4-14-25 - 8am - Economics

Episode Transcript

Speaker 1 (00:00):
Michael, nuclear is the answer for our energy future. But
the problem is will never shake more. It would be
almost impossible to shake this. Oh Takushima, Oh Chernobyl, oh
three Mile Island, it can happen again. Well, no, it's
unlikely that anything like that will ever happen again. And

(00:22):
let us be your minded that no one died at
Three Mile Island, not a single person.

Speaker 2 (00:28):
And let's remember those that did die in in Chernobyl.
Uh did so because the Rusties, the Ruskies, the Russians,
we're they're communists for me if they don't care about lives,
so they sent those men in to try to shut
down the reactor. Irrespect you, and regardless of uh any

(00:52):
any any care about human life whatsoever. The other thing
that if you if you really study those so called meltdowns,
which is they weren't technically meltdowns because the containers did
exactly what they were supposed to do, you now realize
that life is teeming all at those places. It's it's like,

(01:17):
you know, a forest fire goes ravaging. Wildfire goes ravaging
through anywhere, and the burn scars truly are ugly. I
noticed this every time I go down to the undisclosed location,
because you remember, we had the wildfire that almost wiped
us out down there a few years ago, and while
you can still see the burn scar, you can see

(01:40):
the new growth that quite frankly, had New Mexico, just
like Colorado and California and other places, properly manage the forest,
we probably would not have had those wildfires, even with
the severe droughts. But you see all the new growth starting,
and it's a reminder of how resilient this planet is.

(02:04):
So I believe that that nuclear power really can make
a comeback, because I think a lot of people are.
I well, hasn't they say this? The Cabal, while still
exercising and over and over too much influence, much more

(02:32):
influence than they deserve or should be influencing people's perceptions,
There is a counterline, a counter trend line growing where
people are turning away from the cabal and going to
alternate sources and understanding that we're being lied to virtually

(02:53):
all the time about stuff, and so as we begin
to allow new sources of information to come in, I
think we're becoming wiser about stuff like that. And again,
while I do well, I agree that nuclear is that
most immediate alternative. I still don't discount that there's something

(03:14):
out there that may actually be maybe it's a different
iteration of solar, or maybe it's new battery technology so
that you can take it advantage. You can take advantage
of solar, when you can take advantage of solar and
store that energy and still have it to be of
sufficient storage that you can maintain a reliable and consistent

(03:37):
supply of energy. The point being we don't know. All
we do know is that I think that humankind, God
gave us these these amazing brains, and we see what
amazing people are able to do when they're left to
their own devices to pursue their own dreams and ideas

(03:58):
without government all is mandating you do this, or you
can't do this, or this is too dangerous, so this
is too scary. Oh my God drives me nuts, Which
is kind of a good lead into to the next topic,
which is I gotta talk about tariffs a little bit,
but not necessarily in the way you think we're gonna
talk about tariffs. Let's start by going, well, I was

(04:21):
going to use some from last week because she I'll
tell you who she is in just a second, Because
she was on all the cable She wasn't on Fox,
but she was on all the networks in the cable channels.
Last week she being Janet yell In, the former Secretary
of the Treasury, the one that told us that inflation

(04:42):
was transitory, the one that told us that, you know,
there is no debt crisis, the one that told us
we don't have any of these problems. So you know
that we're all we're all insane. Well, she's back again
this morning. So I'm throwing out last week's sound bites
and going to this week's now bites because she's just
using the talking points. Is she saying the same damn

(05:04):
thing over and over and over.

Speaker 3 (05:06):
So in terms extraordinary terrriffs, in terms of the quote
unquote art of the deal, who do.

Speaker 4 (05:12):
You think has more leverage right now? There seems to
be two arguments. One is that the United States is
still the biggest economy in the world, the most important
economy in the world, that everybody needs and wants to
do business with the US, and therefore we have leverage
over our allies and others. There's another perspective that over
these next ninety days that China may try to create

(05:35):
its own alliances with the EU and other countries effectively
to ask ask things effectively of us, or at least
make it harder for them to have for US to
have leverage over them.

