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Ray Dalia, welcome back to the All-In podcast. Third Times the Charm. Thanks for being here.
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>> It's always a always a blast to be here. Thank you for having me. >> The last conversation we had was so
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popular and it was so timely because it was just a few days actually after the inauguration of President Trump and you
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had provided some very kind of preient outlooks for the administration that I think we all thought would be very
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helpful to get on the record. At the time you had highlighted and and as you have been for some time this great debt
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cycle we're in the fiscal and monetary policy issues that are driving that debt
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cycle and provided some input that if we were able to cut our deficit to GDP to roughly 3%
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we may have a shot at a smoother transition here. Today, the CBO estimates that the 2026 deficit to GDP
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is about 6%. >> If you were building a global financial system from first principles today, you
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wouldn't build it on 50-year-old legacy rails. You'd build airwallings. It's the
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first question I have for you looking back on the past year of the administration and the actions of
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Congress and the economy. Are we on a good path? Are we on no different a path than we were say a year ago? Are we
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moving too slowly? I studied these big cycles in history going back 500 years and there are five big forces that are
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intertwined to determine the answer to your question which is uh there's the
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debt money one and I I'll take you into that in a minute. Um there is the um
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domestic gaps, the wealth and values gaps that are causing irreconcilable differences
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between um the left and the right that is affecting how u taxes, democracy and everything works. There's the
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international great power conflict, the classic rising of a great power, challenging existing great power and
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changing the international world order. Then there's technology. All through
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these cycles there have been technology. And then there's uh acts of nature,
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droughts, floods, and pandemics. So um and when we think of orders, we're talking about there's always a monetary
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order. And all monetary orders have broken down for the same reasons. All uh political orders, domestic political
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orders, they all always change in the United States less. So we have 250 years here, but um that they always change.
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There was one civil war in there. And then the uh but internationally they always change. All orders change. and
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the international geopolitical order going from a um a unil a multilateral to a unilateral world order is changing and
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certainly technolog is changing. Okay. So getting that fact that they're all on
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there now I'll go down to explain the government's finances and answer your
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question. The economics of a country are basically the same as the economics of a
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company or an individual except the government has a ability to print money. Look at it like a company or like your
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own. Basically, it's projected to spend about $7 trillion, take in about $5 trillion. So, it's
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running a 40% deficit, 40% of its spending. It's been running deficits for a long time. So, it has a debt that is
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600% six times the amount of money that it takes in. And we can project that number. Um the problem with debt cycles
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and you could see them transpire. They're um almost like the circulatory system of the body. the capital markets
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uh bring credit to different parts of the economy and if that credit is used to be productive and produces an income
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that pays for the debt service, it's a healthy process. But what happens is that if the um income, the debt service
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grows relative to the income because it's not paying for it, it's like uh
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plaque in the system uh growing up and it squeezes out spending. And so we now have that $2 trillion deficit. Half of
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that is interest payments plus we have to roll over $9 trillion of debt that has been accumulated and is maturing.
