around the house.
And I don't want to take money out of broke
(26:22):
Reache or anywhere else. I want to take it out
of I want to take it out of the house.
And the rate they gave me is great, so I'm
that's what I'm doing. But when I got the appraisal
on the house and I told Tamra what the appraisal was,
I was like, holy crap. But I also realize that
(26:47):
that's gonna that's going to vary, and that's going to
come down. It's gonna change. It'll go back up, and
it'll change. I'll go up and it'll go up and down.
But so many people look at their paper value going
back to oh my gosh, I lost five thousand dollars
in the market, did you You lost five thousand dollars
in value in what you had in the market, But
you didn't actually lose five thousand dollars because you haven't
(27:09):
sold those stocks. Only until you sell the stocks can
you actually say that I either gained or lost something. Oh,
Because only then do you pay any capital gains is
when you sell it and you actually made some money
on it. So there's a lot of people that are
in the so called millionaire class right now where their
wealth is tied to inflated valuations and not really too
productive output. And I think housing is a great example.
(27:34):
The average house in this country right now four hundred
and nineteen thousand dollars financed at seven percent. That cannot
create a strong middle class. I hear so many horror
stories about people who are struggling to buy a house,
who are just struggling.
Speaker 2 (27:52):
Well.
Speaker 3 (27:52):
At dinner Saturday night, a couple was trying to buy
a house from the sun of this couple that we
were with, they were fighting and struggling and doing everything
they could, these potential buyers to buy their son's house,
just trying to get a three percent down payment. And
what they're paying for their son's smaller, newer house is
(28:17):
outrageous compared to what they're paying. He's actually the son
is buying his parents' house because they love that house
and they want to move into it. They've done a
lot of remodeling and stuff anyway, they want that house.
So if the average home is now four hundred nineteen
thousand at seven percent, that's really hard for people to
(28:37):
get into homes. So any illusion of prosperity that's built
on inflated credit at some point has to be punctured. Now,
even if inflation retreats and our purchasing power begins to improve,
the reconstruction of the entire middle class of a working
(28:58):
class economy is not going to have with the snap
of a finger. That's a long term effort. But again,
that's what we want, isn't it. And you have to
start somewhere. You can't again, you can't snap your fingers
and just turn it around on a dime. You have
to start somewhere. After decades of offshoring, all the demoralization
(29:23):
of this government spending and the inflation, the cultural decay
going on, all of that can't be repaired in a quarter.
It's going to take time, patience, and it's going to
take us, and us means we have to take our
blinders off.
Speaker 5 (29:44):
Mar Mike, I've been watching Fox thirty one News this morning,
and all they're talking about is elastic commodities going up,
the price of the new Nintendo Switch going up, the
price of iPhones going up, the price of new cars
going up. These are all elastic commodities. If the price
is too high, people will buy something else, or they
won't buy anything. This puts pressure on the companies to
(30:08):
do something about their costs.
Speaker 2 (30:12):
Key, you sound like you might understand econ one oh one.
Speaker 3 (30:16):
That fascinating, but they don't or actually, you know, with
all due respect, because I happen to know one of
the anchors on the Fox on KDVR in the morning program,
he does understand econ one o one. He's reading what
the editors are put in the in the teleprompter. But
think about what their purpose is. Their purpose is as
(30:40):
always to instill fear. You know, when I drove in
this morning, Janisteine and Fox News was talking about once again, Dragon,
you have many people under we've had No she wasn't
telling you how many people.
Speaker 2 (30:52):
It was.
Speaker 3 (30:52):
It was how many storms we've had over the weekend.
That was the news we had. Did you know we
had storms over the weekend?
Speaker 2 (30:59):
It's spring? Never mind, never mind.
Speaker 5 (31:06):
There's storms every day it's spring.
Speaker 2 (31:11):
Huh. Well that was the headline. But it'll affect fifty
million people.
Speaker 3 (31:15):
And that was the and that was the weather report. Yeah,
I mean of course, I guess when you're on a
national cable channel. I mean, you really can't tell me
what the temperature is going to be in Denver unless
we just happen to be one of eight cities that
they name off real quickly. Well, high in Denver today
will be one hundred and two degrees. It's going to
be a record, maybe, who knows. Oh my god, I
want you to think about this. Biden added what what
(31:44):
Biden added? Almost two trillion dollars were my notes? Uh,
one point eight trillion was that he added in one year.
