Transcription
What the hell is going to happen next? We're in for serious trouble. The question is, are you prepared for it? And a better question is, how do you prepare for it? And how do we get through what's about to happen? Cuz it's one thing to crash, but can you survive it? And I think we're at the end of the line.
Now I want you to know, 25 years ago what Richard was saying was blasphemous. You know, it's treasonous. How dare he talk about that? And the problem is, it's true today. His books were prophetic, you know, I mean, they were calling what's coming right now.
So the problem with most people is they're stuck in microeconomy. You know, they don't see the big picture. And I would estimate 90% of Americans just believe, you know, "don't worry, America will bounce back. Happy days are here again." And as a US Marine, you know, we call the people who are stuck in the micro-economy, they've got their heads up their asses. They can't even see what's happening in the real world.
So I talked to many real estate agents here in Arizona and said, "Oh, don't worry. You know, interest rates are going up and all this stuff, but don't worry, Arizona is hot." That's true because people are migrating out of California, Chicago, New York, now Florida; they're moving here, you know. So Arizona is good. So on the micro scale, these real estate agents are accurate. They're going, "Yeah, I don't have to worry, man, I live in Arizona." So that's having your head up your ass, as far as I'm concerned, because you can't see the macro. And when you look at the macro, the whole world is collapsing around him. And it's going to be good for Arizona maybe because people will move here and all this stuff. Let's say that China whacks Taiwan. Well, that's good for me in Hawaii because all those Taiwanese will move to either California, Arizona, or Hawaii. So that's micro and macro.
So let me give a definition of micro: you got your head up your ass; you better stand around and take a look at what's going on. Richard has been to our events and he's taught, and people always get blown away because they find out how micro they are.
So my friend, you've been calling this for a long time. The dollar is in crisis, isn't it? Well, so our economic system is in crisis, and I'm really worried now that we're on the verge of a serious economic crisis that could see the destruction of trillions of dollars of additional wealth before this thing is over. Give me a break. Are we corrupt or what? Has it been corrupted? Capitalism, in my view, became corrupted at the fundamental level when we stopped backing dollars with gold. Yes. And to make a long story short, this unleashed an explosion of credit. Credit absolutely exploded. Total credit or total debt in the United States grew from $1 trillion when I was 3 years old in 1964 to $91 trillion now; from $1 to $91 trillion in my lifetime. And during that process, that created a great deal of wealth, a great deal of economic growth in the United States and all around the world. But our economy became addicted to credit growth. Our economy must have credit growth to stay out of crisis. And now credit is contracting when you adjust it for inflation. So this is a very serious problem for our economic system, which I call "creditism" rather than capitalism, since it's driven by credit growth.
I want you to pull your head out of your butt and take a look at the world, cuz Richard sits in Thailand. He's an American. He sits out there and he can see the world, but Americans can't see past their house. You know, micro is this: You're pumping gas into your lease SUV and you're going, "Why is the price of oil going up?" That's micro. I mean, they can't see it. But inflation, I'm afraid, is systemic now. And a lot of it because what Richard is talking about is creditism. They just print so much money. Instead of solving the problems, they print money. And now it's going to backfire on everybody. Nordstream 2, they torpedoed the pipeline. You have the war in the Ukraine. The English pound crashed. Japan's yen is in serious trouble. You know, I guess North Korea fired some rocket at the Japanese. You have inflation being systemic, and you have the BRICS, you know, B-R-I-C-S: Brazil, Russia, India, China, South Africa. You want to take anyone on?
