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Ray Dalia, welcome back to the All-In
00:00:02
podcast. Third Times the Charm. Thanks
00:00:04
for being here.
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>> It's always a always a blast to be here.
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Thank you for having me.
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>> The last conversation we had was so
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popular and it was so timely because it
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was just a few days actually after the
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inauguration of President Trump and you
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had provided some very kind of preient
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outlooks for the administration that I
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think we all thought would be very
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helpful to get on the record. At the
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time you had highlighted and and as you
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have been for some time this great debt
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cycle we're in the fiscal and monetary
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policy issues that are driving that debt
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cycle and provided some
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input that if we were able to cut our
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deficit to GDP to roughly 3%
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we may have a shot at a smoother
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transition here. Today, the CBO
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estimates that the 2026 deficit to GDP
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is about 6%.
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>> If you were building a global financial
00:01:08
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00:01:10
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00:01:12
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00:01:14
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00:01:16
cards, and payments that treats the
00:01:18
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00:01:21
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00:01:23
the future at airwallix.com/allin.
00:01:26
Airwallix. Build the future. So the
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first question I have for you looking
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back on the past year of the
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administration and the actions of
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Congress and the economy. Are we on a
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good path? Are we on no different a path
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than we were say a year ago? Are we
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moving too slowly? I studied these big
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cycles in history going back 500 years
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and there are five big forces that are
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intertwined to determine the answer to
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your question which is uh there's the
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debt money one and I I'll take you into
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that in a minute. Um there is the um
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domestic
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gaps, the wealth and values gaps that
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are causing irreconcilable differences
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between um the left and the right that
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is affecting how u taxes, democracy and
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everything works. There's the
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international great power conflict, the
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classic rising of a great power,
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challenging existing great power and
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changing the international world order.
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Then there's technology. All through
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these cycles there have been technology.
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And then there's uh acts of nature,
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droughts, floods, and pandemics. So um
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and when we think of orders, we're
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talking about there's always a monetary
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order. And all monetary orders have
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broken down for the same reasons. All uh
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political orders, domestic political
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orders, they all always change in the
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United States less. So we have 250 years
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here, but um that they always change.
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There was one civil war in there. And
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then the uh but internationally they
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always change. All orders change. and
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the international geopolitical order
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going from a um a unil a multilateral to
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a unilateral world order is changing and
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certainly technolog is changing. Okay.
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So getting that fact that they're all on
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there now I'll go down to explain the
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government's finances and answer your
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question. The economics of a country are
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basically the same as the economics of a
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company or an individual except the
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government has a ability to print money.
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Look at it like a company or like your
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own. Basically, it's projected to spend
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about $7 trillion,
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take in about $5 trillion. So, it's
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running a 40% deficit, 40% of its
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spending. It's been running deficits for
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a long time. So, it has a debt that is
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600% six times the amount of money that
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it takes in. And we can project that
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number. Um the problem with debt cycles
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and you could see them transpire.
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They're um almost like the circulatory
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system of the body. the capital markets
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uh bring credit to different parts of
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the economy and if that credit is used
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to be productive and produces an income
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that pays for the debt service, it's a
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healthy process. But what happens is
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that if the um income, the debt service
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grows relative to the income because
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it's not paying for it, it's like uh
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plaque in the system uh growing up and
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it squeezes out spending. And so we now
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have that $2 trillion deficit. Half of
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that is interest payments plus we have
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to roll over $9 trillion of debt that
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has been accumulated and is maturing.
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Okay. So now if you were to look at a
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company like that or an individual like
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that you have that problem. So as a
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handy number 3% of GDP would sort of
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stabilize the situation. Very unhealthy
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condition. It's not just unhealthy
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because it's squeezing out those
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spendings, but also because there's a
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supply and a demand. In other words, you
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have to roll over the $9 trillion of
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debt that's coming due and you have to
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sell two trillion more, something like
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that. Okay. So, now you go to the buyers
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and the buyers, who are the buyers?
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There are some domestic buyers and
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they're foreign buyers. about a third of
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foreign buyers and now it's a riskier
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situation from their point of view. It's
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riskier. First of all, it's a lot to
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acquire. They dollar denominated debt is
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already a large percentage of their
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portfolio, larger than it would be if
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just decided on on a prudent basis. But
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also we have political geopolitical
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risks that also extend to possibly the
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risks that the debtor and the creditor
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will have a conflict. You could imagine
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that with China. You could imagine that
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with Europe even. And you know Europeans
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could wonder whether they will get
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sanctioned. In other words, the debt
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service payments might not be made as a
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sanction. and the United States has to
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worry about whether it's going to bring
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in that money. Now, the things that I'm
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describing have happened repeatedly
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through history. So, in other words, I'm
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not just making this stop stuff up. If
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you were to see uh particularly, you
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know, in the 1929 to 45 period, you saw
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this dynamic. You saw it before. So
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there is this financial piece which in
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and of itself is not healthy for the US
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government
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and it's um but it's also problematic
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because of the other factors uh
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compounding the problem.
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>> You highlighted this problem.