Speaker 3 (05:49):
Well, I think the policies that the Trump administration are following,
both with respect to unilateral imposition of tariffs and also
our alliance's commitment to NATO treatment of Ukraine, are really

(06:12):
causing our allies to have severe doubts about the United
States as a friend and reliable ally.

Speaker 2 (06:23):
Now, how can she possibly claim that when now it's
well over a hundred nations have said that they're lining up.
It's like it's like that You've got all of these
government jets bringing all these presidents and prime ministers and
kings and everybody else. They're all lined up in a

(06:44):
flight path, trying to land at Dulles as fast as
they can, to get to the White House as fast
as they can to sit down and negotiate a deal
with us. She truly is ignorant of the practicalities of
what's going on.

Speaker 3 (06:59):
Right now and promises we have made, including through USMCA
to Canada and Mexico.

Speaker 2 (07:07):
That Canada, Mexico, Mexico said, oh yeah, okay, never mind,
we're not going to engage in the trade war. And
even Canada is now saying even what's his name, Clark,
whatever his name is, that's that's Carnee that's running right now.

Speaker 5 (07:22):
Is a.

Speaker 2 (07:25):
Diehard liberal. Oh yeah, I can't stand Ald Trump. By
the way, mister Trump can can we could we talk the.

Speaker 3 (07:34):
Previous Trump administration negotiated. We are simply burning those agreements
without consultations. So I really am worried about the United
States being becoming isolated, viewed as untrustworthy, and just creating

(07:54):
an opportunity for China to work with some of our
best allies, Japan, South Korea, others, to try to and
you know that is that is a very substantial economic region.

Speaker 2 (08:14):
It's funny she mentions Japan because in the she's in
a two box, and the graphic they have is she's
talking about Japan. It shows the Nike is up one
percent this morning. South Korea is up ninety zero point
nine percent, i Haang Thing is up two point four.

(08:36):
Shanghai composits are up zero point seven per six. So
so all the all the Asian markets are opening up
as she's sitting there talking about they're they're all turning
away from us as is, She's not paying attention at
all to what's going on while she's speaking. Then she
goes on.

Speaker 4 (08:57):
To say, have you discussed any of this, Scott Besson, No,
I have not. I know there was a dinner that
took place last week among a whole host of former
treasure sectors. I don't believe you were there, but I
was curious if.

Speaker 2 (09:10):
You Why weren't you there?

Speaker 6 (09:12):
You had spoken to him.

Speaker 4 (09:13):
Early on when he first got the job. I didn't
know if you had had conversations with others inside the administration.
If you haven't spoken to him. I was going to
ask you whether you've talked to j. Powell, because he's
the other person that may have to make some decisions
about how to treat all this. And I'm curious if
you put your FED hat back on sort of how
you think the FED should even think about this, which

(09:33):
is to say, you know, there's a question mark about
whether the Trump administration has a put or a floor
on this market, whether they can take the tariffs away
or what they can do. But on the other end,
you know, if the FED effectively tries to prop up
the system, they effected me therefore, are supporting these policies,
and it's unclear whether well it's not even unclear. Jay

(09:54):
Powell clearly doesn't like these policies.

Speaker 3 (09:57):
Well, look, there's no put when it comes to the
stock market.

Speaker 5 (10:02):
Ever, with respect to the FED.

Speaker 3 (10:04):
Also, if risk to financial stability arise, and let me
be clear, I do not yet see those in play,
and hope they don't come into play. The FED has
a range of liquidity facilities that I would expect them
to deploy, as they did in March of twenty twenty

(10:28):
after the pandemic. I think that the tariff policies and
the uncertainty they're creating create.

Speaker 5 (10:37):
The most difficult possible.

Speaker 3 (10:41):
Situation for the FED, because the FED is going to
focus squarely on its two congressionally mandated objectives, price stability
and maximum employment, and.