First of all, what happened to the English pound? Cuz that's the, to me, you know, with the gilt and all the other stuff. Gilts is a government bond or something like that from England, right? What happened there was the new English prime minister and her finance minister announced very large tax cuts, very, very large tax cuts, with a lot of this going to the wealthy people, the wealthiest parts of society. And that meant that the UK government was going to have to borrow a great deal of additional money, just at the time when the Bank of England, which had been buying government bonds through its quantitative easing program, it was planning to start selling government bonds. So suddenly England looked like a third-world country. Its interest rates on its government bonds doubled in about a two-week period. They went from 2% on a 10-year government bond yield to 4%. Normally that would make the currency appreciate, but the English pound started dropping like a rock. This huge swing in the currency and, more importantly, in the interest rates on the government bonds was so violent and so unprecedented that the UK pension funds thought that they had cleverly hedged their positions with these derivatives contracts known as liability-driven investments. But the moves were so large that the people they had these derivative hedging positions with started calling in their margins, and they couldn't put up their margins. So they got sold out of these hedging positions, and it looked like the entire UK pension system, the various pension funds, were on the brink of going bankrupt. And so the Bank of England had to jump in, and they intended to start reversing quantitative easing. They were going to do quantitative tightening, but by the end of the week they reversed course, announced they were going to do even more quantitative easing. They said they'd buy 65 billion pounds of additional government bonds over the next month or so. And that has restored calm temporarily. And in fact, it's injected a bit of euphoria in all the markets because investors hope that since the Bank of England reversed course and started loosening monetary policy, they hope the Fed is going to do the same thing.
The point here is this: What does it mean to the English people? Cuz their pensions were about to collapse. And the Bank of England is the Fed, the same as our Fed. When they start printing more money, what does that mean? Inflation, or they're trying to avoid a depression? What were they doing? Well, the first move is to try to avoid a depression. That was what they had to do first. They had to act as a lender of last resort. No one else would provide money to support the financial system in England. The Bank of England said, "We'll do it. We'll create a bunch of money and we'll restore order." And they did. That's been the problem since about 1998 when Long-Term Capital Management crashed and the Fed had to bail out a hedge fund, and Jim Rogers's question was back then, who bails out the Fed? And I think we're kind of there now. Who's going to bail out the Bank of England, and who's going to bail out the Fed and all the other, the Bank of Japan and all these central banks?
Well, the central banks have had it very easy for the last three and a half decades because globalization was extremely deflationary. It was pushing down prices, and the inflation rate was very low. So interest rates were very low. So they could get away with printing a whole lot of money without causing high rates of inflation. And by printing a lot of money, they would buy government bonds, and that would finance government spending and let the government spend a lot of money and stimulate the economy that way. So this was Goldilocks for three and a half decades. But suddenly now globalization is going, at least partially, into reverse. First, we had COVID and supply chain bottlenecks all around the world. Next thing you know, Russia's invaded Ukraine, pushing up energy prices, oil prices, gas prices, wheat prices, corn prices, another big round of inflation. And suddenly the central banks are in shock because, for the first time in 35 years, they have to deal with inflation. Inflation in the UK is at 10%. It's 10% in Germany. It's practically 10% in the United States. And so now if they try to support the economy by printing more money, that's going to just fan the inflationary flames. But if they don't print more money, then credit's going to contract, and the economy is going to spiral into crisis, cuz the English people still have no idea. Most of them, most Americans have no idea what happened. And they actually believe the Fed can save them. But as my friend Jim Rogers says, who's going to bail out the Fed? Who's going to bail out the Bank of England? The central bank system is under crisis also right now. And that's what Richard was alluding to 20-something years ago.
And so the question is next, what's happening in China? I mean, they have the biggest bubble in real estate ever. Right. Absolutely. And well beyond real estate, they have excess capacity of everything on a mammoth scale. I once was told by a Chinese professor that in his town the city government had built two beautiful big new bridges. The only thing is, they hadn't built the river yet.
What's going to happen with the Japanese yen, and why is North Korea firing rockets at them? The Bank of Japan, the Japanese central bank, is determined to keep their interest rates at a very low level, even though interest rates in the United States and everywhere else, most other countries, are going up very rapidly. Japanese interest rates are only one-quarter of 1%, and the Bank of Japan plans to keep them there, and they can do that. But that means no one's going to want to hold yen because you can't earn any money if the interest rates are 25 basis points. They want to sell their yen and buy dollars because the dollar, you can get 3.5% interest. That means the Japanese yen is falling. It's at a 20-year low. And unless the Bank of Japan changes its policy, it looks like it's going to keep falling. I'm fourth-generation Japanese-American, and I always laugh about it because the Japanese per capita have the highest savings rate, demographically the highest savings rate of any population, and that's why the Japanese aren't the smartest, you know, I mean, why would you save money when the governments are printing it? So that's why in Rich Dad Poor Dad, savers are losers, and now American savers are getting their butts handed to them because they're going to print even more. America today is the biggest debtor nation in history, and the only way we can save the economy is by printing more money. They just keep pumping more money into the thing. And I think we're at the end of the line, you know, we're pretty close to it, I think. And so that's why I own gold mines, silver mines. I own tons of gold, but they're still in the ground. And I own a lot of Bitcoin, but I came on to Bitcoin a little bit late cuz I had to test it. So I picked it up at 6,000. But anyway, it's because our money is fake. I mean, this here is fake. And every day people get up and go to work for this crap, and then they save it, and then they say, "Live debt-free," when this is debt. If you put this in your pocket, you put debt in your pocket. You put a US bill or Treasury note in your pocket. I mean, that's how people have no idea what's going on.