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Okay. So now if you were to look at a company like that or an individual like that you have that problem. So as a
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handy number 3% of GDP would sort of stabilize the situation. Very unhealthy condition. It's not just unhealthy
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because it's squeezing out those spendings, but also because there's a supply and a demand. In other words, you
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have to roll over the $9 trillion of debt that's coming due and you have to sell two trillion more, something like
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that. Okay. So, now you go to the buyers and the buyers, who are the buyers? There are some domestic buyers and
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they're foreign buyers. about a third of foreign buyers and now it's a riskier
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situation from their point of view. It's riskier. First of all, it's a lot to
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acquire. They dollar denominated debt is already a large percentage of their portfolio, larger than it would be if
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just decided on on a prudent basis. But also we have political geopolitical risks that also extend to possibly the
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risks that the debtor and the creditor will have a conflict. You could imagine that with China. You could imagine that
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with Europe even. And you know Europeans could wonder whether they will get sanctioned. In other words, the debt
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service payments might not be made as a sanction. and the United States has to worry about whether it's going to bring
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in that money. Now, the things that I'm describing have happened repeatedly through history. So, in other words, I'm
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not just making this stop stuff up. If you were to see uh particularly, you know, in the 1929 to 45 period, you saw
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this dynamic. You saw it before. So there is this financial piece which in and of itself is not healthy for the US
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government and it's um but it's also problematic because of the other factors uh
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compounding the problem. >> You highlighted this problem. You provided a diagnosis that if we
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could get to 3% we could soften the effect but it hasn't happened. We were all very hopeful last year around this
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time when Elon Musk decided to lead Doge, the Department of Government Efficiency. He was going to go in and
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there were going to be these kind of big sweeping changes to reduce government spending, find fraud, waste, and abuse
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and so on. Did Doge fail because the actions that were taken were wrong or did Doge fail because the
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system itself cannot be changed at this point in the cycle that there's too much
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capital flowing. The economy is too dependent on it. There are too many individuals and businesses are dependent
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on it and it's structurally impossible to pull our way out of it. I mean, does
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Doge tell us something about what's possible at this stage? >> Yeah, you're talking about uh taking an
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inefficient government and making it efficient, okay? And having to do it quick because
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there are elections and if people don't like it, then you know, you lose your
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mandate. And in a um society in which no matter what you do, you're criticized and and
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torn down. So you know we have the fact of uh the question of does democracy and
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our system lend itself toward the sort of um executive leadership that both makes it efficient and makes it
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acceptable for all people. You know there was a lot of uh cutbacks um you know things like school lunch
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programs and things you know um and then trying to do it surgically. So it's um
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how do you do that effectively quickly in a manner that uh doesn't uh cause so
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much controversy that the government falls. So if you look at history, that's why I deal with
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the political. If you deal with history and you deal just even common sense, think, you know,
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like u are you going to have the executive leadership that's going to be able to make this satisfactory with most
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people? Um, you know, and do that quickly. I think that's that's a hell of
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a hell of a trick to pull off, >> right? So it might just be structurally it's a little difficult at this stage.
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>> What an understatement. Structurally a little difficult at this stage. >> Yeah.
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>> Well, there was another big news story recently that there may be quite a lot
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of fraud going on with public dollars in Minnesota that there are these daycarees
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that don't exist and billions of dollars are flowing to individuals to run these
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daycarees. And now there's a lot of this sort of citizen journalism going on
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across the country that federal spending is actually being fraudulently abused. Do you think that this is a symptom of
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this stage of the cycle? What's your view on how this relates to this problem
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that we're generally kind of talking about? >> Yeah, it's both the stage of the cycle
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and if you're going to have something wellmanaged, are you going to have the
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government well manage it? I mean, how how how well managed, you know, go to the Department of Motor Vehicles for
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your it's so big and complex and such a, you know, such a mess. Like, what you
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know, like when when you think, is this a surprise to you that there's all of
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this stuff going on all over the place in terms of inefficiency? Is that a surprise to you?
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>> No. Uh but you know I guess the question is are people waking up to this? Because
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last time we spoke you highlighted that a piece of your portfolio was in gold. You had invested quite a bit in gold.
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Since we spoke I think gold has climbed from 2900 an ounce to 5200 an ounce. What has happened with gold over the
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last year? Is it that markets are waking up to the point in the cycle that we're
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in that you've been highlighting for a number of years at this point? Or is it
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because China is structurally abandoning the US dollar and treasuries and moving
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more into gold and other central banks are moving into gold? Is it because individual speculators and market
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participants are getting bubbly with gold? What's your view on what's gone on
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with gold and how it relates to the market's acknowledgement of the stage that we're in? It's the big cycle. And
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what what what you have to understand is that gold is not a precious metal that's
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speculated on like most people have come to think of it as. Um it is um the most
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established money that it's the second largest reserve country currency that
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central banks hold. And so what we've seen is for various reasons that I pretty much covered the economic, the
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supply demand, the uh political, the geopolitical, for those reasons, central banks themselves have acquired
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gold to build that up and individuals and others are looking for an alternative money. The question is what
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is money? So when we're thinking about this, money mechanistically, money is
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debt. What I mean by that is that if you're holding money, you're holding it
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in the form of a debt instrument. And if you um are holding a debt instrument, what you're getting is a
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promise from somebody to deliver you money. Okay? And what as I mentioned in the
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beginning, the power of the central banks when they have too much debt is to print money.
