Untitled Document

[00:00:00] Ray Dalio, thank you very much. We spoke [00:00:01] last year in Exactly this place and and [00:00:04] you outlined in part kind of the cycle [00:00:07] that you see in civilizations [00:00:10] uh vying for supremacy of the world. Um [00:00:13] and not everyone I think bought kind of [00:00:15] bought into your views on this and you [00:00:17] were derided as um you know a Jeremiah [00:00:20] scaring people and everything. A year [00:00:21] later, you have a new summary of ideas [00:00:25] that you've been formulating for a long [00:00:27] time out this week and about 18 people [00:00:29] have sent it to me and so I think we've [00:00:31] reached a moment where people are ready [00:00:32] to hear what you're saying. So, if you [00:00:34] wouldn't mind [00:00:36] outlining in whatever detail you like [00:00:38] the cycle that you see that countries go [00:00:39] through and where our country, the US is [00:00:41] in that cycle. [00:00:43] >> Gladly. Um, yeah. So there's um there's [00:00:48] a cycle, there are orders, there are [00:00:51] systems, right? So there's a monetary [00:00:55] order. [00:00:56] Um how does the economy work? You put in [00:00:59] money creates credit. People with credit [00:01:01] take do things with that. They borrow if [00:01:04] they can uh earn enough money to pay [00:01:06] back. Uh the system works well. They [00:01:08] create productivity. They create [00:01:10] opportunities. The capital markets and [00:01:12] so on. That's the monetary system. And [00:01:14] the way that works um in the cycle is [00:01:18] that when there's no debt um such as in [00:01:21] 1945 we start a new monetary order [00:01:24] there's no debt there's a system and it [00:01:27] builds up over a period of time and it's [00:01:29] a mechanics that when incomes when debt [00:01:32] service payments rise relative to [00:01:35] incomes it squeezes out other spending [00:01:38] the way it would do for you as an [00:01:40] individual the way it would do for uh [00:01:42] companies except governments can print [00:01:45] money but that squeezes out spending and [00:01:48] that becomes a problem and then um you [00:01:51] also have a supply demand problem. So [00:01:53] when you have a new monetary system [00:01:56] which the United States um had the new [00:01:58] monetary system and the dollar was the [00:02:01] world's reserve currency then uh you can [00:02:04] sell a lot more uh of the debt. So [00:02:07] there's a supply and a demand, right? [00:02:09] And so when that builds up and [00:02:11] everybody's one man's debts are another [00:02:13] man's assets and they build up holding a [00:02:15] lot of uh dollar denominated debt and [00:02:18] then they sell a lot more debt then [00:02:21] there's a mechanics of that supply [00:02:23] demand and then when you have politics [00:02:26] and world politics geopolitics enter [00:02:28] into it that monetary system is more at [00:02:31] risk for those reasons. We'll get into [00:02:33] that. But the first force of these five [00:02:36] forces is the mechanics of this uh [00:02:39] process which is the monetary system. [00:02:42] The second is there's a domestic [00:02:45] political order. There's all countries [00:02:47] have an order, a system and all these [00:02:49] orders change and they evolve and of [00:02:52] course that is connected to the uh [00:02:54] economic system and so when you get [00:02:57] large wealth and values differences and [00:03:00] there's a sense that the system isn't [00:03:02] working for them and there's greater [00:03:04] polarity. There's the emergence of [00:03:06] populism like in the 30s, you know, the [00:03:09] left and the right and there's um that [00:03:12] populism gets to the point that there [00:03:14] are irreconcilable difference. And in [00:03:17] other words, the lack of willingness to [00:03:20] compromise, the lack of willingness to [00:03:22] accept loss, losing one's vote and and [00:03:26] so on. But a fight and win for me at all [00:03:29] costs. Like in the 30s, four democracies [00:03:32] chose to be autocracies because the [00:03:34] polarity uh was so great and the uh [00:03:37] willingness to go along with that [00:03:39] democracy system um ceased to exist. So [00:03:42] that dynamic has happened throughout [00:03:44] history. Um and then um the the third is [00:03:48] the geopolitical order. How countries [00:03:51] work relative to each other. What's the [00:03:54] system? And after World War II, we [00:03:57] created a system, a multilateral system [00:04:00] in which it was um in some ways naive, [00:04:03] but it was very different than existed [00:04:05] before in that by being multilateral, [00:04:08] having a United Nations, a World Trade [00:04:10] Organization, a World Health [00:04:12] Organization, a World Court, and all of [00:04:14] those, the idea of being representative, [00:04:16] and they would make decisions in a [00:04:18] certain rule-based system um was u the [00:04:23] path. And uh of course the problem of [00:04:25] that is that any system has to have its [00:04:29] uh enforcement and if the system as a [00:04:32] whole a multilateral system is not [00:04:34] consistent with the interests of those [00:04:37] who are the most powerful the well you [00:04:39] know power rules and so you have the [00:04:42] dynamic of the breaking down of that [00:04:44] order. Right? So we're breaking down the [00:04:46] monetary order in in a very classic way. [00:04:49] We're breaking down the political order [00:04:51] in a very classical way. We're breaking [00:04:53] down the geopolitical order. So those [00:04:56] orders, we have to recognize throughout [00:04:58] time all of those orders have changed. [00:05:01] There's never been a time that they [00:05:02] haven't changed and haven't broken down. [00:05:04] And there are issues and they're getting [00:05:06] back to how they were in some ways in [00:05:08] the past. Number four is acts of nature. [00:05:12] Drought, floods, and pandemics have [00:05:13] killed more people than wars. So you [00:05:15] can't ignore it as a big influence. And [00:05:17] number five is the inventions of new [00:05:20] technologies particularly um you know [00:05:23] fabulous new technologies u come about [00:05:26] and they're important not only for [00:05:28] prosperity but they're important in wars [00:05:30] you know whoever wins the tech war wins [00:05:33] also the economic and the geopolitical [00:05:35] war and so there's that dynamic and [00:05:38] there that dynamic is when there's [00:05:40] rising powers challenging an existing [00:05:43] powers there's no court to go to there's [00:05:45] no way of resolving that there tests of [00:05:48] these powers and we're in a power type [00:05:50] of dynamic. Now when you understand that [00:05:53] that dynamic works through time and you [00:05:56] get down to its individual s symptoms [00:05:59] and in other words there's in in my book [00:06:02] u um principles for dealing with the [00:06:04] changing world order which I wrote about [00:06:06] five years ago. I took um and I broke [00:06:09] that cycle into five parts of the six [00:06:12] parts of the cycle and the like a [00:06:15] disease you can see the symptoms in [00:06:17] those parts and you could see it [00:06:19] progress and you could see the choices [00:06:22] that exist at those stages. So when [00:06:24] you're in a different stage, the [00:06:26] leadership has a difference uh stage. [00:06:29] And all I wanted to do, whether it's in [00:06:31] that book or in our conversation here [00:06:33] today, is to try to um uh let people um [00:06:39] see that. And um and I'm I'm just a [00:06:42] practical uh investor, right? I've been [00:06:45] a for 60 years I've been a macro [00:06:47] investor. So I have to bet on what the [00:06:50] future is going to be like. I place [00:06:52] financial bets on that. And now I'm at a [00:06:54] stage in life that I want to pass that [00:06:56] along. So um I hope that we could talk [00:06:59] about or look at that in a dispassionate [00:07:02] way to say how does the machine work to [00:07:05] produce that dynamic. [00:07:06] >> That's exactly right. And