And in that year, with that amount of money, everybody
just yawned. Nobody thought anything about it whatsoever. In fact,
(32:09):
I would say that it was one point seven eight
one point seven eight trillion he added to the national
debt just in the past year. And all the people
that attended, in this case, the Church of the budget
deficit worshipers, they didn't say anything. Trump comes along, tries
to simply reverse the course and to the talkback point
(32:30):
and to I'm sure like if I looked up now,
but they're talking about the NCAA finals, they would be
talking about, oh my gosh, everything's only up. This is calamitous.
If you roll nine trillion dollars in debt at five percent,
that's four hundred and fifty billion dollars annually. Rolling in
nine trillion at three percent would save you one hundred
(32:52):
and eighty billion dollars a year over a decade. That's
one point eight trillion dollars. That's what Biden spent in
one year in twenty twenty four. So the stakes in
this gambit are pretty big. But think about this as
a thought experiment. If we could incredibly signal to the
(33:13):
bond markets that we were going to balance the budget
within ten years, and then we could say that we
got the will, the political will, to suppress inflation, to
protect our capital, to spur growth, to deregulate, cut costs,
do all of that. Why would the yield and treasuries
not fall? Of course they would. Why would investors not
(33:35):
bid more aggressively on US debt, driving the rates down
even further?
Speaker 2 (33:39):
And in fact, that's what happened in the nineteen.
Speaker 3 (33:41):
Nineties when Clinton and Nuke Genrich said yes, let's do that,
let's get on a path to do that.
Speaker 2 (33:50):
Well, now, just simply because it's Trump, it's bad. But
when it was Clinton, Genrich. It was good.
Hey, Mike, listen to your program this weekend. You were
talking about proxy voting and that you really didn't like
it except for that you did use it for being
a shareholder, like on iHeart where you don't work. But
then you corrected yourself and said you did work. When
did you start working there? I mean, I know you
(00:20):
go in and blow hot air, but I didn't know
you worked there.
Speaker 2 (00:28):
I'm crushed.
Speaker 3 (00:34):
Hmmm, I don't know. I don't know how to move forward.
Bubble soldier on, the soldier on, because now everybody's talking
about interesting famous in the federal government that are projected
to reach eight hundred and ninety two billion dollars or
(00:54):
more this year, obviously more than we spend on defense,
a third higher than what we spent on debt interest
payments in twenty twenty three, a third higher than twenty
twenty three. And it just keeps going up. So where
(01:16):
does it stop? What if, just what if there was
a grand plan to fix that problem? You know, on
my American financing spots, I talked about, you know, Americans
or some four trillion.
Speaker 2 (01:35):
Dollars in debt or what is it? How much is it?
Speaker 3 (01:38):
How much do we owe in debt. Oh no, I'm
talking about credit card debt for Americans. It's over Americans
collectively over a trillion dollars in credit card debt. Well,
that's not counting what you owe in federal government debt
and the interest that you're paying on that. What if
(01:59):
Trump had a plan, Because if if it was, where
was that?
Speaker 2 (02:07):
It was a.
Speaker 3 (02:11):
In twenty twenty four, interest was almost thirty percent higher
than it was in twenty twenty three. I haven't seen
the twenty twenty five numbers yet. So we spent eight
hundred and ninety two billion dollars, almost a trillion dollars
on interest in twenty twenty four, and that was a
third higher than what we paid in twenty twenty three.
(02:33):
You begin to realize that if you were to chart
this out, we're looking at al Gore's hockey stick, and
pretty soon interest payments, which are already a great, great
percentage of our GDP, will become even more. It's just
going straight up. Well, that national debt has become something
(02:55):
of kind of like a metaphysical object. It's it's all,
he's there, it's oppressive, and somehow we don't really have
a handle on it. Thirty seven thirty nine trillion dollars.
You can't come. I can't comprehend that number. What was
it dragon to take to pay it off? At a million.
Speaker 2 (03:17):
Dollars per second? It was over three thousand years, almost
four thousand.
Speaker 3 (03:22):
Almost four thousand years at a million dollars a second.
One Mississippi two, Mississippi three, Mississippi four, Mississippi five, Mississippi
five million dollars in those five seconds. And to pay
off that thirty seven thirty nine trillion dollars you're talking
about almost four thousand years to do so. It is
(03:43):
not sustainable. It's it's like you're you're under anesthesia and
you don't really you don't even really know what's going
on around you. Yeah, what do we do? We keep
borrowing more, we keep spending more, and we just shrug
our shoulders and we go on. And the damn politics
keep telling us, no, I'm going to I'm you vote
for me because I'm gonna go to DC and I'm
(04:04):
gonna balance the budget.