Speaker 5 (10:57):
Inflations come down.

Speaker 3 (11:00):
Not quite at the said's target, but there's good reason
to believe that we're going to see a surge and
inflation at least for a while.

Speaker 2 (11:09):
Yeah, it'll be transitory. Again, Notice that this globalist, which
is what she is, once again, has no alternative. Keep
going down the same path we've been going down for decades. Okay, Well,
we're gonna try something different. Uh no, no, no, I

(11:32):
don't have any alternative. We should just keep doing what
we've been doing. So I've talked a lot about tariffs,
and obviously lots of other people are doing the same thing.
Tariffs are easy. The right answer is unilateral free trade.
Tariffs are hard. The rest is explaining why one hundred

(11:55):
objections are wrong. Well, we'll get there in a minute.
As I say, the plane are lining up in a
flight path to Dulles to try to get here, to
talk to us about them, try to work, reach a deal,
reach an agreement, reach some reciprocity. Because we still are
the strongest economy in the world. Now, do we have problems?

(12:15):
Do we have weaknesses? Of course we do. Why because
of our debt situation, because we have become a financialized
society and we don't make anything, We don't really even
do anything. But one aspect is less clear than the others.
The whole business about saving investments, the reserve currency that

(12:40):
we've talked on all that, I think most economists react
in horror at some claims that US reserve currency status,
that being that in a nutshell, we can print money
send it abroad, and other countries work hard and send
us stuff in return that that's somehow a burden for

(13:03):
the United States. Now there might be a slight kernel
of logic there, and there was a great danger the
tariffs will do nothing to rectify the situation, at least
without some economic cost. Think about Greece. Greece is a
good source of cautionary tales about kind of where we

(13:26):
are today. In two thousand and one, Greece joined the
Euro and by doing so it forced wore inflation and devaluation.
Should it borrow too much and then not be able
to repay, well, what if we get this situation where
we borrow too much and are not able to repay. Well,

(13:47):
in Greece, the European financial markets, especially the European Central
Bank and all the other sovereign central banks, they responded
by offering very low interest rates. Now going to use
the money for productive investment. Instead, it went on a
consumption boom. Porsches went south, paper promises went north. When

(14:15):
all the lenders figured out what was happening, they refused
to roll over the loans. You know, all crises are
kind of crises of short term debt. And then you
had the famous Greek crisis that erupted. Well, something similar
has happened to us on a grander scale, and with
nobody standing in the wings to bail us out. That's
the danger. For a bunch of reasons, a lot of

(14:39):
countries around the world, including China, wanted to save. They
wanted to save. They saved by buying up our debt
kind of like as an investment, and started pushing all
their products out to US. For all sorts of reasons,

(15:01):
additional domestic investment to the Chinese did not seem like
a good idea. Chinese savers did not want even more
Chinese factories. One of many reasons for this saving is
that China is aging. China doesn't really have a safety net,
so middle aged workers in China want to put money

(15:24):
aside so they can withdraw that money when they get older.
So those savers chose to invest in the United States.
China already does a huge amount of domestic investment, including
a suspicious number of save bridges to nowhere empty apartments.
You look at what they're actually doing in China itself

(15:45):
and you wonder what the hell are they doing. Maybe
they ran out of opportunities. No, they just were propping
up their own economy, which you have to consider in
in in the context of three what I think are
bedrock principles of economics one and I'll explain this, but

(16:09):
just put it this way. The capital account and your
current account have got to add up. If we import
more than we export, we have to forget we have
to give foreigners something valuable in return. What if we
import more than we export, what do we give foreigners

(16:33):
something valuable in exchange for that? For that exchange, even
China doesn't send us stuff for free, well, we give dollars,
We give treasury securities, stocks or bonds in return for
sending us cheap stuff. And if other countries like China

(16:54):
want to accumulate our securities, our bonds, our debt, then
they must send us more goods and services. Then we
send them. Why because they need to get the dollars
that they can use to buy the securities. So it's
got to be this equal trade off all the time.
So that's number one. Number two, money's just the veil.