you're not [00:07:08] casting judgments here. You're just [00:07:10] acknowledging what has happened and and [00:07:12] what therefore is likely to happen. Can [00:07:13] I just go back? I don't want to let this [00:07:14] pass. In the second factor that you [00:07:17] described in this, the political factor, [00:07:19] you pointed back to the very fraught [00:07:21] decade of the 1930s. And you said you [00:07:22] had four democracies become or revert to [00:07:26] autocracies because of [00:07:30] the partisanship that became unworkable. [00:07:32] They couldn't reconcile and so they [00:07:33] became autocratic. Is that a consistent [00:07:37] principle? Do you think? [00:07:38] >> Yeah, that's you can look at it through [00:07:41] Chinese dynasties. You could look at it [00:07:43] through Rome like who is in control [00:07:45] right that they you know Caesar and the [00:07:48] Senate and being st in the Senate. um uh [00:07:51] Plato wrote about this. I think it was [00:07:53] like um 350 BC. He wrote about the cycle [00:07:58] in the republic. In other words, [00:07:59] democracies and the challenge of [00:08:02] democracies where you vote and so on. [00:08:05] But then there's the the wealth gaps and [00:08:07] the rich gaps and then who has the money [00:08:10] and then the not willing to vote and [00:08:12] then there's the power that changes. [00:08:14] Yes. So partisanship becomes gridlock [00:08:17] becomes irreconcilable just mess and [00:08:20] then that evolves by necessity into [00:08:23] autocracy. [00:08:24] >> Right? When the when I'm no longer [00:08:26] willing to accept that the system the [00:08:29] rule of the system because everybody [00:08:31] thinks it's rigged. Okay. Is this the [00:08:34] Supreme Court is it rigged because that [00:08:36] partisan has more appointees and it [00:08:39] won't be fair. And so the I remember [00:08:42] when the Supreme Court was kind of the [00:08:44] Supreme Court and we lived in a time [00:08:46] where we said the system is fair. The [00:08:48] legal system when you go in and you're [00:08:50] convicted, okay, is the legal system [00:08:52] fair and so on and then you believe in [00:08:55] that system with its imperfections and [00:08:57] so on. When that ceases to be the case, [00:09:00] when the when the causes that people are [00:09:03] behind are more important to them than [00:09:06] the system, the system is in jeopardy, [00:09:09] right? Yes, [00:09:12] of course, by definition. And you know, [00:09:14] all this is relevant to where we are [00:09:15] now. So tribalism, whether it's [00:09:17] political or ethnic, but when people [00:09:19] square off into tribes and they have no [00:09:21] common ground and they have no hope of [00:09:23] reconciling or compromising, then you're [00:09:25] getting a new system. And and and you [00:09:27] see it it it's so interesting. It's like [00:09:29] watching a movie over and over and over [00:09:31] again because then you see how it is [00:09:33] they make stereotypes of the other, [00:09:35] >> right? [00:09:36] >> The stereotype of this that personality, [00:09:38] the stereotype of that type, whether [00:09:41] it's an ethnic or economic or whatever [00:09:44] it is. Oh, they're one of those and I'm [00:09:47] one of these. And now it becomes the [00:09:50] stereotypes that are fighting, right? [00:09:54] which are non-human, right? So, it's [00:09:56] easier to [00:09:58] >> there's there's no empathy. There's of [00:10:00] course there's the it's not a human [00:10:01] being. It's a stereotype. [00:10:03] >> It's the fight, right? [00:10:04] >> And so, then you have to pick a side. I [00:10:06] mean, one of three things. You have to [00:10:08] pick a side and fight for it [00:10:11] >> or you keep your head down and hope you [00:10:13] don't get shot or flee [00:10:16] >> throughout this throughout history. [00:10:19] Yeah. And that's what's be happening. [00:10:22] hate to brag, but we're pretty confident [00:10:23] this show is the most vehemently pro- [00:10:26] dog podcast you're ever going to see. We [00:10:29] can take or leave some people, but dogs [00:10:31] are non-negotiable. They are the best. 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You never have to leave your [00:11:23] house. You don't have to throw the dog [00:11:24] in the truck. No wasted time waiting for [00:11:27] appointments. No wasted money on clinics [00:11:28] or visit fees. Unlimited visits and [00:11:30] follow-ups for no extra cost. Plus, free [00:11:33] shipping on all products for up to five [00:11:35] pets. It sounds amazing like couldn't be [00:11:38] real, but it actually is real. Visit [00:11:40] dutch.com/tucker [00:11:42] to learn more. Use the code Tucker for [00:11:43] 50 bucks off your veterinary care per [00:11:46] year. Your dogs, your cats, and your [00:11:49] wallet will thank you. [00:11:50] >> So, you join effectively the Civil War. [00:11:53] You try and find a safe place [00:11:55] domestically or you just split. [00:11:56] >> Yeah. You, In other words, you're quiet [00:11:58] because you don't want to get into the [00:12:00] fight. You're going to get injured, [00:12:02] right? A lot of people are scared now, [00:12:05] right? People you'd imagine never would [00:12:07] be scared, [00:12:08] >> right? Yes. [00:12:09] >> Right. They they don't want to speak up [00:12:11] or something. So you keep your head [00:12:12] down. You either get in the fight and [00:12:14] fight. Pick a side and fight for it. [00:12:17] Throughout history, this is true. Pick a [00:12:19] side and fight for it. Or keep your head [00:12:22] down or in some cases flee. You know, [00:12:26] people leave. They go from, you know, [00:12:28] immigration. Think about how all the [00:12:30] immigration largely has taken place. [00:12:32] There's some hell taking place in there [00:12:34] and then they move to someplace else [00:12:36] where there's not. Here we are in uh the [00:12:39] UAE. Okay. a lot of people are coming to [00:12:42] the UAE because they're fleeing in a [00:12:45] sense. Um so there's that dynamic and so [00:12:48] you can see many many many symptoms [00:12:53] right there are things um uh you know [00:12:56] when it gets violent and when you get um [00:13:00] killing too many people [00:13:03] then you start to cross the lines you [00:13:05] know like maybe in Iran. Okay. do we [00:13:08] cross the lines and and then where you [00:13:10] you you know there are these symptoms [00:13:12] that and there's financial [00:13:14] >> you know how do you pay [00:13:17] >> um so and I'm rambling [00:13:19] >> but just no you're not rambly I but just [00:13:21] back to the political one last question [00:13:22] is is it ever resolved does the system [00:13:24] ever stay intact when you get to a point [00:13:26] where people just don't want to [00:13:29] compromise at all or even live in the [00:13:31] same place have you seen any example of [00:13:34] where people sort of say wait a second [00:13:37] let's let's enter into power sharing and [00:13:39] pull back before this gets violent or we [00:13:41] get a king. [00:13:43] >> Um [00:13:46] in some [00:13:48] places sometimes in dynasties and so on. [00:13:52] Um they're but they're not often there. [00:13:56] What happens is there's a reversal or a [00:14:00] fixing by somebody who can not um who's [00:14:07] strong enough to deal with the issues. [00:14:10] For example, we have a debt issue. We [00:14:13] have all of these other issues and can [00:14:15] bring people together. Um but there [00:14:18] needs to be almost um Plato would say [00:14:22] the benevolent despot. [00:14:24] >> Yes. they and that's in his cycle. In [00:14:26] other words, there's somebody who can um [00:14:30] stop the fighting and be smart and [00:14:34] impose the disciplines that are [00:14:36] necessary. For example, there's a [00:14:38] financial discipline. Do how do we deal [00:14:41] with um the debt and the um [00:14:47] all the supply demand and and so on? Do [00:14:49] can we raise taxes? Can we u cut [00:14:52] spending? What are we going to do to [00:14:55] bring about a budget balance or not a [00:14:58] budget balance let's say a deficit