So the other thing, too, then is what do you think about the BRICS? See, Americans can't see the BRICS. It's out of their picture: Brazil, Russia, India, China, and South Africa, and the Belam Road project or the Silk Road project. What do you think those guys are up to against the dollar? They used to all be very strong and moving together, so they could be grouped together under this heading of the BRICS, but now they're all moving in different directions for different reasons. Russia's economy is in serious trouble because of its ill-advised invasion of Ukraine, and it's not doing very well. They've got lots of sanctions imposed on them. They can't import any high-tech semiconductors, for instance. So they're going to run out of weapons. So their economy is in crisis. And of course, as you know, I believe that 20 years from now, oil's not going to have any value whatsoever. And their economy is entirely fueled by their earnings from oil and gas. So they're looking at a very dire future, in my opinion. Uh, China, they have the biggest bubble in history. Since they have a totalitarian government, then make the banks continue lending and continuing to invest. Their bubble will probably not collapse into any kind of great depression, but it's not at all inconceivable that they'll just stop growing the way Japan stopped growing 20 years ago. And that'll be a huge change for the world because China's growth has driven the global economy since 2008 when the US stopped playing that role. So no growth in China is a very big deal. India has better prospects because it's a little more friendly with the United States, and a lot of companies now realize that they probably better move their factories out of China, which the United States is becoming increasingly hostile toward, and move it somewhere safer with a lot of low-cost labor like India. Prospects are the best among the BRICS, in my opinion.
And let me give one more point out there. They um, for all you guys who are working from home right now, your uh, job replacement lives in India today because if you can, you can come in via the computer and you don't need to go to the office, cuz you don't want to go to the office, like many workers don't, then guys like me are going to say, well, why don't I just hire somebody in India? Because that's what technology is doing.
The problem with most people, and I see it every day, micro means that you got your head up your butt and you can't see anything outside of your neighborhood or your gas pump. What's going on throughout the world? People cannot see it cuz it's out of sight. If you're prepared for what's about to happen or what is happening today, it's good news. But if you're not prepared, you're going to get your butt handed to you.
The reason this is important because we're crashing, like it or not. You know, I'm a Marine pilot. I went down three times. And the question is not if you're going to crash. The question is, will you survive the crash? And that's why I love about the Marine Corps. We practice crashing every single day. And so when the three times it happened in Vietnam, we survived. So today, you know, I'm making more money hand over fist, but unfortunately, the rest of the world's going broke. You know, like I went to school, my background is oil. I drive oil tankers for Standard Oil. And so today I own oil wells. I don't own oil stocks. And when Biden cut off the Keystone XL pipeline, the first act he did was an act of sabotage. What Biden did, in my opinion, I was selling oil at $30 a barrel. Immediately when he cut that off, it went to $130 a barrel. Meanwhile, the middle class and poor got poor, and guys like me got richer. And that's what I mean about Rich Dad's prophecy. If you prepare, you'll come out okay. But you got your micro-watch and you got your head up your butt thinking, "Oh, the Fed's going to save me. America's the greatest. I don't have to worry. I got a pension. I got a 401k. I'll take laps around the rosary beans tonight."