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Okay. So if you've got that down, okay, then you can understand what's happening. Okay. The because the
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question is Dave, what money do you think is safe? >> Right. given what I've just said.
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>> Okay. >> Which Yeah. the act asset back, right? I want an asset. I want to have something
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that's got some physical known limitation to it. >> And particularly what you want is that
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can be transferred from one place to another because money is both a medium of exchange and a storehold of wealth.
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So in other words, if you if one country's central bank or government wants to pay another gun government, it
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can't just be in fixed assets like buildings. Okay? If you want to transact, you have to transact in
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something that you can transfer to them and so on. And gold is the only uh asset. It's the long-term historic asset
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for for reasons. That means that it can be transferred. They can't print a lot
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of it. Um and um it is not dependent on somebody giving you something. In other words, most money most if you hold debt
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or you hold stocks or you hold something, you're holding a promise from somebody to give you buying power. Okay?
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So you can like wealth. There's important thing to distinguish wealth from money.
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Okay? Wealth is in stuff. It's it, you know, it's in buildings. It's in
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companies and so on. But you can't spend wealth. You have to when you want to
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spend it, and that's the purpose of money, you have to sell it. And then you
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get money to spend. And right now, we have an awful lot of wealth relative to money. And the question is,
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what is that money? And there's the risk that you go to get convert your wealth
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into money that they're going to print money cuz that's what they've always
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done since we've had fiat currencies. >> So as you look out and have conversations with all the market
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participants that you know and you know everyone that's of size and scale, where are we in terms of folks
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converting their wealth into gold or their money into gold? like how much more do we have to run in terms of the
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dollar denominated value of gold in the market cycle as this great rush for the doors rush for the exit happens. two
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things that come to mind. What I what I look at is literally who has what assets
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including like central banks, what is the money in and so on and and what is that mix and I look at the amount of uh
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wealth relative to money or I look at the amount of wealth relative uh to gold. And what we've seen is that
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there's an enormous amount of wealth and there was an enormous amount in central banks of the other money
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relative to hard money gold. And so we've seen about what I would call it go from an extremely small number to
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something that is a less small number. That price increase and that change in composition
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has brought it almost not quite but almost toward the average of what it's been uh over a period of time. So uh
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being out of balance however because the wealth is total wealth is still so large
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relative to money that's a real uh issue. So let me give you a practical example of of of this wealth taxes and
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wealth being a risk. One question that might be asked are are we in a bubble? In other
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words, are AI stocks and other such stocks in a bubble? That's a does if you
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want to get into that, we'll get into that. But one of the things that we know
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from that is that one of the characteristics of bubbles is that there becomes a need for money
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that requires people to sell their assets to get money to meet that need. Now quite often that
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need comes from borrowing money to buy those assets. Okay? and then the assets go up in price and and so on. But what
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happens is it can't be sustained because you have to make the debt service payments and they're not thrown off the
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cash the to make that and so they have to start to sell that and then you and when you have to sell it because you
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need money you need cash to pay your debt service or to pay nowadays wealth taxes.
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Okay. So now we have a dynamic. The bubble will burst as that dynamic takes place. There are a number of things we
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could talk about about the bubble if you're interested. But just imagine if you put in wealth taxes. Everybody could
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talk about whether they like or don't like wealth taxes or something. But anything that if if you put in wealth
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taxes and there's a lot of fear of wealth taxes in and of itself that can drive money uh wealth to cash
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and and and there's only one way you're going to get the cash with the wealth
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and that's either sell it or to borrow against it which causes its own cash flow issues. And we have a dynamic
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having to do with the social part of this, you know, the wealth gap that makes that politically an issue. So
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anyway, all I'm saying is people should worry and and companies should worry or
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countries should worry. Do they have enough gold? I mean, if you didn't know
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what the if you didn't know what gold was likely to do and you had no view on
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gold, one should have between five and 15% of their portfolio in gold because of the fact of how it works with the
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other components. In other words, it's a diversifier when when the hits the fan,
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okay, gold does well and the other things don't. generally speaking and because of that correlation depending on
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what else is in the uh portfolio if you put it through an optimizer you'd have
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something like that. So I'm not trying to tout people on buying gold but I would say what is safe?