of 3% [00:15:00] of GDP which would sustain the set of [00:15:04] circumstances what is that financial [00:15:06] discipline what is that way of working [00:15:09] together so we do not do each other harm [00:15:13] because we are at a point let's say as [00:15:15] we come to the next um u midterm [00:15:18] elections you know um and there's a u [00:15:22] significant probability that the um [00:15:25] Republicans would lose the House and um [00:15:28] talk of even could be the Senate. Okay. [00:15:31] Now, when you go after that and you [00:15:34] imagine what the conflict can be like, [00:15:37] how will that conflict work? Will it be [00:15:40] rule of law or will it be a win at all [00:15:43] cost? and as that win at all cost and [00:15:46] what that means um it is there rules is [00:15:50] there playing by the rules you know that [00:15:53] dynamic so this thing is repeated it's [00:15:56] not easy to get to that point because [00:15:59] you have to deal with you know um how do [00:16:01] we stop fighting with each other and how [00:16:03] do we do the right things to get strong [00:16:06] that's and that's a that's a great [00:16:08] challenge in history [00:16:09] >> so where are we now given the five [00:16:12] factors that you outlined where is the [00:16:14] United States or even really the west [00:16:15] will include Europe in this very [00:16:18] familiar cycle of rise and fall. [00:16:20] >> Um [00:16:22] uh in my book I um show 18 measures of [00:16:26] health having to do with education, [00:16:28] military [00:16:29] um um reserve currency, a number of [00:16:33] measures that show strength. Okay, what [00:16:36] is the level of strength? And uh the [00:16:39] United States is the strongest power [00:16:43] which has been in relative decline and [00:16:47] experiencing these conflicts. Um and [00:16:50] that's measured if if you go in the book [00:16:52] uh how uh principles for dealing with [00:16:55] the changing world order you'll see a [00:16:56] number of charts. So I don't want to [00:16:58] just pronounce it that way. I just want [00:17:00] to say that um like if you were to take [00:17:03] education and you take um scores, piece [00:17:07] of scores and so on in statistics you [00:17:09] will see that there is a r there are [00:17:12] rising powers there declining powers [00:17:14] there are large wealth and values uh [00:17:17] differences and we are in what is what I [00:17:20] call stage five which means uh we are [00:17:24] sort of at the brink but not over the [00:17:27] brink in other words we're not um [00:17:30] there's the capacity um to um uh it's [00:17:35] before um a period of great disorder [00:17:39] when there can be a monetary breaking [00:17:41] down uh of the system you know what is [00:17:44] money we should talk at some point what [00:17:46] is money and can I can money be an [00:17:48] effective storehold of wealth and what [00:17:50] happens if it's not and so we are at [00:17:53] what I would call stage five in a six [00:17:56] stage cycle six The sixth stage is when [00:18:00] there's a breaking down of these orders. [00:18:02] We're not there yet, but we are um close [00:18:06] to there and headed in that type of [00:18:08] direction. What does a breakdown look [00:18:11] like? What does stage six look like? [00:18:13] Well um from the monetary point of view [00:18:17] um it is that um there the the demand [00:18:22] for [00:18:24] the reserve currency [00:18:26] um is not sufficient to meet the supply. [00:18:34] So what that means is you uh see a [00:18:39] supply demand problem. Uh you produce a [00:18:42] lot of supply and the demand's [00:18:44] inadequate and all things being equal [00:18:46] there will be a rising long rate while [00:18:50] the central bank is trying to hold that [00:18:53] from down by easing the short rate and [00:18:58] and low shortening the maturity of the [00:19:00] debt that it sells. Okay, that dynamic [00:19:04] and that then the currency [00:19:06] um um the these debts and the currency [00:19:10] falls relative to the non fiat [00:19:13] currencies. In other words, like gold. [00:19:15] In other words, you you you are seeing a [00:19:17] movement by central banks as and [00:19:21] countries to um hold gold [00:19:26] um as an alternative reserve currency [00:19:29] partially because of that supply demand [00:19:31] situation and partially because they u [00:19:35] worry that um there may be a payments [00:19:39] problem and the payments problem like um [00:19:42] it happened in Japan Prior to World War [00:19:45] II, you had an economic problem and the [00:19:47] United States um um sanctioned [00:19:51] essentially um didn't pay the the the [00:19:54] Japanese uh their debt the money in [00:19:58] terms of that like a debtor creditor [00:19:59] problem and they didn't make those [00:20:01] payments much like Russia you know you u [00:20:04] they they basically took control because [00:20:07] they have the ability to take control of [00:20:09] the treasuries and other things and so [00:20:12] there is becomes more of a uh reluctance [00:20:17] to hold that money as that and a [00:20:20] movement more into um the non-fiat [00:20:24] currency which is is gold. That's [00:20:26] >> so in other words other countries [00:20:28] perceive a risk in holding dollars [00:20:32] because well for lots of reasons but one [00:20:34] of them is like if the United States [00:20:36] government at the time doesn't like you [00:20:37] they can grab your dollars. [00:20:39] >> That's right. [00:20:39] >> So it's not worth it. [00:20:41] >> Right. And it it's a it's a risk that [00:20:43] both the debtor and the creditor have to [00:20:45] each other. So think about a China. [00:20:48] >> And if you were thinking China, how do [00:20:50] you feel about holding Treasury bonds? [00:20:53] Okay. So you may not feel secure about [00:20:56] holding Treasury bonds both for for two [00:20:59] reasons. Because you could be sanctioned [00:21:02] or you also because there's a supply [00:21:04] demand problem. So you start to see the [00:21:07] movement in that direction. And then of [00:21:09] course it's also uh also in that [00:21:12] situation governments want to control [00:21:15] their supply demand. So they might [00:21:17] establish foreign exchange controls. [00:21:19] They might do certain things like that. [00:21:21] Uh but they also feel vulnerable. the [00:21:24] United States c can feel vulnerable if [00:21:27] they can't sell enough of those bonds to [00:21:30] others in that if the demand isn't [00:21:33] because then interest rates would have [00:21:35] to rise because the supply demand too [00:21:38] much supply relative to demand [00:21:40] >> to make it more appealing to buyers. [00:21:42] >> Yes. But and also to cut the demand for [00:21:45] credit. In other words, if the price [00:21:47] rise then people will borrow less and so [00:21:50] on. And that then has the effect of [00:21:52] mechanically slowing down the economy [00:21:55] that produces that result which so then [00:21:58] what happens is then the central bank [00:22:00] comes in and it prints money and it buys [00:22:03] the debt which depreciates the currency. [00:22:06] That's the mechanics that's of the debt [00:22:09] part of it that is related to the [00:22:12] political and the geopolitical part of [00:22:14] it that I'm answering. [00:22:16] >> May I ask you something? So, if foreign [00:22:18] countries don't want to buy your debt [00:22:20] and your central bank decides we're [00:22:22] going to print more money and buy our [00:22:24] own debt with it, which is what what [00:22:26] we're doing, wouldn't the people doing [00:22:29] that stop and say, "Wait a second. This [00:22:30] sounds like an electric windmill. Like, [00:22:32] what are we doing here? This sounds [00:22:33] crazy." [00:22:34] >> They're stuck. [00:22:36] They're stuck. They're st they're stuck [00:22:38] because [00:22:40] um they have a deficit [00:22:44] and the deficit will be there unless [00:22:47] they raise taxes and cut spending or [00:22:50] something and that's bad for the economy [00:22:53] and it's politically bad. Yes. [00:22:55] >> Okay. Um or or you