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You provided a diagnosis that if we
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could get to 3% we could soften the
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effect but it hasn't happened. We were
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all very hopeful last year around this
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time when Elon Musk decided to lead
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Doge, the Department of Government
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Efficiency. He was going to go in and
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there were going to be these kind of big
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sweeping changes to reduce government
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spending, find fraud, waste, and abuse
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and so on. Did Doge fail
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because the actions that were taken were
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wrong or did Doge fail because the
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system itself cannot be changed at this
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point in the cycle that there's too much
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capital flowing. The economy is too
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dependent on it. There are too many
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individuals and businesses are dependent
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on it and it's structurally impossible
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to pull our way out of it. I mean, does
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Doge tell us something about what's
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possible at this stage?
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>> Yeah, you're talking about uh taking an
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inefficient government
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and making it efficient,
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okay? And having to do it quick because
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there are elections and if people don't
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like it, then you know, you lose your
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mandate.
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And in a um society in which no matter
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what you do, you're criticized and and
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torn down. So you know we have the fact
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of uh the question of does democracy and
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our system lend itself toward the sort
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of um executive leadership that both
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makes it efficient and makes it
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acceptable for all people. You know
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there was a lot of uh cutbacks
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um you know things like school lunch
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programs and things you know um and then
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trying to do it surgically. So it's um
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how do you do that effectively quickly
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in a manner that uh doesn't uh cause so
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much controversy
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that the government falls. So if you
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look at history, that's why I deal with
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the political.
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If you deal with history and you deal
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just even common sense, think, you know,
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like u are you going to have the
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executive leadership that's going to be
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able to make this satisfactory with most
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people? Um, you know, and do that
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quickly. I think that's that's a hell of
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a hell of a trick to pull off,
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>> right? So it might just be structurally
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it's a little difficult at this stage.
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>> What an understatement. Structurally a
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little difficult at this stage.
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>> Yeah.
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>> Well, there was another big news story
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recently that there may be quite a lot
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of fraud going on with public dollars in
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Minnesota that there are these daycarees
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that don't exist and billions of dollars
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are flowing to individuals to run these
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daycarees. And now there's a lot of this
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sort of citizen journalism going on
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across the country that federal spending
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is actually being fraudulently abused.
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Do you think that this is a symptom of
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this stage of the cycle? What's your
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view on how this relates to this problem
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that we're generally kind of talking
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about?
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>> Yeah, it's both the stage of the cycle
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and if you're going to have something
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wellmanaged, are you going to have the
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government well manage it? I mean, how
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how how well managed, you know, go to
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the Department of Motor Vehicles for
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your
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it's so big and complex and such a,
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you know, such a mess. Like, what you
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know, like when when you think, is this
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a surprise to you that there's all of
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this stuff going on all over the place
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in terms of inefficiency? Is that a
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surprise to you?
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>> No. Uh but you know I guess the question
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is are people waking up to this? Because
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last time we spoke you highlighted that
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a piece of your portfolio was in gold.
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You had invested quite a bit in gold.
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Since we spoke I think gold has climbed
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from 2900 an ounce to 5200 an ounce.
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What has happened with gold over the
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last year? Is it that markets are waking
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up to the point in the cycle that we're
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in that you've been highlighting for a
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number of years at this point? Or is it
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because China is structurally abandoning
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the US dollar and treasuries and moving
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more into gold and other central banks
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are moving into gold? Is it because
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individual speculators and market
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participants are getting bubbly with
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gold? What's your view on what's gone on
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with gold and how it relates to the
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market's acknowledgement of the stage
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that we're in? It's the big cycle. And
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what what what you have to understand is
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that gold is not a precious metal that's
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speculated on like most people have come
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to think of it as. Um it is um the most
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established money that it's the second
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largest reserve country currency that
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central banks hold. And so what we've
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seen is for various reasons that I
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pretty much covered the economic, the
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supply demand, the uh political, the
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geopolitical, for those reasons, central
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banks themselves have acquired
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gold to build that up and individuals
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and others are looking for an
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alternative money. The question is what
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is money? So when we're thinking about
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this, money mechanistically, money is
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debt. What I mean by that is that if
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you're holding money, you're holding it
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in the form of a debt instrument.
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And if you um are holding a debt
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instrument, what you're getting is a
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promise from somebody to deliver you
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money.
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Okay? And what as I mentioned in the
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beginning, the power of the central
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banks when they have too much debt is to
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print money.
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Okay. So if you've got that down,
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okay, then you can understand what's
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happening. Okay. The because the
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question is Dave, what money do you
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think is safe?
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>> Right. given what I've just said.
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>> Okay.
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>> Which Yeah. the act asset back, right? I
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want an asset. I want to have something
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that's got some physical known
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limitation to it.
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>> And particularly what you want is that
00:14:00
can be transferred from one place to
00:14:02
another because money is both a medium
00:14:05
of exchange and a storehold of wealth.
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So in other words, if you if one
00:14:10
country's central bank or government
00:14:14
wants to pay another gun government, it
00:14:17
can't just be in fixed assets like
00:14:19
buildings. Okay? If you want to
00:14:21
transact, you have to transact in
00:14:24
something that you can transfer to them
00:14:27
and so on. And gold is the only uh
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asset. It's the long-term historic asset
00:14:35
for for reasons. That means that it can
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be transferred. They can't print a lot
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of it. Um and um it is not dependent on
00:14:46
somebody giving you something. In other
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words, most money most if you hold debt
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or you hold stocks or you hold
00:14:53
something, you're holding a promise from
00:14:56
somebody to give you buying power. Okay?
00:15:00
So you can like wealth. There's
00:15:02
important thing to distinguish wealth
00:15:04
from money.