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What is safe? And it's safe is somewhere if you had no view between five and 15%.
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Why hasn't Bitcoin performed in the same way? In the same period that gold's
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climbed 80% since we last talked, Bitcoin's down 25%. What's your view on what's happened with
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Bitcoin and why that hasn't played the role that many thought it was going to
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play, which is the safe haven asset? >> There there's an important differentiating characteristics of
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Bitcoin and then there's also, you know, like who owns it and why they buy, why
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they bought and sell. Okay. So, Bitcoin does not have privacy tra any transactions uh can be monitored and
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then u indirectly perhaps controlled. Central banks are not going to want to buy bitcoin and being able to hold it.
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So, it's not just individuals, it's institutions and so on, but most you
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know and central banks. So, that there are attributes of that. there has been um some question or thoughts of the
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development of you know new technologies like quantum computing and so on. Can there be issues regarding that? And then
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there's um you know who owns it and what are the other exposures that they have
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in their portfolio? It tends to have a a pretty high correlation with uh the tech
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stocks. So from an ownership, you know, just the supply demand is affected by if somebody
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gets squeezed in one thing, they sell something that whatever else they have. So there are those dynamics. It's a long
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way as and it's a relatively small market that's a relatively controllable
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market. I think a lot of attention has been given to Bitcoin but as a money you know it's it's it's it's small in
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relationship to u gold and so you know those are the dynamics. There is only one gold.
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>> What about silver? I mean silver has had a big run up in the past year as well.
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Is that a derivative to gold and it's effectively people playing off of the wake of gold movement? um silver in its
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production is a residual commodity. The supply of it is difficult to increase and through history uh you know like the
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pound sterling silver was perceived as a monetary uh item. Uh but it uh has also
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taken on a speculative life of its own. So, you know, people are um you know, hot in it because it's been hot.
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>> I just want to shift gear a little bit back to something you touched on, but
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the last time we met, you also talked about the importance of making sure that interest rates remained low for us to
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kind of manage the effect and the impact of the stage of the cycle that we're in.
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What's your view, I guess, today on where rates are and how the Fed has acted over the past year relative to
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what needs to be done to soften the effects of the stage in the cycle that we're in
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>> because we have so much debt, federal debt, um interest rates are one of the three
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main considerations. There's the um taxes, there's spending, and then there's interest rates or on the debt.
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But you can't make interest rates um severely artificially low because one man's debts are another man's assets.
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And if you make those interest rates too low for the creditor, you will produce the dynamic that we
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understand. In other words, you'll produce a lot more borrowing. You'll put
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it into things and you can fuel a bubble. And so at the same time uh you can't have them so high that the
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debtor gets squeezed uneffectively. So there's a balancing act. You know keep them high enough that
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they're adequate for the creditor but not so high that the debtor. And so when
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you have a lot of debt assets and liabilities because for every debt asset there's a debt liability. And when you
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have a lot of those that balancing act is is very difficult. this made more difficult you know because of what's
00:24:49
called the K economy you know in other words there are bubble elements that are going on in the part of the economy you
00:24:59
know where um you know the question is who will be the first to be a trillionaire and and and
00:25:06
that you know that top 1% of the population and all of that at the same time as you have the other part of the
00:25:16
econom economy where um for example 60% of all Americans have below a sixth grade reading level and and to make them