Speaker 2 (04:07):
It's laughable.
Speaker 3 (04:09):
You know, when we get to the midterm elections, if
anybody tells you that.
Speaker 2 (04:12):
Depending on how things go over between now and the
midterm elections.
Speaker 3 (04:15):
You should just spew your diet coke at on them,
just like really if and if it gets their shirt dirty,
you know, because you know, well, if it's Michael Bennett,
he'll have his sleeves rolled up, he'll have his fly
fishing gear on, He'll be standing out in the middle
of you know, the Blue River somewhere pretending to fly fish. Well,
you can walk out there and just splash him with
the water. But what Donald Trump understands that escapes both
(04:42):
Tunisian economics and the Biden Treasury is that that is
not just a numerical sum, but is a dynamic instrument,
and it's subject to all sorts of manipulation, policy, psychology, sovereignty.
(05:03):
The question in is not whether we can afford our debt,
but whether it can govern the terms under which that
debt is managed, rolled over, refinanced, and perhaps lower our costs,
(05:24):
or perhaps even have some of it, just imagine some
of it, because I've actually been in negotiations on Wall
Street where part of the negotiations was, hey, listen, we
will we'll pay you X y Z if you'll refinance
(05:46):
this part of the debt, and then if you're right
off this part of the debt Heart iHeart meeting the
company I'm sitting here, right here, working, working at right now,
kind of did that with our debt. So I heard
a couple of years goes through chapter eleven. Should have
done it earlier than that, but for whatever reason they
put it off. They finally go through chapter eleven, and
(06:10):
then once they get through chapter eleven, they realize, hmm,
still got a problem. We're having a hard time servicing
our debt.
Speaker 2 (06:20):
So what do they do?
Speaker 3 (06:21):
Well, they start before they reach the point I'm going
to get to. They start by trimming everything they can.
They cut us to the bone. They actually cut us
to the marrow, in my opinion in some places. So
they just cut cut, cut, cut, cut, cut cut. Then
when it comes time for guys like me and others
(06:42):
to negotiate our contracts, well it turns out there really
wasn't much negotiation. Here's our contract. Oh well that's not
good enough. Well that's what we're doing this year. Okay. Now,
I wasn't surprised by that, because I'm a shareholder of iHeart.
I knew what they were doing because the analysts are
(07:03):
always reporting about what the sea sweet's talking about, So
I knew that they were going to go They were
going to go to the bondholders, the debt holders, and
they were going to say to the to the bondholders, look,
we have slashed our costs, our expenses, and now we
have frozen our costs just like mine. Okay, here's your contract,
(07:26):
same as last you know, same same as your you know.
Speaker 2 (07:28):
Here, here's your new three four year.
Speaker 3 (07:31):
Contract, same as your old three four year contract. Well
that's not good enough for me, so we got to
find some other ways. Okay, well we can maybe work
on some benefits over here. But they were able to
now go to the bondholders, to the debt to people
hold the debt and say, look, for the next three years,
we have locked in our costs. Now they still have
(07:53):
they have to take in inflation, and they have to
take in obviously things happened that are emergencies, like you know,
tower goes down somewhere, and they said, in exchange for
us doing that, we want to put off our payments
for three years so we can build up some reserves
so we can expand in some areas we'd like to
(08:13):
expand in.
Speaker 2 (08:14):
Would you do that? And the bondholders, knowing that, well,
we can either throw them into a chapter seven and
liquid them and not come out with except pennies on
the dollars. Or we can roll the dice with them
and go along with the Sea suite and see what
they can do. So they chose the latter.
Speaker 3 (08:32):
Trump understands exactly the same thing. So this is not
a hypothetical idea. As of last month, we hold thirty
six point two to two trillion in gross national debt,
of which twenty eight point nine trillion is held by
(08:53):
the public. Fully one third of that public held debt,
some nine trillion dollars will mature in the next twelve months.
Speaker 2 (09:06):
That's not a that's not an inconvenience.
Speaker 3 (09:13):
That's a problem of arithmetic, because bonds don't self renew.