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Okay? Wealth is in stuff. It's it, you
00:15:09
know, it's in buildings. It's in
00:15:11
companies and so on. But you can't spend
00:15:13
wealth. You have to when you want to
00:15:15
spend it, and that's the purpose of
00:15:17
money, you have to sell it. And then you
00:15:21
get money to spend. And right now, we
00:15:25
have an awful lot of wealth
00:15:28
relative to money. And the question is,
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what is that money? And there's the risk
00:15:33
that you go to get convert your wealth
00:15:35
into money that they're going to print
00:15:37
money cuz that's what they've always
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done since we've had fiat currencies.
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>> So as you look out and have
00:15:42
conversations with all the market
00:15:44
participants that you know and you know
00:15:47
everyone that's of size and scale,
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where are we in terms of folks
00:15:52
converting their wealth into gold or
00:15:56
their money into gold? like how much
00:15:58
more do we have to run in terms of the
00:16:00
dollar denominated value of gold in the
00:16:03
market cycle as this great rush for the
00:16:06
doors rush for the exit happens. two
00:16:08
things that come to mind. What I what I
00:16:10
look at is literally
00:16:13
who has what assets
00:16:17
including like central banks, what is
00:16:18
the money in and so on and and what is
00:16:22
that mix and I look at the amount of uh
00:16:26
wealth relative to money or I look at
00:16:30
the amount of wealth relative uh to
00:16:33
gold. And what we've seen is that
00:16:36
there's an enormous amount of wealth
00:16:40
and there was an enormous amount in
00:16:42
central banks of the other money
00:16:45
relative to hard money gold. And so
00:16:49
we've seen about what I would call
00:16:54
it go from an extremely small number to
00:16:58
something
00:17:00
that is a less small number. That price
00:17:04
increase and that change in composition
00:17:08
has brought it almost not quite but
00:17:11
almost toward the average of what it's
00:17:15
been uh over a period of time. So uh
00:17:19
being out of balance however because the
00:17:21
wealth is total wealth is still so large
00:17:25
relative to money that's a real uh
00:17:28
issue. So let me give you a practical
00:17:31
example of of of this wealth taxes and
00:17:34
wealth
00:17:36
being a risk. One question that might be
00:17:38
asked are are we in a bubble? In other
00:17:41
words, are AI stocks and other such
00:17:44
stocks in a bubble? That's a does if you
00:17:47
want to get into that, we'll get into
00:17:48
that. But one of the things that we know
00:17:52
from that is that one of the
00:17:54
characteristics of bubbles is that there
00:17:59
becomes a need for money
00:18:02
that requires people to sell their
00:18:05
assets
00:18:07
to get money
00:18:09
to meet that need. Now quite often that
00:18:11
need comes from borrowing money to buy
00:18:15
those assets. Okay? and then the assets
00:18:18
go up in price and and so on. But what
00:18:21
happens is it can't be sustained because
00:18:24
you have to make the debt service
00:18:25
payments and they're not thrown off the
00:18:28
cash the to make that and so they have
00:18:31
to start to sell that and then you and
00:18:34
when you have to sell it because you
00:18:35
need money you need cash to pay your
00:18:38
debt service or to pay nowadays wealth
00:18:42
taxes.
00:18:44
Okay. So now we have a dynamic. The
00:18:46
bubble will burst as that dynamic takes
00:18:50
place. There are a number of things we
00:18:51
could talk about about the bubble if
00:18:52
you're interested. But just imagine if
00:18:55
you put in wealth taxes. Everybody could
00:18:57
talk about whether they like or don't
00:18:59
like wealth taxes or something. But
00:19:01
anything that if if you put in wealth
00:19:03
taxes and there's a lot of fear of
00:19:06
wealth taxes in and of itself that can
00:19:10
drive money uh wealth to cash
00:19:13
and and and there's only one way you're
00:19:15
going to get the cash with the wealth
00:19:17
and that's either sell it or to borrow
00:19:19
against it which causes its own cash
00:19:22
flow issues. And we have a dynamic
00:19:24
having to do with the social part of
00:19:26
this, you know, the wealth gap that
00:19:29
makes that politically an issue. So
00:19:33
anyway, all I'm saying is people should
00:19:36
worry and and companies should worry or
00:19:40
countries should worry. Do they have
00:19:42
enough gold? I mean, if you didn't know
00:19:44
what the if you didn't know what gold
00:19:49
was likely to do and you had no view on
00:19:51
gold, one should have between five and
00:19:54
15% of their portfolio in gold because
00:19:58
of the fact of how it works with the
00:20:00
other components. In other words, it's a
00:20:03
diversifier when when the hits the
00:20:07
fan,
00:20:09
okay, gold does well and the other
00:20:11
things don't. generally speaking and
00:20:14
because of that correlation depending on
00:20:17
what else is in the uh portfolio if you
00:20:20
put it through an optimizer you'd have
00:20:22
something like that. So I'm not trying
00:20:25
to tout people on buying gold but I
00:20:27
would say what is safe?
00:20:30
What is safe? And it's safe is somewhere
00:20:33
if you had no view between five and 15%.
00:20:37
Why hasn't Bitcoin performed in the same
00:20:40
way? In the same period that gold's
00:20:41
climbed 80% since we last talked,
00:20:43
Bitcoin's down 25%.
00:20:46
What's your view on what's happened with
00:20:48
Bitcoin and why that hasn't played the
00:20:50
role that many thought it was going to
00:20:52
play, which is the safe haven asset?