00:25:26
productive particularly as we are also having AI have replacements for them um is a particularly difficult thing to
00:25:38
achieve. In other words, when you have so much debt assets and liabilities and then you have such a disparity in
00:25:46
conditions between those that are at the top and let's call it the bottom 60% of
00:25:52
the population what that's like that's uh you know another hattick that's
00:25:58
another difficult thing to pull off. So this is a challenging situation as for as far as monetary policy
00:26:11
exists. The idea of setting an interest rate and having a fiscal policy and a monetary policy that's for the economy
00:26:22
as a whole and doesn't deal with the differences in the econ in the circumstances. may be
00:26:31
more is more challenging. >> Well, so taking a look at Fed action and market activity, there's been a lot
00:26:42
of reporting over the past year that a number of global central banks have stopped buying US treasuries and are
00:26:49
shifting to gold. Does this mean that the Fed in the US is going to have to start buying treasuries and expand their
00:26:57
balance sheet again? Is it inevitable that we see a re-expansion of the Fed's
00:27:02
balance sheet in this phase in the cycle given what's going on with global market
00:27:07
action? >> I think that it's likely down the road. Um uh right now uh there's um the
00:27:14
shortening of maturities um as a means of trying to deal with that. Of course, that increases the debt
00:27:23
rollover risk. uh but the you know sell less long debt uh try to uh hold the short rate down so that the longer rates
00:27:34
attachment to it doesn't get you know helps to hold the long rate down and then uh try to um
00:27:43
use the government's power of persuasion on other countries to either buy the
00:27:52
debt or to hold the debt or to have other forms of capital enter the United States.
00:27:58
>> How do you like Kevin Wars has picked for Fed chair? What's your view on how
00:28:02
he's going to guide interest rate policy for the central bank and when he assumes
00:28:06
his term? >> It's a very very big challenge. I think he's a practical man. He understands
00:28:11
both sides of the pros and cons. I think it's a tough job. One of the other things that I would say was pretty
00:28:19
surprising over the past year is how adamantly against tariffs for fear of inflation and reduced consumption
00:28:31
which would mean a negative effect on GDP growth. Perhaps tariffs might be. The president and the administration put
00:28:39
in place a number of tariffs under the emergency economic powers act which the Supreme Court in the last week or so
00:28:48
overturned. But looking back on the economic effect of tariffs, what do you think economists
00:28:56
got right and wrong about their predictions about the effect tariffs would have on the economy, on
00:29:03
consumption, on inflation? And are there things that economists fundamentally missed or didn't
00:29:08
understand and why? >> Yeah, I I think so. First of all, um there's the uh tax revenue part of them.
00:29:17
I mean thinking of it just as uh revenue and I think that people don't all economists make the mistake of not
00:29:28
including taxes in inflation. >> And what I mean by that is if your if your taxes go up
00:29:40
that's inflation. I mean, why should it be any different than if your cost of housing goes up?
00:29:48
Why shouldn't it be part of the inflation calculation number? It's take it's taking money out of your pocket. I
00:29:56
mean, it's probably the, you know, for a lot of people the biggest expense. And
00:30:00
so, when they to say inflation is something separate, you know, uh uh I think it's changing the form of of
00:30:10
inflation in a sense. So what I mean is you know through history tariffs used to be the biggest
00:30:18
source of uh revenue for government through throughout most history and in most countries. Okay. So, it is a um I
00:30:29
think it's viewed it's it's a totally valid way of raising money and it should
00:30:35
be kept kept in consideration for that and and you get the foreigners paying a portion of it. But there's also as part
00:30:43
of the big cycle question is the problem that we have that we are not independent. Okay, we've had a hollowing
00:30:52
out. This is the big question, you know, that we've had a hollowing out of manufacturing the middle class and so
00:31:02
on. Now, are we going to try to build that? and what is the plan to build that or are we going to continue on with
00:31:10
large trade deficits and um so you have unsustainable trade deficits that the United States
00:31:20
has and which are capital um surpluses. In other words, the dependence on foreign capital is the other side of
00:31:29
those trade balances and that's unsustainable. So because that's unsustainable
00:31:36
um you need uh uh some way of uh rectifying that. Okay. So what is the plan to rectify that? Partially that
00:31:47
plan uh can have trade tariffs. I think they're totally valid. uh but it all has to be part of another
00:31:56
greater plan which is to develop the industries that we need to have developed which we're seeing happen in a
00:32:04
much more proactive way. In other words, you're seeing more government um activity to create infrastructure
00:32:13
to bring in industries and so on. You need that not only economically but you need it geopolitically because you can't
00:32:20
have dependencies. In other words, we're entering a world of greater conflict. We've moved from a
00:32:26
multilateral world order to a a powerbased confrontational world economy. And in that environment,
00:32:35
everybody's threatening to cut off everything from, you know, the uh goods and capital wars that we can have are
00:32:44
threatening. And so, you have to build independence. And so, um, that's part of a plan to try
00:32:52
to build that independence. Um, so I I think when I look at that, I don't think that's the problem. I I'd
00:33:00
say uh and it's misunderstood. So yes, I think people are misunderstanding that.