print the money and [00:22:59] you make up the difference. And so since [00:23:01] the breakdown of the monetary system in [00:23:04] 1971, that was when there were too many [00:23:07] claims on gold and we had a system [00:23:09] attached to gold. And because they were [00:23:12] in August 15th, 1971, [00:23:14] I remember well I was clerking on the [00:23:16] floor of the New York Stock Exchange [00:23:18] after my after college before I went to [00:23:21] graduate school. Richard Nixon gets on [00:23:24] August 15th, Sunday night. He gets on [00:23:26] the television and he says, um, we're [00:23:29] not going to, uh, allow the conversion [00:23:34] of that paper money into gold and we're [00:23:36] not going to, you won't get your gold. [00:23:39] And I walked on the floor of the stock [00:23:41] exchange the next morning. I thought, [00:23:43] this is a big crisis. And, uh, what they [00:23:46] did is they essentially printed it. And [00:23:48] then we had the stagflation of the 70s. [00:23:51] But I was very surprised. And I found [00:23:53] out um I didn't never threw anything [00:23:57] like that before. I studied history. I [00:23:58] found out they did the exact same thing [00:24:01] in March. Roosevelt did the exact same [00:24:03] thing in March of 1933 [00:24:05] >> right after he got inaugurated. [00:24:07] >> Right. Okay. For the same reasons. Okay. [00:24:11] Because your choice is to have a lot of [00:24:13] defaults and a debt problem or to do [00:24:16] that. All right. That's how it works. [00:24:19] That's how the machine works. So um and [00:24:23] at the end of the day since 1971 when we [00:24:26] went off the uh gold standard and we [00:24:29] went to a fiat monetary system we have [00:24:32] always done that and you know and you [00:24:35] know the Fed put and um you know that's [00:24:38] that that that's the way it is. So, and [00:24:41] it's kind of worked for 55 years, but [00:24:43] it's showing signs of [00:24:45] >> Well, what it does is um it's like [00:24:51] uh using [00:24:52] what uh was the hair of the dog that bit [00:24:56] you. [00:24:56] >> Oh, it's the hangover cure. [00:24:58] >> I'm familiar with that. [00:24:59] >> Okay. Me, too. [00:25:00] >> For sure. Um it it's um what you do is [00:25:04] you give more money in credit and what [00:25:08] happens is to get out of it and because [00:25:11] then you make it easier to pay the debt [00:25:13] you make like in um 2008 or 2020 you [00:25:18] give the money okay and you give the [00:25:21] credit and you and you fund it [00:25:23] >> and you make that but that makes the [00:25:26] debts go up again okay until then you [00:25:29] reach the point where the debt is [00:25:33] squeezing on the expenditures and you [00:25:37] have the supply demand. So that's why [00:25:39] you have these big debt cycles. You [00:25:41] know, when we started this company, we [00:25:43] promised that we would only partner with [00:25:45] other companies that share our values. [00:25:47] We didn't want to advertise products [00:25:49] made by people who hate us or for that [00:25:51] matter you. So with that in mind, it is [00:25:54] a pleasure to announce that we're [00:25:56] working with Charity Mobile. 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Charity Mobile is a pro-life [00:26:40] company serving pro-life customers and [00:26:41] supporting pro-life causes and has done [00:26:43] it for more than 30 years. Visit [00:26:45] charitymobile.com/tucker. [00:26:47] Use promo code Tucker to get a free [00:26:48] phone with free activation, free [00:26:50] shipping, and a free gift with every new [00:26:52] line of service. So I think every even [00:26:55] people who are not really interested in [00:26:56] monetary policy or macroeconomics feel [00:26:59] like there is a point at which this [00:27:01] doesn't work anymore. It just breaks. [00:27:03] >> It is it's happened all in all. [00:27:05] >> So what does that look like specifically [00:27:07] the debt crisis people keep talking [00:27:09] >> well I I um uh because of that my uh [00:27:13] last book my most recent book put out [00:27:15] about a little less than a year ago um [00:27:18] is called how countries go broke. Yes. [00:27:20] The big cycle. And what I wanted to do [00:27:23] and is to just show 35 cases of it. That [00:27:28] is just the mechanics to show how it [00:27:30] works. Okay. But it is that dynamic of [00:27:33] the squeezing on the spending and the [00:27:36] supply demand and then you start to see [00:27:39] it where as I was saying the long rate [00:27:42] um goes up while the short rate comes [00:27:44] down because the central bank's pushing [00:27:46] the short rate down and then they [00:27:48] shorten the maturities of the debt and [00:27:50] then the central bank buys that and then [00:27:53] the central bank now it's owns all these [00:27:56] treasuries and then the central bank [00:27:59] starts losing money cuz they own the [00:28:01] treasury. ries and then they and they're [00:28:03] going up. So they have to produce the [00:28:06] money and credit to to keep that uh rate [00:28:11] down and they lose more and more money [00:28:13] and that dynamic then doesn't stop the [00:28:17] the change in the capital flows. That's [00:28:19] why you and then traditionally in all of [00:28:22] these cases you see a move to the hard [00:28:24] money, the move to gold. Okay, as we're [00:28:27] seeing, you see that dynamic in terms of [00:28:30] that move to gold and um and then it [00:28:33] starts to run its course. So, it's very [00:28:35] much like think about what happened from [00:28:38] 71 through the 70s produces more [00:28:40] stagflation and then at some point the [00:28:43] inflation problem or the devaluation of [00:28:46] money problem becomes such that the [00:28:48] central bank then tightens money and and [00:28:52] so on. And then the vuler years the [00:28:53] vulkar years 1979 80 8182 right um so [00:28:58] the pendulum swings think about it this [00:29:01] way um in order to have a balance a [00:29:03] successful economy uh or successful [00:29:06] capital market since one man's debts or [00:29:09] another man's assets [00:29:11] you have to keep interest rates [00:29:15] um not so high that they crush the [00:29:19] debtor [00:29:21] >> right without having them so low that [00:29:25] they um are bad for the creditor. [00:29:30] >> Right? [00:29:31] >> So you see these cycles when we had uh [00:29:35] zero interest rates and negative real [00:29:37] interest rates. What you saw was massive [00:29:40] creation of credit and and money and [00:29:43] borrowing and so on. And then you had [00:29:45] that that cycle. So uh that's what the [00:29:48] cycle looks like if you have losses and [00:29:50] then you also have under those [00:29:52] circumstances classically [00:29:55] um the uh weakening of the central [00:29:58] bank's control the you or I should say [00:30:01] the strengthening of the central bank [00:30:04] the central government's control over [00:30:06] the central bank in other words when [00:30:08] these things happen then there is um [00:30:12] they can't be at odds okay and so there [00:30:15] is greater under control by the central [00:30:17] government of this and um [00:30:20] >> are you writing the news? [00:30:22] >> No, I've just seen this movie before. [00:30:24] >> It's like this exactly what's happening. [00:30:26] >> I I know but that's what I'm saying [00:30:28] because it must happen in in in in that [00:30:31] in the nature of that dynamic when you [00:30:35] have um imagine the fight between the [00:30:38] central bank and the central government [00:30:40] in the middle of a crisis and so on. So [00:30:43] there there is this control because [00:30:45] there's a monetary thing [00:30:46] >> because there has to be [00:30:48] >> right what happens if if you're the [00:30:50] president of the United States or you [00:30:52] are the leader in that country and you [00:30:55] are in this kind of a monetary crisis [00:30:57] it's like anything uh any fight you [00:31:00] don't want the internal fight you want [00:31:01] to get control and there's a fight for [00:31:03] control so we're