(17:17):
You've got to understand the underlying movement of goods and services.
If you really understand economics, look beyond money and watch
the underflow the underlying flow, the back and forth of
real stuff. To invest in the United States, other countries

(17:38):
have to put things on boats and send it here,
or sell us some kind of service. One Chinese person
can buy a stock from another Chinese person, but China
as a whole cannot accumulate US assets without putting what
stuff on boats and sending it here? What about? What

(18:00):
about from our side of that transaction?

Speaker 5 (18:06):
Good morning, class.

Speaker 1 (18:07):
Today we're going to learn a new word, nuclear.

Speaker 4 (18:12):
I already know how to pronounce nuclear, but I had
to go home and walk my lumburgers.

Speaker 2 (18:21):
Your luhnburgers, lumburgers. I pretty much despise this audience, absolutely
despise them.

Speaker 6 (18:30):
Feelings mutual, I know.

Speaker 2 (18:32):
And that's the great thing about it. We're all here
just for the hate, just here for the hate. By
the way, I forgot that thanks to eighty nine forty four.
I did tell Dragon Happy Birthday. But here's the funny thing.
I wanted to send Missus Redbeard a little Venmo just

(18:53):
so she could take mister Redbeard out to Taco Bell.
But then I realized I don't really know what Missus
Redbeard's actual name is, right, And it's much like I
have for my entire life. I've been to New York City,

(19:13):
I don't know a bazillion times, or maybe half a bazillion,
not quite a bazillion. Yet I've never ridden the New
York City subway. And now I am never ever going
to go ride the New York City subway because I
can claim that I've never ridden a New York City subway.
I've never known miss All I know is Missus Redbeard.

(19:35):
And so I asked Dragon, well, let me send Missus
Redbeard as a joke. Let me send her some Venmo
so that she can go get something for herself, and
maybe you could tag it along, and maybe you could
have a breedo.

Speaker 6 (19:50):
Or something, just like the Christmas presents, right exactly.

Speaker 2 (19:53):
So I wanted to continue to be an AO toward
Dragon Why at the same time being really nice to
missus redd And then mister Redbeard said, as he looked
at her account, but then you'll know her name, And
I'm like, damn it, I can't do that. So I

(20:13):
sent mister Redbeard some Taco bell.

Speaker 6 (20:17):
Money twenty cents, haven't I can't.

Speaker 2 (20:21):
Believe you think I gave you a full twenty five.
I gave you a full quarter. And if you think
I would just give twenty cents, I can't believe you
think I'm thatt cheap. God, you're such a jure.

Speaker 6 (20:35):
Yep, thirty seven cents there it is.

Speaker 2 (20:41):
I thought, well you get you can get a third
of a dollar brito or something? Could I get a
third of a burrito?

Speaker 5 (20:49):
Yeah?

Speaker 2 (20:50):
I just you know what, Now I'm in a bat
I was kind of in a good mood until those
talkbacks and then until you and your damn birthday, and
now I'm in a really bad mood.

Speaker 6 (20:58):
You remember what they talk about. Brito used to seriously
be like fifty nine cents. Oh yeah, yeah, those were
the days.

Speaker 2 (21:05):
Did you ever have Taco Tico when you were growing up? No?
So we had Taco Tico in Oklahoma, and Taco Tika
was like a precursor to Taco Bell. But you remember
when Taco Bell had like they had I think it
was Taco Bell, I mean it was Taco Tico. They
came in the little foil they had the little antilogues
that came in a little foil container. Do you remember those?

Speaker 6 (21:28):
Yeah, it was something specially it was like the smothered
burrito or some brill or something. Yeah.

Speaker 2 (21:34):
Now it just all comes in plastic bags, they throw
in boiling water, and then they just slap it together exactly.
Oh my god. Well, anyway, tell mister Redbeard a happy
birthday or don't.