You have to go back to the marketplace. You've got
to go back with that debt and say these bonds
have matured, and now we want to replace those maturing
notes with new notes. Then you start the negotiations at
(09:38):
what price, what's the cost, what's the rate? And here's
where I think Trump may actually be playing the markets correctly.
And it's kind of genius when you think about it.
So Biden saddles the treasury with trillions three and five
(10:00):
year bonds at rates that have now proven to be
short sighted. And Trump sees the trap for what it is.
It's a force refinancing at higher rates. And when you
do a forced refinancing at a higher rate, that does what.
That doesn't help you solve your problem. That compounds the burden,
that transform transforms debt from a tool of leverage into
(10:25):
a runaway liability. And it gets back to my question.
I asked you at the very beginning of this program,
what's your alternative? Because right now we have runaway liabilities.
We're solely at at the at the mercy of anybody
that wants to buy our debt, they can demand any
price they want to because we can't.
Speaker 2 (10:47):
Afford to default.
Speaker 3 (10:50):
The average interest rate on US debt five years ago
was two point three percent, give or take today, because
of Biden's borrowing, three point three five percent. Now, you
might think that the difference between two point three to
two and three point three five, which is one point
(11:13):
zero three percentage points, may seem like immaterial. That doesn't
really make any difference until you take it to scale.
That represents a forty four percent increase in the cost
of borrowing across the entire debt, of all debt that
we owe, a forty four percent increase. In other words,
we've reached the physical cliff.
Speaker 2 (11:35):
In dollar terms alone.
Speaker 3 (11:38):
The interest payments now rival and will soon exceed the
entire budget of the Pentagon. So interest is no longer
a budget line item. Interest has become the budget itself.
So here's what's Trump. Here's here's what Trump is trying
to do. Reduce federal outlays, reduce our spending, waste, fraud,
(12:03):
and abuse, bureaucratic inertia. That's the first place to start.
And then you start trying to pressure foreign governments to
reduce their tariffs, so that would open new markets for
our goods, for our businesses. And when you do that,
you attract an unprecedented influx of foreign capital. Right now,
(12:27):
he's got three trillion dollars and more coming into this country.
That three trillion dollars will be invested in American assets,
in our infrastructure, and in our businesses. So you get
reduce spending, get foreign governments to reduce their tariffs, and
(12:53):
then open up our markets to get more investment into
this country. So what does that do? This is where
I have a hard time putting my head around this,
but it makes sense. You start bending the yield curve downward.
What that does is that reduces the effective rate at
(13:16):
which any new debt is issued. So let's walk through
each of those spending. It's not merely cutting fat. That
dose is actually torture. They're burning the fat off, duplicative
grant programs, misallocated welfare programs, all the climate bull crap,
(13:41):
and they're moving with incredible speed. Every dollar cut from
future outlays from future spending lowers expected deficits. Every dollar
cut from future spending lowers the expected deficits. And a
lower deficit means there's less upward pressure on the yields
(14:04):
on the bonds that we have to buy to pay
for to cover that debt. So less pressure means lower rates. Now,
the same is true with regulations. The more you free
up and increase revenues, not by increasing taxes, but by
(14:26):
increasing economic activity, it has the same effect. It's my theory.
It's what I talk about all the time about we
need more taxpayers, or we need more companies or individuals
making more money so that they end up paying more
taxes by what and still keep the same rates. The
(14:47):
same brackets. So that's the first thing. It's about spending
and taxes. Then you can get to the second point,
and that's about the trade. Now, I don't care what
Collins and anybody else keeps talking about with respect to tariffs.
They are not mere taxes on consumers, because when you
(15:11):
use a tariff as a strategic maneuver, it becomes a
bargaining ship. And that's what Trump is doing. By threatening
retaliatory tariffs or by choosing very selectively decoupling our tariff relationships.
Speaker 2 (15:29):
What is he doing.
Speaker 3 (15:30):
He's forcing, he's compelling, He's requiring our trading partners to
reduce their own barriers. Now, when they reduce their barriers,
if just take Germany for example, they haven't done anything yet.
But if when Germany or the EU does something that
means that, oh, American made cars, you can actually start
(15:50):
selling those American made goods, you can actually start selling those.
As someone who's traveled through Europe extensively, I can tell
you it's hard to find much of any American made
in Europe because of the tariffs. Now I've not been
to China, but I assume the same thing is even
worse in China. I had been all through Southeast Asia.