living in a world today [00:31:06] in which there are fights for control [00:31:08] right who has the power and the fights [00:31:09] for control [00:31:11] >> so again So at what point do we know the [00:31:14] system is just broken and this this [00:31:18] experiment which began post war 1945 is [00:31:20] like reached its end and we need [00:31:21] something [00:31:22] >> um pretty much almost only in [00:31:25] retrospect. [00:31:27] What what what what happens [00:31:30] if you if if you're really close up and [00:31:33] you've you say when did they know that [00:31:36] there was a breakdown or when did they [00:31:39] know that there was uh let's say the [00:31:42] French Revolution there's a day that [00:31:44] they say [00:31:45] >> storm the best deal [00:31:46] >> uh right and there's that day and they [00:31:48] said it they didn't know that [00:31:50] >> no they didn't just like some prison got [00:31:52] raided or something they didn't Yeah. I [00:31:54] know that's right. [00:31:54] >> Okay. So, when it it's not like they [00:31:58] announce it or it becomes clearcut, [00:32:00] right? [00:32:01] >> You slip into those things. There's [00:32:03] never that clear moment. [00:32:06] >> But what happens next? Like we heard [00:32:08] Chairman Shei 3 days ago say, "Hey, by [00:32:11] the way, China should hold the world's [00:32:12] reserve currency." And that seems very [00:32:14] far away now, I guess. But maybe. [00:32:17] >> Uh, so you're asking me what I think [00:32:19] about China's having. Well, the only [00:32:22] reason I'm putting it I have no idea if [00:32:23] that's possible. [00:32:24] >> I I can respond. Tell me. Okay. I don't [00:32:27] think China is going to have a There are [00:32:29] two purposes of a currency. [00:32:31] >> Yes. [00:32:32] >> Medium of exchange and storehold of [00:32:35] wealth. [00:32:35] >> Right. [00:32:36] >> Okay. Medium of exchange. It's logical [00:32:40] that uh China is going to uh have much [00:32:43] more of a medium of exchange type of [00:32:46] reserve currency because it is right now [00:32:49] the world's largest trading country, [00:32:51] >> right? [00:32:52] >> And so people um um central banks want [00:32:56] to hold some reserves in the things that [00:33:00] they're trading in course and so on. Um [00:33:03] and so they the Chinese have [00:33:05] intentionally um in order to minimize [00:33:08] that conflict have not pushed that thing [00:33:10] and now they're going to operate in in [00:33:14] moving in that way. As far as storehold [00:33:16] of wealth though, who's going to trust [00:33:18] the Chinese uh with your wealth and and [00:33:21] capital controls and so on? I think that [00:33:24] all fiat currencies have a problem. [00:33:27] Okay. So um uh there they they have the [00:33:30] history of of foreign exchange controls. [00:33:33] They have a would you trust it's [00:33:36] anti-wealth protection. You know this is [00:33:39] not um that's not their great track [00:33:42] record of having I'm going to protect [00:33:45] your wealth. You even private property [00:33:47] and how it works in China is a new [00:33:50] concept relatively and it's something [00:33:51] that they're you know wrestling about. [00:33:54] They don't you can't own land you know [00:33:56] you can't own property. So the storehold [00:33:59] of wealth element is going to be very [00:34:02] tough for them to sell. So the world [00:34:04] does not have what you want as a [00:34:07] currency as a reserve currency other [00:34:09] than gold. I mean it's just a default [00:34:12] right because it's a debt and and gold [00:34:14] is the you know what like they say it's [00:34:16] the one asset you can have that's not [00:34:18] somebody else's liability meaning you [00:34:20] have to get money from somebody else to [00:34:22] do [00:34:22] >> so I asked you last year off camera I'll [00:34:24] never forget it. I've always been a gold [00:34:26] buyer, but then I don't know anything. I [00:34:28] just it just instinctively seemed like [00:34:29] it made sense, but I've always been a [00:34:31] little bit embarrassed about it. And so [00:34:32] I asked you, is it crazy to, you know, [00:34:34] take some money and buy some gold? And [00:34:36] you said it's not crazy at all. And I [00:34:39] remember feeling vindicated, but also [00:34:40] wondering like, why don't more people [00:34:42] say that? It almost feels like there was [00:34:43] a conspiracy in the financial press. all [00:34:46] around not only in not only in um [00:34:50] related to gold but all of the things I [00:34:53] I think people get used to [00:34:58] what's credible to them is what they [00:35:00] experience and the norm that they have [00:35:03] at that time [00:35:05] and so much see that's happening you I [00:35:09] hear people say I'm shocked by [00:35:12] >> but the only reason they're shocked is [00:35:14] because they become used to that right? [00:35:16] If you if you were traveling through [00:35:19] time and you went and before 1971 and so [00:35:24] on and you saw history and you saw the [00:35:27] univers universality [00:35:30] of um money and gold and how the whole [00:35:33] system worked repeatedly over time, you [00:35:36] would understand there's that dynamic [00:35:39] that's taking place. But yes, people [00:35:41] think they misunderstand. They think [00:35:44] it's a a metal to speculate on, [00:35:47] >> right? [00:35:47] >> They don't realize [00:35:50] that actually [00:35:52] it's a money. [00:35:54] >> Okay. Central banks second largest [00:35:57] money. [00:35:59] Okay. So when you're it's almost like [00:36:01] when you look at the world through that [00:36:04] money, you can see what things cost [00:36:08] through that lens. Exactly. people are [00:36:10] looking at it instead like through a [00:36:12] dollar lens and they see um gold go up. [00:36:16] Okay. But that's [00:36:18] >> or you could look you could look at the [00:36:20] world through a gold lens and see money [00:36:24] go down. Okay. So all I'm saying is [00:36:28] because of their experience and what it [00:36:30] is, it's implausible. It's like, you [00:36:33] know, the the the tooth fairy or Santa [00:36:36] Claus, you know, you it you you believe [00:36:39] in these things and so on and then you [00:36:41] you realize through the cycle and that's [00:36:43] why surprises take place. That's why it [00:36:46] seems implausible. [00:36:48] Um, but if you read history, it's [00:36:51] almost, [00:36:53] you know, it's it's logical. [00:36:54] >> Most security systems operate like [00:36:56] old-fashioned cable internet. They're [00:36:58] installed in one place. are tied to one [00:37:00] address and if you move or your job [00:37:02] moves, you got to start over. But that's [00:37:04] not how other people do it. 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You got clear footage, night [00:37:50] vision alerts straight to your phone. [00:37:53] Defend never sells any data to anyone. [00:37:55] Not tech companies, not the government, [00:37:57] not China. Plans start at about five [00:38:00] bucks a month. There's no contract. You [00:38:02] can cancel at any time. Visit [00:38:03] defendellcam.com [00:38:06] today. defend cellcam.com. So, um, you [00:38:09] don't seem surprised at all by anything [00:38:11] that's happened or is happening right [00:38:14] now. Um, what are a few other things you [00:38:17] would not be surprised to see in the [00:38:19] near future? For example, let's just [00:38:20] start with gold. What would you not be [00:38:22] surprised to see the spot price of gold [00:38:24] per ounce in like 5 years? [00:38:25] >> Uh um [00:38:28] I don't want to um you know that's one [00:38:31] of those headline presuming I let me say [00:38:34] it this way. [00:38:35] >> Yes. [00:38:37] >> I think people pay too much attention to [00:38:39] the spot price of whe is the spot going [00:38:42] to go up or down or whatever. And what [00:38:44] they don't do is think if I didn't have [00:38:48] any view on gold, what amount should I [00:38:51] have in my portfolio? In other words, if [00:38:54] you did a portfolio construction [00:38:56] exercise, right? [00:38:57] >> And