00:20:53
>> There there's an important
00:20:55
differentiating characteristics of
00:20:57
Bitcoin and then there's also, you know,
00:20:59
like who owns it and why they buy, why
00:21:01
they bought and sell. Okay. So, Bitcoin
00:21:04
does not have privacy tra any
00:21:07
transactions uh can be monitored and
00:21:10
then u indirectly perhaps controlled.
00:21:14
Central banks are not going to want to
00:21:16
buy bitcoin and being able to hold it.
00:21:19
So, it's not just individuals, it's
00:21:21
institutions and so on, but most you
00:21:24
know and central banks. So, that there
00:21:27
are attributes of that. there has been
00:21:30
um some question or thoughts of the
00:21:33
development of you know new technologies
00:21:35
like quantum computing and so on. Can
00:21:37
there be issues regarding that? And then
00:21:41
there's um you know who owns it and what
00:21:44
are the other exposures that they have
00:21:46
in their portfolio? It tends to have a a
00:21:49
pretty high correlation with uh the tech
00:21:52
stocks.
00:21:54
So from an ownership, you know, just the
00:21:57
supply demand is affected by if somebody
00:22:00
gets squeezed in one thing, they sell
00:22:02
something that whatever else they have.
00:22:05
So there are those dynamics. It's a long
00:22:08
way as and it's a relatively small
00:22:11
market that's a relatively controllable
00:22:13
market. I think a lot of attention has
00:22:15
been given to Bitcoin but as a money you
00:22:18
know it's it's it's it's small in
00:22:21
relationship to u gold and so you know
00:22:25
those are the dynamics. There is only
00:22:27
one gold.
00:22:28
>> What about silver? I mean silver has had
00:22:30
a big run up in the past year as well.
00:22:32
Is that a derivative to gold and it's
00:22:34
effectively people playing off of the
00:22:37
wake of gold movement? um silver in its
00:22:41
production is a residual commodity. The
00:22:45
supply of it is difficult to increase
00:22:48
and through history uh you know like the
00:22:51
pound sterling silver was perceived as a
00:22:56
monetary uh item. Uh but it uh has also
00:23:01
taken on a speculative life of its own.
00:23:04
So, you know, people are um you know,
00:23:06
hot in it because it's been hot.
00:23:08
>> I just want to shift gear a little bit
00:23:10
back to something you touched on, but
00:23:12
the last time we met, you also talked
00:23:14
about the importance of making sure that
00:23:16
interest rates remained low for us to
00:23:18
kind of manage the effect and the impact
00:23:20
of the stage of the cycle that we're in.
00:23:22
What's your view, I guess, today on
00:23:24
where rates are and how the Fed has
00:23:27
acted over the past year relative to
00:23:29
what needs to be done to soften the
00:23:33
effects of the stage in the cycle that
00:23:35
we're in
00:23:35
>> because we have so much debt, federal
00:23:37
debt,
00:23:38
um interest rates are one of the three
00:23:42
main considerations. There's the um
00:23:45
taxes, there's spending, and then
00:23:47
there's interest rates or on the debt.
00:23:49
But you can't make interest rates um
00:23:53
severely artificially low because one
00:23:55
man's debts are another man's assets.
00:23:58
And if you make those interest rates
00:24:02
too low for the creditor,
00:24:05
you will produce the dynamic that we
00:24:08
understand. In other words, you'll
00:24:09
produce a lot more borrowing. You'll put
00:24:12
it into things and you can fuel a
00:24:14
bubble. And so at the same time
00:24:19
uh you can't have them so high that the
00:24:22
debtor gets squeezed
00:24:25
uneffectively. So there's a balancing
00:24:27
act. You know keep them high enough that
00:24:31
they're adequate for the creditor but
00:24:33
not so high that the debtor. And so when
00:24:35
you have a lot of debt assets and
00:24:37
liabilities because for every debt asset
00:24:40
there's a debt liability. And when you
00:24:42
have a lot of those that balancing act
00:24:45
is is very difficult. this made more
00:24:47
difficult you know because of what's
00:24:49
called the K economy you know in other
00:24:52
words there are bubble elements that are
00:24:55
going on in the part of the economy you
00:24:59
know where um
00:25:02
you know the question is who will be the
00:25:04
first to be a trillionaire and and and
00:25:06
that you know that top 1% of the
00:25:10
population and all of that at the same
00:25:13
time as you have the other part of the
00:25:16
econom economy where um for example 60%
00:25:19
of all Americans have below a sixth
00:25:22
grade reading level and and to make them
00:25:26
productive particularly as we are also
00:25:30
having AI have replacements for them um
00:25:35
is a particularly difficult thing to
00:25:38
achieve. In other words, when you have
00:25:40
so much debt assets and liabilities
00:25:43
and then you have such a disparity in
00:25:46
conditions between those that are at the
00:25:49
top and let's call it the bottom 60% of
00:25:52
the population what that's like that's
00:25:55
uh you know another hattick that's
00:25:58
another
00:26:00
difficult thing to pull off. So
00:26:04
this is a challenging situation as for
00:26:06
as far as monetary policy
00:26:11
exists. The idea of setting an interest
00:26:15
rate and having a fiscal policy and a
00:26:18
monetary policy that's for the economy
00:26:22
as a whole
00:26:24
and doesn't deal with the differences in
00:26:28
the econ in the circumstances. may be
00:26:31
more
00:26:33
is more challenging.