The Nordstream 2, the pipeline running out of Russia, was torpedoed, was bombed, and was in 200 ft of water. I mean, the charge to blow that thing up, I mean, go God, you know, I'm a Marine, I fought and all this stuff, but I wouldn't know how to blow up a pipeline, you know, I mean, that is really, really big. But the question is, what does it mean? What's the significance, like Biden cutting off the Keystone XL pipeline in America, which is an act of treason in my opinion, and then the Nordstream 2 pipeline gets demolished intentionally, and it's Russia's major source of income is exporting power or energy. There's no hard evidence about who did it. So this is purely speculation on my part, but if I had to guess, I believe that Russia blew them up. It was not just Nordstream 2, which hasn't begun operating yet. It was also Nordstream 1. Both of them got blown up the same day, nearly the same time. Nordstream 2 hadn't started pumping any gas yet, but Nordstream 1 had been pumping gas for a very long time until recently. Recently Putin stopped all the gas going through Nordstream 1. So there was no gas going to Europe from Russia through Nordstream 1 or Nordstream 2. And the day that they blew up was the day or the day before that a new pipeline opened between Norway and Germany that's going to supply a great deal of gas from Norway to Europe this winter. And I believe that by blowing up these pipelines, which were doing Russia no good anyway because they weren't pumping any gas anymore, he was sending a signal that he could blow up the Norwegian pipeline to Germany as well. And if he did that, then it will be a very cold winter for the Europeans, and they won't be able to run their factories, and so their economy will have a very severe crisis. So that seems to be the message he was sending. You know, of course, he's also threatening to use nuclear weapons, which is the most frightening statement I've seen coming out of any world leader since I was a child. Right, we're back. I mean, historically, every time there's inflation, despots rise, like Stalin and Hitler and Mao and all those guys rise out of hyperinflation and things like this.
If China's in trouble and, you know, Russia hit Ukraine, what are the odds of China going after Taiwan? It's a possibility. It would lead to a war between the United States and China, and at the very least it would result in an economic calamity in China because China's trade surplus with the United States, the amount of goods China sells to the US over and above the amount the US sells to China, is more than $1 billion every day, more than $400 billion a year that they would lose overnight and never to recover if they invade Taiwan. So that's a very big incentive for them not to do it because unemployment would go up. It would cause social instability. They'd also end up having some of their cities wrecked, and the communist party might be overthrown. So that's probably the biggest reason they're not going to do it this decade.
When I was talking to real estate agents, they're going, "Oh, I don't have to worry, Arizona is hot." Well, good, because people are migrating here. But where are they migrating from is another issue. And what's happening to interest rates? This guy Jay Powell, he has to stop inflation because inflation is now systemic. It means it's now going to keep going. And the more inflation runs, it's like the person standing at the pump pumping gas into their lease SUV, worried about their job and the price of oil's going up. They're micro. They cannot see past their butt. Can Powell, Jay Powell, the head of the Fed, US Fed, can he stop inflation? He can if he increases interest rates high enough. And all hell broke out two weeks ago when Powell put out the Fed's new projections for how high they would increase interest rates. This was a radical adjustment upward in their projections for how high they're going to increase interest rates just over the next few months. That caused a big selloff in the stock market. The dollar got a lot stronger. That caused problems for the UK pound, and all hell broke loose in the financial markets. And on top of that, not only are they hiking interest rates, but at the same time they're reversing quantitative easing. Instead of creating money, they're now destroying $95 billion every month. The US Fed's doing this. That's right. Multiply that times 12 months, and that's going to be $1.1 trillion that don't exist 1 year from now that exists today. That's about 13% of all the dollars. As long as the Fed is carrying out quantitative tightening or destroying dollars like that, it's very likely that asset prices are going to keep falling because all of the asset prices are floating on this ocean of liquidity that the Fed is now draining. So it's like a bathtub. The bathtub is being drained of water, and all the asset prices are going down. That means that their real estate is going to come down because there's fewer buyers. I was at a major bank yesterday. The bank was empty. You know why it was empty? Because they don't need loan officers. The biggest layoffs are coming in the banks right now because banks cannot loan money because people cannot afford to borrow. That was yesterday. All the asset classes are likely to fall together. In the past, it didn't work like that. Stocks would go up and bonds would go down and vice versa. But today they all move up and down together because they're all floating on this ocean of liquidity that the Fed is now draining. So as long as the Fed keeps draining liquidity through quantitative tightening, all of the asset