Speaker 6 (21:45):
That's fine.

Speaker 2 (21:46):
I see he's mad now because I mentioned it, and
I mentioned it because I knew he'd make him mad.
But I also know that he'll really just eat it up.
So claim happy birthday.

Speaker 5 (21:57):
Or do.

Speaker 2 (21:59):
Or don't. All right, So back back to this wonderful
discussion about economics, which I know you find thrilling, but
I really do. There's so much economic illiteracy out there.
And if you understand to understand tariffs and to understand

(22:22):
trade deficits, you have to understand the underlying movement of
goods and services from one from one country to another.
It's it's you have to look beyond the money, and
you have to watch the flow of real stuff. It's
why I always refer to widgets goods and services, because otherwise,

(22:48):
if if you and I'm not saying that you're a
bad person, but if if if you're a trader, a
day trader, if you're not really producing, don't goble with
the language here. You're not really producing anything of value

(23:10):
that you can trade. Yes, you're making money for yourself,
and so I know, you can take your money, and
you can take your wealth and you can go invest
that and you can, you know, help other companies to grow.
And by buying something, whether it be going to taco
bell or buying a new shirt or whatever it is,

(23:32):
I know you're helping the economy grow. But I'm distinguishing
that from somebody who is making something, making a widget,
because that widget has to be a compilation of other materials,
supplies you know that come in. You have to have
labor usually or even if you don't use labor, you

(23:53):
use robots, but somebody had to manufacture the robots. You're
producing things. You're producing something, and then somebody buys that widget,
and the purchase of that widget, because of all the
costs and all the expenses of money that flowed into
creating that widget, then goes out and helps grows the economy.

(24:17):
So we need to produce things, real stuff, as I said,
to invest in the United States. Other countries put things
on boats. You've seen the cargo ships that come in
to port here not here, but you know, on the coast,
and they send it here, or they might sell us

(24:37):
a service of some sort. So one Chinese person can
buy a stock from another Chinese person. But China as
a whole cannot accumulate US assets without putting goods on
boats and shipping those here. And from our side, we
are investing more than we are saving. China in effect

(25:01):
wants to send us factories, but China doesn't make portable factories.
It's great at making consumer stuff. So China sends us
that consumer stuff so that we can build our own
factories without lowering consumption. That's how the stuff moves back
and forth. China right now is trying to financialize it. Well,

(25:26):
it's actually trying to save its own economy. So because
it's a centrally planned economy unlike mostly unlike ours, they
are forcing companies to build high rise apartment buildings. They
remain vacant because Chinese workers are making enough money to
go build it. Governments are going further and further into debt.

(25:49):
We can see. Just like we can look to Europe
to see what a European socialist state turns into, we
can look into China and see what a centrally planned
economy turns into. If we would just do it. So
that's money is the veil, and it's really about the

(26:11):
exchange of goods and services. But then there's a third point,
and the overall trade of those goods and services. The
overall trade deficit equals that difference between savings and investments
plus the government deficit. Now put those ideas together. What

(26:35):
happens if other countries decide they want to save more
and invest in the United States, Well, they buy United
States assets, which sends up the real exchange rate. There's
another bedrock economic principle, and that is you've got to
separate real from nominal. There's an immense amount of confusion

(26:58):
over we keep hearing about currency manipulation. Even if we
use the same currency, or the foreign currency is pegged
to the dollar, a foreigners demand for our securities would
drive up the price of those securities and then the
underlying factories in the houses that they represent. Because what

(27:23):
do our securities represent. It represents the stuff, the things
that we produce. Well, what are we producing? Well, I'm
looking at here, we're producing some real estate. We produce
some stuff we produce. Basically, I'm gonna make a generalization here,
and economists will disagree with me about this. But we

(27:48):
produce innovation. That's one of our biggest things that we
produce innovation, technological innovation. But when we put that technological
innovation into a real world product, we haven't manufactured somewhere else.