00:33:06
And the important thing is we get the other things right, you know, like let's
00:33:12
get down to 3%. And and by the way, there's a bipartisan bill that on this and um uh the 3% has um has come out in
00:33:24
favor of it. I'm in favor of it. And I mean lots of people are in favor of you
00:33:29
know um what I'll call the 3% threepart solution. 3% of GDP, three parts uh a
00:33:38
bit from one thing, a bit from another. taxes, spending, and um and hopefully interest rates.
00:33:45
>> And just to take the inflation question to its conclusion, at the State of the
00:33:49
Union this week, President Trump shared his vision, which is that tariffs can completely replace an income tax in the
00:33:57
United States. Do you think that that's a feasible path? Is it make sense at
00:34:00
some point for tariffs, which are effective? I don't think it's it's I I
00:34:04
don't think it's going to No, I don't think it's anywhere near um that uh both
00:34:09
because of the combination of the size and then the impact of that size. tariffs are regressive and I think that
00:34:19
uh there needs to be um some um we have to deal with the wealth gap app to me the wealth gap the biggest problem of
00:34:28
the wealth gap which is a big social problem is also the productivity gap and you have to make most people productive
00:34:38
and you have to do that through infrastructure and so on and I I don't think I I think that needs to be
00:34:45
addressed. >> It's a really important point you just made. I think my analysis
00:34:52
indicates that nearly half of Americans either work for a government agency or a
00:34:59
government service provider or contractor. The data over the past year is the federal workforce declined by
00:35:07
317,000 employees, roughly 14% of the total federal workforce. As this administration has reduced the
00:35:16
size of some of these agencies, reduced the size of that workforce, what happens
00:35:21
to those individuals? Do they go work in the private workforce and become productive or do you think they're
00:35:27
getting subsumed by other government agencies either state or local or government service providers to do work
00:35:33
that fundamentally is not productive to growing the economy? >> I uh I I haven't studied the numbers. I
00:35:39
I don't think I can adequately answer that. I would say government is extremely inefficient.
00:35:49
It has a role. It has an important role but even that role it's handling very
00:35:54
inefficiently. Other governments handle that role of um maybe education some of these things in a better way. We
00:36:04
need fundamental we need you know best thing you could invest in is education. But anyway, where they go and what they
00:36:13
do u from the government and and you know the other inefficiencies is a problem. The one thing that's good about
00:36:21
uh the system um that the capitalist system in a sense is it doesn't live if
00:36:28
it can't uh if somebody either won't bet on it or it doesn't make a profit. So,
00:36:33
um, yeah. So, I think wherever it goes, um, it's wherever those people go, they're just so many inefficient people
00:36:44
and inefficient systems. >> Is there not enough productivity driven economic growth in this nation at this
00:36:52
time to give more people the opportunity to improve their income, improve their wealth, improve their livelihoods?
00:37:01
Is that the fundamental issue we're dealing with at the moment? Or is it that you know people aren't prepared or
00:37:08
educated to be productive and therefore the system itself has failed them? >> There are three things basically that
00:37:15
you need to do to be successful. You have to first educate your children well and uh so that they are capable of
00:37:23
being productive and also educate them in civility so that they are civil with each other.