00:26:34
>> Well, so taking a look at Fed action
00:26:38
and market activity, there's been a lot
00:26:42
of reporting over the past year that a
00:26:44
number of global central banks have
00:26:47
stopped buying US treasuries and are
00:26:49
shifting to gold. Does this mean that
00:26:52
the Fed in the US is going to have to
00:26:55
start buying treasuries and expand their
00:26:57
balance sheet again? Is it inevitable
00:26:59
that we see a re-expansion of the Fed's
00:27:02
balance sheet in this phase in the cycle
00:27:04
given what's going on with global market
00:27:07
action?
00:27:07
>> I think that it's likely down the road.
00:27:10
Um uh right now uh there's um the
00:27:14
shortening of maturities
00:27:18
um as a means of trying to deal with
00:27:20
that. Of course, that increases the debt
00:27:23
rollover risk. uh but the you know sell
00:27:26
less long debt uh try to uh hold the
00:27:31
short rate down so that the longer rates
00:27:34
attachment to it doesn't get you know
00:27:37
helps to hold the long rate down and
00:27:39
then uh try to um
00:27:43
use
00:27:45
the government's power of persuasion
00:27:49
on other countries to either buy the
00:27:52
debt or to hold the debt or to have
00:27:55
other forms of capital enter the United
00:27:57
States.
00:27:58
>> How do you like Kevin Wars has picked
00:28:00
for Fed chair? What's your view on how
00:28:02
he's going to guide interest rate policy
00:28:04
for the central bank and when he assumes
00:28:06
his term?
00:28:07
>> It's a very very big challenge. I think
00:28:09
he's a practical man. He understands
00:28:11
both sides of the pros and cons. I think
00:28:15
it's a tough job. One of the other
00:28:17
things that I would say was pretty
00:28:19
surprising over the past year
00:28:22
is
00:28:23
how adamantly against tariffs for fear
00:28:28
of inflation and reduced consumption
00:28:31
which would mean a negative effect on
00:28:33
GDP growth. Perhaps tariffs might be.
00:28:36
The president and the administration put
00:28:39
in place a number of tariffs under the
00:28:42
emergency economic powers act which the
00:28:45
Supreme Court in the last week or so
00:28:48
overturned.
00:28:49
But looking back on the economic effect
00:28:53
of tariffs, what do you think economists
00:28:56
got right and wrong about their
00:28:59
predictions about the effect tariffs
00:29:01
would have on the economy, on
00:29:03
consumption, on inflation?
00:29:05
And are there things that economists
00:29:07
fundamentally missed or didn't
00:29:08
understand and why?
00:29:10
>> Yeah, I I think so. First of all, um
00:29:13
there's the uh tax revenue part of them.
00:29:17
I mean thinking of it just as uh revenue
00:29:21
and I think that people don't
00:29:25
all economists make the mistake of not
00:29:28
including taxes in inflation.
00:29:32
>> And what I mean by that is
00:29:35
if your if your taxes go up
00:29:40
that's inflation.
00:29:42
I mean, why should it be any different
00:29:44
than if your cost of housing goes up?
00:29:48
Why shouldn't it be part of the
00:29:49
inflation calculation number? It's take
00:29:53
it's taking money out of your pocket. I
00:29:56
mean, it's probably the, you know, for a
00:29:58
lot of people the biggest expense. And
00:30:00
so, when they to say inflation is
00:30:03
something separate, you know, uh uh I
00:30:06
think it's changing the form of of
00:30:10
inflation in a sense.
00:30:12
So what I mean is you know through
00:30:14
history tariffs used to be the biggest
00:30:18
source of uh revenue for government
00:30:21
through throughout most history and in
00:30:24
most countries. Okay. So, it is a um I
00:30:29
think it's viewed it's it's a totally
00:30:31
valid way of raising money and it should
00:30:35
be kept kept in consideration for that
00:30:38
and and you get the foreigners paying a
00:30:40
portion of it. But there's also as part
00:30:43
of the big cycle question is the problem
00:30:47
that we have that we are not
00:30:50
independent. Okay, we've had a hollowing
00:30:52
out. This is the big question, you know,
00:30:56
that we've had a hollowing out of
00:30:58
manufacturing the middle class and so
00:31:02
on. Now, are we going to try to build
00:31:05
that? and what is the plan to build that
00:31:08
or are we going to continue on with
00:31:10
large trade deficits
00:31:13
and um so you have unsustainable
00:31:17
trade deficits that the United States
00:31:20
has and which are capital um surpluses.
00:31:25
In other words, the dependence on
00:31:27
foreign capital is the other side of
00:31:29
those trade balances and that's
00:31:31
unsustainable. So because that's
00:31:34
unsustainable
00:31:36
um you need uh uh some way of uh
00:31:40
rectifying that. Okay. So what is the
00:31:43
plan to rectify that? Partially that
00:31:47
plan uh can have trade tariffs. I think
00:31:50
they're totally valid.
00:31:53
uh but it all has to be part of another
00:31:56
greater plan which is to develop
00:32:00
the industries that we need to have
00:32:02
developed which we're seeing happen in a
00:32:04
much more proactive way. In other words,
00:32:06
you're seeing more government um
00:32:10
activity to create infrastructure
00:32:13
to bring in industries and so on. You
00:32:15
need that not only economically but you
00:32:17
need it geopolitically because you can't
00:32:20
have dependencies.