(16:11):
I've been all through Japan, I've been through all South Korea,
and I can tell you in those countries you can't
find really anything that's American made. But once they trying
to avoid our tariffs start to negotiate to lower their tariffs,
that opens up new markets. And again, once you start
(16:32):
boosting American exports, those exports are taxable. More exports, more revenue,
more revenue, you decrease the pressure to borrow more money.
And then there's the investment. You get the arrival of
trillions of foreign capital into the American economy, which is
(16:55):
their preferred place to invest anyway, because we're the largest
economy in the world. So whether it's investing in equities,
investing in our market, whether it's purchasing real estate, or
it's building out their industrial base here in this country
instead of their own country.
Speaker 2 (17:14):
That's a vote of confidence.
Speaker 3 (17:16):
Capital always goes, remember, money flows where where it's most
likely to be used to its best highest use. Capital
goes where it's treated the best. And under Trump, that
foreign capital is going to find a low regulatory drag,
high expected returns, and a government that is actually courting
(17:38):
We want your money here, So foreign demand for our
assets is going to demand increase demand for the dollar,
for our treasuries and for long term Americans to bilits.
Speaker 4 (17:49):
Michael, it seems to me that what's really going on
with people freaking out over what Trump is doing with
Paris and everything else in the stock market, dropping, et cetera,
et cetera, is that we have the memory of a
that and the attention span of ant. We were just
focused on what's right in front of Holy crap, my
(18:10):
four lots, one hundred thousand dollars, did you sell? No,
But you're freaking out because you just keep looking at
what's writing for you.
Speaker 3 (18:19):
That's so true, and there's no historical perspective at all.
October whatever it was, nineteen eighty seven. Remember that you
go look at any chart of the Dow Jones industrial
averages over a fifty year period, there is a trend
(18:43):
line that goes up, and on that trend line there
are depths all up and down the trend line. And
then somebody asked on the text line, which I was
the point I was trying to make, But I guess
I didn't do it very well.
Speaker 2 (18:59):
Mike.
Speaker 3 (18:59):
If the interest rates go down, shouldn't we refinance the debt? Well,
we in essence do refinance the debt. Every time a
group of bonds mature. We go back to the market
and we say, look, we've got, you know, these bonds
that are maturing in such and such weak and we'll
offer treasuries at this and we'll and we'll negotiate, and
people will bid, and we'll in essence refinance that debt
(19:23):
every time those bonds mature. So we do that all
the time. The point is that now what Trump is
trying to do is to depress the yield curve so
that the the overall rates on those bonds continue to drop.
(19:44):
And I think that's part of the master plan. I'm
not ready to go There's something in the back of
my head that in terms of our privates of billion
life terms of refinancing debt that I think he may
(20:04):
be thinking about, but I'm not ready to get there
yet because I don't have enough data points to really
substantiate it. But there may be part of that going
on too, and that.
Speaker 2 (20:18):
Has to do with just revaluing the dollar and everything else.
Speaker 3 (20:22):
But let's don't let's don't get off track of that,
because I think instead when you think about the three
pillars here, spending, cutting, spending, trade and using trades so
that we can boost American exports, and then the arrival
of foreign capital into this country by making this country
(20:46):
even more Look people still would people rather invest in
the United States or in Vietnam in the United States.
But as we get further and from others that physical cliff,
people start hedging their bets. So yeah, instead of putting
all of our one hundred dollars in the US, we'll
(21:08):
put seventy five dollars in the US, and we'll put
twenty five dollars spread around five other countries, five dollars
in five other countries. When you think about obviously there's
risk and reward and everything and everything that you do,
everything that we do, involves risk and reward.
Speaker 2 (21:30):
And this is a big gamble.
Speaker 3 (21:34):
But I think to put it in perspective, you have
to look beyond what's right in front of us. This
is intentionally structured to reverse the long term erosion that
was brought on by NAFTA, the North American Free Trade Agreement,
(21:55):
which remember when Ross Perrot was running for president back
in nineteen and was it eighty eight, and he was
screaming about that big, giant sucking sound. He was so
opposed to NAFTA, but the Cabald at the time was
so enamored with NAFTA because it was gonna it was
gonna it was gonna open up free trade, it was
(22:16):
going to lower the cost of all these goods and services,
and so it was sold to Americans as, look, if
you put the North America Free Trade Agreement in place, way,
our cars will be cheaper and all you know, our
guacamoleia will be cheaper. Everything will be cheaper. Our our
tequila is gonna be cheaper. Yeah, and all that went
south or north, and that giant sucking sound that ross
(22:38):
Perot predicted came to bear.