you said, um, what is an effective [00:39:00] diversified portfolio and what assets [00:39:04] should I have and what amounts in that? [00:39:07] Because gold is a a very effective [00:39:10] diversifier and also a protector of [00:39:13] this. During very bad times, gold does [00:39:16] very well. When the rest of your [00:39:17] portfolio does poorly because let's say [00:39:22] the 70s being a good example or the 30s [00:39:24] being a good example, during those times [00:39:27] it's a diversifier. [00:39:29] Okay? So the optimal amount to have for [00:39:33] um an individual or a central bank might [00:39:35] be different but a but an individual [00:39:38] would be depending on what's in their [00:39:40] portfolio between five and 15% of a [00:39:43] portfolio. And so what I would say is if [00:39:47] you approach that question that way and [00:39:49] you think what should I have you should [00:39:51] have what I what we talked about before [00:39:54] when my a year ago I guess and so on you [00:39:57] should have that particular amount [00:40:00] somewhere in that neighborhood depending [00:40:01] on what your portfolio is like and uh [00:40:05] because it's an effect of diversifier [00:40:07] and it is a money okay when the [00:40:09] traditional money does badly this money [00:40:12] does well when the traditional money [00:40:14] which gives you an interest rate [00:40:18] then it's the reverse so you so that's [00:40:21] the thing that I would try to convey to [00:40:23] people you know okay do you have some of [00:40:26] that what's the amount that's your [00:40:28] comfort level you know but have some so [00:40:32] um what if you were running the United [00:40:36] States or a country like the United [00:40:38] States in its current position what [00:40:41] would you need to do to protect your [00:40:44] country in the midst of these changes, [00:40:46] some of which are inevitable, some of [00:40:47] which maybe aren't. Like what are the [00:40:48] steps specifically that you would take [00:40:51] to help your country? [00:40:52] >> Um, [00:40:54] I would [00:40:56] be dealing with achieve [00:41:00] uh something like a 3% [00:41:03] budget deficit, not more than a 3% [00:41:06] budget deficit. [00:41:08] Um, I would try to get financial [00:41:13] I I try to minimize or eliminate but [00:41:18] minimize the risks of that dynamic I was [00:41:20] talking about. [00:41:21] >> So you would get the budget deficit to [00:41:22] 3%. [00:41:23] >> Yes. Um, and I I I would say um to every [00:41:28] I've said to legislators, I go down to [00:41:31] Washington and you know, leaders of both [00:41:34] parties um and I said um um it's like um [00:41:41] being on a ship and um everybody on the [00:41:45] ship is headed to a rock and that and [00:41:49] everybody knows that if you have a [00:41:52] deficit of six or 7% of GDP, you're [00:41:56] going to have a supply demand problem. I [00:41:59] and I have the conversations and by and [00:42:01] large this is the agreement. And I don't [00:42:04] care whether you turn left or you turn [00:42:06] right in terms of that, but do not hit [00:42:09] the rock. And what if I would do is I [00:42:11] would take a 3% pledge. In other words, [00:42:14] say I will get it down there. And if I [00:42:15] can't agree on how, I would do it [00:42:18] proportionately with three things. I [00:42:20] would u proportionately with taxes [00:42:23] spending in other words um um if you [00:42:26] raised taxes by 4% if you cut spending [00:42:30] by 4% and you lowered and which would [00:42:34] lower interest rates because it would [00:42:36] improve the supply demand and it would [00:42:38] also convey the message that it's being [00:42:40] dealt with. you would also lower the [00:42:42] interest rate on the debt and those two [00:42:46] things would begin to get it to approach [00:42:48] about a 3% budget deficit and so on. Um [00:42:52] um but doing that uh would require uh [00:42:57] would be politically impossible. So I I [00:43:00] have these conversations and the answer [00:43:02] is um you know like Rey, you don't [00:43:04] understand the world of politics. If I'm [00:43:07] um uh uh there I have to give at least [00:43:12] one of two pledges. [00:43:14] Um the pledge is and probably both. Um [00:43:18] the pledges is I won't raise your taxes [00:43:21] and I won't cut your benefits. [00:43:25] Okay? You don't raise the taxes, you [00:43:27] know. So the there's a big move here [00:43:30] primarily to uh try to grow your way out [00:43:34] of it. In other words, again, you know, [00:43:37] stimulate fiscal and monetary [00:43:39] stimulation and hope that that produces [00:43:43] perhaps with the new technologies and so [00:43:45] on. That's the idea. Enough income [00:43:48] growth and so on so that uh this moves [00:43:52] toward that 3%. Um which is uh in my [00:43:56] opinion a um not likely occurrence. Why [00:43:59] is it not it's not likely that [00:44:01] technology will turn out to be so [00:44:04] uh beneficial and lucrative that it [00:44:07] >> I think that the techn that the [00:44:10] artificial and technology miracle is a [00:44:12] is a is a great miracle. Okay. I mean [00:44:16] very uh very beneficial. Um and I've [00:44:21] gone through studied great miracles. the [00:44:24] invention of electricity. I mean, wow. [00:44:28] Well, imagine where we'd be without [00:44:30] that. But if you anyway, you I could [00:44:32] describe what the 20s would like and [00:44:35] 2000s and like and so on. Um the ability [00:44:39] to convert that to enough of a [00:44:41] productivity miracle [00:44:44] um is is not I think probable in the [00:44:49] also the time frame that we're dealing [00:44:52] with. So this is an issue. The debt is [00:44:54] and that dynamic uh remains an issue. [00:44:57] And then of course what there is is the [00:45:00] dynamic of of how that prosperity and [00:45:02] productivity is shared. In other words, [00:45:05] there's the um it's it creates a uh [00:45:08] great wealth gap. [00:45:10] >> You know, you're seeing um this we'll [00:45:12] talk about wealth. Um I'm going to come [00:45:14] back and talk about wealth, but um [00:45:17] you're seeing great um increases in [00:45:20] wealth on some populations on you know [00:45:22] wow trillionaire okay and that kind of [00:45:26] thing and then there's 60% of Americans [00:45:29] have below a sixth grade reading level [00:45:32] >> so that you take that sixth grade and [00:45:34] okay now how are you going you still [00:45:36] have to deal with the nature of that [00:45:38] dynamic of how it comes so the question [00:45:41] is what is the amount of productivity [00:45:43] converted into income. How does the [00:45:46] government get that income to deal with [00:45:48] its debt so the holders of the debt get [00:45:51] a effective real return and don't have [00:45:53] the problems? How does that happen you [00:45:55] know in a politically acceptable way? [00:45:57] There are lots of things that make that [00:46:00] um you know uh very very difficult. I [00:46:02] want to say something about wealth and [00:46:04] wealth taxes which is I think um worth [00:46:07] understanding. [00:46:09] Um there's a big difference between [00:46:11] wealth and money and I want to just [00:46:14] highlight it. Okay. Um [00:46:17] uh [00:46:18] wealth is it it is is very easy to [00:46:23] create [00:46:25] because it's almost [00:46:28] um accounting. Let me what I mean by [00:46:30] that is um I could uh put out a um raise [00:46:35] $50 million or individuals can raise $50 [00:46:38] million at a billion dollar valuation [00:46:42] and they will call that that that's that [00:46:45] person's a billionaire and that there's [00:46:47] a billion dollars more wealth. [00:46:50] Okay. It's not literally that you have [00:46:53] to have those transactions. And wealth [00:46:56] is not worth very much unless you [00:46:59] convert it to money. In other words, you [00:47:03] have all of that wealth, but you can't [00:47:05] spend wealth. [00:47:05] >> You can't pay for dinner with it. [00:47:07] >> Right. [00:47:07] >> Right. [00:47:08] >> You have to sell it, sell some