00:32:22
In other words, we're entering a world
00:32:24
of greater conflict. We've moved from a
00:32:26
multilateral world order to a a
00:32:29
powerbased confrontational world
00:32:32
economy. And in that environment,
00:32:35
everybody's threatening to cut off
00:32:37
everything from, you know, the uh goods
00:32:40
and capital wars that we can have are
00:32:44
threatening. And so, you have to build
00:32:46
independence.
00:32:48
And so, um, that's part of a plan to try
00:32:52
to build that independence.
00:32:54
Um, so I I think when I look at that, I
00:32:58
don't think that's the problem. I I'd
00:33:00
say uh and it's misunderstood. So yes, I
00:33:04
think people are misunderstanding that.
00:33:06
And the important thing is we get the
00:33:09
other things right, you know, like let's
00:33:12
get down to 3%. And and by the way,
00:33:14
there's a bipartisan bill that on this
00:33:18
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
00:33:26
mean lots of people are in favor of you
00:33:29
know um what I'll call the 3% threepart
00:33:33
solution. 3% of GDP, three parts uh a
00:33:38
bit from one thing, a bit from another.
00:33:41
taxes, spending, and um and hopefully
00:33:44
interest rates.
00:33:45
>> And just to take the inflation question
00:33:48
to its conclusion, at the State of the
00:33:49
Union this week, President Trump shared
00:33:53
his vision, which is that tariffs can
00:33:55
completely replace an income tax in the
00:33:57
United States. Do you think that that's
00:33:58
a feasible path? Is it make sense at
00:34:00
some point for tariffs, which are
00:34:02
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
00:34:05
think it's anywhere near um that uh both
00:34:09
because of the combination of the size
00:34:12
and then the impact of that size.
00:34:14
tariffs are regressive and I think that
00:34:19
uh there needs to be um some um we have
00:34:23
to deal with the wealth gap app to me
00:34:26
the wealth gap the biggest problem of
00:34:28
the wealth gap which is a big social
00:34:30
problem is also the productivity gap and
00:34:35
you have to make most people productive
00:34:38
and you have to do that through
00:34:40
infrastructure and so on and I I don't
00:34:43
think I I think that needs to be
00:34:45
addressed.
00:34:45
>> It's a really important point you just
00:34:47
made. I think my analysis
00:34:52
indicates that nearly half of Americans
00:34:56
either work for a government agency or a
00:34:59
government service provider or
00:35:00
contractor. The data over the past year
00:35:04
is the federal workforce declined by
00:35:07
317,000
00:35:09
employees, roughly 14% of the total
00:35:11
federal workforce.
00:35:13
As this administration has reduced the
00:35:16
size of some of these agencies, reduced
00:35:18
the size of that workforce, what happens
00:35:21
to those individuals? Do they go work in
00:35:23
the private workforce and become
00:35:25
productive or do you think they're
00:35:27
getting subsumed by other government
00:35:29
agencies either state or local or
00:35:31
government service providers to do work
00:35:33
that fundamentally is not productive to
00:35:35
growing the economy?
00:35:36
>> I uh I I haven't studied the numbers. I
00:35:39
I don't think I can adequately answer
00:35:41
that. I would say
00:35:45
government is extremely inefficient.
00:35:49
It has a role. It has an important role
00:35:51
but even that role it's handling very
00:35:54
inefficiently. Other governments handle
00:35:57
that role of um maybe education
00:36:01
some of these things in a better way. We
00:36:04
need fundamental we need you know best
00:36:06
thing you could invest in is education.
00:36:10
But anyway, where they go and what they
00:36:13
do u from the government and and you
00:36:16
know the other inefficiencies is a
00:36:18
problem. The one thing that's good about
00:36:21
uh the system um that the capitalist
00:36:25
system in a sense is it doesn't live if
00:36:28
it can't uh if somebody either won't bet
00:36:30
on it or it doesn't make a profit. So,
00:36:33
um, yeah. So, I think wherever it goes,
00:36:38
um, it's wherever those people go,
00:36:41
they're just so many inefficient people
00:36:44
and inefficient systems.
00:36:47
>> Is there not enough productivity driven
00:36:49
economic growth in this nation at this
00:36:52
time to give more people the opportunity
00:36:55
to improve their income, improve their
00:36:58
wealth, improve their livelihoods?
00:37:01
Is that the fundamental issue we're
00:37:03
dealing with at the moment? Or is it
00:37:05
that you know people aren't prepared or
00:37:08
educated to be productive and therefore
00:37:11
the system itself has failed them?
00:37:13
>> There are three things basically that
00:37:15
you need to do to be successful.
00:37:18
You have to first educate your children
00:37:20
well and uh so that they are capable of
00:37:23
being productive and also educate them
00:37:26
in civility so that they are civil with
00:37:29
each other.
00:37:31
The second is then they have to come out
00:37:34
to an environment that is an orderly
00:37:37
civil environment that people can
00:37:40
compete and work wi with with and and
00:37:43
compete and work with each other to be
00:37:45
productive. That that works for the most
00:37:48
people. And the third thing is you have
00:37:51
to stay out of wars. You have to stay
00:37:53
you have to have no civil war and no
00:37:56
international war. If you do those three
00:37:59
things right, you will have a successful
00:38:01
country. That's all throughout history.