(28:08):
So when that happens, that those underlying things that we
then buy or build or or produce here, factories or houses,
we would see higher prices in the United States than abroad,
and thus there would be a higher real exchange rate.
But instead we see a higher value of the dollar.

(28:31):
But that generates exactly the same effect. Things are worth
more in this country. Things are worth more in this
country for a whole host of reasons. One, because we're richer,
we have more money. We produce things that are of
greater value. What's of greater value something that we actually
and let's just say the widget I always talk about.

(28:55):
A widget produced in this country comes with all of
the intangibles of something produced in this country. Oh, it's
it's American maid. It was produced by American workers, which
means the quality of it is probably much higher, and
of course it's going to be more expensive than that

(29:15):
same widget. Whatever the widget is that gets produced by
a bunch of workers, slave labor, cheap labor in a
centrally planned economy in China where they get paid a
lower wage, their standard of living is lower. All of that,
so things are worth more in the United States. Now,

(29:37):
higher prices in this country induce people in this country
to do what. Well, I'm looking at Maid in America
at one dollar, I'm looking at Maid in China at
Walmart for fifty cents. Now, unless I'm just going to
be a real patriot and I understand that, oh, I'm

(29:58):
actually hurting my own country by buying the cheaper thing
at Walmart that's made in China for fifty cents. Well,
I buy the thing at fifty cents. And why do
I buy things at fifty cents? Because I have to
take care of my family and because I have a
limited amount of income, and I want to say I
want to put that difference into something that I value

(30:20):
more than the cheap thing I'm buying at Walmart.

Speaker 7 (30:23):
I just find it ironic. Same people that say we
need to reduce and reuse and not be such a
throwaway society are protesting because they want their cheap Chinese crap.

Speaker 2 (30:43):
You think about, Yes, they want the cheap Chinese crap.
And I think you make a great point about the
throwaway society because the cheap Chinese crap gets thrown away.
I'm not saying it was necessarily keep Chinese crap, but
I'm going through this phase and I don't know why. Well,

(31:06):
I think I do know why, psychologically. I I went
to visit my mom bought a couple of months ago. Remember,
I drove down on a weekend to check on her,
and I was just astonished at how much stuff some
of them just jump, but just stuff that she's accumulated.
And I came home and I've been on this mission

(31:27):
of just trying to slowly just get rid of stuff.
In fact, don't tell anybody here, but this morning I
came in early, a little early because I dumped two
giant trash bags of stuff in the dumpster back here
behind the building because I knew I wasn't going to
be around to drag it out to the curb while

(31:48):
I'm in Chicago because it was too heavy for Tamar.
But I think it's also that we accumulate all of
this stuff and then it's all going to get thrown away.
And some of the stuff that I throw away. You
ever do that dragon You look at stuff and you
wonder why did I buy that in the first place.
But we're a consumed We're a consumption society. We're a

(32:11):
consumption economy. And one of the things that we need
to learn and kind of get back to is and
I'm not sure we can never get back to just
an industrial economy, but we got to have some balance.
We don't have any balance right now. The foreigners that
are in this country don't know, they don't really care

(32:32):
where the resources to pay them back come from. So
a promise to fund Chinese retirements, which is kind of
what we're doing right now with US taxes, is just
as good to them as a promise to fund them
from profital factories. They don't care, until suddenly they start
to wonder just whether we're going to be willing or

(32:55):
able to pay them back, just as the French and
German bank started to wonder whether and just how with
grease repay them. The tipping point that I always worried
about is on the horizon, and what Trump has been
saying for decades is we're going to reach that tipping point.

(33:18):
And I think that Trump sees this final term in
office as I got to get my asking gear and
I've got to realign this economy. I've got to restructure
this economy as much as I can. It's not going
to be easy and it's not going to be painless.
There is going to be some pain. And I think

(33:39):
the more that we understand just how these economies work
and understand this, this not only is the system we're
operating under right now not sustainable, but it has geopolitical
ramifications that could see us becoming a second rate country.

Speaker 5 (34:03):
M