classes are likely to fall together. Times like these are not times to make a great deal of money. This might be a good time to start thinking about improving your business, creating your own business, getting into business for yourself, something you can control, building up your own business and worrying less about speculating and speculative assets in the hope that they'll go higher in the near term because they're probably going lower. There will be a day when things turn around. Last year I was very bullish on the stock market because the Fed was creating $120 billion every month and pumping it into the markets. And as long as that carried on, it was clear asset prices would probably keep moving higher. But now the reverse is happening. They probably have significantly further to fall. Property prices are probably going to start falling at a double-digit rate by the middle of next year. And things are not going to turn around for a while. And today they're crashing, and their housing, their 401k is probably crashing. If they just stop printing, then things would more or less be leveled, but they're actually destroying money. Now you can say they're unprinting money at the rate of $95 billion a month. And when they do that, they have these bonds that the government has issued. When they mature, the Fed takes the money from the government. Then the government has to get money from somewhere else, from the public, and that reduces the amount of money that exists in the economy. And so with less money, that pushes up interest rates, that makes the bond prices go down, and the interest rates, the bond yields go up. So quantitative tightening is another way of tightening monetary policy and pushing up interest rates and making it more expensive for people to borrow and consume or borrow and invest. If I have a bond that was paying 5%, but the new bond is 8%, what does that do to the value of the bond? It pushes it down, right? Because no one is going to want to own the bond that's yielding 5% if the new bonds they can buy are yielding 8%. So it causes the price of the old bond to fall until its equivalent yield also comes into line. If it falls enough, then the yield would be 8% on that bond as well.
What Richard is saying is so important is because Wall Street for years has been selling 60/40, 60% equity, 40% bonds, and they're all dropping. You know, it's all dropping right now. And today I own gold mines, silver mines. I own real oil. I don't have oil stocks. I own cattle. I own everything the Fed cannot print. So remember when they say Bank of England and they say the Fed, they're the same things. And the English pound nearly took it. And the reason they have to start printing again, which is causing more inflation for the English people, is that the pensions are going to collapse. The same thing is going to happen to America cuz it's already happened. People don't know that.
So ladies and gentlemen, this is the most dangerous time in world history. But let me give you some bright news. In the Marine Corps, before I went to Vietnam, I was stationed at Camp Pendleton. We were in advanced weapons, you know, guns and rockets, machine guns and all this stuff. We had to practice crashing three times a day. Now crashing an empty helicopter is different than crashing a helicopter with guns, rockets, machine guns, and ammunition on board. But we practiced and we practiced and we practiced. So when it came, three times in Vietnam, cuz the odds were, you know, my life expectancy as a Marine pilot, gunship pilot, was 30 days. We didn't live very long. So if we practice crashing, we had a chance of surviving. So I went down three times. And my crew and I came back home, back in 1973, only to get spit on, hit by eggs by the commie pinko hippies from the Woodstock generation. And here we are today, and there's no financial education in our schools.
Well, the world is crashing. I don't know if people understand that because in 1971 Nixon took the dollar off the gold standard. 1944, during the Bretton Woods agreement, the dollar became the reserve currency of the world. Well, we made a promise to the world that the US dollar would be as good as gold. The trouble is, as Andy Schectman talks about in all this, is that we started fighting the war in Vietnam and the war on poverty in America, socialism, and we didn't have enough money. So we broke the Bretton Woods agreement in 1971. Nixon took us off the gold standard, and that was the corruption of capitalism. They could print money rather than make work for money. So ladies and gentlemen, we're screwed. Prepare for the crash and remember, micro means pull your head out of your butt.
There's good debt and bad debt. You want to buy a house, and everybody says my house is an asset. That's not true. Your house is a liability. If you have a car, a car is a liability. The average person, they have a job. Money comes in here; they pay for their house, and the money goes to a bank. So the definition of liability: does it take money from your pocket? And for an asset: does it put money in your pocket? A rental property here, it puts money in my pocket. If I live in a house, it's a liability because even if I have no debt on it, I still have taxes, depreciation, repairs and upkeep, insurance, and all this. When I rent a property, I've done a good job buying it and structuring it. Every month it sends me money. I'm borrowing money from here. It's coming here and going this way. So the debt is putting money in my pocket. Bad debt is taking money from my pocket. The renter leaves the place. This goes here that fast.