of it in [00:47:11] order to get money, in order to pay it. [00:47:13] And so when wealth rises a lot relative [00:47:17] to money, you have a risky situation. [00:47:21] Okay? Now the other thing about [00:47:24] >> why is that a risky situation? [00:47:25] >> Because when there's a movement, the the [00:47:29] bubbles pop, [00:47:31] >> right? [00:47:31] >> When there's a movement that I need to [00:47:34] get money. Now that quite often is I [00:47:37] need to get money because it's a debt [00:47:39] service payment. you know in other words [00:47:40] let's say what quite often people borrow [00:47:43] to buy wealth [00:47:45] >> okay so there's a lot of borrowing now [00:47:49] um not only in in buying stock but [00:47:52] companies themselves buying to create [00:47:55] wealth and when you need to get the [00:47:58] money like in the in all the stock [00:48:00] market bubbles there was a lot of [00:48:02] borrowing to buy the wealth when the the [00:48:05] need for money came along they had to [00:48:08] sell some of that wealth [00:48:10] to get the money and then that produces [00:48:12] a dynamic. Well, you don't tax wealth. [00:48:16] Okay. So, because you don't tax wealth [00:48:19] and then there is this political issue [00:48:22] of of of wealth. Are you going to tax [00:48:25] wealth? What is going to happen in [00:48:26] California? What is going to happen in [00:48:28] elsewhere in terms of taxing wealth? If [00:48:30] you tax wealth, then imagine what [00:48:33] happens. [00:48:35] You have to sell wealth to pay taxes. [00:48:38] Okay. So there's a dynamic understanding [00:48:41] >> and that lowers the value of it, right? [00:48:43] >> And that's what pops bubbles, [00:48:45] >> right? [00:48:47] >> So this the wealth issue [00:48:52] is um is a political issue. The wealth [00:48:55] gap issue is a political issue and it's [00:48:59] a market issue. Um and it's important [00:49:02] issue to understand. Is it inevitable [00:49:05] that you would see given the way our [00:49:08] wealth is allocated across 350 million [00:49:11] people that that you would get the rise [00:49:14] of wealth taxes? Isn't could this have [00:49:16] been predicted? [00:49:17] >> It it it seems like [00:49:21] it it's such an obvious headline [00:49:25] um seemingly [00:49:28] um logical thing to do, right? In other [00:49:33] words, everybody would say, "Wait a [00:49:34] second. All these people are having all [00:49:36] the wealth and they're not paying any [00:49:38] taxes on their wealth while this is [00:49:40] going on. Okay, we need to go where the [00:49:43] money is." Right. [00:49:44] >> Right. [00:49:45] >> So we so it seems like that without then [00:49:49] you know the full understanding of of [00:49:51] those things and how to do it in a you [00:49:54] know managed way. But so it's anyway [00:49:56] it's upon us certainly [00:49:58] >> and what will happen I mean that's I [00:50:00] think a referendum in California. [00:50:02] So [00:50:03] >> well I think what's what's happening is [00:50:07] and we're seeing it around the world um [00:50:10] in many different ways people are [00:50:15] um people in California moving and and [00:50:19] it's not the it happening it's the fear [00:50:23] of it happening. [00:50:24] >> Right. Right. [00:50:25] >> So you're you know you're seeing that [00:50:28] dynamic. I'm just a you know like I'm a [00:50:31] mechanic [00:50:31] >> of I get it. You're not judging other [00:50:33] way. You're just describing what's [00:50:34] happening but because that is happening [00:50:36] and people are moving and not just [00:50:39] within the country but outside the [00:50:40] country. Do you have any guesses as to [00:50:42] or observations about where people are [00:50:44] moving? So clearly in the country it's [00:50:46] Texas, Florida but Wyoming but in the [00:50:48] world where are people moving? um there [00:50:51] generally speaking they're moving to [00:50:53] where there's um civility and [00:50:56] opportunity and there's not much [00:50:58] fighting there, you know, they want to [00:51:00] be in places that um have a um [00:51:05] uh they go to places that have lower [00:51:08] taxation but also vibrancy. you know, [00:51:11] they go Texas and Florida as you say and [00:51:16] um here in the Middle East or in um you [00:51:19] know, places that um are also vibrant [00:51:23] and things are happening. And so you [00:51:25] could see the patterns of those kinds of [00:51:27] movements. And then the the problems [00:51:29] that that creates is a hollowing out in [00:51:31] those places, the other places [00:51:33] >> because when they leave the tax base um [00:51:36] is um you know um roughly speaking, you [00:51:41] know, the top 10% [00:51:43] um pays about 80% of 76% or something of [00:51:48] the taxes. And so when you lose let's [00:51:50] say half of them you lose a big amount [00:51:53] of tax revenue and um then that becomes [00:51:58] a you know a dynamic. So [00:52:00] >> could you see given all the factors [00:52:01] you've described um like democracy [00:52:05] representative democracy continuing in a [00:52:07] in a country like ours? [00:52:10] I um [00:52:16] I you know I just I hope so. [00:52:20] >> Oh, me too. I'm not just and um and I [00:52:24] just don't know. I think [00:52:27] >> um I I think we I I think deep in us we [00:52:32] want most Americans really really want [00:52:34] that and so on. Um and then at the same [00:52:38] time there are unreconc irreconcilable [00:52:42] differences and um I think it was um a [00:52:46] recent poll something like 25% of the um [00:52:51] population said that they would fight [00:52:52] violently for their side. I mean some [00:52:55] significant percentage. Yes. And um so [00:52:59] and it only takes a relatively small [00:53:02] amount. So I I don't think we can take [00:53:04] it for granted. In other words, there's [00:53:07] a lot we can't take for granted. And I [00:53:09] think we want to cherish those things. [00:53:11] We want to put those things above [00:53:13] everything else, but you can't take it [00:53:15] for granted. [00:53:17] >> When you hear people speaking lightly of [00:53:19] civil war, what's your which they are, [00:53:21] >> what's your reaction? [00:53:24] >> Um I I have a principle. If if you [00:53:27] worry, you don't have to worry. And if [00:53:29] you don't worry, you need to worry [00:53:31] because if you worry, [00:53:33] >> pro worry. [00:53:33] >> If you worry, [00:53:35] then you're more inclined to prevent the [00:53:38] thing that you're worried about. [00:53:41] So I think that the greater worry about [00:53:45] some of these things is a good thing. [00:53:48] You know, [00:53:49] >> in other words, okay, now we we won't [00:53:51] take it for granted. We worry about [00:53:53] these things. So what are we going to do [00:53:54] about it? I see people not worrying and [00:53:57] sort of blindly blindly throwing it out [00:53:59] like almost like the way they talk about [00:54:00] some foreign policy operations was go in [00:54:02] and you know kill these guys put these [00:54:04] guys in it'll be fine. That same [00:54:06] attitude I hear a lot about the United [00:54:09] States like well we're going to have to [00:54:11] fight it out at some point. You've taken [00:54:13] a close look at civil wars throughout [00:54:15] history. What are they like? [00:54:18] Well, civil wars and um and um [00:54:22] international wars [00:54:24] are so horrendous that every the the [00:54:28] most bold people who were, you know, the [00:54:32] trumpets blaring and and going into that [00:54:36] um and so on, everyone came out of it [00:54:38] with deep regret. I mean, we can see [00:54:42] while we see it on the um news and you [00:54:45] can see that, but just imagine uh what [00:54:48] how how horrendous [00:54:50] um the wars are. Um so um I I think it's [00:54:56] a cycle, you know. Um your confidence [00:55:00] and your boldness [00:55:02] um is increased by the distance that you [00:55:04] have to your last wars, you know, [00:55:06] >> right? [00:55:08] Um what is the difference? You you were [00:55:11] saying earlier there's a difference [00:55:14] between uh [00:55:17] money and wealth and wealth you said is [00:55:22] um not necessarily easily convertible to [00:55:24] money. [00:55:26] In a society like ours, where is the [00:55:28] money? Who has the money? Is it the same [00:55:29] people who have the wealth? [00:55:31] >> Um no, no, no, no, no. Many people have [00:55:35] a lot of wealth and don't have much [00:55:37] money. They have illlquid assets. Yes. [00:55:40] Okay. Uh me money is the is that what [00:55:44] you can transact currency short-term [00:55:48] deposits that you can assuredly and [00:55:51] quickly turn into money. You know, [00:55:53] that's what uh money is. [00:55:55] >> Yes. [00:55:55] >> And um um and the central bank really [00:55:59] controls the money. Um and then you [00:56:03] could look at who has that increasingly [00:56:06] like you could look at um M0M1 and you [00:56:09] could see money market accounts and you [00:56:11] could see um those very liquid you know [00:56:15] money safe money treasury bills those [00:56:18] kinds of things and um so that um you [00:56:21] know it's but ultimately it's the [00:56:24] central bank because they control the [00:56:26] supply demand. So I mean if in a period [00:56:29] of volatility it would seem like the [00:56:30] central bank would clamp down on the [00:56:32] money supply circulating among people. [00:56:35] >> Well, it faces the tradeoff, right? The [00:56:38] tradeoff is [00:56:41] like in um let's say co [00:56:44] >> right [00:56:46] >> uh [00:56:49] or in 1971 when there's too many claims [00:56:52] and so on. Um [00:56:56] there the trade-off is that um people [00:56:59] need money and they may need money to [00:57:03] pay debt and they may need money for [00:57:06] whatever reasons and so they are tempted [00:57:10] therefore to create money and so you see [00:57:12] the coordination between fiscal policy [00:57:15] and monetary policy. So you saw two big [00:57:18] waves of large budget deficits and large [00:57:22] supports of central banks um uh uh first [00:57:27] um under Trump when the uh co began and [00:57:30] then under Biden when they got in and [00:57:33] because he also wanted more universal [00:57:35] basic income and both of those cases the [00:57:39] government sent out lots of checks and [00:57:42] that's also a popular thing to do. [00:57:44] discipline, financial discipline is not [00:57:47] what the population typically likes. [00:57:49] Send out those checks, but where does [00:57:51] the money come from and then the central [00:57:54] bank cooperates by buying the government [00:57:58] bonds and um produce, you know, print [00:58:01] money and then buying those bonds. So, [00:58:03] it's um when they're in the middle, you [00:58:05] know, austerity is not an easy thing to [00:58:09] have, right? [00:58:11] What happens if the government is [00:58:13] digital currency? Like what does that [00:58:15] mean? [00:58:16] >> Well, digital currency is right. You're [00:58:18] talking about um central bank digital [00:58:22] currencies. Yeah. Okay. And that um um [00:58:26] there's a great deal of appeal because [00:58:29] of uh the fact that it's easy and so on, [00:58:32] but it's um and I think uh it'll it'll [00:58:35] be um it'll be done. A lot happens. [00:58:38] >> You think it will be done? Um yeah I [00:58:41] think it's and but what happens in the [00:58:44] digital currency [00:58:46] um of course it's easy to transact and [00:58:49] so on um almost the and it'll be like [00:58:52] money market funds I think um the [00:58:55] question will be first [00:58:57] uh will they be able to offer interest [00:59:00] so there's a debate now as to whether [00:59:02] they will be interest if they're not [00:59:04] able to offer interest and they there [00:59:07] will be a debate probably they won't be, [00:59:10] but then they're not an effective [00:59:12] vehicle to hold it in because you'll [00:59:14] have the depreciation. You'd rather hold [00:59:17] it in a money market fund or a bond. But [00:59:19] that's debate. There will be no privacy [00:59:22] and it's a very effective controlling [00:59:25] mechanism by the government. What I mean [00:59:27] is all the transactions will be known. [00:59:30] All transactions done with digital [00:59:31] currencies will be known. um which is [00:59:35] good for illegal activities, getting [00:59:37] control of legal activities, but it also [00:59:39] means that the government has a great [00:59:41] deal of control. For example, they can [00:59:43] they can tax that way. They can take [00:59:45] your money. they can establish foreign [00:59:47] exchange controls and the like and [00:59:49] that'll um so that's something that uh [00:59:53] will be an increasing issue particularly [00:59:55] for international holders of that [00:59:58] currency because they might feel let's [01:00:01] say if you're a Frenchman and they [01:00:04] wanted to have sanctions they could take [01:00:06] your money course you know and and so on [01:00:08] so there's the privacy issue uh of that [01:00:11] um so uh [01:00:13] >> and if you're politically disfavored you [01:00:14] could be shut politically dislavered, [01:00:17] you could be shut off. Yes. Um so those [01:00:19] kinds of issues enter into it. For those [01:00:23] reasons, I don't and and they're very [01:00:25] tiny. Um I don't think that you're going [01:00:28] to see the development of central bank [01:00:31] digital currencies to be of a magnitude [01:00:34] that it's going to be um um you know [01:00:38] that that big of a deal. Um I I I think [01:00:42] that doesn't mean it won't grow, but I [01:00:44] don't think it's going to be um a big [01:00:47] deal. Um so [01:00:49] >> so my last question is given um your [01:00:52] description of the United States as in [01:00:54] stage five in a process that only [01:00:56] >> doesn't mean it's inevitable. [01:00:58] >> Of course, but it there only six stages [01:01:00] in the process you describe. So it's [01:01:03] toward the terminus. [01:01:04] >> It's it's the time that it's time to [01:01:06] worry. So you go to Washington, you try [01:01:08] to convince policy makers, members of [01:01:10] Congress, people, administration, here's [01:01:12] what you need to do. You've described [01:01:14] the reception you get as like, hey, you [01:01:16] don't understand politics. We can't do [01:01:17] that. So that's, you know, not a lot of [01:01:19] headway made obviously for obvious [01:01:21] reasons. [01:01:22] Do you have advice for people watching [01:01:25] who are not policy makers, who are just [01:01:27] Americans as to what they can do to [01:01:29] prepare for whatever comes next? [01:01:32] Uh well, you know, there's the there's [01:01:34] the basics, you know, uh [01:01:39] well, [01:01:40] earn more than you spend, [01:01:43] try to save, [01:01:46] diversify your portfolio, h including [01:01:50] about money [01:01:53] and those um that's those things are of [01:01:56] paramount importance. Um, [01:02:00] think about the country, the [01:02:02] opportunities. Where are the [01:02:04] opportunities? [01:02:05] People have migrated from one place to [01:02:07] another. Follow the opportunities. And [01:02:10] most importantly [01:02:12] is raise your children well. [01:02:15] um you know so that they're well [01:02:18] educated and able to be productive and [01:02:22] also civil so that they can be um uh be [01:02:27] effective and as I say there are only [01:02:29] three things a country needs to do and [01:02:30] that's the same for the individuals you [01:02:32] know raise your kids well uh so that [01:02:35] they're well educated and can earn um an [01:02:38] income um and operate go to places that [01:02:42] work well so that they there's civility [01:02:46] and productivity and there's opportunity [01:02:48] and stay out of uh civil wars and [01:02:51] international wars. [01:02:54] Those seem pretty obvious [01:02:56] >> that I you do those things well. I mean [01:03:00] really almost everything else takes care [01:03:02] of itself. Really? [01:03:03] >> Yeah. [01:03:05] >> Ray Dalio, thank you very much for that. [01:03:06] >> It's always a pleasure. [01:03:07] >> Thank you.