Speaker 2 (22:42):
Well.
Speaker 3 (22:42):
So now Trump is trying to intentionally restructure that long
term erosion that was brought on by not just NAFTA,
but by globalization itself. So when you implement very specific
reciprocal tarots, he's applying strategic pressure to try to restore
(23:06):
some sort of equilibrium among all of our trading relationships,
not just China. You know this is this would not
work if he just said China, I'm going to do
this to you and nobody else because we sold the
same problem in Europe.
Speaker 2 (23:24):
Do you know.
Speaker 3 (23:26):
I still go back to the one time that I
that I had some uh London firefighters here. I'd spoken
a conference in London and then they came here for
a seminar and they were I was driving another Jeep
Grand Cherokee at the time. They all wanted to do
(23:48):
our meetings. Weren't called out of springs. Now they're used
to driving on the left side, and they're not actually,
except for the autobond, they're not really accustomed. Particularly when
you live in the London metropolitan area, you're not really
accustomed to driving it, you know, eighty five ninety five
miles an hour, and they're not accustomed driving, you know,
left handed in the right lane and blah blah blah.
(24:11):
But they wanted to drive that Jeep so badly they
couldn't see straight. And it wasn't just the size of it,
it was the uniqueness of it. Because we don't sell
jeeps Europe, we don't sell American autos in Europe, and
they and they wanted to drive an American automobile. So
(24:32):
by opening ourselves up to oh, if you guys don't
like the tariffs, we're imposing on you. Then what you
ought to do is drop your tariffs so we can
actually start engaging in some trade, and that's going to
benefit everyone. And that's exactly what he's doing. Let's think
about commodities. Right now, the price of most commodities are
(24:54):
beginning to fall, and I think that decline will probably continue. Now,
whether tariffs will adequately compensate for what's really deflationary pressure,
I just have no crystal ball.
Speaker 2 (25:11):
I don't know.
Speaker 3 (25:12):
But in the short term, falling oil and real estate
prices might bring some relief to consumers because it will
lower your living costs. It'll undermine the inflation panic of
the past three years. But and here's the butt asset
deflation could expose the fragility of the post COVID paper
(25:34):
millionaire class because all of their wealth is tied to
inflated valuations. It's not tied to productive output. I am
full disclosure. I'm doing a.
Speaker 2 (25:58):
Although I don't I don't. It's not really a home
equity loans. I don't.
Speaker 3 (26:01):
I have one hundred percent equity in my house. But
I'm doing a mortgage with American Finance Finance, and I'm
doing it obviously because Obviously I get a good deal
with them because they're one of my sponsors. But we
want to do some remodeling and some renovations around the house.
And I don't want to take money out of broke
(26:22):
Reache or anywhere else. I want to take it out
of I want to take it out of the house.
And the rate they gave me is great, so I'm
that's what I'm doing. But when I got the appraisal
on the house and I told Tamra what the appraisal was,
I was like, holy crap. But I also realize that
(26:47):
that's gonna that's going to vary, and that's going to
come down. It's gonna change. It'll go back up, and
it'll change. I'll go up and it'll go up and down.
But so many people look at their paper value going
back to oh my gosh, I lost five thousand dollars
in the market, did you You lost five thousand dollars
in value in what you had in the market, But
you didn't actually lose five thousand dollars because you haven't
(27:09):
sold those stocks. Only until you sell the stocks can
you actually say that I either gained or lost something. Oh,
Because only then do you pay any capital gains is
when you sell it and you actually made some money
on it. So there's a lot of people that are
in the so called millionaire class right now where their
wealth is tied to inflated valuations and not really too
productive output. And I think housing is a great example.
(27:34):
The average house in this country right now four hundred
and nineteen thousand dollars financed at seven percent. That cannot
create a strong middle class. I hear so many horror
stories about people who are struggling to buy a house,
who are just struggling.
Speaker 2 (27:52):
Well.
Speaker 3 (27:52):
At dinner Saturday night, a couple was trying to buy
a house from the sun of this couple that we
were with, they were fighting and struggling and doing everything
they could, these potential buyers to buy their son's house,
just trying to get a three percent down payment. And
what they're paying for their son's smaller, newer house is
(28:17):
outrageous compared to what they're paying. He's actually the son
is buying his parents' house because they love that house
and they want to move into it. They've done a
lot of remodeling and stuff anyway, they want that house.