00:37:31
The second is then they have to come out to an environment that is an orderly civil environment that people can
00:37:40
compete and work wi with with and and compete and work with each other to be productive. That that works for the most
00:37:48
people. And the third thing is you have to stay out of wars. You have to stay you have to have no civil war and no
00:37:56
international war. If you do those three things right, you will have a successful
00:38:01
country. That's all throughout history. Okay. We're having problems with those.
00:38:06
And are those three things the antidote to some of the rising movements that we're seeing in increased unionization
00:38:16
and effects that unions are having on the political process which is also leading to these rises in socialism and
00:38:23
support for socialist movements in the United States as well as the wealth taxes which from the view that's shared
00:38:31
by those participating in those movements they are meant to solve income inequality wealth health gap issues that
00:38:37
we're seeing in the United States. So that's their solution. Is the solution
00:38:40
to those movements? Education and civility, creating a civil environment, and staying out of wars. Is that all we
00:38:47
need to do to make this successful or is there more to the >> That's that what we need
00:38:54
is is is to stop fighting. Okay. We're now at a stage where we have irreconcilable differences.
00:39:03
In other words, when when the causes people are behind are more important to them than the system,
00:39:12
the system is in jeopardy. Our system is in jeopardy because um they people will not accept the system
00:39:26
or the alternatives and so they're going to fight. You know, I think I think when
00:39:33
we have we're going to have the midterm elections, you're going to go past the midterm
00:39:37
elections with probably the uh Democrats will take the House and be and maybe I don't know, it's going to be difficult.
00:39:46
And you know what? Nobody can succeed because everybody's going to be fighting. They're going to all be
00:39:52
fighting. Okay? So, how does that affect productivity? Uh, okay. And then when you deal with things like how do you get
00:40:00
a good education system? So you have now almost the mob disorder mob disorder and inefficiency.
00:40:10
Nobody's allowed to take charge of this. If if you go back in history, Plato, you know, I think it was like 350
00:40:19
BC wrote about the cycle, you know, of democracies and the threat to democracies.
00:40:26
What's happening now is similar to Julius Caesar and Rome and being, you know, stabbed in the Senate and and what
00:40:38
you need is you need a bipartisan you need you need the country to have have a strong almost a strong leader. We
00:40:50
do need a strong leader to get the the reforms done to make the country work well. But I mean, so how do you force
00:41:00
this mob of people who are behaving this way including in the elections and so fragment to create order. So you need a
00:41:11
a tough leader who will force them to do diff force things to difficult things and not fight with each other and focus
00:41:20
on being productive. That's what you need. I think >> it sounds a little like there may be
00:41:25
this inevitable path of the choice that no one wants to make between some form of
00:41:32
socialism and some form of fascism. Is that where this >> I think there's I think you were we're
00:41:36
moving toward the that war. We're in that war. We're in what's sta what I
00:41:42
call stage five of a cycle. Okay. In the book I describe the pattern that's happened over and over again. And when
00:41:49
you get to this position when there are a bad finances combined with large wealth and values
00:41:59
gaps and irreconcilable differences and you have external threats as well as domestic threats.