00:38:04
Okay. We're having problems with those.
00:38:06
And are those three things the antidote
00:38:09
to some of the rising movements that
00:38:12
we're seeing in increased unionization
00:38:16
and effects that unions are having on
00:38:18
the political process which is also
00:38:20
leading to these rises in socialism and
00:38:23
support for socialist movements in the
00:38:25
United States as well as the wealth
00:38:27
taxes which from the view that's shared
00:38:31
by those participating in those
00:38:33
movements they are meant to solve income
00:38:34
inequality wealth health gap issues that
00:38:37
we're seeing in the United States. So
00:38:38
that's their solution. Is the solution
00:38:40
to those movements? Education and
00:38:43
civility, creating a civil environment,
00:38:46
and staying out of wars. Is that all we
00:38:47
need to do to make this successful or is
00:38:49
there more to the
00:38:51
>> That's that what we need
00:38:54
is is is to stop fighting. Okay. We're
00:38:57
now at a stage where we have
00:38:59
irreconcilable differences.
00:39:03
In other words, when
00:39:06
when the causes people are behind are
00:39:09
more important to them than the system,
00:39:12
the system is in jeopardy.
00:39:15
Our system is in jeopardy
00:39:18
because
00:39:21
um
00:39:23
they people will not accept the system
00:39:26
or the alternatives and so they're going
00:39:29
to fight. You know, I think I think when
00:39:33
we have we're going to have the midterm
00:39:34
elections,
00:39:36
you're going to go past the midterm
00:39:37
elections with probably the uh Democrats
00:39:41
will take the House and be and maybe I
00:39:44
don't know, it's going to be difficult.
00:39:46
And you know what? Nobody can succeed
00:39:49
because everybody's going to be
00:39:50
fighting. They're going to all be
00:39:52
fighting. Okay? So, how does that affect
00:39:55
productivity? Uh, okay. And then when
00:39:58
you deal with things like how do you get
00:40:00
a good education system? So you have now
00:40:04
almost the mob disorder
00:40:07
mob disorder and inefficiency.
00:40:10
Nobody's allowed to take charge of this.
00:40:13
If if you go back in history,
00:40:16
Plato, you know, I think it was like 350
00:40:19
BC wrote about the cycle, you know, of
00:40:22
democracies and the threat to
00:40:24
democracies.
00:40:26
What's happening now is similar to
00:40:30
Julius Caesar and Rome and being, you
00:40:35
know, stabbed in the Senate and and what
00:40:38
you need is you need a bipartisan
00:40:43
you need you need the country to have
00:40:46
have a strong almost a strong leader. We
00:40:50
do need a strong leader to get the the
00:40:53
reforms done to make the country work
00:40:56
well. But I mean, so how do you force
00:41:00
this mob of people who are behaving this
00:41:04
way including in the elections and so
00:41:07
fragment to create order. So you need a
00:41:11
a tough leader who will force them to do
00:41:13
diff force things to difficult things
00:41:17
and not fight with each other and focus
00:41:20
on being productive. That's what you
00:41:22
need. I think
00:41:23
>> it sounds a little like there may be
00:41:25
this
00:41:27
inevitable path of the choice that no
00:41:30
one wants to make between some form of
00:41:32
socialism and some form of fascism. Is
00:41:34
that where this
00:41:35
>> I think there's I think you were we're
00:41:36
moving toward the that war. We're in
00:41:39
that war. We're in what's sta what I
00:41:42
call stage five of a cycle. Okay. In the
00:41:45
book I describe the pattern that's
00:41:47
happened over and over again. And when
00:41:49
you get to this position when there are
00:41:53
a bad finances
00:41:55
combined with large wealth and values
00:41:59
gaps
00:42:01
and irreconcilable differences
00:42:05
and you have external threats as well as
00:42:08
domestic threats.
00:42:10
You have this dynamic. I think that's
00:42:13
where we are. I I'm like a mechanic. My
00:42:16
goal I'm not ideological. I'm just a
00:42:18
practical guy trying to make money in
00:42:19
the markets and trying to describe
00:42:22
things and that's what it looks like. I
00:42:24
think when we look at the bubble
00:42:25
question on AI, what a lot of people
00:42:28
don't realize in bubbles is that through
00:42:33
all technologies, they think that they
00:42:37
are betting on the technology when they
00:42:39
buy the stocks and the companies. That's
00:42:43
not true.
00:42:44
Okay? There's a giant difference between
00:42:48
the behavior of the companies and the
00:42:51
behavior of the technologies
00:42:53
and that the norm is in these is that a
00:42:56
lot of companies won't survive in the
00:42:59
start. It very small percentage and
00:43:01
they'll all fight and so on but the
00:43:04
technologies will go on and it'll be
00:43:06
great. the technologies will. So I want
00:43:09
to emphasize to people that dynamic and
00:43:12
I can go on and describe you know what
00:43:16
it's like. Uh of course we've seen it to
00:43:19
some extent with the 2000 bubble in the
00:43:22
technologies and what went on. But e
00:43:25
even if I describe what it was like in
00:43:27
the late 20s, you know, it's just it was
00:43:30
unbelievable. But the technologies will
00:43:32
go on but the companies uh won't
00:43:34
necessarily go on. And um so when I'm
00:43:38
looking at that, that has big
00:43:40
implications. Right now it looks to me
00:43:44
like AI
00:43:46
uh basically is eating everything and it
00:43:49
might eat itself.