So if the average home is now four hundred nineteen
thousand at seven percent, that's really hard for people to
(28:37):
get into homes. So any illusion of prosperity that's built
on inflated credit at some point has to be punctured. Now,
even if inflation retreats and our purchasing power begins to improve,
the reconstruction of the entire middle class of a working
(28:58):
class economy is not going to have with the snap
of a finger. That's a long term effort. But again,
that's what we want, isn't it. And you have to
start somewhere. You can't again, you can't snap your fingers
and just turn it around on a dime. You have
to start somewhere. After decades of offshoring, all the demoralization
(29:23):
of this government spending and the inflation, the cultural decay
going on, all of that can't be repaired in a quarter.
It's going to take time, patience, and it's going to
take us, and us means we have to take our
blinders off.
Speaker 5 (29:44):
Mar Mike, I've been watching Fox thirty one News this morning,
and all they're talking about is elastic commodities going up,
the price of the new Nintendo Switch going up, the
price of iPhones going up, the price of new cars
going up. These are all elastic commodities. If the price
is too high, people will buy something else, or they
won't buy anything. This puts pressure on the companies to
(30:08):
do something about their costs.
Speaker 2 (30:12):
Key, you sound like you might understand econ one oh one.
Speaker 3 (30:16):
That fascinating, but they don't or actually, you know, with
all due respect, because I happen to know one of
the anchors on the Fox on KDVR in the morning program,
he does understand econ one o one. He's reading what
the editors are put in the in the teleprompter. But
think about what their purpose is. Their purpose is as
(30:40):
always to instill fear. You know, when I drove in
this morning, Janisteine and Fox News was talking about once again, Dragon,
you have many people under we've had No she wasn't
telling you how many people.
Speaker 2 (30:52):
It was.
Speaker 3 (30:52):
It was how many storms we've had over the weekend.
That was the news we had. Did you know we
had storms over the weekend?
Speaker 2 (30:59):
It's spring? Never mind, never mind.
Speaker 5 (31:06):
There's storms every day it's spring.
Speaker 2 (31:11):
Huh. Well that was the headline. But it'll affect fifty
million people.
Speaker 3 (31:15):
And that was the and that was the weather report. Yeah,
I mean of course, I guess when you're on a
national cable channel. I mean, you really can't tell me
what the temperature is going to be in Denver unless
we just happen to be one of eight cities that
they name off real quickly. Well, high in Denver today
will be one hundred and two degrees. It's going to
be a record, maybe, who knows. Oh my god, I
want you to think about this. Biden added what what
(31:44):
Biden added? Almost two trillion dollars were my notes? Uh,
one point eight trillion was that he added in one year.
And in that year, with that amount of money, everybody
just yawned. Nobody thought anything about it whatsoever. In fact,
(32:09):
I would say that it was one point seven eight
one point seven eight trillion he added to the national
debt just in the past year. And all the people
that attended, in this case, the Church of the budget
deficit worshipers, they didn't say anything. Trump comes along, tries
to simply reverse the course and to the talkback point
(32:30):
and to I'm sure like if I looked up now,
but they're talking about the NCAA finals, they would be
talking about, oh my gosh, everything's only up. This is calamitous.
If you roll nine trillion dollars in debt at five percent,
that's four hundred and fifty billion dollars annually. Rolling in
nine trillion at three percent would save you one hundred
(32:52):
and eighty billion dollars a year over a decade. That's
one point eight trillion dollars. That's what Biden spent in
one year in twenty twenty four. So the stakes in
this gambit are pretty big. But think about this as
a thought experiment. If we could incredibly signal to the
(33:13):
bond markets that we were going to balance the budget
within ten years, and then we could say that we
got the will, the political will, to suppress inflation, to
protect our capital, to spur growth, to deregulate, cut costs,
do all of that. Why would the yield and treasuries
not fall? Of course they would. Why would investors not
(33:35):
bid more aggressively on US debt, driving the rates down
even further?
Speaker 2 (33:39):
And in fact, that's what happened in the nineteen.
Speaker 3 (33:41):
Nineties when Clinton and Nuke Genrich said yes, let's do that,
let's get on a path to do that.
Speaker 2 (33:50):
Well, now, just simply because it's Trump, it's bad. But
when it was Clinton, Genrich. It was good.
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On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!