00:42:10
You have this dynamic. I think that's where we are. I I'm like a mechanic. My
00:42:16
goal I'm not ideological. I'm just a practical guy trying to make money in
00:42:19
the markets and trying to describe things and that's what it looks like. I think when we look at the bubble
00:42:25
question on AI, what a lot of people don't realize in bubbles is that through
00:42:33
all technologies, they think that they are betting on the technology when they buy the stocks and the companies. That's
00:42:43
not true. Okay? There's a giant difference between the behavior of the companies and the
00:42:51
behavior of the technologies and that the norm is in these is that a lot of companies won't survive in the
00:42:59
start. It very small percentage and they'll all fight and so on but the technologies will go on and it'll be
00:43:06
great. the technologies will. So I want to emphasize to people that dynamic and I can go on and describe you know what
00:43:16
it's like. Uh of course we've seen it to some extent with the 2000 bubble in the
00:43:22
technologies and what went on. But e even if I describe what it was like in the late 20s, you know, it's just it was
00:43:30
unbelievable. But the technologies will go on but the companies uh won't necessarily go on. And um so when I'm
00:43:38
looking at that, that has big implications. Right now it looks to me like AI uh basically is eating everything and it
00:43:49
might eat itself. And what I mean by that is not produce adequate profits. We can't take just a
00:44:00
domestic view of that. We have to look also at what's happening in China and um
00:44:05
make interesting distinctions there. You know, there's a difference in philosophy
00:44:10
that's carried through in the economy of how the economies of the United States
00:44:15
and China work in that we have basically primarily a profit-based system. They have a system in which they might
00:44:25
believe that profits are a second consideration. they're not necessarily needed in order to achieve the best
00:44:33
results. For example, in in China, they would say usage of AI is fantastic. So, it should be like electricity or
00:44:45
something and let's make it free for everyone and let's make it open source for
00:44:50
everyone. Okay? and they might get much higher usage and they'll get their productivity
00:44:57
gains through the usage and we have a profit system to pay back. Okay. Well, now we're in one world. How
00:45:06
do you compete in that world? What do you do with that? In other words, just imagine that their technologies are
00:45:12
almost as good as ours because they are. They're not far behind. and um and and
00:45:18
then but that you could get them for free open source. Okay. Now you got to pay it back. Okay.
00:45:27
So I just want to emphasize that these are also systematic risks that enter into the picture of of AI.
00:45:37
But you certainly yeah there are a lot of unknowns here. As we wrap, looking back on the history of this nation, I
00:45:46
ask myself the question a lot. How did we get to the point that we've gotten to
00:45:50
in terms of the amount of debt, the amount of government spending, the role that the central bank has played, and
00:45:56
the risks that we find ourselves in today that all seem largely avoidable if we hadn't taken or made the decisions we
00:46:03
made along the way. You've highlighted that they repeat over and over again.
00:46:07
But if you could go back and restructure the United States and be a founding father and write the Constitution
00:46:12
yourself, what are one to three things that you would have done differently? What would you have written into the
00:46:18
Constitution that may have prevented us from getting into the situation that we're in today?
00:46:22
>> Well, the uh I mean it's like the marshmallow test. You know the marshmallow test? You know, you want to
00:46:29
see it as a kid going at early age. you uh give them the choice between one marshmallow now and two marshmallows in
00:46:38
20 minutes and the kid that chooses the two marshmallows in 20 minutes is going to have a better life and make better
00:46:44
decisions kind of thing. Um I mean that therein lies our problem the immediate gratification and also the not knowing
00:46:52
if things are going to be productive but the system has been remarkably adaptable
00:46:57
too. In other words, we've gone through crisises, we've wiped out debts, and
00:47:03
we've gotten past it. And there are certain ways of getting past it. But you, you know, it's a it's a tough
00:47:09
question to balance um financial prudence with uh innovative inventions, you know, uh because you like
00:47:21
particularly like take AI now. Nobody knows what's going to come of it and and
00:47:26
what what way, right? Is it going to pay? Is it not going to pay? And all of that. And so what do you write into uh
00:47:34
the law that uh is going to get you financial prudence and control? And do you when you write it into the law, does
00:47:44
that lessen the experimentation and you know the entrepreneurship and all of the things that you know? So it's
00:47:52
tough to do this with um with rules. I think maybe the main thing is I would say read history. Read history and know
00:48:01
these things and try to get that balance right. You know, um everything's a matter of the balance. So the balance of
00:48:08
the pain of failing or the pain of let putting money into a something that fails.
00:48:15
>> Well, Ray, I want to thank you once again for taking the time to be here
00:48:20
with me. It's always great to catch up, hear your perspective. Obviously, so
00:48:23
much has changed in the last year and yet so much hasn't. It's been great to
00:48:27
to get your view on it and I think it's really helpful to do this. So, so thanks
00:48:31
so much >> and and thank you for what you guys do. I'm I'm I'm riveted to your program and
00:48:37
um I think you make a great contribution. Um so conversations like this are are really practical helps for
00:48:45
a lot of people. So anyway, thank you for letting me participate and uh thank you for what you do for a lot of people.
00:48:51
Thank you. >> That's right. I'm going all in. I'm going all in.