00:43:52
And what I mean by that is not produce
00:43:57
adequate profits. We can't take just a
00:44:00
domestic view of that. We have to look
00:44:02
also at what's happening in China and um
00:44:05
make interesting distinctions there. You
00:44:08
know, there's a difference in philosophy
00:44:10
that's carried through in the economy of
00:44:14
how the economies of the United States
00:44:15
and China work in that we have basically
00:44:18
primarily a profit-based system.
00:44:22
They have a system in which they might
00:44:25
believe that profits are a second
00:44:28
consideration. they're not necessarily
00:44:30
needed in order to achieve the best
00:44:33
results. For example, in in China, they
00:44:37
would say usage of AI is fantastic. So,
00:44:42
it should be like electricity or
00:44:45
something and let's make it free for
00:44:47
everyone
00:44:49
and let's make it open source for
00:44:50
everyone.
00:44:53
Okay? and they might get much higher
00:44:54
usage and they'll get their productivity
00:44:57
gains through the usage
00:45:00
and we have a profit system to pay back.
00:45:04
Okay. Well, now we're in one world. How
00:45:06
do you compete in that world? What do
00:45:08
you do with that? In other words, just
00:45:09
imagine that their technologies are
00:45:12
almost as good as ours because they are.
00:45:15
They're not far behind. and um and and
00:45:18
then but that you could get them for
00:45:20
free open source.
00:45:23
Okay. Now you got to pay it back. Okay.
00:45:27
So I just want to emphasize
00:45:30
that these are also systematic risks
00:45:34
that enter into the picture of of AI.
00:45:37
But you certainly yeah there are a lot
00:45:40
of unknowns here. As we wrap, looking
00:45:44
back on the history of this nation, I
00:45:46
ask myself the question a lot. How did
00:45:49
we get to the point that we've gotten to
00:45:50
in terms of the amount of debt, the
00:45:53
amount of government spending, the role
00:45:54
that the central bank has played, and
00:45:56
the risks that we find ourselves in
00:45:58
today that all seem largely avoidable if
00:46:00
we hadn't taken or made the decisions we
00:46:03
made along the way. You've highlighted
00:46:05
that they repeat over and over again.
00:46:07
But if you could go back and restructure
00:46:08
the United States and be a founding
00:46:10
father and write the Constitution
00:46:12
yourself, what are one to three things
00:46:14
that you would have done differently?
00:46:16
What would you have written into the
00:46:18
Constitution that may have prevented us
00:46:20
from getting into the situation that
00:46:21
we're in today?
00:46:22
>> Well, the uh I mean it's like the
00:46:25
marshmallow test. You know the
00:46:27
marshmallow test? You know, you want to
00:46:29
see it as a kid going at early age. you
00:46:33
uh give them the choice between one
00:46:35
marshmallow now and two marshmallows in
00:46:38
20 minutes and the kid that chooses the
00:46:41
two marshmallows in 20 minutes is going
00:46:43
to have a better life and make better
00:46:44
decisions kind of thing. Um I mean that
00:46:47
therein lies our problem the immediate
00:46:50
gratification and also the not knowing
00:46:52
if things are going to be productive but
00:46:54
the system has been remarkably adaptable
00:46:57
too. In other words, we've gone through
00:47:00
crisises, we've wiped out debts, and
00:47:03
we've gotten past it. And there are
00:47:05
certain ways of getting past it. But
00:47:08
you, you know, it's a it's a tough
00:47:09
question to balance um financial
00:47:13
prudence with uh innovative inventions,
00:47:18
you know, uh because you like
00:47:21
particularly like take AI now. Nobody
00:47:24
knows what's going to come of it and and
00:47:26
what what way, right? Is it going to
00:47:28
pay? Is it not going to pay? And all of
00:47:30
that. And so what do you write into uh
00:47:34
the law that uh is going to get you
00:47:38
financial prudence and control? And do
00:47:41
you when you write it into the law, does
00:47:44
that lessen the experimentation
00:47:47
and you know the entrepreneurship and
00:47:49
all of the things that you know? So it's
00:47:52
tough to do this with um with rules. I
00:47:55
think maybe the main thing is I would
00:47:58
say read history. Read history and know
00:48:01
these things and try to get that balance
00:48:04
right. You know, um everything's a
00:48:06
matter of the balance. So the balance of
00:48:08
the pain of failing or the pain of let
00:48:12
putting money into a something that
00:48:14
fails.
00:48:15
>> Well, Ray, I want to thank you once
00:48:17
again for taking the time to be here
00:48:20
with me. It's always great to catch up,
00:48:22
hear your perspective. Obviously, so
00:48:23
much has changed in the last year and
00:48:25
yet so much hasn't. It's been great to
00:48:27
to get your view on it and I think it's
00:48:29
really helpful to do this. So, so thanks
00:48:31
so much
00:48:32
>> and and thank you for what you guys do.
00:48:34
I'm I'm I'm riveted to your program and
00:48:37
um I think you make a great
00:48:38
contribution. Um so conversations like
00:48:42
this are are really practical helps for
00:48:45
a lot of people. So anyway, thank you
00:48:47
for letting me participate and uh thank
00:48:49
you for what you do for a lot of people.
00:48:51
Thank you.
00:48:51
>> That's right. I'm going all in.
00:49:08
I'm going all in.
